Dear all,

we would like to invite you to our next ECON Theory and Policy Seminar talks:

Thursday, May 5, 4:00 pm (Seminarroom DB gelb 05 A, yellow area, 5th floor)

Labor Market Institutions, Fiscal Multipliers, and Macroeconomic Volatility

Maximilian Böck (Vienna School of International Studies) https://maximilian-boeck.webflow.io/

We study empirically how various labor market institutions – (i) union density, (ii) unemployment benefit remuneration, and(iii) employment protection – shape fiscal multipliers and macroeconomic volatility. Our theoretical model highlights that more stringent labor market institutions attenuate both fiscal spending multipliers and macroeconomic volatility. This is validated empirically by an interacted panel vector autoregressive model estimated for 16 OECD countries. The strongest effects emanate from employment protection, followed by union density. While some labor market institutions mitigate the size or frequency of exogenous shocks, they, however, reinforce their propagation mechanism. The main policy implication is that stringent labor market institutions render cyclical fiscal policies less relevant for macroeconomic stabilization.

and on

Friday, May 6, 4:00 pm (Seminarroom DB04, Freihaus Building, 4th floor, yellow area)

Temporary Non-Employment and Labor Reallocation: Testing a “Job Ladder” Model with Accidents and Recalls 

Tímea Laura Molnár (CEU) https://people.ceu.edu/timea-laura_molnar

How do temporary spells out-of-employment affect individuals’ labor trajectory? To answer this question, we leverage a 50%  employer-employee matched dataset from Hungary for years 2009-2017, that also contains the entire history of individuals’ drug prescriptions and medical diagnosis. We use unexpected accidents (e.g., fracture of arm, or dislocations of joints) with arguably no permanent productivity impacts, to identify the effect of random assignment to temporary non-employment. Using both matching and instrumental variable identification strategies and controlling for a rich set of individual- and firm-level characteristics prior accidents, we find that, after non-employment spells following temporary accidents, individuals’ wages decrease substantially for up to two years. We show that most of the wage effect is due to reallocation of workers to lower quality employers (captured by firm size, ownership structure and AKM firm effect). We interpret our results through the lens of an augmented “job ladder” model, in which individuals receive alternative take-it-or-leave-it wage offers from firms and potentially suffer accidents which may push them into the state of non-employment. In such an environment, conditional on not suffering an accident, wages grow via job switching (both within and across employers). In a non-employment spell following an accident, the individual becomes less selective on which wage offer to accept relative to when she had a job. Thus, upon receiving a health shock and not having the option to return to their previous employer, the individual “falls from the job ladder”. However, even if the individual is able to return to the same exact job after recovery, her wage is smaller than in the counterfactual of no accident; the intuition is that she did not have the opportunity to receive alternative job offers that she would have received had she remained employed, and thus foregoes the opportunity to “climb the job ladder”. Both mechanisms alter the entire labor trajectory of individuals, with persistent wage and reallocation effects. 

Further Events: https://www.econ.tuwien.ac.at/index.html#events

Best regards,

Julia Hutter

for Alexia Fürnkranz-Prskawetz

Julia Hutter

TU Wien

Institute of Statistics and Mathematical Methods in Economics

Economics E105-3

Phone: +43-1-58801x10531

E-Mail: julia.hutter@tuwien.ac.at