Financial Amplification of Labor Supply Shocks

2020 ◽  
Author(s):  
Nina Biljanovska ◽  
Alexandros Vardoulakis
Keyword(s):  
Labor Supply ◽  
Supply Shocks

scholarly journals Financial Amplification of Labor Supply Shocks

2020 ◽  
Vol 20 (189) ◽  
Author(s):  
Nina Biljanovska ◽  
Alexandros Vardoulakis
Keyword(s):  
Labor Supply ◽  
Financial Frictions ◽  
Financing Constraints ◽  
Macroeconomic Model ◽  
Policy Responses ◽  
Tax Subsidy ◽  
Pecuniary Externality ◽  
Supply Shocks ◽  
Labor Tax ◽  
Factors Of Production

We study how financial frictions amplify labor supply shocks in a macroeconomic model with occasionally binding financing constraints. Workers supply labor to entrepreneurs who borrow to purchase factors of production. Borrowing capacity is restricted by the value of capital, generating a pecuniary externality when financing constraints bind. Additionally, there is a distributive externality operating through wages. The planner’s allocation can be decentralized with two instruments: a credit tax/subsidy and a labor tax/subsidy. Labor shocks, such as the COVID-19 shock, amplify the policy responses, which critically depend on whether financing constraints bind or not.

scholarly journals Labor Supply Shocks, Native Wages, and the Adjustment of Local Employment

2016 ◽  
Author(s):  
Christian Dustmann ◽  
Uta Schönberg ◽  
Jan Stuhler
Keyword(s):  
Labor Supply ◽  
Supply Shocks ◽  
Local Employment

scholarly journals Labor Market Effects of Economic Integration: The Impact of Re-Unification in German Border Regions

2007 ◽  
Vol 8 (4) ◽  
pp. 536-560 ◽  
Author(s):  
Thiess Buettner ◽  
Johannes Rincke
Keyword(s):  
Labor Market ◽  
Labor Supply ◽  
Economic Integration ◽  
The West ◽  
Market Effects ◽  
Border Regions ◽  
Cross Border ◽  
Supply Shocks ◽  
German Regions ◽  
The Impact

Abstract This paper exploits the significant reduction in impediments to labor mobility in the process of German re-unification in order to identify labor supply shocks in the West German labor market. The focus is on the quasi-experiment of the border removal in the regions situated at the German-German border that faced a massive increase of cross-border labor supply. The results indicate that despite a gain in employment, the border removal was accompanied by a decline in wages and an increase in unemployment relative to other West German regions.

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