Excess Churn in Integrated Labor Markets

Bernt Bratsberg (), Oddbjørn Raaum and Knut Røed ()

No 12697, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: The common European labor market encourages worker mobility that enhances allocative efficiency, but certain institutional features may trigger inefficient migration. As a job in one of Europe's high-income countries typically also entails coverage in a generous welfare and social insurance system, migrants' reservation wages may lie below their opportunity cost of labor. This represents an externality because employers and migrant workers can pass some of their remuneration costs onto the welfare state. Once welfare benefit entitlement is secured, the reservation wage of the migrant worker is expected to rise, giving the firm an incentive to replace the worker with a new migrant willing to accept lower pay. This leads to excess churn—the reallocation of labor within firms simultaneously involving the flow of employees to unemployment insurance and the hiring of similar workers. Based on Norwegian data, we present evidence of high excess churn rates in firms with many workers from the new EU member states.

Keywords: churning; Integrated labor markets; social dumping; EU enlargement (search for similar items in EconPapers)
JEL-codes: D62 E24 F22 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2019-10
New Economics Papers: this item is included in nep-eur, nep-lab, nep-mac and nep-mig
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published - published in: Journal of Population Economics, 2021, 34, 865-892

Downloads: (external link)
https://docs.iza.org/dp12697.pdf (application/pdf)

Related works:
Journal Article: Excess churn in integrated labor markets (2021)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp12697

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().