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on Labour Economics |
| By: | Gielen, A. C. (Tilburg University, Center for Economic Research) |
| Abstract: | This paper studies the presence of hours constraints on the UK labor market and its effect on older workers labor supply, both at the extensive and the intensive margin. Using panel data for the period 1991-2004, the results from a competing risks model show that over-employed male workers can freely reduce working hours with their current employer prior to full retirement. However, some over-employed women are observed to leave the labor market early due to hours constraints. Despite the fact that hours constraints may shorten working lives of older women, this paper presents some explorative results which illustrate that increasing working hours flexibility does not seem to increase older workers total labor supply as is often suggested. |
| Keywords: | Labor supply;hours constraint;mobility;retirement. |
| JEL: | J22 J31 J63 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubcen:200749&r=lab |
| By: | Michael Bognanno (Temple University and IZA); Ryo Kambayashi (Hitotsubashi University) |
| Abstract: | We examine the period from 1991 to 2005 to document the effects of a changing Japanese labor market on trends in the cost of job change. During this period, job change penalties and the extent to which they were age-related grew. Evidence is also found of a diminishing specificity in human capital (in industry, occupation and firm size) for job changers in the Japanese labor market. As might be expected, older workers and workers leaving the largest firms suffered the largest wage losses from job change. Older workers were also harmed more by involuntary job separations. In percentage terms, young females have larger wage losses than young males but older females have smaller losses than older males. This pattern is masked in considering only the overall effect of gender on the cost of job change. |
| Keywords: | job displacement, Japan |
| JEL: | J31 J41 J63 J6 |
| Date: | 2007–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2954&r=lab |
| By: | Ohlsson, Henry (Department of Economics); Storrie, Donald (European Foundation) |
| Abstract: | The objective of this paper is to study the long term effects of public policy measures for displaced workers. Our focus is on the individuals affected by the cutbacks at the LKAB iron ore mines in northern Sweden in 1983 and the closure of the Uddevalla Shipyard in western Sweden in 1985. These workers not only experienced job loss, but were also the target group for extraordinary labour market policies. Using register data from Statistics Sweden (labour market status, earnings, education etc.), we follow those affected until 1999. We compare this with the corresponding development of a large sample other workers who lost their jobs because of plant closures in 1987–88 but who did not receive extraordinary measures. Estimations of the net effect of the extraordinary measures find that they did have positive long-term effects for the displaced shipyard workers and miners. They have higher employment, not higher unemployment, and higher earnings than the comparison group. |
| Keywords: | involuntary job loss; displacement; plant closures; cutbacks; labour market policy; employment; unemployment; earnings |
| JEL: | J65 J68 L62 L72 |
| Date: | 2007–08–28 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:uunewp:2007_019&r=lab |
| By: | Karen Mumford (University of York and IZA); Peter N. Smith (University of York) |
| Abstract: | This study examines the role of individual characteristics, occupation, industry, region, and workplace characteristics in accounting for differences in hourly earnings between men and women in full and part-time jobs in Britain. A four-way gender-working time split (male fulltimers, male part-timers, female full-timers and female part-timers) is considered, and allowance is explicitly made for the possibility of both workplace and occupational segregation across each group. Individual and workplace characteristics are shown to explain much of the earnings gaps examined. Within gender groups, the striking difference between full and part-time employees is that full-timers work in higher paying occupations than do part-timers. Also, female occupational segregation makes a significant contribution to the earnings gap between male and female part-time employees but not for full-time workers. A further new result is that female workplace segregation contributes significantly to the full/part time earnings gap of both males and females. Part-time employees work in more feminised workplaces and their earnings are lower. By contrast, female occupational segregation has little impact on the full-time/part-time earnings gap of either males or females. There remains, moreover, a substantial residual gender effect between male and female employees. |
| Keywords: | gender earnings, wage gap, part-time, fixed effects, segregation |
| JEL: | J3 J7 |
| Date: | 2007–08 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2981&r=lab |
| By: | Michal Myck (DIW Berlin, IFS and IZA) |
| Abstract: | How individual wages change with time, and how they are expected to change as individuals grow older, is one of crucial determinants of their behaviour on the labour market including their decision to retire. The profile of individual hourly wages has for a long time been assumed to follow an "inverse-U" path, although there has been little work specifically concerning the age-wage profile and documenting it convincingly. The focus of this paper is the relationship between age and wages with special attention given to individuals close to retirement. The analysis is presented in a comparative context for Britain and Germany looking at two longitudinal datasets (BHPS and GSOEP respectively) for years 1995-2004. It stresses the importance of cohort effects and selection out of employment which seem crucial in determining the downward-sloping part of the "inverse-U" profile observed in most cross-sections. There seems to be little evidence that wages fall with age. |
| Keywords: | wage dynamics, ageing, selection |
| JEL: | J14 J21 J31 C14 |
| Date: | 2007–08 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2983&r=lab |
| By: | Malcolm Brynin (Institute for Social and Economic Research); Simonetta Longhi (Institute for Social and Economic Research) |
| Abstract: | We test whether in Great Britain the recent increase in the supply of university graduates has a negative impact on their wages, and analyse to what extent the local labour market for graduates should be seen as regional rather than national. We do this by computing two measures of job competition amongst graduates: the first assumes that the labour market for graduates is regional, while the second assumes that it is national. We then compare the two estimated wage impacts. We find that job competition amongst graduates has a negative impact on graduate wages, that the labour market for graduates appears to be regional, and that a large part of the regional imbalance between labour supply and demand is corrected by commuting rather than migration. Also, the wage impact of job competition seems to differ by gender and across groups of occupations. |
| Keywords: | labour demand, labour supply, wages |
| Date: | 2007–08 |
| URL: | http://d.repec.org/n?u=RePEc:ese:iserwp:2007-18&r=lab |
| By: | Gielen, A. C. (Tilburg University, Center for Economic Research) |
| Abstract: | Market imperfections may cause firms and workers to under-invest in specific training. This paper shows that profit sharing may be a suitable instrument to enhance specific training investments, either by enhancing wage ?exibility or by increasing the returns to training. As a result, profit sharing not only increases productivity by means of an effort effect, but also by increased training investments. Furthermore, the results suggest that older workers' employability can be improved if a profit-related remuneration is paid. |
| Keywords: | profit-related pay;training;labor productivity;labor mobility. |
| JEL: | M52 M53 J24 J62 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubcen:200748&r=lab |
| By: | Ernst Fehr; Lorenz Goette |
| Abstract: | Recent studies found evidence for nominal wage rigidity during periods of relatively high nominal GDP growth. It has been argued, however, that in an environment with low nominal GDP growth, when nominal wage cuts become customary, workers’ opposition to nominal cuts would erode and, hence, firms would no longer hesitate to reduce nominal pay. If this argument is valid nominal wage rigidity is largely irrelevant because in a high-growth environment there is little need to cut nominal pay while in a low-growth environment the necessary cuts would occur. To examine this argument we use data from Switzerland where nominal GDP growth has been very low for many years in the 1990s. We find that the rigidity of nominal wages is a robust phenomenon that does not vanish in a low growth environment. In addition, it constitutes a considerable obstacle to real wage adjustments. In the absence of downward nominal rigidity, real wages would indeed be quite responsive to unemployment. Moreover, the wage sweep-ups caused by nominal rigidity are strongly correlated with unemployment suggesting that downward rigidity of nominal wages indeed contributes to unemployment. |
| Date: | 2007–06 |
| URL: | http://d.repec.org/n?u=RePEc:kie:kieliw:1343&r=lab |
| By: | Etienne Lehmann (CREST and IZA); Mathias Hungerbühler (University of Namur) |
| Abstract: | We build a theoretical model to study whether a minimum wage can be welfare-improving if it is implemented in conjunction with an optimized nonlinear income tax. We consider this issue in a framework where search frictions on the labor market generate unemployment. Workers differ in productivity. The government does not observe workers’ productivity but only their wages. Hence, the redistributive policy solves an adverse selection problem. We show that a minimum wage is optimal if the bargaining power of the workers is relatively low. However, if the government controls the bargaining power, then it is preferable to set a sufficiently high bargaining power. |
| Keywords: | optimal taxation, minimum wage, search-matching unemployment, bunching, wage bargaining |
| JEL: | D86 H21 H23 J64 J68 |
| Date: | 2007–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2957&r=lab |
| By: | Giulia Faggio; Kjell Salvanes; John Van Reenen |
| Abstract: | There has been a remarkable increase in wage inequality in the US, UK and many other countries over the past three decades. A significant part of this appears to be within observable groups (such as age-gender-skill cells). A generally untested implication of many theories rationalizing the growth of within-group inequality is that firm-level productivity dispersion should also have increased. The relevant data for the US is problematic, so we utilize a UK panel dataset covering the manufacturing and non-manufacturing sectors since the early 1980s. We find evidence that productivity inequality has increased. Existing studies have underestimated this increased dispersion because they use data from the manufacturing sector which has been in rapid decline. Most of the increase in individual wage inequality has occurred because of an increase in inequality between firms (and within industries). Increased productivity dispersion appears to be linked with new technologies as suggested by models such as Caselli (1999) and is not primarily due to an increase in transitory shocks, greater sorting or entry/exit dynamics. |
| JEL: | D24 J24 J31 O31 |
| Date: | 2007–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13351&r=lab |
| By: | Jan Brenner |
| Abstract: | We analyze the impact of job entry restrictions on the economic integration of recent ethnic German immigrants, using twelve waves of the German Socio-Economic Panel.The German labor market closely ties job accessibility to vocational education which likely hampers the transferability of foreign human capital. To assess this effect, we compare the job mismatch probabilities of ethnic German immigrants and German natives and the employment probability in jobs that vary by the qualifications they require. Our results suggest that ethnic Germans are disadvantaged upon arrival, yet almost completely assimilate to comparable natives considering these two job quality measures. Furthermore, controlling for these factors explains a considerable share of the earnings gap between ethnic and native Germans. |
| Keywords: | Human capital transferability and investment, job mismatch, skill requirements, immigrants, wage assimilation |
| JEL: | F22 J61 J62 |
| Date: | 2007–08 |
| URL: | http://d.repec.org/n?u=RePEc:rwi:repape:0025&r=lab |
| By: | Kailing Shen (Xiamen University and IZA) |
| Abstract: | This paper studies contingent, temporary unemployment insurance (UI) coverage’s impacts on employment and unemployment durations using a duration model extended with heaping considerations and a recent Canadian panel data. A unique source of identification here is the Employment Insurance (EI) reform of Canada in the 1996. Based on the estimated coefficients from the duration models, the simulations suggest that UI increases unemployment rates by 2% and 5% in the non-seasonal and seasonal sectors respectively. |
| Keywords: | unemployment insurance, unemployment durations, employment durations, heaping effect |
| JEL: | J65 J64 |
| Date: | 2007–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2959&r=lab |
| By: | Hernando Zuleta; Veneta Andonova |
| Abstract: | Firms’ compensation practices affect the protection of investors’ interests and the degree of economic inequality by changing the stakes of engaging in appropriation activities versus respecting the status quo. We use a general equilibrium model where workers can either work peacefully or join a guerrilla movement that expropriates entrepreneurs. If workers are peaceful, they receive a competitive wage. If they join a guerrilla movement, they receive a share of the appropriated wealth, which depends positively on the number of guerrilla members. In this framework, we find one low-income, low-wage equilibrium with guerrilla activity and one peaceful, high-income, high-wage equilibrium. The peaceful equilibrium can be reached through redistribution policies such as efficiency wages, which are also used to control agency problems. In essence, through their compensation policies entrepreneurs might be able to control the internal principal-agent issues and simultaneously protect their assets against expropriation, while alleviating economic inequality. |
| Date: | 2006–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:col:000092:002181&r=lab |
| By: | Colm McLaughlin |
| Abstract: | There has been increasing interest of late in the question of whether minimum wage regulations can raise productivity through the 'shock effect'. This paper explores this question in comparative perspective, by examining the impact of minimum wage regulations and institutions in Denmark, New Zealand and Ireland. It argues that while they are important, a supportive institutional framework plays a far more crucial role in providing coordinated solutions to issues of market failure, such as inadequate levels of training. The paper suggests that sectoral bargaining institutions in low-paid sectors may have the potential to facilitate such coordination and enable the high-productivity model to emerge. For the UK context, this raises the question as to whether Wages Councils in a modernised form might have some future role to play. |
| Keywords: | National Minimum Wage; Low pay; Training; Productivity; Labour market coordination; Comparative employment relations. |
| JEL: | J38 J58 J80 P52 |
| Date: | 2007–06 |
| URL: | http://d.repec.org/n?u=RePEc:cbr:cbrwps:wp342&r=lab |
| By: | Hector Sala; Jose I. Silva; Manuel E. Toledo |
| Abstract: | We argue that segmented labor markets with flexibility at the margin (e.g., just affecting fixed-term employees) may achieve similar volatility than fully deregulated labor markets. Flexibility at the margin produces a gap in separation costs among matched workers that cause fixed-term employment to be the main workforce adjustment device. Moreover, in the presence of limitations in the duration and number of renewals of fixed-term contracts, firms respond by fostering labor turnover which further raises the volatility of the labor market. We present a matching model with temporary and permanent jobs where (i) the gap in firing costs and (ii) restrictions in the use of fixedterm contracts play the central role to explain the similar volatility observed in many regulated labor markets with flexibility at the margin vis-à-vis the fully deregulated ones. |
| Date: | 2007–07 |
| URL: | http://d.repec.org/n?u=RePEc:cte:werepe:we075832&r=lab |
| By: | Andries de Grip (Maastricht University and IZA); Hans Bosma (Maastricht University); Dick Willems (Maastricht University); Martin van Boxtel (Maastricht University) |
| Abstract: | We have used longitudinal test data on various aspects of people’s cognitive abilities to analyze whether overeducated workers are more vulnerable to a decline in their cognitive abilities, and undereducated workers are less vulnerable. We found that a job-worker mismatch induces a cognitive decline with respect to immediate and delayed recall abilities, cognitive flexibility and verbal fluency. Our findings indicate that, to some extent, it is the adjustment of the ability level of the overeducated and undereducated workers that adjusts initial job-worker mismatch. This adds to the relevance of preventing overeducation, and shows that being employed in a challenging job contributes to workers’ cognitive resilience. |
| Keywords: | job-worker mismatch, overeducation, cognitive abilities |
| JEL: | J24 I19 I29 |
| Date: | 2007–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2956&r=lab |
| By: | Robert Baumann |
| Abstract: | The gap in college enrollment rates between whites and blacks has remained stable since 1990, despite large increases in tuition and higher average wages for whites. We find the determinants of the enrollment decision differ greatly between whites and blacks, and within race between black males and females, but not between white males and females. These systematic differences require separate enrollment estimations for each race and for blacks each gender. Specifically, responses to changes in family income, parents’ education, and school quality are vastly different across race-gender groups. |
| Keywords: | college, enrollment, tuition, race, education |
| JEL: | I21 J15 |
| Date: | 2007–08 |
| URL: | http://d.repec.org/n?u=RePEc:hcx:wpaper:0705&r=lab |
| By: | Wojciech Kopczuk; Emmanuel Saez; Jae Song |
| Abstract: | This paper uses Social Security Administration longitudinal earnings micro data since 1937 to analyze the evolution of inequality and mobility in the United States. Earnings inequality follows a U-shape pattern, decreasing sharply up to 1953 and increasing steadily afterwards. We find that short-term and long-term (rank based) mobility among all workers has been quite stable since 1950 (after a temporary surge during World War II). Therefore, the pattern of annual earnings inequality is very close to the pattern of inequality of longer term earnings. Mobility at the top has also been very stable and has not mitigated the dramatic increase in annual earnings concentration since the 1970s. However, the stability in long-term earnings mobility among all workers masks substantial heterogeneity across demographic groups. The decrease in the gender earnings gap and the substantial increase in upward mobility over a career for women is the driving force behind the relative stability of overall mobility measures which mask declines in mobility among men. In contrast, overall inequality and mobility patterns are not significantly influenced by the changing size and structure of immigration nor by changes in the black/white earnings gaps. |
| JEL: | D3 J3 |
| Date: | 2007–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13345&r=lab |
| By: | Ariel R. Belasen (Saint Louis University); Solomon W. Polachek (State University of New York at Binghamton and IZA) |
| Abstract: | Exogenous shocks often impact a local labor market more than at the national level. This study improves upon the standard Difference in Difference (DD) approach by examining exogenous shocks using a Generalized Difference in Difference (GDD) econometric approach that identifies the effects of shocks resulting from hurricanes. Based on the Quarterly Census of Employment and Wages (QCEW) data on earnings and employment, the earnings of an average worker in Florida will increase as much as four percent within the first quarter of being hit directly by a hurricane, whereas the effects of a hurricane occurring in a neighboring county move earnings per worker in the opposite direction by roughly the same percentage. As time goes by, workers in both sets of counties will experience faster growth in their earnings than workers in completely unaffected counties; however, this is coupled with a slower growth rate in employment. Powerful hurricanes have greater effects than their weaker counterparts. Additionally, the shifts in earnings and employment can be traced back, in part, to geographic features of the counties, namely that the coastal and Panhandle counties exhibit greater effects than landlocked counties. Although focus is on hurricanes in Florida, this GDD technique is applicable to a wider range of exogenous shocks. |
| Keywords: | exogenous shock, difference-in-difference estimation, local labor markets, earnings, employment, hurricanes |
| JEL: | J23 J49 Q54 R11 |
| Date: | 2007–08 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2976&r=lab |
| By: | Paula Auerbach (Inter-American Development Bank); Maria Eugenia Genoni (Duke University); Carmen Pagés (Inter-American Development Bank and IZA) |
| Abstract: | This paper examines the reasons behind the low rates of participation in old age pension programs in developing countries. Using a large set of harmonized household surveys from Latin America we assess how much of the low participation can be explained by involuntary rationing out of jobs with benefits versus how much can be instead explained by workers’ low willingness/ability to contribute towards such programs. We compare contribution patterns among wage employees, for whom participation is compulsory, with contribution patterns among self-employed workers, for whom participation is often voluntary. For both types of workers the probability of contributing to old age pension programs is similarly correlated with education, earnings, size of the employer, household characteristics and age. Our results indicate that on average at least 20-30 percent of the explained within-country variance in participation patterns can be accounted for by individuals’ low willingness to participate in oldage pension programs. Nonetheless, we also find evidence suggesting that some workers are rationed out of social security against their will. |
| Keywords: | informality, old-age pension, social security, self-employment, Latin America |
| JEL: | J32 J81 |
| Date: | 2007–08 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2979&r=lab |
| By: | David M. Blau (Ohio State University and IZA); Ryan Goodstein (University of North Carolina at Chapel Hill) |
| Abstract: | After nearly a full century of decline, the Labor Force Participation Rate (LFPR) of older men in the United States leveled off in the 1980s, and began to increase in the late 1990s. We use a time series of cross sections from 1962 to 2005 to model the LFPR of men aged 55-69, with the aim of explaining these trends. We investigate the effects of changes in Social Security rules, lifetime earnings, pension coverage, wages, health, health insurance, and the educational composition of the labor force. Our results indicate that the decline in the LFPR from the 1960s through the 1980s cannot be explained by any of these factors. The recent increase in the LFPR of older men can be explained by changes in the composition of the older male population away from high school dropouts and toward college attendees and graduates. Changes in Social Security may have contributed to the recent increase as well, but the results for Social Security are sensitive to specification. |
| Keywords: | labor force participation, retirement, social security, pensions |
| JEL: | J26 J21 |
| Date: | 2007–08 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2991&r=lab |
| By: | Amelie Constant (Georgetown University, DIW DC and IZA); Klaus F. Zimmermann (University of Bonn, IZA and DIW Berlin) |
| Abstract: | The economic literature has largely overlooked the importance of repeat and circular migration. The paper studies this behavior by analyzing the number of exits and the total number of years away from the host country using count data models and panel data from Germany. More than 60% of migrants from the guestworker countries are indeed repeat or circular migrants. Migrants from European Union member countries, those not owning a dwelling in Germany, the younger and the older (excluding the middle ages), are significantly more likely to engage in repeat migration and to stay out for longer. Males and those migrants with German passports exit more frequently, while those with higher education exit less; there are no differences with time spent out. Migrants with family in the home country remain out longer, and those closely attached to the labor market remain less; they are not leaving the country more frequently. |
| Keywords: | repeat migration, circular migration, guestworkers, minorities, count data |
| JEL: | F22 J15 J61 C25 |
| Date: | 2007–08 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2999&r=lab |
| By: | Pierre Cahuc (University of Paris 1, CREST-INSEE, CEPR and IZA); Guy Laroque (CREST-INSEE and IZA) |
| Abstract: | We analyze optimal taxation in an economy with monopsonistic labor markets. The individuals, whose only decisions are whether to work, or not, have heterogeneous productivities and opportunity costs of work. Given its preferences for redistribution, the government, which does not observe the opportunity costs of work, chooses a tax scheme implementing the second best allocation. We compare the optima in the competitive and monopsonistic environments. We find that the government can always implement the second best allocation of the competitive economy in the monopsonistic environment. The optimal tax schedule comprises employment subsidies financed by taxes on profits. In this setup, there is no room for a minimum wage. |
| Keywords: | minimum wage, optimal taxation, monopsony |
| JEL: | H31 J30 J42 |
| Date: | 2007–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2955&r=lab |
| By: | Islam, Nizamul (Department of Economics, School of Business, Economics and Law, Göteborg University) |
| Abstract: | A dynamic Tobit model is applied to longitudinal data to estimate the hours of work of married women in Sweden during 1992-2001. Hours of work are found to be negatively related to fertility. Other characteristics of married women are also found to have an effect on labor supply. Inter- temporal labor supply decisions seemed to be characterized by a substantial amount of unobserved heterogeneity, first order state dependence and serially correlated error components. The findings suggest that the first order state dependence and unobserved heterogeneity are very sensitive to the initial condition. |
| Keywords: | Female labor supply; state dependence; heterogeneity; dynamic Tobit |
| JEL: | C23 C25 J22 |
| Date: | 2007–08–29 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:gunwpe:0259&r=lab |
| By: | Suzanne J. Konzelmann; Frank Wilkinson; Roy Mankelow |
| Abstract: | Professional work is a category of employment that has traditionally been associated with high levels of worker autonomy, economic and social status. During the past decade, changes in customer expectations, government policy and technology have generated pressures resulting in enhancement of the quality and efficiency of service provision, expansion in task requirements and a need for higher levels of discretion. In this sense, professional work has been upgraded. However, the changes have also led to a deterioration in the economic and social status of professional work, adversely impacting on the social and psychological well-being of professional workers. This paper examines these developments in five professions including two established professions (lawyers and pharmacists), one aspiring profession (midwives) and two emerging professions (counselling psychologists and human resource managers). The empirical findings are based on a survey of 1270 professional workers conducted in 2000 and 2001. |
| Keywords: | Professional work, counseling psychologists, human resource managers, lawyers, midwives, pharmacists, job satisfaction and morale. |
| JEL: | J44 L84 |
| Date: | 2007–06 |
| URL: | http://d.repec.org/n?u=RePEc:cbr:cbrwps:wp345&r=lab |
| By: | Raquel Fonseca; Lise Patureau; Thepthida Sopraseuth |
| Abstract: | This paper examines the impact of labor market institutions (LMI) on business cycle (BC) synchronization. The authors first develop a two-country right-to-manage model of wage bargaining. They find that, following a symmetric demand change, cross-country differences in LMI generate divergent responses in employment and output. They then investigate the empirical relevance of this result using panel data of 20 OECD countries observed over 40 years. Their estimation strategy controls for a large set of possible factors influencing GDP correlations, which allows to confront their results with those found in previous studies. Consistently with their theoretical results, they find that similar labor markets tend to favor more synchronized cycles. In particular, disparity in tax wedges yields lower GDP comovement. Besides, interactions between labor market institutions do matter, as they are found to affect the effect of tax wedge divergence on BC synchronization. Their overall results suggest that the impact of distortions in demand-supply labor mechanism should be investigated in international business cycle models. |
| Keywords: | International business cycle, business cycle synchronization, labor market institutions, panel data estimation |
| JEL: | F42 C23 J32 J52 |
| Date: | 2007–05 |
| URL: | http://d.repec.org/n?u=RePEc:ran:wpaper:511&r=lab |
| By: | Brice Corgnet (Universidad de Navarra) |
| Abstract: | We develop a model of team formation in which workers learn about their level of ability. We show that insufficient cooperation may arise as workers learn positively about their own skills. We then build a model for team managers and establish that their objectivity in assessing coworkers' abilities may facilitate cooperation among agents. This is the case because managers are able to design team contracts based on workers' true performances. Our work provides a motive for the existence of team managers in theabsence of asymmetry of information. We develop a model of team formation in which workers learn about their level of ability. We show that insufficient cooperation may arise as workers learn positively about their own skills. We then build a model for team managers and establish that their objectivity in assessing coworkers¿ abilities may facilitate cooperation among agents. This is the case because managers are able to design team contracts based on workers¿ true performances. Our work provides a motive for the existence of team managers in theabsence of asymmetry of information. |
| JEL: | C70 C73 C90 |
| Date: | 2007–08 |
| URL: | http://d.repec.org/n?u=RePEc:ivi:wpasad:2007-18&r=lab |
| By: | Marco Francesconi (University of Essex and IZA); Helmut Rainer (University of St Andrews); Wilbert van der Klaauw (Federal Reserve Bank of New York) |
| Abstract: | This paper examines the effects of the Working Families’ Tax Credit (WFTC) on couples in Britain. We develop a simple model of household decisions which explicitly accounts for the role played by the tax and benefit system. Its main implications are then tested using panel data from the British Household Panel Survey collected between 1991 and 2002. Overall, the financial incentives of the reform had negligible effects on a wide range of married mothers’ decisions, such as eligible (working at least 16 hours per week) and full-time employment (working at least 30 hours per week), employment transitions, childcare use, and divorce rates. Women’s responses, however, were highly heterogeneous, depending on their partners’ labour supply and earnings. Mothers married to low-income men showed larger responses in employment, especially if they had younger children. They were more likely to remain in the labour force and had higher rates at which they entered it. While more likely to receive the tax credit, they also experienced a greater risk of divorce. We find virtually no effect for women with higher-income husbands. Likewise, there are no statistically significant responses among married men. |
| Keywords: | tax credit, household labour supply, intrahousehold bargaining, divorce |
| JEL: | C23 H31 I38 J12 J13 J22 |
| Date: | 2007–08 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2980&r=lab |
| By: | Braz Camargo; Todd Stinebrickner; Ralph Stinebrickner |
| Abstract: | In two recent cases involving the University of Michigan (Gratz v. Bollinger and Gruttinger v. Bollinger), the Supreme Court examined whether race should be allowed to play an explicit role in the admission decisions of schools. The arguments made in support of affirmative action admission policies in these cases and others raise two fundamental questions. First, do students actually have incorrect beliefs about individuals from different races at the time of college entrance? Second, if students do have incorrect beliefs at the time of college entrance, can diversity on a college campus change these beliefs? While a small literature has recently shed some light on the second question, no previous work has been able to provide direct evidence about the first one. In this paper we examine the first question by taking advantage of unique data collected specifically for this purpose. |
| JEL: | I2 J0 J15 K0 |
| Date: | 2007–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13342&r=lab |
| By: | Arnab K. Basu (College of William and Mary); Nancy H. Chau (Cornell University and IZA); Ravi Kanbur (Cornell University) |
| Abstract: | In many countries, non-compliance with minimum wage legislation is widespread, and authorities may be seen as having turned a blind eye to a legislation that they have themselves passed. But if enforcement is imperfect, how effective can a minimum wage be? And if non-compliance is widespread, why not revise the minimum wage? This paper examines a minimum wage policy in a model with imperfect competition, imperfect enforcement and imperfect commitment, and argues that it is the combination of all three that produces results which are consistent with a wide range of stylized facts that would otherwise be difficult to explain within a single framework. We demonstrate that turning a blind eye can indeed be an equilibrium phenomenon with rational expectations subject to an ex post credibility constraint. Since credible enforcement requires in effect a credible promise to execute ex post a costly transfer of income from employers to workers, a government with an objective function giving full weight to efficiency but none to distribution is shown, paradoxically, to be unable to credibly elicit efficiency improvements via a minimum wage reform. |
| Keywords: | non-compliance, minimum wage, dynamic consistency, equity and efficiency |
| JEL: | D6 E61 J38 |
| Date: | 2007–08 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2998&r=lab |
| By: | Cornelia Muresan (Max Planck Institute for Demographic Research, Rostock, Germany) |
| Abstract: | This study investigates the effect of educational attainment and educational enrolment on the risks of second birth in Romania, using data from the Generations and Gender Survey of 2005. Looking at the 1950-2005 period, we found a persistently negative effect of education on second birth, i.e., women with a relatively high level of education have lower risks of birth. Being in education significantly reduces the risk of second birth compared to women with no educational qualification. The risk is not lower, however, when we compare women who are still enrolled in education with individuals who have a high level of education. The strong negative effect of age at first birth observed when we do not control for personality weakens once we control for unobserved heterogeneity. We also show the extent to which changes in the socio-political regime, in family policies, and in the educational system affect the impact of education on second births. |
| Keywords: | Romania, education of women, fertility |
| JEL: | J1 Z0 |
| Date: | 2007–08 |
| URL: | http://d.repec.org/n?u=RePEc:dem:wpaper:wp-2007-028&r=lab |
| By: | Biewen, Martin; Fitzenberger, Bernd; Osikominu, Aderonke; Waller, Marie |
| Abstract: | We use a new and exceptionally rich administrative data set for Germany to evaluate the employment effects of a variety of public sponsored training programs in the early 2000s. Building on the work of Sianesi (2003, 2004), we employ propensity score matching methods in a dynamic, multiple treatment framework in order to address program heterogeneity and dynamic selection into programs. Our results suggest that in West Germany both short-term and medium-term programs show considerable employment effects for certain population subgroups but in some cases the effects are zero in the medium run. Short-term programs are surprisingly effective when compared to the traditional and more expensive longer-term programs. With a few exceptions, we find little evidence for significant positive treatment effects in East Germany. There is some evidence that the employment effects decline for older workers and for low– skilled workers. |
| Keywords: | evaluation, multiple treatments, dynamic treatment effects, local linear matching, active labor market programs, administrative data |
| JEL: | C14 H43 J68 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:5868&r=lab |
| By: | N. CHUSSEAU; M. DUMONT; J. HELLIER; G. RAYP; P. WILLEMÉ |
| Abstract: | We analyse the immigration flows to Western Europe in the sixties. We develop a theoretical model tailored to account for some of the key features of this period, i.e., trade in manufacturing that essentially involved advanced countries, the growing administration of labour markets in Western Europe and the huge inflow of low skilled immigrants from the South (less advanced countries) into Western Europe. Two propositions are subsequently derived from this model. First, the immigration flow increases with the skill premium in the country of destination. Second, for a given skill premium, immigration is an increasing function of both the host country’s working population and its relative endowment in skilled labour. The first proposition reflects a demand side effect that diverges from the result of the traditional self-selecting approach to migration, i.e., that a higher skill premium in the country of destination tends to discourage potential low-skilled migrants. Estimations implemented for a panel of four European countries (Belgium, France, Sweden and West Germany) over the period 1960-1975 corroborate to a large extent our propositions. We also find that none of the supply determinants are individually significant at equilibrium. These results confirm the hypothesis that immigration to Western Europe in the sixties was primarily demand driven. |
| Keywords: | Immigration, International Division of Labour, Wage Inequality |
| JEL: | F22 J31 |
| Date: | 2007–06 |
| URL: | http://d.repec.org/n?u=RePEc:rug:rugwps:07/471&r=lab |
| By: | Alexander K. Koch (Royal Holloway, University of London and IZA); Julia Nafziger (ECARES, Université Libre de Bruxelles) |
| Abstract: | The Peter Principle captures two stylized facts about hierarchies: first, promotions often place employees into jobs for which they are less well suited than for that previously held. Second, demotions are extremely rare. Why do organizations not correct ‘wrong’ promotion decision? This paper shows in a complete contracting setting that a simple trade-off between incentive provision and efficient job assignment may make it optimal to promote some employees to a job at which they produce less than they would at the previous level. |
| Keywords: | moral hazard, information, job assignments, Peter Principle |
| JEL: | D82 J31 J33 M12 |
| Date: | 2007–08 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2973&r=lab |
| By: | Leilanie Basilio (Ruhr Graduate School in Economics); Thomas K. Bauer (RWI Essen, Ruhr-University Bochum and IZA); Mathias Sinning (RWI Essen and IZA) |
| Abstract: | This paper analyzes whether immigrant families facing credit constraints adopt a family investment strategy wherein, upon arrival, an immigrant spouse invests in host countryspecific human capital while the other partner works to finance the family's current consumption. Using data for West Germany, we do not find evidence for such a specialization strategy. We further examine the labor supply and wage assimilation of families whose members immigrated together relative to families whose members immigrated sequentially. Our estimates indicate that this differentiation is relevant for the analysis of the labor market activities of migrant households. |
| Keywords: | international migration, assimilation, family investment hypothesis |
| JEL: | D10 F22 J22 |
| Date: | 2007–08 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2989&r=lab |
| By: | Haile, Getinet; Nguyen, Ngoc Anh |
| Abstract: | We investigate the determinants of high school students’ academic attainment in maths, reading and science; focusing particularly on possible effects that ethnicity and family background may have on attainment. Using data from the NELS2000 and employing quantile regression techniques, we find two important results. First, the gaps in maths, reading and science test scores among ethnic groups vary across the conditional quantiles of the measured test scores. Specifically, Blacks and Hispanics tend to fare worse in their attainment at higher quantiles, particularly in science. Secondly, the effects of family background factors such as parental education and father’s occupation also vary across quantiles of the test score distribution. The implication of these findings is that the commonly made broad distinction on whether one is from a privileged/disadvantaged ethnic and/or family background may not tell the whole story that the academic attainment discourse has to note. Interventions aimed at closing the gap in attainment between Whites and minorities may need to target higher levels of the test score distribution. |
| Keywords: | Educational attainment; Quantile regression; |
| JEL: | I20 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:4626&r=lab |
| By: | Lorenzo Cappellari (Department of Economics, Universite Cattolica di Milano); Richard Dorsett (Policy Studies Institute); Getinet Haile (Policy Studies Institute) |
| Abstract: | This paper examines employment transitions among men and women in the UK aged between 50 and the state pension age. We begin by examining the issue of duration dependence, using standard duration models. We then use a fourth order Markov model to estimate quarterly transitions while allowing for potential endogeneity of initial conditions. The results reject exogeneity of initial conditions and show the importance of both duration dependence and state dependence. This implies there is the potential for any individual to become trapped in non-employment and, ideally, policy should intervene as soon as an individual begins a period of non-employment. |
| Keywords: | labour force transitions, labour market |
| Date: | 2007–07 |
| URL: | http://d.repec.org/n?u=RePEc:ese:iserwp:2007-16&r=lab |
| By: | Helmut Dietl (Institute for Strategy and Business Economics, University of Zurich); Markus Lang (Institute for Strategy and Business Economics, University of Zurich); Alexander Rathke (Institute for Empirical Research in Economics, University of Zurich) |
| Abstract: | Increasing financial disparity and spiralling wages in European football have triggered a debate about the introduction of salary caps. This paper provides a theoretical model of a team sports leagues and studies the welfare effect of salary caps. It shows that salary caps will increase competitive balance and decrease overall salary payments within the league. The resulting effect on social welfare is counter-intuitive and depends on the preference of fans for aggregate talent and for competitive balance. A salary cap that binds only for large market clubs will increase social welfare if fans prefer aggregate talent despite the fact that the salary cap will result in lower aggregate talent. If fans prefer competitive balance, on the other hand, any binding salary cap will reduce social welfare. |
| Keywords: | Salary Caps, Social Welfare, Competitive Balance, Team Sports League |
| JEL: | L83 |
| Date: | 2007–08 |
| URL: | http://d.repec.org/n?u=RePEc:iso:wpaper:0067&r=lab |
| By: | Manuel Artís (AQR-IREA, University of Barcelona); Raúl Ramos (AQR-IREA, University of Barcelona and IZA); Jordi Suriñach (AQR-IREA, University of Barcelona) |
| Abstract: | Using microdata, we analyse the determinants of firm relocation and outsourcing decisions and their effects on firms’ employment decisions. The results for a sample of 32 countries show that both strategies have been more intense in the EU-15 countries than in the rest and that, in some cases, they have been complementary. Regarding the determinants, we have found that while some characteristics such as size, age, activity sector, main market or belonging to a group affect both decisions, other such as a higher innovation, demand sensitivity or productivity explain why some firms choose to subcontract instead of relocate. |
| Keywords: | firm relocation, outsourcing, triprobit model |
| JEL: | R30 M55 M51 |
| Date: | 2007–08 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2978&r=lab |