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on Labour Economics |
| By: | Catalina Amuedo-Dorantes (San Diego State University); Sara de la Rica Goiricelaya (Universidad del País Vasco) |
| Keywords: | Gender wage differentials, segregation, matched employer-employee data |
| JEL: | J16 J7 |
| Date: | 2005–09–22 |
| URL: | http://d.repec.org/n?u=RePEc:ehu:dfaeii:200516&r=lab |
| By: | Robert Shimer |
| Abstract: | This paper develops a dynamic model of mismatch. Workers and jobs are randomly assigned to labor markets. Each labor market clears at each instant but some labor markets have more workers than jobs, hence unemployment, and some have more jobs than workers, hence vacancies. As workers and jobs move between labor markets, some unemployed workers find vacant jobs and some employed workers lose or leave their job and become unemployed. The model is quantitatively consistent with the comovement of unemployment, job vacancies, and the rate at which unemployed workers find jobs over the business cycle. It can also address a variety of labor market phenomena, including duration dependence in the job finding probability and employer-to-employer transitions, and it helps explain the cyclical volatility of vacancies and unemployment. |
| JEL: | E24 J63 J64 |
| Date: | 2005–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:11888&r=lab |
| By: | Eric French; Bhashkar Mazumder; Christopher Taber |
| Abstract: | We examine the key components that determine an individual's early career wage growth and how these factors have changed for less skilled workers over the last twenty years. In particular, we examine the relative importance of accumulating work experience as compared to the quality of job matches in influencing wage growth. Our main finding is that over this period, the vast majority of the variation in wage growth is due to variability in the return to experience. |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedhwp:wp-05-24&r=lab |
| By: | Verner, Dorte |
| Abstract: | The author analyzes the labor markets in the Northeast region of Brazil that includes Pernambuco, Bahia, and Ceará states. Her findings show a rather heterogeneous impact pattern of individual characteristics on monthly wages across the wage distribution. That is, the magnitude of the effect of a wage determinant is different depending on whether the worker is placed in the lower, median, or top of the wage distribution. The findings reveal that basic schooling matters for all four geographical areas and across the income distribution. However, poor workers are awarded lower returns than their richer peers, and in Bahia and Ceará, the poor do not obtain any returns to basic schooling. Furthermore, the impact of 5-8 or 9-11 years of education is larger than that of 1-4 years of completed education. The returns obtained by a median worker are higher in Ceará and Pernambuco than in Bahia. Finally, completed tertiary education offers the largest returns of all levels of education. The median worker receives a premium of 105, 249, and 216 percent in Ceará, Pernambuco, and Bahia, respectively. Hence, one direct policy implication is to increase the quality of education, in particular in poorer neighborhoods. Experience impacts positively on wages and it increases with age until workers reach 50 years of age. However, returns to experience are falling significantly across the wage distribution. For the poor and younger generations, experience contributes more to wages than education. The occupation of workers is important for wage determination. All workers in the included occupational groups are paid more than workers engaged in agricultural activities. Workers employed as technicians or administrators obtain the highest returns. The white/nonwhite wage disparity reveals that white workers are paid 17 percent more than their nonwhite co-workers, taking into account other characteristics. Gender disparities are large in the Northeast and heterogeneous across the wage distribution. The time spent in the current state impacts adversely on wages. That is, those that have stayed earn, on average, less than the newcomers. There are no considerable differences between male and female workers. Union membership has a positive impact on workers ' wages. |
| Keywords: | Health Monitoring & Evaluation,Curriculum & Instruction,Teaching and Learning,Gender and Education,Economic Theory & Research |
| Date: | 2005–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:3548&r=lab |
| By: | Lorenz Goette (University of Zurich and CEPR and IZA Bonn); David Huffman (IZA Bonn) |
| Abstract: | This chapter argues that the neglect of emotion in economic models explains their inability to predict important aspects of the labor market. We focus on one example: firms frequently cut real wages, increasing nominal wages by less than the inflation rate, but they very seldom cut nominal wages. This pattern suggests that workers exhibit a special resistance to nominal wage cuts, which is hard to explain if they are purely rational as assumed in standard economic models. We argue that resistance to nominal wage cuts is best understood in terms of a model where salient features of a situation trigger emotional responses and sway judgment of the entire situation. Since a cut in the nominal wage leads to a very salient reduction in pay, we argue that the reaction of workers is dominated by emotions. On the other hand, an increase in the nominal wage may produce a more deliberative evaluation, because there is no immediately salient feature. The individual needs to compare the inflation rate to the wage change before it becomes clear whether the change increases or decreases utility, thus producing a more measured response. We present evidence from experiments showing that self-reported emotions respond strongly to nominal wage cuts, but not to decreases in the real wage achieved through increasing the nominal wage by less than the inflation rate. Although emotions may benefit individual workers, by strengthening their bargaining position and preventing wage cuts, they may also lead to worse outcomes, in the form of higher unemployment. |
| Keywords: | wage rigidity, affect, emotions, money illusion, loss aversion |
| JEL: | E24 E31 E32 B49 |
| Date: | 2005–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp1895&r=lab |
| By: | Marisa Bucheli (Departmento de Economía, Facultad de Ciencias Sociales, Universidad de la República); Graciela Sanroman (Departmento de Economía, Facultad de Ciencias Sociales, Universidad de la República) |
| Abstract: | The aim of this article is to answer the question of whether women in Uruguay face a glass ceiling. To do this, the conditional gender wage gap is evaluated along the empirical wage distribution function. Separated quantile regression for women and men are estimated. We evaluate the counterfactual gap between the observed male wage and what this would be if men?s characteristics were remunerated in accordance with women?s wage distribution. After this the counterfactual gap is also evaluated for women?s wages. The results suggest that women?s wages are a¤ected by a glass ceiling. |
| Keywords: | discriminación de género, techo de cristal, regresiones cuantílicas |
| JEL: | J16 J71 |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:ude:wpaper:0504&r=lab |
| By: | Tuomas Pekkarinen (Nuffeld College, Oxford and IZA Bonn) |
| Abstract: | This paper studies the relationship between the timing of tracking of pupils into vocational and academic secondary education and gender differences in educational attainment and income. We argue that in a system that streams students into vocational and academic tracks relatively late (age 15-16), girls are more likely to choose the academic track than boys because of gender differences in the timing of puberty. We exploit the Finnish comprehensive school reform of the 1970’s to analyze this hypothesis. This reform postponed the tracking of students from the age of 10-11 to 15-16 and was adopted gradually by municipalities so that we can observe members of the same cohorts in both systems. We find that the postponement of the tracking age increased gender differences in the probability of choosing the academic secondary education and in the probability of continuing into academic tertiary education. The reform had particularily negative effects on boys from non-academic family backgrounds. Finally, the reform decreased the gender wage gap in adult income by four percentage points. |
| Keywords: | education, tracking, gender wage gap |
| JEL: | I20 J16 |
| Date: | 2005–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp1897&r=lab |
| By: | Pradeep Dubey; John Geanakoplos (Cowles Foundation, Yale University) |
| Abstract: | We introduce grading into games of status. Each player chooses effort, producing a stochastic output or score. Utilities depend on the ranking of all the scores. By clustering scores into grades, the ranking is coarsened, and the incentives to work are changed. We first apply games of status to grading exams. Our main conclusion is that if students care primarily about their status (relative rank) in class, they are often best motivated to work not by revealing their exact numerical exam scores (100,99,...,1), but instead by clumping them into coarse categories (A,B,C). When student abilities are disparate, the optimal grading scheme is always coarse. Furthermore, it awards fewer A's than there are alpha-quality students, creating small elites. When students are homogeneous, we characterize optimal grading schemes in terms of the stochastic dominance between student performances (when they shirk or work) on subintervals of scores, showing again why coarse grading may be advantageous. In both the disparate case and the homogeneous case, we prove that absolute grading is better than grading on a curve, provided student scores are independent. We next bring games of money and status to bear on the optimal wage schedule: workers can be motivated not merely by the purchasing power of wages, but also by the status higher wages confer. How should the employer combine both incentive devices to generate an optimal pay schedule? When workers' abilities are disparate, the optimal wage schedule creates different grades than we found with status incentives alone. The very top type should be motivated solely by money, with enormous salaries going to a tiny elite. Furthermore, if the population of workers diminishes as we go up the ability ladder and their disutility for work does not fall as fast, then the optimal wage schedule exhibits increasing wage differentials, despite the linearity in production. When workers are homogeneous, the same status grades are optimal as we found with status incentives alone. A bonus is paid only to scores in the top status grade. |
| Keywords: | Status, Grading, Incentives, Education, Exams, Wages |
| JEL: | C70 I20 I30 |
| Date: | 2005–12 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:1544&r=lab |
| By: | Peter Kuhn; Fernando Lozano |
| Abstract: | After declining for most of the century, the share of employed American men regularly working more than 50 hours per week began to increase around 1970. This trend has been especially pronounced among highly educated, high-wage, salaried, and older men. Using two decades of CPS data, we rule out a number of factors, including business cycles, changes in observed labor force characteristics, and changes in the level of men's real hourly earnings as primary explanations of this trend. Instead we argue that increases in salaried men's marginal incentives to supply hours beyond 40 accounted for the recent rise. Since these increases were accompanied by a rough constancy in real earnings at 40 hours, they can be interpreted as a compensated wage increase. |
| JEL: | J22 |
| Date: | 2005–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:11895&r=lab |
| By: | Kai Christoffel (European Central Bank); Tobias Linzert (European Central Bank and IZA Bonn) |
| Abstract: | In this paper we incorporate a labor market with matching frictions and wage rigidities into the New Keynesian business cycle model. In particular, we analyze the effect of a monetary policy shock and investigate how labor market frictions affect the transmission process of monetary policy. The model allows real wage rigidities to interact with adjustments in employment and hours affecting inflation dynamics via marginal costs. We find that the response of unemployment and inflation to an interest rate innovation depends on the degree of wage rigidity. Generally, more rigid wages translate into more persistent movements of aggregate inflation. Moreover, the impact of a monetary policy shock on unemployment and inflation depends also on labor market fundamentals such as bargaining power and the flows in and out of employment. |
| Keywords: | monetary policy, matching models, labor market search, inflation persistence, real wage rigidity |
| JEL: | E52 J64 E32 E31 |
| Date: | 2005–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp1896&r=lab |
| By: | Maria Inés Terra (Departmento de Economía, Facultad de Ciencias Sociales, Universidad de la República); Marisa Bucheli (Departmento de Economía, Facultad de Ciencias Sociales, Universidad de la República); Silvia Laens (CINVE); Carmen Estrades (Departmento de Economía, Facultad de Ciencias Sociales, Universidad de la República) |
| Abstract: | Uruguay is a small economy. Its integration to MERCOSUR has increased the exposure to regional macroeconomic inestability. The aim of this paper is to assess the impact of regional integration on labour market and poverty. We estimated wage differentials between labour categories, finding a 60% wage gap between formal and informal workers. A CGE model with an efficiency wage specification for unskilled labour was built. Results show that regional shocks deeply affect Uruguayan economy. The consideration of efficiency wage model is particularly important when shocks lead to a reallocation of resources towards sectors intensive in unskilled labour. A subsidy on formal, unskilled labour could contribute to decrease informality and therefore increase GDP, but this type of policy need to be carefully implemented, because it may have negative effects on investment. Finally, the effects on poverty and income distribution obtained through microsimulations are consistent with the results of the CGE experiments. |
| Keywords: | Uruguay, labour market, general equilibrium model, regional integration, efficiency wage, microsimulation, poverty |
| JEL: | D58 I32 F15 F16 J41 |
| Date: | 2005–11 |
| URL: | http://d.repec.org/n?u=RePEc:ude:wpaper:1205&r=lab |
| By: | Erling Barth (Institute for Social Research, Oslo, University of Oslo and IZA Bonn); Tone Ognedal (University of Oslo) |
| Abstract: | Unreported labour by one worker in a firm increases the probability of detection for his fellow workers, not only for himself. The firm takes this external effect into account. As a consequence, unreported work becomes rationed by the firms demand, rather than determined by demand equal supply. The gap between supply and demand increases with firm size. An empirical analysis on survey data supports theses theoretical predictions. Using a bivariate probit model, we find evidence of excess supply of unreported work in firms. We also find that the gap between supply and demand increases with firm size. |
| Keywords: | tax evasion, hidden labour market |
| JEL: | H26 J20 J22 J23 J24 |
| Date: | 2005–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp1893&r=lab |
| By: | Guillaume Vandenbroucke |
| Abstract: | During the first half of the 20th century the workweek in the United States declined, and the distribution of hours across wage deciles narrowed. At the same time, the distribution of wages narrowed too. The hypothesis proposed is (i) Households have access to an increasing number of leisure activities which enhance the value of non-market time; (ii) The rise of education accounts for the narrowing of the wage and hours distributions. Such mechanisms, embedded into a neoclassical growth model, quantitatively account for the observations. The rise in wages is the main contributor to the decline in hours. The decline in the price of leisure goods is second in importance, yet its contribution is large. |
| Keywords: | Hours worked, leisure, home production, technological progress |
| JEL: | E24 J22 O11 O33 |
| Date: | 2005–12 |
| URL: | http://d.repec.org/n?u=RePEc:scp:wpaper:05-40&r=lab |
| By: | Ann Huff Stevens |
| Abstract: | This study considers whether there has been a decline in the attachment of workers and firms in the United States over the past several decades. Specifically, it compares snapshots of job tenure taken at the end of workers' careers from 1969 to 2002, using data from the Retirement History Survey, the National Longitudinal Survey of Older Men, and the Health and Retirement Study. The primary finding is one of stability in the prevalence of long-term employment relationships for men in the United States. In 1969, average tenure in the longest job for males aged 58-62 was 21.9 years. In 2002, the comparable figure was 21.4 years. Just over half of men ending their careers in 1969 had been with a single employer for at least 20 years; the same is true in 2002. This finding is robust to adjustments for minor differences in question details across data sources and for educational and retirement age changes over this time period. |
| JEL: | J6 |
| Date: | 2005–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:11878&r=lab |
| By: | Nicola Pavoni; Giovanni L. Violante |
| Abstract: | A Welfare-to-Work (WTW) program is a mix of government expenditures on “passive” (unemployment insurance, social assistance) and “active” (job search monitoring, training, wage taxes/subsidies) labor market policies targeted to the unemployed. This paper provides a dynamic principal-agent framework suitable for analyzing the optimal sequence and duration of the different WTW policies, and the dynamic pattern of payments along the unemployment spell and of taxes/subsidies upon re-employment. First, we show that the optimal program endogenously generates an absorbing policy of last resort (that we call “social assistance”) characterized by a constant lifetime payment and no active participation by the agent. Second, human capital depreciation is a necessary condition for policy transitions to be part of an optimal WTW program. Whenever training is not optimally provided, we show that the typical sequence of policies is quite simple: the program starts with standard unemployment insurance, then switches into monitored search and, finally, into social assistance. Only the presence of an optimal training activity may generate richer transition patterns. Third, the optimal benefits are generally decreasing or constant during unemployment, but they must increase after a successful spell of training. In a calibration exercise based on the U.S. labor market and on the evidence from several evaluation studies, we use our model to analyze quantitatively the features of the optimal WTW program for the U.S. economy. With respect to the existing U.S. system, the optimal WTW scheme delivers sizeable welfare gains, by providing more insurance to skilled workers and more incentives to unskilled workers. |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedmem:143&r=lab |
| By: | Randall Jones |
| Abstract: | This paper analyses the increasing dualism in the Korean labour market and the need to encourage greater labour force participation. Although the rising proportion of non-regular workers lowers labour costs and increases employment flexibility, it has a negative impact on both equity and efficiency over the long term. Relaxing employment protection for regular workers and increasing the coverage of the social safety net for non-regular workers would help limit the extent of dualism. Population ageing is projected to be exceptionally rapid in Korea, leading to a significant decline in the workforce by mid-century. Steps to boost the participation of women through family-friendly policies are a priority. It is also important to encourage employees to stay at firms beyond the age of 50. Making the wage system more dependent on productivity and less on seniority and implementing a company pension system in place of the retirement allowance would help maintain the employment of older persons. This Working Paper relates to the 2005 OECD Economic Survey of Korea (www.oecd.org/eco/surveys/korea). <P>Le marché du travail en Corée On examinera dans ce papier le marché du travail coréen sous l’angle de son dualisme de plus en plus marqué et de l’augmentation nécessaire des taux d’activité. La proportion croissante de travailleurs non réguliers réduit les coûts de main-d’oeuvre et favorise la flexibilité de l’emploi, mais elle a un impact négatif à long terme sur le plan de l’équité et de l’efficience. On atténuerait le dualisme en assouplissant la protection de l’emploi des travailleurs réguliers et en élargissant la couverture sociale des travailleurs non réguliers. Le vieillissement de la population devant être extrêmement rapide en Corée, la population active diminuera très sensiblement jusqu’au milieu de ce siècle. Il est impérieux d’augmenter le taux d’activité des femmes grâce à des mesures favorables aux familles. Il importe également d’encourager la poursuite de l’activité des salariés au-delà de 50 ans. En faisant en sorte que le système salarial fasse davantage intervenir la productivité au lieu de l’ancienneté et en remplaçant l’indemnité de retraite par un régime de retraite au niveau de l’entreprise, on faciliterait la prolongation de l’activité des personnes âgées. Ce Document de travail se rapporte à l'Étude économique de l'OCDE de la Corée, 2005 (www.oecd.org/eco/etudes/coree). |
| Keywords: | Korea, Corée, labour markets, marché du travail, industrial relations, relation du travail, old workers, unemployment insurance, travailleurs âgés, assurance chômage |
| JEL: | J11 J3 J5 J7 |
| Date: | 2005–12–16 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:469-en&r=lab |
| By: | Lorenz Goette (University of Zurich, CEPR and IZA Bonn); David Huffman (IZA Bonn) |
| Abstract: | In this chapter we propose a new, dual-process model of labor supply, which incorporates both cognitive and affective aspects of decision-making. Consistent with evidence from neuroscience, the worker may experience conflicting cognitive and affective motivations during the workday. In particular, the affective system values effort more highly as long the worker’s performance is below a personal goal, or income target, and becomes increasingly aroused as the goal approaches. As a result, affect can distort effort decisions relative to a fully cognitive benchmark, in a way that is consistent with evidence on loss aversion, and with the so-called goal-gradient effect, a tendency for animals and humans to increase effort as a goal approaches. In contrast to a standard model of labor supply, our model can predict a goal gradient, and predicts that workers may actually lower total daily effort in response to a temporary increase in the wage. Also, within-day windfall gains may have an impact on a worker's effort profile over the workday. The second part of the chapter tests this latter prediction using data from two bicycle messenger firms. At both firms, a windfall gain in the morning has the predicted impact. A lucky messenger works harder than other messengers over the first part of the afternoon, and the difference is increasing, consistent with a goal gradient. Later in the afternoon, a lucky messenger works significantly less hard than the others, consistent with having surpassed a personal earnings goal earlier in the day and having less affective motivation. |
| Keywords: | affect, emotion, labor supply, loss aversion, income targeting, goal gradient |
| JEL: | J22 L2 B49 |
| Date: | 2005–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp1890&r=lab |
| By: | Pinka Chatterji; Margarita Alegria; Mingshun Lu; David Takeuchi |
| Abstract: | This paper investigates to what extent psychiatric disorders and mental distress affect labor market outcomes among ethnic minorities of Latino and Asian descent, most of whom are immigrants. Using data from the National Latino and Asian American Study, we examine the labor market effects of meeting diagnostic criteria for any psychiatric disorder in the past 12 months as well as the effects of psychiatric distress in the past year. Among Latinos, psychiatric disorders and mental distress are associated with detrimental effects on employment and absenteeism, similar to effects found in previous analyses of mostly white, American born populations. Among Asians, we find mixed evidence that psychiatric disorders and mental distress detract from labor market outcomes. |
| JEL: | I1 |
| Date: | 2005–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:11893&r=lab |
| By: | Rubio, Marcela; Tinajero, Monica; López-Acevedo, Gladys |
| Abstract: | The authors follow the Hellerstein, Neumark, and Troske (1999) framework to estimate marginal productivity differentials and compare them with estimated relative wages. The analysis provides evidence on productivity and nonproductivity-based determinations of wages. Special emphasis is given to the effects of human capital variables, such as education, experience, and training on wages and productivity differentials. Higher education yields high er productivity. However, highly educated workers earn less than their productivity differentials would predict. On average, highly educated workers are unable to fully appropriate their productivity gains of education through wages. On the other hand, workers with more experience are more productive in the same proportion that they earn more in medium and large firms, meaning they are fully compensated for their higher productivity. Finally, workers in micro and small firms are paid more than what their productivity would merit. Training benefits firms and employees since it significantly increases workers ' productivity and their earnings. |
| Keywords: | Primary Education,Economic Theory & Research,Access & Equity in Basic Education,Labor Markets,Tertiary Education |
| Date: | 2005–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:3791&r=lab |
| By: | Alfonso Arpaia (Directorate-General Economic & Financial Affairs, European Commission); Gilles Mourre (Directorate-General Economic & Financial Affairs, European Commission) |
| Abstract: | This paper presents a selective survey of the recent literature on labour market institutions. It describes the different empirical approaches used to explore the nexus between labour market institutions and labour market performance. It stresses that the effect of institutions is complex in both stock and flow models and that it is also crucial to take into account the interactions they generate among themselves and with macroeconomic shocks. While their importance in explaining labour market performances is uncontroversial, there is no full consensus on their actual impact and the precise transmission channels. In addition, rather than taking institutions for granted, a new branch of research attempts to understand them as the result of an endogenous process. The paper also briefly discusses the relationships between the efficiency of the redistributive policies (via taxation) and the type of protection provided (on the job or in the market). Lastly, the paper examines the key issue of efficient policy design both at the macro- and micro-level. |
| Keywords: | Labour market institutions, Endogenous institutions, Labour market reforms, |
| JEL: | J |
| Date: | 2005–12–19 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpla:0512011&r=lab |
| By: | Peter Diamond |
| Abstract: | After presenting the Gruber-Wise analysis showing a strong effect on retirement of implicit taxes from pension rules, it is shown that there is no effect of these implicit taxes on unemployment. This supports the argument for avoiding high implicit taxes on continued work. Also discussed are methods for adjusting benefits and taxes for increases in life expectancy, with particular attention to increasing "the retirement age." Calculations are presented showing the decreases in benefits for an increase in the normal retirement age in the US and the years of service for a full benefit in France. |
| JEL: | H55 |
| Date: | 2005–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:11877&r=lab |