Papers by Christopher Pissarides
Cyprus Economic Policy Review, 2008
This paper investigates the reasons that the labour market is given so much prominence in discuss... more This paper investigates the reasons that the labour market is given so much prominence in discussions about the euro. It concludes that differences in labour market flexibility across countries can have the same impact as asymmetric shocks and so warrant different monetary policies. The paper further discusses the role of welfare policy and migration in European integration.
In recent weeks we have hosted pre-election briefings exploring the central issues in the 2012 el... more In recent weeks we have hosted pre-election briefings exploring the central issues in the 2012 election. To bring this feature to a close we asked a range of academics to offer their thoughts on the results of the election, as well as its significance for the wider world
Europe has to impress on the Americans that it can benefit from free trade, writes Sir Christophe... more Europe has to impress on the Americans that it can benefit from free trade, writes Sir Christopher Pissarides
Labor: Personnel Economics, 2002
This paper derives optimal employment contracts when workers are risk averse and there are employ... more This paper derives optimal employment contracts when workers are risk averse and there are employment and unemployment risks. Without income insurance, consumption rises during employment and falls during unemployment. Optimal employment contracts offer severance compensation and sometimes give notice before dismissal. Severance compensation smoothes consumption during employment but dismissal delays insure partially against the unemployment risk because of moral hazard. During the delay consumption falls to give incentives to the worker to search for another job. No dismissal delays are optimal if exogenous unemployment compensation is sufficiently generous.
We thank the editor Michèle Tertilt, Daron Acemoglu, George Akerlof, Varanya Chaubey, Raj Chetty,... more We thank the editor Michèle Tertilt, Daron Acemoglu, George Akerlof, Varanya Chaubey, Raj Chetty, Sanjay Chugh, Peter Diamond, Emmanuel Farhi, Jordi GalÃ, Mikhail Golosov, Yuriy Gorodnichenko, David Gray, Philipp Kircher, Etienne Lehmann, Guido Lorenzoni, Emi Nakamura, Christopher Pissarides, Robert Shimer, Johannes Spinnewijn, Jón Steinsson, Aleh Tsyvinski, IvánWerning, three anonymous referees, and numerous seminar and conference participants for helpful discussions and comments. This work was supported by the Center for Equitable Growth at the University of California Berkeley, the British Academy, the Economic and Social Research Council [grant number ES/K008641/1], and the Institute for New Economic Thinking. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
SSRN Electronic Journal
This paper derives optimal employment contracts when workers are risk averse and there are employ... more This paper derives optimal employment contracts when workers are risk averse and there are employment and unemployment risks. Without income insurance, consumption rises during employment and falls during unemployment. Optimal employment contracts offer severance compensation to smooth consumption during employment without causing moral hazard. A preannounced delay in dismissal when the job becomes unproductive provides further insurance but because of moral hazard it does not fully smooth consumption. During the delay consumption falls and the worker searches for another job. No delays in dismissals are optimal if exogenous unemployment compensation is sufficiently generous.
Journal of the European Economic Association
China’s hukou system imposes two main barriers to population movements. Agricultural workers get ... more China’s hukou system imposes two main barriers to population movements. Agricultural workers get land to cultivate but are unable to trade it in a frictionless market. Social transfers (education, health, etc.) are conditional on holding a local hukou. We show that the land policy leads to over-employment in agriculture and it is the more important barrier to industrialization. Effective land tenure guarantees and a competitive rental market would correct this inefficiency. The local restrictions on social transfers also act as disincentives to migration with bigger impact on urban migrations than to job moves to rural enterprises.
SSRN Electronic Journal
This paper studies the impact of liquidity on investors' choice between Foreign Direct Investment... more This paper studies the impact of liquidity on investors' choice between Foreign Direct Investment (FDI) and Foreign Portfolio Investment (FPI). As argued in Goldstein and Razin (2006), this choice could be influenced by the trade off between management efficiency and liquidity effects. Here we extend their model by assuming liquidity shocks to individual investors are triggered by aggregate liquidity shocks. A key prediction then is that countries with higher probability of aggregate liquidity crises will be the source of more FPI and less FDI. To test this hypothesis, we therefore apply a dynamic panel model to examine the variation of FPI relative to FDI for 140 source countries from 1990 to 2004. Our key variable is the probability, estimated from Probit models, of liquidity shocks, as proxied by episodes of negative purchase of external assets. It turns out that liquidity shocks have strong effects on the composition of foreign investment, as predicted by our model. Moreover, capital market opacity in source country accelerates the effect of the probability of liquidity shock on the FPI/FDI composition. We repeat this analysis using real interest rate hike or real exchange rate depreciation as an alternative indicator of a liquidity crisis, and get similar results.
Industrial and Labor Relations Review, 1979
Economic Record, 1987
This paper surveys recent developments in the theory of employment and wages and describes a fram... more This paper surveys recent developments in the theory of employment and wages and describes a framework for policy analysis which recognizes the existence of monopolistic elements in labour markets. Wages are determined by firm-union bargains, fvmr choose the number o f jobs, and workers influence the fiuction of jobs that i s filed through search. The framework is applied to the analysis of the wage and employment effects of indexation, tax-bawd incomes policies and profit-sharing. This p a w was written during a visit to the Reserve Bank of Australia in Sydney. The views cxpreued are mtirdy my own. though I hopc there arc ahas who h e them. I am most grateful to the Bank, the staff of the Research Department and to Peter Jonson in particular for their kind hospitality, stimulating discussions and fwncial support. 'Ibis papa would not have been written without Peter Jonson's mcouraganmt. When raising the paper in London I benefited from extensive comments from two anonymous referees. Editon' note This is a survey article commissioned by the Survey Editor. cure for unemployment is more 'flexibility'. which can be achieved with as little intervention with the market mechanism as possible.' At the other extreme (in 1980s Western democracies, at least) are the Keynesian demand-siden. who deny any short-run role for the supply of labour and who subscribe to the view that even if money-and realwage adjustment were effective cures for unemployment, aggregate demand policy is more effective. Thus, they conclude, if there is abnormal unemployment the fault must lie with inadequate aggregate demand management.2 Keynesian demand management is not an influential policy view in 1980s Western I The most influmdnl theoretical modd in the current literature in this tradition is the inter-temporal WbstiNuOfI model of L u a , and Rapping (1969). This vim of the labour market conforms to the one adopted in virtually all of the new classical macroeconomics. 2 The fuprice models of Barro and Grossman (1971) and Malinvaud (1977) have bcen the inspiration of theorrtical work i n this area. More rcEclltly the proponents of this view have advocated policies beyond aggregate demand managaaent. but aggRgate Aanud managanent and interventionism remain criticpl prescriptions. Sec. for example, Malinvaud (1984), Blanchard d u l. (1985) and Drac (1986).
Page 1. The Economic Journal, go (September I980), 569-58I Printed in Great Britain BRITISH GOVER... more Page 1. The Economic Journal, go (September I980), 569-58I Printed in Great Britain BRITISH GOVERNMENT POPULARITY AND ECONOMIC PERFORMANCE* The relation between voting intentions and economic performance ...
Human Resources, Employment and Development, 1983
The number of students attending full-time education after the age of 16, when compulsory educati... more The number of students attending full-time education after the age of 16, when compulsory education ends, is determined by (i) the size of the relevant age group, and (ii) the percentage of the age group attending full-time education. The former is known fairly precisely several years before students reach the age of 16. The latter is not known, because it fluctuates in response to demand (whether students want to continue with further education) and supply (whether they are able to continue, having received the relevant qualification). Supply constraints, however, are not likely to operate before university; variations in the percentage of the age group continuing with education up to GCE ‘A’ level examinations (taken by most students at the age of 18) are almost certain to be the result of demand shifts. Students qualifying for university entry (obtaining two or more GCE ‘A’ levels), and wishing to pursue it, may find that there are restrictions in the number of places that can be offered. If this is so, the percentage of the age group entering university may vary in response to both demand and supply shifts, but as we shall argue below there is no evidence of operative supply constraints after 1963.
The Economic Journal, 1984
Page 1. EFFICIENT JOB REJECTION* CA Pissarides In this paper we consider the efficiency of job re... more Page 1. EFFICIENT JOB REJECTION* CA Pissarides In this paper we consider the efficiency of job rejection in steady-state equili-brium, in a market where the allocation of jobs takes place through job search.' Wage and profit ...
This paper surveys recent work in equilibrium models of labor markets characterized by search and... more This paper surveys recent work in equilibrium models of labor markets characterized by search and recruitment frictions and by the need to reallocate workers across productive activities. The duration of unemployment and jobs and wage determination are treated as endogenous outcomes of job creation and job destruction decisions made by workers and firms. The solutions studied are dynamic stochastic equilibria in the sense that time and uncertainty are explicitly modeled, expectations are rational, private gains from trade are exploited and the actions taken by all agents are mutually consistent. A number of alternative wage determination mechanisms are explored, including the frequently studied non-cooperative wage bargaining and wage posting by firms. We use the framework to study the influence of alternative labor market institutions and policies on wages and unemployment.
Theoretical predictions of the effect of TFP growth on employment are ambiguous, and depend on th... more Theoretical predictions of the effect of TFP growth on employment are ambiguous, and depend on the extent to which new technology is embodied in new jobs. We estimate a model for employment, wages and investment with an annual panel for the United States, Japan and Europe and find that TFP growth increases employment. For the United States TFP growth explains the trend change in unemployment. We evaluate the model and find that creative destruction plays no part in aggregate unemployment dynamics. The model can explain up to half of the estimated impact of growth on unemployment.
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Papers by Christopher Pissarides