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Economics

 

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​​​​​​
Julen Esteban-Pretel
Associate Professor
Economics Department

Ph.D. in Economics, New York University, May 2004


julen.esteban@qc.cuny.edu
Office: Powdermaker Hall 300
Phone: 718 997 5451
Personal Website
Before joining the Economics Department at Queens College, Professor Esteban-Pretel was an associate professor at the National Graduate Institute for Policy Studies, (GRIPS), in Tokyo, Japan, and an assistant professor at the University of Tokyo. He obtained my Ph.D. in Economics at New York University, and previously a B.A. in Economics from the University of Valencia.

Research interests: Macroeconomics and Labor Economics.

Selected Publications:
"The Labor Market Effects of Introducing Unemployment Benefits in an Economy with High Informality," joint with M. Bosch, European Economic Review, April 2015.
Unemployment benefit systems are nonexistent in many developing economies. Introducing such systems poses many challenges which are partly due to the high level of informality in the labor markets of these economies. This paper studies the consequences on the labor market of implementing an unemployment benefit system in economies with large informal sectors and high flows of workers between formality and informality. We build a search and matching model with endogenous destruction, on-the-job search, and intersectoral flows, where agents in the economy decide optimally whether or not to formalize jobs. We calibrate the model for Mexico, and show that the introduction of an unemployment benefit system, where workers contribute when employed in the formal market and collect benefits when they lose their jobs, even if they obtain informal jobs, can lead to an increase in formality in the economy, while also producing small increases in unemployment. The exact impact of incorporating such benefits depends on the relative strength of two opposing effects: the generosity of the benefits and the level of the contributions that finance those benefits. We also show important policy complementarities with other interventions in the labor market. In particular, combining the unemployment benefit program with policies that reduce the cost of formality, such as lower employment taxes and firing costs, can produce greater decreases in informality and lower impacts on unemployment than when the program is applied in isolation.

"Life-Cycle Labor Search with Stochastic Match Quality," joint with J. Fujimoto, International Economic Review, May 2014.
In the U.S., unemployment, job finding, and separation rates decline as worker age increases. To explain these facts, we build a search and matching model of the labor market that incorporates a life-cycle structure and features random match quality as well as human capital accumulation. The calibrated model successfully reproduces the empirical patterns of unemployment and job transition rates over the life-cycle, and generates plausible wage implications. We then explore the efficiency implications of the model, and find that the differences between the market and planner allocations are more important for older workers.

"On the Role of Policy Interventions in Structural Change and Economic Development: The Case of Postwar Japan," joint with Y. Sawada, Journal of Economic Dynamics and Control, March 2014.
In this paper, we study the structural change occurring in Japan's post-World War II era of rapid economic growth. We use a two-sector neoclassical growth model with government policies to analyze the evolution of the Japanese economy in this period and to assess the role of such policies. Our model is able to replicate the empirical behavior of the main macroeconomic variables. Three findings emerge from our policy analysis. First, neither price and investment subsidies to the agricultural sector, nor industrial policy play a crucial role in the rapid postwar growth. Second, while a government subsidy for families in urban areas could have facilitated migration from the agricultural to the non-agricultural sector, such a policy would not have improved the overall performance of the Japanese economy. Finally, had there existed a labor migration barrier, the negative long-run level effect on output would have been substantial.

"Life-Cycle Search, Match Quality and Japan's Labor Market," joint with J. Fujimoto, Journal of the Japanese and International Economies, September 2012.
The Japanese labor market has been experiencing considerable transformations over the recent decades. We analyze the implications of some of these actual and potential transformations, whose impact may not be homogeneous across workers of different ages. We first develop a life-cycle search and matching model which incorporates random match quality as well as elements capturing important institutional features of the Japanese economy. Our model is consistent with the life-cycle properties of Japan’s labor market, namely that the job separation and unemployment rates are U-shaped, whereas the job finding rate declines with age. We then conduct three experiments that are relevant to Japan: a decline in productivity, a removal of the firing costs, and a decline in the population growth. In the first two experiments, we find substantial changes to these three rates, where young workers tend to be the most affected. We observe, however, a very small labor market impact in the third experiment.

"Job creation and job destruction in the presence of informal markets," joint with M. Bosch, Journal of Development Economics, July 2012.
In developing economies, the fraction of informal workers can be as high as 70% of total employment. For economies with significant informal sectors, business cycle fluctuations and labor market policy interventions can have important effects not only on the unemployment rate, but also on the allocation of workers across regulated and unregulated jobs. In this paper, using worker flows data from Brazil, we build, calibrate, and simulate a two-sector search and matching labor market model, in which firms have the choice of hiring workers formally or informally. We show that our model can explain well the main cyclical patterns that lead to those cyclical reallocations. We also show how the effect of government interventions in the labor market depend on the magnitude of the reallocation of labor across regulated and unregulated sectors. For our calibration, policies that decrease the cost of formal jobs, or increase the cost of informality, raise the share of formal employment while reducing unemployment.

"Are Contingent Jobs Dead Ends or Stepping Stones to Regular Jobs? Evidence from a Structural Estimation," joint with R. Nakajima and R. Tanaka, Labour Economics, August 2011.
The proportion of part-time, dispatch, and temporary workers has increased in many developed economies in recent years. These workers receive lower average wages and benefits, and are subject to lower employment stability. This paper analyzes the effects of initially taking such jobs on the employment careers of young workers. We build an on-and-off-the-job search model, using Japanese data to perform a structural estimation of the model parameters and simulate career paths, in order to study the effects of the initial choice of employment on the probability of having a regular job in the future and on the welfare of the worker. We find that although contingent jobs are neither stepping stones towards regular employment nor dead-ends, starting a career in a contingent job has a lasting effect on the welfare of the individual in Japan.

"The Role of the Government in Facilitating TFP Growth during Japan's Rapid Growth Era," joint with S. Aoki, T. Okazaki and Y Sawada. Community, Market and State in Development, K. Kalirajan and K. Otsuka editors, Palgrave MacMillan, 2011.
Japan experienced high growth of TFP following World War II. This paper studies the sources of this technological growth and documents the role played by different government policies in achieving such growth. We find that in non-agricultural sectors, TFP growth occurred at first through the import of foreign technologies via licensing, and subsequently through the innovation of its own technologies. In agriculture, TFP grew mostly through the development of its own technologies. The Japanese government played a part in the growth of TFP by directing the adoption of foreign technologies, promoting coordination of R&D activities, and setting up channels for the domestic diffusion of available technologies.

"Monetary Shocks in a Model with Skills Loss," joint with E. Faraglia, Journal of Money, Credit and Banking, October 2010.
Unemployment shows persistent and long lasting responses to nominal and real shocks. Standard real business cycle models with search frictions but homogeneous labor force are able to generate some persistence, but not enough to match the empirical evidence. Moreover, empirical studies emphasize the importance of the heterogeneity of the unemployment pool to fully understand unemployment dynamics. In particular, in most European countries the incidence of long term unemployment is big and well known. One of the causes/consequences of long-term unemployment is the skill deterioration of the unemployment pool. In this paper we introduce the loss of skill mechanism, and therefore an heterogeneous labor force, in a New Keynesian framework with search frictions. Calibrating the model to the Spanish economy, we show that the loss of skill mechanism helps to explain the persistence in the response of unemployment to monetary shocks.

"TFP Growth Slowdown and the Japanese Labor Market in the 1990s," joint with R. Nakajima and R. Tanaka, Journal of the Japanese and International Economies, March 2010.
Unemployment in Japan nearly tripled during the 1990s. Underlying this upsurge lie an increase in the probability of workers to lose their jobs and a decrease in the probability that the unemployed find jobs. This paper analyzes the sources responsible for these labor market changes in Japan in the decade of the 1990s. We build, calibrate and simulate a neo-classical growth model with search frictions in the labor market. Using actual TFP data, the model is able to reproduce the path of unemployment and the job flows, as well as that of output. We find it to be the decrease in productivity, coupled with the reduction in hours worked, which curtails the profits of firms, inducing a drop in employment and an increase in unemployment.

"A Comparison of the Japanese and U.S. Business Cycles," joint with R. A. Braun, T. Okada, N. Sudou. Japan and the World Economy, Vol 18, Issue 4, December 2006.
This paper constructs a consistent set of quarterly Japanese data for the 1960-2002 sample period and compares properties of the Japanese and U.S. business cycles. We document some important differences in the adjustment of labor input between the two countries. In Japan most most of the adjustment is in hours per worker of males and females and also in employment of female. In the U.S. most of the adjustment is in employment of both males and females. We formulate, estimate and analyze a model that makes distinction between the intensive and extensive margin and allows for gender differences in labor supply. A weak empirical correlation between hours per worker and employment in Japanese data is a puzzle for our theory.
 
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