Essays in labour economics and econometrics
Abstract: The thesis consists of five self-contained essays in Labour Economics and Econometrics.Essay I examines the potential effects of altered payroll taxes on unemployment by using a general equilibrium model with wage bargaining and two groups of labour: skilled and unskilled. The results within the framework of the paper are not very encouraging, though. Differentiated or generally lowered payroll taxes cannot be expected to provide relief for the unemployed unskilled. However, increasing the progressiveness of the payroll tax could induce positive effects through wage moderation. This policy is however likely to have adverse effects on skill formation, a problem which is addressed by modelling individuals' choices of education explicitly.Essay II (with Sara Lindberg) investigates the potential influence of financial leverage on the intertemporal hiring decisions of firms. Using the hierarchy of finance approach to corporate finance, we derive the Euler equation of employment in the presence of convex adjustment costs. We show the empirical implications for the Euler equation of firms facing a hierarchy of financial costs, and estimate a linearised version thereof using a large panel of Swedish manufacturing firms over the period 1979-88. To alleviate some of the estimation problems involved we make use of recently suggested bootstrap methods. Our empirical findings indicate that the influence of financial leverage on firms' hiring decisions differs significantly between firms in different financial regimes.In Essay III (with Matz Dahlberg and Eva Johansson) we investigate the determinants of municipal labour demand in Sweden 19881995. Utilising a major grant reform in 1993, through which a switch from mainly targeted to mainly general central government grants occurred, we are able to identify which type of grants that have the largest effects on municipal employment. We find a larger municipal employment elasticity with respect to grants before the reform, implying that the more freedom given to the municipalities, the less they seem inclined to spend on municipal employment.It is a well known property that standard GMM estimators for dynamic panel data might perform poorly in small samples. The aim of Essay IV (with Matz Dahlberg and Eva Johansson) and Essay V is to compare how two recently suggested bootstrap procedures can assist inference in dynamic panel data models, when the mentioned small-sample bias is a potential problem. We do this by means of Monte Carlo experiments, forming tests using both standard errors estimated by asymptotic approximations, as well as by bootstrap procedures. The results give a fairly clear support for using bootstrap inference. Whereas the tests based on asymptotics have empirical levels that may deviate substantially from their nominal ones, the bootstrap procedures appear to perform quite well in the context of dynamic panel data estimation.
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