Institute for the Study of Labor

About: Institute for the Study of Labor is a nonprofit organization based out in Bonn, Germany. It is known for research contribution in the topics: Wage & Unemployment. The organization has 2039 authors who have published 13475 publications receiving 439376 citations.

Policy Responses to Fiscal Restraints: A Difference-in-Discontinuities Design

Abstract: We evaluate the effect of relaxing fiscal rules on policy outcomes applying a quasi-experimental research design. In 1999, the Italian central government introduced fiscal rules aimed at imposing fiscal discipline on municipal governments, and in 2001 the rules were relaxed for municipalities below 5,000 inhabitants. This institutional change allows us to implement a "difference-in-discontinuities" design by combining the before/after with the discontinuous policy variation. Our estimates show that relaxing fiscal rules triggers a substantial deficit bias, captured by a shift from a balanced budget to a deficit that amounts to 2 percent of the total budget. The deficit comes primarily from reduced revenues as unconstrained municipalities have lower real estate and income tax rates. Finally, we investigate the heterogeneity in policy responses across municipalities to provide new evidence about the costs and benefits of restricting fiscal policy. The impact is larger if the mayor can run for reelection, the number of political parties seated in the city council is higher, voters are older, the performance of the mayor in providing public good is lower, and cities are characterized by historical deficit, consistently with models on the political economy of fiscal adjustment.

Trade, peace and democracy: an analysis of dyadic dispute

Abstract: At least since 1750 when Baron de Montesquieu declared peace is the natural effect of trade, a number of economists and political scientists espoused the notion that trade among nations leads to peace. Employing resources wisely to produce one commodity rather than employing them inefficiently to produce another is the foundation for comparative advantage. Specialization based on comparative advantage leads to gains from trade. If political conflict leads to a diminution of trade, then at least a portion of the costs of conflict can be measured by a nation's lost gains from trade. The greater two nations' gain from trade the more costly is bilateral (dyadic) conflict. This notion forms the basis of Baron de Montesquieu's assertion regarding dyadic dispute. This paper develops an analytical framework showing that higher gains from trade between two trading partners (dyads) lowers the level of conflict between them. It describes data necessary to test this hypothesis, and it outlines current developments and extensions taking place in the resulting trade-conflict literature. Crosssectional evidence using various data on political interactions confirms that trading nations cooperate more and fight less. A doubling of trade leads to a 20% diminution of belligerence. This result is robust under various specifications, and it is upheld when adjusting for causality using cross-section and time-series techniques. Further, the impact of trade is strengthened when bilateral import demand elasticities are incorporated to better measure gains from trade. Because democratic dyads trade more than non-democratic dyads, democracies cooperate with each other relatively more, thereby explaining the democratic peace that democracies rarely fight each other. The paper then goes on to examine further extensions of the trade-conflict model regarding specific commodity trade, foreign direct investment, tariffs, foreign aid, country contiguity, and multilateral interactions.

Institutions and Development: The Interaction Between Trade Regime and Political System

Abstract: This paper argues that openness to goods trade in combination with an unequal distribution of political power has been a major determinant of the comparatively slow development of resource- or land-abundant regions like South America and the Caribbean in the nineteenth century. We develop a two-sector general equilibrium model with a tax-financed public sector, and show that in a feudal society (dominated by landed elites) productivity-enhancing public investments like the provision of schooling are typically lower in an open than in a closed economy. Moreover, we find that, under openness to trade, development is faster in a democratic system. We also endogenize the trade regime and demonstrate that, in political equilibrium, a land-abundant and landowner dominated economy supports openness to trade. Finally, we discuss empirical evidence which strongly supports our basic hypotheses.

Youth Unemployment: Deja Vu?

Abstract: This paper reviews current issues in youth labour markets in developed countries. It argues that young people aged 16-25 have been particularly hard hit during the current recession. Using the USA and UK as cast studies, it analyses both causes and effects of youth unemployment using micro-data. It argues that there is convincing evidence that the young are particularly susceptible to the negative effects of spells of unemployment well after their initial experience of worklessness. Because the current youth cohort is relatively large, the longer-term outlook for youth unemployment is quite good, but there is a strong case for policy intervention now to address the difficulties that the current cohort is having in finding access to work.

The impact of school choice on pupil achievement, segregation and costs: Swedish evidence

Abstract: The Impact of School Choice on Pupil Achievement, Segregation and Costs: Swedish Evidence. This paper evaluates school choice at the compulsory school level. We estimate the impact of an increased enrolment in private schools on average achievement using within-municipality variation over time. We find positive effects, shown to be the sum of a (small) private school attendance effect and a competition effect. We also find effects on segregation and costs.Age at Immigration and School Performance: A Siblings Analysis Using Swedish Register Data. This paper analyzes the role of age at immigration for the school performance gap between native and immigrant pupils by exploiting within-family variation. The critical age is about nine, above which there is a strong negative impact on performance. The results are similar for boys and girls, but vary by region of origin. A comparison of sibling-difference and cross-sectional estimates reveals striking similarities. Integration of Childhood Immigrants in the Short and in the Long Run: Swedish Evidence. I study childhood immigrants at different stages in life in order to examine the role of age at immigration for educational and labor market outcomes. I find that childhood immigrants tend later to recover strongly in terms of educational achievement. Yet, the same individuals are on average found to be poorly integrated into the labor market. Life-Cycle Variations in the Association between Current and Lifetime Income: Replication and Extension for Sweden. We apply a generalized errors-in-variables model, recently developed by Steven Haider and Gary Solon, in order to produce estimates of the association between current and lifetime income. We find strong life-cycle patterns. This implies that the widespread use of current income as a proxy for lifetime income leads to inconsistent estimates even when the proxy is used as the dependent variable. We find country similarities, but gender and cohort differences.