Transatlantic Differences in Labour Markets: Changes in Wage and Non-Employment Structures in the 1980s and the 1990s

Rising wage inequality in the U.S. and Britain and rising continental European unemployment have led to a popular view in the economics profession that these two phenomena are related to negative relative demand shocks against the unskilled, combined with flexible wages in the Anglo-Saxon countries, but institutional rigidities in continental Europe ('Krugman hypothesis'). This paper tests this hypothesis based on seven large person-level data sets for the 1980s and the 1990s. I use a more sophisticated categorisation of low-skilled workers than previous studies, which highlights the distinction between German workers with and without apprenticeship training. I find evidence for the Krugman hypothesis when Germany is compared to the U.S. However, supply changes differ considerably between countries, with Britain experiencing enormous increases in skill supply explaining the relatively constant British skill premium in the 1990shttp://deepblue.lib.umich.edu/bitstream/2027.42/40148/3/wp762.pd

Poland on the dole: unemployment benefits, training, and long-term unemployment during transition

We analyse the duration of unemployment spells in Poland using data from the Polish Labour Force Survey of August 1994. The effects on the duration of unemployment of important socio-economic and demographic characteristics are explored besides the impacts of the unemployment benefit system and training schemes. Finally, we investigate whether prior unemployment influences one's chances to find a job. Entitlements to unemployment benefits prolong unemployment spell durations significantly. This effect is roughly of the same magnitude under the two benefit regimes that existed between 1990 and 1994, although the generosity of the unemployment benefit system has been reduced drastically in 1992. The results give credence to the view that the unlimited entitlement period of the old regime was not the main culprit for the widespread incidence of long-term unemployment. Training programmes organised by labour offices should not be regarded as a panacea for the problems of the long-term unemployed. The results suggest that active labour market policies should perhaps be seen more as a tool for social rather than economic policy. People with previous unemployment spells must expect to stay unemployed far longer than people who become unemployed for the first time. On the other hand, controlling for unobserved individual heterogeneity, we find that the probability of finding a job increases, especially for men, with the duration of unemployment. --unemployment duration,incentives,training,Poland,transition

Foul or Fair?

This paper gives a short overview of Monte Carlo studies on the usefulness of Heckman?s (1976, 1979) two?step estimator for estimating a selection model. It shows that exploratory work to check for collinearity problems is strongly recommended before deciding on which estimator to apply. In the absence of collinearity problems, the full?information maximum likelihood estimator is preferable to the limited?information two?step method of Heckman, although the latter also gives reasonable results. If, however, collinearity problems prevail, subsample OLS (or the Two?Part Model) is the most robust amongst the simple?to? calculate estimators. --

Transatlantic Differences in Labour Markets: Changes in Wage and Non-Employment Structures in the 1980s and the 1990s

Rising wage inequality in the U.S. and Britain and rising continental European unemployment have led to a popular view in the economics profession that these two phenomena are related to negative relative demand shocks against the unskilled, combined with flexible wages in the Anglo-Saxon countries, but institutional rigidities in continental Europe ('Krugman hypothesis'). This paper tests this hypothesis based on seven large person-level data sets for the 1980s and the 1990s. I use a more sophisticated categorisation of low-skilled workers than previous studies, which highlights the distinction between German workers with and without apprenticeship training. I find evidence for the Krugman hypothesis when Germany is compared to the U.S. However, supply changes differ considerably between countries, with Britain experiencing enormous increases in skill supply explaining the relatively constant British skill premium in the 1990swage, earnings, unemployment, non-employment, rigidity, identification

Advantage through training? A microeconometric evaluation of the employment effects of active labour market programmes in Poland

We estimate the employment effects of training, intervention works (subsidised employment), and public works programmes in Poland. The analysis is based on retrospective monthly calendar information on the labour force state and active labour market programme (ALMP) participation between January 1992 and August 1996. The data are obtained from the Polish Labour Force Survey of August 1996 and its Supplement on Labour Market Policies. Because there is no general agreement on the appropriate evaluation methodology when working with non-experimental data, we use two widely applied approaches to identify causal effects. First, non-parametric estimates of the programme effects are obtained on the basis of matched samples. Second, we use traditional econometric modelling in the form of duration models with unobserved individual heterogeneity. We find that training improves the employment opportunities of both men and women, whereas intervention and public works do not: intervention works prolong unemployment for both genders as do public works for men. The number of observations on women in public works is too small to make a statistically safe statement. In general, all ALMP effects are larger in absolute size for men than for women. --evaluation,microeconometrics,active labour market policy,Poland

Labour mobility - an adjustment mechanism in Euroland? Empirical evidence for Western Germany, France and Italy

The purpose of this paper is to evaluate whether labour mobility is likely to act as a sufficient adjustment mechanism in the face of asymmetric shocks in Euroland. To this end, we estimate the elasticity of migration with respect to changes in unemployment and income on the basis of regional panel data provided by Eurostat, the statistical office of the European Union. Regression results are provided for Western Germany, France, and Italy. It is shown that labour mobility is highest in Germany, followed by France, and Italy. However, even in Germany, the accommodation of a shock to unemployment by migration takes several years. We conclude that labour mobility is extremely unlikely to act as a sufficient adjustment mechanism to asymmetric shocks in Euroland. --European Monetary Union (EMU),euro,labour mobility

What Happened to Wage and Non-Employment Structures During the ‘Dutch Employment Miracle’?

The Netherlands have experienced an employment miracle since the 1980s. This note investigates what happened to the wage, unemployment, and non-employment structures between 1988 and 1998, when both unemployment and non-employment rates decreased markedly. Surprisingly, I find no significant changes in the wage structures, although there clearly was wage moderation on average. Although there have also been virtually no changes in the unemployment structure, the relative non-employment of older workers (due to incentives to retire) and men increased. Whereas supply effects and early retirement schemes can explain the constancy of the returns to age, the lack of an increase in the returns to education remains a puzzle in the face of well-documented skill-biased technological change in other major industrialised countries.earnings, flexibility, labour

On the identification of relative wage rigidity dynamics: a proposal for a methodology on cross-section data and empirical evidence for Poland in transition

We present a new and simple empirical methodology to identify relative wage rigidity dynamics. The methodology is applied to data from the Polish Labour Force Survey for the period 1994 to 1998. We estimate ceteris paribus changes in relative wage and unemployment differentials for various labour market defining characteristics. A simultaneous increase in the relative wage and the unemployment likelihood is defined as a relative wage rigidity dynamic for a labour market characteristic. We find that the Polish wage structure generated hardly any rigidities between 1994 and 1998 nor did it reduce possibly existing rigidities during that period. --wages,unemployment,rigidities,identification,Poland

The Treatment Effect, the Cross Difference, and the Interaction Term in Nonlinear “Difference-in-Differences” Models

I demonstrate that Ai and Norton’s (2003) point about cross differences is not relevant for the estimation of the treatment effect in nonlinear “difference-in-differences” models such as probit, logit or tobit, because the cross difference is not equal to the treatment effect, which is the parameter of interest. In a nonlinear “difference-in-differences” model, the treatment effect is the cross difference of the conditional expectation of the observed outcome minus the cross difference of the conditional expectation of the potential outcome without treatment. Unlike in the linear model, the latter cross difference is not zero in the nonlinear model. It follows that the sign of the treatment effect in a nonlinear “difference-in-differences” model with a strictly monotonic transformation function is equal to the sign of the coefficient of the interaction term of the time and treatment group indicators. The treatment effect is simply the incremental effect of the coefficient of the interaction term.identification, nonlinear models, limited dependent variable, probit, logit, tobit, difference-in-differences, interaction effect

The Effects of a Sick Pay Reform on Absence and on Health-Related Outcomes

We evaluate the effects of a reduction in sick pay from 100 to 80% of the wage. Unlike previous literature, apart from absence from work, we also consider effects on doctor/hospital visits and subjective health indicators. We also add to the literature by estimating both switch-on and switch-off effects, because the reform was repealed two years later. We find a two-day reduction in the number of days of absence. Quantile regression reveals higher point estimates (both in absolute and relative terms) at higher quantiles, meaning that the reform predominantly reduced long durations of absence. In terms of health, the reform reduced the average number of days spent in hospital by almost half a day, but we cannot find robust evidence for negative effects on health outcomes or perceived liquidity constraints.Sickness pay, absenteeism, health expenditure, hospitalization, difference-indifferences, switch on, switch off, quantile regression, intrinsic motivation