scholarly journals Wages and the Value of Nonemployment*

2020 ◽  
Vol 135 (4) ◽  
pp. 1905-1963 ◽  
Author(s):  
Simon Jäger ◽  
Benjamin Schoefer ◽  
Samuel Young ◽  
Josef Zweimüller
Keyword(s):  
Unemployment Insurance ◽  
Unemployment Duration ◽  
Nash Bargaining ◽  
Bargaining Model ◽  
Wage Setting ◽  
Outside Option ◽  
Wage Effect ◽  
Point Estimates ◽  
Experimental Variation ◽  
Quasi Experimental

Abstract Nonemployment is often posited as a worker’s outside option in wage-setting models such as bargaining and wage posting. The value of nonemployment is therefore a key determinant of wages. We measure the wage effect of changes in the value of nonemployment among initially employed workers. Our quasi-experimental variation in the value of nonemployment arises from four large reforms of unemployment insurance (UI) benefit levels in Austria. We document that wages are insensitive to UI benefit changes: point estimates imply a wage response of less than $0.01 per $1.00 UI benefit increase, and we can reject sensitivities larger than $0.03. The insensitivity holds even among workers with low wages and high predicted unemployment duration, and among job switchers hired out of unemployment. The insensitivity of wages to the nonemployment value presents a puzzle to the widely used Nash bargaining model, which predicts a sensitivity of $0.24–$0.48. Our evidence supports wage-setting models that insulate wages from the value of nonemployment.

scholarly journals Unemployment Insurance and Means-Tested Program Interactions: Evidence from Administrative Data

2020 ◽  
Vol 12 (2) ◽  
pp. 159-192
Author(s):  
Pauline Leung ◽  
Christopher O’Leary
Keyword(s):  
Unemployment Insurance ◽  
Safety Net ◽  
Social Safety Net ◽  
Welfare Participation ◽  
Quarterly Earnings ◽  
The Past ◽  
Labor Earnings ◽  
Experimental Variation ◽  
The Social ◽  
Quasi Experimental

We study the ways in which unemployment insurance (UI) benefits interact with other elements of the social safety net around job losses. We exploit a cutoff for UI eligibility, based on a workers’ highest quarterly earnings in the past year, to generate quasi-experimental variation in UI receipt. We find that UI receipt cuts welfare (TANF) receipt by half among low-earning UI applicants but has no impact on SNAP or Medicaid usage. However, because welfare participation is low in this population, overall crowdout is small. In the quarter following layoff, UI increases total income by 55 percent (including labor earnings and transfers) (JEL E24, H53, I18, I38, J64, J65).

Informal Labor and the Efficiency Cost of Social Programs: Evidence from Unemployment Insurance in Brazil

2021 ◽  
Vol 13 (3) ◽  
pp. 167-206
Author(s):  
François Gerard ◽  
Gustavo Gonzaga
Keyword(s):  
United States ◽  
Moral Hazard ◽  
Labor Markets ◽  
Unemployment Insurance ◽  
The United States ◽  
Social Programs ◽  
Informal Labor ◽  
Experimental Variation ◽  
Efficiency Cost ◽  
Quasi Experimental

It is widely believed that the presence of a large informal sector increases the efficiency cost of social programs in developing countries. We evaluate such claims for the case of unemployment insurance (UI) by combining an optimal UI framework with comprehensive data from Brazil. Using quasi-experimental variation in potential UI duration, we find clear evidence for the usual moral hazard problem that UI reduces incentives to return to a formal job. Yet, the associated efficiency cost is lower than it is in the United States, and it is lower in labor markets with higher informality within Brazil. This is because formal reemployment rates are lower to begin with where informality is higher, so that a larger share of workers would draw UI benefits absent any moral hazard. In sum, efficiency concerns may actually become more relevant as an economy formalizes. (JEL J65, O15, O17, E26, D82, J46)

scholarly journals Does Extending Unemployment Benefits Improve Job Quality?

2017 ◽  
Vol 107 (2) ◽  
pp. 527-561 ◽  
Author(s):  
Arash Nekoei ◽  
Andrea Weber
Keyword(s):  
Unemployment Insurance ◽  
Negative Relationship ◽  
Unemployment Duration ◽  
Duration Dependence ◽  
Regression Discontinuity Design ◽  
Matching Function ◽  
Unemployment Benefits ◽  
Wage Effect ◽  
Wage Effects ◽  
Positive Effect

Contrary to standard search models predictions, past studies have not found a positive effect of unemployment insurance (UI) on reemployment wages. We estimate a positive UI wage effect exploiting an age-based regression discontinuity design in Austria. A search model incorporating duration dependence predicts two countervailing forces: UI induces workers to seek higher-wage jobs, but reduces wages by lengthening unemployment. Matching-function heterogeneity plausibly generates a negative relationship between the UI unemployment-duration and wage effects, which holds empirically in our sample and across studies, reconciling disparate wage-effect estimates. Empirically, UI raises wages by improving reemployment firm quality and attenuating wage drops. (JEL J31, J64, J65)

scholarly journals The Effect of Unemployment Benefits on the Duration of Unemployment Insurance Receipt: New Evidence from a Regression Kink Design in Missouri, 2003–2013

2015 ◽  
Vol 105 (5) ◽  
pp. 126-130 ◽  
Author(s):  
David Card ◽  
Andrew Johnston ◽  
Pauline Leung ◽  
Alexandre Mas ◽  
Zhuan Pei
Keyword(s):  
Administrative Data ◽  
Unemployment Insurance ◽  
The State ◽  
Unemployment Benefits ◽  
Experimental Variation ◽  
Quasi Experimental ◽  
Duration Of Unemployment ◽  
Regression Kink Design ◽  
New Evidence

We provide new evidence on the effect of the unemployment insurance (UI) weekly benefit amount on unemployment insurance spells based on administrative data from the state of Missouri covering the period 2003-2013. Identification comes from a regression kink design that exploits the quasi-experimental variation around the kink in the UI benefit schedule. We find that UI durations are more responsive to benefit levels during the recession and its aftermath, with an elasticity between 0.65 and 0.9 as compared to about 0.35 pre-recession.

scholarly journals Using Payroll Tax Variation to Unpack the Black Box of Firm-Level Production

2021 ◽  
Author(s):  
Youssef Benzarti ◽  
Jarkko Harju
Keyword(s):  
Black Box ◽  
Total Output ◽  
Tax Rates ◽  
Firm Level ◽  
Payroll Tax ◽  
Payroll Taxes ◽  
Input Factor ◽  
Experimental Variation ◽  
Quasi Experimental ◽  
Level Production

Abstract This paper uses quasi-experimental variation in payroll tax rates in Finland to investigate how firms use their input factors. We find that higher payroll tax rates lead to large employment responses and have no effects on employee-level earnings. As payroll taxes increase, firms substitute away from low-skilled, routine and manual workers. Higher firm-level payroll tax rates also slightly decrease the total output of firms. Our results imply that firm-level production and input factor choices are clearly affected by payroll taxes.

scholarly journals Wage bargaining as an optimal control problem: a dynamic version of the efficient bargaining model

2021 ◽  
Author(s):  
Marco Guerrazzi
Keyword(s):  
Optimal Control ◽  
Continuous Time ◽  
Bargaining Power ◽  
Wage Bargaining ◽  
Bargaining Model ◽  
Speed Of Convergence ◽  
Wage Setting ◽  
Dynamic Version ◽  
Efficient Bargaining ◽  
Over Time

AbstractIn this paper, I develop a dynamic version of the efficient bargaining model grounded on optimal control in which a firm and a union bargain over the wage in a continuous-time environment under the supervision of an infinitely lived mediator. Overturning the findings achieved by means of a companion right-to-manage framework, I demonstrate that when employment is assumed to adjust itself with some attrition in the direction of the contract curve implied by the preferences of the two bargainers, increases in the bargaining power of the firm (union) accelerate (delay) the speed of convergence towards the stationary solution. In addition, confirming the reversal of the results obtained when employment moves over time towards the firm’s labour demand, I show that the dynamic negotiation of wages tends to penalize unionized workers and favour the firm with respect to the bargaining outcomes retrieved with a similar static wage-setting model.

EXPRESS: Variety Effects in Advertising

2021 ◽  
pp. 002224372110560
Author(s):  
Omid Rafieian ◽  
Hema Yoganarasimhan
Keyword(s):  
Response Rate ◽  
Mobile Apps ◽  
Underlying Mechanism ◽  
Experimental Variation ◽  
Different Types ◽  
Unit Increase ◽  
Quasi Experimental ◽  
Managerial Implications ◽  
Click Through Rate ◽  
Empirical Framework

Users are often exposed to a sequence of short-lived marketing interventions (e.g., ads) within each usage session in mobile apps. This study examines how an increase in the variety of ads shown in a session affects a user's response to the next ad. The authors leverage the quasi-experimental variation in ad assignment in their data and propose an empirical framework that accounts for different types confounding to isolate the effects of a unit increase in variety. Across a series of models, the authors consistently show that an increase in ad variety in a session results in a higher response rate to the next ad: holding all else fixed, a unit increase in variety of the prior sequence of ads can increase the click-through rate on the next ad by approximately 13\%. The authors then explore the underlying mechanism and document empirical evidence for an attention-based account. The paper offers important managerial implications since it identifies a source of interdependence across ad exposures that is often ignored in the design of advertising auctions. Further, the attention-based mechanism suggests that platforms can incorporate real-time attention measures to help advertisers with targeting dynamics.

An Empirical Bargaining Model with Left-Digit Bias: A Study on Auto Loan Monthly Payments

2021 ◽  
Author(s):  
Zhenling Jiang
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Large Data ◽  
The United States ◽  
Nash Bargaining ◽  
Bargaining Model ◽  
Data Set ◽  
Proposed Model ◽  
Lower Interest Rate ◽  
The Empirical Analysis

This paper studies price bargaining when both parties have left-digit bias when processing numbers. The empirical analysis focuses on the auto finance market in the United States, using a large data set of 35 million auto loans. Incorporating left-digit bias in bargaining is motivated by several intriguing observations. The scheduled monthly payments of auto loans bunch at both $9- and $0-ending digits, especially over $100 marks. In addition, $9-ending loans carry a higher interest rate, and $0-ending loans have a lower interest rate. We develop a Nash bargaining model that allows for left-digit bias from both consumers and finance managers of auto dealers. Results suggest that both parties are subject to this basic human bias: the perceived difference between $9- and the next $0-ending payments is larger than $1, especially between $99- and $00-ending payments. The proposed model can explain the phenomena of payments bunching and differential interest rates for loans with different ending digits. We use counterfactuals to show a nuanced impact of left-digit bias, which can both increase and decrease the payments. Overall, bias from both sides leads to a $33 increase in average payment per loan compared with a benchmark case with no bias. This paper was accepted by Matthew Shum, marketing.

scholarly journals Corruption, Trade Costs, and Gains from Tariff Liberalization: Evidence from Southern Africa

2016 ◽  
Vol 106 (10) ◽  
pp. 3029-3063 ◽  
Author(s):  
Sandra Sequeira
Keyword(s):  
Southern Africa ◽  
Firm Behavior ◽  
Trade Flow ◽  
Primary Data ◽  
Public Officials ◽  
Trade Elasticities ◽  
Experimental Variation ◽  
Quasi Experimental ◽  
Tariff Liberalization ◽  
Import Behavior

This paper exploits quasi-experimental variation in tariffs in southern Africa to estimate trade elasticities. Traded quantities respond only weakly to a 30 percent reduction in the average nominal tariff rate. Trade flow data combined with primary data on firm behavior and bribe payments suggest that corruption is a potential explanation for the observed low elasticities. In contexts of pervasive corruption, even small bribes can significantly reduce tariffs, making tariff liberalization schemes less likely to affect the extensive and the intensive margins of firms' import behavior. The tariff liberalization scheme is, however, still associated with improved incentives to accurately report quantities of imported goods, and with a significant reduction in bribe transfers from importers to public officials. (JEL D22, D73, F13, H83, O17, O19, O24)

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