David Margolis

Frictional labor markets impose a fundamental trade-off: individuals may work on their own at any time, but can only take a potentially better-paid wage job after spending some time looking for it, suggesting that intertemporal considerations affect how people choose their occupation. We formalize this intuition under the job search framework and show that a sufficiently high subjective discount rate can justify the choice for own-account work even when it pays less than wage work. With this simple model, we estimate the lowest discount rate that is consistent with the occupational choice of urban own-account workers in Brazil. We find that at least 65 percent of those workers appear to discount the future at rates superior to those available in the formal credit market, which suggests constrained occupational choice.<p>Finally, we show that our estimated lower bound of the time preference is positively associated with food, clothing, and housing deprivation.</p>

This paper contests the traditional view of layoffs as solely reactive to negative economic conditions. Using survey and administrative French data, we provide evidence on how firms strategically utilize mass layoffs to restructure their workforce composition. First, we investigate if firms use layoffs to shift their skill requirements. Analyzing both layoff and matched non-layoff firms, we find firms significantly increase the requirements for social skills while decreasing dependence on manual and cognitive skills requirements after layoffs. This suggests a premeditated reshaping of the workforce instead of a costcutting practice. Secondly, we explore the factors influencing selection into displacement during layoffs. We focus on three key aspects: skills mismatch, relative worker quality, and perceived monetary cost. Our findings highlight the significant role of skill mismatch and worker quality in determining dismissal, suggesting firms actively select based on strategic needs. By revealing the strategic nature of mass layoffs and their impact on skills composition and worker selection, this paper offers valuable insights into the understanding of workforce adjustment. Such insights are relevant for policy design.

We assess the effect of the introduction of a minimum wage policy of 8.50 EUR/hour in Germany in January 2015 on the probability of transitioning from fixed-term to open-ended contracts. Utilizing administrative data from social security records, we compare ex-ante affected (i.e., those earning below the minimum wage) workers against unaffected ones during the pre-implementation period, and find a significant decline in the probability that ex-ante affected workers employed under fixed-term contracts transition to open-ended contracts as the ending month of their fixed-term contract approaches January 2015, when the minimum wage policy was enforced. We interpret our empirical results through the lens of a job search model where firms use fixed-term contracts as a probation phase to learn about the matchspecific productivity with a given worker. In this model, firms sign open-ended contracts based on a productivity threshold rule. A sufficiently high minimum wage can push this threshold up, thus reducing the probability at which workers transition from fixed-term to open-ended contracts.

Frictional labor markets impose a fundamental trade-off: individuals may work on their own at any time, but can only take a potentially better-paid wage job after spending some time looking for it, suggesting that intertemporal considerations affect how people choose their occupation. We formalize this intuition under the job search framework and show that a sufficiently high subjective discount rate can justify the choice for own-account work even when it pays less than wage work. With this simple model, we estimate a lower bound for the discount rate that is implicit in the occupational choice of urban own-account workers in Brazil. We find that at least 65 percent of those workers appear to discount the future at rates superior to those available in the credit market, which suggests constrained occupational choice. Finally, we show that the estimated lower bound of the preference for the present is positively associated with food, clothing, and housing deprivation.