Documents business cycle 201 results

"In this paper, we analyze the impact of downward wage rigidity on the labor market dynamics. We shows that imposing downward wage rigidity in a matching model with cyclical fluctuations in productivity, endogenous match-destruction, and on-the-job search, quits are procyclical and layoffs countercyclical. Using the European Community Household Panel (ECHP), we provide evidence that downward wage rigidity is empirically relevant in ten European countries. Finally, we show that layoffs are countercyclical and quits are procyclical, as predicted by the model."

"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."

"Part-time employment in Europe has continued to grow faster than overall employment during the Great Recession and its aftermath. But as part-time work becomes more prevalent, so does involuntary part-time – at least in most countries. In this paper we focus on Greece and the UK, two European labour markets characterised by different institutions, but also a common trend of rising involuntary part-time (from different levels). We attempt to detect determinants and/or correlates of involuntary part-time, and changes over time. We analyse Labour Force Survey data for 2008 and 2013. We find that the UK labour market appears to be more successful in aligning workers' preferences with employers' demand for part-time work. However, as the economic downturn has made full-time jobs scarcer, involuntary part-time work has risen. Moreover, significant gaps in pay and job quality between voluntary and involuntary part-timers persist. In the case of Greece, involuntary part-time was already very high in 2008, in spite of the fact that pay differentials were relatively small, which suggests that part-time jobs were widely viewed by workers as sub-optimal. Under the impact of the recession and the austerity, the Greek labour market has become more flexible but also more insecure. As pay differentials have risen, and non-standard work has been made more precarious, part-time jobs have become even less attractive, so involuntary part-time has grown further still. We conclude that while the structure of the economy and the business cycle explain some of the differences between the two countries and over time, institutional factors and the quality of part-time jobs on offer are of great importance in shaping workers' attitudes. We suggest that future research should focus on the interaction between shocks and institutions."

"Recent empirical work has found evidence that the elasticity of labor supply to individual firms is finite, implying that firms may have wage setting power. However, these studies capture only single snapshots of the elasticity. We are the first to study how the elasticity of labor supply to the firm changes between economic contractions and economic expansions. We study two manufacturing firms operating in geographically distinct labor markets during the volatile inter-war period. Our analysis suggests that the elasticity of labor supply to the firm is lower during recessions than during expansions, providing evidence of differential wage setting power over the business cycle. This differential wage setting ability provides an explanation of the pro-cyclicality of real wages."

"This paper considers a real business cycle model with search frictions in the labor market and labor supply which is elastic along the participation margin. Previous authors have found that such models generate counterfactually procyclical unemployment and a positively sloped Beveridge curve. This paper presents a calibrated model which succeeds at generating countercyclical unemployment and a negatively sloped Beveridge curve, despite the presence of a participation margin."

"We study individual job separations and their associated destination states for all individuals in the private sector in Denmark for the period 1980 to 2000, and account for their magnitude and cyclical flows. One finding is that individual and workplace characteristics as well as business cycle effects determine the individual behaviour. In policy simulations the consequences for individual labour market transitions are analysed. We find that structural and growth policies have different consequences for the economy due to the way they change workers' incentives. Policy interventions targeting displaced workers coming from plant closures are argued to be inefficient."

"The past employment history – employment requirements – is part of the eligibility conditions for unemployment insurance in most western countries. In a standard search-matching model, we show how employment requirements strengthen the reentitlement effect and thereby changes the trade-off between insurance and incentives in the design of the optimal insurance scheme. Deploying employment requirements for benefit eligibility may thus allow for both higher benefit levels and longer duration, and yet labor market performance is improved. When the need for insurance increases due to higher risk aversion, employment requirements becomes less lenient, and oppositely when the environment becomes more risky."

"The coronavirus (COVID-19) pandemic almost certainly affected potential output negatively via various channels, affecting the trends of total factor productivity, capital and labour. Quantitative estimates show that euro area potential growth will likely stall or even decline in 2020 and the pace of the recovery is highly uncertain, as it depends on whether the shock is temporary or persistent. Comprehensive policy measures are playing a crucial role in preventing hysteresis in the euro area economy and long-term economic scarring."