TY - JOUR A1 - Brown, Alessio A1 - Merkl, Christian A1 - Snower, Dennis T1 - In Incentive Theory of Matching JF - Macroeconomic Dynamics N2 - 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. KW - matching, incentives, adjustment costs, unemployment, employment, quits, firing, job offers, job acceptance Y1 - 2015 U6 - https://doi.org/10.1017/S1365100513000527 VL - 19 IS - 3 SP - 643 EP - 668 ER - TY - JOUR A1 - Snower, Dennis A1 - Merkl, Christian T1 - The Caring Hand that Cripples: The East German Labor Market after Reunification JF - American Economic Review N2 - 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 Y1 - 2006 UR - http://hdl.handle.net/10419/3828 VL - 96 IS - 2 SP - 375 EP - 382 ER - TY - JOUR A1 - Brown, Alessio A1 - Merkl, Christian A1 - Snower, Dennis T1 - The Minimum Wage from a Two-Sided Perspective JF - Economics Letters N2 - 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. Y1 - 2014 U6 - https://doi.org/10.1016/j.econlet.2014.06.020 VL - 124 IS - 3 SP - 389 EP - 391 ER - TY - JOUR A1 - Lechthaler, Wolfgang A1 - Snower, Dennis T1 - Institutions and Training Inequality JF - European Journal of Political Economy N2 - 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. KW - Firm training; Skill inequality; Institutions Y1 - 2012 U6 - https://doi.org/10.1016/j.ejpoleco.2011.09.004 VL - 28 IS - 1 SP - 88 EP - 104 ER - TY - JOUR A1 - Brown, Alessio A1 - Orszag, J. Michael A1 - Snower, Dennis T1 - Unemployment Accounts and Employment Incentives JF - European Journal of Political Economy N2 - 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. KW - Unemployment benefits, Unemployment accounts, Redistribution, Employment, Unemployment Y1 - 2008 U6 - https://doi.org/10.1016/j.ejpoleco.2008.06.006 VL - 24 IS - 3 SP - 587 EP - 604 ER - TY - JOUR A1 - Lechthaler, Wolfgang A1 - Snower, Dennis T1 - Minimum Wages and Training JF - Labour Economics N2 - 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. KW - Minimum; Wage; Firm; Training; Skills; Inequality Y1 - 2008 U6 - https://doi.org/10.1016/j.labeco.2007.11.005 VL - 15 IS - 6 SP - 1223 EP - 1237 ER - TY - JOUR A1 - Brown, Alessio J. G. A1 - Kohlbrecher, Britta A1 - Merkl, Christian A1 - Snower, Dennis T1 - The effects of productivity and benefits on unemployment: Breaking the link JF - Economic Modelling N2 - 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. Y1 - 2021 U6 - https://doi.org/10.1016/j.econmod.2020.02.037 ER - TY - JOUR A1 - Lima de Miranda, Katharina A1 - Snower, Dennis T1 - Recoupling Economic and Social Prosperity JF - Global Perspectives N2 - 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. KW - well-being, social sustainability, social solidarity, social inclusion, social cohesion, empowerment, inequality, beyond gdp Y1 - 2020 U6 - https://doi.org/10.1525/001c.11867 SN - 2575-7350 VL - 1 IS - 1 SP - 1 EP - 30 ER - TY - JOUR A1 - Chierchia, Gabriele A1 - Przyrembel, Marisa A1 - Lesemann, Franca Parianen A1 - Bosworth, Steven A1 - Snower, Dennis A1 - Singer, Tania T1 - Navigating Motivation: A Semantic and Subjective Atlas of 7 Motives JF - Frontiers in Psychology N2 - 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. KW - - KW - affiliation KW - care KW - motives KW - motivation psychology KW - semantic categorization KW - economic decision making Y1 - 2021 U6 - https://doi.org/10.3389/fpsyg.2020.568064 SN - 1664-1078 VL - 11 PB - Frontiers Media S.A. ER - TY - RPRT A1 - Fleurbaey, Marc A1 - Kanbur, Ravi A1 - Snower, Dennis T1 - Efficiency and Equity in a Society-Economy Integrated Model N2 - 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. Y1 - 2021 UR - https://www.cesifo.org/en/publikationen/2021/working-paper/efficiency-and-equity-society-economy-integrated-model ET - CESifo Working Paper No. 9259 ER - TY - JOUR A1 - Snower, Dennis A1 - Bosworth, Steven T1 - Economic, Social and Political Fragmentation: Linking Knowledge-Biased Growth, Identity, Populism and Protectionism JF - European Journal of Political Economy N2 - 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. KW - Inequality; Communitarianism; Social fragmentation; Globalisation; Individualism; Identity Y1 - 2021 UR - https://www.sciencedirect.com/science/article/abs/pii/S0176268020301130?via%3Dihub U6 - https://doi.org/10.1016/j.ejpoleco.2020.101965 VL - 67 IS - 101965 ER -