@article{BrownMerklSnower, author = {Brown, Alessio and Merkl, Christian and Snower, Dennis}, title = {In Incentive Theory of Matching}, series = {Macroeconomic Dynamics}, volume = {19}, journal = {Macroeconomic Dynamics}, number = {3}, doi = {10.1017/S1365100513000527}, pages = {643 -- 668}, abstract = {This paper presents a theory explaining the labor market matching process through microeconomic incentives. There are heterogeneous variations in the characteristics of workers and jobs,and firms face adjustment costs in responding to these variations. Matches and separations are described through firms' job offer and firing decisions and workers' job acceptance and quit decisions. This approach obviates the need for a matching function. On this theoretical basis, we argue that the matching function is vulnerable to the Lucas critique. Our calibrated model for the U.S. economy can account for important empirical regularities that the conventional matching model cannot.}, language = {en} } @article{SnowerMerkl, author = {Snower, Dennis and Merkl, Christian}, title = {The Caring Hand that Cripples: The East German Labor Market after Reunification}, series = {American Economic Review}, volume = {96}, journal = {American Economic Review}, number = {2}, pages = {375 -- 382}, abstract = {The East German labour market has hardly made any progress since German reunification, despite massive migration flows and support from the West. We argue that East Germany is in trouble precisely because of the support it has received. This paper explores the phenomenon of 'the caring hand that cripples,' arising from bargaining by proxy, the adoption of the West German welfare system and the associated employment persistence. Even the steady decrease of labour cost (normalized by productivity) since the beginning of the 1990s did not help to kick start the East. We suggest that labour force participants fell into 'traps,' concerning low skills, ageing of the workforce, labour-saving capital and skills, capital underutilization, and unemployment arising from the decline of the tradeable sector}, language = {en} } @article{BrownMerklSnower, author = {Brown, Alessio and Merkl, Christian and Snower, Dennis}, title = {The Minimum Wage from a Two-Sided Perspective}, series = {Economics Letters}, volume = {124}, journal = {Economics Letters}, number = {3}, doi = {10.1016/j.econlet.2014.06.020}, pages = {389 -- 391}, abstract = {This paper sheds new light on the effects of the minimum wage on employment from a two-sided theoretical perspective, in which firms' job offer and workers' job acceptance decisions are disentangled. Minimum wages reduce job offer incentives and increase job acceptance incentives. We show that sufficiently low minimum wages may do no harm to employment, since their job-offer disincentives are countervailed by their job-acceptance incentives.}, language = {en} } @article{LechthalerSnower, author = {Lechthaler, Wolfgang and Snower, Dennis}, title = {Institutions and Training Inequality}, series = {European Journal of Political Economy}, volume = {28}, journal = {European Journal of Political Economy}, number = {1}, doi = {10.1016/j.ejpoleco.2011.09.004}, pages = {88 -- 104}, abstract = {We analyze the interaction among important institutional variables in the labor market (firing costs, minimum wages and unemployment benefits) in determining firm-provided training. We find that the institutional interactions - specifically, their degree of complementarity and substitutability - depends on employees' abilities. On this account, the institutional interactions influence skills inequality. We derive how the influence of one of the institutional variables above is affected by other institutional variables with respect to inequality skills arising from firm-provided training. We derive several striking results, such as: (a) the minimum wage and unemployment benefits generate increasing skills inequality whereas firing costs generate diminishing skills inequality; (b) unemployment benefits and firing costs are complements in their effects on skills disequalization, (c) firing costs and the minimum wage are complements in their effects on skills equalization, and (d) unemployment benefits and the minimum wage are substitution in their effects on skills inequality.}, language = {en} } @article{BrownOrszagSnower, author = {Brown, Alessio and Orszag, J. Michael and Snower, Dennis}, title = {Unemployment Accounts and Employment Incentives}, series = {European Journal of Political Economy}, volume = {24}, journal = {European Journal of Political Economy}, number = {3}, doi = {10.1016/j.ejpoleco.2008.06.006}, pages = {587 -- 604}, abstract = {We explore the far-reaching implications of replacing current unemployment benefit (UB) systems by an unemployment accounts (UAs) system. Under the UAs system, employed people are required to make ongoing contributions to their UAs and the balances in these accounts are available to them during periods of unemployment. The government is able to undertake balanced-budget interpersonal redistributions among the UAs. At the end of their working lives, people could transfer the remaining balances on their UAs into their pensions. We present an analytical framework to analyse the incentive effects of UAs and calibrate our model for the high high-unemployment countries of Europe. Our results suggest that this policy reform would significantly change people's employment incentives and could achieve reductions in unemployment without reducing the level of support to the unemployed.}, language = {en} } @article{LechthalerSnower, author = {Lechthaler, Wolfgang and Snower, Dennis}, title = {Minimum Wages and Training}, series = {Labour Economics}, volume = {15}, journal = {Labour Economics}, number = {6}, doi = {10.1016/j.labeco.2007.11.005}, pages = {1223 -- 1237}, abstract = {The paper analyzes the influence of minimum wages on firms' incentive to train their employees. We show that this influence rests on two countervailing effects: minimum wages (i) augment wage compression and thereby raise firms' incentives to train and (ii) reduce the profitability of employees, raise the firing rate and thereby reduce training. Our analysis shows that the relative strength of these two effects depends on the employees' ability levels. Our striking result is that minimum wages give rise to skills inequality: a rise in the minimum wage leads to less training for low-ability workers and more training for those of higher ability. In short, minimum wages create a "low-skill trap." We indicate that this effect may be important empirically. Finally, including workers' incentives to train themselves makes no major difference to our results.}, language = {en} } @article{BrownKohlbrecherMerkletal., author = {Brown, Alessio J. G. and Kohlbrecher, Britta and Merkl, Christian and Snower, Dennis}, title = {The effects of productivity and benefits on unemployment: Breaking the link}, series = {Economic Modelling}, journal = {Economic Modelling}, doi = {10.1016/j.econmod.2020.02.037}, abstract = {In the standard macroeconomic search and matching model of the labor market, there is a tight link between the quantitative effects of (i) aggregate productivity shocks on unemployment and (ii) unemployment benefits on unemployment. This tight link is at odds with the empirical literature. We show that a two-sided model of labor market search where the household and firm decisions are decomposed into job offers, job acceptances, firing, and quits can break this link. In such a model, unemployment benefits affect households' behavior directly, without having to run via the bargained wage. A calibration of the model based on U.S. JOLTS data generates both a solid amplification of productivity shocks and a moderate effect of benefits on unemployment. Our analysis shows the importance of investigating the effects of policies on the households' work incentives and the firms' employment incentives within the search process.}, language = {en} } @article{LimadeMirandaSnower, author = {Lima de Miranda, Katharina and Snower, Dennis}, title = {Recoupling Economic and Social Prosperity}, series = {Global Perspectives}, volume = {1}, journal = {Global Perspectives}, number = {1}, issn = {2575-7350}, doi = {10.1525/001c.11867}, pages = {1 -- 30}, abstract = {This paper explores a new theoretical and empirical approach to the assessment of human well-being, relevant to current challenges of social fragmentation in the presence of globalization and technological advance. We present two indexes of well-being — solidarity (S) and agency (A) — to be considered alongside the standard indexes of material gain (G) and environmental sustainability (E). The four indexes —SAGE— form a balanced dashboard for evaluating well-being. The solidarity index covers the needs of humans as social creatures, living in societies that generate a sense of social belonging. The agency index involves people's need to influence their fate through their own efforts. While "economic prosperity" (material gain) is conventionally measured through GDP per capita, "social prosperity" can be measured through our solidarity and agency indexes, alongside environmental sustainability that is measured through the Environmental Performance Index. The SAGE dashboard is meant to provide a "sage" approach to assessing well-being, since it aims to denote sagacity in the pursuit and satisfaction of fundamental human needs and purposes. Many of the prominent challenges of the 21st century, including the dissatisfaction of population groups who feel left behind by globalization and technological advance, may be viewed in terms of a "decoupling" of economic prosperity from social prosperity.We present a theoretical model that provides a new perspective on the welfare effects of globalization and automation. The dashboard is meant to provide an empirical basis for mobilizing action in government, business, and civil society to promote a recoupling of economic and social prosperity.}, language = {en} } @article{ChierchiaPrzyrembelLesemannetal., author = {Chierchia, Gabriele and Przyrembel, Marisa and Lesemann, Franca Parianen and Bosworth, Steven and Snower, Dennis and Singer, Tania}, title = {Navigating Motivation: A Semantic and Subjective Atlas of 7 Motives}, series = {Frontiers in Psychology}, volume = {11}, journal = {Frontiers in Psychology}, publisher = {Frontiers Media S.A.}, issn = {1664-1078}, doi = {10.3389/fpsyg.2020.568064}, abstract = {Research from psychology, neurobiology and behavioral economics indicates that a binary view of motivation, based on approach and avoidance, may be too reductive. Instead, a literature review suggests that at least seven distinct motives are likely to affect human decisions: "consumption/resource seeking," "care," "affiliation," "achievement," "status-power," "threat approach" (or anger), and "threat avoidance" (or fear). To explore the conceptual distinctness and relatedness of these motives, we conducted a semantic categorization task. Here, participants were to assign provided words to one of the motives. By applying principal component analysis to the categorization assignments we represent the semantic inter-relations of these motives on a two-dimensional space, a "semantic atlas." This atlas suggests that, while care and affiliation are conceptually close, affiliation is closer to threat avoidance (or fear); opposite to these motives we find achievement, consumption and power, with the latter lying closer to threat approach (or anger). In a second study, we asked participants to rate how well the motive-specific words obtained in the first study described their currently experienced feelings. We find that semantically close motives are also more likely to be experienced together, that is, we replicate most of the semantic relations in the "subjective atlas." We discuss our findings in comparison to other multi-dimensional models of motivation, which show clear similarities. In addition to these motivational atlases, we provide a database of motive-specific words, together with the valence and arousal scores. These can be used for future research on the influence of motives on decision making.}, subject = {-}, language = {en} } @techreport{FleurbaeyKanburSnower, type = {Working Paper}, author = {Fleurbaey, Marc and Kanbur, Ravi and Snower, Dennis}, title = {Efficiency and Equity in a Society-Economy Integrated Model}, edition = {CESifo Working Paper No. 9259}, pages = {56}, abstract = {A model that only focuses on economics relations, and in which efficiency and equity are defined in terms of resource allocation may miss an important part of the picture. We propose an integrated model that embeds economic activities in a larger game of social interactions, and define comprehensive notions of efficiency and equity. Social interactions provide additional sources of inefficiencies and inequalities, including through the mere lack of coordination between the regulation mechanisms of the economics sphere and the social sphere. Remedies may require more than market solutions and redistribution of resources. In particular, social norms are likely to play an important role.}, language = {en} } @article{SnowerBosworth, author = {Snower, Dennis and Bosworth, Steven}, title = {Economic, Social and Political Fragmentation: Linking Knowledge-Biased Growth, Identity, Populism and Protectionism}, series = {European Journal of Political Economy}, volume = {67}, journal = {European Journal of Political Economy}, number = {101965}, doi = {10.1016/j.ejpoleco.2020.101965}, abstract = {This paper examines how economic fragmentation (widening inequality of skills, income and education) gives rise to social fragmentation (via incompatible social identities), generating political fragmentation (via incompatible economic policies). We consider three value-driven identities: individualism, focused on status concerns, communitarianism, focused on social affiliations, and multi-affiliatedness, encompassing both objectives. Under endogenous identity formation high-skill people are drawn to individualism, the lower-skilled to communitarianism, and those of intermediate skill to multi-affiliatedness. Skill- and education-biased growth leads to increasing social polarisation, expanding the individualistic and communitarian groups at the expense of multi-affiliates. This expands the political constituency for closed policies (such as protectionism, immigration controls and nationalism), even when these policies reduce everyone's living standards. Our analysis thereby helps explain the economic and social underpinnings of populism.}, language = {en} }