The Economics of Imperfect Labor Markets

by Boeri, Tito; Ours, Jan Van

• ISBN13: 9781400829835
• ISBN10: 1400829836
• Copyright: 2009-06-22
• Publisher: Princeton Univ Pr

Summary

Most labor economics textbooks pay little attention to actual labor markets, with the exception of the occasional reference to competitive labor markets like that of the United States.The Economics of Imperfect Labor Marketsis the only textbook to focus on imperfectly competitive labor markets and to provide a systematic framework for analyzing how labor institutions function and interact in these markets.The Economics of Imperfect Labor Marketsexamines the many institutions that affect the behavior of workers and employers in imperfect labor markets. These include minimum wages, employment protection legislation, unemployment benefits, active labor market policies, working time regulations, family policies, collective bargaining, early retirement programs, and education and migration policies. Written for advanced undergraduates and beginning graduate students, the book carefully defines and measures these institutions to accurately characterize their effects, and discusses how these institutions are today being changed by political and economic forces. Unique focus on institutions in imperfect labor markets Integrated framework and systematic coverage A self-contained chapter on each of the most important labor market institutions End-of-chapter review questions

Table of Contents

Preface	p. xi
Symbols and Acronyms	p. xvii
Overview	p. 1
A Few Key Definitions	p. 2
A Competitive Labor Market	p. 4
Labor Supply and the Reservation Wage without Hours Restrictions	p. 4
Aggregate Labor Supply	p. 7
Labor Demand andWage Determination	p. 9
Equilibrium	p. 11
Labor Market Institutions	p. 14
Acting on Prices	p. 14
Acting on Quantities	p. 15
Institutional Interactions	p. 17
Why Do Labor Market Institutions Exist?	p. 18
Product Market Competition and Institutional Reforms	p. 21
Technical Annex: A Simple Static Framework	p. 24
A Competitive Labor Market	p. 24
Labor Market Institutions	p. 25
The Wedge	p. 26
Product Market Competition and the Employment Bias of Institutions	p. 27
Minimum Wages	p. 29
Cross-Country Comparisons	p. 30
Theory	p. 33
A Competitive Labor Market	p. 33
A Noncompetitive Labor Market	p. 34
Empirical Evidence	p. 38
Studies Based on Firm-Level Data	p. 38
Studies Based on Natural Experiments	p. 39
Studies Based onWorkers' Histories	p. 43
Policy Issues	p. 44
Should the Minimum Wage Be Reduced or Increased?	p. 44
Is the Minimum Wage Effective in Reducing Earnings Inequality and Poverty?	p. 45
Why Does a Minimum Wage Exist?	p. 46
Suggestions for Further Reading	p. 47
Review Questions	p. 47
Technical Annex: Fine-Tuning of the Minimum Wage	p. 48
Unions and Collective Bargaining	p. 51
Measures and Cross-Country Comparisons	p. 52
Union Density	p. 52
Coverage and Excess Coverage	p. 54
Coordination	p. 56
Theory	p. 56
Collective Bargaining	p. 57
Endogenous Membership	p. 61
Empirical Evidence	p. 66
Effects of Unions onWages	p. 67
Bargaining Coordination, Union Density, and Unemployment	p. 71
Policy Issues	p. 72
Do Unions Increase Efficiency?	p. 72
Should Collective Bargaining Be Decentralized?	p. 74
Why Do Unions Exist?	p. 75
Suggestions for Further Reading	p. 76
Review Questions	p. 76
Technical Annex: How Strong Should Unions Be in Order to Be Efficient?	p. 77
Payroll Taxes	p. 81
Measures and Cross-Country Comparisons	p. 82
Theory	p. 86
Empirical Evidence	p. 90
Policy Issues	p. 92
Negative Income Taxes or In-Work Benefits?	p. 92
Tax Credits orWage Subsidies?	p. 96
Why Do Payroll Taxes Exist?	p. 97
Suggestions for Further Reading	p. 98
Review Questions	p. 98
Technical Annex: Taxes and Benefits in a Competitive Labor Market	p. 98
Regulation ofWorking Hours	p. 101
Measures and Cross-Country Comparisons	p. 101
Theory	p. 102
Regulating Weekly Working Hours	p. 104
Part-Time Work	p. 107
Empirical Evidence	p. 109
Working Hours	p. 109
Part-Time Work	p. 113
Policy Issues	p. 116
Should Governments Regulate Working Hours?	p. 116
Should Governments Stimulate Part-Time Labor?	p. 117
Why Does Regulation ofWorking Hours Exist?	p. 117
Suggestions for Further Reading	p. 118
Review Questions	p. 118
Technical Annex: Reduction of Standard Working Hours	p. 119
Retirement Programs	p. 121
Measures and Cross-Country Comparisons	p. 122
Theory	p. 124
Empirical Evidence	p. 125
Age and Employment	p. 125
Age and Productivity	p. 132
Policy Issues	p. 134
Should the Mandatory Retirement Age Be Increased?	p. 134
Should Early Retirement Programs Be Phased Out?	p. 135
Why Do Early Retirement Programs Exist?	p. 136
Suggestions for Further Reading	p. 136
Review Questions	p. 136
Technical Annex: Optimal Retirement Age	p. 137
Family Policies	p. 139
Measures and Cross-Country Comparisons	p. 140
Theory	p. 142
Child Care Facilities	p. 142
Parental Leave	p. 142
Empirical Evidence	p. 144
Policy Issues	p. 150
Can Work and Family Life Be Balanced?	p. 150
Is There a Trade-off between Fertility and Employment?	p. 151
Why Do Family Policies Exist?	p. 153
Suggestions for Further Reading	p. 153
Review Questions	p. 154
Technical Annex: Child Care Facilities and Hours ofWork	p. 154
Education and Training	p. 157
Measures and Cross-Country Comparisons	p. 158
Theory	p. 160
Schooling	p. 160
Training	p. 163
Empirical Evidence	p. 165
Returns to Schooling	p. 165
On-the-Job Training	p. 169
Policy Issues	p. 170
Should Governments Subsidize In-Company Training?	p. 170
Should There Be a Compulsory Schooling Age?	p. 171
Why Do Governments Provide Education and Training?	p. 171
Suggestions for Further Reading	p. 172
Review Questions	p. 172
Technical Annex: Schooling and Training	p. 172
Optimal Years of Schooling	p. 172
Who Pays for General Training?	p. 174
Migration Policies	p. 175
Measures and Cross-Country Comparisons	p. 176
Theory	p. 178
A Competitive Labor Market	p. 179
An Economy withWage Rigidities	p. 180
Wage Rigidities and Unemployment Benefits	p. 181
What Drives Migration Decisions?	p. 182
Effects on Income Distribution of Skill-Biased Migration	p. 183
Empirical Evidence	p. 184
The Labor Market Performance of Migrants	p. 189
Fiscal Effects	p. 190
Policy Issues	p. 191
Closing theWelfare Door?	p. 192
Adopting a Points System?	p. 193
Why Do Migration Policies Exist?	p. 194
Suggestions for Further Reading	p. 195
Review Questions	p. 195
Technical Annex: Net Gains from Migration and the Option Value ofWaiting	p. 195
Employment Protection Legislation	p. 199
Measures and Cross-Country Comparisons	p. 200
Theory	p. 204
A Neutrality Result	p. 204
Removing Risk Neutrality	p. 206
EPL with Rigid Wages	p. 206
EPL as a Tax	p. 209
Two-Tier Regimes	p. 210
Empirical Evidence	p. 211
Cross-Country Analyses	p. 211
Within-Country Studies	p. 213
Endogeneity of EPL	p. 214
Policy Issues	p. 215
How Much Protection Should EPL Provide?	p. 215
Whom Should EPL Be Protecting?	p. 218
Why Does Employment Protection Legislation Exist?	p. 220
Suggestions for Further Reading	p. 220
Review Questions	p. 221
Technical Annex: EPL in a Search-Matching Model	p. 221
A Simple Dynamic Framework	p. 221
Present Discounted and Flow Values	p. 221
Behavior ofWorkers	p. 222
Matching	p. 222
Firms	p. 223
Wage Bargaining	p. 223
Introducing EPL	p. 223
Baseline Parameters	p. 224
Unemployment Benefits	p. 225
Measures and Cross-Country Comparisons	p. 226
Theory	p. 230
A Competitive Labor Market	p. 230
An Imperfect Labor Market	p. 234
Empirical Evidence	p. 238
Effects on Reservation Wage	p. 238
Effects on Unemployment Duration: Aggregate Data	p. 239
Effects on Unemployment Duration: Microeconomic Data	p. 240
Effects of Unemployment on the Generosity of UBs	p. 243
Policy Issues	p. 244
Why and When Should UBs Be Publicly Provided?	p. 244
What Is the Optimal Structure of UBs?	p. 246
Why Do Unemployment Benefits Exist?	p. 247
Suggestions for Further Reading	p. 248
Review Questions	p. 248
Technical Annex: UBs in a Search-Matching Model	p. 249
Effects of UBs in a Two-Sided Job Search Model	p. 249
Optimal Job Search Intensity	p. 249
Vacancies and the Matching Function	p. 250
Wage Bargaining	p. 251
Labor Market Participation	p. 251
Balanced Budget	p. 253
Numerical Simulations	p. 253
Active Labor Market Policies	p. 255
Measures and Cross-Country Comparisons	p. 256
Theory	p. 258
Empirical Evidence	p. 263
Experimental Studies	p. 264
Nonexperimental Studies	p. 268
Policy Issues	p. 270
Do We Need Public Employment Services?	p. 271
Do We Need Activation Policies?	p. 271
Why Do Active Labor Market Policies Exist?	p. 272
Suggestions for Further Reading	p. 272
Review Questions	p. 273
Technical Annex: Activating Unemployed Workers	p. 273
Institutional Interactions	p. 277
Taxes and Unions	p. 278
Employment Protection and Unemployment Benefits	p. 280
Unemployment Benefits and Active Labor Market Policies	p. 282
Employment Protection and Unions	p. 284
Taxes and Unemployment Benefits	p. 285
Education and Retirement Programs	p. 287
What Future for These Institutions?	p. 288
References	p. 291
Index	p. 313
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