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on Labour Economics |
| By: | Andrew Leigh |
| Abstract: | What is the impact of raising the minimum wage on family incomes? Analysing the characteristics of low wage workers, I find that those who earn near-minimum wages are disproportionately female, unmarried and young, without post-school qualifications and overseas born. About one-third of near-minimum wage workers are the sole worker in their household. Due to low labour force participation rates in the poorest households, minimum wage workers are most likely to be in middle-income households. Using various plausible parameters for the effect of minimum wages on hourly wages and employment, I estimate the impact of a minimum wage rise on inequality. |
| Keywords: | Minimum wages, employment, wages, earnings, income distribution |
| JEL: | J23 J31 J38 D31 |
| Date: | 2005–11 |
| URL: | http://d.repec.org/n?u=RePEc:auu:dpaper:501&r=lab |
| By: | Stewart, Mark B. (Department of Economics, University of Warwick); Swaffield, Joanna K. (Department of Economics, University of York) |
| Abstract: | This paper estimates the impact of the introduction of the UK minimum wage on the working hours of low-wage employees using difference-in-differences estimators. The estimates using the employer-based New Earnings Surveys indicate that the introduction of the minimum wage reduced the basic hours of low-wage workers by between 1 and 2 hours per week. The effects on total paid hours are similar (indicating negligible effects on paid overtime) and lagged effects dominate the smaller and less significant initial effects within this. Estimates using the employee-based Labour Force Surveys are typically less significant. |
| Keywords: | minimum wages ; working hours ; labour demand ; difference-in-differences estimator |
| JEL: | J23 J28 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:wrk:warwec:746&r=lab |
| By: | Javier Miranda |
| Abstract: | The paper follows a population of 18-year-old men to examine the impact that early job mobility has on their earnings prospects as young adults. Longitudinal employer-employee data from the state of Maryland allow me to take into consideration the endogenous determination of mobility in response to unobserved worker as well as firm characteristics, which may lead to spurious results. The descriptive portion of the paper shows that mobility patterns of young workers differ considerably with the characteristics of the firm; however, growth patterns are not significantly different on average. Workers employed in high-turnover firms (such as those in retail and services) experience more job turnover but similar rates of wage growth compared to workers employed in low turnover firms (such as those in manufacturing); however, their wage levels remain below and the wage gap actually increases over time. Regression results controlling for unobservable show that employers in the low-turnover sector discount earnings of workers who displayed early market mobility. By contrast, I find no evidence that mobility has negative effects for workers that remain employed in the high turnover sector. |
| Date: | 2005–06 |
| URL: | http://d.repec.org/n?u=RePEc:cen:wpaper:05-05&r=lab |
| By: | Deborah Cobb-Clark; Paul Frijters; Guyonne Kalb |
| Abstract: | This paper investigates whether job offers arrive more frequently for those in employment than for those in unemployment. To this end, we take advantage of a unique Australian data set which contains information on both accepted and rejected job offers. Our estimation strategy takes account of the selectivity associated with the initial employment state and we allow for individual heterogeneity in the probability of obtaining jobs. Our results reveal that, across the wage range, individuals are about equally likely to obtain a job offer in employment as in unemployment. This implies that encouraging unemployed (rather than employed) search through the provision of unemployment benefits does not improve the speed of a job match. |
| Keywords: | job-offer arrival rates, reservation wages, wage-offer distribution, directed search |
| JEL: | C41 C14 J64 |
| Date: | 2005–09 |
| URL: | http://d.repec.org/n?u=RePEc:auu:dpaper:497&r=lab |
| By: | Stewart, Mark (University of Warwick) |
| Abstract: | This paper examines the extent of state dependence in unemployment and the role played in this by intervening low-wage employment. A range of dynamic random and fixed effects estimators are compared. Low-wage employment is found to have almost as large an adverse effect as unemployment on future prospects and the difference in their effects is found to be insignificant. Evidence is presented that low-wage jobs act as the main conduit for repeat unemployment and considerably increases its probability. Obtaining a higher-wage job reduces the increased risk of repeat unemployment to insignificance. |
| Keywords: | Unemployment dynamics ; low-wage employment ; State dependence ; unobserved heterogeneity ; dynamic random effects models ; repeat unemployment |
| JEL: | J64 J31 C25 C23 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:wrk:warwec:741&r=lab |
| By: | Alison Booth; Margi Wood |
| Abstract: | In 2003, part-time employment in Australia accounted for over 42% of the Australian female workforce, nearly 17% of the male workforce, and represented 28% of total employment. Of the OECD countries, only the Netherlands has a higher proportion of working women employed part-time and Australia tops the OECD league in terms of its proportion of working men who are part-time. In this paper we investigate part-time full-time hourly wage gaps using important new panel data from the new Household Income and Labour Dynamics in Australia Survey. We find that the usual negative part-time wage penalty found in other countries is not found in Australia once unobserved individual heterogeneity has been taken into account. Instead, part-time men and women typically earn an hourly pay premium. This result survives our numerous robustness checks and we advance some hypotheses as to why there is a positive part-time pay premium. |
| Keywords: | part-time, full-time; efficiency hours; gender |
| JEL: | J16 J22 J31 |
| Date: | 2004–12 |
| URL: | http://d.repec.org/n?u=RePEc:auu:dpaper:482&r=lab |
| By: | Alison Booth; Margi Wood |
| Abstract: | In 2003, part-time employment in Australia accounted for over 42% of the Australian female workforce, nearly 17% of the male workforce, and represented 28% of total employment. Of the OECD countries, only the Netherlands has a higher proportion of working women employed part-time and Australia tops the OECD league in terms of its proportion of working men who are part-time. In this paper we investigate part-time full-time hourly wage gaps using important new panel data from the first four waves of the new Household, Income and Labour Dynamics in Australia Survey. We find that, once unobserved individual heterogeneity has been taken into account, part-time men and women typically earn an hourly pay premium. This premium varies with casual employment status, but is always positive, a result that survives our robustness checks. We advance some hypotheses as to why there is a part-time pay advantage in Australia. |
| Keywords: | Part-time, full-time, efficiency hours, gender |
| JEL: | J16 J22 J31 |
| Date: | 2006–05 |
| URL: | http://d.repec.org/n?u=RePEc:auu:dpaper:525&r=lab |
| By: | John Marsh (Department of Economics, Rensselaer Polytechnic Institute, Troy, NY 12180-3590, USA); Donald S. Siegel (Department of Economics, Rensselaer Polytechnic Institute, Troy, NY 12180-3590, USA); Kenneth L. Simons (Department of Economics, Rensselaer Polytechnic Institute, Troy, NY 12180-3590, USA) |
| Abstract: | While there have been numerous papers on the employment and wage effects of mergers and acquisitions, there has been no direct analysis of the impact of such ownership changes on minority and female workers. This is an unexplored "equity" dimension of these transactions. We fill this gap by analyzing linked employer-employee data for the entire population of Swedish workers and approximately 16,000 manufacturing plants for the period 1985-1998. For each worker employed in these establishments (as well as the entire population of workers), we have data on gender, age, national origin, level of education, type of education, location, industrial sector, annual earnings, as well as each employee's complete work history during the period. We also have data on numerous plant and firm-level characteristics, which allows us to control for additional factors that might result in changes in labor composition and relative compensation. Our findings suggest that ownership change does not significantly alter the relative earnings and employment status of minority and female workers. |
| JEL: | G34 J23 J31 C81 |
| Date: | 2006–04 |
| URL: | http://d.repec.org/n?u=RePEc:rpi:rpiwpe:0607&r=lab |
| By: | Nick Carroll |
| Abstract: | What influences the probability that someone will leave unemployment? Informed by a search-theoretic framework and allowing for exits to not in the labour force and employment, I examine what influences the probability that somebody will leave unemployment. The unemployment data used are derived from the retrospective work history information from the first two waves of the Household, Income and Labour Dynamics in Australia Survey. I find that variables that increase wage offers and lower reservation wages are associated with shorter durations of unemployment and that exit rates from unemployment appear to remain steady initially with duration before declining relatively sharply. |
| Keywords: | survival analysis unemployment durations |
| JEL: | J64 |
| Date: | 2004–12 |
| URL: | http://d.repec.org/n?u=RePEc:auu:dpaper:483&r=lab |
| By: | Hiau Joo Kee |
| Abstract: | Using the HILDA survey, this paper analyses Australian gender wage gaps in both public and private sectors across the wage distribution. Quantile Regression (QR) techniques are used to control for various characteristics at different points of the wage distributions. Counterfactual decomposition analysis, adjusted for the QR framework, is utilised to examine if the gap is attributed to differences in gender characteristic, or differing returns between genders. The main finding is that a strong glass ceiling effect is detected only in the private sector. Secondly, the acceleration in the gender gap across the distribution does not vanish even after extensive controls. This suggests that the observed wage gap is a result of differences in returns to genders. By focussing only on the mean gender wage gap, substantial variations of the gap will be hidden. |
| Keywords: | glass ceiling, sticky floor, quantile regression, public sector |
| JEL: | J16 J31 J7 |
| Date: | 2005–03 |
| URL: | http://d.repec.org/n?u=RePEc:auu:dpaper:487&r=lab |
| By: | Sébastien Breau; David L. Rigby |
| Abstract: | This paper investigates the effects of exporting on wages, specifically the claim that workers are paid higher wages if they are employed in manufacturing plants that export vis-à-vis plants that do not export. Past research on US plants has supported the existence of an export wage premium, though European studies dispute those results calling for more care in econometric investigation to control for worker characteristics. We answer this call developing a matched employee-employer data set linking worker characteristics from the one-in-six long form of the Decennial Household Census to manufacturing establishment data from the Longitudinal Research Database. Analysis focuses on 1990 and 2000 data for the Los Angeles Consolidated Metropolitan Statistical Area. Our results confirm that the average wage in manufacturing plants that export is greater than that in manufacturing plants that do not export. However, after controlling for worker characteristics such as age, gender, education, race and nationality, the export wage premium vanishes. That is, when comparing workers with similar characteristics, there is no wage difference between exporting and non-exporting plants. These results concord with recent findings from Europe and elsewhere. |
| Date: | 2006–02 |
| URL: | http://d.repec.org/n?u=RePEc:cen:wpaper:06-06&r=lab |
| By: | David Rigby; Sebastien Breau |
| Abstract: | Over the past twenty-five years, earnings inequality has risen dramatically in the US, reversing trends of the preceding half-century. Growing inequality is closely tied to globalization and trade through the arguments of Heckscher-Ohlin. However, with only few exceptions, empirical studies fail to show that trade is the primary determinant of shifts in relative wages. We argue that lack of empirical support for the trade-inequality connection results from the use of poor proxies for worker skill and the failure to control for other worker characteristics and plant characteristics that impact wages. We remedy these problems by developing a matched employer-employee database linking the Decennial Household Census (individual worker records) and the Longitudinal Research Database (individual manufacturing establishment records) for the Los Angeles CMSA in 1990 and 2000. Our results show that trade has a significant impact on wage inequality, pushing down the wages of the less-skilled while allowing more highly skilled workers to benefit from exports. That impact has increased through the 1990s, swamping the influence of skill-biased technical change in 2000. Further, the negative effect of trade on the wages of the less-skilled has moved up the skill distribution over time. This suggests that over the long-run, increasing levels of education may not insulate more skilled workers within developed economies from the impacts of trade. |
| Date: | 2006–04 |
| URL: | http://d.repec.org/n?u=RePEc:cen:wpaper:06-12&r=lab |
| By: | Alison Booth; Jan van Ours |
| Abstract: | Taking into account inter-dependence within the family, we investigate the relationship between part-time work and happiness. We use panel data from the new Household, Income and Labor Dynamics in Australia Survey. Our analysis indicates that part-time women are more satisfied with working hours than full-time women. Partnered women’s life satisfaction is increased if their partners work full-time. Male partners’ life satisfaction is unaffected by their partners’ market hours but is increased if they themselves are working full-time. This finding is consistent with the gender identity hypothesis of Akerlof and Kranton (2000). |
| Keywords: | part-time work, happiness, gender identity. |
| JEL: | J22 I31 J16 |
| Date: | 2005–12 |
| URL: | http://d.repec.org/n?u=RePEc:auu:dpaper:507&r=lab |
| By: | Robert Breunig; Deborah Cobb-Clark; Xiaodong Gong |
| Abstract: | We study the work hours of Australian couples, using a neoclassical labour-supply model in which couples choose from a small, realistic set of possible wife-husband working hour combinations. We introduce three improvements to this standard model. First, we allow partners' preferences about non-market time to be correlated. We also correct the estimates to accunt for the fact that we estimate the non-observable wage rates of individuals who do not work. Lastly, we allow each individual's preferences for nonmarket time to be correlated with her or his wage rate. These changes, which substantially enhance the realism of the standard, discretized labour-supply model, also have an important impact on the results. We estimate the model using HILDA data and find wage elasticities of labour supply - 0.26 for men and 0.50 for women - that are twice as large as those found without these three innovations. Using simulation methods, we then analyze the expected impact of the 2005/06 Australian tax reform. As a result of the tax cuts, we expect working hours to increase by 1.7 per cent for both men and women and household after-tax incomes to increase by approximately $60 per week on average. For families with two wage earners, each earning between $25,000 and $55,000 per year, our model predicts an after-tax increase in income of $38 after accounting for these labour supply effects - much larger than the Australian Government's own prediction of $12, which does not allow for labour supply effects. |
| Keywords: | Family Labour Supply, Australia, Simulated Maximum Likelihood, Discretized Structural Model |
| JEL: | C51 D10 J22 |
| Date: | 2005–09 |
| URL: | http://d.repec.org/n?u=RePEc:auu:dpaper:499&r=lab |
| By: | Zuzana Brixiova; Vera Volchok; |
| Abstract: | In most countries of Central and Eastern Europe and the Commonwealth of Independent States, the transition to market led to the emergence of a private sector and open unemployment. The Belarusian labor market is characterized by low official unemployment, combined with a low share of the private sector in the aggregate employment. However, the cumulative fall in employment since 1990 has been similar to other transition economies, leading to a sharp reduction of labor force, and the youth unemployment remains high. The mismatch in skills between the unemployed and the vacancies and the geographical mismatch suggest that policies aimed at improving skills and increasing mobility are needed. At the same time, the low vacancy-unemployment ratio calls for policies aimed at encouraging private job creation. An immediate policy concern for the government is to launch a labor market reform that would balance providing adequate protection for workers with the need to design the incentives for the unemployed workers to search for new jobs. |
| Keywords: | labor markets, institutions, transition |
| JEL: | J21 J31 P23 |
| Date: | 2005–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:wdi:papers:2005-777&r=lab |
| By: | Giorgio Topa; Stephen Ross; Patrick Bayer |
| Abstract: | We use a novel dataset and research design to empirically detect the effect of social interactions among neighbors on labor market outcomes. Specifically, using Census data that characterize residential and employment locations down to the city block, we examine whether individuals residing in the same block are more likely to work together than those in nearby blocks. We find evidence of significant social interactions operating at the block level: residing on the same versus nearby blocks increases the probability of working together by over 33 percent. The results also indicate that this referral effect is stronger when individuals are similar in sociodemographic characteristics (e.g., both have children of similar ages) and when at least one individual is well attached to the labor market. These findings are robust across various specifications intended to address concerns related to sorting and reverse causation. Further, having determined the characteristics of a pair of individuals that lead to an especially strong referral effect, we provide evidence that the increased availability of neighborhood referrals has a significant impact on a wide range of labor market outcomes including employment and wages. |
| Keywords: | Neighborhood Effects, Job Referrals, Social Interactions, Informal Hiring Networks, Labor Market Outcomes |
| JEL: | J18 J22 J24 J31 R0 |
| Date: | 2005–10 |
| URL: | http://d.repec.org/n?u=RePEc:cen:wpaper:05-23&r=lab |
| By: | Wahba, Jackline |
| Abstract: | This paper examines the influence of adult market wages and having parents who were child labourers on child labour, when this decision is jointly determined with child schooling, using data from Egypt. The empirical results suggest that low adult market wages are key determinants of child labour; a 10 percent increase in the illiterate male market wage decreases the probability of child labour by 22 percent for boys and 13 percent for girls. The findings also indicate the importance of social norms in the inter-generational persistence of child labour: parents who were child labourers themselves are on average 10 percent more likely to send their children to work. In addition, higher local regional income inequality increases the likelihood of child labour. |
| URL: | http://d.repec.org/n?u=RePEc:stn:sotoec:0603&r=lab |
| By: | Knoppik, Christoph |
| Abstract: | A new econometric approach to the analysis of downward nominal wage rigidity in micro data is proposed, the kernel-location approach. It combines kernel-density estimation and the principle of joint variation of location and shape of the distribution of per cent annual nominal wage changes. The approach provides partial estimates of the counterfactual and factual distributions, of the rigidity function and of the degree of downward nominal wage rigidity. It avoids problematic assumptions of other semi- or non-parametric approaches to downward nominal wage rigidity in micro data and allows a discussion of the type of downward nominal wage rigidity encountered in data. |
| Keywords: | Downward Nominal Wage Rigidity, Kernel-Location Approach, Micro Data |
| JEL: | E24 J30 |
| Date: | 2006–05–24 |
| URL: | http://d.repec.org/n?u=RePEc:bay:rdwiwi:662&r=lab |
| By: | Nicola Brandt; Jean-Marc Burniaux; Romain Duval |
| Abstract: | In 1994, the OECD published a set of recommendations -- known as the OECD Jobs Strategy -- to deal with high and persistent unemployment that affected many member countries. These recommendations are currently being reassessed by the OECD and this paper contributes to this process. It provides a detailed description of labour market reforms in member countries over the past ten years, together with a short overview of changes in macroeconomic policies and reforms affecting product markets. It attempts to rank countries according with their past reform efforts, using an aggregate reform intensity indicator, and analyses the link, though in a very preliminary way, between reforms and labour market performance. Overall, there is little evidence of a link between initial conditions and subsequent reform efforts, with some countries taking only modest measures despite a poor starting point, while others carrying out ambitious programs even though their initial conditions were already relatively favourable. Over the past decade, member countries have employed very diverse reform strategies, from comprehensive reforms package (Denmark, Finland and the Netherlands) -- as recommended in the initial Jobs Strategy -- to reforms more narrowly targeted on specific fields where deep action was undertaken (France, Italy, the United Kingdom and Ireland). The intensity of reforms has differed markedly across policy fields, with more action being undertaken in areas that are more widely accepted by the population, such as active labour market policies and cuts of labour taxes. Please note that annexes are available on the Economics Department Website at: www.oecd.org/eco/Working_Papers. <P>Évaluation de la Stratégie de l’OCDE pour l’Emploi En 1994, l’OCDE a publié un ensemble de recommandations -- connu sous le nom de Stratégie de l’OCDE pour l’Emploi -- afin de remédier au chômage élevé et persistant qui affectait beaucoup de pays membres. Le Secrétariat réévalue actuellement ces recommandations, et ce document s’inscrit dans ce processus de réévaluation. Il fournit une description détaillée les réformes du marché du travail entreprises dans les pays membres au cours des dix dernières années ainsi qu’un résumé des modifications de politique macroéconomique et des réformes des marchés des produits. Il contient une tentative de classer les pays selon les efforts de réforme qu’ils ont déployés dans le passé, basée sur un indicateur agrégé d’intensité des réformes, et analyse d’une manière rudimentaire le lien entre les réformes et la performance du marché du travail. En général, il paraît difficile d’établir un lien entre les conditions initiales et l’effort de réforme déployé par la suite : certains pays n’ont entrepris que des réformes modestes malgré une mauvaise situation initiale alors que d’autres pays mettaient en œuvre des programmes de réformes ambitieux bien que leurs conditions initiales étaient déjà relativement favorables. Durant la dernière décennie, les pays membres ont utilisé des stratégies de réforme très différentes, certains (Danemark, Finlande et les Pays- Bas) mettant en œuvre des ensembles de réformes globaux (couvrant presque tous les aspects du marché du travail) -- comme il était recommandé dans la Stratégie pour l’Emploi -- alors que d’autres (France, Irlande, Italie et Royaume Uni) restreignaient leur action à des réformes ciblées sur certains aspects spécifiques du marché de l’emploi qui ont fait l’objet d’une action en profondeur. L’intensité des réformes a varié beaucoup d’un domaine à l’autre et des réformes plus importantes ont généralement été adoptées concernant des aspects bénéficiant d’un plus grand support de la population, comme les politiques actives de l’emploi et les réductions des taxes sur le travail. Veuillez noter que les annexes sont disponibles sur le site web du département des affaires économiques: www.oecd.org/eco/documentsdetravail. |
| Keywords: | wage level, retirement policies, time allocation and labour supply (part-time employment, work sharing), allocation du temps, salaires, political economy, économie politique, capitalist systems, compensation and labour costs, government policy, plant closings, public policy, severance pay, structure and effect, trade unions, unemployment insurance, wages, wage level and structure, welfare and poverty, système capitaliste, indemnisations et coûts du travail, politique du gouvernement, objectif, fermeture d'entreprises, politique publique, politique des pensions, indemnités de licenciement, structure et effets, syndicats, assurance chômage, niveau et structure des salaires, aide sociale et pauvreté, emploi à temps partiel, partage du travail, offre de travail |
| JEL: | I38 J22 J26 J31 J38 J51 J65 P16 |
| Date: | 2005–05–11 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:429-en&r=lab |
| By: | Carsten Eckel; Hartmut Egger |
| Abstract: | This paper studies the relationship between wage negotiations and the mode of foreign market penetration in a general equilibrium framework. We analyze the incentives of firms to set up a foreign production facility for improving their bargaining position vis-à-vis local unions. This renders the allocation of bargaining power among firms and unions a key determinant of the share of multinational enterprises and exporting firms. The economic mechanisms in this paper provide novel insights on how wages and unemployment rates adjust to economic integration. We distinguish between short-run effects for a given number of competitors and long-run effects after firm entry/exit. This allows us to identify possible globalization paths and to analyze their consequences for domestic labor markets. |
| Keywords: | multinational firms, economic integration, wage bargaining, unemployment |
| JEL: | F12 F15 F16 F23 J51 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_1711&r=lab |
| By: | Marc Andreas Mündler; Sascha O. Becker |
| Abstract: | Multinational labor demand responds to wage differentials at the extensive margin, when a multinational enterprise (MNE) expands into foreign locations, and at the intensive margin, when an MNE operates existing affiliates across locations. We derive conditions for parametric and nonparametric identification of an MNE model to infer elasticities of labor substitution at both margins, controlling for location selectivity. Prior studies have rarely found foreign wages or operations to affect employment. Our strategy detects salient adjustments at the extensive margin for German MNEs. With every percentage increase in German wages, German MNEs allocate 2,000 manufacturing jobs to Eastern Europe at the extensive margin and 4,000 jobs overall. |
| Keywords: | multinational enterprise, location choice, sample selectivity, labor demand, translog cost function, nonparametric estimation |
| JEL: | C14 C24 F21 F23 J23 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_1713&r=lab |
| By: | Andrew Leigh |
| Abstract: | How are hourly wages affected by the Earned Income Tax Credit? Two strategies are utilized to determine the relationship between the credit and hourly wages. First, I use variation in state EITC supplements, which magnify the effect of the federal EITC. I find that a 10 percent increase in the generosity of the EITC is associated with a 4 percent fall in the wages of high school dropouts and a 2 percent fall in the wages of those with only a high school diploma, while having no effect on the wages of college graduates. Given standard estimates of labor demand, this is consistent with the common finding that the EITC boosts labor supply. Although workers with children receive a more generous tax credit than childless workers, and the effect of the credit on labor force participation is larger for those with children, the hourly wages of both groups are similarly affected by an increase in the overall generosity of the EITC. A second strategy is then implemented, based on the insight that the impact of the EITC on wages is determined by the typical EITC parameters in an employee’s labor market, rather than by the individual’s own EITC eligibility. Constructing a simulated instrument for the EITC parameters in an employee’s labor market, I find that wages respond to variation in the fraction of eligible employees and the average EITC rate, but do not respond systematically to changes in the marginal EITC rate. |
| Keywords: | taxation incidence, labor supply, simulated instrument |
| JEL: | H22 H23 J22 J30 |
| Date: | 2005–08 |
| URL: | http://d.repec.org/n?u=RePEc:auu:dpaper:494&r=lab |
| By: | Ethan Lewis |
| Abstract: | Using detailed plant- level data from the 1988 and 1993 Surveys of Manufacturing Technology, this paper examines the impact of skill mix in U.S. local labor markets on the use and adoption of automation technologies in manufacturing. The level of automation differs widely across U.S. metropolitan areas. In both 1988 and 1993, in markets with a higher relative availability of lessskilled labor, comparable plants – even plants in the same narrow (4-digit SIC) industries – used systematically less automation. Moreover, between 1988 and 1993 plants in areas experiencing faster less-skilled relative labor supply growth adopted automation technology more slowly, both overall and relative to expectations, and even de-adoption was not uncommon. This relationship is stronger when examining an arguably exogenous component of local less-skilled labor supply derived from historical regional settlement patterns of immigrants from different parts of the world. These results have implications for two long-standing puzzles in economics. First, they potentially explain why research has repeatedly found that immigration has little impact on the wages of competing native-born workers at the local level. It might be that the technologies of local firms—rather than the wages that they offer—respond to changes in local skill mix associated with immigration. A modified two-sector model demonstrates this theoretical possibility. Second, the results raise doubts about the extent to which the spread of new technologies have raised demand for skills, one frequently forwarded hypothesis for the cause of rising wage inequality in the United States. Causality appears to at least partly run in the opposite direction, where skill supply drive s the spread of skill-complementary technology. |
| Keywords: | Technological change, immigration, local labor market |
| JEL: | J2 F1 O3 |
| Date: | 2005–05 |
| URL: | http://d.repec.org/n?u=RePEc:cen:wpaper:05-04&r=lab |
| By: | Shihe Fu |
| Abstract: | Existing studies have explored either only one or two of the mechanisms that human capital externalities percolate at only macrogeographic levels. This paper uses the 1990 Massachusetts Census data and tests four mechanisms at the microgeographic levels in the Boston metropolitan area labor market. We propose that individual workers can learn from their occupational and industrial peers in the same local labor market through four channels: depth of human capital stock, Marshallian labor market externalities, Jacobs labor market externalities, and thickness of the local labor market. We find that all types of human capital externalities are significant across Census blocks. Different types of externalities attenuate at different speeds over distances. For example, the effect of human capital depth decays rapidly beyond three miles away from block centroid. We conclude that knowledge spillovers are very localized within microgeographic scope in cities that we call Smart Café Cities. |
| Keywords: | Human capital externalities, Labor market agglomeration, Hedonic wage model, Marshallian externalities, Jacobs externalities, Spatial attenation |
| JEL: | C21 J24 J31 R23 |
| Date: | 2005–10 |
| URL: | http://d.repec.org/n?u=RePEc:cen:wpaper:05-24&r=lab |
| By: | Andreas Knabe; Ronnie Schöb; Joachim Weimann |
| Abstract: | In this paper, we attempt to renew the interest in marginal employment subsidies. Such subsidies are paid only for a firm's additional employment exceeding some reference level and create larger employment stimuli at lower fiscal costs than general wage subsidies for all workers. If the hiring of a new employee also entails subsidizing an incumbent worker (double marginal subsidization), the replacement of regular paid workers by outsourcing employment to newly established firms – a standard critique of marginal employment subsidies – can be avoided. This additional subsidy reduces the incentive to crowd out regular employment and results in even larger employment effects. Applying the subsidy scheme to the low-skill labor market in Germany, we show that employment can be substantially increased without imposing additional fiscal burden. |
| Keywords: | unemployment, marginal employment subsidies |
| JEL: | H25 J38 J68 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_1707&r=lab |
| By: | Jose Varejao; Anabela Carneiro |
| Abstract: | Understanding the evolution of earnings inequality is a major research topic with obvious policy implications. While there is widespread belief that institutions are largely responsible for the limited rise in inequality in some European countries, it is also recognised that little or no growth in inequality could be the outcome of market forces alone. However, the role of these market forces in different institutional environments is still not entirely understood. Is the small growth in inequality at the country level reflecting small increases in inequality within and between groups or is it the result of large offsetting changes in different components? Using a large longitudinal matched employer-employee dataset we produce several measures of within and between groups inequality in Portugal for the 1986-1998 period. We focus our attention on changes in the returns to observable characteristics (gender, age and education) of workers and test the hypothesis that these changes reflect developments in the labour market. However, we depart from previous research by shifting focus from the supply side to the demand side of the labour market. Drawing on the results of the by-now large literature on plant turnover we investigate the link between plant entry and exit and changing returns to observable worker characteristics. We argue that Portugal is an interesting case study because, despite very tight regulation and a centralised wage setting system, the level and changes of earnings inequality in recent years make the Portuguese case akin to the US and UK cases rather than to other European cases that share with Portugal similar labour market institutions. Furthermore, high firing costs have previously been identified as the cause for a larger share of employment adjustment occurring in Portugal through plant openings and closings as an alternative to the expansion and contraction of continuing plants. Our analysis is done at the regional level - 28 regions in mainland Portugal (NUTS III) are considered. The advantages of working at the regional level are twofold. First, data for all regions come from the same source - the Personnel Records - which eliminates all issues of comparability that plague many studies dealing with international comparisons. Second, regional comparisons within the same country guarantees a common institutional background which is appropriate given our focus on the role market forces play in shaping patterns of changing earnings inequality. Personnel Records are an administrative survey administered by the Ministry of Employment which is mandatory to all plants with at least one wage earner. Data reported by respondents include characteristics of the plant (location, industry and size), the firm they belong to (location, industry, total employment, annual sales and legal status) and each worker in the plant. Reported worker characteristics include gender, age, education, skill, tenure, earnings and weekly hours of work). Because each plant is assigned a unique invariant identifier, plants can be followed across waves and entries and exits can be identified. On average, the data contains information on 200 thousand plants and 2 million workers per year. |
| Date: | 2005–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa05p709&r=lab |
| By: | Reinhold Kosfeld; Christian Dreger |
| Abstract: | Changes in production and employment are closely related over the course of the business cycle. However, as exemplified by the laws of Verdoorn (1949, 1993) and Okun (1962, 1970), thresholds seem to be present in the relationship. Due to capacity reserves of the firms, output growth must exceed certain levels for the creation of new jobs or a fall in the unemployment rate. While Verdoorn's law focuses on the growth rate of output sufficient for an increase in employment, in Okun's law, the fall in the unemployment rate becomes the focus of attention. In order to assess the future development of employment and unemployment, these thresholds have to be taken into account. They serve as important guidelines for policymakers. In contrast to previous studies, we present joint estimates for both the employment and unemployment threshold. Due to demographic patterns and institutional settings on the labour market, the two thresholds can differ, implying that minimum output growth needed for a rise in employment may not be sufficient for a simultaneous drop in the unemployment rate. Second, regional information is considered to a large extent. In particular, the analysis is carried out using a sample of 180 German regional labour markets, see Eckey (2001). Since the cross-sections are separated by the flows of job commuters, they correspond to travel-to-work areas. Labour mobility is high within a market, but low among the entities. As the sectoral decomposition of economic activities varies across the regions, the thresholds are founded on a heterogeneous experience, leading to more reliable estimates.The contribution to the literature is twofold. First, to the best of our knowledge, no previous paper has investigated a similar broad regional dataset for the German economy as a whole before. By using a panel dataset, information on the regional distributions around the regression lines as well as theirs positional changes is provided for each year. Second, the methods applied are of new type. They involve a mixture of pooled and spatial econometric techniques. Dependencies across the regions may result from common or idiosyncratic (region specific) shocks. In particular, the eigenfunction decomposition approach suggested by Griffith (1996, 2000) is used to identify spatial and non-spatial components in regression analysis. As the spatial pattern may vary over time, inference is conducted on the base of a spatial SUR model. Due to this setting, efficient estimates of the thresholds are obtained. With the aid of a geographic information system (GIS) variation of the spatial components can be made transparent. With Verdoorn’s and Okun’s law the figures show some significant patterns become obvious over time. In respect to Verdoorn’s law, for instance, a stripe of high values in the north-western part from Schleswig-Holstein via Lower Saxony and North Rhine Westfalia to Rhineland Palatinate is striking in all years but 1994 and 1995. In most periods the spatial component is likewise concentrated in Saxony. Clusters of low values can be found in northern Bavaria and, in some periods, in Thüringen and Mecklenburg-Vorpommern. Other parts of Germany appear to be more fragmented consisting of relative small clusters of low, medium and high values of the spatial component. With Okun’s law some changing spatial patterns arise. In all, spatially filtering provides valuable insights into the spatial dimensions of the laws of Verdoorn and Okun. Threshold employment and unemployment, regional labour markets, spatial filtering techniques, spatial SUR analysis |
| Date: | 2005–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa05p39&r=lab |
| By: | Grigoris Zarotiadis; T. Lynn Riggs |
| Abstract: | In order to examine the worsening of inequality between workers of different skill levels over the past three decades and to further motivate the theoretical discussion on this issue, we use the decomposition methodology to focus on the interaction of within- and between-industry changes of the relative skill intensity in U.S. manufacturing. Unlike previous work, we use more detailed levels of industry classification (5-digit SIC product codes), and we analyze the impact of plants switching industries as well as of plant births and deaths on these changes. Internal, plant-level data from the U.S. Census Bureau's Longitudinal Research Database and the new Longitudinal Business Database provide us with the requisite information to conduct these studies. Finally, our empirical conclusions are discussed in relation to the inspired theoretical inference, as they enrich the debate concerning the sources of the inequality by justifying the skill-biased character of technical change. |
| Keywords: | Skill Intensity, Skill-Biased Technical Change, Wage Inequality |
| JEL: | F10 F16 E24 J21 |
| Date: | 2006–01 |
| URL: | http://d.repec.org/n?u=RePEc:cen:wpaper:06-01&r=lab |
| By: | Ricardo Mateo (Facultad de Económicas, Universidad de Navarra) |
| Abstract: | Absenteeism among manual workers is, without doubt, one of the most significant factors to affect the functioning of assembly lines in developed markets. That high levels of absenteeism have negative repercussions on the quality and costs of operations is a widely held view. According to the scientific theory of work, workers who temporarily stand in for their absent colleagues affect production quality levels because of a lack of work specialization. However, as the technology of assembly lines has improved, the need for line operator specialization has gone into decline. In this article, we analyse the effects of absenteeism on four assembly lines over the course of one year. The analysis of two hundred working days reveals more than two hundred thousand instances of effects on the quality of products. In contrast to established thinking, the empirical evidence we present here confirms that absenteeism does not produce problems in the quality of operations even at the highest levels. This evidence can be explained by the fact that the value of specialisation among manual workers has been significantly reduced by the invention of more sophisticated and specialised machinery. |
| Keywords: | assembly lines, quality, absenteeism, performance |
| JEL: | M54 M51 |
| URL: | http://d.repec.org/n?u=RePEc:una:unccee:wp0406&r=lab |
| By: | Robert Fairlie; Alicia Robb |
| Abstract: | Four decades ago, Nathan Glazer and Daniel Patrick Moynihan made the argument that the black family "was not strong enough to create those extended clans that elsewhere were most helpful for businessmen and professionals." Using data from the confidential and restricted access Characteristics of Business Owners Survey, we investigate this hypothesis by examining whether racial differences in family business backgrounds can explain why black-owned businesses lag substantially behind white-owned businesses in sales, profits, employment size and survival probabilities? Estimates from the CBO indicate that black business owners have a relatively disadvantaged family business background compared with white business owners. Black business owners are much less likely than white business owners to have had a self-employed family member owner prior to starting their business and are less likely to have worked in that family member's business. We do not, however, find sizeable racial differences in inheritances of business. Using a nonlinear decomposition technique, we find that the relatively low probability of having a self-employed family member prior to business startup among blacks does not generally contribute to racial differences in small business outcomes. Instead, the lack of prior work experience in a family business among black business owners, perhaps by limiting their acquisition of general and specific business human capital, negatively affects black business outcomes. We also find that limited opportunities for acquiring specific business human capital through work experience in businesses providing similar goods and services contribute to worse business outcomes among blacks. We compare these estimates to contributions from racial differences in owner's education, startup capital, geographical location and other factors. |
| Date: | 2005–06 |
| URL: | http://d.repec.org/n?u=RePEc:cen:wpaper:05-06&r=lab |
| By: | José M. Labeaga; Cristina Vilaplana |
| Abstract: | There is a controversial debate about the effects of permanent disability benefits on labor market behavior. In this paper we estimate equations for deserving and receiving disability benefits to evaluate the award error as the difference in the probability of receiving and deserving using survey data from Spain. Our results indicate that individuals aged between 55 and 59, self-employers or working in an agricultural sector have a probability of receiving a benefit without deserving it significantly higher than the rest of individuals. We also find evidence of gender discrimination since male have a significantly higher probability of receiving a benefit without deserving it. This seems to confirm that disability benefits are being used as an instrument for exiting the labor market for some individuals approaching the early retirement or those who do not have right to retire early. Taking into account that awarding process depends on Social Security Provincial Department, this means that some departments are applying loosely the disability requirements for granting disability benefits. |
| URL: | http://d.repec.org/n?u=RePEc:fda:fdaddt:2006-18&r=lab |
| By: | Patrick Bayer (Yale University); Stephen L. Ross (University of Connecticut) |
| Abstract: | Researchers have long recognized that the non-random sorting of individuals into groups generates correlation between individual and group attributes that is likely to bias naive estimates of both individual and group effects. This paper proposes a non-parametric strategy for identifying these effects in a model that allows for both individual and group unobservables, applying this strategy to the estimation of neighborhood effects on labor market outcomes. The first part of this strategy is guided by a robust feature of the equilibrium in the canonical vertical sorting model of Epple and Platt (1998), that there is a monotonic relationship between neighborhood housing prices and neighborhood quality. This implies that under certain conditions a non- parametric function of neighborhood housing prices serves as a suitable control function for the neighborhood unobservable in the labor market outcome regression. The second part of the proposed strategy uses aggregation to develop suitable instruments for both exogenous and endogenous group attributes. Instrumenting for each individualâs observed neighborhood attributes with the average neighborhood attributes of a set of observationally identical individuals eliminates the portion of the variation in neighborhood attributes due to sorting on unobserved individual attributes. The neighborhood effects application is based on confidential microdata from the 1990 Decennial Census for the Boston MSA. The results imply that the direct effects of geographic proximity to jobs, neighborhood poverty rates, and average neighborhood education are substantially larger than the conditional correlations identified using OLS, although the net effect of neighborhood quality on labor market outcomes remains small. These findings are robust across a wide variety of specifications and robustness checks. |
| Date: | 2006–04 |
| URL: | http://d.repec.org/n?u=RePEc:uct:uconnp:2006-13&r=lab |
| By: | Migali, Giuseppe (University of Warwick) |
| Abstract: | In a world where graduate incomes are uncertain (observation of the UK graduate wages from 1993 to 2003) and the higher education is financed through governmental loan (UK Higher Education Reform 2004), we build a theoretical model to show which scheme between an income contingent loan and a mortgage loan is preferred for higher level of uncertainty. Assuming a single lifetime shock on graduate incomes, we compare the individual expected utilities under the two loan schemes, for both risk neutral and risk averse individuals. We extend the analysis for graduate people working in the public sector and private sector, to stress on the extreme difference on the level of uncertainty. To make the model more realistic, we allow for the effects of the uncertainty each year for all the individual working life, assuming that the graduate income grows following a geometric Brownian motion. In general, we find that an income contingent loan is preferred for low level of the starting wage and high uncertainty. |
| Keywords: | Choice ; Risk Aversion ; Uncertainty |
| JEL: | D81 H20 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:wrk:warwec:740&r=lab |
| By: | Nick Carroll |
| Abstract: | Who records the largest drops in life satisfaction when they move into unemployment? Do men experience a larger drop in life satisfaction than women? Do Australians and Americans record a larger drop than Europeans? Using an Australian panel data-set (the Household Income and Labour Dynamics Survey of Australia), this paper finds that the unemployed in Australia report lower life satisfaction than observationally equivalent employed people (holding current income constant). Being currently unemployed is estimated to be equivalent to the loss of $42,100 annual income for men and $86,300 annual income for women. Thus, the drop in life satisfaction, after controlling for unobserved time invariant characteristics, associated with unemployment is larger for women than men. The impact of unemployment on life satisfaction is large compared to the drops in life satisfaction associated with changes in income and disability status. It is found that unemployment is less painful for men in Australia than for men in Germany and the United Kingdom. The paper hypothesises that the large fall in life satisfaction may be the result of a drop in life-time earnings, as well as a ‘psychological’ effect. |
| Keywords: | well-being, happiness, unemployment |
| JEL: | I31 J64 |
| Date: | 2005–07 |
| URL: | http://d.repec.org/n?u=RePEc:auu:dpaper:492&r=lab |
| By: | Alice Zawacki; Amy Taylor |
| Abstract: | We identify the characteristics of establishments that paid 100 percent of health insurance premiums and the policies they offered from 1997-2001, despite increased premium costs. Analyzing data from the MEPS-IC, we see little change in the percent of establishments that paid the full cost of premiums for employees. Most of these establishments were young, small, singleunits, with a relatively high paid workforce. Plans that were fully paid generally required referrals to see specialists, did not cover pre-existing conditions or outpatient prescriptions, and had the highest out-of-pocket expense limits. These plans also were more likely than plans not fully paid by employers to have had a fee-for-service or exclusive provider arrangement, had the highest premiums, and were less likely to be self-insured. |
| Keywords: | employer-sponsored health insurance, contributions, premiums |
| Date: | 2005–12 |
| URL: | http://d.repec.org/n?u=RePEc:cen:wpaper:05-27&r=lab |
| By: | Andrew Leigh |
| Abstract: | With many countries considering the adoption of a system of earned income tax credits, it is useful to analyze how different types of credits affect labor supply and earnings. This paper focuses on a 1999 reform to the UK tax credit system, which increased the value of the credit and reduced the phase-out rate. Using panel data, with individual fixed effects, I compare eligibles and ineligibles within five groups: all individuals; those whose demographic characteristics predict that they will have low earnings; single women; women in couples; and men in couples. Over a 15-month period, boosting the credit appears to have raised the labor participation rates, hours, and earnings of those who were eligible to receive it. |
| Keywords: | working families’ tax credit, earned income tax credit, wage subsidies, labor supply, earnings, self-reported health status |
| JEL: | C23 H21 H31 I18 I38 J22 |
| Date: | 2005–03 |
| URL: | http://d.repec.org/n?u=RePEc:auu:dpaper:488&r=lab |