Three essays on economic dynamics

This Ph.D. dissertation is composed of three chapters, in which several dynamical aspects about several economic problems are analyzed. In the first chapter, entitled “Dynamical Stability in Repeated Games”, we propose a definition of dynamic stability that can be applied to repeated games. For this purpose, we extend the traditional theory by extending the infinite repetition of the stage game not only towards the future, but also towards the past. This allows the existence of stationary strategies and hence the possibility of dynamic stability. In the second chapter, entitled “On the Role of Educational Subsidies” we develop an overlapping generations model, and we analyze its properties concerning the steady state and the transitional dynamics. We also calibrate the model with data on several European countries, and we find that the optimal distribution of public expenses between research and development and educational subsidies should be changed towards the former in a majority of countries. Finally, in the chapter entitled “Inflationary Effects of a Monetary Union” we develop a model that formalizes the Balassa-Samuelson effect, and we analyze its existence both in economies with independent monetary policy and in economies belonging to a monetary union. We find that this effect should only appear in countries inside a monetary union. For countries with independent monetary policy, the sign of the effect is the opposite. We also analyze the effects of an enlargement concerning fast growing countries. We find that both the average inflation rate of the Union and the inflation rate of the old members would be reduced, whereas there are two opposite effects for the new countries: the change towards a less relaxed monetary policy and a money attraction effect. We find that for certain countries of a hypothetical enlargement of the Euro zone, the former effect dominates, so the inflation rate of the new members would also be reduced. ______________________________________________________________________________________________________________________________________________________Esta tesis doctoral se compone de tres capítulos, en los que se analizan diversos aspectos dinámicos de varios problemas económicos. En el primer capítulo, titulado “Estabilidad Dinámica en Juegos Repetidos” se propone una definición de estabilidad dinámica que puede aplicarse a los juegos repetidos. Se amplía para ello la teoría tradicional extendiendo la repetición del juego de etapa no sólo infinitamente hacia el futuro, sino también hacia el pasado, lo que permite la existencia de estrategias estacionarias y por tanto la posibilidad de estabilidad dinámica. En el segundo, titulado “El Papel de los Subsidios a la Educación” se desarrolla un modelo de generaciones solapadas, y se analizan las propiedades tanto de su estado estacionario como de su dinámica de transición. Además, se realiza una calibración del modelo con datos de diversos países europeos, y se encuentra que la composición óptima de gasto público entre investigación y desarrollo y subsidios educativos debería reestructurarse a favor del primer concepto en la mayoría de los países. Finalmente, en el capítulo titulado “Efectos Inflacionarios de una Unión Monetaria” se desarrolla un sencillo modelo que formaliza el efecto Balassa-Samuelson, y se analiza su posible aparición tanto en economías con política monetaria independiente como en aquéllos pertenecientes a una unión monetaria. Se encuentra que este efecto sólo debería ser observable en países en una unión monetaria, siendo de signo contrario al esperado en los países con política monetaria independiente. Además, se analizan los efectos de una ampliación con países de alto crecimiento, encontrándose que tanto la inflación media de la Unión como la particular de sus antiguos miembros se reduciría, mientras que sobre los países nuevos hay dos efectos contrapuestos: el cambio hacia una política monetaria más restrictiva y un efecto de atracción de dinero. Se encuentra que para los países de una hipotética ampliación de la zona Euro, el primer efecto suele dominar, por lo que también se reduciría la inflación de los nuevos miembros

Minimum wages : do they really hurt young people?

We estimate the effects of a signifi cant increase in the minimum wage in Spain between 2004 and 2010 on the individual probability of losing employment, using a large panel of social security records. Our main finding is that older people experienced the largest increase in the probability of losing their job, when compared with other age groups, including young people. The intuition is simple: among the affected (low-productivity) workers, young people are expected to increase their productivity more than older ones, who are in the fl at part of their life-cycle productivity curve. Consequently, an employer facing a uniform increase in the minimum wage may find it profi table to retain young employees and to fi re older onesEste artículo estima los efectos de la intensa subida del salario mínimo que se produjo en España entre los años 2004 y 2010 sobre la probabilidad individual de perder el empleo, utilizando datos de registros de la Seguridad Social. El principal resultado es que el mayor incremento en la probabilidad de perder el empleo se produjo entre los trabajadores de mayor edad, incluso cuando se los compara con los más jóvenes. La intuición de este resultado es sencilla: entre los trabajadores (de baja productividad) afectados, es de esperar que los más jóvenes experimenten incrementos de productividad superiores a los de los más mayores, que están ya en la parte plana de su ciclo vital de productividad. En consecuencia, un empleador que se enfrente a un incremento uniforme del salario mínimo puede encontrar ventajoso retener a los trabajadores jóvenes y despedir a los mayore

Skills mismatch between labour supply and demand in Spain

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Analysis of composition effects on wage behaviour

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Business demography in Spain : determinants of firm survival

The impact of entry upon market performance depends not only on the number of entries and their size, but also on how long do the firms last. Consequently, there are an increasing number of papers, most of them focused on the United States and restricted to the manufacturing sector, aimed at analysing the post-entry performance of firms. Unfortunately, there is not much about this important topic in Spain due to the lack of appropriate longitudinal micro data on firms. The current paper aims to fill this gap by means of a new database covering all sectors of the business economy constructed at the Bank of Spain. We study the determinants of new firm survival using non-parametric and parametric procedures especially designed to analyse duration phenomena. We find that larger start-ups survive longer and that the probability of exit is larger in sectors with high entry rates and low concentration. One of the contributions of the paper is the inclusion of the initial firm’s financial structure among the determinants of survival. Our results suggest that holding debt, instead of equity, has positive and important effects on survival up to some point. Beyond this point, further debt increments have a negative impact on survival, and this effect is more important the higher is the corresponding debt ratio or indebtness of the firm. [resumen de autor

An assessment of the effectiveness of rebates for keeping the over-60s in employment

Artículo de revistaTraditionally, employment policies in Spain have rested to a greater extent than in other countries on the application of rebates to the Social Security contributions of specific groups. The international empirical evidence on the effectiveness of this type of programme tends to show that, in general, these programmes involve a high budgetary cost, with limited although positive effects on the groups concerned, without affecting the aggregate level of employment. With the aim of providing additional evidence on this matter, this article summarises the results of an exercise assessing a specific Social Security contribution rebates programme in force from 2006 to 2012 for the group of workers over 60. Specifically, using data from the Spanish MCVL (Social Security administrative labour records), the effect that the elimination of this rebates programme had on the probability of these workers losing their job is estimated. The results show that the elimination of the incentives gave rise to a positive and significant although limited impact on the probability of this group losing their job, which was concentrated among the low-skilled, with relatively few years of service in the firm and with lower severance costs. Overall, the evidence would indicate that the programme produced scant benefits in terms of a higher rate of employment retention for the group of workers concerned. These findings are confined to this specific programme and, therefore, they are not extensible to the range of employment rebates for different groups that have been in force in the past in Spain or are so are present, although they highlight the need for a detailed assessment of active employment policies providing for an analysis of their effectivenes

What makes a high-growth firm? : a probit analysis using Spanish firm-level data

Many studies have established that a small number of firms, known as fast-growth firms or Gazelles, create most of the new jobs. In spite of the importance of this topic from a policy-point of view, most of those studies are descriptive and limited to a comparison of the characteristics of the high-growth group with respect to a control group of firms. This paper, on the other hand, performs a multivariate analysis of the determinants of the fast growth of Spanish firms controlling for the possible endogeneity of some variables. We use for that purpose a firm-level database with information for about 200,000 Spanish firms per year between 1996 and 2003. We find that being a start-up increases the probability of fast growth by more than 30 percentage points, conditioned on having survived over the period. Firms with initial higher relative wages and debt ratio, up to a certain point, also experience higher chances of fast growth. Hence, as it was established elsewhere, better access to finance and to human capital are key to increase the number and growth of Gazelles. We also find that high-growth firm sustain their expansion with relatively more debt and fixed-term contracts than the rest of the firms in the sampl

Recent changes in cross-regional convergence patterns

Rationale Economic convergence measured by income per capita refers to the process whereby lower income regions post higher growth, so that over time cross-regional differences diminish. This process was quite intense in Spain from 1980 to 2008 when, coinciding with the onset of the financial crisis, it came to a halt. Accordingly, it is of interest to document this phenomenon and investigate its possible causes. Takeaways •Economic convergence between the Spanish regions was intense from 1980 to 2008, when it came to a halt following the outbreak of the financial crisis. •Labour productivity, largely driven by capital accumulation, was the main determinant of the convergence process between 1980 and 2008. It is also the main contributor to its subsequent stagnation. •However, in the most recent period, population ageing, which is especially pronounced in regions with higher income per capita, has helped to narrow the differences, albeit not sufficiently to offset the impact of the other factors

Wage response to changes in the cyclical situation : an estimate based on MCVL social security administrative labour records

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Cyclical migration patterns

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