Research

Why would agents insert employment protection in labour contracts?

Within a Diamond-Mortensen-Pissarides search and matching model with on-the-job search and heterogeneous match-productivity, I show that firms and workers choose employment protection to improve their joint welfare by reducing workers' search intensity. I use this model, augmented with Bayesian learning about a worker's unobserved ability, to explain the coexistence of fixed-term contracts and open-ended contracts in continental Europe, as well as key facts about the distribution of fixed-term contracts in the workforce: (i) their high incidence among young workers; (ii) their correlation with low wages; and (iii) their persistence in a worker's career. I calibrate the model using Italian administrative data, and I perform welfare comparisons between different Employment Protection Legislations. I show that the endogenous nature of the contractual choice plays a key role in the welfare gains of heterogeneous agents.

Link to draft of the paper

We build a model of resource war to investigate the impact of a change in the resource value on the likelihood of a conflict. A predator decides if to wage war against a resource holder and seize its resource. A powerful third party can intervene to back the defendant. However, it does not act as a social planner but it maximizes its own profits. Then, the effect of a change in resource value is a priori unclear. On the one hand, increased resource value results in a higher incentive to predate, on the other hand it makes for a higher incentive to intervene by the third party, increasing deterrence. Under general assumptions, we find that the probability of a conflict as a function resource value is hump-shaped. We find empirical grounding for our model using data on interstate and civil conflicts from the MID and PRIO databases, instrumenting resource value with data on sediments from the CRUST database. In work in progress, we are developing a structural version of the model to study quantitatively counterfactual scenarios.

In the presence of price rigidities, labor migration can help to mitigate the burden of asymmetric shocks across countries in a currency union. However, heterogeneity in workers' productivity and their preference for migration may thwart the potential of labor mobility to absorb asymmetric shocks. We develop a dynamic equilibrium model in which firms match with workers of different skill levels and taste for different countries. We calibrate this model to data from the European Labour Force Survey, and find that migration primarily mitigates the effects of a negative shock on labor market outcomes for high skilled workers, whereas negative effects on wages may actually be amplified for low skilled workers.

We want to study the heterogeneity in the evolution of unemployment in different European countries, trying to quantify the relative contribution of alternative sources of aggregate uncertainty. In particular, we focus on the fluctuations that occurred during the Great Recession and its aftermath. In addition to the more traditional productivity shock, we analyze the effect of a discount factor shock, that has been recently addressed by the literature as a possible explanation of the observed unemployment fluctuations. We then want to study the way in which these shocks interact with the labour market institutions (wage rigidity, labour market duality) of the different European countries, producing the heterogeneity of labour market outcomes that we observe in the data.

Using a novel dataset that combines the French employment register data with the posted vacancies at the French Employment Agency, we are able to analyze the relationship between employment growth at the establishment level and vacancy duration, controlling for a large set of vacancy characteristics. We show that the negative correlation found in the literature is robust to our additional controls, such as posted wages, job-titles, labour contracts, experience required. Then, we conduct some preliminary analysis on the recruitment strategies of the firms.