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Article
Publication date: 13 September 2021

Silvio Rendon

This paper aims to weigh the restrictions to job creation imposed by labor market imperfections with respect to financial market imperfections. The authors want to see which…

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Abstract

Purpose

This paper aims to weigh the restrictions to job creation imposed by labor market imperfections with respect to financial market imperfections. The authors want to see which restriction is more severe, and thus assess which is more powerful in creating permanent employment if it were removed.

Design/methodology/approach

A structural estimation is performed. The policy rules of the dynamic programming model are integrated into a simulated maximum likelihood procedure by which the model parameters are recovered. Data come from the CBBE (Balance Sheet data from the Bank of Spain). Identification of key parameters comes mainly from the observation of debt variation and sluggish adjustment to permanent labor.

Findings

Long-run permanent employment increases up to 69% when financial constraints are removed, whereas permanent employment only increases up to 54% when employment protection or firing costs are eliminated. The main finding of this paper is that the long-run expansion of permanent employment is larger when financial imperfections are removed than when firing costs are removed, even when there are important wage increases that moderate these employment expansions.

Social implications

The removal of firing costs has been suggested by several economists as a result of the analysis of labor market imperfections. These policies, however, face the strong opposition of labor unions. This paper shows that the goals of permanent job creation can be accomplished without removing employment protection but by means of enhancing financial access to firms.

Originality/value

The connection between financial constraints and employment has been studied in recent years, motivated by the Great Recession. However, there is no assessment of how financial and labor market imperfections compare with each other to restrict permanent job creation. This comparison is crucial for policy analysis. This study is an attempt to fill out this gap in the economic literature. No previous research has attempted to perform this very important comparison.

Details

Applied Economic Analysis, vol. 30 no. 89
Type: Research Article
ISSN:

Keywords

Article
Publication date: 9 November 2012

Núria Quella and Silvio Rendon

The purpose of this paper is to measure the effect that knowing the Catalan language has on individuals’ comparative advantage to perform certain jobs in Catalonia (Spain), where…

Abstract

Purpose

The purpose of this paper is to measure the effect that knowing the Catalan language has on individuals’ comparative advantage to perform certain jobs in Catalonia (Spain), where Catalan and Spanish coexist.

Design/methodology/approach

Using census data for 1991 and 1996, and for individuals born in Spain, the paper first estimates a Probit model for individuals’ level of Catalan proficiency in order to correct for the possible endogeneity of Catalan knowledge, as it may be jointly determined with occupational selection or be a reflection of unobserved human capital or innate ability. Then, it estimates a bivariate Probit model for the probability of choosing a given occupation conditional on a given Catalan proficiency level.

Findings

The paper finds that advanced proficiency in Catalan reinforces selection into being employed, being an entrepreneur, and into white‐collar occupations and communication‐intensive jobs. Being able to read and speak Catalan increases selection into white collar occupations by between 11 and 16 percentage points, while writing Catalan increases by 4 to 7 percentage points the probability of engaging in services, and government and educational activities.

Practical implications

Because census data are cross‐sectional panel effects on language selection cannot be analyzed. Nevertheless, the paper's results suggest that investing in learning the local language, at the firm and the government level, improves job matching and assimilation of workers to multilingual economies. The authors suggest a cost‐benefit analysis to assess the effectiveness of language policies for further research.

Originality/value

The results contribute to the scarce literature on the economic value of a language, i.e. on how much language knowledge as a form of human capital reinforces individuals’ comparative advantage to perform certain tasks.

Details

International Journal of Manpower, vol. 33 no. 8
Type: Research Article
ISSN: 0143-7720

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