Trade and Jobs in Portugal: A Microeconomic Approach. CEPS Working Document No. 160, January 2001

The Portuguese economy presents a low unemployment rate when compared to its European counterparts and it has been claimed that this is partly due to the slow restructuring of the economy, which has been keeping its specialisation in traditional industries, some of them major exporting industries. This study analyses job creation and job destruction at the firm level across skill groups, during the 1980s and the 1990s. The major aim is to explore the role of international trade against alternative explanations of job flows, providing an answer to the question: did international trade help sustain the employment of particular groups of workers, namely the least skilled, in the Portuguese economy? Could conditions in international markets therefore have contributed to keep a low unemployment rate? A matched data set on workers and firms is used, which includes a direct measure of the skill of the worker. Results indicate that technology indicators are more relevant determinants of job flows than conditions in international product markets. Indeed, import prices have no impact on job creation or job destruction for the unskilled or on job creation for the skilled. Higher export prices lead to job creation for the skilled labour force, thus pointing to a certain skill upgrading

Long-Term Impact of Youth Minimum Wages: Evidence from Two Decades of Individual Longitudinal Data

This paper quantifies the long-run impact of exposure to youth minimum wages and sheds light on its mechanisms. It uses remarkable longitudinal data spanning for twenty years and explores legislative changes that define groups of teenagers exposed for different durations. After controlling for the contemporaneous impact of the minimum wage, its long-run impact translates into: an overall wage premium, consistent with an upgrading in the quality of jobs offered; a flatter tenure-earnings profile, consistent with lower initial investment in firm-specific training. Interestingly, the overall wage premium increases with exposure and the tenure-earnings profile is flatter the longer the exposure.skill formation, human capital investment, on-the-job-training, career, long-term, linked employer-employee data

School drop-out and push-out factors in Brazil : the role of early parenthood, child labor, and poverty

This paper aims to identify the major drop-out and push-out factors that lead to school abandonment in an urban surrounding-the shantytowns of Fortaleza, Northeast Brazil. The authors use an extensive survey addressing risk factors faced by the population in these neighborhoods, which cover both in-school and out-of-school youth of both genders. They focus on the role of early parenthood, child labor, and poverty in pushing teenagers out of school. The potential endogeneity of some of the determinants is dealt with in the empirical analysis. The authors take advantage of the rich set of variables available and apply an instrumental variables approach. Early parenthood is instrumented with the age declared by the youngsters as the ideal age to start having sexual relationships. Work is instrumented using the declared reservation wage (minimum salary acceptable to work). Results indicate that early parenthood has a strong impact of driving teenagers out of school. Extreme poverty is another factor lowering school attendance, as children who have suffered hunger at some point in their lives are less likely to attend school. In this particular urban context, working does not necessarily have a detrimental effect on school attendance, which could be linked to the fact that dropping out of school leads most often to inactivity and not to work.Education For All,Youth and Governance,Population Policies,Tertiary Education,Street Children

The provision of wage insurance by the firm: evidence from a longitudinal matched employer-employee dataset

We evaluate the impact of product market uncertainty on workers wages, addressing the questions: To what extent do firms provide insurance to their workforce, insulating their wages from shocks in product markets? How does the amount of insurance provided vary with firm and worker attributes? We use a longitudinal matched employer-employee dataset of remarkable quality. The empirical strategy is based on Guiso et al. (2005). We first estimate dynamic models of sales and wages to retrieve consistent estimates of shocks to firms’ sales and to workers’ earnings. We are then able to estimate the sensitivity of wages to permanent and transitory shocks to firm performance. Results point to the rejection of the full insurance hypothesis. Workers’ wages respond to permanent shocks to firm performance, whereas they are not sensitive to transitory shocks. Managers are not fully insured against transitory shocks, while they receive the same protection against permanent shocks as workers in other occupations. Firms with higher variability in their sales, and those operating in di?erent industries, o?er more insurance against permanent shocks. Comparison with Guiso et al. (2005) indicates that Portuguese firms provide less insurance than Italian firms, corroborating evidence on the high degree of wage flexibility in Portugal.

Disentangling the minimum wage puzzle: an analysis of job accessions and separations from a longitudinal matched employer- employee data set

Changes in the legislation in mid-80s in Portugal provide remarkable conditions for economic analysis, as the minimum wage increased very sharply for a very specific group of workers. Relying on a matched employer-employee panel dataset, we model gross job flows - accessions and separations - in continuing firms, as well as in new firms and those going out of business, using a Poisson regression model applied to proportions. Worker behaviour is as well modelled. Employment trends for teenagers, the affected group, are contrasted against older workers, before and after the rise in the youth minimum wage. The major effect on teenagers of a rising minimum wage is the reduction of separations from the employer, which compensates for the reduction of accessions (to new and continuing firms) and the rising dismissals from firms closing down. This result suggests the relevance of supply side factors overcoming demand forces, as they indicate that job attachment for low wage youngsters rises following an increase in their minimum wage. In this sense, our results can reconcile some of the previous evidence that has been presented in the empirical literature when analysing the overall impact of the minimum wage on youth employment without looking at its sources.

Youth risk-taking behavior in Brazil : drug use and teenage pregnancy

Using an extensive survey that addresses risk factors faced by the population in the shantytowns (favelas) of Fortaleza, Brazil, the aim of this paper is to study risk-taking behavior by youth, focusing on drug use and teenage pregnancy. The paper analyzes the impact of factors such as exposure to mass media, the existence of support networks, self-esteem, and the occurrence of violence at home and in the neighborhood, on the probability of risk-taking behavior. A bivariate probit model is estimated. The findings indicate that reliance on support networks and exposure to mass media are associated with a lower probability of either type of risk behavior. Living in a violent home increases drug consumption. Race does not have a significant impact on either type of behavior.Adolescent Health,Population Policies,Health Monitoring&Evaluation,Youth and Governance,Gender and Health

Can Compulsory Military Service Raise Civilian Wages? Evidence from the Peacetime Draft in Portugal

Although the practice of military conscription was widespread during most of the past century, credible evidence on the effects of mandatory service is limited. Angrist (1990) showed that the Vietnam-era draft in the U.S. lowered the early-career wages of conscripts, a finding he attributed to the low value of military experience. More recent studies have found a mixed pattern of effects, with both negative (the Netherlands) and positive (in Sweden) earnings impacts. Even among Vietnam era draftees, Angrist and Chen (2011) find that the net effect on earnings by age 50 is close to zero. We provide new evidence on the long-term impacts of peacetime conscription in a "low education" labor market, using longitudinal data for Portuguese men born in 1967. These men were inducted at a relatively late age (21), allowing us to use pre- conscription wages as a control for potential ability differences between conscripts and non- conscripts. Our estimates of the average impact of military service for men who had entered the labor market by age 21 are slightly positive (1-2 percent) but not significantly different from zero throughout the period from 2 to 20 years after their service. These small average effects arise from a significantly positive later-life impact for men with only primary education, coupled with a zero-effect for men with higher education. The positive impacts for less-educated men suggest that mandatory service can be a valuable experience for poorly-educated men who might otherwise spend their careers in low-level jobs.quasi-differences, longitudinal earnings, military conscription, sensitivity analysis

Can Compulsory Military Service Increase Civilian Wages? Evidence from the Peacetime Draft in Portugal

Although military conscription was widespread during most of the past century, credible evidence on the effects of mandatory service is limited. We provide new evidence on the long-term effects of peacetime conscription, using longitudinal data for Portuguese men born in 1967. These men were inducted at a relatively late age (21), allowing us to use pre-conscription wages to control for ability differences between conscripts and non-conscripts. We find that the average impact of military service for men who were working prior to age 21 is close to zero throughout the period from 2 to 20 years after their service. These small average effects arise from a significant 4-5 percentage point impact for men with only primary education, coupled with a zero-effect for men with higher education. The positive impacts for less-educated men suggest that mandatory service can be a valuable experience for those who might otherwise spend their careers in low-level jobs.

Bargained Wages, Wage Drift and the Design of the Wage Setting System

This paper aims at answering the question: How does a typically European bargaining system - with collective bargaining, extension mechanisms and national minimum wage - coexist with low unemployment rate and high wage flexibility? A unique data set on workers, firms and collective bargaining contracts in the Portuguese economy is used to analyze the determinants of both the bargained wage and the wage drift. Results indicate that wage drift stretches the returns to every worker and firm attribute, whereas it shrinks the returns to union bargaining power. Therefore, firm-specific arrangements, in the form of wage drift, partly offset collective bargaining, granting firms a high degree of freedom when setting wages. Union bargaining power raises the overall wage level, but lowers the returns on worker attributes, an outcome of the egalitarian policy pursued.