CEU Electronic Theses and Dissertations, 2017
| Author | Reizer, Balázs |
|---|---|
| Title | Essays in Labor Economics |
| Summary | This thesis consists of one single-authored and two co-authored chapters, which investigate how changes in wages and unemployment benefits affect the transition between employment and unemployment. The first chapter examines the effect of bonus payments on labor market fluctuations. A large share of workers receives bonus payments besides their base wage. The benefits of flexible wage components in remuneration are twofold: they can incentivize workers and make it easier to adjust wages downward in response to negative shocks. Using data on bonus payments of Hungarian workers from linked employer-employee data, I disentangle the importance of these two factors to assess their respective importance. First, I show that bonus payments flexibly adjust to the revenue shocks of firms. At the same time, the separation rate of workers without bonuses do not react more to revenue changes than the separation rate of workers with bonuses. Bonus paying firms are shown to be financially more stable, larger and more productive, and they have less volatile revenue than firms not paying bonuses. These facts are consistent with a wage posting model with incentive contracting, but they are hard to reconcile with models emphasizing the role of bonus payments in alleviating wage rigidity. These results indicate that wage flexibility regulations may not affect the employment responses of firms to negative shocks The second chapter is co-authored with Péter Elek, János Köllő and Péter András Szabó. In this chapter, we estimate a double-hurdle (DH) model of the Hungarian wage distribution assuming censoring at the minimum wage and wage under-reporting (i.e. compensation consisting of the minimum wage, subject to taxation and an unreported cash supplement). We estimate the probability of under-reporting for minimum wage earners, simulate their genuine earnings and classify them and their employers as ‘cheaters’ and ‘non-cheaters’. In the possession of the classification, we check how cheaters and non-cheaters reacted to the introduction of a minimum social security contribution base, equal to 200 per cent of the minimum wage, in 2007. The findings suggest that cheaters were more likely to raise the wages of their minimum wage earners to 200 per cent of the minimum wage, thereby reducing the risk of tax audit. Cheating firms also experienced faster average wage growth and slower output growth. The results suggest that the DH model is able to identify the loci of wage under-reporting with some precision. The third chapter is co-authored with Attila Lindner and it estimates welfare consequences of frontloading the unemployment benefit. In November 2005, the Hungarian government frontloaded the UI benefit path, while keeping constant the total benefit amount that could be collected over the UI spell. We estimate the effect of this reform on non-employment duration using an interrupted time series design. We find that non-employment duration falls by 1.5 weeks after November 2005. We show that this response is large enough to make the policy revenue neutral. Our evaluation for this reform is positive: frontloading increased job finding, did not make any unemployed worse off, and did not cost anything to the government. |
| Supervisor | Gabor Kezdi, Istvan Konya |
| Department | Economics PhD |
| Full text | https://www.etd.ceu.edu/2017/reizer_balazs.pdf |
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