In this paper, we examine whether the imperfections in the credit market spill over to the labor market. We examine the case of a country that experienced a very high degree of imperfections in the financial markets, but underwent substantial changes in 1992 due to the liberalization brought by the European unification and other institutional changes. Italy is therefore a good laboratory to stu...

This paper revisits the macroeconomic effects of government consumption in the neoclassical growth model augmented with idiosyncratic investment (or entrepreneurial) risk. Under complete markets, a permanent increase in government consumption has no long-run effect on the interest rate, the capital-labor ratio, and labor productivity, while it increases work hours due to the familiar negative w...

This paper studies disinflationary shocks in a non-linear New Keynesian model with search and matching frictions and moral hazard in the labor markets. Our focus is on understanding the wage formation process as well as welfare costs of disinflations in the presence of such labor market frictions. The presence of imperfect information in labor markets imposes a lower bound on worker surplus tha...

This article analyzes determinants of growth across labor markets in the United States, using a production function approach based on four inputs: labor, manufacturing investment, human capital investment, and public capital investment. We find little role for public capital investment in growth, but that manufacturing investment spurred growth in nonmetropolitan areas, in contrast to metropoli...

The financial crisis of 2008 was followed by sharp contractions in aggregate output and employment and an unusual increase in aggregate total factor productivity (TFP). This paper attempts to explain these facts by modeling the creation and destruction of jobs in the presence of heterogeneity in firm productivity and frictional credit and labor markets. The aggregate level of TFP is determined ...

This paper compares hiring and separations over the business cycle in formal and informal labor markets in Brazil. Using a simple model with specificity in employment relationships, the paper shows that the consequences of employment protection can be described by an inverse relationship between the incidence and duration of employment. Employment protection moves labor markets along this curve...

Baland and Robinson (2000) investigate the conditions under which decisions by parents about their own children’s work are inefficient. Using a simple two-period model with altruistically linked family members, they show that child labor decisions are efficient when credit markets are perfect and intergenerational altruistic transfers are nonzero. Moreover, they show that when the level of chil...

Since the nineteen seventies, high- and low-income countries have undergone a pattern of transnational economic and cultural integration known as globalization. The weight of the available evidence suggests that the effects of globalization on labor markets have increased economic inequality and various forms of economic insecurity that negatively affect workers' health. Research on the relatio...

Using data from Peru and Pakistan, this article tests two hypotheses: there is a positive association between hours of child labor and poverty, and there is a negative association between child schooling and poverty. Both of these hypotheses are confirmed by the Pakistani data, but not by the Peruvian data. The reduction in poverty rates due to income from children’s labor is greater in Pakista...