Projects / Programmes
Theoretical Aspects and Empirical Analysis of Labour Market Impact of Flexicurity
| Code |
Science |
Field |
Subfield |
| 5.02.01 |
Social sciences |
Economics |
Economy sciences |
| Code |
Science |
Field |
| S180 |
Social sciences |
Economics, econometrics, economic theory, economic systems, economic policy |
| Code |
Science |
Field |
| 5.02 |
Social Sciences |
Economics and Business |
flexicurity, minimum wages, unemployment insurance, productivity, empirical analysis
Researchers (24)
Organisations (3)
Abstract
Objective. The objective of the proposed research is to investigate the effects of key changes in Slovenia’s labour market regulations since the early 1990s on labour market outcomes and productivity. We focus on policy changes in three areas: (i) employment protection, (ii) minimum wages, and (iii) unemployment benefits. In all these areas, significant policy changes provide credible strategies to identify their impact on labour market outcomes and productivity.
Research Questions. The research will investigate the following effects:
· Worker and job flow effects: What is the impact of selected policy changes on worker and job flows? On the worker flow side, we will examine aggregate accessions, separations, total worker reallocation and excess worker reallocation. We will also investigate more detailed flows, including job-to-job, job-to-unemployment, job-to-inactivity, unemployment-to-job, and inactivity-to-job flows. On the job flow side, net job creation by new and existing firms and job destruction by exiting and continuing firms will be examined.
· Wage effects: What is the impact of policy changes on wages of various groups of workers – and on the overall wage distribution?
· Productivity effects: What is the impact of policy changes on the level and growth of multi-factor productivity and labour productivity of firms?
Each of these effects will be examined for six key legislative changes, three concerning employment protection (changes in regular and fixed-term appointments of 2002 and 2007, and the introduction of temporary work agencies of 1998), one concerning minimum wages (their introduction in 1995 and relevant changes since then), and two concerning unemployment benefits (reduction and increase of unemployment benefit generosity in 1998 and 2011, respectively).
Methodology. To identify the effects of policy changes, we will use a difference-in-differences approach based on before-and-after and treatment-and-control comparisons, applied to both worker- and firm-level outcomes. We will use two methods. First, when the policy change itself produces different groups of firms/workers, with some being affected by the change and others not, we will use this “quasi-controlled” experiment to form treatment and control groups. Second, in cases where such a “quasi-controlled” experiment does not apply, we will employ a “binding industry” method. This method rests on the fact that the the impact of a policy change is likely to be larger in some industries – the policy-binding industries – and smaller in others. To identify policy-binding industries we will adopt an external “benchmark” measure of how binding a specific policy is for each industry.
Data sources. The research will be performed on extraordinarily rich, administrative matched employer-employee datasets, covering the complete Slovenian labour force (including data on employment and unemployment history and associated earnings or unemployment insurance incomes) and all registered firms throughout the period 1991–2010 (and possibly beyond).
Organization and Timing. The research will be carried out by a research team of the University of Primorska, Faculty of Management Koper, in collaboration with two domestic partner institutions as well as with highly visible researchers of foreign institutions (John Haltiwanger, University of Maryland; Peter Orazem, Iowa State University; Helena Schweiger, EBRD; and Jan van Ours, University of Tilburg). The project will last three years, from June 2011 to May 2014.
Expected outputs. Apart from regular progress report and a final report, the proposed research seeks to produce ten scientific papers publishable in high-quality professional journals.
Significance for science
The project has generated innovative, scientifically grounded analytical results that will attract interest in a broad, international scene. First, the results are derived from exceedingly rich and detailed data that is appreciated worldwide, as it exists on a similar scale only in the Scandinavian countries. (To repeat, the database includes the entire history of employment and wages for all workers in the formal sector in Slovenia in the period 1991 to 2014. It is also possible to connect workers with firms - their employers, the so-called matched employee-employer database). This brings a host of benefits that the project has taken advantage of: • Such a database allows a wide range of types of analysis, as the effects of selected policies can be assessed both on an individual level (for example, the effects of a certain measure on the likelihood of new employment) as well as on the firm level (for example, the effects on productivity). The project took advantage from such an approach in its investigation of the impact of the minimum wage. • Such a database enables to address difficult questions and to deploy methodologies rarely available elsewhere. In particular, it provides an excellent basis for high-quality identification of causal effects of the economic policy measures. The completeness of the coverage enables great flexibility in the formation of the experimental and control groups that is essential for such identification. The project has used that approach in all three areas of its analysis. • In the case of the minimum wage our rich database allows for direct identification of workers who are subject to legal changes, based on their position in the wage distribution and for cross-checking the correctness of the status by using other administrative databases, as well as for tracking of their transitions between different labour market states, before and after the change in legislation. This approach eliminates the problem of identification of persons subjected to legal changes faced by many other studies. Second, the project uses modern approaches in identifying the effects of economic policy, above all, the “difference-in-differences” approach applied to both worker- and firm-level outcomes. Third, the areas of analysis alone are of big international interest, as many controversies still remain. Our results will attract international attention not only by providing scientifically-grounded analysis and it will draw on exceptionally rich micro database, but also by the fact that the legislative changes focussed upon by the project are of strong magnitude, particularly the March 2010 minimum wage increase, and thus provide exceptionally fertile ground and strong leverage for detecting the impact on labour market outcomes.
Significance for the country
The research project generated several in-depth, well-grounded studies on extremely topical issues that will contribute to informed policy discussion and will ultimately lead to more effective economic policy measures. Long-term results of the project therefore has the potential to contribute to a more efficient allocation of production resources, especially of labour, and therefore to faster economic growth, as well as to the strengthening of the welfare state: • The project rigorously, at a high professional level, assessed the effects of recently implemented, important legislative changes in Slovenia, thus providing a basis for evidence-based policymaking. The project thus allows the Ministry of Labour, Family, Social Affairs and Equal Opportunities to rely on well-established facts about previously applied measures. This will contribute to a more effective selection of the future policy measures as well as enable the Ministry to identify systemic gaps and effectively overcome them. • The subject-matter of the project – particularly how effective is the Employment Relationships Act on reducing segmentation and increasing access to jobs, and what is the impact of high level of the minimum wage on employment, particularly of young and low-paid workers – has been in the focus of economic debates in the country and has featured prominently in the dialog between Slovenia and the European Commission. In one of the recent communications, the European Council voiced a concern over the limited progress in implementing its previous recommendation on the minimum wage and over the progress on reducing labour market segmentation (Council Recommendation of 8 July, 2014, on the National Reform Programme 2014 of Slovenia). Similarly, on the topic of minimum wages, OECD Economic Survey on Slovenia (2013, p. 7) recommends: “Following a 23% hike in 2010, the authorities should ensure that the minimum wage declines relative to the median wage over time and adopt a new social agreement introducing wage moderation over an extended period of time to support Slovenia’s competitiveness.”
Most important scientific results
Annual report
2011,
2012,
2013,
2014,
final report,
complete report on dLib.si
Most important socioeconomically and culturally relevant results
Annual report
2011,
2012,
2013,
2014,
final report,
complete report on dLib.si
