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on Labour Economics |
| By: | Tomi Kyyrä |
| Abstract: | This thesis consists of four studies. The first study examines wage differentials between women and men in the Finnish manufacturing sector. A matched employer-employee data set is used to decompose the overall gender wage gap into the contributions of sex differences in human capital, labour market segregation, and residual within-job wage differentials. The topic of the second study is the relationship between the extended unemployment benefits and labour market transitions of older workers. The analysis exploits a quasi-experimental setting caused by a change in the law that raised the eligibility age of workers benefiting from extended benefits. Roughly half of the unemployed workers with extended benefits are estimated to be effectively withdrawn from labour market search. The risk of unemployment declined and the re-employment probability increased among the age groups directly affected by the reform. The third study provides an empirical analysis of a structural equilibrium search model. Estimation results from various model specifications are compared and discussed. The last study is a methodological study where the difficulties of interpreting the results of competing risks hazard models are discussed and a solution for a particular class of models is proposed. It is argued that a common practice of reporting the results of qualitative response models in terms of marginal effects is also useful in the context of competing risks duration models. |
| Date: | 2007–04–10 |
| URL: | http://d.repec.org/n?u=RePEc:fer:resrep:133&r=lab |
| By: | Sami Napari |
| Abstract: | In Finnish manufacturing, the gender wage gap more than doubles during the first ten years in the labor market. This paper studies the factors contributing to the gender gap in early-career wage growth. The analysis shows that the size of the gender gap in wage growth varies with mobility status the gap being much higher when changing employers compared to within-firm wage growth. Several explanations for the gender gap in wage growth based on human capital theory and theory of compensating wage differentials are considered. However, most of the gap in wage growth remains unexplained. Further analysis documents that the female penalty in wage growth increases significantly as we move along the conditional wage growth distribution with a sharp acceleration in the gap at the top of the distribution. |
| Keywords: | gender wage gap, wage growth, mobility |
| JEL: | J24 J31 J6 J7 |
| Date: | 2007–05–07 |
| URL: | http://d.repec.org/n?u=RePEc:rif:dpaper:1093&r=lab |
| By: | Romain Aeberhardt (CREST-INSEE); Julien Pouget (CREST-INSEE and IZA) |
| Abstract: | This paper attempts to explain national origin wage differentials in France. Our data come from a matched employer-employee wage survey performed in 2002. Business survey data are matched to many individual-level variables collected in a household survey. The sample of professionals is decomposed into several sub-samples: within each gender, a distinction is made according to the parents’ birthplace (France, North Africa and Southern Europe). We perform a switching regression model of wage determination and occupational employment. Our results suggest that earnings differentials mostly reflect differences in the type of jobs taken up by individuals, according to their experience, background and education. This leads us to favor an interpretation in terms of a certain degree of occupational segregation, rather than mere wage discrimination. |
| Keywords: | immigration, discrimination, wage gap, France |
| JEL: | J15 J16 J31 J71 |
| Date: | 2007–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2779&r=lab |
| By: | Roland A. Amann (University of Konstanz); Tobias J. Klein (University of Mannheim and IZA) |
| Abstract: | We analyze the joint determination of wage levels, wage growth and firm tenure. Our analysis is built on estimating a reduced form for tenure, a structural wage level equation and a structural wage growth equation. We disentangle returns to a latent type variable from estimates of general returns to tenure and wage gains from job changes. This type is related to unobservable match quality that is allowed to vary over time and to be correlated with the returns to tenure. The obtained results for Germany indicate that the type plays a crucial role in the remuneration of employees. Those types who change jobs more often obtain steeper wage profiles but earn less on average. |
| Keywords: | wage growth, returns to tenure, unobserved heterogeneity, control function approach, nonseparable model |
| JEL: | J31 |
| Date: | 2007–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2773&r=lab |
| By: | Gil S. Epstein (Bar-Ilan University, CReAM, London and IZA, Bonn); Odelia Heizler (Cohen) (Bar-Ilan University) |
| Abstract: | This paper examines the connection between illegal migration, minimum wages and enforcement policy. We first explore the employers’ decision regarding the employment of illegal migrants in the presence of an effective minimum wage. We show that the employers’ decision depends on the wage gap between those of the legal and illegal workers and on the penalty for employing illegal workers. We consider the effects a change in the minimum wage has on the employment of illegal immigrants and local workers. We conclude by considering the optimal migration policy taking into consideration social welfare issues. |
| Keywords: | illegal immigration, migration policy, minimum wage, interest groups. |
| Date: | 2007–05 |
| URL: | http://d.repec.org/n?u=RePEc:crm:wpaper:0708&r=lab |
| By: | Gangolf Groh (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg) |
| Abstract: | High an persistent unemployment, especially in the sector of low-skilled work, is usually attributed to the presence of minimum wages or unemployment benefits creating a reservation wage at wich labour demand of firms is insufficient. While not refusing this view this paper argues that also without these obstacles a situation is likely to occur which is similar to unemployment and in a rigorous sense even worse: people not finding a job in the sector of "honest work" at a wages sufficient to meet minimum consumption are forced to recourse to less desirable activities. The topic is analyzed in an OLG-context with two working periods for each generation. |
| Date: | 2007–02 |
| URL: | http://d.repec.org/n?u=RePEc:mag:wpaper:07009&r=lab |
| By: | Alan B. Krueger (Princeton University and NBER); David A. Schkade (University of California, San Diego) |
| Abstract: | This paper tests a central implication of the theory of equalizing differences, that workers sort into jobs with different attributes based on their preferences for those attributes. We present evidence from four new time-use data sets for the United States and France on whether workers who are more gregarious, as revealed by their behavior when they are not working, tend to be employed in jobs that involve more social interactions. In each data set we find a significant and sizable relationship between the tendency to interact with others off the job and while working. People’s descriptions of their jobs and their personalities also accord reasonably well with their time use on and off the job. Furthermore, workers in occupations that require social interactions according to the O’Net Dictionary of Occupational Titles tend to spend more of their non-working time with friends. Lastly, we find that workers report substantially higher levels of job satisfaction and net affect while at work if their jobs entail frequent interactions with coworkers and other desirable working conditions. |
| Date: | 2007–02 |
| URL: | http://d.repec.org/n?u=RePEc:pri:cepsud:139krueger&r=lab |
| By: | Sandra T. Silva (CEMPRE, Faculdade de Economia da Universidade do Porto, Portugal); Jorge M. S. Valente (LIACC/NIAAD, Faculdade de Economia da Universidade do Porto, Portugal); Aurora A. C. Teixeira (INESC-Porto, Faculdade de Economia da Universidade do Porto, Portugal) |
| Abstract: | This paper proposes an evolutionary model that captures the main dynamics of a world where heterogeneous firms and workers interact and co-evolve. Within a micro-meso perspective, the model focuses on the influence of firms' "institutional settings" on industry dynamics, formalizing these settings as firms' labor choices. Benefiting from insights offered by mainstream labor economics, we introduce the dynamic processes of job search, bargaining and matching in an evolutionary framework. The results of a computer simulation model show that in a stable environment there is an initial clear improvement in the average fitness of the population of incumbent firms, which then evolves around an evolutionary stationary threshold. The consideration of endogenous matching and bargaining processes in the labor market results in important frictions. Furthermore, the simulation results show an increasing wage inequality between the two types of workers considered in the model. We also consider the effect of both positive and negative demand shocks. The turbulence in the industry increases (decreases) after the negative (positive) demand shock. As expected, the negative demand shock causes a decrease in the number of vacancies and, consequently, the unemployment rates increase considerably. Following the positive demand shock, on the other hand, the firms slightly increase the number of vacancies, so the behavior in terms of unemployment rates is better than in the model without shocks. |
| Keywords: | evolutionary, firm behavior, job search, bargaining and matching, microfoundations, industrial dynamics |
| JEL: | B52 D21 L2 J2 J3 O12 |
| Date: | 2007–04 |
| URL: | http://d.repec.org/n?u=RePEc:por:fepwps:241&r=lab |
| By: | Tor Eriksson; Niels Westergaard-Nielsen |
| Abstract: | This paper consists of three parts. First, we briefly describe some key features of the labor market in Denmark, some of which contribute to the Danish labor markets behaving quite differently from those in many other European countries. The next two parts exploit detailed linked employer-employee data. In the second part we document in some detail an important aspect of the functioning and flexibility of the labor markets in Denmark: the high level of worker mobility. We show that mobility is about as high, or even higher, as in the highly fluid U.S. labor market. Finally, we describe and examine the wage structure between and within firms and changes therein since 1980, especially with an eye on possible impacts of the trend towards a more decentralized wage determination. The shift towards decentralized wage bargaining has coincided with deregulation and increased product market competition. The evidence is, however, not consistent with stronger competition in product markets eroding firm-specific rents. Hence, the prime suspect is the change in wage setting institutions. |
| JEL: | J31 J50 J62 J63 M52 |
| Date: | 2007–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13064&r=lab |
| By: | Zenou, Yves |
| Abstract: | We develop an urban-search model in which firms post wages. When all workers are identical, the Diamond paradox holds, i.e. there is a unique wage in equilibrium even in the presence of search and spatial frictions. This wage is affected by spatial and labour costs. When workers differ according to the value imputed to leisure, we show that, under some conditions, two wages emerge in equilibrium. The commuting cost affects the land market but also the labour market through wages. Workers' productivity also affects housing prices and this impact can be positive or negative depending on the location in the city. One important aspect of our model is that, even with positive search costs, wage dispersion prevails in equilibrium, a feature not possible in the non-spatial model. |
| Keywords: | Diamond paradox; search frictions; spatial compensation; urban land-use; wage dispersion |
| JEL: | D83 J64 |
| Date: | 2007–05 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:6286&r=lab |
| By: | Roland Kirstein (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg); Annette Kirstein |
| Abstract: | The instability of Cournot cartels can be overcome by a collective wage agreement if this agreement stipulates minimum fixed wages and piece rates that are legally enforceable. This new view on the institution of collective wage agreements is not only relevant for strategic management, it also has an important implication for economic policy: competition authorities should observe such agreements for their potentially collusive effect on product markets. Moreover, the model contributes to the explanation of the “fixed wage puzzle”, i.e., the observation that firms pay lower than efficient variable wages and higher fixed wages than predicted by contract theory. |
| Keywords: | Piece rate, fixed wage, collective wage agreements |
| JEL: | C72 C78 D43 J33 J50 K31 L41 |
| Date: | 2007–02 |
| URL: | http://d.repec.org/n?u=RePEc:mag:wpaper:07004&r=lab |
| By: | Saul D. Hoffman (Department of Economics,University of Delaware); Diane Trace (Department of Economics, University of Delaware) |
| Abstract: | Card and Krueger's analysis of the impact of the 1992 increase in the NJ state minimum wage is very well known and still controversial. Interestingly, the original NJ-PA natural experiment was followed by another one involving the same two states, an experiment that has not yet been noted or examined. In 1996 and 1997, the federal minimum wage was increased in two steps, from $4.25 to $5.15, thereby increasing the minimum wage by $0.90 in PA but by just $0.10 in NJ. We use CPS data from 1995 and 1998 to examine the impacts on employment, using difference-in-difference and difference-in-difference-in-difference estimators that exploit within- state and between-state comparisons. We find consistent evidence that employment of “at-risk” groups was negatively impacted in PA relative to other groups in PA and to comparable groups in NJ. |
| Keywords: | Minimum Wage, Card-Krueger |
| JEL: | J01 J08 J78 |
| URL: | http://d.repec.org/n?u=RePEc:dlw:wpaper:07-08.&r=lab |
| By: | Fatih Guvenen; Burhanettin Kuruscu |
| Abstract: | In this paper we present an analytically tractable overlapping generations model of human capital accumulation, and study its implications for the evolution of the U.S. wage distribution from 1970 to 2000. The key feature of the model, and the only source of heterogeneity, is that individuals differ in their ability to accumulate human capital. Therefore, wage inequality results only from differences in human capital accumulation. We examine the response of this model to skill-biased technical change (SBTC) theoretically. We show that in response to SBTC, the model generates behavior consistent with several features of the U.S. data including (i) a rise in overall wage inequality both in the short run and long run, (ii) an initial fall in the education premium followed by a strong recovery, leading to a higher premium in the long run, (iii) the fact that most of this fall and rise takes place among younger workers, (iv) a rise in within-group inequality, (v) stagnation in median wage growth (and a slowdown in aggregate labor productivity), and (vi) a rise in consumption inequality that is much smaller than the rise in wage inequality. These results suggest that the heterogeneity in the ability to accumulate human capital is an important feature for understanding the effects of SBTC, and interpreting the transformation that the U.S. economy has gone through since the 1970's. |
| JEL: | E21 E24 J24 J31 |
| Date: | 2007–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13096&r=lab |
| By: | Raven E. Saks (Federal Reserve Board of Governors); Abigail Wozniak (University of Notre Dame and IZA) |
| Abstract: | This paper establishes the cyclical properties of a novel measure of worker reallocation: longdistance migration rates within the US. This internal migration offers a bird’s eye view of worker reallocation in the economy as long-distance migrants often change jobs or employment status, altering the spatial allocation of labor. Using historical reports of the Current Population Survey (CPS), we examine gross migration patterns during the entire postwar era, a period that spans ten recessions over more than fifty years. We obtain additional evidence on inter-state and inter-metropolitan population flows during the past thirty years from statistics compiled by the Internal Revenue Service. We find that internal migration within the US is strongly procyclical in both sources. Even after accounting for variation in relative local economic conditions, migration is lower during downturns in the national economy. Using individual-level CPS data, we find that migration is procyclical for most major demographic and labor force groups, although it is strongest for younger workers. Our findings suggest that cyclical fluctuations in internal migration are driven by economywide changes in the net cost to worker reallocation with a major role for the job finding rate of young workers. |
| Keywords: | internal migration, worker reallocation, business cycles, procyclical migration |
| JEL: | J6 E32 |
| Date: | 2007–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2766&r=lab |
| By: | Walter H. Fisher; Christian Keuschnigg |
| Abstract: | This paper investigates how parametric reform in a pay-as-you-go pension system with a tax benefit link affects retirement incentives and work incentives of prime-age workers. We find that postponed retirement tends to harm incentives of prime-age workers in the presence of a tax benefit link, thereby creating a policy trade-off in stimulating aggregate labor supply. We show how several popular reform scenarios are geared either towards young or old workers, or, indeed, both groups under appropriate conditions. We also provide a sharp characterization of the excess burden of pension insurance and show how it depends on the behavioral supply elasticities on the extensive and intensive margins and the effective tax rates implicit in contribution rates. |
| Keywords: | Pension reform, retirement, hours worked, tax benefit link, actuarial adjustment, excess burden |
| JEL: | H55 J26 |
| Date: | 2007–04 |
| URL: | http://d.repec.org/n?u=RePEc:usg:dp2007:2007-13&r=lab |
| By: | Pekka Ilmakunnas; Mika Maliranta |
| Abstract: | We study whether older workers are costly to firms. Our estimation equations are derived from a variant of the decomposition methods frequently used for measuring micro-level sources of industry productivity growth. By using comprehensive linked employer-employee data from the Finnish business sector, we study the productivity and wage effects, and hence the profitability effects, of hiring and separation of younger and older workers. The evidence shows that separations of older workers are profitable to firms, especially in the manufacturing ICT-industries. Robustness checks include the use of regional labor supply and other variables as instruments for the potential endogeneity of the labor flows. |
| Keywords: | aging, productivity, wage, profits, hiring, separation, employer-employee data |
| JEL: | C43 J23 J24 J63 M51 |
| Date: | 2007–05–03 |
| URL: | http://d.repec.org/n?u=RePEc:rif:dpaper:1092&r=lab |
| By: | Alan S. Blinder (Princeton University) |
| Abstract: | Using detailed information on the nature of work done in over 800 BLS occupational codes, this paper ranks those occupations according to how easy/hard it is to offshore the work— either physically or electronically. Using that ranking, I estimate that somewhere between 22% and 29% of all U.S. jobs are or will be potentially offshorable within a decade or two. (I make no estimate of how many jobs will actually be offshored.) Since my rankings are subjective, two alternatives are presented—one is entirely objective, the other is an independent subjective ranking. It is found that there is little or no correlation between an occupation’s “offshorability” and the skill level of its workers (as measured either by educational attainment or wages). However, it appears that, controlling for education, the most highly offshorable occupations were already paying significantly lower wages in 2004. |
| Date: | 2007–03 |
| URL: | http://d.repec.org/n?u=RePEc:pri:cepsud:142blinder&r=lab |
| By: | Julien Prat (University of Vienna and IZA) |
| Abstract: | We construct and estimate by maximum likelihood an equilibrium search model where wages are set by Nash bargaining and idiosyncratic productivity follows a geometric Brownian motion. The proposed framework enables us to endogenize job destruction and to estimate the rate of learning-by-doing. Although the range of the observations is not independent of the parameters, we establish that the estimators satisfy asymptotic normality. The structural model is estimated using Current Population Survey data on accepted wages and employment durations. We show that it captures almost perfectly the joint distribution of wages and job spells. We find that the rate of learning-by-doing has an important positive effect on aggregate output and a small impact on employment. |
| Keywords: | job search, human capital, uncertainty, structural estimation |
| JEL: | J31 J64 |
| Date: | 2007–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2780&r=lab |
| By: | Silasi, Grigore; Simina, Ovidiu Laurian |
| Abstract: | The ‘Jean Monnet’ European Centre of Excellence (C03/0110) and the School of High Comparative European Studies (SISEC), both from the West University of Timisoara, propose to launch the scientific debate on the migration and mobility within the Romanian universities, the academic life and among the policies and decision makers from Romania. The International Colloquium Migration and Mobility: Assets and Challenges for the Enlargement of the European Union proposed for 4-5 of May 2006 is part of the SISEC bi-annual project "EUROPE: SPACE OF FREEDOM AND SECURITY", dedicated to study of European Affairs, with focus on migration and mobility, in the framework of the European Year of Workers’ Mobility 2006. The participants were both renowned experts on migration and mobility, and PhD students interested in the challenging subjects proposed. |
| Keywords: | migration EU acquis illegal migration irregula immigrants labour migration right to work EU enlargement cost and benefit analysis remittances development development networks circular migration Diasporas |
| JEL: | O15 J61 F22 |
| Date: | 2006–05–04 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:2793&r=lab |
| By: | Vincenzo Cuciniello (Facoltà di Economia "Richard M. Goodwin" (Faculty of Economics), Università degli Studi di Siena (University of Siena)) |
| Abstract: | In a micro-founded framework in line with the new open economy macroeconomics, the paper shows that the monetary policies of the domestic and foreign CB are strategic complements and the presence of an inflation-averse central bank (CB) abroad always increases employment in the home country. We demonstrate that a centralized wage setting and CB conservatism curb unemployment only if labor market distortions are sizeable. When labor distortions are sufficiently low, employment may be maximized by atomistic wage setters or a populist CB. Finally, the welfare analysis reveals that a nationally centralized wage bargaining system always maximizes welfare if monopoly distortions in the labor market are relevant, while the appointment of a populist CB or completely decentralized wage setting is optimal when monopoly distortions are not sizeable. |
| Keywords: | Central bank conservatism, centralization of wage setting, inflationary bias. |
| JEL: | E2 E42 E5 F31 F41 |
| Date: | 2007–03–12 |
| URL: | http://d.repec.org/n?u=RePEc:gii:giihei:heiwp12-2007&r=lab |
| By: | Tobias J. Klein (University of Mannheim and IZA) |
| Abstract: | We propose and implement an estimator for identifiable features of correlated random coefficient models with binary endogenous variables and nonadditive errors in the outcome equation. It is suitable, e.g., for estimation of the average returns to college education when they are heterogeneous across individuals and correlated with the schooling choice. The estimated features are of central interest to economists and are directly linked to the marginal and average treatment effect in policy evaluation. The advantage of the approach that is taken in this paper is that it allows for non-trivial selection patterns. Identification relies on assumptions weaker than typical functional form and exclusion restrictions used in the context of classical instrumental variables analysis. In the empirical application, we relate wage levels, wage gains from a college degree and selection into college to unobserved ability. Our results yield a deepened understanding of individual heterogeneity which is relevant for the design of educational policy. |
| Keywords: | returns to college education, correlated random coefficient model, local instrumental variables, local linear regression |
| JEL: | C14 C31 J31 |
| Date: | 2007–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2761&r=lab |
| By: | Fatih Guvenen; Burhanettin Kuruscu |
| Abstract: | In this paper, we construct a parsimonious overlapping generations model of human capital accumulation, and study its quantitative implications for the evolution of the U.S. wage distribution from 1970 to 2000. One of the key features of the model is that individuals differ in their ability to accumulate human capital, which is the main source of wage inequality in this model. We examine the response of this model to skill-biased technical change (SBTC), which is modeled as an increase in the trend growth rate of the price of human capital starting in early 1970's. Due to the heterogeneity in ability and age, the responses of different individuals to SBTC are systematically different from each other, generating rich behavior in the evolution of relative wages. We consider different scenarios regarding how individuals' expectations evolve during SBTC. Specifically, we study the case where individuals immediately realize the advent of SBTC (perfect foresight); and the case where they initially underestimate the future growth of the price of human capital (pessimistic priors), but learn the truth in a Bayesian fashion over time. Lack of perfect foresight appears to have little effect on the main results of the paper. The model is quantitatively consistent with several trends including the rise in overall wage inequality; the fall and rise in the college premium; the rise in within-group inequality; the stagnation in median wage growth, and the small rise in consumption inequality despite the large rise in wage inequality. Overall, the model shows promise for explaining disparate trends in the evolution of the wage distribution in a unifying human capital framework. |
| JEL: | E21 E25 J24 J31 |
| Date: | 2007–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13095&r=lab |
| By: | Hong Tan (World Bank); Yevgeniya Savchenko (World Bank); Vladimir Gimpelson (Higher School of Economics, Moscow and IZA); Rostislav Kapelyushnikov (Higher School of Economics, Moscow); Anna Lukyanova (Higher School of Economics, Moscow) |
| Abstract: | In the transition to a market economy, the Russian workforce underwent a wrenching period of change, with excess supply of some industrial skills coexisting with reports of skill shortages by many enterprises. This paper uses data from the Russia Competitiveness and Investment Climate Survey and related local research to gain insights into the changing supply and demand for skills over time, and the potential reasons for reported staffing problems and skill shortages, including labor turnover, compensation policies and the inhibiting effects of labor regulations. It discusses in-service training as an enterprise strategy for meeting staffing and skill needs, and presents evidence on the distribution, intensity and determinants of in-service training in Russia. It investigates the productivity and wages outcomes of in-service training, and the supportive role of training in firms’ research and development (R&D) and innovative activities. A final section concludes with some policy implications of the findings. |
| Keywords: | human capital, skills, training, employment protection legislation, transition, Russia |
| JEL: | J23 J24 |
| Date: | 2007–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2751&r=lab |