Excess Worker Turnover and Fixed-Term Contracts: Causal Evidence in a Two-Tier System

Portuguese firms engage in intense reallocation, most employers simultaneously hire and separate from workers, resulting in high excess worker turnover flows. These flows are constrained by the employment protection gap between open-ended and fixed-term contracts. We explore a reform that increased the employment protection of open-ended contracts and generated a quasi-experiment. The causal evidence points to an increase in the share and in the excess turnover of fixed-term contracts in treated firms. The excess turnover of open-ended contracts remained unchanged. This result is consistent with a high degree of substitution between open-ended and fixed-term contracts. At the firm level, we also show that excess turnover is quite heterogeneous and quantify its association with firm, match, and worker characteristics.excess worker turnover, two-tier systems, quasi-experiment, fixed-term contracts

When Supply Meets Demand: Wage Inequality in Portugal

Wage inequality in Portugal increased over the last quarter of century. The period from 1982 to 1995 witnessed strong increases in both upper- and lower-tail inequality. A shortage of skills combined with skill-biased technological changes are at the core of this evolution. Since 1995, lower-tail inequality decreased, while upper-tail inequality increased at a slower rate. The supply of high-skilled workers more than doubled during this period, contributing significantly to the slowdown. Polarization of employment demand is the more credible explanation for the more recent evolution. As in other developed economies, for instance Germany and the United States, we show that institutions played a minor role in shaping changes in inequality.inequality, polarization, supply, demand, institutions

A mathematical optimisation model of a New Zealand dairy farm: The integrated dairy enterprise (IDEA) framework

Optimisation models are a key tool for the analysis of emerging policies, price sets, and technologies within grazing systems. A detailed nonlinear optimisation model of a New Zealand dairy farming system is described. The framework is notable for its rich portrayal of pasture and cow biology that add substantial descriptive power to standard approaches. Key processes incorporated in the model include: (1) pasture growth and digestibility that differ with residual pasture mass and rotation length, (2) pasture utilisation that varies by stocking rate, and (3) different levels of intake regulation. Model output is shown to closely match data from a more detailed simulation model (deviations between 0 and 5 per cent) and survey data (deviations between 1 and 11 per cent), providing confidence in its predictive capacity. Use of the model is demonstrated in an empirical application investigating the relative profitability of production systems involving different amounts of imported feed under price variation. The case study indicates superior profitability associated with the use of a moderate level of imported supplement, with Operating Profit ($NZ ha-1) of 934, 926, 1186, 1314, and 1093 when imported feed makes up 0, 5, 10, 20 and 30 per cent of the diet, respectively. Stocking rate and milk production per cow increase by 35 and 29 per cent, respectively, as the proportion of imported feed increases from 0 to 30 per cent of the diet. Pasture utilisation increases with stocking rate. Accordingly, pasture eaten and nitrogen fertiliser application increase by 20 and 213 per cent, respectively, as the proportion of imported feed increases from 0 to 30 per cent of the diet

Effects of Applying Linear and Nonlinear Filters on Tests for Unit Roots with Additive Outliers

Conventional univariate Dickey-Fuller tests tend to produce spurious stationarity when there exist additive outlying observations in the time series. Correct critical values are usually obtained by adding dummy variables to the Dickey-Fuller regression. This is a nice theoretical result but not attractive from the empirical point of view since almost any result can be obtained just by a convenient selection of dummy variables. In this paper we suggest a robust procedure based on running Dickey-Fuller tests on the trend component instead of the original series. We provide both finite-sample and large-sample justifications. Practical implementation is illustrated through an empirical example based on the US/Finland real exchange rate series.Additive outliers, Dickey-Fuller test, Linear and nonlinear filtering, Bootstrap

Strategic Behaviour, Resource Valuation and Competition in Electricity Markets

By means of a suitable Bayesian game we study spot electricity markets from a structural point of view. We address the problem of individual and aggregate eficciency and we show how to value water from market observables. We compare the former to engineering methods and apply our methodology to Colombian spot electricity market. Our results show that big gas and small hydro plants overbid, resources are undervalued by engineering costs and aggregate costs would have been considerably smaller if agents had played optimally. Revealed costs show a substantial gain in eficciency in the Vickrey auction compared to the actual uniform auction.Multi-unit auctions, Oligopoly, electricity markets