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Working Paper Series

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Working papers disseminate economic research relevant not only to the tasks and functions of the Bank of Lithuania and of the European System of Central Banks but also appealing more broadly to the academic community in economics and finance. They present, discuss and analyse the results of original and academically rigorous theoretical and/or empirical research. Working papers constitute the basis for publications in leading academic journals, making contributions to the existing literature in the fields of economics and finance. They encourage collaboration between the researchers of the Bank of Lithuania and other central banks, Lithuanian and foreign universities and research institutes.

Papers are only available in English.

No 121
2024-03-05

Striking a Bargain: Narrative Identification of Wage Bargaining Shocks

  • Abstract

    We quantify wage bargaining shocks’ effects on macroeconomic aggregates in Germany using a structural vector auto-regression model. We identify exogenous variation in bargaining power from episodes of minimum wage introduction and industrial disputes. This disciplines the impulse responses of unemployment and output, and sharpens inference on the behaviour of other variables, which is consistent with theoretical predictions from search and matching models. We find that wage bargaining shocks are an important contributor to agregate fluctuations in unemployment and inflation, exhibit close to full passthrough to consumer prices, and imply plausible dynamics for the vacancy rate, firms’ profits, and the labor share.

    Keywords: Wage bargaining, minimum wage, industrial action, narrative restrictions, structural vector autoregression.

    JEL classification: J2, J3, E32, C32.
     

No 120
2024-03-04

Women’s Voice at Work and Family-Friendly Firms

  • Abstract

    Uneven family responsibilities are at the root of gender gaps. Using a new dataset  covering all firm-level agreements signed in Spain between 2010 and 2018, we explore whether the presence of female worker representatives can facilitate the negotiation of family-friendly policies with management. We compare firms that operate under the same set of labor regulations but differ in the presence of women among employee representatives. Our findings suggest that having female representatives at the bargaining table can help transform workplaces to better meet women’s needs and ultimately close the gender gap.

    Keywords: women representation, bargaining, family-friendly firms

    JEL codes: J16, J32, J53

No 119
2024-01-05

The transmission of trade shocks across countries: firm-level evidence from the Covid-19 crisis

  • Abstract

    This paper studies the margins and heterogeneity of adjustments to trade shocks by estimating how Covid-19 restrictions affected imports and exports. We use data from Lithuania, Latvia and Estonia on foreign trade at the level of the firm and the partner country and at monthly frequency from January 2019 to December 2020. The focus is on the short-term adjustment and on the first wave of the pandemic. We find that the adjustment to the restrictions mostly occurs through the intensive margin, meaning trade values are reduced rather than trade in certain markets or products ceasing. It is further observed that quantity played a more important role in the adjustment process than prices and that both upstream and downstream restrictions played an equally important role in the decline of foreign trade. It is shown that differentiated products that are difficult to replace are responsible for this adjustment pattern.

    Keywords: transmission of shocks, input-output linkages, global value chains, Covid-19, workplace closing.

    JEL codes: F14, F61, D22

No 118
2023-12-21

The Dynamics of Product and Labor Market Power: Evidence from Lithuania

  • Abstract

    This paper characterizes the power dynamics of firms in both product and labor markets in Lithuania between 2004 and 2018. We first show that both markets are not perfectly competitive, as both price markups and wage markdowns are far from unitary and homogeneous. Interestingly, we unveil that the Dynamics of these margins followed different patterns. On the one hand, both the dispersijon and the economy-wide markup have increased, indicative of an increase in product market power. On the other hand, we document a decline in monopsony power, as both the heterogeneity and the aggregate level of markdowns have declined. Altogether, our results underline the importance of jointly analyzing product and labor markets when assessing firms’ market power.

    Keywords: Firm heterogeneity, Monopoly, Markups, Monopsony, Markdowns.

    JEL Classification: D4, E2, J3, L1.