Training Subsidies and the Wage Returns to Continuing Vocational Training: Evidence from Italian ... more Training Subsidies and the Wage Returns to Continuing Vocational Training: Evidence from Italian Regions * We use the variation of training policy over time and across Italian regions to identify the relationship between individual training and earnings. Using longitudinal data for the period 1999 to 2005, we find that the marginal effect of one additional week of formal training on monthly earnings is 4.4 percent. This effect declines rapidly over time and is equal to 0.86 percent 10 years after the investment. We also find that marginal returns are higher among small firms, which are more likely to be constrained by lack of economic resources in their training decisions. Since small firms train less than large firms, their higher returns from the training induced by training policies can simply reflect decreasing marginal returns to training.
I use the crosscountry and time variation in the demographic structure of 11 European countries t... more I use the crosscountry and time variation in the demographic structure of 11 European countries to study how changes in cohort size affect real earnings in Europe. This is an important question in the light of widespread population ageing. l find that cohort size has a negative and statistically significant effect on earnings, and that this effect is larger for the older age group-aged between 35 and 54-than for the younger group-aged 20 to 34. I also find that earnings are more sensible to changes in cohort size in Southern Europe, which points to a lower degree of substitutability between individuals with the same education but different age. I argue that the uncovered lower substitutability in the Olive Belt of Europe is in line with the higher employment protection that its workers enjoy, at least compared to the workers located in Northern Europe. One important policy implication of this study is that the demographic shift away from the young and toward the old, a baby bust after a baby boom, is likely to tilt ageearnings profiles in favor of the young more in Southern than in Northern Europe.
This paper is an empirical investigation of the complementarity between education and training in... more This paper is an empirical investigation of the complementarity between education and training in 13 European countries, based on the European Community Household Panel (ECHP). After confirming the standard result that training incidence is higher among individuals with more education, I find that the relationship between educational attainment and training incidence varies significantly across countries and birth cohorts. I show that individuals have a higher training incidence in countries with a more educated labor force, a less stratified schooling system, a higher union density and a lower value of the Kaitz index. I also find evidence that individuals with more education and limited labor market experience enjoy higher private returns from recent training than individuals with the same experience and less education. More experienced individuals with higher education, however, have lower returns from recent training than less educated workers with the same experience.
... This impulse has permanent effects because the union takes this reduced number as the basis f... more ... This impulse has permanent effects because the union takes this reduced number as the basis for ... BS stress that recent European unemployment exhibits an extreme form of persistency (hysteresis).1 It is ... role in the model by taking care of the first part of the problem, namely the ...
Not in My Community: Social Pressure and the Geography of Dismissals * We investigate the role of... more Not in My Community: Social Pressure and the Geography of Dismissals * We investigate the role of local social pressure in shaping the geographical pattern of firms' firing decisions. Using French linked employer-employee data, we show that social pressure exerted by the local communities where firms' headquarters are located induces CEOs to refrain from dismissing at short distance from their headquarters. More specifically, we find that, within firms, secondary establishments located further away from headquarters have higher dismissal rates than those located closer, taking into account the possible endogeneity of plant location. We also find that the positive effect of distance on dismissals increases with the visibility of the firm in the local community of its headquarters. These effects are stronger the greater the degree of selfishness of the community in which the headquarters are located. This suggests that local social pressure at headquarters is a key determinant of the positive relationship between distance to headquarters and dismissals. We show that our results cannot be entirely accounted for by alternative explanations of the distance-dismissal relationship that are put forward in the literature-e.g. monitoring costs or asymmetric information.
ABSTRACT We use data on professional chess tournaments to study how endogenous selection affects ... more ABSTRACT We use data on professional chess tournaments to study how endogenous selection affects the relationship between age and mental productivity in a brain-intensive profession. We show that less talented players are more likely to drop out, and that the age-productivity gradient is heterogeneous by ability, making fixed effects estimators inconsistent. Since we do not observe the players who dropped out of chess before the beginning of our sampling period, we cannot exploit the standard Heckman sample selection correction procedure. Therefore, we correct for selection by using an imputation method that repopulates the sample by applying to older cohorts the self-selection patterns observed in younger cohorts. We estimate the age-productivity profile on the repopulated sample using median regressions, and find that median productivity increases by close to 5 percent from initial age (15) to peak age (21.6), and declines substantially after the peak. At age 50, it is about 10 percent lower than at age 15. We compare profiles in the unadjusted and in the repopulated sample and show that failure to adequately address endogenous selection in the former leads to substantially over-estimating productivity at any age relative to initial age.
Public finance solutions to high unemployment in Europe have often been advocated during the past... more Public finance solutions to high unemployment in Europe have often been advocated during the past years. With unemployment concentrated among the young and unskilled, it has been suggested that the reduction of social security contributions for low wage earnings, financed by a carbon tax, could yield a double dividend, the reduction of unemployment and the abatement of pollution. A decline in average labor taxes reduces unemployment if it generates lower pretax wages. Pretax wages fall if real after tax income from unemployment and leisure is not affected or only partially affected by the change in average taxes. When unemployment benefits are not taxed in a unionized economy, lower average labor taxes reduce the replacement ratio, and unions are willing to accept lower pretax wages because the net income loss from employment increases. Changes in labor taxation do not necessarily require that average labor taxes vary. In principle, a switch from payroll to income taxes, given average rates, could affect wage pressure and unemployment. The empirical evidence to date, however, does not support this possibility.When labor taxation is nonlinear, another opportunity is to vary the degree of labor tax progressivity. Economic theory suggests that higher progressivity could reduce unemployment. Suppose that wages are bargained over by unions. When a union contemplates the possibility of a wage hike, it has to consider that say for a 1% increase in the after tax wage the pretax wage increases by 1/ν, where ν denotes the coefficient of residual income progression. This implies that the expected employment loss associated to the higher after tax wage is ε/ν, where ε is the elasticity of labor demand. Since ν<1 with progressive taxation, this loss is higher with progressive than with proportional taxation. It follows that, when labor markets are not perfectly competitive, a certain degree of tax progressivity can be desirable because it makes wage increases less attractive to unions, with positive consequences on the unemployment rate. This empirical paper adds to the existing literature additional evidence based on Italian data. We use both panel and grouped data to study the effects of average and marginal (payroll and income) tax rates on wage pressure, and investigate whether these effects vary by skill, age group and region of residence. Our empirical findings are summarized as follows: a) changes in average payroll taxes are not fully absorbed by offsetting changes in the after tax wage and affect both pretax wages and employment; b) the estimated effects of changes in average income taxes on pretax wages are mixed but on balance the evidence suggests that after tax wages do not fully offset these changes; c) higher tax progressivity increases pretax wages; d) there are significant differences in the relationship between labor taxes and pretax wages by age group but not by region of residence or skill. We also find that the estimated elasticity of pretax wages to changes in marginal tax rates, given average rates, is large and ranges between 0.919 and 1.131, depending on the specification being used. It is difficult to explain this large positive elasticity exclusively with the argument that the labor supply effect prevails over the wage moderation effect. Therefore, we add an additional mechanism, the relative wage effect, and describe how it can contribute to producing the above results. Briefly put, when individuals and unions care about relative wages and an increase in tax progressivity reduces the own wage via the wage moderation effect, this reduction translates into lower relative wages, which can only be avoided by increasing wage pressure.
Are the More Educated Receiving More Training? Evidence from Thailand * This paper investigates t... more Are the More Educated Receiving More Training? Evidence from Thailand * This paper investigates the relationship between education and training provided by the firm, both on the job and off the job, using a unique dataset based on a survey of Thai employees conducted in the summer of 2001. We find a significant and negative relationship between educational attainment and on the job training and no significant relationship between education and off the job training. We also find that education and training are technical complements, especially in the case of off the job training. These findings are consistent with more educated individuals having higher marginal costs of training than less educated workers, especially when on the job training is concerned. Either the better educated have lower learning skills in jobs requiring on the job training or they have higher opportunity costs of training, or both.
, two anonymous referees and seminar participants in Aix, Evry, Lyon (Journées AFSE), Marseille (... more , two anonymous referees and seminar participants in Aix, Evry, Lyon (Journées AFSE), Marseille (GREQAM), Milan (Cattolica), Munich (CESifo), Orléans (T2M), Novara, Padova, Paris (CEPN, ESPE and EUREQUA), Pisa (Sant'Anna) and Tokyo (Keio) for comments and suggestions. The usual disclaimer applies. The data used in this paper are from the December 2001 release (contract 14/99).
Standard estimates of earnings profiles ignore that, with unobserved heterogeneity, cross section... more Standard estimates of earnings profiles ignore that, with unobserved heterogeneity, cross section evidence need not reflect the 'true' relationship between earnings and tenure. In this paper, we argue that the observation of the position filled by an employee in the firm hierarchy is informative both of her quality and of the quality of her match. Under some assumptions, this information can be used to construct an unbiased estimator of the effects of tenure on earnings growth. We apply this simple idea to Japanese and British data. A finding of the paper is that tenure effects on earnings are positive but smaller when tenure is long than the effects estimated with the traditional approach. In a comparative perspective, we also find that British and Japanese earnings profiles differ remarkably in the relative importance of within-rank and between-rank earnings growth. In particular, the former is relevant to the Japanese experience while the latter is predominant in Britain.
Journal of the Japanese and International Economies, 1990
BnmeUo, Giorgio-Real Exchange Rate Variability and Japanese Industrial Employment This paper stud... more BnmeUo, Giorgio-Real Exchange Rate Variability and Japanese Industrial Employment This paper studies the effects on employment of real exchange rate movements in Japan during the period 1973-1986 and compares them with similar effects for the United States. As expected, employment reacts to exchange rate fluctuations more sluggishly in Japan than in the United States in most of the industrial sectors considered. The rate of unemployment consistent with Williamson's fundamental exchange rates is only marginally higher than the observed rate and can be set close to 3% if there are no changes in policy rules.
We present a model where the interaction between the size of the elite school sector, industrial ... more We present a model where the interaction between the size of the elite school sector, industrial structure and labor market outcomes is characterized by the concept of Nash decentralized equilibrium. Depending on the underlying parameters, the economy described in the model can be characterized by multiple regime equilibria and historical accident decides which equilibrium the economy falls in. In one
Training Subsidies and the Wage Returns to Continuing Vocational Training: Evidence from Italian ... more Training Subsidies and the Wage Returns to Continuing Vocational Training: Evidence from Italian Regions * We use the variation of training policy over time and across Italian regions to identify the relationship between individual training and earnings. Using longitudinal data for the period 1999 to 2005, we find that the marginal effect of one additional week of formal training on monthly earnings is 4.4 percent. This effect declines rapidly over time and is equal to 0.86 percent 10 years after the investment. We also find that marginal returns are higher among small firms, which are more likely to be constrained by lack of economic resources in their training decisions. Since small firms train less than large firms, their higher returns from the training induced by training policies can simply reflect decreasing marginal returns to training.
I use the crosscountry and time variation in the demographic structure of 11 European countries t... more I use the crosscountry and time variation in the demographic structure of 11 European countries to study how changes in cohort size affect real earnings in Europe. This is an important question in the light of widespread population ageing. l find that cohort size has a negative and statistically significant effect on earnings, and that this effect is larger for the older age group-aged between 35 and 54-than for the younger group-aged 20 to 34. I also find that earnings are more sensible to changes in cohort size in Southern Europe, which points to a lower degree of substitutability between individuals with the same education but different age. I argue that the uncovered lower substitutability in the Olive Belt of Europe is in line with the higher employment protection that its workers enjoy, at least compared to the workers located in Northern Europe. One important policy implication of this study is that the demographic shift away from the young and toward the old, a baby bust after a baby boom, is likely to tilt ageearnings profiles in favor of the young more in Southern than in Northern Europe.
This paper is an empirical investigation of the complementarity between education and training in... more This paper is an empirical investigation of the complementarity between education and training in 13 European countries, based on the European Community Household Panel (ECHP). After confirming the standard result that training incidence is higher among individuals with more education, I find that the relationship between educational attainment and training incidence varies significantly across countries and birth cohorts. I show that individuals have a higher training incidence in countries with a more educated labor force, a less stratified schooling system, a higher union density and a lower value of the Kaitz index. I also find evidence that individuals with more education and limited labor market experience enjoy higher private returns from recent training than individuals with the same experience and less education. More experienced individuals with higher education, however, have lower returns from recent training than less educated workers with the same experience.
... This impulse has permanent effects because the union takes this reduced number as the basis f... more ... This impulse has permanent effects because the union takes this reduced number as the basis for ... BS stress that recent European unemployment exhibits an extreme form of persistency (hysteresis).1 It is ... role in the model by taking care of the first part of the problem, namely the ...
Not in My Community: Social Pressure and the Geography of Dismissals * We investigate the role of... more Not in My Community: Social Pressure and the Geography of Dismissals * We investigate the role of local social pressure in shaping the geographical pattern of firms' firing decisions. Using French linked employer-employee data, we show that social pressure exerted by the local communities where firms' headquarters are located induces CEOs to refrain from dismissing at short distance from their headquarters. More specifically, we find that, within firms, secondary establishments located further away from headquarters have higher dismissal rates than those located closer, taking into account the possible endogeneity of plant location. We also find that the positive effect of distance on dismissals increases with the visibility of the firm in the local community of its headquarters. These effects are stronger the greater the degree of selfishness of the community in which the headquarters are located. This suggests that local social pressure at headquarters is a key determinant of the positive relationship between distance to headquarters and dismissals. We show that our results cannot be entirely accounted for by alternative explanations of the distance-dismissal relationship that are put forward in the literature-e.g. monitoring costs or asymmetric information.
ABSTRACT We use data on professional chess tournaments to study how endogenous selection affects ... more ABSTRACT We use data on professional chess tournaments to study how endogenous selection affects the relationship between age and mental productivity in a brain-intensive profession. We show that less talented players are more likely to drop out, and that the age-productivity gradient is heterogeneous by ability, making fixed effects estimators inconsistent. Since we do not observe the players who dropped out of chess before the beginning of our sampling period, we cannot exploit the standard Heckman sample selection correction procedure. Therefore, we correct for selection by using an imputation method that repopulates the sample by applying to older cohorts the self-selection patterns observed in younger cohorts. We estimate the age-productivity profile on the repopulated sample using median regressions, and find that median productivity increases by close to 5 percent from initial age (15) to peak age (21.6), and declines substantially after the peak. At age 50, it is about 10 percent lower than at age 15. We compare profiles in the unadjusted and in the repopulated sample and show that failure to adequately address endogenous selection in the former leads to substantially over-estimating productivity at any age relative to initial age.
Public finance solutions to high unemployment in Europe have often been advocated during the past... more Public finance solutions to high unemployment in Europe have often been advocated during the past years. With unemployment concentrated among the young and unskilled, it has been suggested that the reduction of social security contributions for low wage earnings, financed by a carbon tax, could yield a double dividend, the reduction of unemployment and the abatement of pollution. A decline in average labor taxes reduces unemployment if it generates lower pretax wages. Pretax wages fall if real after tax income from unemployment and leisure is not affected or only partially affected by the change in average taxes. When unemployment benefits are not taxed in a unionized economy, lower average labor taxes reduce the replacement ratio, and unions are willing to accept lower pretax wages because the net income loss from employment increases. Changes in labor taxation do not necessarily require that average labor taxes vary. In principle, a switch from payroll to income taxes, given average rates, could affect wage pressure and unemployment. The empirical evidence to date, however, does not support this possibility.When labor taxation is nonlinear, another opportunity is to vary the degree of labor tax progressivity. Economic theory suggests that higher progressivity could reduce unemployment. Suppose that wages are bargained over by unions. When a union contemplates the possibility of a wage hike, it has to consider that say for a 1% increase in the after tax wage the pretax wage increases by 1/ν, where ν denotes the coefficient of residual income progression. This implies that the expected employment loss associated to the higher after tax wage is ε/ν, where ε is the elasticity of labor demand. Since ν<1 with progressive taxation, this loss is higher with progressive than with proportional taxation. It follows that, when labor markets are not perfectly competitive, a certain degree of tax progressivity can be desirable because it makes wage increases less attractive to unions, with positive consequences on the unemployment rate. This empirical paper adds to the existing literature additional evidence based on Italian data. We use both panel and grouped data to study the effects of average and marginal (payroll and income) tax rates on wage pressure, and investigate whether these effects vary by skill, age group and region of residence. Our empirical findings are summarized as follows: a) changes in average payroll taxes are not fully absorbed by offsetting changes in the after tax wage and affect both pretax wages and employment; b) the estimated effects of changes in average income taxes on pretax wages are mixed but on balance the evidence suggests that after tax wages do not fully offset these changes; c) higher tax progressivity increases pretax wages; d) there are significant differences in the relationship between labor taxes and pretax wages by age group but not by region of residence or skill. We also find that the estimated elasticity of pretax wages to changes in marginal tax rates, given average rates, is large and ranges between 0.919 and 1.131, depending on the specification being used. It is difficult to explain this large positive elasticity exclusively with the argument that the labor supply effect prevails over the wage moderation effect. Therefore, we add an additional mechanism, the relative wage effect, and describe how it can contribute to producing the above results. Briefly put, when individuals and unions care about relative wages and an increase in tax progressivity reduces the own wage via the wage moderation effect, this reduction translates into lower relative wages, which can only be avoided by increasing wage pressure.
Are the More Educated Receiving More Training? Evidence from Thailand * This paper investigates t... more Are the More Educated Receiving More Training? Evidence from Thailand * This paper investigates the relationship between education and training provided by the firm, both on the job and off the job, using a unique dataset based on a survey of Thai employees conducted in the summer of 2001. We find a significant and negative relationship between educational attainment and on the job training and no significant relationship between education and off the job training. We also find that education and training are technical complements, especially in the case of off the job training. These findings are consistent with more educated individuals having higher marginal costs of training than less educated workers, especially when on the job training is concerned. Either the better educated have lower learning skills in jobs requiring on the job training or they have higher opportunity costs of training, or both.
, two anonymous referees and seminar participants in Aix, Evry, Lyon (Journées AFSE), Marseille (... more , two anonymous referees and seminar participants in Aix, Evry, Lyon (Journées AFSE), Marseille (GREQAM), Milan (Cattolica), Munich (CESifo), Orléans (T2M), Novara, Padova, Paris (CEPN, ESPE and EUREQUA), Pisa (Sant'Anna) and Tokyo (Keio) for comments and suggestions. The usual disclaimer applies. The data used in this paper are from the December 2001 release (contract 14/99).
Standard estimates of earnings profiles ignore that, with unobserved heterogeneity, cross section... more Standard estimates of earnings profiles ignore that, with unobserved heterogeneity, cross section evidence need not reflect the 'true' relationship between earnings and tenure. In this paper, we argue that the observation of the position filled by an employee in the firm hierarchy is informative both of her quality and of the quality of her match. Under some assumptions, this information can be used to construct an unbiased estimator of the effects of tenure on earnings growth. We apply this simple idea to Japanese and British data. A finding of the paper is that tenure effects on earnings are positive but smaller when tenure is long than the effects estimated with the traditional approach. In a comparative perspective, we also find that British and Japanese earnings profiles differ remarkably in the relative importance of within-rank and between-rank earnings growth. In particular, the former is relevant to the Japanese experience while the latter is predominant in Britain.
Journal of the Japanese and International Economies, 1990
BnmeUo, Giorgio-Real Exchange Rate Variability and Japanese Industrial Employment This paper stud... more BnmeUo, Giorgio-Real Exchange Rate Variability and Japanese Industrial Employment This paper studies the effects on employment of real exchange rate movements in Japan during the period 1973-1986 and compares them with similar effects for the United States. As expected, employment reacts to exchange rate fluctuations more sluggishly in Japan than in the United States in most of the industrial sectors considered. The rate of unemployment consistent with Williamson's fundamental exchange rates is only marginally higher than the observed rate and can be set close to 3% if there are no changes in policy rules.
We present a model where the interaction between the size of the elite school sector, industrial ... more We present a model where the interaction between the size of the elite school sector, industrial structure and labor market outcomes is characterized by the concept of Nash decentralized equilibrium. Depending on the underlying parameters, the economy described in the model can be characterized by multiple regime equilibria and historical accident decides which equilibrium the economy falls in. In one
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Papers by G. Brunello