Export Premia and Sub-Contracting Discount. Passive Strategies and performance in Domestic and Foreign Markets

This paper contributes to the literature on firms’ productivity and exporting decisions by analysing the role played by organizational choice aspects. Rather than setting up a vertically integrated structure, manufacturers may act as subcontractors in both domestic and foreign markets, and produce to satisfy the requirements of other firms. A very simple model is presented where the most productive firms self-select into exporting, while the least productive ones work as sub-contractors serving the domestic market only. These predictions are tested using a sample of Italian firms observed in the 1998-2003 period. The results of our estimates highlight a ranking of firms consistent with a priori expectations, and provide a clear indication that passive exporters (i.e. using sub-contracting in foreign markets)display lower TFP values as compared to direct exporters. Moreover, only the latter category exhibits higher pre-entry productivity levels and growth rates as well as higher post-entry TFP growth rates. Such findings are consistent with both the self-selection hypothesis and the learning by exporting explanation.Export Premia, Sub-contracting Discount, Total Factor Productivity, Firm Heterogeneity

Spreading of an infectious disease between different locations

The endogenous adaptation of agents, that may adjust their local contact network in response to the risk of being infected, can have the perverse effect of increasing the overall systemic infectiveness of a disease. We study a dynamical model over two geographically distinct but interacting locations, to better understand theoretically the mechanism at play. Moreover, we provide empirical motivation from the Italian National Bovine Database, for the period 2006-2013.Comment: 22 pages (and 10 pages for appendix); 11 figures (2 in appendix

Job Separations and Informality in the Russian Labor Market

In the years 2003-2008 the Russian economy experienced a period of strong and sustained growth, which was accompanied by large worker turnover and rising informality. We investigate whether the burden of informality falls disproportionately on job separators (displaced workers and quitters) in the Russian labor market in the form of informal employment and undeclared wages in formal jobs. We also pursue the issues whether displaced workers experience more involuntary informal employment than workers who quit and whether informal employment persists. We find a strong positive link between separations and informal employment as well as shares of undeclared wages in formal jobs. Our results also show that displacement entraps some of the workers in involuntary informal employment. Those who quit, in turn, experience voluntary informality for the most part, but there seems a minority of quitting workers who end up in involuntary informal jobs. This scenario does not fall on all separators but predominantly on those with low human capital. Finally, informal employment is indeed persistent since separating from an informal job considerably raises the probability to be informal in the subsequent job.job separations, informality, Russia

Job Separations, Job loss and Informality in the Russian Labor Market

Having unique data we investigate the link between job separations (displacement and quits) and informal employment, which we define in several ways posing the general question whether the burden of informality falls disproportionately on job separators in the Russian labor market. After we have established positive causal effects of displacement and quits on informal employment we analyze whether displaced workers experience more involuntary informal employment than their non-displaced counterparts. Our main results confirm our contention that displacement entraps some of the workers in involuntary informal employment. Those who quit, in turn, experience voluntary informality for the most part, but there seems a minority of quitting workers who end up in involuntary informal jobs. This scenario does not fall on all the workers who separate but predominantly on workers with low human capital. We also pursue the issue of informality persistence and find that informal employment is indeed persistent as some workers churn from one informal job to the next. Our study contributes to the debate in the informality literature regarding segmented versus integrated labor markets. It also contributes to the literature on displacement by establishing informal employment as an important cost of displacement. We also look at the share of undeclared wages in formal jobs and find that these shares are larger for separators than for incumbents, with displaced workers bearing the brunt of this manifestation of informality

Does ICT Investment Spur or Hamper Offshoring? Empirical Evidence from Microdata

In this paper we provide empirical evidence on the effect of ICT investment on the propensity to offshore for a large sample of Italian manufacturing firms. Contrary to previous literature focusing on the service sector, after taking into account the endogeneity of ICT investment in the offshoring decision equation we find a negative and significant effect of ICT on the propensity to offshore some stages of the production process. Furthermore this effect turns out not to depend on the type of ICT investment and applies both to hardware and software/telecommunication expenditures. A potential explanation for our finding is that ICT investments in manufacturing increase the complementarity of production processes within the firm, thereby reducing the incentive to offshore. Our results seem therefore to suggest that negative exogenous shocks to ICT prices–possibly induced by targeted policy programs aimed at the diffusion of ICT technologies–do not favor offshoring of manufacturing activities.ICT Investment, Offshoring, Maximum Likelihood System Estimation

The pecuniary and non-pecuniary costs of job displacement. An evaluation of the post-displacement injury rate

This paper investigates the pecuniary and non-pecuniary costs of involuntary job loss by focusing on both post-displacement earnings losses and injury rates. To this end we employ a unique dataset. Administrative data from Italy describing individual work histories have been merged with individual data on workplace injuries. Propensity score matching techniques are employed to measure the causal effect of displacement on workplace injury rates. We find that in a period marked by tight labour market, re-employed displaced workers experience only moderate and short-lived earnings losses but are about 70 percent more likely to be injured at their subsequent jobs compared to the control group of non-displaced workers. These results suggest that re-employed displaced workers may trade pecuniary job attributes for non-pecuniary ones.Job displacement, post-displacement injury rates, propensity score matching

The Costs of Job Loss in Russia

This paper is the first to analyze the costs of job loss in Russia, using unique new data from the Russian Longitudinal Monitoring Survey over the years 2003-2008, including a special supplement on displacement that was initiated by us. We employ fixed effects regression models and propensity score matching techniques in order to establish the causal effect of displacement for displaced individuals. The paper is innovative insofar as we investigate as relevant outcomes fringe and in-kind benefits and the propensity to have an informal employment relationship in addition to monthly earnings, hourly wages, employment and hours worked, which are traditionally analyzed. We find that, compared to the control group of non-displaced workers (i.e. stayers and quitters), displaced individuals face a significant income loss following displacement, which is mainly due to the reduction in employment and hours worked. This effect is robust to the definition of displacement. The losses seem to be more pronounced and are especially large for older workers with labor market experience and human capital acquired in Soviet times and for workers with low education. Workers displaced from state firms experience particularly large relative losses in the short run, while such losses for workers laid off from private firms are more persistent. Turning to the additional labor market outcomes, there is a loss in terms of the number of fringe and in-kind benefits for reemployed individuals but not in terms of their value. There is also some evidence of an increased probability of working in informal jobs if displaced. These results point towards the importance of both firm-specific human capital and of obsolete skills obtained under the centrally planned economy as well as to a wider occurrence of job insecurity among displaced workers.costs of job loss, worker displacement, propensity score matching, Russia

Job Separations, Job Loss and Informality in the Russian Labor Market

Having unique data we investigate the link between job separations (displacement and quits) and informal employment, which we define in several ways posing the general question whether the burden of informality falls disproportionately on job separators in the Russian labor market. After we have established positive causal effects of displacement and quits on informal employment we analyze whether displaced workers experience more involuntary informal employment than their non-displaced counterparts. Our main results confirm our contention that displacement entraps some of the workers in involuntary informal employment. Those who quit, in turn, experience voluntary informality for the most part, but there seems a minority of quitting workers who end up in involuntary informal jobs. This scenario does not fall on all the workers who separate but predominantly on workers with low human capital. We also pursue the issue of informality persistence and find that informal employment is indeed persistent as some workers churn from one informal job to the next. Our study contributes to the debate in the informality literature regarding segmented versus integrated labor markets. It also contributes to the literature on displacement by establishing informal employment as an important cost of displacement. We also look at the share of undeclared wages in formal jobs and find that these shares are larger for separators than for incumbents, with displaced workers bearing the brunt of this manifestation of informality

Internal Devaluation and Labor Market Outcomes: Evidence from Latvia

This paper analyzes the policy response and labor market adjustment of Latvia, which faced the most severe recession in Europe and globally. Latvia’s adjustment and recovery from the 2008 economic crisis represents “a rare case study”, which “has been an object of intense attention” (Blanchard et al., 2013) as country’s authorities, despite many experts’ recommendations, decided to maintain its currency peg and adjust through fiscal austerity and internal devaluation implementing major structural reforms. Three years later Latvia returned to a positive growth path and in 2014 joined the Euro zone. The main question in the literature is whether this adjustment represents a success story and can provide a lesson for other countries in the Euro area. We provide details on the adjustment in the Latvian labor market employing individual level data over the years 2002 to 2012. We show that with flexible labor markets, weak unions and relatively low employment protection, adjustment takes place predominantly at the extensive margin since it is driven by flows from permanent wage employment to unemployment. Underemployment constitutes another important adjustment channel, while the evidence for informal employment is more mixed. Wage regressions suggest that job mobility is not associated with increased labor productivity during and immediately after the crisis. We also identify groups particularly affected by the crisis and provide suggestions for the right mix of policy interventions

Worker Flows and Labour Market Adjustment during the Great Recession: Evidence from a Large Shock

This paper analyzes how the labor market adjusts to the Great Recession. To this aim, we use the data for Latvia, a country that has experienced one of the most severe recessions in Europe and a subsequent remarkable recovery. Employing longitudinal EU SILC data and a panel data set constructed by us from various waves of the Latvian Labour Force Survey (LLFS), we estimate worker transitions between labor market states. Labor market adjustment takes place predominantly at the extensive margin since it is driven by flows from permanent wage employment to unemployment. We also show that older, non-Latvian and above all less skilled workers are especially hard hit by the economic crisis. Estimated transitions between four mutually exclusive occupational groups demonstrate that downward mobility is very limited even during the Great Recession. Finally, wage regressions suggest that job mobility is not associated with increased labour productivity during and immediately after the crisis