Job Security over the Business Cycle
Dual labour markets, characterised by the coexistence of fixed-term and open-ended contracts, are a distinctive feature of many European economies. This paper develops a directed search model with aggregate uncertainty and risk-averse workers, wherein firms compete for workers through both the wage and the job security they offer. Firms offering open-ended contracts can pay lower wages (all else equal) but sacrifice firing flexibility during downturns. During expansions, the wage-saving effect dominates the flexibility cost, leading firms to favour open-ended contracts; this twists the pool of active contracts towards open-ended ones (and vice versa during recessions) and inten- sifies overall job creation. Furthermore, when accounting for firm heterogeneity, the model shows that some firms strategically offer open-ended contracts to attract work- ers, even when the corresponding match values are lower. This creates a composition effect whereby workers self-select into more secure positions at high-productivity firms. I provide direct evidence of this form of labour-market competition between firms using Labour Force Survey data from four major European economies.
The Effects of Covid-19 on Couples' Job Tenures: Mothers Have it Worse with Cristina Lafuente, Raül Santaeulàlia-Llopis and Ludo Visschers, Labour Economics, Volume 83, 2023
Presented at: "Economics and Pandemics in the XXI Century" Workshop - UAB 2022*; EALE Conference - Padova, 8-10 September 2022*.
We look, across couples and by gender and presence of children, at dimensions that capture aspects of job quality: job tenure and the temporary/permanent status of contracts. Using the EU-LFS we study the evolution of couples' joint tenure distribution over time, with a special focus on the Covid-19 pandemic/recession and its aftermath, across Europe. We further look at the role of contracts and dual labor markets in these dynamics. To illustrate, we look at the evolution of "permanent'' jobs (stable, with open-ended contracts) in Spain as a result of the Covid-19 pandemic/recession, using the Spanish LFS. We provide evidence that women with children in Spain suffer relatively larger losses of permanent employment that persist after two years into the pandemic. Finally, linking partners within households, we show a change of the assortative matching patterns in terms of permanent contracts across partners during Covid-19.
Short-Time Work schemes and labour market flows in Europe during COVID with Cristina Lafuente
Economics Working Papers EUI ECO 2022/02, European University Institute.
Presented at: Fed St. Louis-JEDC-SCG-SNB-Conference: Heterogeneity and Macroeconomics of Labor Markets - Gerzensee 2023 (poster presentation); "Economics and Pandemics in the XXI Century" Workshop - UAB 2022; Junior SaM Workshop 2022; ESCoE conference on Economic Measurement 2022 (poster presentation).
In this paper we investigate the impact that Short-Time Work schemes (STWs) had on employment and labour market flows during the COVID emergency of 2020 in four of the five largest economies of the EU. Most European countries used STWs at this time to alleviate the negative impact of sanitary measures like lockdowns. Looking at labour market stocks and flows, we document that these schemes were widely adopted and likely prevented substantial job losses. However, they failed to protect temporary workers. Moreover, in all countries, transitions from employment to non-participation reached unprecedented levels. These flows are reverted in subsequent quarters, which implies that many workers postponed job search during the lockdown. We do not observe permanent increases in non-participation, but we document a large fall in flows between temporary and permanent jobs. We interpret this as a drop in labour market mobility. We find that vacancy posting and firm dynamics may be able to explain part of the observed differences between countries.
Optimal Job Retention [Draft coming soon] with Edouard Challe
Presented at: EES Workshop on "New Developments in the Macroeconomics of Labor Markets" - Bonn, May 2024; NYU Macro Student Lunch - March 2023; 4th Year Forum at the EUI Economics Department - January 2023
Measuring labour market participation in Europe during COVID: the role of Short-Time Work schemes with Cristina Lafuente [pdf]
During the COVID-19 emergency of 2020, many European countries adopted or expanded Short-Time Work schemes (STWs) to cope with the economic effects of lockdowns and other sanitary measures. These involved government subsidizing labour costs and replacement wages while economic activity was shut. However, the fast expansion of these policies and the uncertainty at the start of the pandemic have led to measurement problems: are workers on STWs employed even if they are working zero hours? In this paper we document how the labour force surveys of different European countries have tackled this problem. We find that in Spain a sizeable number of workers in STWs are classified as inactive or out-of-the-labour force. In contrast, in France all workers on STWs are counted as employed. This is puzzling since both countries should be using the same inactivity definition from EUROSTAT. Further inspecting the data from Spain, we document these inactive workers in STWs have very different composition and behaviour than other inactive workers. In particular, we note that workers in industries and occupations that were more exposed to STWs in the Great Recession are less likely to be classified as inactive on a STW in the COVID recession. As a result of this classification issue, we find that in Spain transitions between non-participation and employment are greatly exaggerated in 2020. We implement a simple correction using linked interviews, which makes the Spanish and French labour market flows more comparable. Researchers using labour force surveys of countries with STWs during this period should be careful with the application of the non-participation definition.
Are you at risk of losing your job? Determinants of job separations in the euro area with Vasco Botelho, Agostino Consolo and Claudia Foroni
Presented at: ECB mini workshop - Research Taskforce on Heterogeneity 2022; ECB DG-Economics Internal Seminar 2022; ECB DG-Economics, Supply Side, Labour and Surveillance (SSL) division presentation 2022.
* Co-author presenting