Carolina Silva
Assistant Professor
Department of Economics
University of Alicante
e-mail: csilva@ua.es
phone: +34 965903400 (Ext. 3222)
University of Alicante
Fundamentos del Análisis Enconómico
Ctra. San Vicente del Raspeig, s/n
E-03080 Alicante, Spain
Research Areas
Macroeconomics, Labor economics.
Working Papers
"The Interaction of Minimum Wage and Severance Payments in a Frictional Labor Market: Theory and Estimation" pdf
We introduce a minimum wage and severance payments in an equilibrium labor
market model with search frictions. We analyze how these policies affect
endogenous job creation and destruction decisions and, more generally, the
general equilibrium allocation. We structurally estimate the model's parameters
using data from Chile, a country where labor market regulations prescribe high
severance payments and minimum wage; we build three subsamples corresponding to
three different levels of educational attainment. With the resulting sets of
estimates we perform a quantitative welfare analysis. We reach three main
conclusions. First, when the dispersion in wages found in the subsample is low
and the share that workers receive from the surplus their job generates is at
an appropriate level, the economy's maximum welfare level is reached in a
policy-free environment; on the other hand, if the workers' share is too
low, the maximum level of welfare can be attained using any of the following
possibilities: severance payments or a minimum wage by themselves or an
appropriate combination of these two policies. Second, as dispersion in wages
increases, the minimum wage, by itself, can no longer reach the economy's
maximum level of welfare. Third, when the dispersion in wages is high enough,
no policy in isolation can attain the economy's maximum level of welfare,
and a particular combination of labor market policies is required.
"An Empirical Analysis of the Minimum Wage in Chile" pdf
At the end of the 1990s, Chilean legislators mandated substantial increases in
the minimum wage. We perform an empirical study of the minimum wage welfare
effects on the Chilean market using Flinn's (2009) framework, which is a
continuous time search model with participation decision, Nash bargaining, and
match specific heterogeneity. We use Flinn's strategy to estimate the
structural parameters of the model except for the share that workers receive
from the surplus generated by the match. Due to inadequate demand side data, we
estimate the model fixing the workers' share (α) at different levels in
the [0,0.5] interval, and perform the welfare analysis for each set of
parameters. A first result is that the optimal minimum wage is decreasing in
the workers' share, and for α near 0.13, the actual 2000 level would have
been optimal. We then extend Flinn's welfare analysis in two directions. We
identify the elements of the equilibrium allocation that are mainly affected by
the changes in the minimum wage, and we study the minimum wage as a second-best
tool for reaching the constrained efficient allocation. Our second finding is
that, for every set of estimates, the change in the participation rate accounts
for more than half of the welfare gain induced by the optimal minimum wage.
Thirdly, the maximum welfare gain increases with larger values of α. That is,
the gap between the planner's welfare and the equilibrium one becomes more
significant as the workers' share increases. On the other hand, for larger
α's, the optimal minimum wage closes a smaller fraction of the gap, and is
therefore less effective. The results of the paper suggest that, at least for
larger α's, some labor market policy aimed directly at participation would
have been more effective than a mandatory minimum wage.
Teaching
I'm currently teaching Econometrics II (8989).