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on Labour Economics |
| By: | Alexander Klein |
| Abstract: | This paper deals with the rural-urban migration of families in the last decades of the 19th century in one of the most developed regions of the Austro-Hungarian monarchy – the Pilsen region. The analysis indicates that the household head’s expected real rural-urban wage gap was not the main factor behind migration. Instead, the observed behavior is consistent with families maximizing a dynastic utility function such that it was the future prospects of children which triggered migration. The results are not based on tracing of families in time but rely on identifying a control group of stayers. Specifically, I compare the structure of migrant families at the time of arrival to an urban area with that of families who stayed in the hinterlands and to decipher migration motifs. |
| Date: | 2005–03 |
| URL: | http://d.repec.org/n?u=RePEc:cer:papers:wp250&r=lab |
| By: | F. Alfonso Arellano |
| Abstract: | This study analyses the effects on unemployment and the quality of employment of the Spanish labour market reform in 2001 for the most important age groups. The content of the reform was based on the implementation of two policies: (i) a new permanent contract with lower firing costs than the ordinary one, and (ii) the reduction of the payroll taxes paid by firms to foster creation/ conversion of/ into permanent contracts. This reform extended to further groups of workers similar measures adopted in a previous reform in 1997. Using a data base of unemployed workers in the region of Madrid from January 1997 up to September 2003, and methods for non-experimental data, the results suggest that, regardless of gender, workers below 30 years are negatively affected by the reform, and workers above 55 years show positive but small effects. The influence of the reform for workers between 45 and 50 years is negligible. As regards education, graduates are more sensitive to the reform than workers with a lower level of education (primary and secondary education). |
| Date: | 2005–02 |
| URL: | http://d.repec.org/n?u=RePEc:cte:werepe:we051205&r=lab |
| By: | Alireza Naghavi (University College Dublin and CERAS) |
| Abstract: | This paper studies the behavior of firms towards weak labor rights in developing countries (South). A less than perfectly elastic labor supply in the South gives firms oligopsonistic power tempting them to strategically reduce output to cut wages. In an open economy, competitors operating in perfectly competitive labor markets meanwhile enjoy less aggressive competitors and raise output. Finally, competition effect reduces the ex-post output of a relocating firm. These effects reduce relative profitability of the South casting doubts on traditional beliefs that multinationals are attracted to regions with lower wages. Adopting a minimum wage unambiguously enhances Southern competitiveness and welfare. |
| Keywords: | Labor standards, Labor market imperfection, Oligopsony, Location of firms, Minimum wages, Strategic behavior, Multinationals, Southern welfare |
| JEL: | J80 F23 J42 F12 R38 L13 |
| Date: | 2005–01 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2005.17&r=lab |
| By: | van der Klaauw, Bas (Free University Amsterdam); van Vuuren, Aico (Free University Amsterdam); Berkhout, Peter (University of Amsterdam) |
| Abstract: | In this paper we develop a structural model for job search behavior of students entering the labor market. The model includes endogenous search effort and on the job search. Since students usually do not start a regular job before graduation but start job search earlier, our model is not stationary. The model explains the common finding that a substantial share of individuals starts working immediately upon graduation. We estimate the model using a unique data set of individuals who completed undergraduate education in the Netherlands between 1995 and 2001. Our estimation results show that 1 percentage point decrease in unemployment rate increases wage offers on average with 3 percent and that there are substantial returns to work experience. Employment rates at graduation could be increased from 40 percent to 65 percent if alls students start job search 6 months prior to graduation. |
| Keywords: | Job search behavior; structural model |
| JEL: | J64 |
| Date: | 2005–04–06 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:ifauwp:2005_009&r=lab |
| By: | Bennmarker, Helge (Institute for Labour Market Policy Evaluation); Carling, Kenneth (Institute for Labour Market Policy Evaluation); Holmlund, Bertil (Department of Economics) |
| Abstract: | In 2001 and 2002, Sweden introduced several unemployment insurance reforms. A major innovation in the first reform was the introduction of a two-tiered benefit structure for some unemployed individuals. This system involved supplementary compensation during the first 20 weeks of unemployment. The 2002 reform retained the two-tiered benefit structure but involved also substantial benefit hikes for spells exceeding 20 weeks. This paper examines how these reforms affected transitions from unemployment to employment. We take advantage of the fact that the reforms had quasi-experimental features where the “treatments” differed considerably among unemployed individuals. We find that the reforms had strikingly different effects on job finding among men and women. The two reforms in conjunction are estimated to have increased the expected duration of unemployment among men but to have decreased the duration of unemployment among women. The overall effect on the duration of unemployment is not statistically different from zero. However, the reforms reduced job finding among males who remained unemployed for more than 20 weeks. |
| Keywords: | Unemployment duration; Unemployment benefits |
| JEL: | J64 J65 |
| Date: | 2005–03–29 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:uunewp:2005_015&r=lab |
| By: | Judith Hellerstein (University of Maryland); David Neumark (Public Policy Institute of California and IZA Bonn) |
| Abstract: | Wage gaps between individuals of difference races, sexes, and ethnicities have been documented and replicated extensively, and have generated a long history in labor economics research of empirical tests for labor market discrimination. The most widely-used approach to test for labor market discrimination is based on wage regressions estimated at the level of individual workers, with the estimate of discrimination inferred from the residual race, sex, or ethnic group differential in wages that remains unexplained after including a wide array of proxies for productivity. What is absent from the residual wage approach - and in our view leaves the approach vulnerable to being regarded as uninformative regarding discrimination - is any directly observable measure of productivity with which to adjust differentials in wages in trying to infer whether a particular group suffers from discrimination. The ideal solution would be individual-level productivity data that can be compared with wages. Any of the variables that differ across groups and are unobserved in the residual wage regression approach should affect wages and productivity equally, and hence not bias the test. However, such data are extremely rare, in large part because individual productivity is often unobservable and seldom measured. This chapter focuses on the use of matched employer-employee data sets to carry out a version of this ideal test, but at the establishment level. When these data sets permit the measurement of the demographic characteristics of establishments' workforces, as well as the estimation of production functions, they can be used to infer productivity differentials between workers in different groups. Comparisons of these productivity differentials with wage differentials then provide versions of the ideal test for discrimination at the establishment level. In addition to providing tests of discrimination, matched employer-employee data sets have proven useful in studying other questions that arise in the economics of discrimination, including measuring labor market segregation and assessing its consequences, and examining hypotheses or predictions that are central to economic models of discrimination. |
| Keywords: | labor market discrimination, matched employer-employee data |
| JEL: | J71 |
| Date: | 2005–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp1555&r=lab |
| By: | Luis Diaz-Serrano (National University of Ireland Maynooth, CREB and IZA Bonn); Jose A. Cabral Vieira (University of the Azores and CEEAplA) |
| Abstract: | We examine differences in job satisfaction between low- and higher-paid workers within the European Union (EU). To do so The European Community Household Panel Data covering the period 1994-2001 is used. Our results indicate that low paid workers report a lower level of job satisfaction when compared with their higher paid counterparts in most countries, except in the UK. This supports the idea that low-wage employment in these countries mainly comprises low quality. The results also indicate that gap in average job satisfaction between low- and higher-paid workers is markedly wider in the Southern European countries than in the rest of EU. Finally, there are significant differences in the determinants of job satisfaction across countries. It seems then that a homogeneous policy may be inappropriate to increase satisfaction, and hence labour productivity, in the EU as a whole. Hence, an improvement of the quality of the jobs in the EU may require different policies. In particular, in some countries such as the United Kingdom removing low employment, namely through regulation, may worsen the workers’ well-being, although in other cases such a policy may lead to a totally different outcome. |
| Keywords: | job satisfaction, job quality, low-wage employment |
| JEL: | J28 |
| Date: | 2005–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp1558&r=lab |
| By: | Giorgio Brunello (University of Padova, CESifo and IZA Bonn); Lorenzo Cappellari (Catholic University of Milan, CESifo, CHILD and IZA Bonn) |
| Abstract: | We use data from a nationally representative survey of Italian graduates to study whether Alma Mater matters for employment and earnings three years after graduation. We find that the attended college does matter, and that college related differences are substantial both among and within regions of the country. However, these differences are not large enough to trigger substantial mobility flows from poorly performing to better performing institutions. There is also evidence that going to a private university pays off at least in the early part of a career: the employment weighted college wage gains from going to a private college are close to 18 percent. Only part of this gain can be explained by the fact that private universities have lower pupil - teacher ratios than public institutions. |
| Keywords: | college education, Italy |
| JEL: | J24 |
| Date: | 2005–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp1562&r=lab |
| By: | Brenda Gannon (Economic and Social Research Institute (ESRI)); Robert Plasman (Université Libre de Bruxelles, DULBEA); François Rycx (Université Libre de Bruxelles, DULBEA and IZA Bonn); Ilan Tojerow (Université Libre de Bruxelles, DULBEA) |
| Abstract: | This study analyses the interaction between inter-industry wage differentials and the gender wage gap in six European countries using a unique harmonised matched employer-employee data set, the 1995 European Structure of Earnings Survey. Findings show the existence of significant inter-industry wage differentials in all countries for both sexes. While their structure is quite similar for men and women and across countries, their dispersion is significantly larger in countries with decentralised bargaining. These differentials are significantly and positively correlated with industry profitability. The magnitude of this correlation, however, is lower in countries with centralised and coordinated collective bargaining. Further results show that in all countries more than 80% of the gender wage gaps within industries are statistically significant. Yet, industries having the highest and the lowest gender wage gaps vary substantially across European countries. Finally, results indicate that industry effects explain between 0 and 29% of the overall gender wage gap. |
| Keywords: | gender wage gap, inter-industry wage differentials, Europe |
| JEL: | J16 J31 J71 |
| Date: | 2005–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp1563&r=lab |
| By: | Anna Maria Ferragina (CNR and University of Rome "Tor Vergata"); Francesco Pastore (University of Naples II and IZA Bonn) |
| Abstract: | The paper surveys the theoretical and empirical literature on regional unemployment during transition in Central and Eastern Europe. The focus is on Optimal Speed of Transition (OST) models and on comparison of them with the neoclassical tradition. In the typical neoclassical models, spatial differences essentially arise as a consequence of supply side constraints and institutional rigidities. Slow-growth, high-unemployment regions are those with backward economic structures and constraints on factors mobility contribute to making differences persistent. However, such explanations leave the question unanswered of how unemployment differences arise in the first place. Economic transition provides an excellent testing ground to answer this question. Prefiguring an empirical law, the OST literature finds that the high degree of labour turnover of high unemployment regions is associated with a high rate of industrial restructuring and, consequently, that low unemployment may be achieved by implementing transition more gradually. Moreover, international trade, FDI and various agglomeration factors help explain the success of capital cities compared to peripheral towns and rural areas in achieving low unemployment. |
| Keywords: | regional unemployment, structural change, labour turnover, optimal speed of transition, Central and Eastern Europe |
| JEL: | J6 P2 R1 R23 |
| Date: | 2005–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp1565&r=lab |
| By: | Scott Adams (University of Wisconsin-Milwaukee); David Neumark (Public Policy Institute of California and IZA Bonn) |
| Abstract: | Living wage campaigns have succeeded in about 100 jurisdictions in the United States but have also been unsuccessful in numerous cities. These unsuccessful campaigns provide a better control group or counterfactual for estimating the effects of living wage laws than the broader set of all cities without a law, and also permit the separate estimation of the effects of living wage laws and living wage campaigns. We find that living wage laws raise wages of low-wage workers but reduce employment among the least-skilled, especially when the laws cover business assistance recipients or are accompanied by similar laws in nearby cities. |
| Keywords: | living wages, wages, employment |
| JEL: | J28 J38 |
| Date: | 2005–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp1566&r=lab |
| By: | Thierry Lallemand (Free University of Brussels, DULBEA and Centre de Comptabilité, Planning et Contrôle); Robert Plasman (Free University of Brussels and DULBEA); François Rycx (Free University of Brussels, DULBEA and IZA Bonn) |
| Abstract: | This study examines the magnitude and determinants of the establishment-size wage premium in five European countries using a unique harmonised matched employer-employee data set. Findings show the existence of a significant positive wage premium in all countries, even when controlling for labour quality, working conditions, monitoring, sectoral and regional effects, bargaining institutions, job stability, and concentration of skilled workers. In crossnational perspective, results support the existence of an inverse relationship between the size wage gap and the degree of corporatism. Final results indicate that the size wage premium is generally larger in the manufacturing sector and for blue-collar workers. |
| Keywords: | establishment-size and wages, matched employer-employee data, Europe |
| JEL: | J31 |
| Date: | 2005–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp1569&r=lab |
| By: | Maya Bacache-Beauvallet (CEPREMAP, ENS Paris-Jourdan); Etienne Lehmann (ERMES, University of Paris 2 and IZA Bonn) |
| Abstract: | This article studies the political choice over the extent and the means of income redistribution between high and low skilled workers. Redistributive tools encompass fiscal transfers with negative income tax and minimum wage. Using fiscal instruments only is assumed optimal. We show that high skilled workers may favor a second-best minimum wage requirement. This is because minimum wage increases unemployment, hence the marginal cost of redistribution is higher which gives a pretext for high skilled workers to moderate low skilled workers claim for income redistribution. |
| Keywords: | unemployment, political economics, income redistribution, minimum wage |
| JEL: | D78 E24 H23 J38 |
| Date: | 2005–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp1570&r=lab |
| By: | Samuel Danthine (Université du Québec à Montréal, CIRPÉE and IZA Bonn) |
| Abstract: | entrepreneurial skills is proposed. It is possible to characterize both the competitive equilibrium and the optimal solution numerically. The competitive equilibrium is shown to be suboptimal. Less-skilled workers and firms are too selective, not matching with their comparable counterparts. High-types, on the other hand, are not selective enough. The model shows promise as a tool for evaluating the effects of labor policies (and other changes in the economy) on the composition of unemployment and on unemployment duration, as well as on wage distributions. The effect of introducing a simple unemployment insurance scheme is then twofold. First, it increases unemployment by allowing a greater proportion of low types not to match, which decreases output. Second, it decreases mismatch, which has a positive effect on output. It is possible to have a positive effect of unemployment insurance on productivity and find the optimal level of unemployment insurance. Finally, it is shown that assuming risk-neutral workers in this model is not innocuous. |
| Keywords: | two-sided search, heterogeneity, unemployment, unemployment insurance, risk aversion |
| JEL: | J63 J65 J31 |
| Date: | 2005–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp1572&r=lab |
| By: | Mona Larsen (Danish National Institute of Social Research, Aarhus School of Business and Graduate School for Integration, Production and Welfare); Peder J. Pedersen (University of Aarhus, Danish National Institute of Social Research and IZA Bonn) |
| Abstract: | This paper describes and analyses the pathways to early retirement in Denmark. The analyses are based on a 10 per cent panel sample of the population 45-66 years old followed from 1984 onwards. We use a multinomial logit approach to analyse the characteristics of individuals that retire through each pathway compared to those remaining in the labour force. The transition from work to retirement is complex and far from the conventional idea of exit typically occurring from a job at the official pension age. Eight pathways from work to an early retirement program are identified. One group of pathways is transitions directly from employment corresponding to 75 per cent of all transitions in the sample period. The great majority of these transitions occur to an early retirement program. A second group consists of pathways dominated by unemployment insurance benefits (UIB) covering 20 per cent. The remaining 5 per cent of the transitions occur through pathways dominated by benefit programs reflecting a low attachment to the labour force in the period prior to retirement. Overall, availability and/or generosity of retirement programs are important for early retirement through the employment and UIB dominated pathways. For early retirement through other pathways, however, personal characteristics seem to be at least as important as retirement programs. |
| Keywords: | retirement, pathways, panel data |
| JEL: | J14 J26 |
| Date: | 2005–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp1575&r=lab |
| By: | Rahul Shastri (National Akademi of Development); Ramana Murthy (NALSAR) |
| Abstract: | The share of wages in organised Indian industry declined considerably between 1973 and 1997. The end to end drop was 19 per cent, and the wage share fell from 51.7 per cent to 32.8 per cent. In proportionate terms, the decline in wage share was between 30-40 per cent. The period of analysis divides into two phases. In the first phase of fifteen years (1973-87), wage share declined by 5½ percentage points, while the fall accelerated after 1987, and the decline from 1987-97 was by 13½ percentage points. If it is possible to identify the period 1987-97 with the period of liberalisation, it may be inferred that 70 per cent of the decline in the wage share was during the period of liberalisation. The period of liberalisation has witnessed an acceleration in the decline of the wage share. Faster growth of low-wage-share industries was responsible for a substantial part of the decline the share of labour. More than 1/3 of the total decrease in the wage share (1973-97) was due to the faster growth of low wage-share industries. Growing importance of low wage-share industries was the sole reason for the decline in wage share between 1973-87. After 1987, the relative growth of low wage-share industries contributed only 9 per cent of the fall in the aggregate wage share. In the period as a whole, the decline in wage share at the individual industry level contributed at least half (9½ percentage points) of the total decline in the aggregate wage share. In the first period, 1973-87, the industry level wage shares actually rose. However, in the second period, the industry level shares have been falling rapidly. They fell by 12.3 percentage points against the total decline of 13.5 percentage points in the wage share in this period. Thus, the decline in industry level wage shares contributed more than 90 per cent of the total decline in wage share in the second period (1987-97). If this period may be called the period of liberalisation, it may said that wage shares fell drastically at individual industry levels during liberalisation. For the period as a whole, the decline in industry level wage share was entirely due to the rise in material/wage (m/w) ratio. Constant composition mark-up remained the same end to end between 1973- 97. This study also examines the reasons for the consistent rise in m/w ratio and finds it to be due to technical change. Almost the entire increase in the m/w ratio was due to the rise in the material used per employee. This index rose from 100 to 380 over the period. Most of the increased material used found its way into greater output. Thus, O/L (index) rose from 100 to 346 over the time period. A small fraction of the rise in the material intensity per employee went into a rise in the material output ratio, whose index rose from 100 to 110. Thus, the study reveals a drastic decline in the aggregate share of wages between 1973- 97. This decrease came about as a result of a faster growth of low wage share industries over the period, as well as a rise in the material intensity per employee in the production process. Thus changes in output mix and technical change were responsible for the 19 percentage point drop in the share of wages. Mark-ups played no role in the decline in the period as a whole. |
| Keywords: | markups, material-wage ratio, technical change, output mix, wage share, distribution of income, Indian industry |
| JEL: | L E J D1 D4 |
| Date: | 2005–04–19 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpio:0504020&r=lab |
| By: | Arie Kapteyn (RAND Corporation); James P. Smith (RAND Corporation); Arthur van Soest (RAND Corporation & Tilburg University) |
| Abstract: | Self-reported work disability is analyzed in the US and The Netherlands. The raw data show that Dutch respondents much more often report that they have a work limiting health problem than respondents in the US. The difference remains when controlling for demographic characteristics and observed onsets of health problems. Respondent evaluations of work limitations of hypothetical persons described in vignettes are used to identify the extent to which the differences in self-reports between countries or socio-economic groups are due to systematic variation in the response scales. A model that assumes the same response scales for different health domains is compared with a model that allows for domain specific response scales. Results of both models suggest that about half of the difference between the self-reported rates of work disability in the US and The Netherlands can be explained by response scale differences. |
| Keywords: | Work limiting disability, Vignettes, Reporting bias |
| JEL: | J |
| Date: | 2005–04–15 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpla:0504006&r=lab |
| By: | Petri Böckerman (Labour Institute for Economic Research); Pekka Ilmakunnas (Helsinki School of Economics) |
| Abstract: | This paper explores the connection between unemployment and subjective well-being in Finland by using cross-sections for the years 1990, 1996 and 2000 from World Values Surveys. An unprecedented increase in the national unemployment rate (from 3 to 17 per cent) did not produce a drop in the mean level of subjective well-being. Experiencing unemployment personally reduces life satisfaction, but does not have a significant effect on happiness in ordered logit estimation. However, generalized ordered logit estimation reveals that being unemployed has a negative effect on happiness at lower happiness scores, but no significant effect at high happiness levels. |
| Keywords: | happiness, unhappiness, life satisfaction, unemployment |
| JEL: | C30 J28 J31 |
| Date: | 2005–04–19 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpla:0504008&r=lab |
| By: | Petri Böckerman (Labour Institute for Economic Research); Seppo Laaksonen (University of Tampere & University of Helsinki); Jari Vainiomäki (University of Tampere) |
| Abstract: | This paper explores the incidence of nominal and real wage cuts in the Finnish private sector during the 1990s. Centralized wage freezes together with a positive inflation rate produced real wage cuts for a large proportion of workers during the worst recession years of the early 1990s. In this sense, centralized bargaining shaped the adjustment. The results from micro data reveal that the full-time workers have had a lower likelihood of wage cuts compared with part-time workers. Declines in wages have also been more common in small plants. In addition, there is an important transitory component in wage cuts. |
| Keywords: | micro-level, wages, adjustment |
| JEL: | J31 |
| Date: | 2005–04–19 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpla:0504009&r=lab |