The response of household wealth to the risk of losing the job : evidence from differences in firing costs

Economic theory predicts that individuals exposed to the risk of losing their job postpone their consumption and accumulate more assets to build a buffer stock of saving. We provide a new test of the hypothesis using substantial variation in severance payments across contracts in the Spanish labor market. Using the 2002 and 2005 waves of a new survey of wealth and consumption we estimate the link between the probability that several household members lose their job and the wealth and consumption of that household. We instrument the type of contract using regional variation in the amount, timing and target groups of subsidies given to firms to hire workers using high severance payment ones. We find that workers covered by fixed-term contracts accumulate more financial wealth. An increase in the probability of losing the job of 8 percentage points increases average financial wealth by 4 months of income. We provide simulations from a simple buffer stock and a permanent income models that suggest that our results are more likely to be generated by the forme

Contract staggering and unemployment during the great recession : evidence from Spain

Una caída de la actividad agregada conlleva una reducción de la demanda de empleo, que es tanto mayor cuanto más rígidos sean los salarios. Este artículo examina el impacto de la rigidez salarial en España sobre la evolución del empleo entre 2009 y 2010. La extensión de los convenios colectivos de sector a todas las empresas en el ámbito negociado permite identifi car a los trabajadores sujetos a salarios mínimos de sector —una fuente de rigidez salarial—. El grado de rigidez salarial varía entre ámbitos de negociación, ya que los convenios negociados tras una caída de la actividad agregada pueden ajustar los salarios pactados, lo que no es posible para los convenios ya firmados. Así, los convenios firmados tras la quiebra de Lehman Brothers pactaron un incremento salarial para 2009 inferior en 1,3 puntos porcentuales al acordado en los convenios firmados antes del 15 de septiembre de 2008. Si se enlazan datos individuales de trabajadores afiliados a la Seguridad Social con registros de convenios, se descubre que los trabajadores cuyo convenio de sector fue pactado antes de la caída de Lehman Brothers tuvieron una probabilidad de perder el empleo en 1 punto por ciento superior a la del resto. Las caídas en el empleo se concentraron en los trabajadores cuyo salario antes de la recesión estaba próximo a la tarifa de convenio. Esta evidencia sugiere que la dificultad para renegociar contratos amplifica el efecto sobre el empleo de las fluctuaciones en la demanda agregada. Finalmente, se discute en qué medida estos resultados se pueden extrapolar a otros períodosWe study the impact of (widespread) downward wage rigidity on the flows from employment to non-employment at the onset of the Great Recession. Downward wage (growth) rigidity is due to the fact that sector-level collective agreements in Spain are automatically extended to all firms, setting wage minima for workers in the same province-industry-skill cell. We identify the impact of wage rigidity on employment because, unlike settled ones, newly bargained contracts can adjust to aggregate shocks. Using the exact dates of bargaining periods of all sector-level contracts in Spain, we find that agreements reached after the fall of Lehman Brothers were for an average wage growth of 1.8%, while agreements signed before 15 September 2008 were for mean wage increases of 3.1%. Matching information on collective agreements with longitudinal Social Security records on workers, we document two findings. Firstly, the probability of job loss between 2009 and 2010 was 1 percent higher among workers covered by agreements signed before the fall of Lehman Brothers than among workers covered by contracts signed afterwards. Secondly, the analysis of a subsample of contracts with information about the exact province-industry-skill level minimum wage suggests that the impact of date of contract signature on wage changes and employment losses is confi ned to workers whose pre-recession earnings were below 1.2 times the contract-specifi c minimum wage. Those findings are consistent with the hypothesis that the staggering of contracts and the inability to renegotiate contracts amplify aggregate shocks. We end with a discussion of whether those results can be extrapolated to other sample period

The recent slowdown of bank lending in Spain : are supply-side factors relevant?

Using information of the balance sheets of Spanish banks between 1995 and 2009, we estimate the average impact of current and anticipated changes in banks’ capital on fi rm lending. We isolate the role of credit supply factors using the variation in capital growth associated to the bank-specifi c historical exposure to real estate development –measured 10 years before the outburst of the fi nancial crisis- and its interaction with the change in housing prices in the provinces where they operate. We further control for the quality of borrowers by using industry fi xed effects. Our main results suggest fi rstly that lagged exposure to real estate development and its interaction with prices explain banks’ capital growth and the overall doubtful loans ratio after 2008 – in turn, a determinant of anticipated changes in capital. And, secondly, that the deterioration of banks’ capital position has had a negative, although of a limited magnitude, effect on the supply of loans to non-construction fi rms. Our interpretation is that banks that have experienced capital shortfalls or banks that have increased their capital but without reaching the level that is demanded by fi nancial markets might have had no option but to reduce their lending. The relatively small magnitude of credit supply factors may be explained by the weakness of loan demand in a context of a deep recessionEste trabajo utiliza información desagregada de los balances de las entidades bancarias españolas desde 1995 hasta 2009 para estimar el efecto del crecimiento del capital bancario sobre la evolución del crédito a empresas, distinguiéndose entre el efecto de cambios efectivos y anticipados en el capital. Con el fi n de aislar el efecto de factores asociados a la oferta de crédito, se utilizan los cambios en el capital bancario que están vinculados a la exposición histórica de cada entidad al sector de promoción inmobiliaria (aproximada por el promedio de la exposición e el período 1995-1997) así como a su interacción con el precio de la vivienda en las provincias en las que operan las entidades bancarias. Con el fi n de acomodar la heterogeneidad en la solvencia de la demanda de crédito, se incluyen en las especifi caciones efectos fijos de industria y año. Los resultados sugieren, en primer lugar, que las entidades tradicionalmente más expuestas al sector de promoción inmobiliaria experimentaron en 2009 un menor crecimiento de su capital y, después de 2008, un mayor crecimiento de la tasa de morosidad. En segundo lugar, estas entidades redujeron su oferta de crédito a sectores no relacionados con la construcción, si bien la magnitud de dicha reducción fue limitada. Los resultados sugieren que las entidades que experimentaron disminuciones en su capital —o que lo aumentaron en menor medida que lo exigido por los mercados financieros— contrajeron su oferta de crédito, aunque de forma modesta. La pequeña magnitud del efecto puede deberse a la debilidad de la demanda de crédito durante la recesió

The effect of workplace pension schemes on households' private savings

Artículo de revistaThe tax incentive enjoyed by workplace pension schemes could encourage participants to increase their total savings or, alternatively, crowd out savings that would have materialised in other financial vehicles in the absence of this incentive. This article uses data from the Spanish Survey of Household Finances to estimate the additional savings generated by this type of scheme. To this end, the financial position of workplace pension scheme participants is compared to that of a group of workers of similar ages, with similar educational attainment levels and occupations, but who do not participate in such schemes. Once the comparable group is constructed, it can be seen that, on average, each euro saved in workplace pension schemes increases private savings by around 66 cents. This is the ratio of the difference in average net wealth between participants and their comparable group (€13,600) to the average amount accumulated in pension schemes (€20,600). Once adjusted for the fact that contributions are taxexempt, the additional savings generated amount to around 31 cents for every euro contributed, calculated as the ratio of the €6,500 difference in tax-relief-adjusted wealth between the two groups to the average amount accumulated in workplace pension schemes

Changes in bank capital and lending : a microeconomic approach

Artículo de revist

Does limited access to mortgage debt explain why young adults live with their parents?

Young adults leave their parents' home at a higher rate in Northern Europe and the United States than in Southern Europe, with broad implications on labor mobility, intergenerational sharing of resources and on fertility. This paper assesses if differences in household structure can be traced back to restricted access to credit for the young. To study the causal impact of getting a loan on the probability of "leaving the nest", we exploit two reforms of a Portuguese program that subsidized interest rate on mortgages signed by low- and medium- income young adults. Using a unique dataset that merges a Labor Force Survey with administrative debt records, we estimate that getting a mortgage loan increases the rate of leaving home by between 31 and 54 percentage points. We combine those estimates with an European household panel to document that if our preferred estimates held for all countries, differential use of credit markets would explain between 16% and 20% of the North-South differences in home leaving. [resumen de autor

Employment risk and household formation : evidence from differences in firing costs

The rate of new household formation among young adults who live with their parents has decreased in the last twenty years, specially in Southern Europe. At the same time, exposure to the risk that a young adult loses his or her job has increased. We use differences in firing costs across contract types in the Spanish labor market to identify if there is a causal link between both developments. Our first identification strategy exploits a legally-induced sharp increase in firing costs 3 years after the starting of a fixed-term contract between 1987 and 1996. The second uses variation in regional incentives to promote high-firing cost contracts between 1997 and 2001. Both strategies fail to detect a causal impact of job insecurity on the probability of forming a new household. Tentative evidence supports the notion that lower job insecurity has an impact on the form of tenure of the first house of residence, favoring home-ownership over rentin

Negociación colectiva, rigideces salariales y empleo : un análisis con datos microeconómicos

Artículo de revist

Los efectos de las condiciones hipotecarias sobre el consumo de los hogares propietarios de vivienda : una estimación a partir de la EFF

Artículo de revist

The growth in permanent contracts and its potential impact on spending

Rationale This article analyses what impact the increase in permanent contracts observed over the course of 2022 might have had on household spending. Takeaways •In 2019, workers on permanent contracts devoted 81% (on average) of their household income to spending, compared with 72% for those on temporary contracts. •In the past, having their temporary contract converted to a permanent one has prompted households to increase their spending-to-income ratio by approximately 20% over the following two quarters. •Based on those figures, the conversion of temporary to permanent contracts observed in 2022 could have increased the spending-to-income ratio by between 0.18 and 0.24 percentage points