Does the stock market really cause unemployment? A cross-country analysis

Pan, Wei-Fong

doi:10.1016/j.najef.2017.11.002

Cited by 23 publications

(26 citation statements)

References 40 publications

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“…A number of studies document the economic consequences of labour cost since labour cost rising in China from 2001. These studies analyse the impact of labour cost on employment, growth (Cahuc & Michel, ; Eckel, ), market competition (Bachmann, Bauer, & Frings, ), innovation (Romer, ), exports (Brecher, ) and other aspects (Pan, ). Prior studies also investigate the impact of labour cost on rising cost (Shapiro & Stiglitz, ), capital outflow (Gunter, ) and decline in the performance of enterprises (Draca & Reenen, ).…”

Section: Introductionmentioning

confidence: 99%

Unemployment governance, labour cost and earnings management: Evidence from China

Beladi

Chen

et al. 2020

World Economy

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This study investigates the effect of labour cost on earnings management based on the panel data of listed firms in China. We use the average wage of employees in firm level as the proxy for labour cost. Firms with rising labour cost become more likely to engage in negative earnings management to conceal profits or report losses. The effect becomes more significant in state‐owned enterprises, labour‐intensive enterprises, firms in high unemployment‐rate regions and firms with political connections. Further research finds that, under the institutional background of Chinese unemployment governance, firms get more government subsidies and tax preferences and reduce the excessive employment through negative earnings management. To a certain extent, this weakens the policy effect of unemployment governance. Overall, our conclusions are meaningful to the reform of unemployment governance, the standardisation of earnings management behaviour, the improvement of the government subsidy policies and the improvement of the efficiency of public resource allocation.

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Section: Introductionmentioning

confidence: 99%

Unemployment governance, labour cost and earnings management: Evidence from China

Beladi

Chen

et al. 2020

World Economy

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“…, 1928 -1942 The connection of the unemployment rate to the stock market documented in Figure 5 is not an experience confined to the Great Depression in the U.S. It is a universal connection that holds in post WWII U.S. data, (Farmer R. E., 2012b), (2015) German data, (Fritsche & Pierdzioch, 2016), and in a panel of industrialized and non-industrialized countries (Pan, 2018).…”

Section: The Stock Market and The Unemployment Ratementioning

confidence: 95%

The Indeterminacy School in Macroeconomics

Farmer¹

2019

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This article surveys a subset of literature in macroeconomics which embraces the existence of multiple equilibria. This indeterminacy agenda in macroeconomics uses multiple-equilibrium models to integrate economics with psychology. Economists have long argued that business cycles are driven by shocks to the productivity of labour and capital. According to the indeterminacy agenda, the selffulfilling beliefs of financial market participants are additional fundamental factors that drive periods of prosperity and depression. The indeterminacy agenda provides a microeconomic foundation to Keynes' General Theory that does not rely on the assumption that prices and wages are costly to change. AbstractThis article surveys a subset of literature in macroeconomics which embraces the existence of multiple equilibria. This indeterminacy agenda in macroeconomics uses multiple-equilibrium models to integrate economics with psychology.

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“…Farmer (2012Farmer ( , 2013 showed that the unemployment rate can be explained as a steady-state equilibrium; assuming that market participants' beliefs are self-fulfilling resolves the indeterminacy of the equilibrium. Farmer (2015) and Pan (2018) used Farmer's (2012, 2013 model, respectively, to show that the stock market causes unemployment. Pan (2018) further pointed out this causal relationship is particularly strong in Group of Seven countries.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Farmer (2015) and Pan (2018) used Farmer's (2012, 2013 model, respectively, to show that the stock market causes unemployment. Pan (2018) further pointed out this causal relationship is particularly strong in Group of Seven countries. Vuillemey and Wasmer (2017) introduced stochastic bubbles into the Diamond-Mortensen-Pissarides model and showed that it can explain the volatility of labor market outcomes.…”

Section: Literature Reviewmentioning

confidence: 99%

How Does the Macroeconomy Respond to Stock Market Fluctuations? The Role of Sentiment

Pan¹

2018

Macroecon. Dynam.

Self Cite

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This study estimates the response of macroeconomic variables to stock market fluctuations in Japan and the United States. It emphasizes the economy's reaction to stock market bubbles and crashes. To do this, I propose a new way to identify bubbles and crashes by testing price-to-fundamental ratios using the newly developed trend-filtering approach. Regardless of the measures used, both countries' macroeconomy tends to respond positively to the positive shock of stock price. Asymmetric effects of the stock market are observed. Japan's macroeconomic variables, especially investment and industrial production, are more sensitive to market crashes, while those of the United States are more sensitive to stock bubbles. Finally, I provide evidence that market sentiment can affect the economy either directly or indirectly through the stock market.

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Does the stock market really cause unemployment? A cross-country analysis

Cited by 23 publications

References 40 publications

Unemployment governance, labour cost and earnings management: Evidence from China

Unemployment governance, labour cost and earnings management: Evidence from China

The Indeterminacy School in Macroeconomics

How Does the Macroeconomy Respond to Stock Market Fluctuations? The Role of Sentiment

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