WASMER Etienne

Abstract We build a tractable model of frictional labor markets and segmented housing markets to study welfare effects of regulations, including spatial misallocation and deviation from competitive pricing of rents. The model is summarized by a labor demand curve depending on rents and wages, a wage curve reflecting labor market tightness and rents, and finally a rent curve reflecting employment. In this economy, the rent gradient in the flexible rent sector is higher than in a purely competitive housing market. This leads to spatial misallocation due to some employees commuting too much and some non-employed living inefficiently close to jobs. In turn, reducing generalized commuting costs reduces the rent gradient in the flexible rent sector and the cost of spatial misallocation of workers. The reduction in market rents is maximal when labor markets are less frictional and housing markets are more frictional, and welfare gains are larger when both are more efficient.

We build a flexible model with search frictions in three markets: credit, labor, and goods markets. We then apply this model (called CLG) to three different economies: a flexible, finance-driven economy (the UK), an economy with wage moderation (Germany), and an economy with structural rigidities (Spain). In these three countries, goods and credit market frictions play a dominant role in entry costs and account for 75% to 85% of the total entry costs. In the goods market, adverse supply shocks are amplified through their propagation to the demand side, as they also imply income losses for consumers. This adds up to, at most, an additional 15% to 25% to the impact of the shocks. Finally, the speed of matching in the goods market and the credit market accounts for a small fraction of unemployment: most variation in unemployment comes from the speed of matching in the labor market.

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The first chapter shows the interdependence in the rental market between procedural formalism (PF) and local social networks. While PF increases the cost of resolving legal disputes between landlords and tenants, social networks have the advantage of being able to resolve a dispute without the courts. PS makes individuals belonging to a social network more attractive to the landlord. The second chapter explains the importance of sunlight on the demand for regulation of the rental market. The sunny countries of southern Europe are attractive because of their mildness of life. This potential immigration increases the tension on the rental market. To reduce this tension, individuals from southern Europe develop a complementarity between local social capital and regulation. This strategy explains a Mediterranean equilibrium where local social capital and PF are high. On the other hand, the lack of attractiveness of countries with little sunshine explains an Anglo-Saxon and Scandinavian equilibrium with opposite characteristics. The third chapter explains the support for labor market regulation by the presence of regulations on the rental market. When the latter is highly regulated, landlords select tenants according to their ability to pay the rent. Protecting open-ended contracts forces firms to select workers and then allows landlords to better estimate the individual risk of layoff. We construct a model where unemployed individuals demand more regulations and protections despite the increase in unemployment and the share of temporary contracts.

This thesis consists of three studies on the role of disagreement in economics. In the first chapter, I study the impact of judicial uncertainties on the role of disagreement in the financial market. I begin by documenting and defining these judicial uncertainties, in as much depth and detail as possible. The uncertainty related to the imperfect ability of regulators to observe is called the monitoring problem, and the uncertainty related to the penalty and enforceability problem. I introduce these concepts in a model with financial frictions. The simulation of the model shows us that the monitoring ability of regulators determines the stability or fragility of the banking sector. The cost of capital does not increase much in an economy with judicial uncertainties but the rate of return of the economy to the steady state decreases. For example, the rate of return of the economy to a steady state (after experiencing a medium-level external shock) lasts on average 7 - 12 quarters. I argue that this is due to changes in asset quality in the face of judicial uncertainty. Finally, I look at whether the simulated model could pick up the fluctuations of the business cycle after the financial crisis and it does so well. Furthermore, I provide detailed arguments for the analysis of welfare programs in the presence of judicial uncertainties. In the second chapter, I study the volatility due to disagreement in the labor market. I try to identify the sources of this high volatility in a structural way. Thus, I use a vector autoregression with stochastic volatility (Time Varying Parameter SVAR) to investigate the properties of job creation in the United States and their variations over time. The results show that a technology shock appears to explain less than 40% of the observed fluctuations in job creation volatility after the 1980s and indicate that volatility depends largely on demand and price shocks. Job vacancies (i.e., job creation) reacted negatively to technology shocks until the early 1990s. The same pattern is found for the recent period. This result is very important for public authorities because it calls into question the creation of jobs following new technologies. The third chapter is devoted to disagreement in the loan market where I show how bankruptcy law could intensify the moral hazard problem between a debtor firm and its creditors. This chapter tries to link bankruptcy law to the cost of capital by studying the level of demand for covenants in a contract. The hypothesis that I will try to validate empirically is the following: if bankruptcy law becomes more and more favorable to firms, creditors will put more and more restrictive clauses in the contract (i.e. seek to obtain a stronger control over the debtors' behavior). I validate the above hypothesis and show that an additional covenant decreases the rate of return by 23 basis points. Thus, I provide a new interpretation of covenants compared to the literature.

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This thesis aims to explain three major economic facts: excessive urban sprawl, unemployment dispersion, and trade hierarchy. In the first chapter, I construct and calibrate a simple labor market matching model in which the residential density of workers is endogenous. Using this analytical framework I show that the structure of the labor market creates significant excess sprawl. I identify the fact that firms compensate for the transportation costs of employees as the major source of this inefficiency. Finally, I point out that optimality can be restored if the government implements mileage compensation. The second chapter questions the fact that although it has been established that cities are characterized by a high dispersion of unemployment, segregation models remain the standard framework of urban and labor economics. In particular, I show that the classical model of this literature explains the dispersion of unemployment if the residential environment affects workers' preferences. In the third chapter, co-authored with Antoine Vatan, we show that whether firms follow a trade hierarchy depends very strongly on their experience as exporters. Then, we develop a simple and dynamic model that addresses the new empirical fact that we have highlighted. Namely, we show that this new fact can be explained by a trade-off between attractiveness and competition, the latter being present in any model of monopolistic competition with sequential exporting.

We build a flexible model with search frictions in three markets: credit, labor, and goods markets. We then apply this model (called CLG) to three different economies: a flexible, finance-driven economy (the UK), an economy with wage moderation (Germany), and an economy with structural rigidities (Spain). In the three countries, goods and credit market frictions play a dominant role in entry costs and account for 75% to 85% of total entry costs. In the goods market, adverse supply shocks are amplified through their propagation to the demand side, as they also imply income losses for consumers. This adds up to, at most, an additional 15% to 25% to the impact of the shocks. Finally, the speed of matching in the goods market and the credit market accounts for a small fraction of unemployment: Most of the variation in unemployment comes from the speed of matching in the labor market.

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I use search models as a starting point for my analysis, examining the impact of frictions from either a theoretical or an empirical perspective. In Chapter 1 I analyze the effects of uncertainty on the macroeconomy. Empirical estimates show that uncertainty has a negative impact on the economy and that the labor market is an important transmission channel. A general equilibrium model with DMP frictions is able to reproduce the observed facts. In Chapter 2 I use a Time Varying Parameter SVAR with stochastic volatility to investigate the properties of job creation in the United States and their variation over time. The estimates indicate that the volatility depends largely on demand and price shocks. Jobs responded negatively to technology shocks until the early 1990s. Chapter 3 incorporates the spatial dimension into a search model. This allows to explain some regularities observed in Austrian data: i) the existence of a reservation frontier between wage and distance. ii) the change in job search strategy. iii) the discouraging effect of unemployment benefits. In Chapter 4 I present a model that explains the selection of new hires between short and long term contracts. Using an Italian database, we find that the probability of obtaining a permanent contract depends negatively on the degree of mismatch between the worker's education and the occupation. Moreover, reforms that liberalize fixed-term contracts encourage their use, but they have non-linear effects on the unemployment rate.

This thesis consists of four articles, mainly empirical, on discrimination in the labor market. The first article focuses on the employment and wages of French people of North African origin, the second on their wages and access to managerial status, the third on the heterogeneity of their employment gaps, and the fourth uses data from a test designed to measure the impact of a prison background on access to employment in the United States. The added value of these articles is twofold. First, they provide new empirical evidence on the labor market situation of French people of foreign origin: employment and wage gaps with the reference population are high, but once differences between populations (age, education, etc.) are taken into account, most of the wage gaps disappear. On the contrary, a substantial part of the differences in employment and in the proportion of managers remains. Moreover, we propose an original description of the heterogeneity of employment gaps which shows that these gaps are relatively large for individuals whose employment rates would be the lowest in the reference population, while for those whose theoretical employment rates are higher these unexplained gaps are much smaller. Second, these articles provide methodological elements for measuring discrimination. The first three articles attempt to incorporate ideas and notations used in the public policy evaluation literature. The fourth attempts to shed light on the methods usually used in testing studies.

While there has long been talk of reforming employment subsidies for the lowest paid, the recent difficulty encountered by the government in lowering employee social security contributions on low wages (a measure censured by the Constitutional Council) has reopened the debate on reforms of existing schemes for the lowest incomes: the Employment Bonus and the Active Solidarity Income. As part of the LIEPP's reflections on the evaluation of the use of taxation for social policy purposes, we publish hereafter three texts defining three possible orientations for the reforms of the RSA and the PPE. These texts are from a study day organized on January 29, 2014, entitled "The taxpayer and the assisted. The RSA/PPE debate between principles and parameters". They focus on the challenges of using taxation to support the activity of low-income workers, but also on the profound limitations of the current system. Since 2000, France has developed a negative tax, first in the form of the employment premium (PPE) and then as part of the active solidarity income. This is indeed a tax expenditure aimed at employment and social policy. Several factors call into question the coherence and effectiveness of the choices made: the specific characteristics of the RSA, as well as the massive non-use of its activity component, have led to a reflection on this issue. For its part, the PPE, whose scale has been frozen, poses a distribution problem. Widely distributed, it suffers from "sprinkling" and poor responsiveness. Taking note of these structural weaknesses of the two schemes designed to support low-income workers, the report submitted by deputy Christophe Sirugue to the Prime Minister in the summer of 2013 proposed an "activity bonus" merging the PPE and the RSA activité.While the reduction of employee social contributions for salaries between 1 and 1.3 SMIC was favored to "make work pay" or at least more attractive, at the bottom of the wage scale, a decision of the Constitutional Council of 06/08/2014 , rejecting such a reduction on the grounds of disregard for the principle of equality before the law has put the issue of merging RSA / PPE back on the agenda? How to respond in the most effective way to a challenge created by low wages on the one hand, the inconsistency and failures of public policies on the other?.

The unemployment rate in France is roughly 6 percentage points higher for African immigrants than for natives. In the US the unemployment rate is approximately 9 percentage points higher for blacks than for whites. Commute time data indicates that minorities face longer commute times to work, potentially reflecting more difficult access to jobs. In this paper we investigate the impact of spatial mismatch on the unemployment rate of ethnic groups using the matching model proposed by Rupert and Wasmer (2012). We find that spatial factors explain 1-1.5 percentage points of the unemployment rate gap in both France and the US, amounting to 17-25% of the relative gap in France and about 10-17.5% in the US. Among these factors, differences in commuting distance play the most important role. In France, though, longer commuting distances may be mitigated by higher mobility in the housing market for African workers. Overall, we still conclude that labor market factors remain the main explanation for the higher unemployment rate of Africans.

This thesis is composed of various works in macroeconomics and labor economics. These works revolve around the same theme: the study of labor markets whose functioning is hampered by information frictions and in which workers differ from one another in their characteristics. These two elements are essential to our understanding of the labor market and their consideration makes it possible to better understand empirical than normative issues. The first chapter of this thesis is on the side of empirical questioning. It shows that the combination of information frictions and heterogeneity of individual skills can explain a significant part of the fluctuations observed in the flows of workers entering and leaving the labor force. The second chapter also takes a positive approach while considering government intervention as one of the mechanisms for allocating resources in the labor market. It examines how certain public policies interact with individual job-seeking and human capital investment decisions, and may have contributed in the long run to Europe's poorer performance relative to the United States in the employment of older workers. The third chapter lends itself more to a normative reading. It proposes a quantitative analysis of the effects of redundancy payments on employment and individual well-being. To do this, it places itself in a framework where the incompleteness of insurance markets leads workers to accumulate precautionary savings.

In this contribution, we will try to answer the question: what is the need for multiple insights into public policy by different disciplines within the humanities and social sciences, i.e. interdisciplinarity? Is it necessary to go as far as the blurring of disciplinary boundaries in the case of transdisciplinarity? This question must be asked because, although there is a fairly extensive literature on evaluation and interdisciplinarity outside of economics, and evaluation methodologies have long been developed within economics, economics has not really taken up this question of interdisciplinarity: it seems to have enough to do with resolving the debates between controlled experiments and structural model estimations.

This paper discusses the pros and cons of a single labour contract. After reviewing the current state of dualism in labour markets. and the recent labour reforms in Europe, we discuss the various proposals to eliminate dualism. Next, we emphasise the costs of. dualism and discuss whether they would be addressed by introducing a single labour contract. We notably introduce a distinction. between reforms based on introducing a single contract with progressive seniority rights (CPSR) or a single contract with long. probation periods (CLPP).We argue that their gains and costs are very different, especially with regards to the stigma effects and. dualism. We also consider alternative reforms: the introduction of a single labour contract as such, and alternative reforms. independent of the labour contract but addressing the issue of dualism (training, access to housing and to credit) and compare their. costs and benefits. We then build a simple model where both temporary and permanent contracts are available to firms. We use it to describe the. demand for temporary contracts and the potential consequences of removing them and reach the following conclusions. First,. employment protection has a moderate negative impact on employment, which can be mitigated when temporary contracts are.

Employment protection is defined as the regulations governing the rules for hiring and firing employees, and finds its sources in legislation, collective bargaining and court decisions. For the past fifteen years, a vast macroeconomic literature has examined the effects of employment protection on labor market performance, or more precisely the effects of dismissal procedures on the employment rate, duration and unemployment rate. More recent work is beginning to highlight other consequences of employment protection, namely its incentive effects on the behavior of individuals: faced with a certain employment regulation regarding layoffs, economic agents adapt, react and adopt strategic behaviors. This thesis is part of this work by exploring the individual incentives generated by labor legislation. Indeed, labor law relating to dismissal and its implementation by the courts have consequences on the behavior of the parties to the employment relationship at several levels. On the one hand, the terms and conditions of dismissal have an ex ante impact on the respective levels of investment of the employer and the employee within their relationship: indeed, the way in which the courts judge a dispute following a dismissal and in particular the elements taken into account in their decisions have an influence on the incentives of the parties to make specific investments. Thus, the analysis presented shows, in particular, which economic and social elements judges should take into account if the objective is to maximize the levels of investment chosen by the parties. On the other hand, the structure of court proceedings also has an impact on the behavior of individuals once the dispute between the two parties has started. By making comparisons between several dispute resolution systems using theoretical tools and experimental analysis, this thesis contributes to the current legal debates about the ability of procedures to generate the maximum number of agreements, allowing the reduction of legal expenses.

Structural change is a necessary process if we want to improve welfare in our economy. It also generates a variation in relative prices, which implies a reallocation of resources between productive units. But factor mobility can be painful in the short run. This thesis addresses this issue in the context of labor markets and aims at answering a number of questions such as: How does an economy adjust in periods of structural change? What are the costs? Is the associated labor reallocation process worth it? Does the gain from change exceed the cost? The thesis consists of four essays. It has recently been shown that opening up to international trade leads to the destruction of the least productive firms and the expansion of the most important ones. The first chapter aims to determine the net impact on the level of employment of this reallocation. The second chapter analyses the effect on aggregate welfare and its determinants. The third chapter considers another type of structural change: it has often been argued that to reduce unemployment in Europe it is necessary to increase geographic labor mobility. This chapter analyzes the costs of labor mobility in terms of local social capital (e.g. friends, family, neighbors). The latter refers to a type of social capital that depreciates if the individual holding it is reallocated to another geographical point. Finally, the last chapter studies the impact of growth on the quality of jobs in terms of skills that correspond to the education of agents.