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Working Paper Series in Economics
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No. wp2012-5
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- Hubert Gabrisch and Karsten Staehr
- The Euro Plus Pact: Competitiveness and external capital flows in the EU countries
- JEL-Codes: E61, F36, F41
- Keywords: European integration , policy coordination , unit labor costs , current account imbalances, economic crises
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No. wp2012-4
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- David Seim
- Job displacement and labor market outcomes by skill level
This paper investigates the effects of displacement on outcomes such as annual earnings, unemployment, wages and hours worked. It relies on previously unexplored administrative data on all displaced workers in Sweden in 2002, 2003 and 2004 which are linked to employer-employee matched data at the individual level. By linking the data to military enlistment records, the paper assesses the selection into displacement and finds that workers with low cognitive and noncognitive skills are significantly more likely to be displaced than high-skilled workers. The analysis of displacement effects shows evidence of large and long-lasting welfare costs from displacement. Moreover, studying the heterogenous impacts of job displacement in terms of cognitive and noncognitive skills reveals that although workers with high skills fare better than low-skilled workers in absolute terms, there are no significant differences in the recovery rates between skill groups. Finally, by using administrative data on displacements, it is possible to assess quantitatively the bias that results from not being able to separate quits from layoffs in earlier studies
- JEL-Codes: J60, J63, J65, I21, C23
- Keywords: job displacement, cognitive and noncognitive skills, employer-employee data
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No. wp2012-3
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- Merike Kukk, Dmitry Kulikov and Karsten Staehr
- Consumption sensitivities in
Estonia: income shocks of different persistence
The Permanent Income Hypothesis (PIH) entails that consumption reacts more strongly to persistent than to temporary income shocks. This prediction is tested using data from the Estonian Household Budget Surveys for 2002-2007. The dataset contains questions which make it possible to distinguish between persistent and temporary income shocks based on the households' own assessment. The estimations confirm that the marginal propensities to consume out of the two income shocks differ, households are forward-looking and seek to smooth consumption. Moreover, the estimated propensities of persistent shocks are of reasonable magnitudes, consistent with the PIH. Further analysis reveals, however, features that are in breach of the PIH. The consumption estimations are affected by lagged temporary income shocks. When income shocks are decomposed into positive and negative values, there is evidence of excess sensitivity to positive temporary shocks.
- JEL-Codes: D12, E21, R22
- Keywords: consumption, Permanent Income Hypothesis, income persistence, consumption smoothing, rule-of-thumb consumption
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No. wp2012-2
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- Jaanika Merikull
- Households borrowing during a
creditless recovery
This paper investigates the contribution of households to the creditless recovery. We use Estonian cross-sectional microdata on households' assets, liabilities, income, expectations and intention to use credit in 2001-2010. The results indicate that (1) there was a large-scale drop in households demand for credit during the recession and sluggish recovery after the recession. (2) One third of the sluggish recovery in credit demand is explained by changed household endowments such as income reduction and lower income expectations, while two thirds is explained by changed behavioural relations such as renters taking mortgages less often and employed individuals using credit less often. (3) Changed behavioural relations explain a higher proportion of the credit demand drop in longer-term credit such as loans than in shorter-term credit such as credit card purchases. (4) 44% of households who wanted to use credit were credit constrained during the recovery and households with lower credit worthiness were more likely to apply for credit.
- JEL-Codes: D12, D14, G01
- Keywords: households borrowing, business cycles, micro-econometric evidence, Oaxaca-Blinder decomposition
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No. wp2012-1
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- Kadri Männasoo
- Determinants of bank interest
spread in Estonia
The recent global financial turmoil increased bank interest spreads in Estonia to the highest levels recorded since the Russian crisis in 1998- 1999. The pure spread concept and the two-step estimation approach of Ho and Saunders (1981) have been used to decompose the interest spreads in Estonia. The pure spread is mainly determined by risk aversion and the market structure of the banking sector, with money market interest volatility playing quite a modest role in the long-term equilibrium. The regulatory, efficiency and bank-portfolio effects share a roughly equal weight in the observed spread, whereas credit risk adds only a tiny portion to the mark-up. Strong liquidity and foreign capital permit lower spreads
- JEL-Codes: G21, E43
- Keywords: bank interest spread, dealership model
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No. wp2011-10
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- Martti Randveer, Lenno Uuskula and Liina Kulu
- The impact of private debt on economic growth
Both theoretical and empirical evidence show that recessions are steeper in countries with high levels of private debt and/or credit booms. But do these negative effects carry over to the period where the recession is over and the economy recovers from the crisis? In this paper we look at economic recovery episodes and relate the growth performance of countries with their debt levels and debt growth before the beginning of the recession. We find that a higher level of debt before a recession is correlated with smaller economic growth after the economic slowdown has finished. In contrast, higher credit growth before a recession is associated with higher GDP growth after the crisis. The effects of debt on consumption are more negative, implying that after recessions people consume less and save more than they did in the period before the recession. However, the overall economic effects of the debt measures on GDP and consumption growth are limited
- JEL-Codes: E32, O16, E44
- Keywords: private debt, recession, economic growth, consumption
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