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Distributional Consequences of Labor Demand Adjustments to a Downturn: A Model-Based Approach with Application to Germany 2008-09

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Listed:
  • Herwig Immervoll

    (OECD)

  • Olivier Bargain

    (University College, Dublin)

  • Andreas Peichl

    (Institute for the Study of Labor)

  • Sebastien Siegloch

    (Institute for the Study of Labor)

Abstract

Macro-level changes can have substantial effects on the distribution of resources at the household level. While it is possible to speculate about which groups are likely to be hardest-hit, detailed distributional studies are still largely backward-looking. This paper suggests a straight forward approach to gauge the distributional and scale implications of large output changes at an early stage. We illustrate the method with an evaluation of the impact of the 2008-2009 crisis in Germany. We take as a starting point a very detailed administrative matched employer-employee dataset to estimate labor demand and predict the effects of output shocks at a disaggregated level. The predicted employment effects are then transposed to household-level micro data, in order to analyze the incidence of rising unemployment and reduced working hours on poverty and inequality. We focus on two alternative scenarios of the labor demand adjustment process, one based on reductions in hours (intensive margin) and close to the German experience, and the other assuming extensive margin adjustments that take place through layoffs (close to the US situation). Our results suggest that the distributional and scale consequences are less severe when labor demand reacts along the intensive margin. Les changements au niveau macroéconomique peuvent exercer des effets importants sur la répartition des ressources au niveau des ménages. Alors qu’on peut conjecturer des catégories qui risquent d’être le plus fortement touchées, les études détaillées sur la distribution des revenus sont en grande partie rétrospectives. Ce document propose une approche directe pour mesurer les implications de la répartition et l’ampleur des évolutions d’ensemble à un stade précoce. La méthode est illustrée par une évaluation de l’impact de la crise de 2008-2009 en Allemagne. On utilise comme point de départ un ensemble de données administratives employeur/employé pour estimer la demande d’emploi et prédire les effets des chocs à un niveau détaillé. Les effets attendus sur l'emploi sont ensuite transposés aux micro-données au niveau du ménage de manière à analyser l’incidence de l’augmentation du chômage et de la réduction des heures de travail sur la pauvreté et l’inégalité. . Deux scénarios sur le processus d’ajustement de la demande d’emploi sont étudiés : un scénario sur la réduction des heures de travail (marge intensive), proche de l’expérience allemande ; et un scénario qui suppose des ajustements intensifs des marges par le biais des licenciements (proche de la situation existant aux États-Unis). Les résultats laissent penser que les conséquences sur la répartition et l’ampleur du phénomène sont moins sévères quand la demande d’emploi réagit selon la marge intensive

Suggested Citation

  • Herwig Immervoll & Olivier Bargain & Andreas Peichl & Sebastien Siegloch, 2010. "Distributional Consequences of Labor Demand Adjustments to a Downturn: A Model-Based Approach with Application to Germany 2008-09," OECD Social, Employment and Migration Working Papers 110, OECD Publishing.
    • Handle: RePEc:oec:elsaab:110-en
    DOI: 10.1787/5km68fvs7gzt-en
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    References listed on IDEAS

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    1. Stefan Bender & Till von Wachter, 2006. "In the Right Place at the Wrong Time: The Role of Firms and Luck in Young Workers' Careers," American Economic Review, American Economic Association, vol. 96(5), pages 1679-1705, December.
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    Cited by:

    1. Nolan, Matt, 2018. "Income-leisure preferences in New Zealand: 1988-2013," Working Paper Series 7660, Victoria University of Wellington, Chair in Public Finance.

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    More about this item

    Keywords

    crisis; income distribution; labour demand; tax-benefit system;
    All these keywords.

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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