Labour‐market Institutions and Macroeconomic Shocks

Abstract. Macroeconomic shocks and labour‐market institutions jointly determine employment growth and economic performance. The effect of shocks depends on the nature of these institutions and the effect of institutional change depends on the macroeconomic environment. It follows that a given set of institutions may be appropriate in one epoch and not in another. We derive a dynamic model of labour demand in which the effect of firing costs on labour demand depends on the macroeconomic environment: when the level of macroeconomic activity is expected to drop and/or the trend rate of productivity growth is small, a rise in firing costs affects mainly (and adversely) the hiring decision and not the layoff decision. This makes firing costs harmful to employment when it may appear most appropriate. In contrast, firing costs can raise employment during periods of high growth and positive shocks. Our hypothesis is supported by empirical results using OECD data.     

The Union Effect on Wages in Chile: A Two‐Stage Approach Using Panel Data

We estimate the union effect on wages in Chile to be between 18 and 24 per cent. We follow a two‐stage procedure that allows us to correct the endogeneity of union status and to separate true from spurious dependence, by exploiting the union history of individuals using panel data. We find evidence of comparative‐advantage sorting in union status, strong true state dependence and a re‐distributional effect of union membership (i.e. wage gains from unionization are larger for lower‐wage earners).     

Communication in Nuclear Emergency Preparedness: A Closer Look at Information Reception

Preparedness of the general population plays a key role in the effective implementation of protective actions in case of a nuclear emergency (e.g., evacuation or intake of iodine tablets). In this context, a good communication of emergency management actors with the public along the entire cycle of preparedness–response–recovery is of paramount importance. This article aims at providing a better understanding of the way people process communicated messages and the factors that may influence how they do this. In particular, it investigates information reception as part of the information processing in precrisis communication. As a case study, the precrisis communication context was chosen, as it has been tackled to a lesser extent in the literature. The empirical data used for this study originated from a large‐scale opinion survey in Belgium. One topic in this survey addressed the information campaign for the distribution of iodine tablets, in the context of preparedness for nuclear emergencies. The findings of this study demonstrate that systematic predictors have a stronger influence on information reception, as compared to heuristic predictors. The latter are only to a minor extent involved in the reception of emergency preparedness information. The hypothesized pattern—that more specific knowledge about the field relates to a higher reception of information—was confirmed for precrisis communication. Contrary to expectations, results showed that people with a high perception of radiation risks were less attentive to information about protective actions. People with little confidence in authorities were also more likely to have a low reception of information.     

Optimal Capital Taxation,Labour Unions,and the Hold‐Up Problem

This document examines optimal capital taxation with wage‐setting labour unions when the government taxes consumption, labour, and capital. The results are as follows. If unions can commit themselves to particular wages for a long period, then there is no hold‐up problem. Otherwise, the hold‐up problem creates a positive link from capital accumulation to the wage. The optimal labour subsidy is positive and greater in the presence than in the absence of the hold‐up problem. The optimal capital subsidy is zero in the absence, but positive in the presence of the hold‐up problem.     

Macroeconomic Effects of Public‐Sector Unions

Motivated by the highly unionized public sectors, the high public shares in total employment, and the public‐sector wage premia observed in Europe, this paper examines the importance of public‐sector unions for macroeconomic theory. The model generates cyclical behavior in hours and wages that is consistent with data behavior in an economy with highly unionized public sector, namely Germany during the period 1970–2007. The union model is an improvement over a model with exogenous public employment. In addition, endogenously determined public wage and hours add to the distortionary effect of contractionary tax reforms by generating greater tax rate changes, thus producing higher welfare losses.     

Non‐linear Effects of Comparison Income in Quit Decisions: Status versus Signal!

This research note utilizes German matched employer–employee data to investigate the relationship between mobility and relative wage positions within establishments for workers without university degrees. The main innovation involves the examination of non‐linear effects, because previous literature mainly analyses mean linear effects. Our random‐effects probit estimates of mobility suggest a non‐linear U‐shaped effect with respect to relative standing. This is plausible because workers in low relative wage positions might quit because of their low status and those in high relative wage positions because of their low career advancement opportunities. Consideration of non‐linearities, thus, is a major improvement for the analysis of the effects of relative wage positions.     

A New Look at the Public Wage Premium in Italy: The Role of Schooling Endogeneity

This paper uses a sample of male workers to estimate public and private wage structures and the public wage premium for Italy. Results from a model with endogenous sector and schooling suggest that public employees have on average lower unobserved wage potentials in both sectors than private employees, but work in the sector where they benefit from a comparative wage advantage. Schooling is positively correlated with wages in both sectors, and controlling for that is crucial to get more reliable estimates and predictions. The associated average unconditional public wage premium is 12 per cent. The net premium is 9 per cent, but not statistically significant.     

Join the Union and Be Safe: The Effects of Unionization on Occupational Safety and Health in the European Union

This paper investigates the effect of unionization on occupational safety and health, as measured by the fatal and non‐fatal work accidents, after controlling for the country's gross domestic product. It uses a panel sample of 10 European Union countries, for the period 1982–2006. The study takes into account the time persistence in work injuries and the endogenous nature of the work injuries–union density relationship. In addition, the effect of union density is decomposed into a temporary and permanent effect. It is shown that increasing union density is associated with a decrease in the number of both fatal and non‐fatal work injuries.     

Transitions in the Labour Market: Discouragement Effect and Individual Characteristics

The present work analyses the unemployment gender gap in Italy for the period 2004–11. We present a methodology for decomposing the natural rate of unemployment, thus defining it in terms of equilibrium labour market flows between the aggregate states of the labour market (Employment, Unemployment, Inactivity). In addition, we offer estimates of the determinants of the unemployment gender gap to pinpoint the relative role of individual characteristics and structural factors in determining this difference.     

The Differential Earnings and Income Effects of Involuntary Job Loss on Workers with Disabilities — Evidence from Sweden

People with disabilities are consistently found to face considerable difficulties in the labour market. In this study we investigated whether their earnings and income trajectories are more adversely affected in case of involuntary job loss. Earnings of those with and without disabilities began to diverge already several years prior to job loss because of larger incidence of sickness. Following job loss much more job losers with disabilities became disability retirees resulting in a considerable and seemingly permanent earnings differential. However, larger uptake of public social insurances among job losers with disabilities resulted in a much smaller income differential.     

Labour Market Policies in Times of Crisis: A Reaction Function Approach for the Period 1985–2010

This article examines the reaction function of labour market expenditure to unemployment in 24 OECD countries, over the period 1985–2010, using the OECD panel data. The level of public debt is also introduced as a factor that is likely to influence these expenditures. Using a fixed‐effect model with interaction terms, this research focuses on two periods of crisis (1992–93 and 2007–09). The results confirm the counter‐cyclical variation of labour market policy expenditures. Nevertheless, the sensitivity of labour market expenditure to the economic cycle has in general decreased and the policy mix has changed. This could result from the important labour market reforms undertaken in the last 20 years.     

Unemployment and Retirement in a Model with Age‐specific Heterogeneity

This paper presents a model where young and old workers compete for one type of jobs in the presence of retirement opportunity. Within this framework, we show that increased retirement opportunities (such as a decrease of the retirement age) has most of the time a depressing impact on the unemployment rate. Indeed the number of vacancies posted by firms is influenced by the probability that an old worker is going into retirement. We show that the degree to which younger workers are influenced by retirement of older workers depends on the relative productivity of young and older workers. It is only when older workers are much more productive than young workers that retirement may benefit to unemployment.     

Personality and Employment Transitions at Older Ages: Direct and Indirect Effects through Non‐Monetary Job Characteristics

We study whether individuals with different personality traits systematically exhibit different retirement trajectories. We find weak direct associations between personality and employment transitions. On the other hand, personality does contribute indirectly to these transitions by moderating the effects of non‐monetary job characteristics. Specifically, workers with different traits are observed to follow different retirement paths when faced with similar physical demands, computer skills requirements, job flexibility, and age discrimination in the workplace. Contrary with other economic domains, conscientiousness does not have the strongest association with retirement; the other components of the Big Five personality traits show more salient patterns.     

A Theory of the Firm with Non‐binding Employment Contracts

This paper examines an employment relation in which individual workers enjoy some bargaining power vis‐a‐vis the firm although they are not unionized. The main elements of the situations studied here are that the employment contracts are non‐binding across periods of production and that the firm has opportunities to replace workers. The paper analyzes a dynamic model in which the processes of contracting and recontracting between the firm and its workers are intertwined with the dynamic evolution of the firm's workforce. The analysis of the model is somewhat complicated because the employment level is a nondegenerate state variable that evolves over time and is affected by past decisions. The main analytical results characterize certain important equilibria: the profit maximizing and stationary equilibria. The unique stationary equilibrium is markedly inefficient: it exhibits inefficient over‐employment and the steady state wages coincide with the workers' reservation wage. It confirms earlier results derived by Stole and Zwiebel (1996a, b) in the context of a static model and shows that they are very robust even when the firm has nearly frictionless hiring opportunities. In contrast, in the profit maximizing equilibrium the outcome is nearly efficient and the wage exhibits a mark‐up over the reservation wage.     

Internet‐Based Employer Search and Vacancy Duration: Evidence from Finland

This study investigates the effect of the introduction of the public employment agency's Internet‐based service on the duration of employer search. The analysis exploits the introduction of a web‐based service by the Finnish Employment Agency in October 2002. The results, based on information on job vacancies announced via the public employment agency between 2002 and 2003, indicate that the introduction of the web service, in general, shortened the duration of employer search. However, we find that the introduction of the web‐based service shortened the average duration of vacancies in some regions but not in others. In addition, employers in urban areas were more likely to benefit from the introduction of the online service.     

Voluntary Work‐related Technology Use during Non‐work Time: A Narrative Synthesis of Empirical Research and Research Agenda

The Internet and mobilization of information and communication technologies (ICTs) have made non‐manual work increasingly portable and remotely accessible. As a result, a considerable number of employees use their ICTs to engage in work‐related tasks during designated non‐work time, even without contractual obligation. However, existing research on such voluntary work‐related ICT use remains fragmented and spread across disciplines. The authors conducted a narrative review of 56 studies to identify themes in existing research, synthesize the evidence base and identify gaps in understanding. They identify five themes: (1) Social‐normative organizational context, (2) Job‐related characteristics and work processes, (3) Person characteristics, (4) Designated non‐work time and well‐being, and (5) Empowerment/Enslavement Paradox. A conceptual model of voluntary ICT use is developed by integrating the identified themes with existing organizational research, outlining the relationships between the identified themes and voluntary ICT use. The discussion emphasizes the need for more conceptual clarity on voluntary ICT use and related constructs, and for the integration of different disciplines and methodological approaches to advance knowledge in the field. The authors further identify person‐centred research as a critical future avenue to explore different ICT user types. Additionally, more research into the mechanisms and moderating influences regarding voluntary ICT use and its outcomes is considered advisable to advance knowledge on the Empowerment/Enslavement Paradox and its potential resolution. The paper concludes with preliminary implications to inform practice, addressing the need for employers to provide control over voluntary ICT use and employees enacting this control.     

A Causality Analysis of Economic Growth and Union Density in European Countries

In this paper, we analyse the relationship between union density and economic growth using a Granger causality analysis and shocks analysis with vector autoregression model. We find that the Granger causality goes from the growth rate to the unionization rate in four of the 11 European countries under study. France bucks the trend: it is the only country in which union density influences economic growth, moreover in a positive way.     

A Look at State‐Level Risk Assessment in the United States: Making Decisions in the Absence of Federal Risk Values

State environmental agencies in the United States are charged with making risk management decisions that protect public health and the environment while managing limited technical, financial, and human resources. Meanwhile, the federal risk assessment community that provides risk assessment guidance to state agencies is challenged by the rapid growth of the global chemical inventory. When chemical toxicity profiles are unavailable on the U.S. Environmental Protection Agency's Integrated Risk Information System or other federal resources, each state agency must act independently to identify and select appropriate chemical risk values for application in human health risk assessment. This practice can lead to broad interstate variation in the toxicity values selected for any one chemical. Within this context, this article describes the decision‐making process and resources used by the federal government and individual U.S. states. The risk management of trichloroethylene (TCE) in the United States is presented as a case study to demonstrate the need for a collaborative approach among U.S. states toward identification and selection of chemical risk values while awaiting federal risk values to be set. The regulatory experience with TCE is contrasted with collaborative risk science models, such as the European Union's efforts in risk assessment harmonization. Finally, we introduce State Environmental Agency Risk Collaboration for Harmonization, a free online interactive tool designed to help to create a collaborative network among state agencies to provide a vehicle for efficiently sharing information and resources, and for the advancement of harmonization in risk values used among U.S. states when federal guidance is unavailable.     

The Motherhood Wage Penalty and Its Determinants: A Public–Private Comparison

We investigate whether public and private sector employees bear a different wage penalty for having children. According to our estimates, the total motherhood wage penalty is much larger in the private than in the public sector. Nevertheless, in both sectors, we find no unexplained penalty once we control for potential determinants of the family pay gap, namely, a reduced labour supply of mothers, child‐related career interruptions, less access to management positions, and adjustments in working conditions. Finally, only child‐related career interruptions play a different role in explaining the motherhood wage penalty in each sector.