This paper analyzes the role of furlough schemes when aggregate risk has a sector-specific component. In particular, our focus lies on the different responses of the Spanish labor market to the Great Recession and the recent pandemic crisis since both downturns have been driven by such a type of shocks. However, the pandemic episode involves much less job destruction than the previous recession, following firms’ widespread use of furlough schemes (ERTEs, by their Spanish acronym) which were hardly used before. A favorable effect of these policies is that they stabilize unemployment rates by allowing workers to remain matched with their employers in the most affected sectors. However, under their current design, it is argued that ERTEs crowd out labor hoarding exerted by employers in the absence of those schemes, as well as increase the volatility of working rates and output. In particular, we show, both theoretically and empirically, that ERTEs slow down worker reallocation away from declining sectors to other sectors not affected by those shocks.

This paper quantifies the impact of means-tested programs - in particular, Medicaid and Public Housing - on the interstate mobility of their beneficiaries. Simulations from a structural model with heterogeneous workers and locations show that beneficiaries' mobility falls by 17.2 percent, with the greatest reduction occurring among the poorest beneficiaries. Around half of this effect stems from the lack of federal coordination in the programs' administrations, i.e., the possibility that a moving beneficiary loses transfers despite being eligible for them. Reducing this probability to zero raises overall welfare, with 5 percent of low-income households obtaining a welfare gain of 1.1 percent.

When mobility between locations is frictional, a person’s economic well-being is partially determined by her place of birth. Using a life cycle model of mobility, we find that search frictions are the main impairment to the mobility of young people in Spain, and these frictions are particularly strong in economically distressed locations. As a result, being born in a high-unemployment urban area carries with it a large welfare penalty. Less stable jobs, slower skill accumulation, lower average wages, and fewer possibilities for geographic mobility all contribute to these welfare losses. Paying transfers to people in distressed economic locations decreases these welfare losses without large adverse effects on mobility. In contrast, several policies that encourage people to move to low-unemployment urban areas increase these welfare losses and fail to meaningfully increase mobility towards these more successful locations.

Labor market competition drastically differs for production workers and managers. For instance, in Portugal, there are half as many firms competing for managers as for production workers in the typical local labor market. Using administrative data from Portugal together with a general equilibrium model of oligopsony that incorporates minimum wages and management delegation, we show that monopsony power by firms leads to a welfare loss of 5.7\% for production workers and 23.1\% for managers relative to an efficient economy. Production workers bear smaller losses because they often work in markets with more competitor firms, view firms as closer substitutes, and are more affected by the minimum wage. The weak monopsony power of low-wage firms over production workers implies that raising the statutory minimum wage reduces overall welfare and affects managers through worker reallocation and delegation adjustments. Moving from the benchmark to an occupation-based minimum wage that optimally addresses monopsony power increases welfare by about 0.2\% for both occupations.

Online food delivery platforms typically operate through a controversial business model that relies on subcontracting self-employed workers, known as riders. We quantify the labor-market effects of the Spanish Riders' Law in 2021 that established the presumption of dependent employment for riders using a search and matching model. Riders with heterogeneous preferences for leisure trade off work flexibility and easier employability as self-employed against enjoying higher wages as employees. Our main finding is that the reform led to a higher share of employees but failed to fully absorb the large flows of workers transiting out of self-employment and decreased riders' wages, resulting in welfare losses. However, complementing the reform with a payroll tax cut for platforms hiring employees preserves employment levels and increases riders' welfare.