a review of the recent empirical literature on displaced workers this article reviews the empirical literature on job displacement job displacement is widespread and strongly countercyclical tending to peak during economic downturns but concentrated in indus

learning and wage dynamics we develop a dynamic model of learning about worker ability in a competitive labor market the model produces three testable implications regarding wage dynamics 1 although the role of schooling in the labor market s inference process declines as performance observations accumulate the estimated effect of schooling on the level of wages is independent of labor market experience 2 timeinvariant variables correlated with ability but unobserved by employers such as certain test scores are increasingly correlated with wages as experience increases and 3 wage residuals are a martingale we present evidence from the nlsy that is broadly consistent with the model s predictions

heterogeneous wage effects of apprenticeship training the relatively small average wage effects of employer and occupation changes after apprenticeship training mask large differences between occupation groups and apprentices with different schooling backgrounds people who change employer and occupation within industrial occupations enjoy large wage advantages whereas apprentices in commerce and trading occupations as well as in construction and crafts occupations face wage losses from an occupation change the differences between the firms that provide the apprenticeship training are found to be small or insignificant in this paper we reconcile the differences between previous findings by comparing and replicating the empirical estimation strategies used this demonstrates that selectivity in occupations and changes unobserved heterogeneity between occupations and sample selection do matter

new issues in corporate finance flow of funds data are used to compare methods of finance in 5 countries over the period 1970 to 1985 many of the problems associated with previous studies are avoided by estimating net instead of gross financing proportions the degree of consolidation of accounts reciprocal arrangements between borrowers and lenders and compensating deposit requirements on borrowers no longer distort financing patterns corrections for inflation are provided by employing flow rather than stock figures and using own aggregation procedures to derive stock measures significant variations in financing emerge these are not readily explained by traditional descriptions of corporate finance in particular taxation as an alternative the paper suggests that relationships between borrowers and lenders establish forms of commitment that are conducive to the provision of long term finance the separation between investment and finance which has been the starting point of corporate finance theory is untenable in a multiperiod context in which terms of finance define future allocation of control

the school to work transition a cross national perspective school to work patterns and issues are discussed for seven economies france germany japan the netherlands sweden the united kingdom and the united states the emphasis is placed on differences across countries in the current labor market position of young people and recent trends therein along with the institutions that regulate youth education training and employment the power of public policies including labor market deregulation labor market programs vocationalization of education and apprenticeship to improve youth outcomes is discussed drawing on national evaluation literatures evidence of extensive policy failure points up the need to develop nationally appropriate institutions to improve school to work transitions

the long term costs of job displacement for young adult workers using nlsy data the authors estimate the long term costs of job displacement for young adults earnings and wage losses were large for the first three years following displacement compared to earnings losses found by other studies for more mature workers however earnings losses for these young adults were short lived with differences between observed and expected earnings narrowing considerably five years after job loss at that point the shortfall in annual earnings relative to what would have been expected absent job loss was 9 for men and 12 5 for women and the shortfall in hourly wages was 21 2 for men young workers also apparently differ from more established workers in the composition of total earnings losses for older workers total losses largely represent actual immediate earnings losses whereas for young workers the loss of opportunities for rapid earnings growth is more important

long term consequences of short term precipitation shocks evidence from brazilian migrant households we find that large short term precipitation shocks damage the long term income of households that have permanently migrated from rural to urban areas this outcome is consistent with the behavior of credit constrained rural households who are willing to accept lower long term income in urban areas following the depletion of their productive assets during an adverse shock our empirical evidence suggests that there may be a link between large precipitation shocks in rural areas and urban poverty further exploration is warranted on the mechanisms by which natural disasters cause these long term losses

earnings losses and unemployment of displaced workers in germany data from the german socio economic panel are used to examine the experiences of german workers following job displacement due to plant closure in the year of displacement annual earnings decline

comparative advantage learning and sectoral wage determination we develop a model in which a worker s skills determine the worker s current wage and sector the market and the worker are initially uncertain about some of the worker s skills endogenous wage changes and sector mobility occur as labor market participants learn about these unobserved skills we show how the model can be estimated using nonlinear instrumental variables techniques we apply our methodology to study wages and allocation of workers across occupations and industries using individual level panel data from the national longitudinal survey of youth we find that high wage sectors employ high skill workers and offer high returns to workers skills

task specific human capital since gary becker s 1964 seminal work the theoretical and empirical literature on human capital has focused almost exclusively on general purpose and firm specific human capital in this paper we discuss the implications of a third type of human capital which we call task specific and which we believe is potentially as commonplace and as important as the two classic types by task specific human capital we mean that some of the human capital an individual acquires on the job is specific to the tasks being performed as opposed to being specific to the firm in other words task specific human capital is the simple but plausible idea that much of the human capital accumulated on the job is due to task specific learning by doing the idea of task specific human capital is closely related to occupationand industryspecific human capital in each case human capital is specific to the nature of the work not specific to the firm hence when capital is accumulated multiple firms value the capital so most or even all of the value of the capital will be reflected in the worker s wage the main difference between the idea of task specific human capital and occupationand industryspecific human capital is in how the idea is applied we argue that task specific human capital has much wider applicability than suggested so far by the occupationand industry specific human capital literatures the specific issues we address are cohort effects job design and promotions another argument in the literature closely related to ours is the classic argument of adam smith 1776 in the wealth of nations concerning returns to specialization smith s argument was that due to learning by doing at the level of the task productivity can be enhanced by having each job entail fewer tasks we believe that smith was correct in focusing on learningby doing at the level of the task as an important idea for thinking about organizations the goal of our paper is to describe some of the other implications of this idea for the design and operation of organizations

incentives in organizations n 1975 steven kerr published on the folly of rewarding a while hoping for b the argument was simple you get what you pay for kerr distilled this unifying theme from a disparate set of examples involving politicians soldiers doctors orphanage directors professors and students as well as manufacturing and clerical employees and even human resource managers from these examples kerr pp 77980 concluded that two main causes of distorted incentives are fascination with an objective criterion where individuals seek to establish simple quantifiable standards against which to measure and reward performance and overemphasis on highly visible behaviors when some parts of the task are highly visible while others are not it took agency theory 15 years to express kerr s title not to mention to evaluate or extend his conclusions during this period agency theory was obsessed with the tradeoff between incentives and insurance even though clear eyed observations like kerr s about the design and performance of real incentive contracts suggested that several other issues are at least as important fortunately recent work has brought agency theory not only to kerr s position but beyond in this paper i summarize four new strands in agency theory that help me think about incentives in real organizations as a point of departure i begin with a quick sketch of the classic agency model i then discuss static models of objective performance measurement that sharpen kerr s argument repeated game models of subjective performance assessments incentives for skill development rather than simply for effort and incentive contracts between versus within organizations i con

the link between ability and specialization an explanation for observed correlations between wages and mobility rates wage levels and turnover rates are negatively correlated across types of employment and this fact is often interpreted as evidence that high wage jobs are rationed a simple training model illustrates however that this correlation may arise because able workers have an incentive to choose highly specialized jobs in any job the most able workers possess the most valuable stocks of specific skills and therefore face the highest mobility costs thus able workers may have a comparative advantage in specialized employments data from the national longitudinal survey of youth provide an opportunity to evaluate the merits of the training model developed here data on worker training and mobility provide support for several implications of the model the model also provides new ways to interpret existing results in the literature on interindustry wage differentials

the determinants of cross border equity flows abstract we explore a new panel data set on bilateral gross cross border equity flows between 14 countries 1989 1996 we show that a gravity model explains international transactions in financial assets at least as well as goods trade transactions gross transaction flows depend on market size in source and destination country as well as trading costs in which both information and the transaction technology play a role distance proxies some information costs and other variables explicitly represent information transmission an information asymmetry between domestic and foreign investors and the efficiency of transactions the geography of information is the main determinant of the pattern of international transactions while there is weak support in our data for the diversification motive once we control for the informational friction we broaden the scope of our results by presenting some evidence linking the results on equity transactions to equity holdings

the eurobond market and corporate financial policy abstract on average significant positive abnormal returns are associated with eurobond issues during the period 1975 1985 the cross sectional and time series distributions of the abnormal returns are consistent with the hypothesis that impediments to the adjustment of asset supplies to new demand conditions are large enough to create profitable financing opportunities for firms our analysis demonstrates how profitable financing opportunities can persist on the eurobond market and when they are most likely to arise

a theory of wage and promotion dynamics inside firms we show that a framework that integrates job assignment human capital acquisition and learning captures several empirical findings concerning wage and promotion dynamics inside firms including the following first real wage decreases are not rare but demotions are second wage increases are serially correlated third promotions are associated with large wage increases fourth wage increases at promotion are small relative to the difference between average wages across levels of the job ladder fifth workers who receive large wage increases early in their stay at one level of the job ladder are promoted quickly to the next

portfolio preferences of foreign institutional investors the authors examine the relationship between foreign investment and the attributes of emerging market countries and firms in which investment is made their findings indicate that countries with higher levels of economic development and floating exchange rate regimes tend to have greater ability to obtain foreign capital after controlling for the country s level of economic development they find that firms in countries with stronger shareholder rights and legal framework attract more foreign capital the authors also find that foreign institutions allocate more of their assets to firms with better corporate governance after controlling for other country and firm attributes the main firm level measures of corporate governance are derived from accounting quality variables their results imply that steps can be taken both at the country and the firm level to create an environment conducive to foreign portfolio investment the analysis is based on a unique dataset consisting of equity positions of u s mutual funds in emerging markets

a theory of quits and layoffs with efficient turnover this paper answers the efficient turnover literature s long silence regarding the quit layoff distinction treating quits as worker initiated separations and layoffs as firm initiated separations i establish that the existence of layoffs is compatible with optimizing workers and firms forming and dissolving employment matches to exploit all the gains from trade the efficient turnover approach is shown to be consistent with many empirical regularities that distinguish quits from layoffs structural implications of the model are tested on data from the psid

dividend taxes and international portfolio choice this paper investigates how dividend taxes influence portfolio choices using the response to the distinctive treatment of a subset of foreign dividends in the jobs and growth tax relief reconciliation act jgtrra of 2003 an open economy after tax capital asset pricing model is used to derive the hypothesis that jgtrra should lead to a portfolio reallocation by us investors towards equities in tax favored countries a difference in difference analysis that compares us equity holdings in affected and unaffected countries finds a substantial portfolio reallocation towards the former this effect cannot be explained by several potential alternative hypotheses including differential changes to the preferences of american investors differential changes in investment opportunities differential time trends in investment changed tax evasion behavior or changes in stock prices associated or contemporaneous with jgtrra

the impact of global equity offerings this article examines the impact of u s firms issuing equity in multiple markets we compare the stock price reactions to announcements of global equity offers to a control group of issues offered exclusively in the domestic u s market all else equal the adverse price reaction that typically accompanies equity issuance is reduced by 0 8 percent when some shares are sold abroad the overall evidence suggests global offers are effective in expanding demand and reducing the price pressure effects associated with share issuance the benefits of global offers appear to be associated with an increase in the number of foreign shareholders the search for new capital markets and lower costs of capital is an ongoing search for most firms in recent years the number of u s firms issuing common equity in international markets has increased significantly in 1985 u s firms raised 89 million through follow on equity offers in foreign markets and this amount increased to 18 915 million in 1995 a greater than 200 fold increase in nominal terms this paper focuses on follow on global equity issues by u s firms and attempts to assess why firms widely acknowledged to have access to broad and deep domestic capital markets increasingly seek to raise equity abroad the global equity offerings we examine involve a simultaneous sale of common equity at the same offer price in the u s market and one or more international markets we examine the characteristics of the issuers and issues and investigate to what extent the wider distribution of shares affects the pricing and costs of these issues our main line of inquiry examines whether the distribution of shares to multiple markets results in a higher offer price for equity shares than would be obtained had the shares been sold exclusively in the u s market domes

financial intermediation and delegated monitoring this paper develops a theory of financial intermediation based on minimizing the cost of monitoring information which is useful for resolving incentive problems between borrowers and lenders it presents a characterization of the costs of providing incentives for delegated monitoring by a financial intermediary diversification within an intermediary serves to reduce these costs even in a risk neutral economy the paper presents some more general analysis of the effect of diversification on resolving incentive problems in the environment assumed in the model debt contracts with costly bankruptcy are shown to be optimal the analysis has implications for the portfolio structure and capital structure of intermediaries

the effect of implicit contracts on the movement of wages over the business cycle evidence from micro data in this paper we address the question of whether wages are affected by labor market conditions in a manner more consistent with a contract approach than with a standard spot market model from a simple implicit contract model we derive implications about the links between wages and past labor market conditions using individual data from the current population survey and the panel study of income dynamics we find that an implicit contract model with costless mobility describes these links better than either a simple spot market model or an implicit contract model with costly mobility

international corporate diversification market valuation and size adjusted evidence errunza and senbet es 7 analyze the effects of international operations on the market value of the firm both at theoretical and empirical levels the theoretical model which is largely heuristic exploits the costly supply adjustment of multinational firms mncs in providing international portfolio diversification services to investors who face differential cost barriers to direct holdings of assets across national boundaries mncs compete as financial intermediaries to undo the barriers so that in equilibrium profits are driven out mncs and pure domestic firms sell at an equivalent risk adjusted return however costly financial intermediation and the associated relative efficiency leads to a positive valuation effect for mncs relative to purely domestic firms further the equilibrium analysis implies that demand side investor barriers to international capital flows alone are inconsequential to the valuation of mncs in their pure financial role but that the interaction with the supply side costs are necessary to produce a valuation effect at the corporate level es subject the theory to an empirical analysis in a value based approach by employing a variant of tobin s 17 qratio the analysis controlling for industrial market power suggests that the relationship between the excess valuation and the degree of international involvement doi has magnified over periods characterized by severe u s government controls vis a vis the more recent periods in this paper we formalize the theoretical argument by viewing indirect portfolio diversification by mncs as a means of completing the international capital market we employ a paradigm in the unanimity literature and formally characterize the equilibrium in which there is a rationale for mnc financial intermediation we then perform an expanded empirical study by employing generalized least squares and maximum likelihood procedures since the positive relationship between excess valuation and doi as suggested in es 7 might be attributed to the so called small firm or size and the p e effects the test methodology controls for such effects also the traditional literature has relied upon foreign sales percentage as a proxy for doi in view of the well recognized limitations of this proxy we employ four different measures of international

youth labor markets in the united states shopping around vs staying put the need for school to work programs or other means of increasing early job market stability is predicated on the view that the chaotic nature of youth labor markets in the united states is costly because workers drift from one job to another without developing skills behavior or other characteristics that in turn lead to higher adult earnings however there is also ample evidence that workers receive positive returns to job shopping this paper asks whether youths in unstable jobs early in their careers suffer adverse labor market consequences as adults its specific contribution is to account for the endogenous determination of early job stability and adult wages as outcomes of a job search job shopping process labor market conditions in the early years in the labor market are used as instrumental variables for the job stability experienced during those years the instrumental variables estimates generally point to substantial positive effects of early job stability on adult wages in contrast to

why do firms train theory and evidence this paper offers a theory of training whereby workers do not pay for the general training they receive the superior information of the current employer regarding its employees abilities relative to other firms creates ex post monopsony power and encourages this employer to provide and pay for training even if these skills are general the model can lead to multiple equlibria in one equilibrium quits are endogenously high and as a result employers have limited monopsony power and provide little training while in another equilibrium quits are low and training is high using microdata on german apprentices we show that the predictions of our model receive some support from the data

evidence on adverse selection and establishment size in the labor market a commonly suggested explanation for the finding that laid off workers have greater mean post displacement earnings losses than workers who lose theirjobs through plant closings is that the former are of lower quality than the latter but there is also an alternative explanation for this result laid off workers suffer larger earnings losses because as a group they have more to lose in the first place having been displaced from larger higher wage establishments an analysis of data from the national longitudinal survey of youth confirms this hypothesis accounting for establishment size removes virtually all of the difference in wage losses for the two groups of displaced workers an adverse selection framework has been employed by many authors to explain various phenomena in the labor market spence 1973 harris and holmstrom 1982 greenwald 1986 recently several authors gibbons and katz 1991 doiron 1995 grund 1997 have investigated whether the postjob loss experiences of two different types of displaced workers those who are laid off from their jobs and those who are displaced by a plant closing reflect adverse selection specifically do laid off workers exhibit larger post job loss wage

the internal economics of the firm evidence from personnel data we analyze twenty years of personnel data from one firm the hierarchical structure is quite simple and stable career movements suggest that the employee s rate of learning and the firm s learning about ability are important there are promotion fast tracks exit rates vary little with tenure or salary the firm has personnel policies like those described in the internal labor markets literature although several theoretical preconditions for ilms such as ports of entry and exit are lacking job levels are important to compensation but there is also substantial individual variation in pay within levels our companion paper in this issue explores the wage policy of this firm

in the right place at the wrong time the role of firms and luck in young workers careers we examine administrative data on young german workers and their employers to study the long term effects of an early career job loss to account for nonrandom sorting of workers into firms with different turnover rates and for selective job mobility we use changes over time in firm and age specific labor demand as an instrument for displacement we find that wage losses of young job losers are initially 15 percent but drop to zero within five years only workers leaving very large establishments suffer persistent losses a comparison of estimators implies that initial sorting negative selection and voluntary job mobility biases ordinary least squares estimates toward finding permanent negative effects of early displacements

empirical age earnings profiles the human capital earnings function in which earnings are expressed as a quadratic in potential experience is probably the most widely accepted empirical specification in economics in spite of its widespread acceptance the human capital earnings function provides a very poor approximation of the true empirical relationship between earnings and experience the standard formulation understates early career earnings growth by about 30 50 and overstates midcareer growth by 20 50 however simple alternative specifications that fit the data are available

international capital flows abstract the surge in international asset trade since the early 1990s has lead to renewed interest in models with international portfolio choice we develop the implications of portfolio choice for both gross and net international capital flows in the context of a simple two country dynamic stochastic general equilibrium dsge model we focus on the time variation in portfolio allocation following shocks and resulting capital flows endogenous time variation in expected returns and risk which are the key determinants of portfolio choice affect capital flows in often subtle ways the model is consistent with a broad range of empirical evidence an additional contribution of the paper is to overcome the technical difficulty of solving dsge models with portfolio choice by developing a broadly applicable solution method

does unmeasured ability explain inter industry wage differentials this paper provides empirical assessments of the two leading explanations of measured inter industry wage differentials 1 true wage differentials exist across industries and 2 the measured differentials simply reflect unmeasured differences in workers productive abilities first we summarize the existing evidence on the unmeasured ability explanation second we construct a simple model which shows that if matching is important then endogenous job change decisions can create important self selection biases even in first differenced estimates of industry wage differentials third we analyze a sample that approximates the experiment of exogenous job loss we find that i the wage change experienced by a typical industry switcher closely resembles the difference in the relevant industry differentials estimated in a cross section and ii pre displacement industry affiliation plays an important role in post displacement wage determination

does corporate governance risk at home affect investment choices abroad abstract disparity between control and ownership rights gives rise to the risk of tunneling by the controlling shareholder and is prevalent in many emerging market economies and present in some developed countries at the same time international investors come from different countries whose home markets are characterized by varying degrees of control ownership disparity this paper studies whether this difference in investors home countries affects their portfolio choice in an emerging market it combines two unique data sets on ownership and control in business groups and investor stock level foreign investment in korea a key finding is that investors from low disparity countries disfavor high disparity stocks in korea but investors from high disparity countries are indifferent moreover investors from low disparity countries became averse to disparity only after the asian financial crisis these results suggest that the nature of corporate governance in international investors home countries affects their portfolio choice abroad and therefore these investors should not be lumped together in the analyses of their portfolio choice

financial system design and liquidity provision by banks and markets in a dynamic economy this paper contributes to the literature on financial system design by comparing markets and banks in a dynamic economy investors trade off their liquidity needs against the high returns on illiquid investments both the banking system and the market can provide partial liquidity insurance to investors we consider full market participation as well as limited market participation we demonstrate that the full participation market with intergenerational trading can provide more liquidity than one without insurance is provided through wealth transfer across generations instead of cross subsidization across contemporaneous types as is the case in the finite economy given a full participation market that allows trading across generations only banks with initial capital can provide additional liquidity in a limited participation market with uncertainty about trading types an intergenerational bank with or without initial capital provides additional insurance to investors the need for trade is eliminated finally if there is no uncertainty about trading types then an intergenerational bank with initial capital eliminates the need for trading and improves welfare for all an intergenerational bank without initial capital improves welfare for people who do not trade

employee treatment and contracting with bank lenders an instrumental approach for stakeholder management adopting an instrumental approach for stakeholder management we focus on two primary stakeholder groups employees and creditors to investigate the relationship between employee treatment and loan contracts with banks we find strong evidence that fair employee treatment reduces loan price and limits the use of financial covenants in addition we document that relationship bank lenders price both the levels and changes in the quality of employee treatment whereas first time bank lenders only care about the levels of fair employee treatment taking a contingency perspective we find that industry competition and firm asset intangibility moderate the relationship between good human resource management and bank loan costs the cost reduction effect of fair employee treatment is stronger for firms operating in a more competitive industry and having higher levels of intangible assets

the definition of part time employment a switching regression model with unknown sample selection rejecting the standard less than thirty five hours per week categorization of part time workers this paper offers an empirically justified definition of the part time employed the definition is based on the distinction through wage payments that employers make between a high hours full time and a low hours part time group of workers a switching regression model of wage equations with deterministic but unknown sample selection is estimated resulting in a significant split between high hours and low hours workers that is higher than the standard definition wage differentials are calculated and decomposed and estimates from the structural choice model are presented copyright 1991 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

order from chaos the effects of early labor market experiences on adult labor market outcomes this paper examines the consequences of initial periods of churning or mobility in the labor market to help assess whether faster transitions to stable employment relationships as envisioned by advocates of school to work programs would be likely to lead to better adult labor market outcomes an analysis of national longitudinal survey of youth data for the years 1979 92 yields modest evidence at best linking early job market stability to better labor market outcomes the authors find that for both genders adult labor market outcomes defined as of the late 20s or early to mid 30s are for the most part unrelated to early labor market experiences this evidence does not support efforts to explicitly target the school to work transition insofar as doing so implies changing the structure of youth labor markets so that workers form earlier and firmer attachments to employers industries or occupations

investor base and corporate borrowing evidence from international bonds abstract we examine international bond issues by us firms to study the benefits of investor taste for cross border security issuances we proxy for firms international investor taste with the fraction of prior international bond holding in firms domestic and international bonds and find that international investor demand increases with such taste moreover the offering yield spreads on international bonds are lower than domestic offering yield spreads for these internationally recognized firms and they have higher probability of issuing internationally such international recognition may occur for instance if the diversification benefits of adding the security to investor s portfolio outweigh the negative effects of higher renegotiation costs for international compared to domestic investors

foreign currency denominated debt an empirical examination we examine the determinants of debt issuance in 10 major currencies by large u s firms using the fraction of foreign subsidiaries and tests exploiting the disaggregated nature of our data we find strong evidence that firms issue foreign currency debt to hedge their exposure both at the aggregate and the individual currency levels we also find some evidence that firms choose currencies in which information asymmetry between domestic and foreign investors is low we find no evidence that tax arbitrage liquidity of underlying debt markets or legal regimes influence the decision to issue debt in foreign currency

ranking unemployment duration and wages it explores the implication of one central assumption when firms receive multiple acceptable applications they hire the worker who has been unemployed for the least amount of time this assumption ranking is contrasted with the assumption of random hiring no ranking by embodying this assumption in a model of the labour market with job creation destruction and matching the joint behaviour of unemployment the distribution of unemployment durations and wages are characterized the implication that the re employment prospects of employed workers were they to become unemployed are better than those of the currently unemployed appears to have been an important feature of european unemployment experience in the 1980 s this paper examines the effects of the composition of unemployment on wage determination it explores one central assumption when firms receive multiple acceptable applications they hire the worker who has been unemployed for the least amount of time we refer to this assumption as ranking and contrast it throughout to the assumption of random hiring or no ranking by embodying this assumption in a model of the labour market with job creation destruction and matching we characterize the joint behaviour of unemployment the distribution of unemployment durations and wages ranking has a number of important implications first in addition to the obvious result that the exit rate from unemployment is a decreasing function of duration we show that the effect of duration is stronger the higher the rate of unemployment second with the wage depending on the distributions of prospective unemployment durations the presence of long term unemployed per se has little effect on wages third looking at the relation between the wage and the aggregate level of unemployment and comparing ranking to the case of no ranking the wage moves less with the level of unemployment but more with the change in unemployment put simply ranking and no ranking models show exactly the same aggregate unemployment slightly different long run responses of wages to unemployment and sharply different wage dynamics the paper is organized as follows section i characterizes the matching process and derives a matching function based on an urn ball process with vacancies as urns and applications by unemployed workers as balls thus the distribution of applications per vacancy depends on aggregate unemployment and vacancies vacancies with at least one acceptable application are filled when a vacancy receives more than one acceptable application firms use a rule to choose among applicants thus the rule determines who is hired but does not affect the number of hires section ii uses this matching function in a model of the labour market with continual job creation and destruction and characterizes the equilibrium values of unemployment vacancies and hires

the effects of unemployment and underemployment on employment opportunities results from a correspondence audit of the labor market for college graduates the authors use data from a resume audit to estimate the impact of unemployment and underemployment on the employment prospects of recent college graduates they find no statistical evidence linking unemployment spells of different durations to employment opportunities by contrast college graduates who are underemployed have callback rates that are 30 lower than those of applicants who are adequately employed the null effects associated with unemployment and the adverse effects associated with underemployment are robust across cities with relatively tight and loose labor market conditions internship experience obtained while completing one s degree substantially reduces the negative effects of underemployment the data support the proposition that employers view underemployment as a strong signal of lower expected productivity

labor market institutions and long term effects of youth unemployment graduating from a school during a time of adverse economic conditions has a persistent harmful effect on workers subsequent employment opportunities an analysis of panel data from oecd countries during the 1960 2010 periods reveals that a worker who experiences a 1 percentage point higher unemployment rate while the worker is 16 24 years old has a 0 14 percentage point higher unemployment rate at ages 25 29 years and 0 03 percentage points higher at ages 30 34 years the persistence of this negative effect is stronger in countries with stricter employment protection legislation a composite index for labor market rigidity is constructed and the index is shown to have positive correlation with the persistence moderating macroeconomic fluctuations is more important in countries that have more persistent labor market entry effects on subsequent outcomes