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on Labour Economics |
| By: | Pascal Michaillat (London School of Economics); Emmanuel Saez (University of California, Berkeley) |
| Abstract: | This paper develops a model of unemployment fluctuations. The model keeps the architecture of the Barro and Grossman (1971) general disequilibrium model but replaces the disequilibrium framework on the labor and product markets by a matching framework. On the product and labor markets, both price and tightness adjust to equalize supply and demand. There is one more variable than equilibrium condition on each market, so we consider various price mechanisms to close the model, from completely flexible to completely rigid. With some price rigidity, aggregate demand influences unemployment through a simple mechanism: higher aggregate demand raises the probability that firms find customers, which reduces idle time for firms’ employees and thus increases labor demand, which in turn reduces unemployment. We use the comparative-statistics predictions of the model together with empirical measures of quantities and tightnesses to re-examine the origins of labor market fluctuations. We conclude that (1) price and real wage are not fully flexible because product and labor market tightness fluctuate significantly; (2) fluctuations are mostly caused by labor demand and not labor supply shocks because employment is positively correlated with labor market tightness; and (3) labor demand shocks mostly reflect aggregate demand and not technology shocks because output is positively correlated with product market tightness. |
| Keywords: | aggregate demand, unemployment, matching frictions, business cycles |
| JEL: | E10 E24 E30 J2 J64 |
| Date: | 2014–07 |
| URL: | http://d.repec.org/n?u=RePEc:upj:weupjo:14-214&r=lab |
| By: | Andres Erosa; Luisa Fuster; Gueorgui Kambourov |
| Abstract: | We build a heterogeneous life-cycle model which captures a large number of salient features of individual labor supply over the life cycle, by education, both along the intensive and extensive margins. The model provides an aggregation theory of individual labor supply, firmly grounded on individual-level micro evidence, and is used to study the aggregate labor supply responses to changes in the economic environment. We find that the aggregate labor supply elasticity to a transitory wage shock is 1.75, with the extensive margin accounting for 62% of the response. Furthermore, we find that the aggregate labor supply elasticity to a permanent-compensated wage change is 0.44. |
| Keywords: | Aggregate labor supply, intensive margin, extensive margin, life cycle, fixed cost of work, non-linear earnings, precautionary savings, preference heterogeneity |
| JEL: | D9 E2 E13 E62 J22 |
| Date: | 2014–07–14 |
| URL: | http://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-516&r=lab |
| By: | Max Löffler; Andreas Peichl; Sebastian Siegloch |
| Abstract: | There is still considerable dispute about the magnitude of labor supply elasticities. While differences in micro and macro estimates are recently attributed to frictions and adjustment costs, we show that relatively low labor supply elasticities derived from microeconometric models can also be explained by modeling assumptions with respect to wages. Specifically, we estimate 3,456 structural labor supply models each representing a plausible combination of frequently made choices. While most model assumptions do not systematically affect labor supply elasticities, our analysis shows that the results are very sensitive to the treatment of wages. In particular, the often-made but highly restrictive independence assumption between preferences and wages is key. To overcome this restriction, we propose a flexible estimation strategy that nests commonly used models. We show that loosening the exogeneity assumption leads to labor supply elasticities that are much higher. |
| Keywords: | labor supply, elasticity, random utility models, wages |
| JEL: | C25 C52 H31 J22 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwsop:diw_sp675&r=lab |
| By: | Stéphane Auray (CREST-ENSAI, ULCO and CIRPEE); David Fuller (Concordia University, CIREQ); Damba lkhagvasuren (Concordia University, CIREQ); Antoine Terracol (CES-Université Paris 1) |
| Abstract: | A dynamic multi-sector model with net and excess mobility is developed to quantify the determinants of the canonical increasing wage-tenure profile. The model distinguishes between three factors: sector specific skill accumulation, sectoral-level shocks, and dynamic worker sector mismatch shocks. The sector-specific skill premium drives the observed negative correlation between lifetime earnings and mobility. Excess mobility driven by worker-sector mismatch shocks explains nearly 20 percent of the observed wage growth for recent movers. A model featuring only dynamic worker-sector mismatch shocks still captures the salient features of the wage-tenure profile. Sectoral-level shocks have a negligible impact on the wage-tenure profile and excess mobility |
| Keywords: | Labor Mobility, Wage Structure, Excess and Net Mobility, Industry-Specific Experience, Dynamic Sectoral Mismatch, Labor Income Shocks, Returns to Tenure |
| JEL: | E24 J31 J24 J62 |
| Date: | 2014–03 |
| URL: | http://d.repec.org/n?u=RePEc:crs:wpaper:2014-12&r=lab |
| By: | Rob Euwals; Anja Deelen |
| Abstract: | In this study, we investigate the anatomy of older workers’ wages. The central question is whether the wage cushion—i.e., the difference between actual wages and collectively agreed-upon (maximum) contractual wages—contributes to the fact that wages continue increasing at older ages. We follow the wages of individual workers in twenty-two sectors of industry in the Netherlands using administrative data for the period 2006 – 2010. In the public sector, we find no evidence of a wage cushion. Wage scale ceilings set in collective agreements are guiding for older workers’ wages, and workers earning a contractual wage equal to a wage scale ceiling are not compensated with higher additional wages. In the private sector, we do find evidence of a wage cushion. Wage scale ceilings are less restrictive and workers earning a contractual wage exceeding the highest wage scale ceiling experience higher contractual wage growth. The private sector wage cushion enhances wage differentiation and allows for wages that continue increasing at older ages. |
| JEL: | C23 J14 J31 |
| Date: | 2014–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpb:discus:282&r=lab |
| By: | Luz Adriana Flórez |
| Abstract: | This paper contributes to the theoretical analysis of the informal sector in the search and matching framework. Building upon the work of Albrecht et al. (2009), where the informal sector consists of unregulated self-employment, I describe the search and matching equilibrium in an economy with an informal sector where workers are risk neutral and the government can observe when a worker is formal and informal. In this case I solve the matching equilibrium by introducing three policies: unemployment benefits, a formal lump sum tax, and a job creation subsidy. I analyze the effects of these policies on unemployment rates, formal employment and informal employment. I show that these policies affect the incentives of workers to be formal or informal changing the composition of these two types of workers in the labor market. |
| Keywords: | Policies, Search and Matching, Informal Sector. |
| JEL: | J65 J68 |
| Date: | 2014–07–18 |
| URL: | http://d.repec.org/n?u=RePEc:col:000094:011953&r=lab |
| By: | Leilanie Basilio. Thomas K. Bauer; Anica Kramer |
| Abstract: | This paper investigates the transferability of human capital across countries and the contribution of imperfect human capital portability to the explanation of the immigrant-native wage gap. Using data for West Germany, our results reveal that, overall, education and in particular labor market experience accumulated in the home countries of the immigrants receive signifiantly lower returns than human capital obtained in Germany. We further find evidence for heterogeneity in the returns to human capital of immigrants across countries. Finally, imperfect human capital transferability appears to be a major factor in explaining the wage differential between natives and immigrants. |
| Keywords: | Human Capital, Rate of Return, Immigration, Assimilation |
| JEL: | J61 J31 J24 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwsop:diw_sp671&r=lab |
| By: | Sundip Dhanjal, Tammy Schirle (Wilfrid Laurier University) |
| Abstract: | In this study, we investigate whether an aging workforce affects the job opportunities of youth. Provincial data from the 1976-2013 Labour Force Surveys and a fixed-effects model is used to estimate the effect of the share of the adult male labour force that is aged 55 to 69 on the employment and unemployment rates of men aged 25 to 29. We estimate effects on other labour market outcomes including wages and school enrolment, and other samples of younger men and women. There is no evidence to suggest that a growing share of older workers negatively affects the decisions or outcomes of youth in the labour market. To the contrary, there is weak evidence to suggest an aging population has a positive effect on the labour market outcomes of youth. |
| Keywords: | Population aging, employment, unemployment, youth |
| JEL: | J11 J21 |
| Date: | 2014–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:wlu:lcerpa:0074&r=lab |
| By: | Patrizia Ordine; Giuseppe Rose (Dipartimento di Economia, Statistica e Finanza, Università della Calabria) |
| Abstract: | This study aims at investigating whether wage of workers entering positions entitled to employment protection may be affected by the introduction of a two-tier labor market regime. By using repeated cross-sections microdata, we apply difference-in-differences estimators - also combined with propensity score matching techniques - to evaluate the impact of the Italian labor market reform of 2003. The results are robust and show that after the policy implementation protected entrants experienced a reduction in earnings ranging between -3.0% and -6.0%. |
| Keywords: | EPL, Flexibility-at-the-Margin, Difference-in-Differences, Propensity Score, Matching Estimators |
| JEL: | J63 J64 |
| Date: | 2014–07 |
| URL: | http://d.repec.org/n?u=RePEc:clb:wpaper:201410&r=lab |
| By: | Stefan Boeters |
| Abstract: | The particular situation of the youngest and oldest individuals on the labour market motivates age-specific labour market analysis. One topical case is employment protection for older workers. The effect of employment protection on the total number of jobs is ambiguous. The positive effect of lower job destruction is counteracted by the negative effect of lower job creation. This ambiguity carries over to the more specific case of age-related employment protection. Numerical analysis can be illuminating when countervailing effects produce an ambiguity. In this paper, I present a numerical model based on the theoretical set-up of Chéron, Hairault and Langot (2011). Simulations performed with the model highlight age-specific effects of general employment protection measures and effects of measures targeted at particular age-groups on workers outside the target group. Firing taxes and hiring subsidies have age-specific consequences because employment and unemployment rates vary over the lifecycle. Positive effects of employment protection for the target group can be outweighed by negative effects for other workers. |
| JEL: | J64 J63 J21 |
| Date: | 2014–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpb:discus:281&r=lab |
| By: | Patrizia Ordine; Giuseppe Rose (Dipartimento di Economia, Statistica e Finanza, Università della Calabria) |
| Abstract: | This paper analyzes the process driving graduate workers in undergraduate jobs. Micro and macro perspectives are considered so that the interrelationships between individual mismatch and over-education at the aggregate level are analyzed. The theoretical model highlights that individual mismatch does not necessarily imply that the share of graduates exceeds what is optimally required at the aggregate level. The empirical investigation tests to what extent the individual probability of mismatch is related to the availability of graduates in the labor market. A structural estimation is implemented using a quasi-natural experiment ideally provided by an exogenous expansion of higher education that took place in some Italian regions in the mid ?'90s. Difference-in-Differences models show that in this country an increase in the supply of graduates has actually reduced the individual probability of mismatch which is an effect rationalized by the theory. |
| Keywords: | Overeducation, mismatch, matching models, difference-in-differences |
| JEL: | J24 J64 I23 |
| Date: | 2014–07 |
| URL: | http://d.repec.org/n?u=RePEc:clb:wpaper:201409&r=lab |
| By: | Roland Rathelot (CREST) |
| Abstract: | This paper aims to isolate the ethnic gap on the labor market that can be attributed to ethnicity and not to differences in individual characteristics or residential location. Controlling for residential location is important as ethnic minorities often live in distressed neighborhoods. It is also challenging because spatial sorting is likely to differ across ethnicities because of labor- or housing-market discrimination. This paper shows that controlling for neighborhoods and observed individual characteristics fails to pro-vide a consistent estimate for the component of the gap accountable to ethnicity only. However, under some assumptions, the quantity of interest is set identified even when heterogeneous sorting patterns across ethnicities are allowed for and the set estimate can still be informative. A two-step estimation method is presented and applied to explain the ethnic employment differential in France, between French individuals of North African ancestry and those with non-immigrant parents. Most of the gap is not due to differences in residential location or individual characteristics, but rather to ethnicity itself |
| Keywords: | ethnic employment gaps, spatial sorting, set identification, discrimination, spatial mismatch |
| JEL: | C23 J71 R23 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:crs:wpaper:2014-09&r=lab |
| By: | Jaylson Jair da Silveira; Gilberto Tadeu Lima |
| Abstract: | Motivated by a considerable (experimental and empirical) evidence on endogenous labor effort and inter- and intra-industry wage differentials, this paper explores implications for income distribution, capacity utilization and economic growth of firms using different strategies to elicit effort (and hence productivity) from workers. The frequency distribution of effort-elicitation strategies in the population of firms is governed by a replicator dynamics that generates wage differential as a long-run, evolutionary equilibrium outcome. Although firms willing to elicit more labor effort have to compensate workers with a higher wage rate, a larger proportion of firms adopting such strategy will not necessarily produce a higher wage share in income and thereby higher rates of capacity utilization and economic growth. The intuition is that, depending on the accompanying rise in average labor productivity, the wage share in income (and hence the aggregate effective demand) may not vary positively with the proportion of firms paying higher wages. Therefore, endogenous labor productivity and wage differentials carry relevant theoretical and policy implications for a wage-led growth regime. |
| Keywords: | Labor effort; wage differentials; income distribution; capacity utilization; economic growth. |
| JEL: | O11 O41 J31 |
| Date: | 2014–07–21 |
| URL: | http://d.repec.org/n?u=RePEc:spa:wpaper:2014wpecon10&r=lab |
| By: | Long, Iain W. (Cardiff Business School); Polito, Vito (Cardiff Business School) |
| Abstract: | We study an individual's incentive to search for a job in the presence of random criminal opportunities. These opportunities extenuate moral hazard, as the individual sometimes commits crime rather than searching. Even when he searches, he applies less effort. We then revisit the design of optimal unemployment insurance in this environment. If the individual is more likely to remain unemployed and unpunished when he commits crime than when he searches for a job (as suggested by empirical studies), declining unemployment benefits reduce the payoff from crime relative to that from searching. Compared to the canonical models of optimal unemployment insurance, this provides a further incentive to reduce benefits over time. |
| Keywords: | Unemployment insurance; Moral hazard; Crime; Recursive contracts |
| JEL: | C61 D82 H55 J65 K42 |
| Date: | 2014–07 |
| URL: | http://d.repec.org/n?u=RePEc:cdf:wpaper:2014/9&r=lab |
| By: | Alok Kumar (Department of Economics, University of Victoria); Kam Shergill |
| Abstract: | This paper analyzes the determinants of the rural non-farm employment in the fifteen major states of India by using panel data analysis for the period 1972-2010. The analysis indicates that there are significant gender differences in the factors affecting the level and the growth of rural non-farm employment. The level of urbanization, the rural literacy rate and the rural unemployment rate have a significant positive effect on the incidence of non-farm employment for male workers. For female workers, agricultural productivity and the incidence of rural poverty have a significant positive effect. There is evidence of convergence in the incidence of rural non-farm employment for both male and female workers, indicating that states with initially low incidence of rural non-farm employment experienced a higher growth rate in the rural non-farm employment than states with initially high incidence. |
| Keywords: | Rural Non-Farm Employment, Male, Female, Convergence, Panel Data |
| JEL: | J22 I20 D60 |
| Date: | 2014–07–25 |
| URL: | http://d.repec.org/n?u=RePEc:vic:vicddp:1403&r=lab |
| By: | Guillemette de Larquier; Emmanuelle Marchal |
| Abstract: | This article addresses diversity in hiring processes, its reasons and its consequences. Using the French OFER survey on the hiring practices of 3,584 firms in 2005, we investigate how firms organise the selection of job applicants and analyse the outcome of this selection in regard to the profiles of successful applicants. The data analysis reveals four types of screening processes: an informal process (streamlined) and three formalised processes (written-based, testing, and professionalised). The use of a type of screening process depends on the characteristics of the establishments and occupations and is associated with the recruitment channel. Finally, logit regressions show that each recruitment channel and each type of screening process favours and penalises different categories of applicants (e.g., women, unemployed or inactive individuals or individuals with no diploma). |
| Keywords: | hiring process, screening methods, recruitment channels, diversity. |
| JEL: | J01 M5 Z1 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:drm:wpaper:2014-42&r=lab |
| By: | Patrick Kampkötter |
| Abstract: | Formal performance appraisals (PA) are one of the most important human resource management practices in companies. In this paper, we focus on the reaction of employees to these performance assessments. In particular, we investigate the effect between the incidence of being formally evaluated by a supervisor and job and income satisfaction. Building on a representative, longitudinal sample of more than 12,000 individuals from the German Socio-Economic Panel Study (SOEP), we apply fixed effects regressions and find a significantly positive effect of PA on job satisfaction, which is driven by appraisals that are linked to monetary outcomes. Furthermore, the moderating effects of personality traits (Big Five, locus of control) on the relationship between PA and job satisfaction are explored. We find a negative interaction term between PA without any monetary consequences and both employees scoring high on openness to experience and internal locus of control. This suggests that for these employees appraisals, which induce performance monitoring without any monetary consequences, have a detrimental effect on job satisfaction rates. |
| Keywords: | Performance Appraisal; Job Satisfaction; Income Satisfaction; Big Five; Locus of Control; SOEP |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwsop:diw_sp672&r=lab |
| By: | Mette Foged (University of Copenhagen) |
| Abstract: | I document that couples are more likely to migrate if household income is disproportionally due to one partner, and that families react equally strong to a male and female relative earnings advantage. A unitarian model of family migration in which families may discount wives’ private gains is used to derive testable implications regarding the type of couples that select into migrating. The empirical tests show that gender-neutral family migration cannot be rejected against the alternative of husband-centered migration. The lower response of family migration to the human capital held wives than the human capital of husbands, documented in the literature, may be attributed to more intense colocation problems and lower income among female-headed households. The more severe colocation problem stems from stronger educational homogamy among highly educated women relative to highly educated men. The results hold for internal as well as international migration of couples |
| Keywords: | Internationalmigration,familymigration,colocationproblem,selection |
| JEL: | F22 D19 J61 |
| Date: | 2014–07 |
| URL: | http://d.repec.org/n?u=RePEc:crm:wpaper:1429&r=lab |
| By: | Philippe Choné (CREST); Guy Laroque (Sciences-Po and UCL) |
| Abstract: | This article aims at understanding the interplay between pension schemes and tax instruments. The model features extensive labor supply in a stationary environment with overlapping generations and perfect financial markets. Compared with the reference case of a pure taxation economy, we find that taxes become more redistributive when the pension instrument is available, while pensions provide incentives to work |
| Date: | 2014–03 |
| URL: | http://d.repec.org/n?u=RePEc:crs:wpaper:2014-07&r=lab |
| By: | Alexander Sohn; Nadja Klein; Thomas Kneib |
| Abstract: | In this paper we explore the application of structured additive distributional regression for the analysis of conditional income distributions in Germany following the reunification. Using a bootstrapped Kolmogorov-Smirnov test we find that conditional personal income distributions can generally be modelled using the three parameter Dagum distribution. Additionally our results hint at an even more pronounced effect of skill-biased technological change than can be observed by standard mean regression. |
| JEL: | C13 C21 D31 J31 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwsop:diw_sp676&r=lab |