Chapter 6. LONG-RUN LUNACY, SHORT-RUN SANITY: A SIMPLE MODEL OF TRADE WITH LABOR MARKET TURNOVER

Keyword(s):  
Long Run ◽  
2021 ◽  
pp. 1-29
Author(s):  
Sangyup Choi ◽  
Myungkyu Shim

This paper establishes new stylized facts about labor market dynamics in developing economies, which are distinct from those in advanced economies, and then proposes a simple model to explain them. We first show that the response of hours worked and employment to a technology shock—identified by a structural VAR model with either short-run or long-run restrictions—is substantially smaller in developing economies. We then present compelling empirical evidence that several structural factors related to the relevance of subsistence consumption across countries can jointly account for the relative volatility of employment to output and that of consumption to output. We argue that a standard real business cycle (RBC) model augmented with subsistence consumption can explain the several salient features of business cycle fluctuations in developing economies, especially their distinct labor market dynamics under technology shocks.


2017 ◽  
Vol 17 (1) ◽  
Author(s):  
Nicolas Salamanca ◽  
Jan Feld

AbstractWe extend Becker’s model of discrimination by allowing firms to have discriminatory and favoring preferences simultaneously. We draw the two-preference parallel for the marginal firm, illustrate the implications for wage differentials, and consider the implied long-run equilibrium. In the short-run, wage differentials depend on relative preferences. However, in the long-run, market forces drive out discriminatory but not favoring firms.


2015 ◽  
Vol 42 (4) ◽  
pp. 356-367
Author(s):  
Faridul Islam ◽  
Saleheen Khan

Purpose – The purpose of this paper is to examine the dynamic relationship among immigration rate, GDP per capita, and and real wage rates in the USA. Design/methodology/approach – The paper implements the Johansen-Juselius (1990, 1992) cointegration technique to test for a long-run relationship; and for short-run dynamics the authors apply Granger causality tests under the vector error-correction model. Findings – The results show that the long-run causality runs from GDP per capita to immigration, not vice versa. Growing economy attracts immigrants. The authors also find that immigration flow depresses average weekly earnings of the natives in the long-run. Originality/value – The authors are not aware of any study on the USA addressing the impact of immigrants on labor market using a tripartite approach by explicitly incorporating economic growth. It is therefore important to pursue a theoretically justified empirical model in search of a relation to resolve on apparent immigration debate.


2012 ◽  
Vol 3 (2) ◽  
pp. 55-81
Author(s):  
Károly Mike

In Albert Hirschman’s theory, loyalty plays a key role in the equilibrium between exit and voice. This article extends economic (rational choice) analysis to the emergence of loyalty, which Hirschman considers an exogenous factor. This is accomplished by linking Williamson’s theory of specific investment to Hirschman’s model. Three cases are distinguished: (1) loyalty is due to specific investment; (2) loyalty is due to (intermediate) factors influenced by specific investment; and, (3) loyalty is independent of specific investment. A simple model formalizes the first case. A paradoxical dynamic of loyalty is identified: a lower degree of specificity may lead to a weakening of loyalty in the short run but astrengthening of loyalty in the long run. An application to the process of European integration is sketched.


1983 ◽  
Vol 15 (2) ◽  
pp. 165-185 ◽  
Author(s):  
G L Clark

Cyclical sensitivity in employment, wages, and hours worked are explored with reference to three industries and eleven US cities over the period 1972–1980. Conventional neoclassical discrete-exchange models of the labor market are shown to be inadequate because of marked rigidities in the patterns of short-run adjustment. Money wages are very stable, being dominated by a long-run trend, and firms tend to adjust hours worked and only then employment in the short run. There are, however, significant interregional variations in these patterns within the same industry. Spectral analysis and tests for periodicities in the patterns of residuals derived from trend-line estimates of money wages confirm a supposition that urban Phillips curves do not exist. The evidence supports the implicit notion of contract theory that continuous employer-worker relationships exist over the business cycle. The question of how useful, in general, this theory might be is left open for the present.


ILR Review ◽  
2016 ◽  
Vol 70 (3) ◽  
pp. 767-812 ◽  
Author(s):  
Annabelle Doerr ◽  
Bernd Fitzenberger ◽  
Thomas Kruppe ◽  
Marie Paul ◽  
Anthony Strittmatter

Participation in intensive training programs for the unemployed in Germany is allocated by awarding training vouchers. Using rich administrative data for all vouchers and actual program participation, the authors provide first estimates of the short-run and long-run employment and earnings effects of receiving a training voucher award based on a selection-on-observables assumption. The results imply that, after the award, voucher recipients experience long periods of lower labor market success compared to had they not received training vouchers. Small positive employment effects and no gains in earnings were observed four to seven years after the receipt of the voucher award. In addition, the findings suggest stronger positive effects both for all low-skilled individuals who were awarded and redeemed a voucher and for low-skilled and medium-skilled individuals who chose to take degree courses than for higher-skilled recipients.


2016 ◽  
Vol 8 (1) ◽  
pp. 193-223 ◽  
Author(s):  
Sandra E. Black ◽  
Paul J. Devereux ◽  
Kjell G. Salvanes

Using population data from Norway, we examine the effects of stress induced by the death of the mother's parent during pregnancy on both the short-run and the long-run outcomes of the infant. Using a variety of empirical strategies to address the issue of nonrandom exposure to death during a pregnancy, we find small negative effects on birth outcomes. However, we find no evidence of adverse effects on adult outcomes. This suggests that, though there may be measurable effects on birth outcomes, acute psychological stressors during pregnancy have limited adverse consequences for the child's success in education and the labor market. (JEL I12, J13, J16)


2022 ◽  
Vol 29 (99) ◽  
pp. 50-77
Author(s):  
Tom Ahn ◽  
Amilcar Menichini

As the economic impact of the COVID-19 pandemic lingers, with the speed of recovery still uncertain, the state of the civilian labor market will impact the public sector. Specifically, the relatively stable and insulated jobs in the Department of Defense (DoD) are expected to be perceived as more attractive for the near future. This implies changes in DoD worker quit behavior that present both a challenge and an opportunity for the DoD leadership in retaining high-quality, experienced talent. The authors use a unique panel dataset of DoD civilian acquisition workers and a dynamic programming approach to simulate the impact of the pandemic on employee retention rates under a variety of recovery scenarios. Their findings posit that workers will choose not to leave the DoD while the civilian sector suffers from the impact of the pandemic. This allows leadership to more easily retain experienced workers. However, once the civilian sector has recovered enough, these same workers quit at an accelerated rate, making gains in talent only temporary. These results imply that while the DoD can take short-run advantage of negative shocks to the civilian sector to retain and attract high-quality employees, long-run retention will be achieved through more fundamental reforms to personnel policy that make DoD jobs more attractive, no matter the state of the civilian labor market.


2014 ◽  
pp. 66-92 ◽  
Author(s):  
R. Kapeliushnikov ◽  
A. Oshchepkov

In the end of 2012 the Russian economy entered a period of permanently declining growth rates. The paper provides a thorough analysis of the labor market performance under these new conditions. We explain why despite economic stagnation its basic characteristics - labor force participation, employment, unemployment, hirings and separations, vacancies - remained at very favorable levels. Our analysis also indicates that though with a certain lag the labor market has started to react to negative economic shocks. We conclude that now effects of long-run structural shifts intervene with effects of short-run economic fluctuations and this will seriously affect the dynamics of the Russian labor market in the medium- and long-term perspectives.


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