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

98 Pages Posted: 30 Jan 2019 Last revised: 1 Aug 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

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Date Written: January 2019

Abstract

By the influential “Coasean” theory of employment relationships, job separations occur only once the worker and the employer have exhausted all remaining gains from trade through flexible bargaining and unrestricted contracting, with joint job surplus hence having turned negative. Our strategy to study this empirically elusive view is to track jobs longitudinally over the course of the introduction and sudden abolition of a policy that subsidized nonemployment and hence lowered job surplus: an age-and-region-specific extension of the maximum duration of unemployment benefits from one to four years in Austria. We document that this program destroyed 10.9ppt of jobs (a 27% increase in the separation rate). By the Coasean theory, these separations must have extracted marginal (low-surplus) jobs – a property not directly measurable. The testable prediction we instead investigate is that after the program abolition, the jobs having “survived” the treatment should be more resilient to any subsequent shocks (for lack of marginal i.e. low-surplus jobs), compared to their control peers. Strikingly, in the data, the two groups exhibit identical post-abolition separation behavior. The Coasean view can rationalize our findings only under narrow conditions: if surplus exhibits no persistence whatsoever. One non-Coasean model candidate fully accounts for our findings, building on wage rigidity and a constellation of large worker surplus and small firm-surplus, with the latter driving post-abolition separations.

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Suggested Citation

Jäger, Simon and Schoefer, Benjamin and Zweimueller, Josef, Marginal Jobs and Job Surplus: A Test of the Efficiency of Separations (January 2019). NBER Working Paper No. w25492. Available at SSRN: https://ssrn.com/abstract=3324115

Simon Jäger (Contact Author)

Massachusetts Institute of Technology (MIT) ( email )

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Benjamin Schoefer

University of California, Berkeley ( email )

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Josef Zweimueller

University of Zurich - Department of Economics ( email )

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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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