Marginal Jobs and Job Surplus: A Test of the Efficiency of Separations

University of Zurich, Department of Economics, Working Paper No. 314, 2018

81 Pages Posted: 28 Jan 2019

See all articles by Simon Jäger

Simon Jäger

Massachusetts Institute of Technology (MIT); CESifo (Center for Economic Studies and Ifo Institute); IZA Institute of Labor Economics; briq- Institute on Behavior & Inequality

Benjamin Schoefer

University of California, Berkeley

Josef Zweimüller

University of Zurich - Department of Economics; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute); IZA Institute of Labor Economics

Multiple version iconThere are 4 versions of this paper

Date Written: December 29, 2018

Abstract

We present a sharp test for the efficiency of job separations. First, we document a dramatic increase in the separation rate – 11.2ppt (28%) over five years – in response to a quasi-experimental extension of UI benefit duration for older workers. Second, after the abolition of the policy, the "job survivors" in the formerly treated group exhibit exactly the same separation behavior as the control group. Juxtaposed, these facts reject the "Coasean" prediction of efficient separations, whereby the UI extensions should have extracted marginal (low-surplus) jobs and thereby rendered the remaining (high-surplus) jobs more resilient after its abolition. Third, we show that a formal model of predicted efficient separations implies a piece-wise linear function of the actual control group separations beyond the missing mass of marginal matches. A structural estimation reveals point estimates of the share of efficient separations below 4%, with confidence intervals rejecting shares above 13%. Fourth, to characterize the marginal jobs in the data, we extend complier analysis to difference-in-difference settings such as ours. The UI-indiced separators stemmed from declining firms, blue-collar jobs, with a high share of sick older workers, and firms more likely to have works councils – while their wages were similar to program survivors. The evidence is consistent with a "non-Coasean" framework building on wage frictions preventing efficient bargaining, and with formal or informal institutional constraints on selective separations.

Keywords: efficient separations, unemployment insurance, job surplus, wage bargaining, complier analysis

JEL Classification: J63, J65, J30, C52, C55

Suggested Citation

Jäger, Simon and Schoefer, Benjamin and Zweimueller, Josef, Marginal Jobs and Job Surplus: A Test of the Efficiency of Separations (December 29, 2018). University of Zurich, Department of Economics, Working Paper No. 314, 2018. Available at SSRN: https://ssrn.com/abstract=3320465 or http://dx.doi.org/10.2139/ssrn.3320465

Simon Jäger (Contact Author)

Massachusetts Institute of Technology (MIT) ( email )

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CESifo (Center for Economic Studies and Ifo Institute)

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IZA Institute of Labor Economics

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briq- Institute on Behavior & Inequality ( email )

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Benjamin Schoefer

University of California, Berkeley ( email )

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Berkeley, CA 94720
United States

Josef Zweimueller

University of Zurich - Department of Economics ( email )

Zuerich, 8006
Switzerland
+411 634 3724 (Phone)
+411 634 4907 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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