Labor market policies, informality and misallocation

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Priyaranjan Jha ◽  
Rana Hasan
Keyword(s):  
Labor Market ◽  
Empirical Support ◽  
Risk Averse ◽  
Allocation Of Resources ◽  
Income Risk ◽  
Content Type ◽  
Severance Payments ◽  
Cross Country ◽  
Labor Market Regulations ◽  
Theoretical Results

Purpose The purpose of this paper is to understand labor market regulations and their consequences for the allocation of resources. Design/methodology/approach This paper constructs a theoretical model to study labor market regulations in developing countries and how it affects the allocation of resources between the less productive informal activities and more productive formal activities. It also provides empirical support for some theoretical results using cross-country data. Findings When workers are risk-averse and the market for insurance against labor income risk is missing, regulations that provide insurance to workers (such as severance payments) reduce misallocation. However, regulations that simply create barriers to the dismissal of workers increase misallocation and end up reducing the welfare of workers. This study also provides some empirical evidence broadly consistent with the theoretical results using cross-country data. While dismissal regulations increase the share of informal employment, severance payments to workers do not. Research limitations/implications The empirical exercise is constrained by the lack of availability of good data on the informal sector. Originality/value The analysis of the alternative labor market regulations analyzed in this paper in the presence of risk-averse workers is an original contribution to the literature.

Firing tax vs severance payments – an unequal comparison

2014 ◽  
Vol 41 (5) ◽  
pp. 721-736 ◽  
Author(s):  
Dennis Wesselbaum
Keyword(s):  
Labor Market ◽  
Business Cycle ◽  
Policy Reforms ◽  
Cost Component ◽  
Content Type ◽  
Firing Costs ◽  
Severance Payments ◽  
Business Cycle Model ◽  
Business Cycle Dynamics ◽  
Real Business Cycle Model

Purpose – The purpose of this paper is to compare two elements of lay-off costs in a dynamic model of the labor market and analyze the differences for business cycle dynamics and welfare. Design/methodology/approach – The paper builds a general equilibrium Real Business Cycle model and introduces firing costs and severance payments. Labor market frictions are assumed to follow the famous search and matching approach. Findings – The paper finds that firing costs imply a higher volatility over the cycle and have stronger negative welfare effects. Severance payments have a lower volatility, reduce unemployment, and reduce welfare by a smaller amount. Practical implications – Policy reforms should be aimed to use severance payments and reduce the ring cost component of lay-off costs. Originality/value – Increasing welfare and a more stable business cycle could be supported by using severance payments instead of firing costs.

scholarly journals Informality: the Doorstep of the Legal System

2018 ◽  
Vol 1 (1) ◽  
pp. 49-70
Author(s):  
Francesco Flaviano Russo
Keyword(s):  
Labor Market ◽  
Dynamic Model ◽  
Legal System ◽  
Informal Economy ◽  
Entry Costs ◽  
Start Up ◽  
Industry Equilibrium ◽  
Cross Country ◽  
The Cross ◽  
Labor Market Regulations

Abstract Many entrepreneurs work informally because it is costly to start and run a business legally. Using a dynamic model of industry equilibrium, I show that the costs of the legal system can explain the cross country variability of the size of the informal economy. The model implies that the business start-up costs are more important than taxes and labor market regulations. Small, less productive, entrepreneurs, facing high entry costs, start informally, waiting to become more productive before legalizing. Informality is often the doorstep of the legal system.

scholarly journals Do Labor Market Regulations Affect the Link between Innovation and Employment? Evidence from Latin America

2019 ◽  
Vol 19 (3) ◽  
Author(s):  
Laura Baensch ◽  
Maria Laura Lanzalot ◽  
Giulia Lotti ◽  
Rodolfo Stucchi
Keyword(s):  
Latin America ◽  
Labor Market ◽  
Latin American ◽  
Employment Growth ◽  
Positive Impact ◽  
Process Innovations ◽  
Severance Payments ◽  
Labor Market Regulations ◽  
The Relationship ◽  
Latin American Countries

Abstract This paper sheds light on how labor market regulations affect the relationship between different types of innovation and employment in Latin America. We estimate the effect of process and product innovation on employment growth using Enterprise Surveys for 14 Latin American countries. We calculate the model for the whole sample and then classify countries according to the rigidness of their labor market regulations. We find that: (i) product innovations have a positive impact on employment growth; (ii) process innovations do not affect employment growth; and (iii) more rigid labor market regulations (minimum wages and severance payments) reduce the effects of innovation.

Employment patterns and family satisfaction in Europe

2018 ◽  
Vol 38 (5-6) ◽  
pp. 394-410 ◽  
Author(s):  
Petra Böhnke ◽  
Isabel Valdés Cifuentes
Keyword(s):  
Social Security ◽  
Labour Market ◽  
Market Integration ◽  
Empirical Support ◽  
Family Satisfaction ◽  
Content Type ◽  
Labour Market Integration ◽  
Country Comparison ◽  
Cross Country

Purpose The purpose of this paper is to explore the relationship between labour market integration and family satisfaction in a cross-country comparison perspective and takes important intervening factors into consideration such as the social policy and flexibility strategy as well as the cultural context of 27 European countries. Design/methodology/approach The authors rely on data from the European Quality of Life Survey 2012 and conduct multi-level analyses using both the one-step random intercept Model with cross-level interactions as well as a two-step hierarchical model. The country-specific framework is addressed with indicators for the level of social security, for external flexibility labour market characteristics, and for the predominant family solidarity norm of a country. Findings The paper provides empirical support for the thesis of social disruption according to insecure labour market attachment. This link is weakened in countries where flexible labour market conditions are accompanied by strong efforts on state-provided social security. High family support norms can only partially compensate a lack of social protection covered by the state. Research limitations/implications The paper reveals the increasing social vulnerability of people who are not or not completely integrated into the labour market. These risks cannot be convincingly weakened by social security measures. To know more about these mechanisms, the link between labour market integration and the quality of family life should be studied in more detail in a cross-country comparative perspective to develop ideas and give advice on reducing the potential insecurity of flexible employment. Originality/value The paper complements previous research by providing empirical findings about the link between insecure labour market attachment and the integration into family networks in a cross-country comparison perspective.

Optimal sharing arrangement for multiple project outcomes

2014 ◽  
Vol 19 (3) ◽  
pp. 264-280 ◽  
Author(s):  
S. Mahdi Hosseinian ◽  
David G. Carmichael
Keyword(s):  
Construction Projects ◽  
Risk Averse ◽  
Original Solution ◽  
Content Type ◽  
Project Outcomes ◽  
Multiple Outcome ◽  
Risk Neutral ◽  
Designed Experiment ◽  
Practical Implications ◽  
Theoretical Results

Purpose – The purpose of this paper is to address a shortfall in the literature dealing with optimal sharing arrangements. In construction projects, where the owner is concerned about multiple project outcomes (cost, time, quality, […]), there exist no guidelines in the literature on what a sharing arrangement should be between the owner and the contractor. This paper gives that arrangement, under defined risk assumptions on the contractor (risk averse ranging to risk neutral) and the owner (risk neutral). The sharing aligns the contractor's interests with those of the owner. Design/methodology/approach – The results are based on solving a constrained maximisation problem involving the expected utilities of both the owner and contractor. Construction practitioners were interviewed in a designed experiment to validate the results. Findings – It is demonstrated that, at the optimum, the proportions of outcomes sharing to the contractor should be higher for outcomes with lower effort cost and a lower level of uncertainty, and by increasing the correlation between outcomes, the fixed component of the contractor’s fee should increase and the proportions to the contractor should decrease. Research limitations/implications – The theoretical results assume that the contractor is risk-averse ranging to risk-neutral, and that the owner is risk-neutral. The theory is supported through conducting an empirical study based on interviewing a sample of practitioners working for medium-sized contractors, and hence the support is limited to similar situations, until further data are assembled. Practical implications – By providing a broader understanding of sharing arrangements within contracts, a contribution is made to the current practice of contracts management. The results may be used in the design of contracts, or as benchmarks, by which contracts designed differently, may be compared. Originality/value – The results address a shortfall in the literature and are an original solution to establishing an optimal multiple-outcome sharing arrangement.

When is positive action not positive action? Exploring the conceptual meaning and implications of the tie-break criterion in the UK Equality Act 2010

2014 ◽  
Vol 33 (1) ◽  
pp. 97-113 ◽  
Author(s):  
Nick Johns ◽  
Sara MacBride-Stewart ◽  
Martin Powell ◽  
Alison Green
Keyword(s):  
Empirical Support ◽  
Equality Of Opportunity ◽  
Equal Opportunities ◽  
Content Type ◽  
Positive Action ◽  
Legal Innovation ◽  
Positive Discrimination ◽  
The Uk ◽  
Conceptual Meaning ◽  
Practical Implications

Purpose – The purpose of this paper is to explore the claim that the tie-break criterion introduced under the Equality Act 2010 is not really positive action as is claimed by its government sponsors. It evaluates this claim by locating the tie-break into equal opportunities theory, taking into account merit considerations, and reviews its potential implications. Design/methodology/approach – A conceptual discussion of the tie-break. Findings – The paper concludes that the tie-break is not positive action, nor is it positive discrimination. It employs the framework established by Forbes (1991) and attempts to locate it in theoretical discussions of the need to refine merit to take identity characteristics into account. While it could serve to make a more sophisticated approach to merit possible it fails to achieve its implicit potential in this regard. Research limitations/implications – The paper is conceptual and will benefit from empirical support in the future. Practical implications – Practically, the tie-break promises to add some greater clarity to the muddled understanding of equal opportunities and diversity that underpins much policy and legislation. As a result it will arguably prove hard to implement and will carry other associated problems. Social implications – Socially, the tie-break, mis-represented as it currently is, promises to create greater uncertainty around the nature and purposes of equality of opportunity. Consequently, it could exacerbate tensions and hostilities and promote significant resistance to “equality” measures. Originality/value – This paper is an original conceptual piece that will shine a light on an important legal innovation. The tie-break is not what it is described to be and carries both potential and threat for advocates of equality of opportunity. In pursuing socially significant outcomes of this type, conceptual accuracy and transparency are vital, and this paper contributes to this endeavour.

Parental leave length, social norms, and female labor market re-entry frictions

2018 ◽  
Vol 39 (4) ◽  
pp. 600-620 ◽  
Author(s):  
Vojtech Bartoš ◽  
Barbara Pertold-Gebicka
Keyword(s):  
Labor Market ◽  
Social Norms ◽  
Job Search ◽  
Social Norm ◽  
Parental Leave ◽  
Human Resource Managers ◽  
Content Type ◽  
Job Applicant ◽  
Employment Gaps ◽  
The Difference

Purpose The purpose of this paper is to identify the role of employers in creating employment gaps among women returning to the labor market after parental leaves of different durations. Design/methodology/approach The authors use a controlled correspondence field experiment that orthogonally manipulates parental leave length and the quality of fictitious female job candidates. The experiment is complemented with a survey among human resource managers. Findings High-quality candidates receive more interview invitations when applying after a short parental leave, while low-quality (LQ) candidates receive more interview invitations when applying after a typical three years long parental leave. Survey results suggest that the difference in invitations between short and typical leave treatments is driven by a social norm that mothers should stay home with children younger than three. Productivity gains from employing a LQ job applicant with a shorter career break might not be high enough to outweigh the adverse social norm effect. Social implications The presented results point toward the strong effect of prevailing social norms on job search prospects of women returning to the labor market after parental leave. Originality/value A correspondence experiment has not been used before to study the relationship between time spent on leave and the labor market prospects of mothers. It also extends research on social norms to the domain of hiring decisions.

Loyalty program in Africa: risk-seeking and risk-averse adventurers

2014 ◽  
Vol 69 (2) ◽  
pp. 137-157 ◽  
Author(s):  
Shogo Mlozi
Keyword(s):  
Consumer Behavior ◽  
Consumer Products ◽  
Loyalty Programs ◽  
Risk Averse ◽  
Loyalty Program ◽  
Content Type ◽  
Risk Seeking ◽  
Proposed Model ◽  
First Time ◽  
The Relationship

Purpose – This article aims to test the relationship between expected attractiveness-satisfaction-loyalty for international adventure tourists visiting Tanzania. The proposed model is based on travel consumer behavior theoretical constructs extracted from the literature. Design/methodology/approach – This article aims to test the relationship between expected attractiveness-satisfaction-loyalty for international adventure tourists visiting Tanzania. The proposed model is based on travel consumer behavior theoretical constructs extracted from the literature. Findings – The findings for overall model differed from the moderating factors of high risk, low risk, first-time visit and repeat visit. Also, the results are interesting when satisfaction is tested as a mediator. Practical implications – Practitioners could consider the fact that repeat visits may change tourists’ perceptions toward destination and may even increase their inclination to take on risks. This may impact innovation of consumer products in tourism. Also, policy makers could benefit on how loyalty programs can be developed to increase performance. Originality/value – The study offers specific strategic recommendations toward different groups of tourists (i.e. first-time, repeat visitors, risk averse, risk seeking) and proposes logic for setting up a loyalty program as a long-term strategy for success.

The impact of labor freedom on geographic cost of living differentials

2017 ◽  
Vol 6 (3) ◽  
pp. 385-395
Author(s):  
Richard Cebula ◽  
James E. Payne ◽  
Donnie Horner ◽  
Robert Boylan
Keyword(s):  
Labor Market ◽  
State Level ◽  
The State ◽  
Annual Data ◽  
Significant Finding ◽  
Cost Of Living ◽  
Content Type ◽  
The Usa ◽  
The Cost ◽  
The Impact

Purpose The purpose of this paper is to examine the impact of labor market freedom on state-level cost of living differentials in the USA using cross-sectional data for 2016 after allowing for the impacts of economic and quality of life factors. Design/methodology/approach The study uses two-stage least squares estimation controlling for factors contributing to cost of living differences across states. Findings The results reveal that an increase in labor market freedom reduces the overall cost of living. Research limitations/implications The study can be extended using panel data and alternative measures of labor market freedom. Practical implications In general, the finding that less intrusive government and greater labor freedom are associated with a reduced cost of living should not be surprising. This is because less government intrusion and greater labor freedom both inherently allow markets to be more efficient in the rationalization of and interplay with forces of supply and demand. Social implications The findings of this and future related studies could prove very useful to policy makers and entrepreneurs, as well as small business owners and public corporations of all sizes – particularly those considering either location in, relocation to, or expansion into other markets within the USA. Furthermore, the potential benefits of the National Right-to-Work Law currently under consideration in Congress could add cost of living reductions to the debate. Originality/value The authors extend the literature on cost of living differentials by investigating whether higher amounts of state-level labor market freedom act to reduce the states’ cost of living using the most recent annual data available (2016). That labor freedom has a systemic efficiency impact on the state-level cost of living is a significant finding. In our opinion, it is likely that labor market freedom is increasing the efficiency of labor market transactions in the production and distribution of goods and services, and acts to reduce the cost of living in states. In addition, unlike previous related studies, the authors investigate the impact of not only overall labor market freedom on the state-level cost of living, but also how the three sub-indices of labor market freedom, as identified and measured by Stansel et al. (2014, 2015), impact the cost of living state by state.

scholarly journals Ethnic Discrimination in the Dutch Labor Market: Differences Between Ethnic Minority Groups and the Role of Personal Information About Job Applicants—Evidence from a Field Experiment

2020 ◽  
Author(s):  
Lex Thijssen ◽  
Marcel Coenders ◽  
Bram Lancee
Keyword(s):  
Labor Market ◽  
Field Experiment ◽  
Ethnic Minority ◽  
Large Scale ◽  
Minority Groups ◽  
Personal Information ◽  
Empirical Support ◽  
Ethnic Discrimination ◽  
Ethnic Minority Groups ◽  
Large Scale Field

AbstractIn this study, we present the results of a large-scale field experiment on ethnic discrimination in the Dutch labor market. We sent fictitious job applications (N = 4211) to vacancies for jobs in ten different occupations in the Netherlands. By examining 35 different ethnic minority groups, we detect considerable differences in discrimination rates, predominantly between Western and non-Western minorities. Furthermore, we find little systematic variation in discrimination patterns with regard to gender, regions, and occupations, pointing to the existence of an ethnic hierarchy that is widely shared among employers. Finally, we do not find empirical support for the hypothesis that adding personal information in job applications reduces discrimination.

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