| dc.description.abstract | This dissertation consists of three essays in labour economics. Its primary focus is labour supply and individual preferences for labour in European countries during recessions.
The first essay (Chapter 2) documents stylised facts on desired hours per employed worker in European countries and identifies the effect of recessions on desired hours. Actual hours worked are usually used to estimate preferences on the labour market. However, actual hours are constrained by labour demand and therefore measure hours worked in the general equilibrium. Descriptive statistics from EU Labour Force Survey show that desired hours are countercyclical and that the underemployment gap increases due to higher desired hours worked of employed individuals. I identify the effect of recessions on desired hours using variation in regional unemployment rates from 2000 to 2017. I find that a 1 percentage point higher unemployment rate increases desired hours, on average, by 2--8 hours on a yearly level (3--5 minutes in the reference week). The results offer a lower bound estimate for the whole sample period of booms and busts. To narrow the sample period, I use a panel of individuals from the French LFS (EEC) and find even bigger effects. In France, from 2007q4 to 2009q1, an increase in regional unemployment rate by 1 percentage point increases desired hours by 1.6 hours in the reference week. Bottom decile of the income distribution significantly increases desired hours in all countries, suggesting an income effect labour supply response in recessions.
The second essay (Chapter 3) studies the effects of overtime tax introduction. Income from overtime work is subject to income tax in most European countries. However, the effect of higher overtime tax on hours worked has largely remained an unanswered question. This essay examines the re-introduction of French overtime tax in 2012, by comparing workers in large (treated) and small firms (control), before and after 2012. I find that overtime tax reduced actual hours worked, but increased reporting of overtime hours. The result is confirmed using synthetic control estimates for actual hours worked. On the other hand, after the reform, part-time and temporary workers increase their actual hours worked, but not overtime hours. This result suggests that firms adjusted hours of workers whose hours are more flexible, while avoiding the higher cost of overtime hours.
The third essay (Chapter 4) examines the effect of an unemployment shock and unemployment benefit reform to income inequality, through the labour supply channel. The approach to this question contributes to the macroeconomic literature by estimating the labour supply responses to labour market shocks and by simultaneously estimating an ambiguous effect of labour market reform on income inequality. I build a labour supply model which accounts for involuntary unemployment, conditional on country-specific and individual characteristics, and includes preference heterogeneity. The results show that income inequality increases after an unemployment shock, which is largely driven by the upper tail of the income distribution and higher hours worked of employed individuals in the European North. Implementing a higher unemployment benefit reform as a stronger safety net shows a large decrease in income inequality in Germany, driven by the bottom tail of the income distribution. I find a negligible decrease in income inequality in Belgium and Italy and an increase of inequality in Spain. | en |
