From severance pay to self-insurance: Effects of severance payments savings accounts in Colombia

In 1990 Colombia replaced its traditional system of severance payments with a new system of severance payments savings accounts (SPSAs). Although severance payments often are justified on the grounds that they provide insurance against earnings loss, they also increase costs for employers and distort employment decisions. The impact of severance payments depends largely on how much of the costs to employers can be shifted to workers. The theoretical analysis in this paper shows that, in contrast to a traditional system of severance payments, the system of SPSAs facilitates the shifting of severance payments costs to workers in the form of lower wages. Empirical results using the Colombian National Household Surveys indicate that the introduction of SPSAs shifted around 80% of the total severance payments contributions to wages and had a positive effect on weekly hours. Results using the 1997 Colombian Living Standards Measurement Survey suggest that, although SPSAs in part replaced employer insurance with self-insurance, SPSAs continue to play a consumption smoothing role for the non-employed.Distortions, tax shifting, unemployment insurance, consumption smoothing, crowding out

Protective or counter-productive? Labor market institutions and the effect of immigration on EU natives

We estimate the effect of immigrant flows on native employment in Western Europe, and then ask whether the employment consequences of immigration vary with institutions that affect labor market flexibility. Reduced flexibility may protect natives from immigrant competition in the near term, but our theoretical framework suggests that reduced flexibility is likely to increase the negative impact of immigration on equilibrium employment. In models without interactions, OLS estimates for a panel of European countries in the 1980s and 1990s show small, mostly negative immigration effects. To reduce bias from the possible endogeneity of immigration flows, we use the fact that many immigrants arriving after 1991 were refugees from the Balkan wars. An IV strategy based on variation in the number of immigrants from former Yugoslavia generates larger though mostly insignificant negative estimates. We then estimate models allowing interactions between the employment response to immigration and institutional characteristics including business entry costs. These results, limited to the sample of native men, generally suggest that reduced flexibility increases the negative impact of immigration. Many of the estimated interaction terms are significant, and imply a significant negative effect on employment in countries with restrictive institutions.Immigrant absorption, European unemployment, labor market flexibility, entry costs

The impact of firing costs on turnover and unemployment: Evidence from the Colombian labour market reform

Reductions in firing costs are often advocated as a way of increasing the dynamism of labour markets in both developed and less developed countries. Evidence from Europe and the U.S. on the impact of firing costs has, however, been mixed. Moreover, legislative changes both in Europe and the U.S. have been limited. This paper, instead, examines the impact of the Colombian Labour Market Reform of 1990, which substantially reduced dismissal costs. I estimate the incidence of a reduction in firing costs on worker turnover by exploiting the temporal change in the Colombian labour legislation as well as the variability in coverage between formal and informal sector workers. Using a grouping estimator to control for common aggregate shocks and selection, I find that the exit hazard rates into and out of unemployment increased after the reform by over 1% for formal workers (covered by the legislation) relative to informal workers (uncovered). The increase of the hazards implies a net decrease in unemployment of a third of a percentage point, which accounts for about one quarter of the fall in unemployment during the period of study.Firing costs, worker turnover, exit hazard rates, grouping estimators, selection biases, labour market reform

From Severance Pay to Self-Insurance: Effects of Severance Payments Savings Accounts in Colombia

In 1990 Colombia replaced its traditional system of severance payments with a new system of severance payments savings accounts (SPSAs). Although severance payments often are justified on the grounds that they provide insurance against earnings loss, they also increase costs for employers and distort employment decisions. The impact of severance payments depends largely on how much of the costs to employers can be shifted to workers. The theoretical analysis in this paper shows that, in contrast to a traditional system of severance payments, the system of SPSAs facilitates the shifting of severance payments costs to workers in the form of lower wages. Empirical results using the Colombian National Household Surveys indicate that the introduction of SPSAs shifted around 80% of the total severance payments contributions to wages and had a positive effect on weekly hours. Results using the 1997 Colombian Living Standards Measurement Survey suggest that, although SPSAs in part replaced employer insurance with self-insurance, SPSAs continue to play a consumption smoothing role for the non-employed

Hiring and firing costs, adverse selection and long-term unemployment

In this paper, we present a matching model with adverse selection that explains why flows into and out of unemployment are much lower in Europe compared to North America, while employment-to-employment flows are similar in the two continents. In the model,firms use discretion in terms of whom to fire and, thus, low quality workers are more likely to be dismissed than high quality workers. Moreover, as hiring and firing costs increase, firms find it more costly to hire a bad worker and, thus, they prefer to hire out of the pool of employed job seekers rather than out of the pool of the unemployed, who are more likely to turn out to be 'lemons'. We use microdata for Spain and the U.S. and find that the ratio of the job finding probability of the unemployed to the job finding probability of employed job seekers was smaller in Spain than in the U.S. Furthermore, using U.S. data, we find that the discrimination of the unemployed increased over the 1980's in those states that raised firing costs by introducing exceptions to the employment-at-will doctrine.Adverse selection, turnover costs, unemployment, worker flows, matching models, discrimination

Rural windfall or a new resource curse? coca, income, and civil conflict in Colombia

Natural and agricultural resources for which there is a substantial black market, such as coca, opium, and diamonds, appear especially likely to be exploited by the parties to a civil conflict. Even legally traded commodities such as oil and timber have been linked to civil war. On the other hand, these resources may also provide one of the few reliable sources of income in the countryside. In this paper, we study the economic and social consequences of a major exogenous shift in the production of one such resource coca paste into Colombia, where most coca leaf is now harvested. Our analysis shows that this shift generated only modest economic gains in rural areas, primarily in the form of increased self-employment earnings and increased labor supply by teenage boys. The results also suggest that the rural areas which saw accelerated coca production subsequently became more violent, while urban areas were affected little. The acceleration in violence is greater in departments (provinces) where there was a pre-coca guerilla presence. Taken together, these findings are consistent with the view that the Colombian civil conflict is fueled by the financial opportunities that coca provides, and that the consequent rent-seeking activity by combatants limits the economic gains from coca cultivation

The Effect of Providing Breakfast on Student Performance: Evidence from an In-Class Breakfast Program

In response to low take-up, many public schools have experimented with moving breakfast from the cafeteria to the classroom. We examine whether such a program increases performance as measured by standardized test scores, grades and attendance rates. We exploit quasi-random timing of program implementation that allows for a difference-in-differences identification strategy. Our main identification assumption is that schools where the program was introduced earlier would have evolved similarly to those where the program was introduced later. We find that in-class breakfast increases both math and reading achievement by about one-tenth of a standard deviation relative to providing breakfast in the cafeteria. Moreover, we find that these effects are most pronounced for low performing, free-lunch eligible, Hispanic, and low BMI students. We also find some improvements in attendance for high achieving students but no impact on grades.

What factors contributed to changes in employment during and after the Great Recession?

Unemployment increased drastically over the course of the Great Recession from 4.5 percent prior to the recession to 10 percent at its peak in October 2009. Since then, the unemployment rate has come down steadily, and it stood at 5.8 percent in November 2014. Based on existing analyses and some new evidence, this paper establishes that much of the change in unemployment during the Great Recession and during the recovery can be attributed to cyclical factors rather than structural factors. The paper then presents new suggestive evidence to quantify the employment impacts of various counter-cyclical policies introduced during this time. We conduct a counter-factual and find that employment would have been between 4.2 percent and 4.5 percent lower had it not been because of the spending in Medicaid injected in local economies by the Recovery Act. In addition, we conduct a differences-in-differences and triple difference analysis, which suggests that the Work Opportunity Tax Credits increased the likelihood of employment by about 4.7 percent for disconnected youth but had no effect on disabled and unemployed veterans. Finally, we also find evidence that suggests that the Hiring Incentive to Restore Employment (HIRE) Act increased employment of the unemployed by 2.6 percent and that the reemployment reforms introduced in 2012 as part of the UI extensions increased employment by 6 percent for the long-term unemployed

Negative frequency tuning of a carbon nanotube nano-electromechanical resonator

A suspended, doubly clamped single wall carbon nanotube is characterized as driven nano-electromechanical resonator at cryogenic temperatures. Electronically, the carbon nanotube displays small bandgap behaviour with Coulomb blockade oscillations in electron conduction and transparent contacts in hole conduction. We observe the driven mechanical resonance in dc-transport, including multiple higher harmonic responses. The data shows a distinct negative frequency tuning at finite applied gate voltage, enabling us to electrostatically decrease the resonance frequency to 75% of its maximum value. This is consistently explained via electrostatic softening of the mechanical mode.Comment: 4 pages, 4 figures; submitted for the IWEPNM 2013 conference proceeding