Documents Moen, Espen R. 3 results

"All OECD countries have either legally mandated severance pay or compensations imposed by industry-level bargaining in case of employer initiated job separations. According to the extensive literature on Employment Protection Legislation such transfers are either ineffective or highly distortionary. In this paper we show that mandatory severance is optimal in presence of wage deferrals when there is moral hazard of employers and workers, notably when employers cannot commit not to fire a non-shirker and shirkers can also get away with it. Our model also accounts for two neglected features of EPL. The first is that dismissal costs depend not only on whether the dismissal is deemed fair or unfair, but also on the nature, economic vs. disciplinary, of the layoff. The second feature is that compensation for unfair dismissal or severance is generally increasing with tenure."

"We examine the origins and outcome of entrepreneurship on the basis of exceptionally comprehensive Norwegian matched worker–firm–owner data. In contrast to most existing studies, our notion of entrepreneurship not only comprises self-employment, but also employment in partly self-owned limited liability companies. Based on this extended entrepreneurship concept, we find that entrepreneurship tends to be profitable. It also raises income variability, but the most successful quartile gains much more than the least successful quartile loses. Key determinants of the decision to become an entrepreneur are occupational qualifications, family resources, gender, and work environments. Individual unemployment encourages, while aggregate unemployment discourages, entrepreneurship."

"The recent financial crises, alongside a dramatic rise in unemployment on both sides of the Atlantic, suggest that financial shocks do translate into the labor markets. In this paper we first document that financial recessions amplify labor market volatility and Okun's elasticity over the business cycle. Second, we highlight a key mechanism linking financial shocks to job destruction, presenting and solving a simple model of labor market search and endogenous finance. While finance increases job creation and net output in normal times, it also augments their aggregate response in the aftermath of a financial shock. Third, we present evidence coherent with the idea that more leveraged sectors experience larger employment volatility during financial recessions. Theoretically, the job destruction effect of finance works as follows. Leveraged firms may find themselves in a position in which their liquidity is suddenly called back by the lender. This has direct consequences on a firm ability to run and manage existing jobs. As a result, firms may be obliged to shut down part of their operations and destroy existing jobs. We argue that with well-developed capital markets, firms will have an incentive to rely more on liquidity, and in normal times deep capital markets lead to tight labor markets. After an adverse liquidity shock, firms that rely much on liquidity are hit disproportionally hard. This may explain why the unemployment rate in the US during the Great Recession increased more than in European countries experiencing larger output losses. Empirically, the paper uses a variety of datasets to test the implications of the model. At first we identify crises that, just like in the model, caused a sudden reduction of liquidity to firms. Next we draw on sector-level data on employment and leverage in a number of OECD countries at quarterly frequencies to assess whether highly leveraged equilibria originate more employment adjustment under financial recessions. We find that highly leveraged sectors and periods are associated with higher employment- to-output elasticities during banking crises and this effect explains the observation of higher Okun's elasticities during financial recessions. We also argue that the effect of leverage on employment adjustment can be interpreted as a causal effect, if our identification assumptions are considered plausible. All this amounts essentially for a test of the labor demand channel of adjustment."