Swiss Institute for Empirical Economic Research (SEW)
University of St. Gallen
We use a simple theoretical framework, a building block of many macroeconomic models, to study the prominently debated relationship between the model parametrisation of the Frisch elasticity and the reduced-form evidence on the elasticity of labour.
Focusing on tax holidays, we show that the elasticity measured with a reduced-form approach is only equal to the Frisch-elasticity parameter if there are no income or general equilibrium effects.
Furthermore, for a wide range of standard values of the Frisch-elasticity parameter, the response of labour generated by a tax holiday in the model is aligned with the reduced-form evidence.
We use a novel instrument based on local social norms towards marriage to present a new finding: being married has a positive causal effect on the wages of both men and women.
Despite the striking changes in the labor market and the composition of families that occurred over the past decades, the positive effect of marriage on the wages of men has remained largely unchanged.
Conversely, while marriage decreased the wages of women until the 1980s, we document the emergence of a causal positive effect from the mid-2000s onward.
The main hypotheses discussed in the literature to explain the positive relationship between being married and the wages of men rely on the idea that married men are able to devote more resources to their careers than their single counterparts because their wives specialize in home work.
The fact that marriage also increases the wages of women challenges these explanations.
The added worker effect (AWE) measures the entry of individuals into the labor force due to their partners' adverse labor market outcomes.
We propose a new method to calculate the AWE that allows us to estimate its effect on any labor market outcome.
The AWE reduces the fraction of households with two non-employed members by 16% for the 1977-2018 period; 28% in the 1990 recession and 23% during the great recession.
The AWE also accounts for why women's employment is much less cyclical and more symmetric than men's.
Without the AWE, married women's employment would be as volatile as men and display negative skewness (declining quickly in recessions and recovering slowly in expansions).
In recessions, while some women lose their employment, others enter the labor market and find jobs. This keeps female employment relatively stable.
We exploit the quasi-random allocation of asylum seekers across Swiss cantons and the high frequency of national referenda to identify the causal effect of immigration on political outcomes in receiving countries.
We find that the arrival of asylum seekers causes voters to increase their support for right-wing and conservative policies.
However, this effect is driven by episodes of unusually high inflows of asylum seekers.
Moreover, we find that for votes on immigration and refugee policy, the arrival of more asylum seekers shifts voters towards policies endorsed by conservative and centre-right parties but not towards positions backed by the rightmost anti-immigration party.
In contrast, the shift towards the rightmost stances is sizeable in votes related to the welfare state, international integration, and the rights of minorities.
We study unemployment insurance in a framework where the main source of heterogeneity among agents is the type of household they live in: some agents live alone while others live with their spouses as a family.
Our exercise is motivated by the fact that married individuals can rely on spousal income to smooth labor market shocks, while singles cannot.
We extend a version of the standard incomplete-markets model to include two-agent households and calibrate it to the US economy with special emphasis on matching differences in labor market transitions across gender and marital status as well as aggregate wealth moments.
Our central finding is that changes to the current unemployment insurance program are valued differently by married and single households.
In particular, a more generous unemployment insurance reduces the welfare of married households significantly more than that of singles and vice-versa.
We show that this result is driven by the amount of self-insurance existing in married households and, thus, we highlight the interplay between self- and government-provided insurance and its implication for policy.
In the US economy, black males on average receive lower wages than their white counterparts.
This difference in wages increases over the working life.
At the same time, the probability of being employed is lower for black than for equally educated white males.
Notably, the black-white gap in employment is almost constant over the lifecycle.
These two facts suggest that the determination of the earnings gap is related to on-the-job human capital accumulation.
We propose a model of on-the-job human capital accumulation with labor market frictions to quantitatively assess how much of the black-white earnings gap can be accounted for by differences in employment probabilities versus pre-market factors.
Conditional on education, we find that differences in employment probabilities between blacks and whites account for 26% of the aggregate labor earnings gap over the working life.
Together with differences in the education distribution, employment probabilities can explain almost half the gap.
In this paper we document that married individuals face a lower unemployment rate than their single counterparts.
We refer to this phenomenon as the marriage unemployment gap.
Despite the dramatic demographic changes in the labor market over the last decades, this gap has been remarkably stable both for men and women.
Using a flow-decomposition exercise, we assess which transition probabilities (across labor force states) are behind the marriage unemployment gap.
We find that, for men, the higher attachment to employment of married males is the main driver of the gap.
For females, we find that the participation margin plays a crucial role.