Documents CEPR 87 results

"n traditional labor markets, workers transform their multidimensional skills into bundles of tasks, which they supply to their employing firms. We examine how labor markets change as new institutions and technologies make it less and less costly for firms and workers to unbundle and trade stand-alone tasks. Our analysis relies on a general equilibrium model of the labor market under bundling, combined with a full model of task unbundling.
The contrast between the old world (where bundling prevails) and the new world (with unbundled tasks) is stark. As unbundling costs fall and outsourcing markets grow, firms reinforce hiring in skills where they have a comparative advantage yielding a more polarized matching equilibrium and a flattened wage schedule. Generalist workers – endowed with a balanced set of skills – tend to benefit whereas specialists tend to be negatively affected by markets opening. Descriptive evidence, using Swedish data sources on workers' skills and their employing firms, is also presented."

"Widely quoted cross-country evidence finds income to be negatively associated with inequality, which suggests that there is no trade-off between efficiency and equity. Such inference presumes that countries are at the frontier in the efficiency-equity space. We refute this for most OECD countries, and find that the best-practice frontier displays a trade-off. In accordance with standard economic theory, a larger tax burden is associated with lower efficiency and more equity. Interestingly, there is no evidence that the trade-off has become steeper over the sample period 1980-2010. Country positions differ significantly with some being consistently at or close to the frontier, while others are well inside the opportunity set."

"IMF forecasts and the EU's Fiscal Compact foresee Europe's heavily indebted countries running primary budget surpluses of as much as 5 percent of GDP for as long as 10 years in order to maintain debt sustainability and bring their debt/GDP ratios down to the Compact's 60 percent target. We show that primary surpluses this large and persistent are rare. In an extensive sample of high- and middle-income countries there are just 3 (nonoverlapping) episodes where countries ran primary surpluses of at least 5 per cent of GDP for 10 years. Analyzing a less restrictive definition of persistent surplus episodes (primary surpluses averaging at least 3 percent of GDP for 5 years), we find that surplus episodes are more likely when growth is strong, when the current account of the balance of payments is in surplus (savings rates are high), when the debt-to-GDP ratio is high (heightening the urgency of fiscal adjustment), and when the governing party controls all houses of parliament or congress (its bargaining position is strong). Left wing governments, strikingly, are more likely to run large, persistent primary surpluses. In advanced countries, proportional representation electoral systems that give rise to encompassing coalitions are associated with surplus episodes. The point estimates do not provide much encouragement for the view that a country like Italy will be able to run a primary budget surplus as large and persistent as officially projected."

"In October 2007 France introduced an exemption on the income tax and social security contributions that applied to wages received for hours worked overtime. The goal of the policy was to increase the number of hours worked. This article shows that this reform has had no significant impact on hours worked. Conversely, it has had a positive impact on the overtime hours declared by highly qualified wage-earners, who have opportunities to manipulate the overtime hours they declare in order to optimize their tax situation, since the hours they work are difficult to verify."

"Can stringent labor laws be efficient? Possibly, if they provide firms with a commitment device to not punish short-run failures and thereby incentivize the pursuit of value-maximizing innovative activities. In this paper, we provide empirical evidence that strong labor laws indeed appear to have an ex ante positive incentive effect by encouraging the innovative pursuits of firms and their employees. Using patents and citations as proxies for innovation and a time-varying index of labor laws, we find that innovation is fostered by stringent labor laws, especially by laws governing dismissal of employees. We provide this evidence using levels-on-levels, changes-on-changes, and finally difference-in-difference regressions that exploit staggered country-level law changes. We also find that stringent labor laws disproportionately influence innovation in those sectors of the economy that are more innovation intensive. Finally, we find that while the overall effect of stringent labor laws is to dampen economic growth, laws that govern dismissal of employees are an exception: dismissal laws promote economic growth, consistent with the evidence that they encourage firm-level innovation."

"This paper reviews theoretical and empirical aspects of the interaction between Europe's Economic and Monetary Union and recent labour market developments. Policies meant to increase and stabilize labour incomes also tend to reduce employment and productivity: theory suggests that the latter effects should be sharper and more relevant within an integrated market area, making it harder for National policy makers to address the consequences of financial and other market imperfections. Empirical patterns of policy and outcome indicators in member and non-member countries of EMU are consistent with that theoretical mechanism. In the data, tighter economic integration is associated with better employment performance, substantial deregulation, sharper disemployment effects of remaining regulatory differences, and somewhat higher inequality and larger private financial market volume.

This paper reviews theoretical and empirical aspects of the interaction between Europe's Economic and Monetary Union and recent labour market developments. Policies meant to increase and stabilize labour incomes also tend to reduce employment and productivity: theory suggests that the latter effects should be sharper and more relevant within an integrated market area, making it harder for National policy makers to address the consequences of financial and other market imperfections. Empirical patterns of policy and outcome indicators in member and non-member countries of EMU are consistent with that theoretical mechanism. In the data, tighter economic integration is associated with better employment performance, substantial deregulation, sharper disemployment effects of remaining regulatory differences, and somewhat higher inequality and larger private financial market volume. "