Risk Aversion,Collective Bargaining,and Wages in Germany

We develop an open‐shop model of trade union membership in which workers differ in their risk attitudes, and derive conditions under which the bargained wage will fall and union membership will increase with a general rise in risk aversion. Using data from the German Socio‐Economic Panel we define broad bargaining units and show that wages decline as average risk aversion of union members in these units rises, controlling for individual effects of risk aversion. Given a negative relationship between wages and employment, this suggests that secular changes in risk attitudes, because of an aging workforce or greater female labour force participation, can help to explain variations in the employment performance of unionized economies.     

Earning While Learning: When and How Student Employment is Beneficial

Although studies of student employment (‘earning while learning’) mostly find positive wage effects, they do not adequately consider the relation of the employment to the field of study. We investigate how different types of student employment during tertiary education affect short‐ and long‐term labour market returns. Beyond examining differences between non‐working and part‐time working students, we distinguish between student employment related and unrelated to the field of study. Our results show significant positive labour market returns of ‘earning while learning’ only for student employment related to the field of study. These returns consist of a lower unemployment risk, shorter job‐search duration, higher wage effects, and greater job responsibility.     

Informal Referrals,Employment, and Wages: Seeking Causal Relationships

Employers and job seekers rely extensively on informal referrals to fill vacancies or to find a job. The widespread use of job contacts has been largely associated with labor outcomes, such as finding a job or even affecting wages. This paper explores whether the use of informal referrals on the job search process affects labor market outcomes of Colombian urban workers. Results indicate that informal referrals are slightly more successful than other job search strategies in term of job seeker's placement. However, referred workers earn in average less than their non‐referred counterparts. Yet, this is only true in formal‐sector positions.     

The Implications of Temporary Jobs on the Distribution of Wages in Italy: An Unconditional IVQTE Approach

Using Italian data, this paper investigates the wage implications of temporary jobs across the whole pay profile using unconditional quantile regression (UQR) models. Results clearly indicate that the wage penalty associated to temporary jobs is significantly larger at the bottom of wage profile and is almost absent for high‐wage jobs. This is in line with the sticky floors hypothesis, supporting the idea that the wage gap for temporary employees depends on their position in the wage distribution for low‐paid jobs. To recover a causal interpretation, I employ an instrumental variable (IV) strategy. I adopt the unconditional instrumental variable quantile treatment effects (IVQTE) estimator proposed by Frolich and Melly, which corrects for endogenous selection in temporary contracts. The IVQTE estimates yield similar results to standard UQR, even if the wage penalty is larger in size at the bottom of the wage distribution and disappears at the top quantiles. This evidence highlights that policies aimed at increasing flexibility may reinforce the two‐tier nature of the Italian labour market and the relative wage inequality.     

The Determinants and Some Consequences of Unemployed Workers' Wage Demands

This paper studies the determinants and consequences in the early stages of the hiring process of unemployed workers' wage demands using direct data on workers' wage requests. We show that most unemployed workers want a wage close to their previous wage, and thus much more than they get in unemployment benefits. However, some groups, such as women, tend to demand lower wages. Moreover, we find that workers with high wage demands are contacted by firms less often than otherwise similar workers with lower wage demands. Thus, our results suggest that too high wage demands may contribute to high unemployment.     

SEARCH INTENSITY,DIRECTED SEARCH,AND THE WAGE DISTRIBUTION

We propose a search equilibrium model in which homogeneous firms post wages along with a vacancy to attract job seekers while homogeneous unemployed workers invest in costly job seeking. The key innovation relies on the organization of the search market and the search behavior of the job seekers. The search market is continuously segmented by wage level, individuals can spread their search investment over the different submarkets, and search intensity has marginal decreasing returns in each submarket. We demonstrate the existence of a nondegenerate equilibrium wage distribution. The density of this wage distribution is increasing at low wages and decreasing at high wages. The distribution can be right‐tailed, and, under additional restrictions, is hump‐shaped. Our results are illustrated by an example generating a Beta wage distribution.     

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).     

Low‐wage Jobs — Springboard to High‐paid Ones?

We examine whether low‐paid jobs have an effect on the probability that unemployed persons obtain better‐paid jobs in the future (springboard effect). We make use of data from the German Socio‐Economic Panel (SOEP) and apply a dynamic random effects bivariate probit model. Our results suggest that low‐wage jobs can act as springboards to better‐paid work. The improvement of the chance to obtain a high‐wage job by accepting low‐paid work is particularly large for less‐skilled persons and for individuals who experienced longer periods of unemployment. Low‐paid work is less beneficial if the job is associated with a low social status.     

The Role of Profit Sharing in Dual Labour Markets with Flexible Outsourcing

We combine profit sharing for high‐skilled workers and outsourcing of low‐skilled tasks in a partly imperfect dual domestic labour market, which means that only low‐skilled labour is represented by a labour union. In that framework we analyse how the implementation of profit sharing for high‐skilled workers influences the amount of outsourcing and the labour market outcome for low‐skilled worker. By doing this, we use some specific assumptions, e.g. exponentially increasing outsourcing costs or the wage for low‐skilled workers will be determined by a union whereas the wage for high‐skilled workers is given. Assuming that low‐skilled labour and outsourcing are interchangeable we show that profit sharing has a positive effect on the wage for low‐skilled workers and helps to decrease wage dispersion. However, under these circumstances, profit sharing enhances outsourcing. Concerning the employment effects for high‐ and low‐skilled workers, we show that there is an employment reducing effect due to higher wages for low‐skilled work, which can be offset by higher productivity of highly skilled workers, as the domestic labour inputs complement each other.     

Employment Protection and Temporary Work Agencies

Employers who use temporary agency staff in contrast to regular staff are not affected by employment protection regulations when terminating a job. Therefore, services provided by temporary work agencies may be seen as a substitute for regular employment. In this paper, we analyse the effects of employment protection on the size of the temporary work agency sector in a model of equilibrium unemployment. We find that higher firing costs may even reduce temporary work agency employment if agencies themselves are subject to employment protection, a consideration that distinguishes our results from those for fixed‐term employment arrangements.     

A Level Playing Field: An Optimal Weighting Scheme of Dismissal Protection Characteristics

In collective redundancies, employers are forced to regard certain characteristics when deciding who to dismiss. This paper develops a procedure to derive an empirical‐based weighting scheme between protection characteristics in Germany (age, disability, dependencies, and tenure). Up to now, an objective weighting scheme is missing, and employers bargain with employee's representatives about the weighting of the characteristics. In the suggested procedure, the relationships of the four characteristics with reemployment probabilities and the quality of the new job are estimated. Then, the relevant outcome variable is chosen applying life satisfaction analysis. Finally, based on the empirical results, a weighting scheme for the characteristics is proposed, which serves as a guideline in the process of collective redundancies.     

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.     

Product Market Regulation and Labor Market Performance around the World

Using annual data on 80 countries for 1980–2007 and a new indicator of product market regulation, this paper studies the effects of product market regulation on labor market performance among the total population as well as among two important groups of labor market outsiders: women and youth. It finds that stricter regulation is likely to both increase the unemployment rate and decrease the employment rate. The magnitude of the estimated effects is substantial. There are above‐average effects on both groups of outsiders, with the effects being particularly strong on youth. The results are robust to variations in specification.     

Union Bargaining,Wage Differentials and Employment

Abstract. Reviewing empirical studies concerning the corporatism-flexibility-performance nexus the paper discusses decentralized and centralized bargaining systems. Revenue pay systems, concession bargaining and two-tier wage systems as means to enhance wage flexibility at the firm level are also considered. Both theoretical and empirical evidence is presented, showing that unions are bargaining for greater employment security for the already employed (the insiders). In return, unions are ready to accept greater wage flexibility and even wage decreases. By contrast, the insider-outsider theory does suggest how unions may accentuate involuntary unemployment, because there may be ways in which a union can help to raise the wages of the insiders without reducing their chances of continued employment.     

Employability of Young Italian Men after a Jobless Period, 1989–98

In this paper we investigate the existence of negative jobless duration dependence and the impact of jobless spells on future wages. Our findings are somewhat out of line compared with analogous explorations. We find evidence of very long unemployment duration of the young male labor force, higher than reported anywhere else in Western Europe, as well as large negative unemployment duration dependence. On the other hand, young Italian men experiencing jobless periods in their early careers face small re‐employment wage losses. Such losses do increase with the duration of joblessness, but they are lower than reported in the USA, Canada, the UK, France, and Spain.     

Vacancy Referrals,Job Search,and the Duration of Unemployment: A Randomized Experiment

One goal of the Public Employment Service is to facilitate matching between unemployed job‐seekers and job vacancies; another goal is to monitor job search so as to bring search efforts among the unemployed in line with search requirements. The referral of job‐seekers to vacancies is one instrument used for these purposes. We report results from a randomized Swedish experiment where the outcome of referrals is examined. To what extent do unemployed individuals actually apply for the jobs they are referred to? Does information to job‐seekers about increased monitoring affect the probability of applying and the probability of leaving unemployment? The experiment indicates that a relatively large fraction (one‐third) of the referrals do not result in job applications. Information about intensified monitoring causes an increase in the probability of job application, especially among young people. However, we find no significant impact on the duration of unemployment.     

Centralization and Decentralization in Collective Bargaining

ABSTRACT: In this paper, the author traces the course of the collective bargaining process in Italy and Europe, and looks in particular at the aspect of its centralisation and decentralisation. It begins with a historical background of this process and examines organizational and institutional alternatives which may limit or redimension this bargaining system in the face of more or less centralisation. It continues by outlining the institutionalisation of this system in Europe, and then by examining the effects which technological innovation and economic recession have had on it. Several hypotheses as to possible alternatives with regard to centralisation/decentralisation, convergence or divergence of the bargaining system are formulated on the basis of the preceding data, and looks at the difficulties now facing this system. Finally, the role of the state and the law with regard to collective bargaining is discussed and some general observations are made.     

Bargaining,Reputation, and Equilibrium Selection in Repeated Games with Contracts

Consider a two‐person intertemporal bargaining problem in which players choose actions and offers each period, and collect payoffs (as a function of that period's actions) while bargaining proceeds. This can alternatively be viewed as an infinitely repeated game wherein players can offer one another enforceable contracts that govern play for the rest of the game. Theory is silent with regard to how the surplus is likely to be split, because a folk theorem applies. Perturbing such a game with a rich set of behavioral types for each player yields a specific asymptotic prediction for how the surplus will be divided, as the perturbation probabilities approach zero. Behavioral types may follow nonstationary strategies and respond to the opponent's play. In equilibrium, rational players initially choose a behavioral type to imitate and a war of attrition ensues. How much should a player try to get and how should she behave while waiting for the resolution of bargaining? In both respects she should build her strategy around the advice given by the “Nash bargaining with threats” (NBWT) theory developed for two‐stage games. In any perfect Bayesian equilibrium, she can guarantee herself virtually her NBWT payoff by imitating a behavioral type with the following simple strategy: in every period, ask for (and accept nothing less than) that player's NBWT share and, while waiting for the other side to concede, take the action Nash recommends as a threat in his two‐stage game. The results suggest that there are forces at work in some dynamic games that favor certain payoffs over all others. This is in stark contrast to the classic folk theorems, to the further folk theorems established for repeated games with two‐sided reputational perturbations, and to the permissive results obtained in the literature on bargaining with payoffs as you go.     

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.     

IMMIGRATION,JOBS, AND EMPLOYMENT PROTECTION: EVIDENCE FROM EUROPE BEFORE AND DURING THE GREAT RECESSION

In this paper we analyze the impact of immigrants on the type and quantity of native jobs. We use data on 15 Western European countries during the 1996–2010 period. We find that immigrants, by taking manual‐routine type of occupations pushed natives towards more “complex” (abstract and communication) jobs. This job upgrade was associated to a 0.7% increase in native wages for a doubling of the immigrants' share. These results are robust to the use of an IV strategy based on past settlement of immigrants across European countries. The job upgrade slowed but did not come to a halt during the Great Recession. We also document the labor market flows behind it: the complexity of jobs offered to new native hires was higher relative to the complexity of lost jobs. Finally, we find evidence that such reallocation was larger in countries with more flexible labor laws.