IDEAS home Printed from https://ideas.repec.org/p/cpr/ceprdp/13473.html
   My bibliography  Save this paper

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

Author

Listed:
  • Jäger, Simon
  • Schoefer, Benjamin
  • Zweimüller, Josef

Abstract

By the influential "Coasean" theory of employment relationships, job separations occur only once the worker and the employer have exhausted all remaining gains from trade through flexible bargaining and unrestricted contracting, with joint job surplus hence having turned negative. Our strategy to study this empirically elusive view is to track jobs longitudinally over the course of the introduction and sudden abolition of a policy that subsidized nonemployment and hence lowered job surplus: an age-and-region-specific extension of the maximum duration of unemployment benefits from one to four years in Austria. We document that this program destroyed 10.9ppt of jobs (a 27% increase in the separation rate). By the Coasean theory, these separations must have extracted marginal (low-surplus) jobs â?? a property not directly measurable. The testable prediction we instead investigate is that after the program abolition, the jobs having "survived" the treatment should be more resilient to any subsequent shocks (for lack of marginal i.e. low-surplus jobs), compared to their control peers. Strikingly, in the data, the two groups exhibit identical post-abolition separation behavior. The Coasean view can rationalize our findings only under narrow conditions: if surplus exhibits no persistence whatsoever. One non-Coasean model candidate fully accounts for our findings, building on wage rigidity and a constellation of large worker surplus and small firm surplus, with the latter driving post-abolition separations.

Suggested Citation

  • Jäger, Simon & Schoefer, Benjamin & Zweimüller, Josef, 2019. "Marginal Jobs and Job Surplus: A Test of the Efficiency of Separations," CEPR Discussion Papers 13473, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:13473
    as

    Download full text from publisher

    File URL: http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=13473
    Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. David Card & Ana Rute Cardoso & Joerg Heining & Patrick Kline, 2018. "Firms and Labor Market Inequality: Evidence and Some Theory," Journal of Labor Economics, University of Chicago Press, vol. 36(S1), pages 13-70.
    2. Lukas Inderbitzin & Stefan Staubli & Josef Zweimüller, 2016. "Extended Unemployment Benefits and Early Retirement: Program Complementarity and Program Substitution," American Economic Journal: Economic Policy, American Economic Association, vol. 8(1), pages 253-288, February.
    3. Frimmel, Wolfgang & Horvath, Thomas & Schnalzenberger, Mario & Winter-Ebmer, Rudolf, 2018. "Seniority wages and the role of firms in retirement," Journal of Public Economics, Elsevier, vol. 164(C), pages 19-32.
    4. Pierre Cahuc & Fabien Postel-Vinay & Jean-Marc Robin, 2006. "Wage Bargaining with On-the-Job Search: Theory and Evidence," Econometrica, Econometric Society, vol. 74(2), pages 323-364, March.
    5. Hansen, Gary D., 1985. "Indivisible labor and the business cycle," Journal of Monetary Economics, Elsevier, vol. 16(3), pages 309-327, November.
    6. Mortensen, Dale & Pissarides, Christopher, 2011. "Job Creation and Job Destruction in the Theory of Unemployment," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 1-19.
    7. Lazear, Edward P, 1981. "Agency, Earnings Profiles, Productivity, and Hours Restrictions," American Economic Review, American Economic Association, vol. 71(4), pages 606-620, September.
    8. Chetty, Raj, 2006. "A general formula for the optimal level of social insurance," Journal of Public Economics, Elsevier, vol. 90(10-11), pages 1879-1901, November.
    9. Rafael Lalive & Camille Landais & Josef Zweimüller, 2015. "Market Externalities of Large Unemployment Insurance Extension Programs," American Economic Review, American Economic Association, vol. 105(12), pages 3564-3596, December.
    10. Hall, Robert E & Lazear, Edward P, 1984. "The Excess Sensitivity of Layoffs and Quits to Demand," Journal of Labor Economics, University of Chicago Press, vol. 2(2), pages 233-257, April.
    11. Jacobson, Louis S & LaLonde, Robert J & Sullivan, Daniel G, 1993. "Earnings Losses of Displaced Workers," American Economic Review, American Economic Association, vol. 83(4), pages 685-709, September.
    12. Jesper Bagger & Fran?ois Fontaine & Fabien Postel-Vinay & Jean-Marc Robin, 2014. "Tenure, Experience, Human Capital, and Wages: A Tractable Equilibrium Search Model of Wage Dynamics," American Economic Review, American Economic Association, vol. 104(6), pages 1551-1596, June.
    13. Simon Jäger & Benjamin Schoefer & Samuel Young & Josef Zweimüller, 2018. "Wages and the value of nonemployment," ECON - Working Papers 313, Department of Economics - University of Zurich.
    14. Susanne M. Schennach, 2004. "Estimation of Nonlinear Models with Measurement Error," Econometrica, Econometric Society, vol. 72(1), pages 33-75, January.
    15. Louis S. Jacobson & Robert J. LaLonde & Daniel G. Sullivan, 1993. "Long-term earnings losses of high-seniority displaced workers," Economic Perspectives, Federal Reserve Bank of Chicago, issue Nov, pages 2-20.
    16. Tomi Kyyrä & Ralf A. Wilke, 2007. "Reduction in the Long-Term Unemployment of the Elderly: A Success Story from Finland," Journal of the European Economic Association, MIT Press, vol. 5(1), pages 154-182, March.
    17. John M. Abowd & Francis Kramarz & David N. Margolis, 1999. "High Wage Workers and High Wage Firms," Econometrica, Econometric Society, vol. 67(2), pages 251-334, March.
    18. Edward C. Prescott & Richard Rogerson & Johanna Wallenius, 2009. "Lifetime Aggregate Labor Supply with Endogenous Workweek Length," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 12(1), pages 23-36, January.
    19. Robert E. Hall & Paul R. Milgrom, 2008. "The Limited Influence of Unemployment on the Wage Bargain," American Economic Review, American Economic Association, vol. 98(4), pages 1653-1674, September.
    20. Day Manoli & Andrea Weber, 2016. "Nonparametric Evidence on the Effects of Financial Incentives on Retirement Decisions," American Economic Journal: Economic Policy, American Economic Association, vol. 8(4), pages 160-182, November.
    21. Hutchens, Robert, 1999. "Social Security Benefits and Employer Behavior: Evaluating Social Security Early Retirement Benefits as a Form of Unemployment Insurance," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(3), pages 659-678, August.
    22. Steven J. Davis & R. Jason Faberman & John C. Haltiwanger, 2013. "The Establishment-Level Behavior of Vacancies and Hiring," The Quarterly Journal of Economics, Oxford University Press, vol. 128(2), pages 581-622.
    23. Lawrence F. Katz, 1986. "Efficiency Wage Theories: A Partial Evaluation," NBER Chapters,in: NBER Macroeconomics Annual 1986, Volume 1, pages 235-290 National Bureau of Economic Research, Inc.
    24. Abadie, Alberto, 2003. "Semiparametric instrumental variable estimation of treatment response models," Journal of Econometrics, Elsevier, vol. 113(2), pages 231-263, April.
    25. Hartung, Benjamin & Jung, Philip & Kuhn, Moritz, 2018. "What Hides behind the German Labor Market Miracle? Unemployment Insurance Reforms and Labor Market Dynamics," IZA Discussion Papers 12001, Institute of Labor Economics (IZA).
    26. Barro, Robert J., 1977. "Long-term contracting, sticky prices, and monetary policy," Journal of Monetary Economics, Elsevier, vol. 3(3), pages 305-316, July.
    27. Giupponi, Giulia & Landais, Camille, 2018. "Subsidizing Labor Hoarding in Recessions: The Employment & Welfare Effects of Short Time Work," CEPR Discussion Papers 13310, C.E.P.R. Discussion Papers.
    28. Giupponi, Giulia & Landais, Camille, 2018. "Subsidizing labor hoarding in recessions: the employment and welfare effects of short time work," LSE Research Online Documents on Economics 91708, London School of Economics and Political Science, LSE Library.
    29. Robert Shimer, 2004. "The Consequences of Rigid Wages in Search Models," Journal of the European Economic Association, MIT Press, vol. 2(2-3), pages 469-479, 04/05.
    30. McLaughlin, Kenneth J, 1991. "A Theory of Quits and Layoffs with Efficient Turnover," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 1-29, February.
    31. Lee, David & Saez, Emmanuel, 2012. "Optimal minimum wage policy in competitive labor markets," Journal of Public Economics, Elsevier, vol. 96(9-10), pages 739-749.
    32. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877.
    33. repec:aea:aecrev:v:107:y:2017:i:9:p:2630-65 is not listed on IDEAS
    34. Susanne M. Schennach, 2012. "Measurement error in nonlinear models - a review," CeMMAP working papers CWP41/12, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    35. Martina Fink & Esther Segalla & Andrea Weber & Christine Zulehner, 2010. "Extracting Firm Information from Administrative Records: The ASSD Firm Panel," NRN working papers 2010-04, The Austrian Center for Labor Economics and the Analysis of the Welfare State, Johannes Kepler University Linz, Austria.
    36. Yuta Takahashi & Lawrence Schmidt & Konstantin Milbradt & Ian Dew-Becker & David Berger, 2016. "Layoff risk, the welfare cost of business cycles, and monetary policy," 2016 Meeting Papers 1293, Society for Economic Dynamics.
    37. Lazear, Edward P, 1979. "Why Is There Mandatory Retirement?," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1261-1284, December.
    38. Feldstein, Martin S, 1976. "Temporary Layoffs in the Theory of Unemployment," Journal of Political Economy, University of Chicago Press, vol. 84(5), pages 937-957, October.
    39. Li, Tong & Vuong, Quang, 1998. "Nonparametric Estimation of the Measurement Error Model Using Multiple Indicators," Journal of Multivariate Analysis, Elsevier, vol. 65(2), pages 139-165, May.
    40. Winter-Ebmer, Rudolf, 2003. "Benefit duration and unemployment entry: A quasi-experiment in Austria," European Economic Review, Elsevier, vol. 47(2), pages 259-273, April.
    41. Rafael Lalive & Jan Ours & Josef Zweimüller, 2011. "Equilibrium unemployment and the duration of unemployment benefits," Journal of Population Economics, Springer;European Society for Population Economics, vol. 24(4), pages 1385-1409, October.
    42. Sergio Correia, 2014. "REGHDFE: Stata module to perform linear or instrumental-variable regression absorbing any number of high-dimensional fixed effects," Statistical Software Components S457874, Boston College Department of Economics, revised 10 Mar 2019.
    43. Guido W. Imbens & Donald B. Rubin, 1997. "Estimating Outcome Distributions for Compliers in Instrumental Variables Models," Review of Economic Studies, Oxford University Press, vol. 64(4), pages 555-574.
    44. Marcus Hagedorn & Iourii Manovskii, 2013. "Job Selection and Wages over the Business Cycle," American Economic Review, American Economic Association, vol. 103(2), pages 771-803, April.
    45. Li, Tong, 2002. "Robust and consistent estimation of nonlinear errors-in-variables models," Journal of Econometrics, Elsevier, vol. 110(1), pages 1-26, September.
    46. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-444, June.
    47. Arthur J. Hosios, 1990. "On The Efficiency of Matching and Related Models of Search and Unemployment," Review of Economic Studies, Oxford University Press, vol. 57(2), pages 279-298.
    48. Robert E. Hall, 2005. "Employment Fluctuations with Equilibrium Wage Stickiness," American Economic Review, American Economic Association, vol. 95(1), pages 50-65, March.
    49. Walter Y. Oi, 1962. "Labor as a Quasi-Fixed Factor," Journal of Political Economy, University of Chicago Press, vol. 70, pages 538-538.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    complier analysis; Efficient separations; job surplus; Unemployment insurance; wage bargaining;

    JEL classification:

    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:13473. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.