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The Economics of Imperfect Labor Markets

The Economics of Imperfect Labor Markets: Second Edition

Tito Boeri
Jan van Ours
Copyright Date: 2013
Edition: STU - Student edition
Pages: 400
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  • Book Info
    The Economics of Imperfect Labor Markets
    Book Description:

    Most labor economics textbooks pay little attention to actual labor markets, taking as reference a perfectly competitive market in which losing a job is not a big deal. The Economics of Imperfect Labor Markets is the only textbook to focus on imperfect labor markets and to provide a systematic framework for analyzing how labor market institutions operate. This expanded, updated, and thoroughly revised second edition includes a new chapter on labor-market discrimination; quantitative examples; data and programming files enabling users to replicate key results of the literature; exercises at the end of each chapter; and expanded technical appendixes.

    The Economics of Imperfect Labor Markets examines 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, equal opportunity legislation, collective bargaining, early retirement programs, education and migration policies, payroll taxes, and employment-conditional incentives. 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.

    Expanded, thoroughly revised second edition New chapter on labor-market discrimination New quantitative examples New data sets enabling users to replicate key results of the literature New end-of-chapter exercises (with solutions at Expanded technical appendixes Unique focus on institutions in imperfect labor markets Integrated framework and systematic coverage Self-contained chapters on each of the most important labor-market institutions

    eISBN: 978-1-4008-4819-5
    Subjects: Economics, Business

Table of Contents

  1. Boxes and Available Datasets
    (pp. xi-xii)
  2. Preface and Acknowledgments
    (pp. xiii-xx)
  3. CHAPTER ONE Overview
    (pp. 1-34)

    What have we learned so far from the labor market response to the Great Recession of 2008–2009? Should we modify our way of teaching labor economics in light of these developments? Surprisingly enough, these questions are rarely addressed in our profession. Although many state that “this time is different” and that “nothing will be like before,” there has been so far little innovation in the teaching. Everything looks very much like before.

    It was, no doubt, a crisis that developed outside the labor market, and yet it heavily invested the markets where labor services are exchanged for pay. The...

  4. CHAPTER TWO Minimum Wages
    (pp. 35-62)

    The minimum wage is a labor market institution that sets a wage floor, that is, a lower bound to the wage paid to individual workers. The first minimum wage was introduced in the United States in 1938 and paid 25 cents per hour. In 2010 the federal minimum wage was $7.25, in nominal terms almost 30 times larger, but, in real terms, less than twice as high as 70 years before. In the United Kingdom a national minimum wage was introduced as late as 1999.

    Although most countries in the world have some form of minimum wage, the scale, eligibility,...

  5. CHAPTER THREE Unions and Collective Bargaining
    (pp. 63-94)

    Labor (or trade) unions are voluntary membership organizations. Like political parties and churches, they represent the interests of their members. They do what their members want them to do.

    Historically, unions emerged in the eighteenth century in the United Kingdom and the United States as craft unions, occupational organizations providing mutual insurance to their members against unemployment, death, and sometimes old age. Later, well into the nineteenth century, they gradually became industrial unions representing workers in semi-skilled positions, who are harder to replace with unemployed workers or immigrants. Increasingly at the beginning of the twentieth century they became national organizations...

  6. CHAPTER FOUR Antidiscrimination Legislation
    (pp. 95-122)

    The labor market position of individuals may depend on their personal characteristics, such as education, training, and work experience. Some individuals will be more likely to have a job, and if they have a job, they will have higher wages. To the extent that these differences are related to productive characteristics, there is no economic inefficiency involved. However, sometimes the differences in labor market position are related to irrelevant characteristics (i.e., characteristics that do not affect the productivity of the worker). Then there is discrimination. Discrimination is defined as “the valuation in the market place of personal characteristics of the...

  7. CHAPTER FIVE Regulation of Working Hours
    (pp. 123-154)

    Working hours have been a topic of heated debate between unions and employers for a long time. May 1, 1886, was a day of strikes and bloody riots in the United States for the introduction of an eight-hour working day. To commemorate the working-hours struggle between unions and employers, May 1 was declared Labor Day, which is still a holiday in many countries.

    The discussion of the optimal length of the working day concerns wages, leisure, and productivity. Past decades have seen several clear trends in hours of work. Working hours per week have been declining slowly in the four...

  8. CHAPTER SIX Early Retirement Plans
    (pp. 155-178)

    Early retirement occurs when the retiring individual is still of working age. Unlike other flows from employment to inactivity, retirement decisions tend to be irreversible, inducing permanent declines of the labor force in any given cohort of individuals. From a historical perspective, large-scale retirement of workers is a rather recent phenomenon. Until the beginning of the twentieth century, not many workers retired. They worked as long as they could, and if they stopped working, retirement often involved a few years of dependence on children at the end of life. In the course of the twentieth century retirement programs were introduced...

  9. CHAPTER SEVEN Family Policies
    (pp. 179-208)

    To cope with aging populations, many countries face the short-run challenge of raising rates of female labor force participation and the long-run challenge of raising fertility. Family policies aim at reconciling work of both parents with childcare responsibilities. There are two main types of family policies: parental leave and subsidized childcare.

    Parental leave arrangements not only provide a period for the working mother to recover from giving birth and to bond with her newborn, but also make it easier for mothers to stay attached to the labor market when raising children. Indeed the leave period grants parents the right to...

  10. CHAPTER EIGHT Education and Training
    (pp. 209-244)

    Governments devote a significant, and often increasing, amount of resources to education. In 1880, for example, the United States spent 1 percent of its GDP on primary and secondary public education. By 1920 this figure had doubled, and by 1980 it had reached 4.1 percent. From 1870 to 1970, the days attended during the school year doubled, and the fraction of those 10–19 years old enrolled in school increased from about 40 to 90 percent (Rangazas 2002).

    Governments spend on education as an investment in their endowment of human capital, a notion that dates back to the Wealth of...

  11. CHAPTER NINE Migration Policies
    (pp. 245-274)

    International migration is the great absentee in the era of globalization. While the barriers to international trade and capital mobility have already been largely removed, cross-border worker flows are tightly restricted. Until a few decades ago many European countries were mass out-migration countries. According to historians, about 60 million Europeans moved away from the Old Continent in the period 1820 1940. Two-thirds of them went to the United States (one can find their names on the website Currently Europe is attracting more migrants in proportion to its population than the United States. Countries like Italy that were sending 100,000...

  12. CHAPTER TEN Employment Protection Legislation
    (pp. 275-306)

    Employment protection legislation consists of the set of norms and procedures to be followed in case of dismissals of redundant workers. EPL imposes legal restrictions on dismissals and sets compensations to workers to be paid by their former employers in case of early termination of a permanent employment contract (i.e., an open-ended contract). EPL also imposes restrictions on the hiring of workers under temporary contracts (i.e., fixed-term contracts). Procedures are also envisaged under EPL that have to be followed in case of both individual and collective layoffs. The final decision on the legitimacy of a layoff may depend on a...

  13. CHAPTER ELEVEN Unemployment Benefits
    (pp. 307-350)

    Unemployment benefits (UBs) protect individuals against uninsurable labor market risk. Unlike EPL (covered in chapter 10) that protects jobholders by making it more difficult for employers to dismiss them, UBs offer replacement income to workers experiencing unemployment spells after having lost their jobs.

    The first UB system was introduced in the United Kingdom in 1911. Many people did not like the idea that persons not working could receive a state transfer, and beneficiaries were ironically named people “on the dole,” which is derived from the “doling out” of charitable gifts of food or money. Nowadays, all OECD countries, most middle-income...

  14. CHAPTER TWELVE Active Labor Market Policies
    (pp. 351-374)

    Active labor market policies have a long-standing tradition in many countries. At the beginning of the twentieth century employment offices were built up. During the depression of the interwar years government programs were established to put the unemployed to work. Later, labor market retraining was organized to stimulate occupational and regional mobility and thus facilitate structural adjustments. More recently, there has been experimentation with activation schemes that put pressure on UB recipients to avoid their getting trapped in a long-term dependency on public transfers.

    ALMPs currently implemented in OECD countries aim mainly at improving the functioning of the labor market...

  15. CHAPTER THIRTEEN Payroll Taxes
    (pp. 375-404)

    Historically, taxes emerged from seigneurial arrangements by which the king could obtain extraordinary revenues to meet unusual temporary conditions, such as wars. From these extraordinary revenues medieval taxation developed, which ultimately became the fiscal basis for government expenditures (Ames and Rapp 1977). Since then, the history of taxation is one of levies introduced to cope with extraordinary events, but the taxes survived well after these circumstances were no longer in place. For the most part the famous 1783 Benjamin Franklin quote is still uncontroversial: “In this world nothing can be said to be certain, except death and taxes.”

    Payroll taxes...