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Essays on Labour Market Fluctuations in Emerging Market Economies

Coskun, Sevgi (2018) Essays on Labour Market Fluctuations in Emerging Market Economies. Doctor of Philosophy (PhD) thesis, University of Kent,. (Access to this publication is currently restricted. You may be able to access a copy if URLs are provided) (KAR id:70107)

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The goal of this dissertation is to contribute to the literature on labour market properties of business cycle fluctuations for emerging market economies (EMEs) by using DSGE modelling and time series analysis. It consists of three essays and the following related topics are analysed.

In the second paper, entitled "Technology Shocks, Non-stationary Hours in Emerging Countries and DSVAR", we test a standard DSGE model on impulse responses of hours worked and real GDP after technology and non-technology shocks in EMEs. Most dynamic macroeconomic models assume that hours worked are stationary. However, in the data, we observe apparent changes in hours worked from 1970 to 2013 in these economies. Motivated by this fact, we first estimate a SVAR model with a specification of hours in difference (DSVAR) and then set up a DSGE model by incorporating permanent labour supply (LS) shocks that can generate a unit root in hours worked, while preserving the property of a balanced growth path. These LS shocks could be associated with very dramatic changes in labour supply that look permanent in these economies. Hence, the identification restriction in our models comes from the fact that both technology and LS shocks have a permanent effect on GDP yet only the latter shocks have a long-run impact on hours worked. For inference purposes, we compare empirical impulse responses based on the EMEs data to impulse responses from DSVARs run on the simulated data from the model. The results show that a DSGE model with permanent LS shocks that can generate a unit root in hours worked is required to properly evaluate the DSVAR in EMEs as this model is able to replicate indirectly impulse responses obtained from a DSVAR on the actual data.

In the last paper, entitled "Informal Employment and Business Cycles in Emerging Market Economies", we examine the relationship between informal employment and business cycles in EMEs and investigate how informal employment is relevant in shaping the aggregate dynamics in these economies. The key features of stylized facts from our data is that it is countercyclical in Mexico, Colombia and Turkey but pro-cyclical in South Africa. In addition, informal employment is negatively correlated with formal employment in Mexico but positively correlated in Colombia, South Africa, and Turkey. To account for these empirical findings, we build a small open economy model with both formal and informal labour markets, and it subjects to stationary and trend shocks to total factor productivity. We also allow labour adjustment costs in the model as strict employment protection which differ among these economies. We then examine the effect of changes in the degree of employment protection on the informal employment and the business cycles in EMEs and the extent to which the informal sector acts as a buffer in the face of adverse shocks to the labour market. The results show that this model can capture some key stylized facts of the labour market in these economies and that the informal sector acts as a propagation mechanism for these shocks. Moreover, informal employment acts as a buffer as it is countercyclical while formal employment is pro-cyclical in the model which supports the results from the data except for South Africa. Regarding volatilities, informal employment does not act as a buffer since formal employment is more volatile than informal employment in the model which contrasts with the evidence in the data for these economies except Colombia.

Item Type: Thesis (Doctor of Philosophy (PhD))
Thesis advisor: León-Ledesma, Miguel
Uncontrolled keywords: Labor Market, Emerging Economies, Real Business Cycle Model, Labor Wedge, Non-stationary Hours, DSGE Models, DSVAR approach, Business Cycles, Informal Employment
Subjects: H Social Sciences > HB Economic Theory
Divisions: Divisions > Division of Human and Social Sciences > School of Economics
SWORD Depositor: System Moodle
Depositing User: System Moodle
Date Deposited: 15 Nov 2018 15:10 UTC
Last Modified: 16 Feb 2021 13:59 UTC
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