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on Labour Economics |
| By: | Arnd Kölling (Berlin School of Business and Law) |
| Abstract: | This paper examines the relationship between intra-firm wage dispersion and establishments’ employment in a theoretical analysis and empirical regressions using German “Linked Employer-Employee Data from the IAB” (LIAB) for the years of 1996 through 2008. Therefore, fractional probit models for the panel data, recommended in Papke and Wooldridge (2008), and fixed effects regression with a log-odds transformation of the dependent variable are conducted to estimate share equations of a labor demand model. The results illustrate a negative influence of the residual wage inequality that takes into account the composition of the workforce in the establishment with employment. In addition, an increasing wage dispersion at the lower end of the wage distribution decreases labor demand of the establishment but the estimates of the overall wage dispersion becomes insignificant then. |
| Keywords: | Labor Demand, Wage Dispersion, Share Equation |
| JEL: | J23 J21 E24 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:lue:wpaper:326&r=lab |
| By: | Furtado, Delia (University of Connecticut); Song, Tao (University of Connecticut) |
| Abstract: | Previous studies show that immigrants married to natives earn higher wages than immigrants married to other immigrants. Using data from the 1980-2000 U.S. censuses and the 2005-2010 American Community Surveys, we show that these wage premiums have increased over time. Our evidence suggests that the trends cannot be explained by changes in the attributes of immigrants that tend to marry natives but are instead most likely a result of increasing returns to the characteristics of immigrants married to natives. Because immigrants married to natives tend to have more schooling, part of the increasing premium can be explained by increases in the returns to a college education. However, we find increasing intermarriage premiums even when allowing the returns to schooling as well as English-speaking ability to vary over time. We believe these patterns are driven by changes in technology and globalization which have made communication and management skills more valuable in the U.S. labor market. |
| Keywords: | intermarriage, wage premium, immigration, globalization |
| JEL: | J12 J24 J31 J61 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp8626&r=lab |
| By: | Felix Koenig; Alan Manning; Barbara Petrongolo |
| Abstract: | Wages are only mildly cyclical, implying that shocks to labour demand have a larger short-run impact on unemployment rather than wages, at odds with the quantitative predictions of the canonical search and matching model. This paper provides an alternative perspective on the wage flexibility puzzle, explaining why the canonical model can only match the observed cyclicality of wages if the replacement ratio is implausibly high. We show that this failure remains even if wages are only occasionally renegotiated, unless the persistence in unemployment is implausibly low. We then provide some evidence that part of the problem comes from the implicit model for the determination of reservation wages. Estimates for the UK and West Germany provide evidence that reservation wages are much less cyclical than predicted even conditional on the observed level of wage cyclicality. We present evidence that elements of perceived "fairness" or "reference points" in reservation wages may address this model failure. |
| Keywords: | Reservation wages, wage cyclicality, reference points |
| JEL: | J31 J64 E24 |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1319&r=lab |
| By: | Christopher Stanton; Catherine Thomas |
| Abstract: | Online markets for remote labor services allow workers and firms to contract with each other directly. Despite this, intermediaries - called outsourcing agencies - have emerged in these markets. This paper shows that agencies signal to employers that inexperienced workers are high quality. Workers affiliated with an agency have substantially higher job-finding probabilities and wages at the beginning of their careers compared to similar workers without an agency affiliation. This advantage declines after high-quality non-affiliated workers receive good public feedback scores. The results indicate that intermediaries have arisen endogenously to permit a more efficient allocation of workers to jobs. |
| Keywords: | Labor market intermediation, Offshoring, Incomplete information |
| JEL: | F16 J30 D02 O30 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1316&r=lab |
| By: | Franziska Hawranek; Norbert Schanne |
| Abstract: | Your very private job agency: Job referrals based on residential location networks This paper analyzes job referral effects that are based on residential location. We use georeferenced record data for the entire working population (liable to social security) and the corresponding establishments in the Rhine-Ruhr metropolitan area, which is Germany's largest (and EU's second largest) metropolitan area. We estimate the propensity of two persons to work at the same place when residing in the same neighborhood (reported with an accuracy of 500m×500m grid cells), and compare the effect to people living in adjacent neighborhoods. We find a significant increase in the probability of working together when living in the same neighborhood, which is stable across various specifications. Additionally, we look at how referral effects differ for various groups like age, skill, ethnic groups and industry sectors. We find that especially low skilled workers make use of residential networks for job search, as well as some groups of immigrants. Especially migrants from the new EU countries as well as Italians and people from former Yugoslavia have a highly increased probability of working together when they share the same neighborhood. This is clear sign for network effects especially for some immigrant groups in the German labor market.JobFurther, we are able to investigate a number of issues in order to deepen the insight on actual job referrals: distinguishing between the effects on working in the same neighborhood and working in the same establishment ? probably the more accurate measure for job referrals ? shows that the latter yield overall smaller effects. Further, we find that clusters in employment although having a significant positive effect play only a minor role for the magnitude of the referral effect, which makes us confident that what we find is actually related to a true referral effect and not some spurious correlation. When we exclude short distance commuters, we find the same probabilities of working together, which reinforces our interpretation of this probability as a network effect. The paper investigates the effect of living together on the probability of working together. We find strong evidence for a positive and highly significant relationship, which is robust across several specifications and robustness tests, addressing common issues on the identification of neighborhood effects. JEL Classification: J20, J46, R23 |
| JEL: | J20 R23 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa14p49&r=lab |
| By: | János Kollo (Institute of Economics, Center for Economic and Regional Studies, Hungarian Academy of Sciences); Bence Czafit (Budapest Institute for Policy Analysis) |
| Abstract: | We study the entry to formal employment and earnings of a large sample of convicts released from Hungarian prisons in 2002-2008. We identify the effect of the prison service on post-release careers by exploiting differences in the timing of incarceration, on the one hand, and estimating fixed effects models, on the other. For convicts with a single prison spell,we find initially negative effect on employment that turns positive after about one year while the impact on wages is permanently negative. A comparison with recidivists, for whom the employment effect is negative and the wage effect is weaker, suggests that these results are driven by a drop in the reservation wages of ‘converted’ criminals rather than the lack of discrimination. This reading is supported by further data showing that the ex-inmates, on average, make increased effort to find legitimate sources of living and support to finding jobs. |
| Keywords: | incarceration, unemployment, wage loss, discrimination |
| JEL: | K42 J64 J39 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:has:bworkp:1408&r=lab |
| By: | Winters, John V. (Oklahoma State University) |
| Abstract: | Formal education is widely thought to be a major determinant of individual earnings. This paper uses the American Community Survey to examine the effect of formal schooling on worker wages. Given the potential endogeneity of education decisions, I instrument for individual schooling using cohort-level mean maternal years of schooling from previous decennial censuses. The instrumental variables results suggest that schooling has a significant positive effect on worker wages. Specifically, an additional year or schooling is estimated to increase hourly wages by 10 percent for men and 12.6 percent for women. |
| Keywords: | human capital, education, returns to schooling, wages, maternal education |
| JEL: | J24 J31 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp8616&r=lab |
| By: | Etienne Lalé |
| Abstract: | We study the effects of front-loading the payment of unemployment benefits in general equilibrium economies with imperfect labor and insurance markets, focusing on the trade-off between improved re-employment rates and the potential welfare losses accruing from consumption-smoothing problems. The calibration to U.S. data shows that these losses are large, enough to offset most gains from front-loading the benefit system. The nature of labor market frictions – i.e. stemming from workers’ search efforts or firms’ vacancy posting – changes the underlying mechanisms, but not the overall welfare figures. We discuss robustness to changing the generosity, duration and eligibility of unemployment insurance. |
| Keywords: | Unemployment Insurance, Precautionary Savings, Labor-Market Frictions, Welfare Effect. |
| JEL: | E21 I38 J63 J65 |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:bri:uobdis:14/651&r=lab |
| By: | HLASNY, Vladimir |
| Abstract: | Chinese employers practice extensive personal screening of job applicants. This study identifies four manifestations of this practice by motive – statistical, customer taste-based, employer taste-based, and regulatory – and evaluates their prevalence, economic determinants and implications for firms’ performance using simultaneous-equations linear and Poisson models. Categorization of a regulatory motive for applicant sorting in China is one contribution of this study. Statistical screening is found to be related positively to employers’ capital intensity, labor-market power and private ownership, and negatively to the supply of skills in provincial labor markets, as may be expected. Customer-taste screening is more prevalent in service and sales industries, as expected, and interestingly in wealthy first-tier cities. Employer-taste screening appears more prevalent at privately-owned firms, and surprisingly in skill-intensive industries and in first-tier cities, potentially reflecting difficulty at distinguishing it from customer-taste screening. Regulatory screening is related positively to firms’ market power, capital intensity and state ownership, as expected. Statistical and customer-taste screening is associated with higher firm profitability, particularly in skill-intensive industries and in service and sales industries, respectively, while employer-taste and regulatory screening is associated with lower profitability, as expected. These results jointly validate our identification of the four pillars of applicant screening. |
| Keywords: | Recruitment, Job applicant screening, Profiling, Statistical & taste-based discrimination, Hukou, China, Poisson regression, Simultaneous equations model |
| JEL: | J7 J24 D83 |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:ant:wpaper:2014029&r=lab |
| By: | Clemens, Jeffrey; Wither, Michael |
| Abstract: | We present data characterizing the U.S. labor market during the Great Recession and subsequent recovery. U.S. employment declines were dramatic among young adults, substantial among prime-aged adults, and modest among those near retirement. The decline in employment among working-age adults generally exceeded those that occurred in other advanced economies. We assess the potential explanatory power of population aging and increases in educational attainment as factors underlying these developments. Recent analyses suggest that population aging can explain nearly one half of the decline in the labor force participation rate and one third of the decline in the employment to population ratio from 2007 to 2013. Our comparisons of employment developments across age groups and countries provide reason to view this one third as an upper bound on aging's plausible contribution. We conduct a more detailed analysis of changes in employment and school attendance across demographic sub-groups of the young adult population. Across sub-groups defined by age, gender, and race/ethnicity, changes in school enrollment predict very little of the variation in this period's employment changes. Taken together, aging and enrollment trends thus appear to underlie a modest to moderate fraction of the aggregate employment decline. We conclude by discussing a range of non-demographic factors that may have contributed to the decline, but on which existing research has yet to arrive at a consensus. |
| Keywords: | Great Recession, Employment Rate, Unemployment, Labor Force Participation |
| JEL: | E32 J0 J11 |
| Date: | 2014–11–26 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:60228&r=lab |
| By: | Robert Clark (North Carolina State University and The National Bureau of Economic Research); Robert Hammond (North Carolina State University); Emma Hanson (North Carolina State University); Melinda Morrill (North Carolina State University) |
| Abstract: | Once retired from a career job, individuals must live off savings, Social Security, and pensions or earnings from post-retirement work. Those who have made adequate plans for retirement are more likely to be able to meet their desired levels of consumption once retired and are less likely to end up relying on public assistance or having to reenter the labor market. While much attention has been paid to participation in voluntary retirement saving plans, less is known about workers’ planning for retirement. Using administrative records linked to a large-scale survey, we explore what factors are associated with both objective and subjective measures of planning for retirement among public sector workers in North Carolina. We find that only about half our sample of workers ages 50-69 have made a retirement plan. We show that individuals who exhibit higher levels of time discounting, or impatience, are also less likely to plan for retirement and that financial literacy is associated with higher rates of planning. We also show that planning is related to wealth accumulation and retirement preparedness. |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:sip:dpaper:14-008&r=lab |
| By: | Stenberg, Anders (SOFI, Stockholm University); Westerlund, Olle (Umeå University) |
| Abstract: | Training programs for the unemployed typically involve teaching specific skills in demand amongst employers. In 1997, Swedish unemployed could also choose general training at the upper secondary school level. Despite the dominance of programs offering specific training, long-term relative earnings effects of general vs. specific training are theoretically ambiguous. Analyzing detailed administrative data 1990-2010, we find specific training associated with higher earnings in the short run, but that earnings converge over time. Results also indicate that individuals act on their comparative advantages. Long-run earnings advantages of general training are found for females with limited prior education and among metropolitan residents. |
| Keywords: | active labor market programs, adult education, vocational training |
| JEL: | I21 J62 J68 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp8668&r=lab |
| By: | Julia Jauer (OECD, Paris); Thomas Liebig (OECD, Paris); John P. Martin (OECD, Paris); Patrick Puhani (Leibniz University of Hannover; CReAM/University College London; IZA/Bonn; SEW/University of St. Gallen) |
| Abstract: | The question of whether migration can be an equilibrating force in the labour market is an important criterion for an optimal currency area. It is of particular interest currently in the context of high and rising levels of labour market disparities, in particular within the Eurozone where there is no exchange-rate mechanism available to play this role. We shed some new light on this question by comparing pre- and post-crisis migration movements at the regional level in both Europe and the United States, and their association with asymmetric labour market shocks. We find that recent migration flows have reacted quite significantly to the EU enlargements in 2004 and 2007 and to changes in labour market conditions, particularly in Europe. Indeed, in contrast to the pre-crisis situation and the findings of previous empirical studies, there is tentative evidence that the migration response to the crisis has been considerable in Europe, in contrast to the United States where the crisis and subsequent sluggish recovery were not accompanied by greater interregional labour mobility in reaction to labour market shocks. Our estimates suggest that, if all measured population changes in Europe were due to migration for employment purposes – i.e. an upper-bound estimate – up to about a quarter of the asymmetric labour market shock would be absorbed by migration within a year. However, in the Eurozone the reaction mainly stems from migration of third-country nationals. Even within the group of Eurozone nationals, a significant part of the free mobility stems from immigrants from third countries who have taken on the nationality of their Eurozone host country. |
| Keywords: | Free mobility, migration, economic crisis, labour market adjustment, Eurozone, Europe, United States |
| JEL: | F15 F16 F22 J61 |
| Date: | 2014–10 |
| URL: | http://d.repec.org/n?u=RePEc:lue:wpaper:331&r=lab |
| By: | Deborah Cobb-Clark (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne; Institute for the Study of Labor (IZA); and ARC Centre of Excellence for Children and Families over the Life Course) |
| Abstract: | This paper reviews the role of locus of control in the labor market. I begin with a discussion of the conceptual origins of locus of control, including its relationship to related concepts such as self-efficacy, motivation, and self-control. The relationship between locus of control and labor market success is then summarized. In doing so, I pay careful attention to what we know about three potential mechanisms – human capital investments, hiring decisions, and optimal incentive contracts – through which locus of control might operate. Finally, the broader implications of these relationships for public policy and future research are discussed. |
| Keywords: | Locus of control, labor markets, non-cognitive skills, behavioral labor economics |
| JEL: | J01 J08 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:iae:iaewps:wp2014n25&r=lab |
| By: | Hiroaki Miyamoto (University of Tokyo) |
| Abstract: | This paper studies the cyclicality of aggregate real wages in Japan. By using both static and dynamic approaches, I measure comovements between real wages and business cycle indicators. This paper finds that while real wages constructed using the consumer price index and the GDP deflator are procyclical, the real wage constructed using the producer price index is countercyclical. This result is robust to the data and methods used to compute the comovements. |
| Keywords: | Real wages, business cycle, correlation |
| JEL: | E32 J30 C10 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:kch:wpaper:sdes-2014-16&r=lab |
| By: | Steffen Andersen; Alec Brandon; Uri Gneezy; John A. List |
| Abstract: | Perhaps the most powerful form of framing arises through reference dependence, wherein choices are made recognizing the starting point or a goal. In labor economics, for example, a form of reference dependence, income targeting, has been argued to represent a serious challenge to traditional economic models. We design a field experiment linked tightly to three popular economic models of labor supply—two behavioral variants and one simple neoclassical model—to deepen our understanding of the positive implications of our major theories. Consistent with neoclassical theory and reference-dependent preferences with endogenous reference points, workers (vendors in open air markets) supply more hours when presented with an expected transitory increase in hourly wages. In contrast with the prediction of behavioral models, however, when vendors earn an unexpected windfall early in the day, their labor supply does not respond. A key feature of our market in terms of parsing the theories is that vendors do not post prices rather they haggle with customers. In this way, our data also speak to the possibility of reference-dependent preferences over other dimensions. Our investigation again yields results that are in line with neoclassical theory, as bargaining patterns are unaffected by the unexpected windfall. |
| JEL: | C93 D01 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20695&r=lab |
| By: | Johan Hombert; Antoinette Schoar; David Sraer; David Thesmar |
| Abstract: | We study a large-scale French reform that provided generous downside insurance for unemployed individuals starting a business. We study whether this reform affects the composition of people who are drawn into entrepreneurship. New firms started in response to the reform are, on average, smaller, but have similar growth expectations and education levels compared to start-ups before the reform. They are also as likely to survive or to hire. In aggregate, the effect of the reform on employment is largely offset by large crowd-out effects. However, because new firms are more productive, the reform has the impact of raising aggregate productivity. These results suggest that the dispersion of entrepreneurial abilities is small in the data, so that the facilitation of entry leads to sizable Schumpeterian dynamics at the firm-level. |
| JEL: | G3 H25 J65 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20717&r=lab |
| By: | Krause, Annabelle; Rinne, Ulf; Zimmermann, Klaus F |
| Abstract: | A Single European Labor Market, particularly involving the free movement of workers within Europe, has been a goal of the European community since the 1950s. Whereas it may entail opportunities and drawbacks alike, the benefits—such as greater economic welfare for most citizens—are supposed to outweigh the losses. However, over fifty years after the aim was first established, a Single European Labor Market has not yet been achieved. This paper gives an overview of current European macroeconomic trends, with a particular focus on the Great Recession, and also explores the drivers of and obstacles to labor mobility. Complementarily, it analyses the results of a unique opinion survey among labor market experts, as well as formulates policy recommendations to enhance mobility. The development of a Single European Labor Market is also discussed in relation to the German model. |
| Keywords: | economic crisis; economic migration; European labor market integration; German model; worker mobility |
| JEL: | J40 J61 J68 |
| Date: | 2014–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10107&r=lab |
| By: | Rainer Eppel (WIFO) |
| Abstract: | In direct job creation schemes, unemployed individuals at risk of permanent labour market exclusion are offered temporary subsidised employment in public or non-profit sector firms in combination with skills training and socio-pedagogical support. The main aim is to stabilise and qualify them for later re-integration into the regular labour market. Exploiting exogenous regional variation in population-group-specific programme capacities, I find evidence that such a job creation scheme is, on average, effective in providing a bridge to a regular job. The achieved integration is, however, often not stable. Successful participants face a high risk of once again becoming unemployed. |
| Date: | 2014–12–16 |
| URL: | http://d.repec.org/n?u=RePEc:wfo:wpaper:y:2014:i:489&r=lab |
| By: | Eichhorst, Werner; Rinne, Ulf |
| Keywords: | youth employment, young worker, youth unemployment, promotion of employment, employment creation, entry into working life, employment policy, developed countries, developing countries, emploi des jeunes, jeune travailleur, chômage des jeunes, promotion de l'emploi, création d'emploi, insertion professionnelle, politique de l'emploi, pays développés, pays en développement, empleo de jóvenes, joven trabajador, desempleo de jóvenes, fomento del empleo, creación de empleos, inserción profesional, política de empleo, países desarrollados, países en desarrollo |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:ilo:ilowps:486254&r=lab |
| By: | David Autor (Massachusetts Institute of Technology and The National Bureau of Economic Research); Mark Duggan (Stanford University and The National Bureau of Economic Research); Kyle Greenberg (Massachusetts Institute of Technology and United States Military Academy); David Lyle (United States Military Academy) |
| Abstract: | We analyze the labor market effects of the U.S. Department of Veterans Affairs’ Disability Compensation (DC) program. The largely unstudied DC program currently provides income and health insurance to approximately four million veterans of military service who have service-connected disabilities. We study a unique policy change, the 2001 Agent Orange decision, which expanded eligibility for DC benefits to a broader set of covered conditions — in particular, type II diabetes — to Vietnam veterans who had served in-theater (with ‘Boots on the Ground’ or BOG). Notably, the Agent Orange policy excluded Vietnam era veterans who did not serve in-theatre (‘Not on Ground’ or NOG), thus allowing us to assess the causal effects of DC eligibility by contrasting the outcomes of BOG and NOG veterans. Our results indicate that the policy-induced increase in DC enrollment reduced labor force participation by 18 percentage points among BOG veterans who enrolled in the DC program as a result of the policy change. We also find evidence of program spillovers, with DC recipients significantly more likely to qualify for Social Security Disability Insurance benefits. |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:sip:dpaper:14-010&r=lab |
| By: | Alice Fabre (Aix Marseille University (Aix Marseille School of Economics, CNRS & EHESS)); Stéphane Pallage (ESG UQAM, CIRPEE and Département des Sciences Economiques, Université du Québec `a Montréal); Christian Zimmermann (Federal Reserve Bank of St-Louis, IZA, RCEA and CESifo) |
| Abstract: | In this paper we compare the welfare effects of unemployment insurance (UI) with an universal basic income (UBI) system in an economy with idiosyncratic shocks to employment. Both policies provide a safety net in the face of idiosyncratic shocks. While the unemployment insurance program should do a better job at protecting the unemployed, it suffers from moral hazard and substantial monitoring costs, which may threaten its usefulness. The universal basic income, which is simpler to manage and immune to moral hazard, may represent an interesting alternative in this context. We work within a dynamic equilibrium model with savings calibrated to the United States for 1990 and 2011, and provide results that show that UI beats UBI for insurance purposes because it is better targeted towards those in need. |
| Keywords: | universal basic income, idiosyncratic shocks, unemployment insurance, heterogeneous agents, Moral Hazard |
| JEL: | E24 D7 J65 |
| Date: | 2014–11–14 |
| URL: | http://d.repec.org/n?u=RePEc:aim:wpaimx:1451&r=lab |