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The Economics of Imperfect Labor Markets
Tito Boeri & Jan van Ours

Book Description | Reviews
Chapter 1 [in PDF format] | Chapter 10 [PDF only] | Chapter 12 [PDF only]

TABLE OF CONTENTS:

Preface xi
Symbols and Acronyms xvii

Chapter 1: Overview 1
1.1 A Few Key Definitions 2
1.2 A Competitive Labor Market 4
1.2.1 Labor Supply and the ReservationWage without Hours Restrictions 4
1.2.2 Aggregate Labor Supply 7
1.2.3 Labor Demand andWage Determination 9
1.2.4 Equilibrium 11
1.3 Labor Market Institutions 14
1.3.1 Acting on Prices 14
1.3.2 Acting on Quantities 15
1.3.3 Institutional Interactions 17
1.3.4 Why Do Labor Market Institutions Exist? 18
1.3.5 Product Market Competition and Institutional Reforms 21
1.4 Technical Annex: A Simple Static Framework 24
1.4.1 A Competitive Labor Market 24
1.4.2 Labor Market Institutions 25
1.4.3 TheWedge 26
1.4.4 Product Market Competition and the Employment Bias
of Institutions 27

Chapter 2: MinimumWages 29
2.1 Cross-Country Comparisons 30
2.2 Theory 33
2.2.1 A Competitive Labor Market 33
2.2.2 A Noncompetitive Labor Market 34
2.3 Empirical Evidence 38
2.3.1 Studies Based on Firm-Level Data 38
2.3.2 Studies Based on Natural Experiments 39
2.3.3 Studies Based onWorkers’ Histories 43
2.4 Policy Issues 44
2.4.1 Should the MinimumWage Be Reduced or Increased? 44
2.4.2 Is the MinimumWage Effective in Reducing Earnings
Inequality and Poverty? 45
2.5 Why Does a MinimumWage Exist? 46
2.6 Suggestions for Further Reading 47
2.7 Review Questions 47
2.8 Technical Annex: Fine-Tuning of the MinimumWage 48

Chapter 3: Unions and Collective Bargaining 51
3.1 Measures and Cross-Country Comparisons 52
3.1.1 Union Density 52
3.1.2 Coverage and Excess Coverage 54
3.1.3 Coordination 56
3.2 Theory 56
3.2.1 Collective Bargaining 57
3.2.2 Endogenous Membership 61
3.3 Empirical Evidence 66
3.3.1 Effects of Unions onWages 67
3.3.2 Bargaining Coordination, Union Density, and Unemployment 71
3.4 Policy Issues 72
3.4.1 Do Unions Increase Efficiency? 72
3.4.2 Should Collective Bargaining Be Decentralized? 74
3.5 Why Do Unions Exist? 75
3.6 Suggestions for Further Reading 76
3.7 Review Questions 76
3.8 Technical Annex: How Strong Should Unions Be in Order to Be Efficient? 77

Chapter 4: Payroll Taxes 81
4.1 Measures and Cross-Country Comparisons 82
4.2 Theory 86
4.3 Empirical Evidence 90
4.4 Policy Issues 92
4.4.1 Negative Income Taxes or In-Work Benefits? 92
4.4.2 Tax Credits orWage Subsidies? 96
4.5 Why Do Payroll Taxes Exist? 97
4.6 Suggestions for Further Reading 98
4.7 Review Questions 98
4.8 Technical Annex: Taxes and Benefits in a Competitive Labor Market 98

Chapter 5: Regulation ofWorking Hours 101
5.1 Measures and Cross-Country Comparisons 101
5.2 Theory 102
5.2.1 RegulatingWeeklyWorking Hours 104
5.2.2 Part-TimeWork 107
5.3 Empirical Evidence 109
5.3.1 Working Hours 109
5.3.2 Part-TimeWork 113
5.4 Policy Issues 116
5.4.1 Should Governments RegulateWorking Hours? 116
5.4.2 Should Governments Stimulate Part-Time Labor? 117
5.5 Why Does Regulation ofWorking Hours Exist? 117
5.6 Suggestions for Further Reading 118
5.7 Review Questions 118
5.8 Technical Annex: Reduction of StandardWorking Hours 119

Chapter 6: Retirement Programs 121
6.1 Measures and Cross-Country Comparisons 122
6.2 Theory 124
6.3 Empirical Evidence 125
6.3.1 Age and Employment 125
6.3.2 Age and Productivity 132
6.4 Policy Issues 134
6.4.1 Should the Mandatory Retirement Age Be Increased? 134
6.4.2 Should Early Retirement Programs Be Phased Out? 135
6.5 Why Do Early Retirement Programs Exist? 136
6.6 Suggestions for Further Reading 136
6.7 Review Questions 136
6.8 Technical Annex: Optimal Retirement Age 137

Chapter 7: Family Policies 139
7.1 Measures and Cross-Country Comparisons 140
7.2 Theory 142
7.2.1 Child Care Facilities 142
7.2.2 Parental Leave 142
7.3 Empirical Evidence 144
7.4 Policy Issues 150
7.4.1 CanWork and Family Life Be Balanced? 150
7.4.2 Is There a Trade-off between Fertility and Employment? 151
7.5 Why Do Family Policies Exist? 153
7.6 Suggestions for Further Reading 153
7.7 Review Questions 154
7.8 Technical Annex: Child Care Facilities and Hours ofWork 154

Chapter 8: Education and Training 157
8.1 Measures and Cross-Country Comparisons 158
8.2 Theory 160
8.2.1 Schooling 160
8.2.2 Training 163
8.3 Empirical Evidence 165
8.3.1 Returns to Schooling 165
8.3.2 On-the-Job Training 169
8.4 Policy Issues 170
8.4.1 Should Governments Subsidize In-Company Training? 170
8.4.2 Should There Be a Compulsory Schooling Age? 171
8.5 Why Do Governments Provide Education and Training? 171
8.6 Suggestions for Further Reading 172
8.7 Review Questions 172
8.8 Technical Annex: Schooling and Training 172
8.8.1 OptimalYears of Schooling 172
8.8.2 Who Pays for General Training? 174

Chapter 9: Migration Policies 175
9.1 Measures and Cross-Country Comparisons 176
9.2 Theory 178
9.2.1 A Competitive Labor Market 179
9.2.2 An Economy withWage Rigidities 180
9.2.3 Wage Rigidities and Unemployment Benefits 181
9.2.4 What Drives Migration Decisions? 182
9.2.5 Effects on Income Distribution of Skill-Biased Migration 183
9.3 Empirical Evidence 184
9.3.1 The Labor Market Performance of Migrants 189
9.3.2 Fiscal Effects 190
9.4 Policy Issues 191
9.4.1 Closing theWelfare Door? 192
9.4.2 Adopting a Points System? 193
9.5 Why Do Migration Policies Exist? 194
9.6 Suggestions for Further Reading 195
9.7 Review Questions 195
9.8 Technical Annex: Net Gains from Migration and the Option Value ofWaiting 195

Chapter 10: Employment Protection Legislation 199
10.1 Measures and Cross-Country Comparisons 200
10.2 Theory 204
10.2.1 A Neutrality Result 204
10.2.2 Removing Risk Neutrality 206
10.2.3 EPL with RigidWages 206
10.2.4 EPL as a Tax 209
10.2.5 Two-Tier Regimes 210
10.3 Empirical Evidence 211
10.3.1 Cross-Country Analyses 211
10.3.2 Within-Country Studies 213
10.3.3 Endogeneity of EPL 214
10.4 Policy Issues 215
10.4.1 How Much Protection Should EPL Provide? 215
10.4.2 Whom Should EPL Be Protecting? 218
10.5 Why Does Employment Protection Legislation Exist? 220
10.6 Suggestions for Further Reading 220
10.7 Review Questions 221
10.8 Technical Annex: EPL in a Search-Matching Model 221
10.8.1 A Simple Dynamic Framework 221
10.8.2 Present Discounted and Flow Values 221
10.8.3 Behavior ofWorkers 222
10.8.4 Matching 222
10.8.5 Firms 223
10.8.6 Wage Bargaining 223
10.8.7 Introducing EPL 223
10.8.8 Baseline Parameters 224

Chapter 11: Unemployment Benefits 225
11.1 Measures and Cross-Country Comparisons 226
11.2 Theory 230
11.2.1 A Competitive Labor Market 230
11.2.2 An Imperfect Labor Market 234
11.3 Empirical Evidence 238
11.3.1 Effects on ReservationWage 238
11.3.2 Effects on Unemployment Duration: Aggregate Data 239
11.3.3 Effects on Unemployment Duration: Microeconomic Data 240
11.3.4 Effects of Unemployment on the Generosity of UBs 243
11.4 Policy Issues 244
11.4.1 Why and When Should UBs Be Publicly Provided? 244
11.4.2 What Is the Optimal Structure of UBs? 246
11.5 Why Do Unemployment Benefits Exist? 247
11.6 Suggestions for Further Reading 248
11.7 Review Questions 248
11.8 Technical Annex: UBs in a Search-Matching Model 249
11.8.1 Effects of UBs in a Two-Sided Job Search Model 249
11.8.2 Optimal Job Search Intensity 249
11.8.3 Vacancies and the Matching Function 250
11.8.4 Wage Bargaining 251
11.8.5 Labor Market Participation 251
11.8.6 Balanced Budget 253
11.8.7 Numerical Simulations 253

Chapter 12: Active Labor Market Policies 255
12.1 Measures and Cross-Country Comparisons 256
12.2 Theory 258
12.3 Empirical Evidence 263
12.3.1 Experimental Studies 264
12.3.2 Nonexperimental Studies 268
12.4 Policy Issues 270
12.4.1 DoWe Need Public Employment Services? 271
12.4.2 DoWe Need Activation Policies? 271
12.5 Why Do Active Labor Market Policies Exist? 272
12.6 Suggestions for Further Reading 272
12.7 Review Questions 273
12.8 Technical Annex: Activating UnemployedWorkers 273

Chapter 13: Institutional Interactions 277
13.1 Taxes and Unions 278
13.2 Employment Protection and Unemployment Benefits 280
13.3 Unemployment Benefits and Active Labor Market Policies 282
13.4 Employment Protection and Unions 284
13.5 Taxes and Unemployment Benefits 285
13.6 Education and Retirement Programs 287
13.7 What Future for These Institutions? 288

References 291
Index 313

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File created: 7/11/2014

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