Produce or speculate? Asset bubbles, occupational choice and efficiency

We study the macroeconomic effects of rational asset bubbles in an overlapping-generations economy where asset trading requires specialized intermediaries and where agents freely choose between working in the production or in the financial sector. Frictions in the market for deposits create rents in the financial sector that affect workers' choice of occupation. When rents are large, the private gains associated with trading asset bubbles may lead too many workers to become speculators, thereby causing rational bubbles to lose their efficiency properties. Moreover, if speculation can be carried out by skilled labor only, then asset bubbles displace skilled workers away from the productive sector and raise income and consumption inequalities. Classification-JEL: E22; E44; G21.Rational bubbles; occupational choice; dynamic efficiency.

Optimum income taxation and layoff taxes

This paper analyzes optimum income taxation in a model with endogenous job destruction that gives rise to unemployment. It is shown that optimal tax schemes comprise both payroll and layoff taxes when the state provides public unemployment insurance and aims at redistributing income. The optimal layoff tax is equal to the social cost of job destruction, which amounts to the sum of unemployment benefits (that the state pays to unemployed workers) and payroll taxes (that the state does not get when workers are unemployed).Layoff taxes, Optimal taxation, Job destruction.

Produce or Speculate? Asset Bubbles, Occupational Choice and Efficiency

We study the macroeconomic effects of rational asset bubbles in an overlapping-generations economy where asset trading requires specialized intermediaries and where agents freely choose between working in the production or in the financial sector. Frictions in the market for deposits create rents in the financial sector that affect workers' choice of occupation. When rents are large, the private gains associated with trading asset bubbles may lead too many workers to become speculators, thereby causing rational bubbles to lose their efficiency properties. Moreover, if speculation can be carried out by skilled labor only, then asset bubbles displace skilled workers away from the productive sector and raise income and consumption inequalities.rational bubbles, occupational choice, dynamic efficiency

Public Employment and Labor Market Performances.

We explore the consequences of public employment for labour market performance. Theory suggests that public employment may not only crowd out private employment, but also increase overall unemployment if, by offering attractive working conditions, it draws additional individuals into the labour force. Empirical evidence from a sample of OECD countries in the 1960–2000 period suggests that, on average, creation of 100 public jobs may have eliminated about 150 private sector jobs, slightly decreased labour market participation, and increased by about 33 the number of unemployed workers. Theoretical considerations and empirical evidence, however, suggest that the crowding out effect of public jobs on private jobs is only significant in countries where public production is highly substitutable to private activities and the public sector offers more attractive wages and/or other benefits than the private labour market.

Can Public Sector Wage Bills Be Reduced?

This paper analyzes the relation between public wage bills and public deficits in the OECD countries from 1995 to 2009. The paper shows that fiscal drift episodes, characterized by simultaneous increases in the GDP shares of public wage bills and budget deficits, are more frequent during booms and election years, but not during recessions, except for the 2009 exceptionally strong recession. The emergence of fiscal drift episodes during booms and election years is less frequent in countries with more transparent government, more freedom of the press, as well as in countries with presidential regimes and less union coverage. Inversely, fiscal tightening episodes, characterized by simultaneous decreases in the GDP shares of public wage bills and budget deficits, occur less often during booms than during recessions. The emergence of fiscal tightening episodes during recessions and election years is less frequent in countries with more union coverage.

Optimal Taxation and Monopsonistic Labor Market: Does Monopsony justify the Minimum Wage?

Does monopsony on the labor market in itself justify the implementation of a minimum wage when it would not be used in a competitive economy? This issue is studied in a model of optimal taxation. We adopt a definition most favorable to the minimum wage: the minimum wage is useful whenever it can replace a non negligible part of the tax schedule. The minimum wage is useful to correct the inefficiencies associated with the monopsony when there is a single skill. But the minimum wage is not useful any more when there are a continuum of skills.Minimum wage, Optimal taxation, Monopsony.

Labor Market Policy Evaluation in Equilibrium: Some Lessons of the Job Search and Matching Model

We analyze the consequences of counseling provided to job seekers in a standard job search and matching model. It turns out that neglecting equilibrium effects induced by counseling can lead to wrong conclusions. In particular, counseling can increase steady state unemployment although counseled job seekers exit unemployment at a higher rate than the noncounseled. Dynamic analysis shows that permanent and transitory policies can have effects of opposite sign on unemployment.evaluation, equilibrium effect, labor market policy

Reduction of working time and unemployment

This paper analyzes the consequences of compulsory reductions in working time on employment. The first part of the paper is devoted to the analysis of labor demand when the firm chooses the number of jobs and hours. This framework allows us to show that compulsory reductions in standard hours can increase employment only if wage compensation is sufficiently low. Then, the second part of the paper looks at the determinants of wages, hours and employment in different frameworks: perfect competition, collective bargaining, monopsony. It is shown that regulation of hours is justified and can even increase employment when competition is imperfect. However, compulsory reductions in working hours cannot systematically improve employment and welfare.working time; work sharing

Is Short-Time Work a Good Method to Keep Unemployment Down?

Short-time work compensation aims at reducing lay-offs by allowing employers to temporarily reduce hours worked while compensating workers for the induced loss of income. These programs are now widespread in the OECD countries, notably following the 2008-2009 crisis. This paper discusses the efficiency of this type of policy and investigates its impact on unemployment and employment. There is some evidence that short-time compensation programs stabilize permanent employment and reduce unemployment during downturns. All in all, it seems that short-time work programs used in the recent downturn had significant beneficial effects. This suggests that countries which do not have short-time compensation programs could benefit from their introduction. But short-time compensation programs can also induce inefficient reductions in working hours and reduce the prospects of outsiders if used too intensively. Thus, the design of short-time compensation programs should include an experience-rating component.short-time work, unemployment, employment