Working Papers

Life-cycle Worker Flows and Cross-country Differences in Aggregate Employment

with Jonathan Créchet (University of Ottawa) and Etienne Lalé (UQAM)

(November 2024)

Abstract: We document how worker flows between employment, unemployment, and out of the labor force, vary by age and gender for a large panel of European countries. We develop and calibrate an extended Diamond-Mortensen-Pissarides model that captures all the salient features of these data. The model assigns a major role to the production technology in driving differences in aggregate employment, while, in contrast to standard analyses, labor-market policies play only a secondary role. Search intensity and a labor-force participation decision are key for propagating the effects of technology across age and gender groups, and for explaining the variation in aggregate employment.

Manuscript

Bargaining over severance: evidence from employment protection reform in Lithuania

with Joanna Tyrowicz (University of Regensburg)

(June 2024)

Abstract: This paper quantifies workers' bargaining power in negotiations with employers regarding severance pay. Our identification strategy relies on a labor code reform in Lithuania, significantly reducing the surplus available for negotiation between employers and employees. Utilizing detailed administrative records we provide difference-in-difference estimates of bargaining power of the workers. Our findings reveal that employees extract a sizable income at contract termination. Additionally, we document considerable variation in bargaining power among workers. In addition, our analysis does not support the notion that women negotiate differently than men.

Manuscript coming soon

Earnings Inequality and Risk over Two Decades of Economic Development in Lithuania

with Jose Garcia-Louzao (Lietuvos Bankas, Vilnius Univeristy)

(December 2024)

Abstract: Using Social Security records between 2000 and 2020, we provide a comprehensive analysis of labor earnings inequality and its dynamics over the course of Lithuania's economic development. Since 2000, there has been a substantial decline in earnings inequality, largely driven by the rapid growth of earnings at the bottom of the distribution, while earnings volatility has hardly changed. Importantly, we estimate a relatively high sensitivity of earnings growth to changes in real GDP, which declines with the level of permanent income. In contrast, we find that the idiosyncratic earnings risk of individuals at the bottom of the permanent income distribution is less sensitive to aggregate growth than that of individuals in the top half. Taken together, our findings underscore that analyzing earnings risk is critical to properly understanding the dynamics of inequality and designing effective policies to address it.

Manuscript