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on Labour Economics |
| By: | Peter Haan; Viktor Steiner |
| Abstract: | We evaluate three policy reforms targeted at older unemployed people: (i) an hourly wage subsidy, (ii) an in-work credit, and (iii) a subsidy of social security contributions on low wages. The work incentive, labour supply and welfare effects of these hypothetical reforms are analysed on the basis a detailed micro-simulation model for Germany which includes a structural household labour supply model. We find that the simulated labour supply effects of the three policy reforms would be rather similar and of moderate size, ranging between 20,000 and 30,000 older women and between 10,000 and 20,000 older men. Our results also suggest that the hourly wage subsidy yields the highest welfare gains. |
| Keywords: | in-work support, wage subsidies, unemployment, elderly workers |
| JEL: | J21 J48 H21 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp641&r=lab |
| By: | Alena Bicakova |
| Abstract: | The trade-off hypothesis suggests that high wage inequality in the US and the UK and high unemployment in countries of continental Europe are consequences of the same negative change in the demand for the low skilled under different degrees of wage rigidity. This paper uses a labor supply and labor demand model with heterogenous types of labor in order to test the trade-off hypothesis and to analyze the effect of market forces and wage rigidity on changes in the between-group variation in earnings, employment, unemployment, and inactivity in France, the UK, and the US between 1990 and 2002. The results provide clear evidence in favor of the trade-off hypothesis when France is compared to the US as well as to the UK. We also find that labor supply and labor demand are more wage elastic in the UK than in the other two countries. Counterfactual simulations based on the estimated model reveal that exogenous changes in the relative demand for skills dominated in France, while supply shifts had more impact in the US over the studied period. In the UK, the opposite effects of the supply and the demand shifts were of similar magnitude, even though the supply effects dominated for the least and the most educated. In addition, an extended version of the trade-off hypothesis is proposed which considers not only wage inequality and unemployment but also labor supply. If labor force participation is sensitive to wages, then rising wage inequality is likely to be accompanied by an increase in the inactivity rate. We find that wage elasticity of labor force participation is positive and significant in all three countries, and suggest that depending on the institutions that affect wage rigidity, there is trade-off between unemployment on one hand, and wage inequality and inactivity on the other. |
| Keywords: | Unemployment and Wage Inequality Trade-o®; Wage Rigidity; Inactivity |
| JEL: | J21 J31 J64 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:eui:euiwps:eco2006/31&r=lab |
| By: | Shouyong Shi |
| Abstract: | I analyze the equilibrium in a labor market where firms offer wage-tenure contracts to direct the search of employed and unemployed workers. Each applicant observes all offers and there is no coordination among individuals. Workers' applications (as well as firms' recruiting decisions) are optimal. This optimality requires the equilibrium to be formulated differently from the that in the literature of undirected search. I provide such a formulation and show that the equilibrium exists. In the equilibrium, individuals explicitly tradeoff between an offer and the matching rate at that offer. This tradeoff yields a unique offer which is optimal for each worker to apply, and applicants are separated endogenously according to their current values. Despite such uniqueness and separation, there is a non-degenerate and continuous wage distribution of employed workers in the stationary equilibrium. The density of this distribution is increasing at low wages and decreasing at high wages. In all equilibrium contracts, wages increase with tenure, which results in quit rates to decrease with tenure. Moreover, the model makes novel predictions about individuals' job-to-job transition and comparative statics. |
| Keywords: | Directed search; on the job; wage tenure contracts |
| JEL: | D83 E24 J60 |
| Date: | 2006–11–03 |
| URL: | http://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-260&r=lab |
| By: | Robert Plasman (DULBEA, Université libre de Bruxelles, Brussels); Tojerow (DULBEA, Université libre de Bruxelles, Brussels); François Rycx (DULBEA, Université libre de Bruxelles, Brussels, and IZA, Bonn) |
| Abstract: | This paper investigates inter-industry wage differentials in Belgium, taking advantage of access to a unique matched employer-employee data set covering the period 1995-2002. Findings show the existence of large and persistent wage differentials among workers with the same observed characteristics and working conditions, employed in different sectors. The hypothesis that workers with better unmeasured abilities are over-represented in high-wage sectors may not be rejected on the basis of Martins’ (2004) methodology. However, the contribution of this explanation to the observed industry wage differentials appears to be limited. Further results show that ceteris paribus, workers earn significantly higher wages when employed in more profitable firms. Our instrumented wage-profit elasticity stands at 0.063 and Lester’s range of pay is about 41 per cent of the mean wage. This rent-sharing phenomenon accounts for a large fraction of the industry wage differentials. We find indeed that the magnitude, dispersion and significance of industry wage differentials decreases sharply when controlling for profits. |
| Keywords: | Collective bargaining, wage structure. |
| JEL: | J31 J51 J52 |
| Date: | 2006–10 |
| URL: | http://d.repec.org/n?u=RePEc:dul:wpaper:06-14rs&r=lab |
| By: | Mark L Bryan (Institute for Social and Economic Research) |
| Abstract: | Paid holiday entitlements are similar on average in the UK to other western European countries, but there is much more variation across jobs in the UK. This paper examines the determinants of paid holiday entitlements for full-time UK workers and the relationship of entitlements to earnings. Holiday entitlements are strongly related to educational qualifications, occupation, job tenure and other employer characteristics. However, these factors cannot explain most of the variation in entitlements, implying there is a wide range of remuneration policies across otherwise similar employers or that some workers manage to obtain higher levels of holiday entitlement than other comparable workers. Longer holiday entitlements are associated with higher earnings, even after controlling for human capital and job characteristics, so that earnings differentials are additional not compensating. By contrast, shorter weekly work hours are associated with lower earnings. Unmeasured skill accumulation or improvements in job match quality appear to be associated with longer holiday entitlements (and higher earnings) but to have little relation to weekly working hours. |
| Keywords: | holiday, labour demand, labour supply |
| Date: | 2006–10 |
| URL: | http://d.repec.org/n?u=RePEc:ese:iserwp:2006-52&r=lab |
| By: | David Neumark; William Wascher |
| Abstract: | We review the burgeoning literature on the employment effects of minimum wages - in the United States and other countries - that was spurred by the "new minimum wage research" beginning in the early 1990's. The wide range of existing estimates makes it difficult for us to draw broad generalizations about the implications of the new minimum wage research. Clearly, no consensus now exists about the overall effects on low-skilled employment of an increase in the minimum wage. However, the oft-stated assertion that this recent research fails to support the traditional view that the minimum wage reduces the employment of low-skilled workers is clearly incorrect. The overwhelming majority of the studies surveyed in this paper give a relatively consistent (although not always statistically significant) indication of negative employment effects of minimum wages. In addition, among the papers we view as providing the most credible evidence, almost all point to negative employment effects. Moreover, the evidence tends to point to disemployment effects of minimum wages in the United States as well as many other countries. Two potentially more important conclusions emerge from our review. First, we see very few - if any - cases where a study provides convincing evidence of positive employment effects of minimum wages, especially from studies that focus on broader groups (rather than a narrow industry) for which the competitive model predicts disemployment effects. Second, when researchers focus on the least-skilled groups most likely to be adversely affected by minimum wages, we regard the evidence as relatively overwhelming that there are stronger disemployment effects for these groups. |
| JEL: | J23 J38 |
| Date: | 2006–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12663&r=lab |
| By: | Thomas Rawski |
| Abstract: | Recent years have brought major changes in many dimensions of China’s large and dynamic economy. Issues of employment and unemployment, labor compensation, wage differentials, working conditions, migration, job mobility, and employment security figure prominently in these developments. This essay reviews recent developments in the Chinese labor scene, focusing successively on demographics, employment, unemployment, migration, productivity, wages, and distribution. The paper concludes with speculation about possible policy responses to China’s growing problems of unemployment and excess labor supply. |
| Date: | 2005–06 |
| URL: | http://d.repec.org/n?u=RePEc:pit:wpaper:280&r=lab |
| By: | Linda Loury |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:tuf:tuftec:0617&r=lab |
| By: | Andy Snell; Jonathan Thomas |
| Abstract: | This paper analyses a model in which firms cannot pay discriminate based on year of entry to a firm, and develops an equilibrium model of wage dynamics and unemployment. The model is developed under the assumption of worker mobility, so that workers can costlessly quit jobs at any time. Firms on the other hand are committed to contracts. Thus the model is related to Beaudry and DiNardo (1991). We solve for the dynamics of wages and unemployment, and show that real wages do not necessarily clear the labour market. Using sectoral productivity data from the post-war US economy, we assess the ability of the model to match actual unemployment and wage series. We also show that equal treatment follows in our model from the assumption of at-will employment contracting. |
| Keywords: | labour contracts, business cycle, unemployment, equal treatment, cohort effects |
| JEL: | E32 J41 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_1835&r=lab |
| By: | Richard Holt |
| Abstract: | Labour markets play a key role in business cycle analysis. Although a focal point of research on unemployment over the past decade, endogenous job destruction has recently fallen into disfavour, since its introduction leads to a positively sloped Beveridge curve. We show that introducing variation in hours per worker - a second margin for labour input adjustment in combination with endogenous job destruction generates a negatively sloped Beveridge curve, a data consistent correlation structure for job flows and captures many aspects of the cyclical behaviour of hours per worker. This improved peformance is robust to wage rigidity (which raises the variability of unemployment and labour market tightness) and a wide range of empirically plausible labour supply elasticities - but not completely inelastic labour supply implicit in much of the literature on labour market search. |
| URL: | http://d.repec.org/n?u=RePEc:edn:esedps:146&r=lab |
| By: | Liang Zhao; Joyce P. Jacobsen (Department of Economics, Wesleyan University) |
| Abstract: | In The Bell Curve, Herrnstein and Murray (1994) claim, based on evidence from cross-sectional regressions, that differences in wages in the U.S. labor market are predominantly explained by general intelligence. Cawley, Heckman, and Vytlacil (1999), using evidence from random effects panel regressions, reject this claim, in part because returns to general intelligence vary by racial and gender subgroups in their results. In this article, we examine the regression methods used by both sides of the debate and conclude that neither is the appropriate method to analyze the NLSY data that both use. We introduce the Hausman-Taylor estimator to obtain consistent estimated coefficients on the time-invariant general intelligence-related variables and also extend the analysis up through 2002. While many additional socio-economic factors are important explanatory variables in determining the wage rate, the effect of general intelligence on wages is larger in the Hausman-Taylor specification for the 1979-1994 panel than in either the cross-sectional or random effects models, though it becomes statistically insignificant for the 1994-2002 panel. The Hausman-Taylor analysis also indicates no significantly different returns to intelligence by race or gender group. |
| Keywords: | wages, cognitive ability, education |
| JEL: | J24 J31 |
| Date: | 2006–11 |
| URL: | http://d.repec.org/n?u=RePEc:wes:weswpa:2006-026&r=lab |
| By: | Hans Gersbach (Alfred-Weber-Institut, Department of Economics, University of Heidelberg); Armin Schmutzler (Socioeconomic Institute, University of Zurich) |
| Abstract: | We develop a product market theory that explains why firms provide their workers with skills that are sufficiently general to be potentially useful for competitors. We consider a model where firms first decide whether to invest in industry-specific human capital, then make wage offers for each others’ trained employees and finally engage in imperfect product market competition. Equilibria with and without training, and multiple equilibria can emerge. If competition is sufficiently soft and returns to the number of trained workers decrease sufficiently, firms may invest in non-specific training if others do the same, because they would otherwise suffer a competitive disadvantage or need to pay high wages in order to attract trained workers. |
| Keywords: | industry-specific training, human capital, oligopoly, turnover |
| JEL: | D42 L22 L43 L92 |
| Date: | 2006–11 |
| URL: | http://d.repec.org/n?u=RePEc:soz:wpaper:0610&r=lab |
| By: | Sebastian Kube; Michel André Maréchal; Clemens Puppe |
| Abstract: | We study the role of reciprocity in a labor market field experiment. In a recent paper, Gneezy and List (2006) investigate the impact of gift exchange in this context and find that it has only a transient effect on long run outcomes. Extending their work to examine both positive and negative reciprocity, we find consonant evidence in the positive reciprocity condition: the gift does not work well in the long run (if at all). Yet, in the negative reciprocity treatment we observe much stronger effects: a wage reduction has a significant and lasting negative impact on efforts. Together, these results highlight the asymmetry of positive and negative reciprocity that exists in the field, and provide an indication of the relative importance of each in the long run. |
| Keywords: | reciprocity, gift exchange, field experiment |
| JEL: | C93 J30 |
| Date: | 2006–11 |
| URL: | http://d.repec.org/n?u=RePEc:usg:dp2006:2006-27&r=lab |
| By: | Christopher H. Wheeler (Federal Reserve Bank of St. Louis) |
| Abstract: | In finding a career, workers tend to make numerous job changes, with the majority of "complex" changes (i.e. those involving changes of industry) occurring relatively early in their working lives. This pattern suggests that workers tend to experiment with different types of work before settling on the one they like best. Of course, since the extent of economic diversity differs substantially across local labor markets in the U.S. (e.g. counties and cities), this career search process may exhibit important differences depending on the size of a worker's local market. This paper explores this issue using a sample of young male workers drawn from the National Longitudinal Survey of Youth 1979 Cohort. The results uncover two rather striking patterns. First, the likelihood that a worker changes industries rises with the size and diversity of his local labor market when considering the first job change he makes. Second, however, this association gradually decreases as a worker makes greater numbers of job changes. By the time he makes his fourth change, the likelihood of changing industries significantly decreases with the scale and diversity of the local market. Both results are consistent with the idea that cities play an important role in the job matching process. |
| Keywords: | Job Search, Labor Market Matching, Agglomeration |
| JEL: | J24 R23 |
| Date: | 2006–09 |
| URL: | http://d.repec.org/n?u=RePEc:upj:weupjo:06-131&r=lab |
| By: | Linda Loury |
| Abstract: | Previous work on social interactions has analyzed the effects of nuclear family, peer, school, and neighborhood characteristics. This paper complements this research by first showing that individuals from similar nuclear families often differ in extended family member characteristics. It then demonstrates that older extended family members - aunts, uncles, and grandparents – independently affect college attendance probabilities and test score results of their younger relatives. In some cases, the sizes of the estimated effects are large enough to substantially narrow the achievement gap between disadvantaged and other youth. |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:tuf:tuftec:0618&r=lab |
| By: | Eric A. Hanushek; Lei Zhang |
| Abstract: | Returns to education are traditionally estimated in a Mincer wage equation from the variation in schooling for a cross-section of individuals of different ages. Because individuals receive education at different time periods, when the quality of their education may not be identical, this method leads to an over- or under-estimation of the return to education of a given quality depending on how education quality evolves over time. This quality issue interacts with ability bias from self-selection into schooling and is particularly problematic when comparing returns across different countries. Using microdata from the International Adult Literacy Survey, we construct quality adjusted measures of schooling attained at different time periods and use these along with international literacy test information to estimate returns to skills for 13 countries. Estimated returns to quality-adjusted education are considerably higher than the traditional estimate for most countries, but these are offset to varying degrees by selection biases on ability. The combined corrections alter significantly the pattern of returns to schooling and skill seen from naïve Mincer wage equations. |
| JEL: | I2 J2 |
| Date: | 2006–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12664&r=lab |
| By: | Kalenkoski, Charlene Marie (Ohio University); Sabrina Wulff Pabilonia (U.S. Bureau of Labor Statistics) |
| Abstract: | Using nationally representative data from the NLSY97 and a simultaneous equations model, this paper analyzes the financial motivations for and the effects of employment on U.S. college students’ academic performance. The data confirm the predictions of the theoretical model that lower parental transfers and greater costs of attending college increase the number of hours students work while in school, although students are not very responsive to these financial motivations. They also show that increased hours of work lead to lower grade point averages (GPAs), at least for students attending four-year colleges. |
| Keywords: | employment, transfers, GPA |
| JEL: | D1 I2 J22 |
| Date: | 2006–11 |
| URL: | http://d.repec.org/n?u=RePEc:bls:wpaper:ec060130&r=lab |
| By: | Amelie Constant; Liliya Gataullina; Klaus F. Zimmermann |
| Abstract: | The European Union's strategy to raise employment is confronted with very low work participation among many minority ethnic groups, in particular among immigrants. This study examines the potential of immigrants' identification with the home and host country ethnicity to explain that deficit. It introduces a two-dimensional understanding of ethnic identity, as a combination of commitments to the home and host cultures and societies, and links it to the labour market participation of immigrants. Using unique German survey data, the paper identifies marked gender differences in the effects of ethnic identification on the probability to work controlling for a number of other determinants. While ethnically assimilated immigrant men outperform those who are ethnically separated and marginalized, they are not different from those with openness to both cultures. Assimilated immigrant women do better than those separated and marginalized, but those who develop an attachment to both cultures clearly fare the best. |
| Keywords: | Ethnicity, ethnic identity, acculturation, immigrant assimilation, immigrant integration, gender, work |
| JEL: | F22 J15 J16 Z10 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp643&r=lab |
| By: | Eric A. Hanushek; Steven G. Rivkin |
| Abstract: | Substantial uncertainty exists about the impact of school quality on the black-white achievement gap. Our results, based on both Texas Schools Project (TSP) administrative data and the Early Childhood Longitudinal Survey (ECLS), differ noticeably from other recent analyses of the black-white achievement gap by providing strong evidence that schools have a substantial effect on the differential. The majority of the expansion of the achievement gap with age occurs between rather than within schools, and specific school and peer factors exert a significant effect on the growth in the achievement gap. Unequal distributions of inexperienced teachers and of racial concentrations in schools can explain all of the increased achievement gap between grades 3 and 8. Moreover, non-random sample attrition for school changers and much higher rates of special education classification and grade retention for blacks appears to lead to a significant understatement of the increase in the achievement gap with age within the ECLS and other data sets. |
| JEL: | H4 H7 I2 J15 J7 I1 |
| Date: | 2006–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12651&r=lab |
| By: | Migali, Giuseppe (University of Warwick) |
| Abstract: | In a world where graduate incomes are uncertain and higher education is financed through governmental loans, we build a theoretical model to show whether an income contingent loan (ICL) or a mortgage loan (ML) is preferred for higher levels 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. The theoretical model is calibrated using real data on wage uncertainty and considering the features of the UK Higher Education Reform to observe the implications of the switch from a ML to an ICL and the effect of the top-up fees. Different scenarios are simulated according to individual characteristics and family background. We finally extend the initial model to incorporate stochastic changes of income over time. |
| Keywords: | Education Choice ; Risk Aversion ; Uncertainty |
| JEL: | D81 I22 H80 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:wrk:warwec:775&r=lab |
| By: | Daniel Mejía; Marc St-Pierre |
| Abstract: | This paper develops a tractable, heterogeneous agents general equilibrium model where individuals have different endowments of the factors that complement the schooling process. The paper explores the relationship between inequality of opportunities, inequality of outcomes, and aggregate efficiency in human capital formation. Using numerical solutions we study how the endogenous variables of the model respond to two different interventions in the distribution of opportunities: a meanpreserving spread and a change in the support. The results suggest that a higher degree of inequality of opportunities is associated with lower average level of human capital, a lower fraction of individuals investing in human capital, higher inequality in the distribution of human capital, and higher wage inequality. In particular, the model does not predict a trade-off between aggregate efficiency in human capital formation (as measured by the average level of human capital in the economy) and equality of opportunity. |
| Keywords: | Human Capital, Inequality, Equity-Efficiency Trade-off. Classification JEL: J24; J31; O15; D33. |
| URL: | http://d.repec.org/n?u=RePEc:bdr:borrec:415&r=lab |