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on Labour Economics |
| By: | Ulrich Glogowsky; Emanuel Hansen; Dominik Sachs; Holger Lüthen |
| Abstract: | Using German administrative data from the 1960s onward, this paper (i) examines the long-term evolution of child-related gender inequality in earnings and (ii) assesses the impact of family policies on this inequality. We present three sets of findings. First, child penalties (i.e., the percentage of potential earnings lost due to children) have strongly increased over the last decades. Mothers who had their first child in the 1960s faced much smaller penalties than those who gave birth in the 2000s. Second, we decompose overall gender inequality into child-related and child-unrelated components. Over our sample period, the fraction of overall inequality attributed to children rose from 14% to 64%. This trend not only resulted from the growing child penalties but also from rising potential earnings of mothers. Intuitively, in later decades, mothers had more income to lose from child-related career breaks. Third, we investigate the role of policy decisions in this rise in child penalties. Parental leave expansions between 1979 and 1992 amplified child penalties and contributed nearly one-third to the increase in child-related gender inequality. Instead, a parental benefit reform in 2007 mitigated further increases. While the third set of results highlights the role of family policies, the first two imply that sidelining mothers becomes increasingly costly over time. |
| Keywords: | gender inequality, child penalties, family policies |
| JEL: | H31 H42 J08 J13 J16 J18 J22 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11365 |
| By: | Isaac, Elliott (Tulane University) |
| Abstract: | Many household labor supply models divide couples by sex and identify separate male and female labor supply parameters. However, institutional factors in the labor market suggest that men are more likely to be primary earners in their household, meaning that intra-household gender gaps in labor supply may reflect both gender norms and earning status. I use a novel identification approach to disentangle the role of gender norms in intra-household labor supply by estimating collective labor supply models for different- and same-sex married couples. Among childless couples, I present point estimates and construct unified bounds showing that gender norms significantly increase the weight placed on women's utility by 1.1–5.1%, leading to lower labor supply. A back-of-the-envelope calculation suggests that the effect of gender norms on married, childless couples' labor supply is equivalent to a substantial widening of the gender |
| Keywords: | gender norms, labor supply, collective model |
| JEL: | J16 D13 J22 H24 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17354 |
| By: | Pascal Michaillat |
| Abstract: | Immigration is often blamed for increasing unemployment among local workers. However, standard models, such as the neoclassical model and the Diamond-Mortensen-Pissarides matching model, inherently assume that immigrants are absorbed into the labor market without affecting local unemployment. This paper presents a more general model of migration that allows for the possibility that not only the wages but also the unemployment rate of local workers may be affected by the arrival of newcomers. This extension is essential to capture the full range of potential impacts of labor migration on labor markets. The model blends a matching framework with job rationing. In it, the arrival of new workers can raise the unemployment rate among local workers, particularly in a depressed labor market where job opportunities are limited. On the positive side, in-migration helps firms fill vacancies more easily, boosting their profits. The overall impact of in-migration on local welfare varies with labor market conditions: in-migration reduces welfare when the labor market is inefficiently slack, but it enhances welfare when the labor market is inefficiently tight. |
| JEL: | E24 E32 J2 J6 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33047 |
| By: | Stephan, Gesine (Institute for Employment Research (IAB), Nuremberg); Hetschko, Clemens (University of Leeds); Schmidtke, Julia (Institute for Employment Research (IAB), Nuremberg); Eid, Michael (Freie Universität Berlin); Lawes, Mario (Freie Universität Berlin) |
| Abstract: | We ran a field experiment to causally identify the effects of intense survey participation on key labour market outcomes. We randomly excluded individuals willing to sign up for the German Job Search Panel, a high-frequency survey with a focus on job search and well-being. Using administrative data on labour market outcomes (e.g., employment, earnings), we find that, on average, survey participation had no effect on labour market outcomes during the year after signing up. Furthermore, there is no strong heterogeneity across subgroups. Overall, this is good news for the validity of survey-based research involving labour market outcomes. We also demonstrate that a comparison of individuals signing up for the survey with individuals not responding to the invitation could have been misleading. Even when controlling for a wide range of observable characteristics, survey participation and the subsequent take up of training programs correlate significantly. This speaks to the importance of experimental research designs in our context. |
| Keywords: | Hawthorne effect, panel conditioning, job search, labour market outcomes, field experiment |
| JEL: | C83 C93 J63 J64 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17347 |
| By: | Kostøl, Andreas Ravndal (Norwegian Business School (BI)); Merkle, Matthew C. (Arizona State University); Grindaker, Morten (University of Chicago) |
| Abstract: | While many employees risk losing their job and having their career disrupted due to employers' financial distress, it is widely recognized that many leave their employer in anticipation of layoff. In this paper, we assess how employee costs of financial distress depend on employees learning and acting on future layoff risk. To this end, we use random assignment of bankruptcy judges as an instrument for employer shutdown and administrative data on petition and quit dates to examine how earnings costs are shaped by employee reallocation. We show that shutdown causes a 24% fall in earnings over a five-year period despite one-quarter of employees having already left their firm. We document substantial heterogeneity in reallocation and earnings losses, typically displaying an inverse relationship, with higher reallocation in strong labor markets and from high-wage firms. The reallocation attenuates earnings losses by about 50%, approximately equal to the insurance from taxes and transfers. To assess the value of information, we estimate a model where risk averse workers learn about distress, search for jobs and access public insurance. Using the model, we calculate that employees' willingness to pay for their current job increases by 14% when the firm is liquidated without any advance information. Our findings suggest that making firms' financial risk information more accessible to employees can yield important benefits. |
| Keywords: | job loss, search, occupational choice, bankruptcy, unemployment insurance |
| JEL: | J62 J63 J65 J68 G33 G51 G52 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17340 |
| By: | Steven J. Davis; Pawel Krolikowski |
| Abstract: | Using innovative longitudinal data from a survey of unemployment insurance (UI) recipients, we test several implications of a canonical job search model for reservation wages during unemployment spells. First, consistent with the model, we find that reservation wages fall faster when UI benefit durations are shorter. However, workers set their initial reservation wages higher, and adjust them slower, relative to model predictions. Second, workers' expectations—elicited at the beginning of their unemployment spell—about how their reservation wage will evolve if they remain unemployed are largely congruent with reservation wage realizations, as assumed in the canonical model. Third, our data on expectations and realizations suggest that dynamic selection over the unemployment spell is inconsequential for our results. Fourth, higher wages on workers' lost jobs, relative to predictions from a Mincerian wage regression, hasten the expected and realized declines in reservation wages over the unemployment spell. Finally, reservation wages are a more powerful predictor of re-employment wages than wages on the previous job. |
| Keywords: | job search; unemployment benefits; survey of job losers; worker expectations |
| JEL: | E24 J31 J63 J64 |
| Date: | 2024–10–24 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedcwq:99015 |
| By: | Bogaard, Mariët (Maastricht University); Künn, Steffen (Maastricht University); Palacios, Juan (Massachusetts Institute of Technology); Pestel, Nico (Maastricht University) |
| Abstract: | This paper investigates the impact of air pollution on reservation wages. We use rich survey data on unemployed job seekers in Germany and exploit variation in individual exposure to fine particulate matter (PM10) based on the quasi-random allocation of interview slots to individuals. Our results show that an increase in PM10 by one standard deviation (corresponding to 12 μg/m3) reduces the reservation wage by approximately 1.2%. We further provide evidence that PM10 pollution decreases job seekers' search effort, risk tolerance and patience, which serve as potential mechanisms through which PM10 exposure negatively affects the reservation wage of unemployed job seekers. |
| Keywords: | reservation wage, air pollution, job search |
| JEL: | Q53 J64 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17344 |
| By: | Czura, Kristina (University of Groningen); Englmaier, Florian (University of Munich); Ho, Hoa (LMU Munich); Spantig, Lisa (RWTH Aachen University) |
| Abstract: | The positive role of transformational leadership for productivity and mental wellbeing has long been established. Transformational leadership behavior may be particularly suited to navigate times of crisis which are characterized by high levels of complexity and uncertainty. We exploit quasi-random assignment of employees to managers and study the role of frontline managers' leadership styles on employees' performance, work style, and mental well-being in times of crisis. Using longitudinal administrative data and panel survey data from before and during the Covid-19 pandemic, we find that the benefits of different leadership styles depend on the environment: Employees of more transactional managers outperform those of more transformational leaders before the onset of the pandemic. During the pandemic, however, more transformational managers lead employees to better performance and mental well-being. We discuss potential explanations and implications. |
| Keywords: | leadership, frontline managers, labor-management relations, organizational behavior, crisis, COVID-19 |
| JEL: | M54 M12 J53 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17350 |
| By: | Ayaka Nakamura (Graduate School of Economics, Osaka University); Katsuya Takii (Osaka School of International Public Policy, Osaka University) |
| Abstract: | We investigate the effect of being a regular employee in a job which a worker takes immediately after graduation (the initial job), on subsequent job status. We construct an assignment model that can be estimated by the marginal treatment effect (MTE) framework; the model suggests that the region- and cohort-level unexpected shocks that influences the demand for full time-worker share is a valid instrument under some assumptions. Estimating the MTE, we find that the treatment effect of the initial job is heterogeneous among individuals: male workers who are less likely to obtain regular employment in the initial job enjoy benefits of stable employment; however, the regular initial job does not increase the probability of subsequent regular employment for male workers who are likely to obtain regular employment in the initial job. |
| Keywords: | Employment stability; Initial labor market condition; MTE; Assignment model |
| JEL: | J62 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:osp:wpaper:24e007 |
| By: | Dauth, Wolfgang (Institut für Arbeitsmarkt- und Berufsforschung); Mense, Andreas (Institute for Employment Research (IAB), Nuremberg); Wrede, Matthias (Friedrich-Alexander-Universität Erlangen-Nürnberg) |
| Abstract: | We investigate the employment effects of living in affordable housing. We develop a unique administrative data set of labor market biographies linked to affordable housing projects in five German cities. This allows us to follow individuals in affordable housing over almost 20 years. The funding scheme is similar to the American LIHTC program, so the results are applicable beyond Germany. We use an event study design to exploit the quasi-random timing and allocation of applicants to units. Our findings show that access to affordable housing increases labor income and job quality while decreasing the likelihood of being unemployed. We explain these results by four mechanisms. These mechanisms work through a higher centrality of affordable units, enabling investment in work-related skills, improved housing stability, and increasing work incentives due to reduced housing benefit payments. |
| Keywords: | affordable housing, unemployment, urban labor market access, labor supply, housing policy |
| JEL: | I31 I38 J13 R23 R38 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17359 |
| By: | Chiswick, Barry R.; Robinson, RaeAnn Halenda |
| Abstract: | This paper analyzes the occupational status of adult White foreign-born men in the antebellum United States, compared to White native-born men, and among the foreign born by country of origin. Hypotheses are developed regarding the effects on occupational status of human capital, demographic, and immigrant-related variables. The hypotheses are tested using the PUMS data for the 100 percent sample (full count) from the 1850 Census of Population, the first census to ask for the male respondent's occupation, as well as the linked 1850-1860 Census data. Two quantitative measures of occupational status serve as the dependent variables - the Occupational Income Score and the Ducan Socioeconomic Index. The hypotheses are found to be consistent with the data. Moreover, other variables the same, while there is a large gap in occupational status between the foreign and native born just after the former arrive, this gap narrows very quickly and, other variables the same, White male immigrants reached occupational-income parity with their native-born counterparts at about 8.4 years after immigration. |
| Keywords: | Immigrants, Occupational Status, Occupational Income Score, Duncan Socioeconomic Index, 1850 Census of Population, Antebellum United States, Labor Market Analysis, Longitudinal Analysis (1850-1860) |
| JEL: | N31 J15 J62 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:glodps:1512 |
| By: | Justin Bloesch; Seung Joo Lee; Jacob P. Weber |
| Abstract: | We develop a novel, tractable New Keynesian model where firms post wages and workers search on the job, motivated by microeconomic evidence on wage setting. Because firms set wages to avoid costly turnover, the rate that workers quit their jobs features prominently in the model’s wage Phillips curve, matching U.S. empirical evidence. We then examine the response of wages to cost-of-living shocks, i.e., shocks that raise the price of household’s consumption goods but do not affect the marginal product of labor. Such shocks pass through to wages only to the extent that higher cost of living improves workers’ outside options, such as competing jobs or unemployment, relative to their current job. However, higher cost of living lowers real wages at all jobs evenly, and unemployment is rarely a credible outside option. We conclude that wage posting and on-the-job search limit the scope for pass-through from prices to wages. |
| Keywords: | monopsony; inflation; cost-of-living shocks; on-the-job search |
| JEL: | E31 E52 J6 |
| Date: | 2024–10–01 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fednsr:98927 |
| By: | Danilo Cavapozzi; Marco Francesconi; Cheti Nicoletti |
| Abstract: | Using UK longitudinal data on dual-earner couples, this paper estimates a model of intrahousehold housework decisions, which combines a randomized experimental framework eliciting counterfactual choices with gender norms differences across ethnicities and cohorts to identify the impacts of individual preferences and gender identity norms. Equal sharing of tasks yields greater utility for both men and women, with women disliking domestic chores as much as men. Although couples would want to use housework arrangements to compensate for differentials in labor market involvement, women end up performing a substantially larger share of housework. This is not due to specialization, rather social norms play a key role. Exposure to more egalitarian gender attitudes significantly increases the probability of choosing an equal share of housework. Were attitudes evened up to the most progressive levels observed in the sample, women doing more housework than their partners would stop to be the norm already among present-day households, except for households with children. |
| Keywords: | intrahousehold allocation of chores, labor supply, vignettes, gender identity norms, gender gaps |
| JEL: | C25 C26 D13 J16 J22 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11413 |
| By: | Beverly Hirtle; Anna Kovner |
| Abstract: | We analyze 6, 400 letters of recommendation for more than 2, 200 economics and finance Ph.D. graduates from 2018 to 2021. Letter text varies significantly by field of interest, with significantly less positive and shorter letters for Macroeconomics and Finance candidates. Letters for female and Black or Hispanic job candidates are weaker in some dimensions, while letters for Asian candidates are notably less positive overall. We introduce a new measure of letter quality capturing candidates that are recommended to “top” departments. Female, Asian, and Black or Hispanic candidates are all less likely to be recommended to top academic departments, even after controlling for other letter characteristics. Finally, we examine early career outcomes and find that letter characteristics, especially a “top” recommendation have meaningful effects on initial job placements and journal publications. |
| Keywords: | recommendation letters; gender in economics; Race and ethnicity; research institutions; professional labor markets |
| JEL: | A11 A23 J15 J16 |
| Date: | 2024–10–01 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fednsr:98958 |
| By: | Richard Audoly; Manudeep Bhuller; Tore Adam Reiremo |
| Abstract: | How informative are job ads about the actual pay and amenities offered by employers? Using a comprehensive database of job ads posted by Norwegian employers, we develop a methodology to systematically classify the information on both pay and non-pay job attributes advertised in vacancy texts. We link this information to measures of employer attractiveness, which we derive from a job search model estimated on observed wages and worker mobility flows. About 55 percent of job ads provide information related to pay and nearly all ads feature information on non-pay attributes. We show that publicly advertised job attributes are meaningful predictors of employer attractiveness, and non-pay attributes are about as predictive as pay-related attributes. High-pay employers mention pay-related attributes more often, while high-amenity employers are more likely to advertise flexible working hours and contract duration. |
| Keywords: | amenities; non-pecuniary job attributes; compensating differentials; worker mobility; information frictions; pay transparency; job ads; text analysis; vacancy duration |
| JEL: | J23 J32 J33 J62 J63 |
| Date: | 2024–09–01 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fednsr:98925 |
| By: | Frech, Maria; Maideu-Morera, Gerard |
| Abstract: | Empirical evidence highlights women’s demand for flexible working hours as a crit-ical cause of the persistent gender disparities in the labor market. We propose a theory of how hidden demand for flexibility drives gendered employment dynamics. We de-velop a dynamic contracting model between an employer and an employee whose time availability is stochastic and unverifiable. We model men and women only to differ in their probability of having low time availability, which we measure in the ATUS. We explore contracts designed specifically for each gender (gender-tailored) and the polar case where a male-tailored contract is given to both men and women. For the latter, we show that contracting frictions endogenously give rise to well-documented gendered labor market outcomes: (i) the divergence and non-convergence of gender earnings differentials over the life-cycle, and (ii) women’s shorter job duration and weaker labor force attachment. |
| Keywords: | Gender wage gap; child penalty; flexible working hours; recursive con-tracts |
| JEL: | J16 J22 J41 D82 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:129894 |
| By: | Kathrin Weis; Samuel Muehlemann; Harald Pfeifer |
| Abstract: | In Germany, works councils possess co-determination rights concerning apprenticeship training, which may influence training outcomes in firms. While the literature commonly assumes homogeneous effects of works councils, this study reveals considerable heterogeneity in their involvement in training-related decisions. Using representative German firm-level data, we explore two dimensions of works councils' heterogeneity: their participation in various decisions and their success in enforcing agendas. We document the extent to which works councils influence decisions on hiring apprentices, determining the number of apprentices, and retention after training. Our findings indicate that works council participation is associated with higher training propensity and retention rates, but no significant effect on the number of apprentices hired. However, the number of apprentices is notably higher in firms with collective bargaining agreements. Interestingly, works councils that are rated as successful are associated with lower retention rates, highlighting potential conflicts between representing the interests of apprentices and those of other worker groups. |
| Keywords: | Works council heterogeneity, apprenticeship training, training quality |
| JEL: | J24 J50 J53 M53 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:iso:educat:0233 |
| By: | Panu Poutvaara; Andreas Graefe |
| Abstract: | Women are severely underrepresented in American politics, especially among Republicans. This underrepresentation may result from women being less willing to run for office, from voter bias against women, or from political structures that make it more difficult for women to compete. Here we show how support for female candidates varies by voters’ party affiliation and gender. We conducted experimental elections in which participants made their vote choices based solely on politicians’ faces. When choosing between female and male candidates, Democrats, and especially Democratic women, preferred female candidates, while Republicans were equally likely to choose female and male candidates. These patterns held after controlling for respondents’ education, age, and political knowledge, and for candidates’ age, attractiveness, and perceived conservatism. Our findings suggest that voter bias against women cannot explain women’s underrepresentation. On the contrary, American voters appear ready to further narrow the gender gap in politics. |
| Keywords: | gender, elections, gender discrimination, political candidates, redistribution |
| JEL: | D72 J16 H23 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11414 |
| By: | Herbst, Chris M. (Arizona State University) |
| Abstract: | Although it is widely acknowledged that high-skilled teachers are integral to service quality and young children's well-being in child care settings, little is known about the qualifications and skills of the child care workforce. This paper combines data from multiple sources to provide a comprehensive assessment of the quality of individuals employed in the child care sector. I find that today's workforce is relatively low- skilled: child care workers have less schooling than those in other occupations, they score substantially lower on tests of cognitive ability, and they are among the lowest-paid individuals in the economy. I also show that the relative quality of the child care workforce is declining, in part because higher-skilled individuals increasingly find the child care sector less attractive than other occupations. Furthermore, I provide evidence that at least three other factors may be associated with the decline in worker quality. First, the recent proliferation of community college programs offering child care-related certificates and degrees may divert students away from attending four-year schools. Second, those majoring in child care-related fields are negatively selected for their cognitive skills, thereby decreasing the quality of the child care labor pool. Third, I show that the increased availability of outside employment options for high-skilled women had a detrimental effect on the quality of the child care workforce. |
| Keywords: | child care, child care quality, early childhood education, teacher quality |
| JEL: | I21 J13 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17351 |
| By: | Bernardi, Martino (Fondazione Giovanni Agnelli); Bertoni, Marco (University of Padova); Brunello, Giorgio (University of Padova); Crocè, Clementina (University of Padova); Rocco, Lorenzo (University of Padova) |
| Abstract: | In 2015, school-work alternation programmes (alternanza scuola lavoro) became compulsory in all Italian high schools, with the purpose of enabling students to combine theoretical learning at school with work-based learning. A distinctive feature of this reform was that the intensity of school-work-alternation programs varied across school tracks, higher for technical schools and lower for academic schools. Using a difference–in–differences approach, we show that female students in more intensively treated tracks experienced a decline in the probability of employment during the year following high school graduation, relative to females in less intensively treated tracks. The decline was accompanied by an increase in full-time higher education. These results could be driven by the relatively unattractive conditions offered by the Italian labour market to high school graduates without college education. |
| Keywords: | work-based learning, employment, college enrolment, Italy |
| JEL: | J60 J68 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17352 |
| By: | Costi, Chiara (University of Luxembourg); Clark, Andrew E. (Paris School of Economics); D'Ambrosio, Conchita (University of Luxembourg); Lepinteur, Anthony (University of Luxembourg); Menta, Giorgia (LISER) |
| Abstract: | We here exploit an exogenous shift in working conditions for public-sector workers in Italy to establish the causal effect of a return-to-office (RTO) mandate on worker health and well-being. In nine waves of quarterly panel data we first find a significant fall in teleworking for those affected by the RTO mandate, who also spend more time outdoors, work fewer hours, and interact less with relatives and friends. The net effect of these lifestyle changes on a battery of health and well-being measures following the return to office work is insignificant. The place of work post-pandemic has neither positive nor negative health implications. |
| Keywords: | return to office, working from home, health, well-being |
| JEL: | I18 I31 J88 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17355 |
| By: | Deshpande, Ashwini (Ashoka University); Singh, Jitendra (Thapar School of Liberal Arts and Sciences) |
| Abstract: | Mainstream literature attributes the decline in female labour force participation rate (FLFPR) in India between 2004-05 and 2017-18 primarily to supply-side factors. In this paper, we show that, in fact, demand-side factors are predominantly responsible for the decline. We begin by demonstrating that the contribution of supply-side factors to the FLFPR decline has been reducing over time. Changes in supply-side factors explain a miniscule part of the decline between 2011-12 and 2017-18. We estimate the contribution of structural transformation and local labour demand as the key determinants of declining FLFPR. Our identification strategy uses the Bartik shift-share instrument as the instrumental variable for measuring exogenous change in local labour demand. We find that female employment is highly responsive to local labour demand, but not male employment. The period of decline in FLFPR has also been a period of "jobless growth". We show that women have borne the brunt of the stagnant employment creation from 2004-05 onwards. Our analysis suggests that India needs to focus on creating rural non-farm jobs to boost FLFPR. |
| Keywords: | female labour force participation rate, employment, social norms, India, labour demand |
| JEL: | J23 J71 J16 O53 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17368 |
| By: | Guerreiro, Joao (UCLA); Hazell, Jonathon (London School of Economics); Lian, Chen (UC Berkeley); Patterson, Christina (University of Chicago Booth School of Business) |
| Abstract: | How costly is inflation to workers? Answers to this question have focused on the path of real wages during inflationary periods. We argue that workers must take costly actions ("conflict") to have nominal wages catch up with inflation, meaning there are welfare costs even if real wages do not fall as inflation rises. We study a menu-cost style model, where workers choose whether to engage in conflict with employers to secure a wage increase. We show that, following a rise in inflation, wage catch-up resulting from more frequent conflict does not raise welfare. Instead, the impact of inflation on worker welfare is determined by what we term "wage erosion"—how inflation would lower real wages if workers' conflict decisions did not respond to inflation. As a result, measuring welfare using observed wage growth understates the costs of inflation. We conduct a survey showing that workers are willing to sacrifice 1.75% of their wages to avoid conflict. Calibrating the model to the survey data, the aggregate costs of inflation incorporating conflict more than double the costs of inflation via falling real wages alone. |
| Keywords: | inflation, wages, conflict |
| JEL: | E31 J52 J31 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17339 |
| By: | Sebastian Heise; Jeremy Pearce; Jacob P. Weber |
| Abstract: | Good measures of labor market tightness are essential to predict wage inflation and to calibrate monetary policy. This paper highlights the importance of two measures of labor market tightness in determining wage growth: the quits rate, and vacancies per effective searcher (V/ES)—where searchers include both employed and non-employed job seekers. Amongst a broad set of indicators of labor market tightness, we find that these two measures are independently the most strongly correlated with wage inflation and also predict wage growth well in out-of-sample forecasting exercises. Conversely, transitory shocks to productivity have little impact on wage growth. Finally, we find little evidence of a nonlinearity in the relationship between wage growth and labor market tightness. These results are generally consistent with the predictions of a New Keynesian DSGE model where firms have the power to set wages and workers search on the job (Bloesch, Lee, and Weber, 2024). |
| Keywords: | Phillips curve; wage-inflation Phillips curve; labor market slack; labor market tightness; on-the-job search |
| JEL: | E3 J6 |
| Date: | 2024–10–01 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fednsr:98935 |
| By: | Zanoni, Wladimir; Fabregas, Raissa |
| Abstract: | We conducted an artifactual field experiment with human resource recruiters in Ecuador to investigate the extent to which migrants are penalized in the labor market. Human resource recruiters were hired to evaluate pairs of job candidates competing for jobs. The candidate profiles were observationally equivalent, except that one was randomly assigned to be a Venezuelan migrant. Recruiters assessed job fitness, proposed wages for each candidate, and made hiring recommendations. We find robust evidence of a penalty against migrants across all dimensions. Venezuelans are penalized despite being from a population who shares cultural, historical, and linguistic characteristics with natives and has, on average, higher levels of education. We do not find evidence that recruiters demographic characteristics, experience, cognitive scores, or personality traits correlate with a preference for natives. Instead, there is suggestive evidence that jobs requiring a greater degree of local knowledge or public interface carry a higher migrant penalty. |
| Keywords: | Migrant;labor market;Wage;discrimination |
| JEL: | J71 J61 C93 O15 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:idb:brikps:13804 |
| By: | Cappelen, Alexander (Dept. of Economics, Norwegian School of Economics and Business Administration); Liu, Yiming (Humboldt University of Berlin); Nielsen, Hedda (Berlin School of Economics); Tungodden, Bertil (Dept. of Economics, Norwegian School of Economics and Business Administration) |
| Abstract: | Modern societies are characterized by widespread disparities in opportunities, creating income inequality between people whose choices were shaped by different circumstances. This paper investigates how people handle income inequality arising from unequal opportunities. We report from a largescale experimental study involving general populations in the United States and Scandinavia, where third-party spectators make consequential redistribution decisions. Our findings provide strong evidence that a large majority of people are willing to accept inequality caused by unequal opportunities, which contrasts with their view on inequality caused by outcome luck. Two distinct forces drive greater acceptance of inequality under unequal opportunities: the tendency to mistakenly attribute the impact of unequal opportunities to differences in productivity, and the moral relevance attached to performance differences caused by unequal opportunities. We further demonstrate a clear societal and political divide in responses to unequal opportunities, with Americans and right-wing voters exhibiting a greater acceptance of the resulting inequality, reflecting both differences in attribution bias and fairness views in these populations. |
| Keywords: | Unequal opportunities; Inequality acceptance; Attribution bias; Fairness views |
| JEL: | J01 J17 J18 |
| Date: | 2024–10–21 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:nhheco:2024_017 |
| By: | Chomik , Rafal (University of New South Wales); O’Keefe , Philip (University of New South Wales); Piggott , John (University of New South Wales) |
| Abstract: | Asia and the Pacific has the most diverse regional pension landscape globally. Yet the region’s pension systems are facing common challenges as they attempt to expand coverage, and ensure adequacy and fairness, while maintaining fiscal sustainability. We review the structures and performance of pension systems across Asia and the Pacific. Most remain characterized by low contributory coverage, social pensions with inadequate benefits and often low (or no) coverage, and informal sector schemes with modest traction to date. They are also characterized by gender inequities, lack of policy flexibility and attention to labor incentives, and underdeveloped governance structures. The paper makes proposals for addressing these challenges through an expanded role for social pensions with inclusive targeting, reformed contributory schemes, ongoing innovations for the informal sector and women, and enhanced reliance on technology. |
| Keywords: | pension; Asian pension; social protection in Asia; means tested pension |
| JEL: | H55 J18 N35 |
| Date: | 2024–10–24 |
| URL: | https://d.repec.org/n?u=RePEc:ris:adbewp:0746 |
| By: | Santiago Caicedo; Jeremy Pearce |
| Abstract: | This paper studies how the speed-quality tradeoff in innovation interacts with firm dynamics, concentration, and economic growth. Empirically, we document long-run trends in the increasing speed of innovation alongside declining quality at large firms. Leveraging variation from an exogenous policy change, we document the existence of the speed-quality tradeoff both at the firm and aggregate level. We develop an endogenous growth model that incorporates the speed-quality tradeoff and show that allocating less labor towards speed increases growth, particularly in the presence of private benefits to innovation and spillovers from heterogeneous innovations. We quantify the model to link firms’ decisions across speed and quality to aggregate outcomes. Quantitatively, the recent growth slowdown is mainly due to changes in the innovation production function, while the allocation of inventors between speed and quality within firms has a modest impact. When spillovers across firms are taken into account, the effect becomes significantly larger; the shift to speed over the last 30 years explains up to one-quarter of the decrease in growth. |
| Keywords: | innovation; economic growth; slowdown; inventors; firm dynamics |
| JEL: | J63 O30 O31 O33 |
| Date: | 2024–10–01 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fednsr:98928 |