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on Labour Economics |
| By: | Been-Lon Chen (Institute of Economics, Academia Sinica, Taipei, Taiwan); Chih-Fang Lai (Institute of Economics, Academia Sinica, Taipei, Taiwan) |
| Abstract: | Labor taxes and unemployment compensation were blamed for causing relative declines in labor supply in the EU to the US in the past decades. We propose a model with an endogenous labor force and compare with the model with an exogenous labor force. Because of discouraging the labor force, labor taxes decrease employment in our model less than the model with an exogenous labor force, have ambiguous effects on hours, and decrease less labor supply in our model. Due to boosting the labor force, unemployment compensation increases employment in our model and decreases in the model with an exogenous labor force, but with opposite effects on hours, labor supply is ambiguous in both models. To understand the net effect on labor supply, we feed in the data of increases in labor taxes and unemployment compensation in the EU relative to the US. We find that the model with an exogenous labor force explain excessively of decreases in employment and labor supply, with increases in hours against the data. In contrast, our model explains reasonable decreases in labor supply, with sensible decreases in employment and in hours. Thus, with an endogenous labor force, our model explains relative declines in labor supply better than the model with an exogenous labor force. |
| Keywords: | search and matching, labor force participation, unemployment, hours worked, labor taxes, and unemployment benefits |
| JEL: | E24 H20 J22 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:sin:wpaper:14-a015&r=lab |
| By: | Tansel, Aysit (Middle East Technical University); Dalgic, Basak (Hacettepe University); Güven, Aytekin (Abant Izzet Baysal University) |
| Abstract: | This paper investigates wage inequality and wage mobility in Turkey using the Surveys on Income and Living Conditions (SILC). This is the first paper that explores wage mobility for Turkey. It differs from the existing literature by providing analyses of wage inequality and wage mobility over various socioeconomic groups such as gender, age, education and sector of economic activity. We first present an overview of the evolution of wages and wage inequality over the period 2005-2011. Next, we compute several measures of wage mobility and explore the link between wage inequality and wage mobility. Further, we compute the transition matrices which show movements of individuals across the wage distribution from one period to another and investigate the determinants of transition probabilities using a multinomial logit model. The results show that overall the real wages increased over the study period and wage inequality exhibits a slight increase. Wage inequality is one of the highest among the European Union (EU) countries. The wage mobility in Turkey is lower than what is observed in the European Union countries although it increases as time horizon expands. Wage mobility has an equalizing impact on the wage distribution, however; this impact is not substantial enough to overcome the high and persistent wage inequality in Turkey. |
| Keywords: | wage inequality, wage mobility, heterogeneity, Turkey |
| JEL: | D31 D63 J31 J60 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp8669&r=lab |
| By: | Dagsvik, John K. (Research Department, Statistics Norway, and the Frisch Centre of Economic Research); Jia, Zhiyang (Statistics Norway) |
| Abstract: | This paper discusses aspects of a framework for modeling labor supply where the notion of job choice is fundamental. In this framework, workers are assumed to have preferences over latent job opportunities belonging to worker-specific choice sets from which they choose their preferred job. The observed hours of work and wage is interpreted as the job-specific hours and wage of the chosen job. The main contribution of this paper is an analysis of the identification problem of this framework under various conditions, when conventional cross-section micro-data are applied. <p> The modeling framework is applied to analyze labor supply behavior for married/cohabiting couples using Norwegian micro data. Specifically, we estimate two model versions with in the general framework. Based on the empirical results, we discuss further qualitative properties of the model versions. Finally, we apply the preferred model version to conduct a simulation experiment of a counterfactual policy reforms. |
| Keywords: | Labor supply; non-pecuniary job attributes; latent choice sets; random utility models; identification |
| JEL: | C51 J22 |
| Date: | 2014–09–15 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:osloec:2014_022&r=lab |
| By: | Lochner, Benjamin |
| Abstract: | Although labor market duality is a widespread phenomenon in many OECD countries, there is yet no research consent on the effects of duality on labor market dynamics and performance. Against this background, using a New Keynesian model with unemployment, this paper theoretically investigates the importance of labor market duality on labor market volatilities. The new insight is that duality leads to a non-linear reaction of unemployment volatility for both supply and demand shocks. A subsequent empirical panel data analysis confirms the model predictions. Uncovering the non-linearity in unemployment volatility helps reconciling previous divergent research results. |
| Keywords: | Dual Labor Market,Employment Protection,Firing Costs,Unemployment |
| JEL: | E24 E32 E52 J23 J41 J63 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:iwqwdp:142014&r=lab |
| By: | Boris Hirsch (University of Erlangen–Nuremberg); Michael Oberfichtner (University of Erlangen–Nuremberg); Claus Schnabel (University of Erlangen–Nuremberg) |
| Abstract: | Using linked employer–employee panel data for West Germany that include direct information on the competition faced by plants, we investigate the effect of product market competition on the gender pay gap. Controlling for match fixed effects we find that intensified competition significantly lowers the unexplained gap in plants with neither collective agreements nor a works council. Conversely, there is no effect in plants with these types of worker codetermination, which are unlikely to have enough discretion to adjust wages in the short run. We also document a larger competition effect in plants with few females in their workforces. Our findings are in line with Beckerian taste-based employer wage discrimination that is limited by competitive forces. |
| Keywords: | gender pay gap, discrimination, product market competition |
| JEL: | J16 J31 J71 |
| Date: | 2014–09 |
| URL: | http://d.repec.org/n?u=RePEc:lue:wpaper:324&r=lab |
| By: | Arvid Raknerud; Mirjam van Praag (Statistics Norway) |
| Abstract: | Empirical studies show that the pecuniary returns to an individual's decision to switch from wage employment to entrepreneurship are low. We reconsider the pecuniary gains from this transition using a unified and flexible approach based on a mixed model with heterogeneous returns to entrepreneurship. Addressing the issue of self-selection, we analyze to what extent earlier findings are obscured by mixing individuals who become entrepreneurs without interesting wage alternatives with those who do have a realistic alternative opportunity. Our data set covers the whole Norwegian population of individuals matched to the entire population of firms established in the period 2002-- 2011, and includes extensive income and ownership share measures. The results indicate that the average return to entrepreneurship is significantly negative for individuals entering entrepreneurship through self-employment. Entrepreneurs who establish firms by injecting the minimum (or close to minimum) required amount of equity in an incorporated firm at start-up, have a significantly positive, but low return to entrepreneurship on average. Finally, persons who become entrepreneurs by establishing firms that are at least twice as large as the minimum requirement, increase their earnings by 10 percent on average by becoming entrepreneurs. We identify a significant positive selection by absolute advantage with regard to the choice of becoming an incorporated entrepreneur, but not with regard to self-employment. |
| Keywords: | Entrepreneurship; Returns to entrepreneurship; Earnings distribution; Matched personfirm data |
| JEL: | L26 C23 J31 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:ssb:dispap:789&r=lab |
| By: | Shoshana Neuman (Bar-Ilan University) |
| Abstract: | Till the early-1990s the collectively-bargained labor contract (between the trade-union that presented the employees, and the employer or the employers'-association) was the norm, granting salaried workers a stable and protected labor contract. Thereafter, and more significantly after 1995, the share of unionized workers dropped constantly, to almost half of its peak level (of more than 80 percent). In parallel, two other types of contracts became more common: personal temporary contracts (between an individual worker and his employer), and contracts between a labor-contractor and employees who are employed in a triangular mode of employment (employee-contractor-client). The latter involves precarious employment and is more common among the more vulnerable sub-populations of new-immigrants, disabled individuals, Israeli-Arabs, foreign-workers and women. The contractual changes resulted in work instability, growth of the secondary labor market and segmentation. Efforts to protect the disadvantaged secondary labor-market workers include legislation, reforms, new regulations, and enforcement of all the above. |
| Keywords: | Israel; labor market segmentation; labor contracts; collective bargaining; contracted labor; immigrants; foreign workers; regulation |
| JEL: | J15 J21 J31 J41 J51 J58 J61 J81 |
| URL: | http://d.repec.org/n?u=RePEc:biu:wpaper:2014-12&r=lab |
| By: | Daniel Borowczyk-Martins (Departement d'Economie de Sciences Po); Etienne Lalé (École Nationale de la Statistique et de l'Administration Économique (ENSAE)) |
| Abstract: | We document a new fact about the cyclical behavior of aggregate hours. Using microdata for the US and the UK, we show that changes in hours per worker are driven by fluctuations in part-time employment, which are in turn explained by the cyclical behavior of transitions between full-time and part-time jobs. This reallocation occurs almost exclusively within firms and entails large changes in employees’ schedules of working hours. These patterns are consistent with the view that employers adjust the hours of their employees in response to shocks, and they partly account for the poor recovery that followed the Great Recession. |
| Keywords: | Employment; Hours; Part-time Work; Great Recession. |
| JEL: | E24 E32 J21 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:spo:wpecon:info:hdl:2441/4itbiqg0h38538a71odou3jmkm&r=lab |
| By: | Niels Vermeer; Mauro Mastrogiacomo; Arthur van Soest |
| Abstract: | In the policy debate on increasing the statutory retirement age, the issue has been raised to make an exception for workers with demanding occupations, since health considerations may make it unreasonable to expect them to work longer. We use unique Dutch survey data to analyze the general public's opinions on what are demanding occupations, to what extent it is justified that someone with a demanding occupation can retire earlier, and on the willingness to contribute to an earlier retirement scheme for such occupations through higher taxes. A representative sample of Dutch adults answered several questions about hypothetical persons with five different jobs. Panel data models are used to analyze the answers, accounting for confounding factors affecting the evaluations of the demanding nature of the jobs as well as their reasonable retirement age or willingness to contribute to an early retirement scheme. The Dutch public thinks that workers in demanding occupations should be able to retire earlier. A one standard deviation increase in the perceived demanding nature of an occupation translates into a one year decrease in the reasonable retirement age and a 30 to 40 percentage points increase in the willingness to contribute to an early retirement scheme for that occupation. There is some evidence that respondents whose own job is similar to the occupation they evaluate find this occupation more demanding than other respondents but respondents are also willing to contribute to early retirement of occupations that are not similar to their own. |
| Keywords: | Retirement age; public pensions; justification bias |
| JEL: | J26 J81 H55 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:dnb:dnbwpp:448&r=lab |
| By: | Andreas Beerli; Ronald Indergand |
| Abstract: | A pervasive, yet little acknowledged feature of international migration to developed countries is that newly arriving immigrants are increasingly highly skilled since the 1980s. This paper analyses the determinants of changes in the skill composition of immigrants using a framework suggested by Grogger & Hanson (2011). We focus on Switzerland, which continuously showed very high immigration rates and dramatic changes in the skill composition of immigrants. In addition, the recent integration of Switzerland into the European labour market in 2002 serves as a policy experiment which allows analysing the influence of a reduction on immigration restrictions on immigrants from European countries in comparison to those from other countries. Our findings suggest that changes of education supply in origin countries and shifts to the relative demand for education groups stand out as the two most important drivers. Yet, while supply alone predicts only a modest increase in the case of highly educated workers and a large increase of middle educated workers, one particular demand channel, the polarisation of labour demand induced by the adoption of computer capital, is crucial to explain the sharp increase in highly educated workers and the mere stabilisation of the share of middle educated immigrant workers. The abolition of quotas for EU residents played a smaller role, yet may have slightly reduced the high skill share among immigrants relative to immigrants from other countries. |
| Keywords: | International migration, self selection, migration policy, job polarisation |
| JEL: | F22 J61 J24 J31 |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:zur:econwp:182&r=lab |
| By: | Kosfeld, Michael; Neckermann, Susanne; Yang, Xiaolan |
| Abstract: | We manipulate workers' perceived meaning of a job in a field experiment. Half of the workers are informed that their job is important, the other half are told that their job is of no relevance. Results show that workers exert more effort when meaning is high, corroborating previous findings on the relationship between meaning and work effort. We then compare the effect of meaning to the effect of monetary incentives and of worker recognition via symbolic awards. We also look at interaction effects. While meaning outperforms monetary incentives, the latter have a robust positive effect on performance that is independent of meaning. In contrast, meaning and recognition have largely similar effects but interact negatively. Our results are in line with image-reward theory (Bénabou and Tirole 2006) and suggest that meaning and worker recognition operate via the same channel, namely image seeking. |
| Keywords: | meaning,monetary incentives,worker recognition,field experiment |
| JEL: | C93 J33 M12 M52 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:14097&r=lab |
| By: | Manoli, Dayanand (University of Texas at Austin); Mullen, Kathleen (RAND); Wagner, Mathis (Boston College) |
| Abstract: | This paper exploits a combination of policy variation from multiple pension reforms in Austria and administrative data from the Austrian Social Security Database. Using the policy changes for identification, we estimate social security wealth and accrual elasticities in individuals' retirement decisions. Next, we use these elasticities to estimate a dynamic programming model of retirement decisions. Finally, we use the estimated model to examine the labor supply and welfare consequences of potential social security reforms. |
| Keywords: | policy variation, retirement, labor supply elasticities |
| JEL: | J26 H55 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp8659&r=lab |
| By: | Carlsson, Mikael (Department of Economics, Uppsala University); Messina, Julián (World Bank); Nordström Skans, Oskar (Departement of Economics, Uppsala University) |
| Abstract: | We analyze how firms adjust their labor in response to idiosyncratic shifts in their production function and demand curves using a unique data-set of Swedish manufacturing firms. We show that permanent shocks to firm-level demand is a main driving force behind both job and worker reallocation. In contrast, shocks to physical productivity and temporary demand shocks have a very limited impact on firm-level employment despite being important determinants of other firm-level fundamentals. We also present evidence suggesting that the adjustment to permanent demand shocks is fairly unconstrained. Most notably, firms primarly downsize through increased separations of both short- and long-tenured workers even when they could have adjusted their employment through reduced hires. |
| Keywords: | Technology; demand; job creation; rigidities; worker flows; |
| JEL: | C33 J23 J63 O33 |
| Date: | 2014–12–09 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:ifauwp:2014_028&r=lab |
| By: | Michelacci, Claudio; Ruffo, Hernán |
| Abstract: | We argue that US welfare would rise if unemployment insurance were increased for younger and decreased for older workers. This is because the young tend to lack the means to smooth consumption during unemployment and want jobs to accumulate high-return human capital. So unemployment insurance is most valuable to them, while moral hazard is mild. By calibrating a life cycle model with unemployment risk and endogenous search effort, we find that allowing unemployment replacement rates to decline with age yields sizeable welfare gains to US workers. |
| Keywords: | insurance; search; unemployment |
| JEL: | E24 H21 J64 J65 |
| Date: | 2014–09 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10167&r=lab |
| By: | Markaki, Yvonni |
| Abstract: | This article draws from different theoretical and empirical literatures to analyse the role of socioeconomic and regulatory conditions on immigrant-native gaps across four outcomes; unemployment, monthly earnings, underemployment, and precarious contracts. The empirical results suggest that immigrant-native gaps are larger in countries with more immigrants. Evidence also indicates that a stricter regulation of regular contracts increases the immigrant-native earnings gap and immigrants’ chances of holding temporary contracts. A stricter regulation of temporary contracts increases immigrants’ risk of unemployment and underemployment. A higher union density appears to suppress wage differences across some immigrant groups, rather than in comparison to natives. |
| Date: | 2014–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:ese:iserwp:2014-41&r=lab |
| By: | Nils Braakmann (Newcastle University, Business School – Economics, UK); John Wildman (Newcastle University, Business School – Economics, UK) |
| Abstract: | Twin births are often used to instrument for fertility when investigating the impact of family size on labor market outcomes. In this paper we consider two econometric problems both related to the link between fertility treatments and multiple births. The first is the potential for omitted variable bias caused by the fact that fertility treatments are typically unobserved. We present estimates corrected for this bias and find it to be comparatively small. Second, we show that the effects of twin-birth induced variation in family size vary substantially with time passed since birth, which has consequences for the interpretation of estimates based on a single cross-section. |
| Keywords: | Twin birth instrument, quantity-quality-tradeoff, labor supply, fertility |
| JEL: | C26 J13 J22 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:lue:wpaper:316&r=lab |
| By: | Markus Riegler |
| Abstract: | Increases in uncertainty lead to increases in the unemployment rate. Using US data, I show empirically that this is due to both an increase in the separation rate and a decrease in the job-finding rate. By contrast, standard search and matching models predict an increase in the job finding rate in response to an increase in the cross-sectional dispersion of firmsâ productivity levels. To explain observed responses in labour market transition rates, I develop a search and matching model in which heterogeneous firms face a decreasing returns to scale technology, firms can hire multiple workers, and job flows (job creation and job destruction) do not necessarily coincide with worker flows (hires and separations). Costly job creation (in addition to the usual hiring cost) is key to obtaining a decrease in the job-finding rate after an increase in uncertainty. Standard numerical solution techniques cannot be used to obtain an accurate solution efficiently and I propose an alternative algorithm to overcome this problem. |
| JEL: | C63 E24 E32 J63 J64 |
| Date: | 2014–11–21 |
| URL: | http://d.repec.org/n?u=RePEc:jmp:jm2014:pri337&r=lab |
| By: | Klemm, Marcus; Weigert, Benjamin |
| Abstract: | This paper addresses the importance of compositional changes in the labor force for the development of the wage distribution. Demographic change and higher educational attainment imply a shift toward employees with more experience and/or better education. These groups are characterized by higher relative wages as well as higher within-group wage inequality. Mechanically, these compositional shifts entail a rise in wage inequality. We demonstrate this mechanism theoretically and present empirical evidence using data of the German Socio-Economic Panel from the mid 1990's to 2012. Accounting for the parallel changes in the age structure and the educational background of the labor force, the compositional effects alone can explain up to one quarter of the observed increase in aggregate wage inequality. |
| Keywords: | wage structure,inequality decomposition,demographic change,population aging,education,skills |
| JEL: | J31 D31 J11 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:svrwwp:062014&r=lab |
| By: | Hemous, David; Olsen, Morten |
| Abstract: | We construct an endogenous growth model of directed technical change with automation (the introduction of machines which replace low-skill labor and complement high-skill labor) and horizontal innovation (the introduction of new products, which increases demand for both types of labor). Such an economy endogenously follows three phases. First, low-skill wages are low, which induces little automation, such that income inequality and labor's share of GDP are constant. Second, as low-skill wages increase, investment in automation is stimulated, which depresses the future growth rate of low-skill wages (potentially to negative), and reduces the total labor share. Finally, the share of automated products stabilizes and the economy moves toward an asymptotic steady state, where low-skill wages grow but at a lower rate than high-skill wages. This model therefore delivers persistently increasing wage inequality and stagnating real wages for low skill workers for an extended period of time, features of modern labor markets which have been difficult to reconcile with the theoretical literature on economic growth. We further include middle-skill workers, which allows the model to generate a phase of wage polarization after one where labor income inequality increases uniformly. Finally, we show that an endogenous labor supply response in this framework can quantitatively account for the evolution of the skill premium, the skill ratio and the labor share in the US since the 1960s. |
| Keywords: | automation; capital-skill complementarity; directed technical change; factor share; horizontal innovation; Income inequality; wage polarization |
| JEL: | E23 E25 O31 O33 O41 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10244&r=lab |
| By: | Hollweg, Claire H.; Lederman, Daniel; Mitra, Devashish |
| Abstract: | This paper explores the impact of structural reforms on a comprehensive set of macro-level labor-market outcomes, including the unemployment rate, the average wage index, and overall and female employment levels and labor force participation rates. Together these outcome variables capture the overall health of the labor market and the aggregate welfare of workers. Yet, there seems to be no other comprehensive empirical investigation in the existing literature of the impact of structural reforms at the cross-country macro level on labor-market outcomes other than the unemployment rate. Data were collected from a variety of sources, including the World Bank World Development Indicators, the International Monetary Fund International Financial Statistics, and the International Labor Organization Key Indicators of the Labor Market. The resulting dataset covers up to 88 countries, the majority being developing, for 10 years on either side of structural reforms that took place between 1960 and 2001. After documenting the average trends across countries in the labor-market outcomes up to 10 years on either side of each country’s structural reform year, the authors run fixed-effects ordinary least squares as well as instrumental variables regressions to account for the likely endogeneity of structural reforms to labor-market outcomes. Overall the results suggest that structural reforms lead to positive outcomes for labor. Unlike related literature, the paper does not find conclusive evidence on unemployment. Redistributive effects in favor of workers, along the lines of the Stolper-Samuelson effect, may be at work. |
| Keywords: | Labor Markets,Labor Policies,Economic Theory&Research,Currencies and Exchange Rates,Banks&Banking Reform |
| Date: | 2014–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:7122&r=lab |
| By: | Light, Audrey (Ohio State University); McGee, Andrew (Simon Fraser University) |
| Abstract: | We demonstrate that empirical evidence of employer learning is sensitive to how one defines the career start date and, in turn, measures cumulative work experience. Arcidiacono, Bayer, and Hizmo (2010) find evidence of employer learning for high school graduates but not for college graduates, and conclude that high levels of schooling reveal true productivity. We show that their choice of start date – based on first-observed school exit and often triggered by school vacations – systematically overstates experience and biases learning estimates towards zero for college-educated workers. Using career start dates tied to a more systematic definition of school exit, we find that employer learning is equally evident for high school and college graduates. |
| Keywords: | employer learning, schooling, measurement |
| JEL: | I21 J24 J31 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp8618&r=lab |
| By: | Antonio Cabrales; Juan J. Dolado; Ricardo Mora |
| Abstract: | Using the Spanish micro data from the Programme for the International Assessment of Adult Competencies (PIAAC), we first document how the excessive gap in employment protection between indefinite and temporary workers leads to large differentials in on-the-job training (OTJ) against the latter. Next, we find that that the lower specific training received by temporary workers is correlated with lower literacy and numeracy scores achieved in the PIAAC study. Finally, we provide further PIAAC cross-country evidence showing that OJT gaps are quite lower in those European labour markets where dualism is less entrenched than in those where it is more extended. |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:fda:fdaeee:eee2014-14&r=lab |
| By: | Behaghel, Luc; Crépon, Bruno; Le Barbanchon, Thomas |
| Abstract: | We evaluate an experimental program in which the French public employment service anonymized resumes for firms that were hiring. Firms were free to participate or not; participating firms were then randomly assigned to receive either anonymous resumes or name-bearing ones. We find that participating firms become less likely to interview and hire minority candidates when receiving anonymous resumes. We show how these unexpected results can be explained by the self-selection of firms into the program and by the fact that anonymization prevents the attenuation of negative signals when the candidate belongs to a minority. |
| Keywords: | anonymous applications; discrimination; randomized experiments |
| JEL: | J71 J78 |
| Date: | 2014–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10215&r=lab |
| By: | Marco de Pinto (Institute for Labour Law and Industrial Relations in the EU, University of Trier); Jörg Lingens (University of Muenster) |
| Abstract: | We analyze the effects of unionization on the decision of a firm to either produce at home or abroad. We consider a model in which home and foreign workers are perfect substitutes and firms have an informational advantage concerning their productivity. The union offers wage-employment contracts to induce truthtelling. Because of a firm's productivity dependent outside option (producing abroad), the problem is characterized by countervailing incentives. We find that, under fairly mild assumptions on the distribution of firm's productivity, the overstating incentive always dominates. The equilibrium contract offered by the union is then characterized by overemployment. Besides its effect on the intensive margin, the union also affects the extensive margin (i.e. de-location). The union forces firms to de-locate because this narrows the possibility to overstate productivity which then saves rent payments to the firm. |
| Keywords: | trade unions, information asymmetry, open economy, countervailing incentives, de-location |
| JEL: | J51 F2 D82 |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:iaa:dpaper:201412&r=lab |
| By: | Boeri, Tito; Garibaldi, Pietro; Moen, Espen R |
| Abstract: | All OECD countries have either legally mandated severance pay or compensations imposed by industry-level bargaining in case of employer initiated job separations. According to the extensive literature on Employment Protection Legislation (EPL), such transfers are either ineffective or less efficient than unemployment benefits in providing insurance against labor market risk. In this paper we show that mandatory severance is optimal in presence of wage deferrals motivated by deterrence of opportunistic behavior of workers. Our results hold under risk neutrality and in general equilibrium. We also establish a link between optimal severance and efficiency of the legal system and we characterize the effects of shifting the burden of proof from the employer to the worker. Our model accounts for two neglected features of EPL. The first is the discretion of judges in interpreting the law, which relates not only to the decision as to whether the dismissal is deemed fair or unfair, but also to the nature, economic vs. disciplinary, of the layoff. The second feature is that compensation for dismissal is generally increasing with tenure. The model also rationalizes why severance is generally higher in countries with less efficient judicial systems and why small firms are typically exempted from the strictest EPL provisions. |
| Keywords: | graded security; legal systems; severance; unfair dismissal |
| JEL: | J33 J63 J65 |
| Date: | 2014–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10182&r=lab |
| By: | Ronny Freier; Mathias Schumann; Thomas Siedler |
| Abstract: | This paper studies the causal effects of graduating from university with an honors degree on subsequent earnings. While a rich body of literature has focused on estimating returns to human capital, few studies have analyzed returns at the very top of the education distribution. We highlight the importance of honors degrees for future labor market success in the context of German law graduates. Using a difference-in-differences research design combined with entropy balancing, we find that students of law who passed the state bar exam with an honors degree receive a significant earnings premium of about 14 percent. The results are robust to various sensitivity analyses. |
| Keywords: | returns to education, difference-in-differences, entropy balancing, law graduates, earnings |
| JEL: | J01 J31 J44 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1431&r=lab |
| By: | Fichen, Anne; Pellizzari, Michele |
| Abstract: | This paper proposes a new measure of skills mismatch that combines information about skill proficiency, self-reported mismatch and skill use. The theoretical foundations underling this measure allow identifying minimum and maximum skill requirements for each occupation and to classify workers into three groups, the well-matched, the under-skilled and the over-skilled. The availability of skill use data further permit the computation of the degree of under and over-usage of skills in the economy. The empirical analysis is carried out using the first wave of the OECD Survey of Adult Skills (PIAAC), allowing comparisons across skill domains, labor market statuses and countries. |
| Keywords: | mismatch; skills |
| JEL: | J0 J20 J24 |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10280&r=lab |
| By: | Steven Venti; David A. Wise |
| Abstract: | The goal of this paper is to draw attention to the long lasting effect of education on economic outcomes. We use the relationship between education and two routes to early retirement – the receipt of Social Security Disability Insurance (DI) and the early claiming of Social Security retirement benefits – to illustrate the long-lasting influence of education. We find that for both men and women with less than a high school degree the median DI participation rate is 6.6 times the participation rate for those with a college degree or more. Similarly, men and women with less than a high school education are over 25 percentage points more likely to claim Social Security benefits early than those with a college degree or more. We focus on four critical “pathways” through which education may indirectly influence early retirement – health, employment, earnings, and the accumulation of assets. We find that for women health is the dominant pathway through which education influences DI participation. For men, the health, earnings, and wealth pathways are of roughly equal magnitude. For both men and women the principal channel through which education influences early Social Security claiming decisions is the earnings pathway. We also consider the direct effect of education that does not operate through these pathways. The direct effect of education is much greater for early claiming of Social Security benefits than for DI participation, accounting for 72 percent of the effect of education for men and 67 percent for women. For women the direct effect of education on DI participation is not statistically significant, suggesting that the total effect may be through the four pathways. |
| JEL: | H52 I21 J26 |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20740&r=lab |
| By: | Buch, Tanja; Hamann, Silke; Niebuhr, Annekatrin; Rossen, Anja |
| Abstract: | Human capital is a driving factor of innovation and economic growth. Economic prospects of cities depend on high qualified workers' knowledge and therefore, attracting highly qualified workers plays a fundamental role for cities' prospects. This study contributes to the question which factors primarily determine the mobility-decision of highly qualified workers by investigating the determinants of the migration balance of German cities between 2000 and 2010. Furthermore, it compares the effects of several labour- and amenity-related variables on migration rates of highly qualified workers and the remaining workforce. Findings suggest that local labour market conditions influence the mobility decision but amenities matter too for the high-skilled. The preferences of the highly qualified workers partly differ from those of the rest of the workforce. However, there are also several factors that do not show systematic differences across skill groups. |
| Keywords: | migration,cities,qualification level,highly qualified,labour market conditions,amenities,Germany |
| JEL: | C23 J61 R23 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:hwwirp:159&r=lab |
| By: | Duncan Roth; John Moffat |
| Abstract: | Will the projected decline in the youth share of European countries' populations alleviate the currently high levels of youth unemployment in Europe? Economic theory predicts that in the absence of perfectly competitive labour markets, changes in the relative size of age groups will cause changes in age-specific unemployment rates. In light of the expected development of the youth population's size over the coming decades, this paper utilises heterogeneity in the structure of youth populations across European countries and regions to identify the effect of nationally and regionally defined age-cohort size on the probability of young individuals being unemployed. To account for the possibility that individuals self-select into areas of low unemployment, the empirical analysis employs an instrumental variables estimator to identify the causal effect of age-cohort size. The results show that individuals in larger cohorts are more likely to be unemployed and that the estimated effect is larger when analysis is conducted using less aggregated spatial units. Although the macroeconomic environment is found to be a more important determinant of unemployment probability, shrinking youth cohorts should therefore improve the current youth unemployment situation. |
| Keywords: | Cohort size; unemployment; regional labour markets; causal effect; instrumental variables; EU-SILC |
| JEL: | J10 J21 R23 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa14p1546&r=lab |
| By: | Edward P. Lazear; Kathryn L. Shaw; Christopher Stanton |
| Abstract: | Why did productivity rise during recent recessions? One possibility is that average worker quality increased. A second is that each incumbent worker produced more. The second effect is termed "making do with less." Using data from 2006 to 2010 on individual worker productivity from a large firm, these effects can be measured and separated. For this firm, most of the gain in productivity during the recession was a result of increased effort. Additionally, the increase in effort is correlated with the increase in the local unemployment rate, presumably reflecting the costs of losing a job. |
| Keywords: | Recession, productivity, sorting |
| JEL: | M50 D20 E32 L22 |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1321&r=lab |
| By: | Geurts, Karen; Van Biesebroeck, Johannes |
| Abstract: | Firm turnover and growth recorded in administrative data sets differ from underlying firm dynamics. By tracing the employment history of the workforce of new and disappearing administrative firm identifiers, we can accurately identify de novo entrants and true economic exits, even when firms change identifier, merge, or split-up. For a well-defined group of new firms entering the Belgian economy between 2004 and 2011, we find highly regular post-entry employment dynamics in spite of the volatile macroeconomic environment. Exit rates decrease with age and size. Surviving entrants record high employment growth that is monotonically decreasing with age in every size class. Most remarkably, we find that Gibrat’s law is violated for very young firms. Conditional on age, the relationship between employment growth and current size is strongly and robustly positive. This pattern is obscured, or even reversed, when administrative entrants and exits are taken at face value. De novo entrants’ contribution to job creation is relatively small and not very persistent, in particular for (the large majority of) new firms that enter with fewer than five employees. |
| Keywords: | employment growth; firm dynamics; Gibrat's law |
| JEL: | E24 L16 L25 |
| Date: | 2014–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10118&r=lab |
| By: | Bertola, Giuseppe |
| Abstract: | "Race-to-the-bottom" deregulation is to be expected when markets operate across the borders of countries that independently choose and enforce labor policies. Less obviously, in pre-crisis EMU reforms of labor market policies were uneven and related to international imbalances. That pattern is readily explained by this paper's model of financial integration between differently capital-abundant countries, within which labor policies benefit individuals with wealth/labor income ratios different from country's aggregate. |
| Keywords: | policy competition; public choice |
| JEL: | F36 J08 |
| Date: | 2014–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10088&r=lab |
| By: | Alejandro Bladel (Federal Reserve Bank of St. Louis); Mark Huggett (Georgetown University) |
| Abstract: | We assess the consequences of substantially increasing the marginal tax rate on U.S. top earners using a human capital model. We nd that (1) the peak of the model Laer curve occurs at a 52 percent top tax rate, (2) if human capital were exogenous, then the top of the Laer curve would occur at a 66 percent top tax rate and (3) applying the theory and methods that Diamond and Saez (2011) use to provide quantitative guidance for setting the top tax rate to model data produces a tax rate that substantially exceeds 52 percent. |
| Keywords: | human capital, marginal tax rate, Inequality, Laffer curve |
| JEL: | D91 E21 H20 J24 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:hka:wpaper:2014-021&r=lab |
| By: | Duleep, Harriet (College of William and Mary); Liu, Xingfei (IZA); Regets, Mark (National Science Foundation) |
| Abstract: | Using microdata from the 1960-2000 decennial censuses, this paper explores how large initial differences in immigrant earnings by country of origin change with duration in the United States. One analysis reveals that country of origin adds less to the explanation of earnings, among working-age adult male immigrants, the longer they reside in the United States. Another discovers that the earnings dispersion of demographically comparable immigrants across countries of origin diminishes with time in the United States. Both indicate convergence in immigrant earnings by country of origin. To probe the sensitivity of these results to immigrant emigration, we pursue a theoretical analysis, which gauges how hypothetical patterns of selective emigration affect the convergence results, and an empirical analysis, which could be more broadly applied as a test for emigration bias. Both suggest that immigrant earnings convergence by country of origin is not an artifact of emigration. The convergence has methodological ramifications for the measurement of immigrant economic assimilation – in studies that follow cohorts and in studies that follow individuals with longitudinal data – and more generally for the study of any process in which unmeasured variables jointly affect initial conditions and subsequent growth. |
| Keywords: | immigrant economic assimilation, human capital investment, country of origin, immigrant earnings convergence |
| JEL: | J1 J2 J3 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp8628&r=lab |