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Essays on the Irish Labour Market Essays on the Irish Labour Market Nóirín McCarthy Thesis submitted to the University of Sheffield for the degree of Doctor of Philosophy May 2016 Abstract The objective of this thesis is to explore issues in the Irish labour market from both the enterprise and employee perspective over the period 2005-2013. We draw on literature from the areas of job flows, displacement and monopsony. Our analysis is primarily based on the unique P35 linked employer-employee dataset, containing almost two million employee observations annually. We also link this dataset to the Census of Industrial Production survey in Chapter 3.1 The first chapter introduces the thesis by detailing its main goals, the importance of this work, as well as summarizing the following chapters. In Chapter 2, we provide an overview of the Irish labour market. Evidence suggests the economy experienced a significant increase in unemployment during the period. We also explore aspects of the resulting policy response. We investigate job flows in the labour market in Chapter 3. Results indicate that job destruction increased significantly between 2006 and 2010 while job creation declined. When examining the impact of changing export intensity on job creation and destruction, our results suggest a small effect. In Chapter 4, we estimate the earnings losses of displaced workers. We focus on two displacement events; mass-layoff and closure. Results indicate that workers who experience a mass-layoff incur greater losses relative to those displaced following a closure, as do those who switch to a new sector to secure re-employment following displacement. 1 Both sources are available from the Central Statistics Office, Ireland. i We examine the labour market for evidence of monopsony in Chapter 5. We find that estimated labour supply elasticities to the firm are low, implying that elasticity is not infinite as suggested by perfect competition, and so employers possess a degree of monopsony power. Chapter 6 summarizes the findings, highlights contributions to the literature, outlines policy implications and describes possible directions for future research. ii Acknowledgements First and foremost I would like to express my sincere thanks to my supervisor Prof. Peter Wright of the University of Sheffield for his invaluable support, advice and guidance throughout this research. I would also like to acknowledge the support of the New Staff Development Programme of the School of Economics, University College Cork which funded this PhD thesis. I am also very grateful for the friendship and support of my colleagues in the School of Economics, particularly Maire O’Connor and Justin Doran. I would also like to thank the staff in the Administrative Data Centre of the Central Statistics Office, Cork, Ireland for their assistance, particularly Mr. John Dunne and Ms. Catalina Gonzalez. I would particularly like to thank my parents Eileen and Brendan, family and friends for their support and encouragement throughout this process. Finally I would like to especially thank my husband Aidan. His love, support and patience were unwavering throughout this entire journey and I am grateful to have had him by my side. iii Table of Contents Chapter 1 : Introduction ............................................................................................... 1 1.1 Overview of the thesis ........................................................................................ 1 1.2 Summary of Chapter 2 ....................................................................................... 3 1.3 Summary of Chapter 3 ....................................................................................... 3 1.4 Summary of Chapter 4 ....................................................................................... 4 1.5 Summary of Chapter 5 ....................................................................................... 5 1.6 Concluding remarks ........................................................................................... 6 Chapter 2 : An Overview of the Irish Labour Market .................................................. 8 2.1 Unemployment and Economic Growth .............................................................. 8 2.2 The earnings of workers ................................................................................... 11 2.3 The Government response to rising unemployment ......................................... 12 2.4 Migration and the Irish Labour Market ............................................................ 15 2.5 Concluding remarks ......................................................................................... 18 Chapter 3 : An Analysis of Job Flows in the Irish Economy ..................................... 19 3.1: Introduction ..................................................................................................... 19 3.2: Literature Review ............................................................................................ 21 3.2.1 The magnitude of job flows across countries ............................................ 21 3.2.2 Job flow rates by industry .......................................................................... 29 3.2.3 Job flow rates and firm size ....................................................................... 31 3.2.3.1 The persistence of job creation and job destruction ........................... 35 3.2.4 Job flow rates by region in Ireland ............................................................ 38 3.2.5 International trade and job flows ............................................................... 39 3.2.6 Conclusion ................................................................................................. 41 3.3: Data & Methodology ....................................................................................... 42 3.3.1 Data sources ............................................................................................... 42 3.3.2 Cleaning the data sources .......................................................................... 45 3.3.3 The merging of the P35 and CIP data sources ........................................... 50 3.3.4 Methodology .............................................................................................. 52 3.4: Findings ........................................................................................................... 54 3.4.1 Job flow rates in the Irish economy, NACE Rev. 2 sectors B-N ............... 54 3.4.1.1 The cyclicality of job flows................................................................ 56 3.4.1.2 The role of enterprise entry and exit .................................................. 59 iv 3.4.2 Job flows and firm size .............................................................................. 62 3.4.2.1 Persistence and job flows ................................................................... 65 3.4.3 Job flow rates in manufacturing sectors .................................................... 67 3.4.3.1 Job flow rates of all manufacturing firms .......................................... 67 3.4.3.2 Job flow rates of manufacturing enterprises by sub-sector ................ 69 3.4.3.3 Job flow rates of manufacturing firms by region ............................... 70 3.4.3.4 Job flow rates of manufacturing enterprises & international trade .... 71 3.5. Concluding remarks ........................................................................................ 83 Chapter 4 : The Impact of Displacement on the Earnings of Workers ...................... 86 4.1: Introduction ..................................................................................................... 86 4.2: Literature Review ............................................................................................ 87 4.2.1 The definition and incidence of job displacement ..................................... 88 4.2.2 Industry and job displacement ................................................................... 92 4.2.3 Displacement and worker characteristics .................................................. 92 4.2.4 The impact of displacement on earnings of workers ................................. 93 4.2.4.1 The earnings of displaced workers in the United States .................... 93 4.2.4.2 The earnings of displaced workers in Europe .................................. 101 4.2.4.3 Earnings losses and variations across workers; gender, tenure and age in the US and Europe ................................................................................... 105 4.2.4.4 Displacement, industry and earnings losses ..................................... 108 4.2.5 Conclusion ............................................................................................... 113 4.3: Data and methodology .................................................................................. 114 4.3.1 Overview of data and construction of cohorts ......................................... 114 4.3.2 Matching procedure ................................................................................. 119 4.3.2.1 Propensity Score Matching .............................................................. 121 4.3.2.2 Assessing Common Support ............................................................ 124 4.3.2.3 Assessing Balance and the quality of matches ................................. 125 4.3.3 Estimation methodology .......................................................................... 129 4.4: Findings ........................................................................................................
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