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on Labour Economics |
| By: | Carlos A.Arango; Angélica Pachón |
| Abstract: | This paper exploits the long history of the minimum wage in a relatively stable developing economy like Colombia in order to see whether it may alleviate the living conditions of low income families and reduce income inequality. The paper does not only explore how the minimum wage may serve these purposes, but also how it may distort market outcomes to do so. We found significant negative minimum wage effects on both the likelihood of being employed and hours worked for all family members, being it stronger for women, and the young and less educated people. We also found a positive effect on non-head participation especialilly in families with low human capial. But, more important, we found evidence that the minimum wage ends up being regressive, improving the living conditions of families in the middle and the upper part of the income distribution with net losses for those at the bottom. |
| Keywords: | Minimum wage, income distribution,income inequality, public policy. |
| JEL: | J31 J42 J48 |
| URL: | http://d.repec.org/n?u=RePEc:bdr:borrec:280&r=lab |
| By: | Peter Gottschalk (Boston College) |
| Abstract: | This paper presents a new method to correct for measurement error in wage data and applies this method to address an old question. How much downward wage flexibility is there in the U.S? We apply standard methods developed by Bai and Perron (1998b) to identify structural breaks in time series data. Applying these methods to wage histories allows us to identify when each person experienced a change in nominal wages. The length of the period of constant nominal wages is left unrestricted and is allowed to differ across individuals, as is the size and direction of the nominal wage change. We apply these methods to data from the Survey of Income and Program Participation. The evidence we provide indicates that the probability of a cut in nominal wages is substantially overstated in data that is not corrected for measurement error. |
| Keywords: | nominal wage rigidity, measurement error |
| JEL: | J38 |
| Date: | 2004–10–31 |
| URL: | http://d.repec.org/n?u=RePEc:boc:bocoec:611&r=lab |
| By: | Rowat, Colin; Seabright, Paul |
| Abstract: | This Paper models aid agencies as financial intermediaries that do not make a financial return to depositors, since the depositors' concern is to transfer resources to investor-beneficiaries. This leads to a significant problem of verification of the agencies' activities. One solution to this problem is for an agency to employ altruistic workers at below-market wages: workers can monitor the agency's activity more closely than donors, and altruistic workers would not work at below-market rates unless the agency were genuinely transferring resources to beneficiaries. We consider conditions for this solution to be incentive compatible.D21 |
| Keywords: | altruism; donations; non-profit; signalling; two-sided market; wage differential |
| JEL: | D21 D64 J31 L31 |
| Date: | 2004–12 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:4781&r=lab |
| By: | Handa, Sudhanshu; Simler, Kenneth R.; Harrower, Sarah |
| Abstract: | "For the well-being of today's families and for future generations, how important is investment in education and other forms of human capital? This report analyzes the potential for investments in education by individual households, by government, and by donor agencies to reduce poverty in postwar Mozambique. It provides an assessment of the existing stock of human capital and examines the association between human capital and both monetary and nonmonetary dimensions of household welfare. It also explores the factors that influence the decision to send children to school, and how long children remain in school.The authors focus on human capital because of its importance in increasing labor productivity in poor countries, its contribution to poverty reduction as both a substitute for and complement to physical capital, and the role of education in determining poverty levels. Although the analysis was originally commissioned by the Government of Mozambique, in many respects the methods and findings are also applicable in other low-income countries." from Text |
| Keywords: | Human capital ,households ,Education ,School children , |
| Date: | 2004 |
| URL: | http://d.repec.org/n?u=RePEc:fpr:resrep:134&r=lab |
| By: | Floden, Martin (Dept. of Economic Statistics, Stockholm School of Economics) |
| Abstract: | This paper examines how variations in labor supply can be used to self-insure against wage uncertainty, and the impact of such self-insurance on precautionary saving. The analytical framework is a two-period model with saving and labor-supply decisions where preferences are consistent with balanced growth. The main findings are that (i) labor-supply flexibility raises precautionary saving when future wages are uncertain, and (ii) uncertainty about future wages raises current labor supply and reduces future labor supply. |
| Keywords: | precautionary saving; prudence; labor supply |
| JEL: | D81 E21 |
| Date: | 2005–04–22 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:hastef:0597&r=lab |
| By: | P R Agénor |
| Abstract: | This paper provides an analytical overview of models of segmented urban labor markets in developing countries. It begins by reviewing the characteristics of the labor market in these countries, including institutions and regulations that may lead to segmentation. The wage and employment e?ects of imperfect labor mobility between the formal and informal sectors are then illustrated with a simple graphical analysis. Formal models of urban wage formation are discussed next, and a two-sector shirking model with segmented urban labor markets is presented. The model is used to analyze the impact of an increase in the minimum wage on unskilled unemployment. |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:man:cgbcrp:52&r=lab |
| By: | Estelle James (Urban Institute); Alejandra Cox Edwards (California State University) |
| Abstract: | Postponing retirement will become increasingly important as a means to increase the labor force, its output and old age security, as populations age. Recent research has focused on incentives stemming from the social security system that influence the worker’s decision to retire. Defined benefit systems (both public and private) often contain penalties for postponing access to pensions or continuing to work while receiving a pension. In contrast, the tight link between contributions and accumulations and the actuarial conversion of accumulations into pensions in privately managed defined contribution systems may lead workers to postpone pensions or to continue working after withdrawals begin. The experience of Chile, which implemented its new system in 1982, offers an opportunity to test if the change in incentives has indeed produced the expected change in retirement behavior. Using probit analysis of household survey data from 1960 to 2002, we estimate the impact of the pension reform on the probability of 1) becoming a pensioner and 2) dropping out of the labor force, for older workers. We find strong effects of the new system on both propensities, in the aggregate and at the individual level after controlling for individual and macro-economic variables. In particular, restricted access to early pensions and the exemption of pensioners from the pension payroll tax appear to exert a powerful effect on labor force participation rates. |
| Date: | 2005–05 |
| URL: | http://d.repec.org/n?u=RePEc:mrr:papers:wp098&r=lab |
| By: | John Laitner (University of Michigan); Dan Silverman (University of Michigan) |
| Abstract: | Using pseudo-panel data, we estimate the structural parameters of a life—cycle consumption model with discrete labor supply choice. A focus of our analysis is the abrupt drop in consumption upon retirement for a typical household. The literature sometimes refers to the drop, which in the U.S. Consumer Expenditure Survey we estimate to be approximately 16%, as the “retirement—consumption puzzle.” Although a downward step in consumption at retirement contradicts predictions from life—cycle models with additively separable consumption and leisure, or with continuous work-hour options, a consumption jump is consistent with a setup having nonseparable preferences over consumption and leisure and requiring discrete work choices. This paper specifies a life—cycle model with these latter two elements, and it uses the empirical magnitude of the drop in consumption at retirement to provide an advantageous method of identifying structural parameters–most importantly, the intertemporal elasticity of substitution. |
| Date: | 2005–02 |
| URL: | http://d.repec.org/n?u=RePEc:mrr:papers:wp099&r=lab |
| By: | Alberto Alesina; Edward L. Glaeser; Bruce Sacerdote |
| Abstract: | Americans average 25.1 working hours per person in working age per week, but the Germans average 18.6 hours. The average American works 46.2 weeks per year, while the French average 40 weeks per year. Why do western Europeans work so much less than Americans? Recent work argues that these differences result from higher European tax rates, but the vast empirical labor supply literature suggests that tax rates can explain only a small amount of the differences in hours between the U.S. and Europe. Another popular view is that these differences are explained by long-standing European "culture," but Europeans worked more than Americans as late as the 1960s. In this paper, we argue that European labor market regulations, advocated by unions in declining European industries who argued "work less, work all" explain the bulk of the difference between the U.S. and Europe. These policies do not seem to have increased employment, but they may have had a more society-wide influence on leisure patterns because of a social multiplier where the returns to leisure increase as more people are taking longer vacations. |
| JEL: | J3 E0 |
| Date: | 2005–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:11278&r=lab |
| By: | George J. Borjas; Lawrence F. Katz |
| Abstract: | This paper examines the evolution of the Mexican-born workforce in the United States using data drawn from the decennial U.S. Census throughout the entire 20th century. It is well known that there has been a rapid rise in Mexican immigration to the United States in recent years. Interestingly, the share of Mexican immigrants in the U.S. workforce declined steadily beginning in the 1920s before beginning to rise in the 1960s. It was not until 1980 that the relative number of Mexican immigrants in the U.S. workforce was at the 1920 level. The paper examines the trends in the relative skills and economic performance of Mexican immigrants, and contrasts this evolution with that experienced by other immigrants arriving in the United States during the period. The paper also examines the costs and benefits of this influx by examining how the Mexican influx has altered economic opportunities in the most affected labor markets and by discussing how the relative prices of goods and services produced by Mexican immigrants may have changed over time. |
| JEL: | J1 J6 |
| Date: | 2005–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:11281&r=lab |
| By: | Jonathan Gruber; David Wise |
| Abstract: | This is the introduction to and summary of Phase III of an international research project to study the relationship between social security provisions and retirement. The project relies on the work of a large group of economists in 12 countries who conduct the analysis for each of their countries. The first phase described the retirement incentives inherent in plan provisions and documented the strong relationship across countries between social security incentives to retire and the proportion of older persons out of the labor force. The second phase illustrated the large effects that changing plan provisions would have on the labor force participation of older workers. This third phase shows the consequent fiscal implications that extending labor force participation would have on net program costs -- reduced government social security benefit payments less increased government tax revenues. The findings are conveyed by simulating the implications of illustrative reforms. One reform increases benefit eligibility ages by three years. Another illustrative reform reduces actuarially benefits received before the normal retirement age. A common reform prescribes the same provisions in each country. The financial implications of the illustrative reforms are very large in many instances, often as much as 20 to 40 percent of current program costs. The savings amount to as much a 1 percent or more of country GDP. The results make clear that reforms like those considered in this volume can have very large fiscal implications for the cost of social security benefits as well as for government revenues engendered by changes in the labor force participation of older workers. |
| JEL: | F0 H0 |
| Date: | 2005–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:11290&r=lab |
| By: | Cathy J. Bradley; David Neumark; Zhehui Luo; Heather L. Bednarek |
| Abstract: | We examine the effects of employment-contingent health insurance on married women's labor supply following a health shock. First, we develop a theoretical model that examines the effects of employment-contingent health insurance on the labor supply response to a health shock, to clarify under what conditions employment-contingent health insurance is likely to dampen the labor supply response. Second, we empirically evaluate this relationship using primary data. The results from our analysis find that -- as the model suggests is likely -- health shocks decrease labor supply to a greater extent among women insured by their spouse's policy than among women with health insurance through their own employer. Employment-contingent health insurance appears to create incentives to remain working and to work at a greater intensity when faced with a serious illness. |
| JEL: | I12 J22 |
| Date: | 2005–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:11304&r=lab |
| By: | Shouyong Shi |
| Abstract: | In this paper I construct a search model of a large labor market in which workers are heterogeneous in productivity and (homogeneous) firms post wages and a ranking of workers to direct workers' search. I establish the following results. First, the wage differential is negatively related to productivity when the productivity differential is small, while a positive relationship emerges when the productivity differential is large. Second, as the productivity differential decreases to zero, the reverse wage differential increases and so it remains strictly positive in the limit. Third, high-productivity workers are not discriminated against even when they have a lower wage, because they always have a higher priority in employment and higher expected wage than low-productivity workers. Fourth, the equilibrium is socially efficient, and so the wage differential and the ranking are part of the efficient mechanism. Finally, I provide numerical examples to illustrate the wage distribution. |
| Keywords: | Search; Wage Differential; Discrimination |
| JEL: | J3 J6 J7 |
| URL: | http://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-189&r=lab |