Job creation and labor reform in Latin America

This paper studies the effects of labor-regulation reform using data for 10,396 firms from 14 Latin American countries. Firms are asked both how many permanent workers they would have hired and how many they would have terminated if labor regulations were made more flexible. I find that making labor regulations more flexible would lead to an average net increase of 2.08 percent in total employment. Firms with fewer than 20 employees would benefit the most, with average gains in net employment of 4.27 percent. Countries with more regulated labor markets would experience larger gains in total employment. These larger gains in total employment, however, would be achieved through higher rates of hiring and higher rates of termination. These results may explain why there is substantial opposition to labor reforms despite the predicted gains in efficiency and total employment.Labor Markets,Labor Policies,Labor Management and Relations,Labor Standards,Work&Working Conditions

Inflation and Establishment Turnover

We study a channel through which inflation can have effects on the real economy. Using job creation and destruction data from U.S. manufacturing establishments from 1973-1988, we show that both jobs created by new establishments and jobs destroyed by dying establishments are negatively correlated with inflation. These results are robust to controls for the real-business cycle and monetary policy. Over a longer time frame, data on business failures confirm our results obtained from job creation and destruction data. We discuss how interaction of inflation with financial-markets, nominal-wage rigidities, and imperfect competition could explain the empirical evidence.

Enforceability of labor law : evidence from a labor court in Mexico

The authors analyze lawsuits involving publicly-appointed lawyers in a labor court in Mexico to study how a rigid law is enforced. They show that, even after a judge has awarded something to a worker alleging unjust dismissal, the award goes uncollected 56 percent of the time. Workers who are dismissed after working more than seven years, however, do not leave these awards uncollected because their legally-mandated severance payments are larger. A simple theoretical model is used to generate predictions on how lawsuit outcomes should depend on the information available to the worker and on the worker's cost of collecting an award after trial, both of which are determined in part by the worker's lawyer. Differences in outcomes across lawyers are consistent with the hypothesis that firms take advantage both of workers who are poorly informed and of workers who find it more costly to collect an award after winning at trial.Public Sector Corruption&Anticorruption Measures,Information Security&Privacy,Legal Products,Microfinance,Bankruptcy and Resolution of Financial Distress

Executive Compensation: Six Questions that Need Answering

In this article, we focus on how recent research advances can be used to address the following six questions: (1) How much does executive compensation cost the firm? (2) How much is executive compensation worth to the recipient? (3) How well does executive compensation work? (4) What are the effects of executive compensation? (5) How much executive compensation is enough? (6) Could executive compensation be improved? We stress the formal link between executive pay and performance that is provided by stock options and equivalent forms of long term compensation. We compare executive compensation in 12 OECD countries for the period from 1984-1996. There are good reasons why the answers to the first two questions are different. Executive compensation research should be very careful to distinguish the concepts of employer cost and the value to the executive. Agency theory remains the only viable candidate for answering the question about how executive compensation works but the empirical research to date cannot explain very much about the structure of the optimal contract. For this reason, it is also hard to answer the questions about the effects of executive compensation and the adequacy of the amounts of executive compensation, although it is clear that companies can provide both too little and too much contingent compensation, in the context of agency theory. We suggest two fertile areas for research regarding the improvement of executive compensation.

Entry regulation and business start-ups : evidence from Mexico

The authors estimate the effect on business start-ups of a program that significantly speeds up firm registration procedures. The program was implemented in Mexico in different municipalities at different dates. Authors estimates suggest that new start-ups increased by about 4 percent in eligible industries, and the authors present evidence that this is a causal effect. Most of the effect is temporary, concentrated in the first 10 months after implementation. The effect is robust to several specifications of the benchmark control group time trends. The authors find that the program was more effective in municipalities with less corruption and cheaper additional procedures.Corporate Law,Microfinance,Regional Governance,Urban Governance and Management,Urban Partnerships&Poverty

Mexican employment dynamics : evidence from matched firm-worker data

Using a census of all workers in private establishments in the formal sector in Mexico to track workers and establishments over time, this paper presents the first Mexican worker and job flow statistics. The data allow for comparing these flows across time, space, and worker characteristics. Although many patterns are similar to those documented in developing countries, the analysis uncovers patterns that have potentially important policy implications. The authors compare the results to the literature, illustrate how the statistics change during times of reform and crisis, and present novel findings that contribute to the broader literature on worker reallocations.Labor Markets,Microfinance,Labor Policies,Access to Finance,E-Business

Litigation and settlement : new evidence from labor courts in Mexico

Using a newly assembled data set on procedures filed in Mexican labor tribunals, the authors of this paper study the determinants of final awards to workers. On average, workers recover less than 30 percent of their claim. The strongest result is that workers receive higher percentages of their claims in settlements than in trial judgments. It is also found that cases with multiple claimants against a single firm are less likely to be settled, which partially explains why workers involved in these procedures receive lower percentages of their claims. Finally, the authors find evidence that a worker who exaggerates his or her claim is less likely to settle.Bankruptcy and Resolution of Financial Distress,Arbitration,Information Security&Privacy,Labor Markets,Judicial System Reform

Nominal Wage Rigidities in Mexico: Evidence from Social Security Records

This paper analyses the existence and extent of downward nominal wage rigidities in the Mexican labor market using data from the administrative records of the Mexican Social Security Institute (IMSS). This longitudinal, firm-level dataset allows us to track workers employed with the same firm, observe their wage profiles and calculate the nominal-wage changes they experience over time. Based on the estimated density functions of nominal wage changes and other moments of the distribution, we are able to calculate several standard tests of nominal wage rigidity that have been proposed in the literature. Furthermore, we extend these tests to take into account the presence of minimum wage laws that may affect the distribution of nominal wage changes. The densities and tests calculated using these date are similar to those obtained using administrative data from other countries, and constitute a significant improvement over the measures of nominal wage rigidities obtained from household survey data. We find considerably more wage rigidity than previous estimates obtained for Mexico using data from the National Urban Employment Survey suggest. Furthermore, we find evidence that the extent of nominal wage rigidities has been falling over time. We also document the importance of minimum wages in the Mexican labor market, as evidenced by the large fraction of minimum wage earners and the widespread indexation of wage changes to the minimum wage increases.

Lattice formulation of (2,2) supersymmetric gauge theories with matter fields

We construct lattice actions for a variety of (2,2) supersymmetric gauge theories in two dimensions with matter fields interacting via a superpotential.Comment: 13 pages, 2 figures. Appendix added, references updated, typos fixe