Marginal Jobs and Job Surplus: A Test of the Efficiency of Separations

Jäger, Simon; Schoefer, Benjamin; Zweimüller, Josef

doi:10.2139/ssrn.3320465

Cited by 16 publications

(18 citation statements)

References 63 publications

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“…Regarding unemployment benefits, social inefficiency arises because the worker only takes into account her private outside option, neglecting the social cost of taxes that should be levied to finance subsidies. Beyond the social inefficiency stemming from general equilibrium effects, centralized wage bargaining elicits separations which are also privately inefficient whenever the impossibility to renegotiate the wage leads to a layoff that could be avoided by suitable transfer schemes between the firm and the worker: this feature is consistent with the empirical evidence in Jäger, Schoefer, and Zweimüller (2019).…”

Section: Introductionsupporting

confidence: 79%

“…In our setup, wage rigidity cannot be neutralized by alternative employment rules as inBarro (1977) because of labor market frictions. Moreover, empirical evidence (seeJäger, Schoefer, and Zweimüller 2019) supports the existence of inefficient separations. DenHaan and Sedlaceck (2014) show as agency problems may trigger inefficient separations during downturns that are not offset by the more labor creation during booms.…”

mentioning

confidence: 92%

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(In)efficient Separations, Firing Costs and Temporary Contracts

Gerali¹,

Guglielminetti²,

Liberati³

2021

SSRN Journal

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In this paper we study the allocative (in)efficiency of employment protection in relation to firing costs, in a general equilibrium model with labor market frictions. The optimal firing costs depend on the level of unemployment benefits and the degree of centralized wage bargaining, two features of the labor market that induce downward wage rigidity and trigger inefficient employment separations. When restrictions on firing employees with permanent contracts are inefficiently high, the introduction of temporary contracts improves welfare but does not fully restore efficiency. A quantitative analysis for the Italian economy shows that the firing costs before the recent labor market reforms were 30% higher than the optimal level, implying a consumption loss of almost 2% in the steady state. The introduction of fixed-term jobs in the early 2000's closed one fourth of the gap between inefficient and efficient allocation, although it led to higher unemployment rates and turnover.

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Section: Introductionsupporting

confidence: 79%

mentioning

confidence: 92%

(In)efficient Separations, Firing Costs and Temporary Contracts

Gerali¹,

Guglielminetti²,

Liberati³

2021

SSRN Journal

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show abstract

“…Estimating the expected value of a characteristic for marginal and always applicants is more challenging and requires additional assumptions (Jäger et al, 2019). The key insight is that the expected value of a characteristic X for all applicants in (T, A57) is a weighted average of the expected value for marginal and 72…”

mentioning

confidence: 99%

Designing Disability Insurance Reforms: Tightening Eligibility Rules or Reducing Benefits

Haller¹,

Staubli²,

Zweimüller³

2020

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We study the welfare eects of disability insurance (DI) and derive social-optimality conditions for the two main DI policy parameters: (i) DI eligibility rules and (ii) DI benets. Causal evidence from two DI reforms in Austria generate scal multipliers (total over mechanical cost reductions) of 2.0-2.5 for stricter DI eligibility rules and of 1.3-1.4 for lower DI benets. Stricter DI eligibility rules generate lower income losses (earnings + transfers), particularly at the lower end of the income distribution. Our analysis suggests that the welfare cost of rolling back the Austrian DI program is lower through tightening eligibility rules than through lowering benets. Applying our framework to the US DI system suggests that both loosening eligibility rules, and increasing benets, would be welfare increasing.

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“…Specifically, it is sufficient to estimate the net impact of the increase in benefit levels on net government revenue, without decomposing the impact into these various channels (Kleven and Kreiner 2005). For example, a large literature has analyzed a wide variety of potential effects of an increase in the level of unemployment insurance benefits on a range of behaviors including unemployment duration (for a recent review, see Shmieder and von Wachter 2016), exit rates into unemployment (Jäger, Schoefer, and Zweimüller 2019) and re-employment wages (Nekoei and Weber 2017). For welfare analysis, however, one needs the net impact of these behavioral changes on the government budget; the individual channels of response are neither necessary nor sufficient.…”

Section: Costsmentioning

confidence: 99%

Welfare Analysis Meets Causal Inference

Finkelstein

Hendren

2020

Journal of Economic Perspectives

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We describe a frame work for empirical welfare analysis that uses the causal estimates of a policy’s impact on net government spending. This framework provides guidance for which causal effects are (and are not) needed for empirical welfare analysis of public policies. The key ingredient is the construction of each policy’s marginal value of public funds (MVPF). The MVPF is the ratio of beneficiaries’ willingness to pay for the policy to the net cost to the government. We discuss how the MVPF relates to “traditional” welfare analysis tools such as the marginal excess burden and marginal cost of public funds. We show how the MVPF can be used in practice by applying it to several canonical empirical applications from public finance, labor, development, trade, and industrial organization.

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Marginal Jobs and Job Surplus: A Test of the Efficiency of Separations

Cited by 16 publications

References 63 publications

(In)efficient Separations, Firing Costs and Temporary Contracts

(In)efficient Separations, Firing Costs and Temporary Contracts

Designing Disability Insurance Reforms: Tightening Eligibility Rules or Reducing Benefits

Welfare Analysis Meets Causal Inference

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