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on Labour Economics |
| By: | Jan Høgelund (Danish National Institute of Social Research); Anders Holm (Department of Sociology, University of Copenhagen) |
| Abstract: | Previous studies find that participation in educational measures does not increase sick-listed em-ployees’ chance of returning to work. This is surprising because education is supposed to increase human capital and raise productivity. However, a higher productivity may make the participants raise their reservation wage. Therefore, it is possible that educational measures increase the chance of returning to work in high pay jobs but reduce the chance of returning to work in low pay jobs. To test this hypothesis, we use panel data of 671 long-term sick-listed employees to estimate a random effects hazards rate model, with returning to work in high paid jobs and low-medium paid jobs, re-spectively, as the two outcomes. Our findings do not support the reservation wage hypothesis. We find that while participation in education significantly increases the probability of returning to work in medium or low paid jobs, it does not affect the probability of resuming work in high paid jobs. |
| URL: | http://d.repec.org/n?u=RePEc:kud:kuieca:2006_07&r=lab |
| By: | Andrés Erosa; Luisa Fuster; Diego Restuccia |
| Abstract: | Using panel data from the National Longitudinal Survey of Youth (NLSY), we document that gender differences in wages almost double during the first 20 years of labor market experience and that there are substantial gender differences in employment and hours of work during the life cycle. A large portion of gender differences in labor market attachment can be traced to the impact of children on the labor supply of women. We develop a quantitative life-cycle model of fertility, labor supply, and human capital accumulation decisions. We use this model to assess the role of fertility on gender differences in labor supply and wages over the life cycle. In our model, fertility lowers the lifetime intensity of market activity, reducing the incentives for human capital accumulation and wage growth over the life cycle of females relative to males. We calibrate the model to panel data of men and to fertility and child related labor market histories of women. We find that fertility accounts for most of the gender differences in labor supply and wages during the life cycle documented in the NLSY data. |
| Keywords: | Gender wage gap, employment, experience, fertility, human capital |
| JEL: | J2 J3 |
| URL: | http://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-199&r=lab |
| By: | David H. Blackaby (University of Wales Swansea); Paul L. Latreille (University of Wales Swansea); Philip D. Murphy (University of Wales Swansea); Nigel O'Leary (University of Wales Swansea); Peter J. Sloane (University of Wales Swansea and IZA Bonn) |
| Abstract: | This paper uses unique data for the economically inactive to calculate elasticity estimates of the reservation wage and exit probability with respect to state benefits and the arrival rate of job offers, and finds that the inactive react in similar ways to benefit increases as the unemployed. |
| Keywords: | economic inactivity, reservation wages |
| JEL: | J21 J22 J31 |
| Date: | 2006–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp1980&r=lab |
| By: | Andrés Erosa; Luisa Fuster; Diego Restuccia |
| Abstract: | An important feature of the U.S. labor market is that, even after controlling for measurable differences in education and experience, the average wage of women with children is 89 percent of the average wage of women without children. This ``family gap\\\" in wages accounts for almost half the gender gap in wages. Proponents of mandatory-leave policies argue that career interruptions associated with fertility have long-lasting effects on female employment and are costly in terms of human-capital losses for females. Despite the fact that mandatory leaves are widely applied in developed countries, their effects on the economy are not well understood. We develop and calibrate a general-equilibrium model of fertility and labor-market decisions to study the quantitative impact of such policies. We build on the Mortensen and Pissarides (1994) labor-market framework by introducing male and female workers, general and specific human-capital accumulation on the job, and temporary separations between the worker and a job. We find that: ($i$) the loss of specific human capital accounts for a small fraction of the wage gaps and ($ii$) mandatory-leave policies have substantial aggregate and redistributive effects on fertility, employment, and welfare. Interestingly, we find that the general-equilibrium effect of mandatory-leave policies is a reduction in the amount of time females spend at home with children. |
| Keywords: | Parental leaves, fertility, specific human capital, temporary separations. |
| JEL: | J2 J3 |
| URL: | http://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-197&r=lab |
| By: | Sebastian Buhai (Tinbergen Institute, Erasmus University Rotterdam and Aarhus School of Business); Coen Teulings (SEO Economic Research, University of Amsterdam, Tinbergen Institute and IZA Bonn) |
| Abstract: | This paper provides a new way of analyzing tenure profiles in wages, by modelling simultaneously the evolution of wages and the distribution of tenures. We develop a theoretical model based on efficient bargaining, where both log outside wage and log wage in the current job follow a random walk, as found empirically. This setting allows the application of real option theory. We derive the efficient separation rule. The model fits the observed distribution of job tenures well. Since we observe outside wages only at job start and job separation, our empirical analysis of within job wage growth is based on expected wage growth conditional on the outside wages at both dates. Our modelling allows testing of the efficient bargaining hypothesis. The model is estimated on the PSID. |
| Keywords: | random productivity growth, efficient bargaining, job tenure, inverse gaussian, wage-tenure profiles, option theory |
| JEL: | C51 C52 J63 |
| Date: | 2006–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp1997&r=lab |
| By: | Patrick Francois (University of British Columbia); Huw Lloyd-Ellis (Queen's University) |
| Abstract: | We develop a Shumpeterian theory of business cycles that relates job creation, job destruction and wages over the cycle to the processes of firm restructuring, innovation and implementation that drive long-run growth. Due to incentive problems, production workers are employed via relational contracts and experience involuntary unemployment. Job destruction and firm turnover are counter-cyclical, but labour productivity growth and job creation are pro-cyclical. Endogenous fluctuations in job creation on the intensive margin are the dominant source of changes in employment growth. Our framework also highlights the counter-cyclical forces on wages due to restructuring, and illustrates the relationship between the cyclicality of wages and long-run productivity growth. 052<p type="texpara" tag="Body Text" et="abstract" > |
| Keywords: | Intrinsic business cycles, job creation and destruction, innovation, wage cyclicality |
| JEL: | E0 E3 O3 O4 |
| Date: | 2005–07 |
| URL: | http://d.repec.org/n?u=RePEc:qed:wpaper:1039&r=lab |
| By: | Thomas Lemieux |
| Abstract: | The paper presents descriptive evidence from quantile regressions and more "structural" estimates from a human capital model with heterogenous returns to show that most of the increase in wage inequality between 1973 and 2005 is due to a dramatic increase in the return to post-secondary education. The model with heterogenous returns also helps explain why both the relative wages and the within-group dispersion among highly-educated workers have increased in tandem over time. These findings add to the growing evidence that, far from being ubiquitous, changes in wage inequality are increasingly concentrated in the very top end of the wage distribution. |
| JEL: | J3 |
| Date: | 2006–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12077&r=lab |
| By: | Birgitta Rabe (Institute for Social and Economic Research) |
| Abstract: | This paper examines how spouses in dual-earner couples in Britain weigh each partner’s expected wage growth in the decision to migrate. Previous research suggests that husbands’ job prospects dominate the migration choice irrespective of their relative earnings potential. Based on British panel data this paper employs an endogenous switching model and estimates wage change differentials of migrating vs. staying for husbands and wives corrected for double selectivity of migration and employment. The analysis shows that dual-earner couples put roughly equal weights on each partner’s expected wage gains when deciding to migrate. Moreover, migrant wives’ employment declines temporarily and there are significant selection effects in migration and employment among non-migrants. |
| Keywords: | double selection, dual earner families, endogenous switching, family migration |
| Date: | 2006–01 |
| URL: | http://d.repec.org/n?u=RePEc:ese:iserwp:2006-01&r=lab |
| By: | Robert Plasman (Free University of Brussels, DULBEA); Michael Rusinek (Free University of Brussels, DULBEA); François Rycx (Free University of Brussels, DULBEA and IZA Bonn) |
| Abstract: | Using a unique harmonized matched employer-employee dataset (European Structure of Earnings Survey, 1995), we study the impact of the regime of collective bargaining on wages in the manufacturing sector of three countries that are characterized by a multi-level system of bargaining: Belgium, Denmark and Spain. Our findings show that, compared to multiemployer bargaining, single-employer bargaining has a positive effect both on wage levels and on wage dispersion in Belgium and in Denmark. In Spain, single-employer bargaining also increases wage levels but reduces wage dispersion. Our interpretation is that in Belgium and Denmark, single-employer bargaining is used to adapt pay to the specific needs of the firm while, in Spain, it is mainly used by trade unions in order to compress the wage distribution. |
| Keywords: | collective bargaining, wage structure |
| JEL: | J31 J51 J52 |
| Date: | 2006–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp1990&r=lab |
| By: | Jean-Olivier Hairault (EUREQUA, CEPREMAP, University of Paris I and IZA Bonn); François Langot (PSE-Jourdan, CEPREMAP and GAINS, University of Maine); Thepthida Sopraseuth (PSE-Jourdan, CEPREMAP and EPEE, University of Evry) |
| Abstract: | This paper presents a theoretical foundation and empirical evidence in favor of the view that the tax on continued activity not only decreases the participation rate by inducing early retirement, but also badly affects the employment rate of older workers just before early retirement age. Countries with an early retirement age at 60 also have lower employment rates for old workers aged 55-59. Based on the French Labor Force Survey, we show that the likelihood of employment is significantly affected by the distance from retirement, in addition to age and other relevant variables. We then extend McCall's (1970) job search model by explicitly integrating life-cycle features and retirement decisions. Using simulations, we show that the effective tax on continued activity caused by French social security system in conjunction with the generosity of unemployment benefits for older workers helps explain the low rate of employment just before the early retirement age. Decreasing this tax, thus bringing it closer to the actuarially-fair scheme, not only extends the retirement age, but also encourages a more intensive job-search by older unemployed workers. |
| Keywords: | retirement, old workers, search, actuarial fairness |
| JEL: | J22 J26 H31 |
| Date: | 2006–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp1984&r=lab |
| By: | Fali Huang; Peter Cappelli |
| Abstract: | Arguably the fundamental problem faced by employers is how to elicit effort from employees. Most models suggest that employers meet this challenge by monitoring employees carefully to prevent shirking. But there is another option that relies on heterogeneity across employees, and that is to screen job candidates to find workers with a stronger work ethic who require less monitoring. This should be especially useful in work systems where monitoring by supervisors is more difficult, such as teamwork systems. We analyze the relationship between screening and monitoring in the context of a principal-agent model and test the theoretical results using a national sample of U.S. establishments, which includes information on employee selection. We find that employers screen applicants more intensively for work ethic where they make greater use of systems such as teamwork where monitoring is more difficult. This screening is also associated with higher productivity and higher wages and benefits, as predicted by the theory: The synergies between reduced monitoring costs and high performance work systems enable the firm to pay higher wages to attract and retain such workers. Screening for other attributes, such as cognitive ability, does not produce these results. |
| JEL: | J2 J3 |
| Date: | 2006–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12071&r=lab |
| By: | George J. Borjas |
| Abstract: | The rapid growth in the number of foreign students enrolled in American universities has transformed the higher education system, particularly at the graduate level. Many of these newly minted doctorates remain in the United States after receiving their doctoral degrees, so that the foreign student influx can have a significant impact in the labor market for high-skill workers. Using data drawn from the Survey of Earned Doctorates and the Survey of Doctoral Recipients, the study shows that a foreign student influx into a particular doctoral field at a particular time had a significant and adverse effect on the earnings of doctorates in that field who graduated at roughly the same time. A 10 percent immigration-induced increase in the supply of doctorates lowers the wage of competing workers by about 3 to 4 percent. About half of this adverse wage effect can be attributed to the increased prevalence of low-pay postdoctoral appointments in fields that have softer labor market conditions because of large-scale immigration. |
| JEL: | J23 J61 |
| Date: | 2006–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12085&r=lab |
| By: | Kaye K. W. Lee |
| Abstract: | This paper studies personality as a potential explanation for wage differentials between apparently similar workers. This follows initial studies by Jencks (1979) that suggest that certain personality traits, such as industriousness and leadership, have an impact on earnings. The paper aims to provide a theoretical framework within which these effects may be analyzed. The study begins by outlining four issues as a backdrop to the model: rationality, the industry, firms, and workers. A crucial factor to the model is the memeÑa mental gene that affects personality. Taking these four factors into consideration, the Contested Exchange model from Bowles and Gintis (1990) is used. Then, it is adapted to study memetic effects on the wage rate. This is followed by an analysis of how memes may affect personality and thus earnings. The issues that require further study and resolution are 1) which traits create wage differentials, and 2) two-way causality: does personality affect the wage, or does a wage premium become an incentive for a person to adopt new memes? |
| Date: | 2006–02 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_443&r=lab |
| By: | Raj Chetty |
| Abstract: | This paper shows that existing evidence on labor supply behavior places an upper bound on risk aversion in the expected utility model. I derive a formula for the coefficient of relative risk aversion (g) in terms of (1) the ratio of the income elasticity of labor supply to the wage elasticity and (2) the degree of complementarity between consumption and labor. I bound the degree of complementarity using data on consumption choices when labor supply varies randomly across states. Using labor supply elasticity estimates from thirty-three studies, I find a mean estimate of g = 1. I then show that generating g > 2 would require that wage increases cause sharper reductions in labor supply than estimated in any of the studies. |
| JEL: | D80 J20 J60 |
| Date: | 2006–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12067&r=lab |
| By: | L.Guarcello; M. Manacorda; F. Rosati; J. Fares; S.Lyon; C. Valdivia |
| Abstract: | While youth issues are subject of growing attention in the Sub-Saharan Africa (SSA) region, data for indicators relating specifically to youth employment remain scarce in most SSA countries. There is therefore limited empirical basis for formulating policies and programmes promoting youth employment and successful school to work transitions. The study is aimed at beginning to fill this gap by generating and analyzing a set of youth education and employment indicators based on World Bank survey data for a subset of 13 countries in the Sub Saharan Africa region. Study findings highlight the disadvantaged position of young people in the labour force in the region. They face much higher levels of unemployment than their adult counterparts or young people in developed economies, and are much more concentrated in low skill and unstable informal sector work. Youth never attending school emerge as a particular policy concern. Uneducated youth appear to be stuck not only in low income jobs but also face a high risk of unemployment. The study places particular emphasis on measuring the initial transition from school to work for different groups of young people, and on identifying the factors affecting this transition. Results indicate that the average duration of the transition is very long in many SSA countries, suggesting young people in these countries are faced with substantial labour market entry problems upon leaving the school system. |
| Date: | 2005–11 |
| URL: | http://d.repec.org/n?u=RePEc:ucw:worpap:15&r=lab |
| By: | Yuriy Gorodnichenko (University of Michigan); Klara Sabirianova Peter (Georgia State University and IZA Bonn) |
| Abstract: | This study is the first to provide a systematic measure of bribery using micro-level data on reported earnings, household spending and asset holdings. We use the compensating differential framework and the estimated sectoral gap in reported earnings and expenditures to identify the size of unobserved (unofficial) compensation (i.e., bribes) of public sector employees. In the case of Ukraine, we find that public sector employees receive 24-32% less wages than their private sector counterparts. The gap is particularly large at the top of the wage distribution. At the same time, workers in both sectors have essentially identical level of consumer expenditures and asset holdings that unambiguously indicate the presence of nonreported compensation in the public sector. Using the conditions of labor market equilibrium, we develop an aggregate measure of bribery and find that the lower bound estimate of the extent of bribery in Ukraine is between 460 mln and 580 mln U.S. dollars (0.9-1.2% of Ukraine’s GDP in 2003). |
| Keywords: | wage, wage differentials, public sector, corruption, bribery, Ukraine |
| JEL: | J3 J4 O1 P2 |
| Date: | 2006–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp1987&r=lab |
| By: | Beach, Charles; Finnie, Ross; Gray, David |
| Abstract: | This paper examines the variability of workers' earnings in Canada over the period 1982-1997 and how earnings variability has varied in terms of the unemployment rate and real gross domestic product (GDP) growth over this period. Using a large panel of tax file data, we decompose total variation in earnings across workers and time into a long-run inequality component between workers and an average earnings instability component over time for workers. The analysis is done for men and women and for both long-run participants and a broad coverage of workers. We find an increase in earnings variability between 1982-1989 and 1990-1997 that is largely confined to men and largely driven by widening long-run earnings inequality. Second, the pattern of unemployment rate and GDP growth rate effects on these variance components is not consistent with conventional explanations of cyclical effects on earnings inequality and is suggestive of an alternative paradigm of how economic growth over this period widens long-run earnings inequality. Third, when the unemployment rate and GDP growth rate effects are considered jointly, macroeconomic improvement is found to reduce the overall variability of earnings as the reduction in earnings instability outweighs the general widening of long-run earnings inequality. |
| Keywords: | Labour, Personal finance and household finance, Salaries and wages, Income |
| Date: | 2006–02–07 |
| URL: | http://d.repec.org/n?u=RePEc:stc:stcp3e:2006268e&r=lab |
| By: | Beach, Charles; Finnie, Ross; Gray, David |
| Abstract: | This article summarizes findings from the research paper entitled: The Impact of Macroeconomic Conditions on the Instability and Long-Run Inequality of Workers' Earnings in Canada. This paper examines the variability of workers' earnings in Canada over the period 1982-1997 and how earnings variability has varied in terms of the unemployment rate and real gross domestic product (GDP) growth over this period. Using a large panel of tax file data, we decompose total variation in earnings across workers and time into a long-run inequality component between workers and an average earnings instability component over time for workers. The analysis is done for men and women and for both long-run participants and a broad coverage of workers. We find an increase in earnings variability between 1982-1989 and 1990-1997 that is largely confined to men and largely driven by widening long-run earnings inequality. Second, the pattern of unemployment rate and GDP growth rate effects on these variance components is not consistent with conventional explanations of cyclical effects on earnings inequality and is suggestive of an alternative paradigm of how economic growth over this period widens long-run earnings inequality. Third, when the unemployment rate and GDP growth rate effects are considered jointly, macroeconomic improvement is found to reduce the overall variability of earnings as the reduction in earnings instability outweighs the general widening of long-run earnings inequality. |
| Keywords: | Labour, Personal finance and household finance, Salaries and wages, Income |
| Date: | 2006–02–07 |
| URL: | http://d.repec.org/n?u=RePEc:stc:stcp3e:2006269e&r=lab |
| By: | Uri Gneezy; John A. List |
| Abstract: | Recent discoveries in behavioral economics have led scholars to question the underpinnings of neoclassical economics. We use insights gained from one of the most influential lines of behavioral research -- gift exchange -- in an attempt to maximize worker effort in two quite distinct tasks: data entry for a university library and door-to-door fundraising for a research center. In support of the received literature, our field evidence suggests that worker effort in the first few hours on the job is considerably higher in the "gift" treatment than in the "non-gift treatment." After the initial few hours, however, no difference in outcomes is observed, and overall the gift treatment yielded inferior aggregate outcomes for the employer: with the same budget we would have logged more data for our library and raised more money for our research center by using the market-clearing wage rather than by trying to induce greater effort with a gift of higher wages. |
| JEL: | J2 J30 J41 C93 |
| Date: | 2006–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12063&r=lab |
| By: | Man Yee Kan (Institute for Social and Economic Research) |
| Abstract: | This article uses a nine-year period of work-life history data from the British Household Panel Survey (1991 – 1999) to examine married/cohabiting women’s work trajectories. In particular, it tests some major contentions of Hakim’s (2000) preference theory. Both supportive and opposing evidence for the theory has been found. First, concurring with Hakim’s arguments, women who have followed a home-career path hold consistently more home-centred attitudes over time than women who have been committed to their employment careers. Moreover, it is found that presence of dependent children has little or no negative effect on a work-centred woman’s chance of being engaged in full-time work. But the findings could not rule out the possibility that women’s employment careers are still constrained. The most work-centred women (as revealed in their gender role attitudes in the nine-year period), despite having been committed mostly to a full-time work, still have displayed a certain degree of discontinuity in their career pursuits. Finally, contrary to corollary of the preference theory, the relationship between gender role attitudes and women’s participation in labour market work is reciprocal rather than unidirectional. That is, women’s work orientation is endogenous to their labour market experiences. |
| Keywords: | gender, women and employment, work orientation |
| Date: | 2005–12 |
| URL: | http://d.repec.org/n?u=RePEc:ese:iserwp:2005-27&r=lab |
| By: | David N. Margolis (University of Paris 1, CNRS, CREST-INSEE and IZA Bonn) |
| Abstract: | This paper considers the role mergers and acquisitions have on employment. First, it considers the importance of different aspects of compensation policy and human resource management practices for distinguishing acquired and acquiring firms. Second, it examines which individuals from which firms remain with the newly created entity after the takeover. Using a unique employer-employee linked data set for France, we find that very few observable workforce or compensation characteristics distinguish acquired from acquiring firms ex-ante. Nevertheless, the human resources department seems to be quite active in the post-takeover period, with employees of the acquired firm being less likely to remain with the new entity in the short term after takeover than those of the acquiring firm and with the differences between the two types of firms disappearing after 3 years. The workers with characteristics that tend to be associated with the fastest subsequent job finding in the displaced worker literature are also those who tend to be overrepresented among the individuals who separate from their employer post-takeover. Finally, as both acquired and acquiring firms differ from firms not involved in takeover activity in a similar manner, employment authorities may be able to anticipate the regions in which takeovers are more likely to occur by looking at the financial accounts of firms with particular characteristics that have local establishments. |
| Keywords: | employment, takeovers, linked employer-employee data |
| JEL: | G34 J21 J23 J31 J63 L29 M51 |
| Date: | 2006–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp1994&r=lab |
| By: | Mark Aguiar; Erik Hurst |
| Abstract: | In this paper, we use five decades of time-use surveys to document trends in the allocation of time. We find that a dramatic increase in leisure time lies behind the relatively stable number of market hours worked (per working-age adult) between 1965 and 2003. Specifically, we show that leisure for men increased by 6-8 hours per week (driven by a decline in market work hours) and for women by 4-8 hours per week (driven by a decline in home production work hours). This increase in leisure corresponds to roughly an additional 5 to 10 weeks of vacation per year, assuming a 40-hour work week. Alternatively, the "consumption equivalent" of the increase in leisure is valued at 8 to 9 percent of total 2003 U.S. consumption expenditures. We also find that leisure increased during the last 40 years for a number of sub-samples of the population, with less-educated adults experiencing the largest increases. Lastly, we document a growing "inequality" in leisure that is the mirror image of the growing inequality of wages and expenditures, making welfare calculation based solely on the latter series incomplete. |
| JEL: | D12 D13 J22 |
| Date: | 2006–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12082&r=lab |