Laura Sunder-Plassmann and Ferran Elias Moreno awarded postdoctoral grants

The Danish Council for Independent Research, Social Sciences awards 12 postdoc grants to research talents in Denmark to the sum of approximately DKK 20 million. Among those are the two economists Laura Sunder Plassmann and Feran Elias Moreno from Department of Economics, UCPH.

Laura studies the links between two types of macroeconomic crises: sovereign default episodes and banking sector collapses. These crises coincide and influence each other, which can lead to vicious, economically costly feedback loops: Sovereign default risk makes banking crises more likely, and vice versa.

The recent European crisis provides a timely illustration of this cycle. The proposed project develops a theoretical model of sovereign and banking crises that captures the interdependencies between the two. Laura will use the model study to under what conditions banking crises trigger sovereign crises, and vice versa, and how the feedback loop can best be contained. In an empirical subproject she will test the model by comparing its predictions to the data, as well as establish novel empirical facts on the co-occurrence and determinants of these crises.

Ferran focuses on understanding the labour market and fiscal effects of legalising undocumented immigrants. While the economics literature has provided evidence on how an increase in the supply of immigrants affects the labour market, almost nothing is known about the labour market effects of policies that grant work permits to illegal immigrants who are already living in their host countries.

To answer the unsolved questions, Ferran will combine a unique policy experiment that happened in Spain in 2005, when 700,000 illegal immigrants became legal workers, with high quality administrative data on social security records and firm’s balance sheets.

The first subproject will study how the employment prospects and wages of native workers are affected by regularisation policies. I will combine that with an analysis of how firms adjust their workforce after the legalisation. The second subproject will measure the implications of the regularisation policy for tax collection and unemployment insurance spending.