Essays in labour economics

Abstract

In this Ph.D. thesis I attempt to investigate in more depth, important topics in labour economics for the UK economy. In the first two chapters, I explore the effect of involuntary job separations on earnings and on aggregate productivity in the UK. In the third chapter, I investigate the efficiency of matchings between firms and workers in the UK’s labour market. I highlight the efficiency of formal and informal channels during searching and finding a job.

More specifically in the first chapter, I exploit household data for the UK economy to estimate the magnitude and the temporal pattern of displaced workers earnings for the UK economy. By linking the British Household Panel Survey” with the Understanding Society” dataset, I have been able to extract a unique dataset of worker’s employment histories for the UK from 1990 to 2011. In this chapter, I estimate the contribution of wage cuts and of the reductions in hours of working on the earning losses that are observed after a job separation. From the empirical estimations, I observe the following results: short run income losses for displaced workers with an unemployment flow after a displacement are about 19 percent and are reduced from 18 to 15 percent the following 3 years. The losses are higher for college educated workers than that with lower eduction. Finally, after decomposing income, a remarkable result is that these losses are mainly driven by cuts in wages (80%-90%) and not by reduction in the hours of working.

In the second chapter, I exploit the effect of involuntary job separations on aggregate productivity for the UK economy (as output per hour worked). More specifically, human capital has been found to be important for aggregate productivity, and large individual human capital losses are associated with job displacements. I investigate the role of involuntary job separations (since displacements have increased during the 2008 financial crisis) on the UK’s productivity puzzle. By using the same dataset as in Chapter 1, I observe the following results: displacements of high tenured workers (more than 2 years in the same job prior to the separation) can explain on average the 27 percent of the post-crisis gap, if aggregate labour productivity had followed the path of the pre-2008 trend. Furthermore, almost the 78 percent of this effect can be explained by the drop in wages of college educated workers and the rest 22 percent by the drop in wages of non-college educated workers.

Finally, in the last chapter of this Ph.D. thesis, I empirically examine the workers’ choice of using different channels of search during seeking for a job. I focus on the UK’s labour market where the usage of referrals as a search channel is by 50% lower than that in the US. I estimate matching functions for 6 different channels and also introduce a new method in the literature which handles better possible endogeneity issues. By using the “Quarterly Labour Force Survey” and the “Vacancy Survey” datasets, the results show that the most efficient channel are referrals and the second most efficient one is the channel “Job advertisements”. The channel with the lower matching efficiency is “Jobcenter, jobmarket or training and employment agency office”.

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