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Author:Tuzemen, Didem 

Working Paper
Minimum Wage Increases and Vacancies
We estimate the impact of minimum-wage increases on the quantity of labor demanded as measured by firms’ vacancy postings. We use propriety, county-level vacancy data from the Conference Board’s Help Wanted Online database. Our identification relies on the disproportionate effects of minimum-wage hikes on different occupations, as the wage distribution around the binding minimum wage differs by occupation. We find that minimum-wage increases during the 2005-2018 period have led to substantial declines in vacancy postings in at-risk occupations, occupations with a larger share of employment around the prevailing minimum wage. Our estimate implies that a 10 percent increase in the binding minimum- wage level reduces vacancies by 2.4 percent in this group. The negative effect is concentrated not exclusively in the routine jobs, but more in the manual occupations.
AUTHORS: Kudlyak, Marianna; Tasci, Murat; Tuzemen, Didem
DATE: 2019-12-23

Working Paper
Labor market dynamics with endogenous labor force participation and on-the-job search
Empirical evidence shows that worker flows in the U.S. labor market are very large. Previous studies have mainly focused on documenting and modeling worker flows between employment and unemployment only. However, these studies ignore other important labor flows including movements in and out of the labor force, and worker flows from one job directly to another job. Improving our understanding of this broader set of labor market flows is critical for assessing the merits of labor market policies such as unemployment insurance and minimum wage. ; This paper focuses on the broader set of worker flows. In terms of magnitude, flows into and out of the labor force are as large as flows between employment and unemployment. And worker flows from one job directly to another job, termed job-to-job flows, account for the vast majority of worker separations from employment. More specifically, job-to-job flows constitute almost 40 percent of all separations from employment, and they are twice as large as flows from employment to unemployment. ; The main contribution of this paper is to develop a framework in which labor market flows between employment, unemployment and out of the labor force can be studied. Earlier attempts to incorporate the participation margin in the standard real business cycle framework have been discouraging in the sense that the model generated counterfactual results. This paper presents an alternative general equilibrium real business cycle model that features search and matching frictions, and endogenous labor force participation. The model additionally features on-the-job search to capture job-to-job flows, which are crucial for the U.S. labor market dynamics. The model successfully generates countercyclical unemployment and the negative correlation between unemployment and vacancies, also known as the Beveridge Curve, observed in the data. The business cycle statistics reproduced by the model are in line with their empirical counterparts.
AUTHORS: Tuzemen, Didem
DATE: 2012

Working Paper
Self-employment and health care reform: evidence from Massachusetts
We study the e ect of the Massachusetts health care reform on the uninsured rate and the self-employment rate in the state. The reform required all individuals to obtain health insurance, required most employers to o er health insurance to their employees, formed a private marketplace that o ered subsidized health insurance options and ex- panded public insurance. We examine data from the Current Population Survey (CPS)for 1994-2012 and its Annual Social and Economic (ASEC) Supplement for 1996-2013. We show that the reform led to a dramatic reduction in the state's uninsured rate due to increased enrollment in both public and private health insurance. Estimation results from di erence-in-di erences models and the synthetic control method indicate that the aggregate self-employment rate was higher in the state after the implementation of the reform. We conclude that easier access to health insurance encouraged self-employment in Massachusetts. There are many similarities between the Massachusetts health care reform and the national health care reform, the Patient Protection and Affordable Care Act (PPACA). Based on Massachusetts' experience, the PPACA will lower the national uninsured rate and may lead to a higher self-employment rate in the nation.
AUTHORS: Becker, Thealexa; Tuzemen, Didem
DATE: 2014-11-25

Working Paper
Job Polarization and the Natural Rate of Unemployment in the United States
I present a new estimate of the natural rate of unemployment in the United States that accounts for changes in the age, sex, and skill composition of the labor force. Using micro-level data from the Current Population Survey for the period 1994-2017, I find that the natural rate of unemployment declined by 0.5 percentage point since 1994 and currently stands at 4.5 percent. My projections show that ongoing demographic and technological changes could lower the trend rate further to 4.4 percent by the end of 2022.
AUTHORS: Tuzemen, Didem
DATE: 2018-03-15

Working Paper
Commodity dependence and fiscal capacity
This paper shows that higher commodity dependence reduces the government's incentive to invest in fiscal capacity. After developing a model that makes this prediction, evidence is provided supporting the view that countries more dependent on commodities (whose rents can be easily appropriated by the government, such as oil) have weaker fiscal capacity. Also, fiscal capacity is found to improve less over time in commodity dependent countries relative to countries where commodity exports play a less relevant role. These empirical results are obtained in a panel dataset with estimators that address endogeneity issues.
AUTHORS: Ramirez, Santiago; Cardenas, Mauricio; Tuzemen, Didem
DATE: 2011

Working Paper
The Cyclical Behavior of Labor Force Participation
We document that labor force participation declines in the short run following a positive technology shock. The countercyclical response of labor force participation to a technology shock contrasts with the well documented mild procyclical behavior of labor force participation in the business cycle. In a search model of the labor market that incorporates a participation choice, we show that a positive technology shock reduces labor force participation in the short run under a reasonable calibration. In the calibrated model, discount factor shocks induce a procyclical response of labor force participation. As a result, the model can generate both the countercyclical response to technology shocks and the procyclical behavior, consistent with the evidence. Our results indicate an important role of nontechnology shocks for explaining labor market fluctuations.
AUTHORS: Van Zandweghe, Willem; Tuzemen, Didem
DATE: 2018-08-01

Working Paper
Under-investment in state capacity: the role of inequality and political instability
Existing studies have shown that the state's ability to tax, also known as fiscal capacity, is positively related to economic development. In this paper, we analyze the determinants of the government's decision to invest in state capacity, which involves a trade-off between present consumption and the ability to collect more taxes in the future. Using a model, we highlight some political and economic dimensions of this decision and conclude that political stability, democracy, income inequality, as well as the valuation of public goods relative to private goods, are important variables to consider. We then test the main predictions of the model using cross-country data and find that state capacity is higher in more stable and equal societies, both in economic and political terms, and in countries where the chances of fighting an external war are high, which is a proxy for the value of public goods.
AUTHORS: Cardenas, Mauricio; Tuzemen, Didem
DATE: 2011

Working Paper
Disappearing Routine Occupations and Declining Prime-Age Labor Force Participation
I study the effect of disappearing routine occupations on the decline in the labor force participation rate of prime-age individuals since the 1990s. I use multiple data sources and empirical models to study this relationship. First, I exploit state-level variation and show that the long-term trends of declining routine employment and prime-age labor force participation are highly correlated. Second, I narrow the geographic unit to local labor markets and quantify the causal effect of declining routine employment on the labor market outcomes of prime-age individuals. My results imply that the decline in routine employment was an important contributor to the declines in the labor force participation rate and employment-to-population ratio since the 1990s, especially for prime-age individuals without a bachelor's degree. Additionally, I show that the decline in routine employment was not limited to prime-age men in the manufacturing industries, but was observed across most major industries and affected women as well. More strikingly, disappearing routine employment had a larger negative effect on the labor force participation rate of prime-age women without a bachelor's degree than their male counterparts.
AUTHORS: Tuzemen, Didem
DATE: 2019-09-30

Working Paper
Health-care reform or labor market reform? a quantitative analysis of the Affordable Care Act
An equilibrium model with ?rm and worker heterogeneity is constructed to analyze labor market and welfare implications of the Patient Protection and Affordable Care Act (ACA). Our model implies a signi?cant reduction in the uninsured rate from 22.6 percent to 5.6 percent. {{p}} The model predicts a moderate positive welfare gain from the ACA, due to redistribution of income through Health Insurance Subsidies at the Exchange as well as Medicaid expansion. About 2.1 million more part-time jobs are created under the ACA, in expense of 1.6 million full-time jobs, mainly because the link between full-time employment and health insurance is weakened. The model predicts a small negative effect on total hours worked (0.36%), partly because of the general equilibrium effect.
AUTHORS: Nakajima, Makoto; Tuzemen, Didem
DATE: 2015-09-01

Journal Article
Does health care reform support self-employment?
Health insurance access can influence individuals' labor market decisions. Some economists argue employer-provided health insurance may have deterred entrepreneurship, as self-employed individuals may have faced difficulties in obtaining coverage. As the Patient Protection and Affordable Care Act (PPACA) is gradually implemented, the reform might affect individuals' decisions to become or remain self-employed. Tzemen and Becker examine a similar reform, the Massachusetts Health Care Reform Act, as a case study for the PPACA. They find the uninsured rate declined in Massachusetts following the reform for working-age individuals in general and for the self-employed in particular. Additionally, the self-employment share stayed flat in the state while declining in the rest of the nation. The authors conclude the reform may have supported self-employment in Massachusetts, and suggest the PPACA might have similar effects on the national self-employment share.
AUTHORS: Becker, Thealexa; Tuzemen, Didem
DATE: 2014-07

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