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on Labour Economics |
| By: | Thomas Lemieux (University of British Columbia and NBER); W. Bentley MacLeod (Columbia University and IZA); Daniel Parent (McGill University) |
| Abstract: | We document that an increasing fraction of jobs in the U.S. labor market explicitly pay workers for their performance using bonuses, commissions, or piece-rates. We find that compensation in performance-pay jobs is more closely tied to both observed (by the econometrician) and unobserved productive characteristics of workers. Moreover, the growing incidence of performance-pay can explain 24 percent of the growth in the variance of male wages between the late 1970s and the early 1990s, and accounts for nearly all of the top-end growth in wage dispersion (above the 80th percentile). |
| Keywords: | performance pay, compensation, bonus pay, incentive pay, wage inequality |
| JEL: | J31 J33 |
| Date: | 2007–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2850&r=lab |
| By: | Karsten Kohn (Goethe University Frankfurt and IZA); Alexander C. Lembcke (London School of Economics and CEP) |
| Abstract: | Using linked employer-employee data from the German Structure of Earnings Survey 2001, this paper provides a comprehensive picture of the wage structure in three wage-setting regimes prevalent in the German system of industrial relations. We analyze wage distributions for various labor market subgroups by means of kernel density estimation, variance decompositions, and individual and firm-level wage regressions. Unions' impact through collective and firm-level bargaining mainly works towards a higher wage level and reduced overall and residual wage dispersion. Yet observed effects are considerably heterogeneous across different labor market groups. There is no clear evidence for wage floors formed by collectively bargained low wage brackets which would operate as minimum wages for different groups of workers. |
| Keywords: | collective wage bargaining, wage structure, kernel density estimation, variance decomposition, wage equations, German Structure of Earnings Survey |
| JEL: | J31 J51 J52 |
| Date: | 2007–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2849&r=lab |
| By: | Lex Borghans (ROA, Maastricht University and IZA); Ben Kriechel (ROA, Maastricht University and IZA) |
| Abstract: | In this paper we document the wage structure and labor mobility in the Netherlands in the period 1999-2003. We explain the importance of wage-setting institutions in the Netherlands and the main actors. The analyses are based on administrative sources allowing for comparisons between and within firms, and in which workers can be followed over time. In the period investigated the Netherlands experienced an increase in wage inequality. Despite the centralized system of wage negotiations in the Netherlands, our findings suggest that market forces were the main determinant of wage growth. Workers with similar wages experienced similar wage increases in firms of different sizes. Wages increases were larger for low-skilled workers in industries with large increases in demand than in other industries. Variation in wage growth was mainly at the individual level. Firm-level wage increases accounted for only 12 % of the total variation. |
| Keywords: | wage structure, labor mobility |
| JEL: | J31 J50 J62 J63 M52 |
| Date: | 2007–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2865&r=lab |
| By: | Lex Borghans; Ben Kriechel |
| Abstract: | In this paper we document the wage structure and labor mobility in the Netherlands in the period 1999-2003. We explain the importance of wage-setting institutions in the Netherlands and the main actors. The analyses are based on administrative sources allowing for comparisons between and within firms, and in which workers can be followed over time. In the period investigated the Netherlands experienced an increase in wage inequality. Despite the centralized system of wage negotiations in the Netherlands, our findings suggest that market forces were the main determinant of wage growth. Workers with similar wages experienced similar wage increases in firms of different sizes. Wages increases were larger for low-skilled workers in industries with large increases in demand than in other industries. Variation in wage growth was mainly at the individual level. Firm-level wage increases accounted for only 12 % of the total variation. |
| JEL: | J31 J50 J62 J63 M52 |
| Date: | 2007–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13210&r=lab |
| By: | T. H. Gindling (University of Maryland, Baltimore County and IZA); Katherine Terrell (University of Michigan, Ann Arbor and IZA) |
| Abstract: | Taking advantage of a complex minimum wage structure in Honduras, this paper examines how changes in minimum wages over the 1990-2004 period affect unemployment as well as the employment and average wages of workers in different sectors of the economy: medium and large-scale firms v. small firms in the private sector (where minimum wage legislation applies) and civil servants and self-employed workers (where it does not apply). The evidence suggests that minimum wages are effectively enforced only in medium and largescale firms, where a 1% increase in the minimum wage leads to an increase of 0.29% in the average wage and a reduction in employment of -0.46%. We find that increases in the private sector minimum wage are emulated in public sector wages, but there are no disemployment effects there. There is some evidence that a higher minimum wage may increase unemployment. There are no discernable effects of minimum wages on the wages of workers in small-firms or the self-employed. The positive impact of higher minimum wages on average wages is greatest for the primary educated in large private firms; but this group also suffers a very large disemployment effect. We conclude that, even in the sector where minimum wages are enforced and even under our upper bound estimate of the effect on the wages of workers, the welfare - the total earnings - of low-paid workers in the large-firm covered sector falls with higher minimum wages. |
| Keywords: | minimum wage, employment, unemployment, wage, Central America, Honduras |
| JEL: | J23 J31 J38 |
| Date: | 2007–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2892&r=lab |
| By: | Kostas Mavromaras (MIAESR, University of Melbourne and IZA); Seamus McGuinness (MIAESR, University of Melbourne); Yin King Fok (MIAESR, University of Melbourne) |
| Abstract: | This paper examines the incidence and wage effects of over-skilling within the Australian labour market. It finds that approximately 30 percent of employees believed themselves to be moderately over-skilled and 11 percent believed themselves to be severely over-skilled. The incidence of skills mismatch varied little when the sample was split by education. After controlling for individual and job characteristics as well as the potential bias arising from individual unobserved heterogeneity, severely over-skilled workers suffer an average wage penalty of 13.3 percent with the penalty ranging from about 8 percent among vocationally qualified employees to over 20 percent for graduates. |
| Keywords: | skills, education |
| JEL: | J24 J31 |
| Date: | 2007–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2837&r=lab |
| By: | Gil S. Epstein (Bar-Ilan University, CReAM and IZA); 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 |
| JEL: | E24 F22 J31 |
| Date: | 2007–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2830&r=lab |
| By: | Eran Yashiv |
| Abstract: | The Beveridge curve depicts a negative relationship between unemployed workers and jobvacancies, a robust finding across countries. The position of the economy on the curve givesan idea as to the state of the labour market. The modern underlying theory is the search andmatching model, with workers and firms engaging in costly search leading to randommatching. The Beveridge curve depicts the steady state of the model, whereby inflows intounemployment are equal to the outflows from it, generated by matching. |
| Keywords: | business cycle, job search, matching function, Phillips curve, unemployment,vacancies, wage inflation |
| JEL: | E24 E32 J63 J64 |
| Date: | 2007–06 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp0807&r=lab |
| By: | Giovanna Aguilar (Universidad Católica del Perú); Sílvio Rendon (ITAM and IZA) |
| Abstract: | To assess the employment effects of labor costs it is crucial to have reliable estimates of the labor cost elasticity of labor demand. Using a matched firm-worker dataset, we estimate a long run unconditional labor demand function, exploiting information on workers to correct for endogeneity in the determination of wages. We evaluate the employment and deadweight loss effects of observed employers’ contributions imposed by labor laws (health insurance, training, and taxes) as well as of observed workers’ deductions (social security, and income tax). We find that non-wage labor costs reduce employment by 17% for white-collars and by 53% for blue-collars, with associated deadweight losses of 10% and 35% of total contributions, respectively. Since most firms undercomply with mandated employers’ and workers contributions, we find that full compliance would imply employment losses of 4% for white-collars and 12% for blue-collars, with respective associated deadweight losses of 2% and 6%. |
| Keywords: | employment, deadweight loss, job creation, labor costs, labor law |
| JEL: | J23 J32 |
| Date: | 2007–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2856&r=lab |
| By: | Eran Yashiv |
| Abstract: | The labor search and matching model plays a growing role in macroeconomic analysis. Thispaper provides a critical, selective survey of the literature. Four fundamental questions areexplored: how are unemployment, job vacancies, and employment determined as equilibriumphenomena? What determines worker flows and transition rates from one labor market stateto another? How are wages determined? What role do labor market dynamics play inexplaining business cycles and growth? The survey describes the basic model, reviews itstheoretical extensions, and discusses its empirical applications in macroeconomics. Themodel has developed against the background of difficulties with the use of the neoclassical,frictionless model of the labor market in macroeconomics. Its success includes the modellingof labor market outcomes as equilibrium phenomena, the reasonable fit of the data, and —when inserted into business cycle models — improved performance of more generalmacroeconomic models. At the same time, there is evidence against the Nash solution usedfor wage setting and an active debate as to the ability of the model to account for some of thecyclical facts. |
| Keywords: | search, matching, macroeconomics, business cycles, worker flows, growth, policy |
| JEL: | E24 E32 E52 J23 J31 J41 J63 J64 J65 |
| Date: | 2007–06 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp0803&r=lab |
| By: | Pierre-Carl Michaud (RAND and IZA); Arthur van Soest (RAND, Tilburg University and IZA) |
| Abstract: | We look at the effect of the 2000 repeal of the earnings test above the normal retirement age (NRA) on retirement expectations of male workers in the Health and Retirement Study (HRS). Using administrative records on Social Security benefit entitlements linked to the HRS survey data, we can distinguish groups of respondents according to how, before the repeal, the earnings test would have affected their marginal wage rate after the NRA. We use panel data models with fixed and random effects to investigate the effect of the repeal on the subjective probability to work full-time after the NRA as well as after age 62. We find that male workers whose marginal wage rate increased because the earnings test was repealed, had the largest increase in this probability. We find no significant effects of the repeal on the probability to work full-time past age 62. Since the tax introduced by the earnings test was small when accounting for actuarial benefit adjustments, our results suggest that male workers misperceive the complicated rules of the earnings test. |
| Keywords: | social security earnings test, expectations, retirement, difference in differences, panel data |
| JEL: | H55 J22 |
| Date: | 2007–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2868&r=lab |
| By: | David Haardt |
| Abstract: | This paper analyses the labour market transitions of older men and women using data from the British Household Panel Survey (BHPS). I find large peaks in exit rates out of employment at ages 60 (women) and 65 (both sexes) which occur in the exact birthday month. This suggests that pension schemes have strong incentive effects. Discrete-time hazard regression analysis shows that benefits and health status are the two most important determinants of retirement, with effects that are larger than found in previous studies for British and US men. When modelling unobserved heterogeneity I find that women are twice as likely as men to be `movers' between work and non-work. |
| Keywords: | labour market transitions, older men and women, BHPS |
| JEL: | J14 J16 J26 |
| Date: | 2007–05 |
| URL: | http://d.repec.org/n?u=RePEc:mcm:sedapp:197&r=lab |
| By: | Cecile Wetzels (FEE, University of Amsterdam and IZA) |
| Abstract: | This paper aims to explore wage differentials between employees in three sub-industries of the cultural industries compared with the main (1-digit level) industry to which they belong. We use data from the Wage Indicator Questionnaire 2001/2002, which includes information on 12,757 employees in the Netherlands. We find that workers in these particular subindustries of the cultural industries are paid differently compared with their respective main industries. Workers in entertainment and publishing and printing are less endowed with standard labour market characteristics. However, whereas workers in entertainment face negative price or evaluation-related effects, the opposite holds for workers in publishing and printing. Workers in IT are more endowed with standard labour market characteristics, but they receive lower rewards for their labour market characteristics. |
| Keywords: | decomposition, entertainment, IT-services, Netherlands, printing and publishing, wage differentials |
| JEL: | J24 J31 L82 O12 |
| Date: | 2007–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2821&r=lab |
| By: | Johannes Van Biesebroeck |
| Abstract: | If labor markets operated entirely frictionless, productivity premiums associated with different worker characteristics would equal the wage premiums earned by workers possessing those characteristics. Using matched employer-employee data from the manufacturing sector of three sub-Saharan countries, we evaluate to what extent the two premiums differ for four characteristics that are clearly related to human capital: schooling, training, experience, and tenure. Equality holds strongly and even surprisingly well for firms in Zimbabwe (the most developed country in the sample), but not at all in Tanzania (the least developed country), while results in Kenya are intermediate. Where equality fails, the pattern is for general human capital characteristics (schooling, experience) to receive a wage return that exceeds the productivity return, while the reverse applies to more firm-specific human capital characteristics (training, tenure). Schooling tends to be over-rewarded, even though large productivity gains are consistently associated with formal employee training programs. Wages tend to rise with experience, while productivity gains are mostly associated with tenure. We demonstrate the remarkable robustness of the findings controlling, among other things, for sampling errors, nonlinear effects, and non-wage benefits. Localized labor markets and imperfect substitutability of different worker-types provide a partial explanations for the estimated gap between the wage and productivity premiums. |
| Keywords: | sub-Saharan Africa; production function; labor market; human capital; market efficiency |
| JEL: | J31 O12 L6 |
| Date: | 2007–06–29 |
| URL: | http://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-294&r=lab |
| By: | Benjamin Aleman-Castilla |
| Abstract: | Mexican migration to the United States has been a very important issue throughout the twentiethcentury, and its relevance has reached unprecedented levels during the last two decades. Even thoughthere is a huge body of literature that analyses many different aspects of this phenomenon, theeconomic performance of migrants with respect to the Mexican labour markets has received very littleattention. This paper aims at filling this gap by presenting new evidence on the effect that migration tothe United States has on labour market outcomes of Mexican workers. It uses data from the MexicanNational Survey of Urban Labour (ENEU) for the period 1994-2002. Among other advantages, thepanel structure of the survey is ideal for minimizing the problems of self-selection bias that arecommon in most of the alternative data sources. Fixed-effects estimation indicates that Mexicanworkers that migrate temporarily to the United States obtain significantly higher earnings in the U.S.labour market than in the Mexican one during the period of migration. They also tend to work longerhours and face a generally higher likelihood of non employment during the period of return migration.Finally, the gains from temporary migration are lower for more skilled workers and for thosemigrating from the most distant regions in Mexico, relative to the United States. |
| Keywords: | temporary migration, real wages, labour supply |
| JEL: | J61 J22 J15 |
| Date: | 2007–06 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp0804&r=lab |
| By: | Peter Haan (DIW Berlin and FU Berlin); Arne Uhlendorff (DIW Berlin and IZA) |
| Abstract: | In this paper we develop a model to consistently estimate the intertemporal labor supply behavior on the extensive margin (participation decision) and the intensive margin (working hours decision). In this framework we distinguish between voluntary non-participation and involuntary unemployment which is caused by labor market rationing and model the dynamics of labor supply by accounting for true state dependence and unobserved effects. Our approach follows the empirical literature on life cycle employment based on approximate decision rules. However, in contrast to previous studies, this framework allows us to test for true state dependence of voluntary non-participation, involuntary unemployment, full-time work and over-time work. Moreover, we derive consistent estimates of intertemporal labor supply elasticities over time and asses the bias of short- and long-run elasticities derived in a pure choice model of labor supply. |
| Keywords: | intertemporal labor supply behavior, transitions on the labor market, state dependence, involuntary unemployment |
| JEL: | C23 C25 J22 J64 |
| Date: | 2007–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2888&r=lab |
| By: | Erkki Koskela (University of Helsinki and IZA); Ronnie Schöb (Free University of Berlin) |
| Abstract: | Within an efficiency wage framework, we study the effects of two revenue-neutral tax reforms that change the progressivity of the labour tax system. A revenue-neutral increase in both the wage tax and tax exemption and a revenue-neutral change in the composition of labour taxation towards the tax with the smaller tax base will lead to the same results: they moderate wages, workers’ effort, effective labour input and aggregate output. Whether employment rises or falls, however, depends in both reforms on the magnitude of the prereform total tax wedge. The larger this tax wedge is, the more negative is the impact of reforms on workers’ effort. A larger total tax wedge increases the negative effect of tax progression on labour productivity and thus thwarts the positive employment effect of wage moderation. |
| Keywords: | efficiency wages, tax progression, structure of labour taxation |
| JEL: | H22 J41 J48 |
| Date: | 2007–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2861&r=lab |
| By: | Stephen Machin; John Van Reenen |
| Abstract: | We examine trends in wage inequality in the US and other countries over the past fourdecades. We show that there has been a secular increase in the 90-50 wage differential in theUS and the UK since the late 1970s. By contrast the 50-10 differential rose mainly in the1980s and flattened or fell in the 1990s and 2000s. We analyze the reasons for these trendsand conclude that a version of the skill biased technical change hypothesis combined withinstitutional changes (the decline in the minimum wage and trade unions) continues to offerthe best explanation for the observed patterns of change. |
| Keywords: | Wage inequality, institutions, technology, trade |
| JEL: | L32 L33 J30 |
| Date: | 2007–04 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:sp18&r=lab |
| By: | Jan Rouwendal (Vrije Universiteit Amsterdam); Peter Nijkamp (Vrije Universiteit Amsterdam) |
| Abstract: | This paper reviews the empirical research that has been generated by Oswald’s thesis, which claims that there is a causal relationship from homeownership to unemployment. The literature confirms a decreasing effect of homeownership on geographical mobility of workers, but does not in general confirm that homeowners have longer unemployment spells or higher unemployment rates. Even though this finding is related to heterogeneity in the labour force and associated selectivity effects, there are clear indications that there is also an effect of homeownership on the search for jobs on the local labour market, especially for highly leveraged homeowners. To offer an integrated representation of the various forces at work, this paper proposes an umbrella model with endogenous search intensity that is consistent with much of the empirical evidence. In particular, it predicts lower geographical mobility of homeowners as well as higher exit rates from unemployment by acceptance of jobs on the local labour market. |
| Keywords: | thesis; labour market search; homeownership |
| JEL: | J61 J64 R21 R23 |
| Date: | 2007–06–18 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:20070047&r=lab |
| By: | Doris Weichselbaumer (Department of Economics, Johannes Kepler University Linz, Austria); Rudolf Winter-Ebmer (Department of Economics, Johannes Kepler University Linz, Austria); Martina Zweimüller (Department of Economics, Johannes Kepler University Linz, Austria) |
| Abstract: | Two very different approaches are used to explore the relation between market orientation and gender wage differentials in international data. More market orientation might be related to gender wage gaps via its effects on competition in product and labor markets and the general absence of regulation in the economy. The first approach employs meta-analysis data and takes advantage of the fact that many studies already exist which use national data sources to the best possible extent. The second approach uses comparable micro data from the International Social Survey Programme (ISSP), which allows calculating internationally consistent gender wage residuals in the first place. By comparing these two very different methods of data collection we get a robust result relating higher levels of market orientation as proxied by the Economic Freedom Index with lower gender wage gaps. |
| Keywords: | Gender wage gap; competition; market orientation |
| JEL: | J16 J31 J71 |
| Date: | 2007–06 |
| URL: | http://d.repec.org/n?u=RePEc:jku:econwp:2007_12&r=lab |
| By: | Pastore Francesco; Verashchagina Alina |
| Abstract: | The project will provide an evidence on the size of gender wage gap in Belarus and on the extent to which such gap is due to discrimination, which is of interest for policy makers, dealing with wage distribution in the country |
| JEL: | J31 J16 |
| Date: | 2007–05–10 |
| URL: | http://d.repec.org/n?u=RePEc:eer:wpalle:04-133e&r=lab |
| By: | Alessio J. G. Brown (Kiel Institute for the World Economy and University of Kiel); Christian Merkl (Kiel Institute for the World Economy and University of Kiel); Dennis J. Snower (Kiel Institute for the World Economy, University of Kiel and IZA) |
| Abstract: | This paper analyses theoretically and empirically how employment subsidies should be targeted. We contrast measures involving targeting workers with low incomes/abilities and targeting the unemployed under the criteria of "approximate welfare efficiency" (AWE). Thereby we can identify policies that (a) improve employment and welfare, (b) do not raise earnings inequality and (c) are self-financing. We construct a microfounded, dynamic model of hiring and separations and calibrate it with German data. The calibration shows that hiring vouchers can be AWE, while low-wage subsidies do not satisfy AWE. Furthermore, hiring vouchers targeted at the long-term unemployed are more effective than those targeted at low-ability workers. |
| Keywords: | low wage subsidy, hiring voucher, targeting, employment, unemployment, duration, self-financing |
| JEL: | J23 J24 J38 J64 J68 |
| Date: | 2007–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2835&r=lab |
| By: | Xiaojun Wang (University of Hawaii at Manoa); Belton M. Fleisher (Ohio State University and IZA); Haizheng Li (Georgia Tech); Shi Li (Chinese Academy of Social Sciences and IZA) |
| Abstract: | We apply a semi-parametric latent variable model to estimate selection and sorting effects on the evolution of private returns to schooling for college graduates during China’s reform between 1988 and 2002. We find that there were substantial sorting gains under the traditional system, but they have decreased drastically and become negligible in the most recent data. We take this as evidence of growing influence of private financial constraints on decisions to attend college as tuition costs have risen and the relative importance of government subsidies has declined. The main policy implication of our results is that labor and education reform without concomitant capital market reform and government support for the financially disadvantaged exacerbates increases in inequality inherent in elimination of the traditional "wage-grid". |
| Keywords: | return to schooling, selection bias, sorting gains, heterogeneity, financial constraints, comparative advantage, China |
| JEL: | J31 J24 O15 |
| Date: | 2007–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2823&r=lab |
| By: | Bernt Bratsberg (Ragnar Frisch Centre for Economic Research); Oddbjørn Raaum (Ragnar Frisch Centre for Economic Research); Knut Røed (Ragnar Frisch Centre for Economic Research and IZA) |
| Abstract: | We find that the lifecycle employment profiles of nonwestern male labor migrants who came to Norway in the early 1970s diverge significantly from those of native comparison persons. During the first years after arrival almost all of the immigrants worked and their employment rate exceeded that of natives. But, about ten years upon arrival, immigrant employment started a sharp and steady decline. By 2000, the immigrant employment rate was 50 percent, compared to 87 percent for the native comparison group. To some extent, the decline in immigrant employment can be explained by immigrants being overrepresented in jobs associated with short employment careers. But we also identify considerable disincentives embedded in the social security system that contribute to poor lifecycle employment performance of immigrants with many dependent family members. Finally, we uncover evidence that labor immigrants are particularly vulnerable to the state of the economy and face a high probability of permanent exit from employment during economic downturns. |
| Keywords: | labor migration, labor market outcomes |
| JEL: | F22 H55 J21 J61 |
| Date: | 2007–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2872&r=lab |
| By: | Mariano Bosch (London School of Economics); William Maloney (World Bank and IZA) |
| Abstract: | This paper applies recent advances in the study of labor market dynamics to a representative developing country with a large unregulated of "informal" sector. It confirms the relevance of the recent mainstream models and debates surrounding gross worker flows to the developing country context, and offers a new view of the role of the informal sector and its role in labor market adjustments. It finds, first, that the formal salaried sector shows the same procyclical job finding rate and mildly countercyclical separation behavior identified in the recent US literature by Shimer (2005a) and Hall (2005). The unregulated informal sector, however, shows reasonable acyclicality in the job finding rate coupled with sharp countercyclical movements in the job separation rate, consistent with standard small firm dynamics and Davis and Haltiwanger (1992 and 1999). The differential behavior of regulated and unregulated sectors, and the finding of relative wage rigidity in the former, sheds suggestive light on the debate surrounding countercyclical job finding behavior in the US. Second, the patterns of worker transitions between all sectors, formal and informal correspond to the jobto- job dynamics observed in the US and not to the traditional idea of informality constituting the inferior sector of a segmented market. That said, the counter cyclical job finding in the formal sector combined with the acyclical job finding in informality does lead to the latter absorbing relatively more labor during downturns, even as its increased separation rates drive movements in unemployment. |
| Keywords: | gross worker flows, labor market dynamics, informality |
| JEL: | J41 J42 J6 |
| Date: | 2007–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2864&r=lab |
| By: | David Card (UC Berkeley) |
| Abstract: | In the past 25 years immigration has re-emerged as a driving force in the size and composition of U.S. cities. This paper describes the effects of immigration on overall population growth and the skill composition of cities, focusing on the connection between immigrant inflows and the relative number of less-skilled workers in the local population. The labor market impacts of immigrant arrivals can be offset by outflows of natives and earlier generations of immigrants. Empirically, however, these offsetting flows are small, so most cities with higher rates of immigration have experienced overall population growth and a rising share of the less-skilled. These supply shifts are associated with a modest widening of the wage gap between more- and less-skilled natives, coupled with a positive effect on average native wages. Beyond the labor market, immigrant arrivals also affect rents and housing prices, government revenues and expenses, and the composition of neighborhoods and schools. The effect on rents is the same magnitude as the effect on average wages, implying that the average “rent burden” (the ratio of rents to incomes) is roughly constant. The local fiscal effects of increased immigration also appear to be relatively small. The neighborhood and school externalities posed by the presence of low-income and minority families may be larger, and may be a key factor in understanding native reactions to immigration. |
| Keywords: | Immigration, Labour Market Impact, Skill Groups |
| JEL: | J21 J31 J61 |
| Date: | 2007–06 |
| URL: | http://d.repec.org/n?u=RePEc:crm:wpaper:0711&r=lab |
| By: | Knut Røed (Ragnar Frisch Centre for Economic Research and IZA); Lars Westlie (Ragnar Frisch Centre for Economic Research) |
| Abstract: | Based on a sequence of reforms in the Norwegian unemployment insurance (UI) system, we show that activity-oriented UI regimes - i.e., regimes with a high likelihood of required participation in active labor market programs, duration limitations on unconditional UI entitlements, and high sanction probabilities - deliver substantially shorter unemployment spells than pure income-insurance regimes. Soft constraints, in the form of activity requirements or small benefit cuts after a pre-specified UI duration, have many of the same behavioral consequences as threats of complete benefit termination. Early introduction of a soft constraint appears particularly effective; our results show that the expected unemployment duration falls by half a day for each week the soft constraint is moved ahead in the UI spell. Mild sanctions, in the form of temporary benefit terminations in response to inadequate search effort or excess choosiness, cause a significant rise in the job hazard. |
| Keywords: | competing risks, unemployment insurance, timing-of-events, NPMLE, MMPH |
| JEL: | C14 C15 C41 J64 J65 J68 |
| Date: | 2007–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2877&r=lab |