nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2011‒07‒27
twenty papers chosen by
Erik Jonasson
Lund University

  1. Working in Family Firms: Less Paid but More Secure? Evidence from French Matched Employer-Employee Data By Bassanini, Andrea; Caroli, Eve; Rebérioux, Antoine; Breda, Thomas
  2. Who Suffers the Penalty? A Panel Data Analysis of Earnings Gaps in Vietnam By Nordman, Christophe J.; Nguyen, Huu Chi; Roubaud, François
  3. The Effects of Health Shocks on Employment and Health Insurance: The Role of Employer-Provided Health Insurance By Cathy J. Bradley; David Neumark; Meryl I. Motika
  4. Impact of Cultural Diversity on Wages and Job Satisfaction in England By Simonetta Longhi
  5. How flexible are real wages in EU countries? A panel investigation By Frigyes Ferdinand Heinz; Desislava Rusinova
  6. Mobilising female labour market reserves: What promotes women’s transitions from part-time to full-time work? By Ragni Hege Kitterød, Marit Rønsen and Ane Seierstad
  7. Drivers of female labour force participation in urban India during Indias Economic Boom By Pieters, Janneke; Klasen, Stephan
  8. Towards a micro-founded theory of aggregate labor supply By Andrés Erosa; Luisa Fuster; Gueorgui Kambourov
  9. Work, Inequality, and the Dual Career Household By Dan Wheatley and Zhongmin Wu
  10. Wage incentive profiles in dual labour markets By Grassi, Emanuele; Di Cintio, Marco
  11. Equal Opportunities in Science? Evidence on Gender Pay Gaps amongst Scientists Working in the UK By Sara Connolly; Susan Long
  12. Benefit Generosity and the Income Effect on Labor Supply: Quasi-Experimental Evidence By Danzer, Alexander M.
  13. Job Quality and Employment of Older People in Europe By Rudolf Winter-Ebmer; Mario Schnalzenberger; Nicole Schneeweis; Martina Zweimüller
  14. Does raising the retirement age increase employment of older workers? By Stefan Staubli; Josef Zweimüller
  15. Contractual Dualism, Market Power and Informality By Basu, Arnab K; Chau, Nancy H; Kanbur, Ravi
  16. The Effect of an Acute Health Shock on Work Behavior: Evidence from Different Health Care Regimes By Datta Gupta, Nabanita; Kleinjans, Kristin J.; Larsen, Mona
  17. Decomposing the Impacts of Overeducation and Overskilling on Earnings and Job Satisfaction: An Analysis Using REFLEX data By Sánchez-Sánchez, Nuria; McGuinness, Seamus
  18. Future Skill Shortages in the U.S. Economy? By David Neumark; Hans P. Johnson; Marisol Cuellar Mejia
  19. Intergenerational transmission of self-employed status in the informal sector: a constrained choice or better income prospects? Evidence from seven West-African countries By Pasquier-Doumer, Laure
  20. Does bargaining matter in the small firm's matching model? By Olivier l’Haridon; Franck Malherbet; Sébastien Pérez-Duarte

  1. By: Bassanini, Andrea (OECD); Caroli, Eve (University Paris Dauphine); Rebérioux, Antoine (University Paris Ouest-Nanterre); Breda, Thomas (Paris School of Economics)
    Abstract: We study compensation packages in family and non-family firms. Using matched employer-employee data for a representative sample of French establishments, we first show that family firms pay on average lower wages to their workers. We find that part of this wage gap is due to differences in unobserved characteristics of workers across family and non-family firms. However, we also find evidence that company wage policies differ according to ownership status, so that workers staying in the same firm enjoy on average a 3% pay increase when a family firm becomes non-family owned and suffer a similar pay drop when the ownership transition occurs the other way round. In contrast, we find evidence that family firms are characterised by lower job insecurity, as measured by dismissal rates and by the subjective risk of dismissal perceived by workers. In addition, family firms appear to rely less on dismissals – and more on hiring reductions – than non-family firms when they downsize. We show that compensating wage differentials account for a substantial part of the inverse relationship between the family/non-family gaps in wages and job security.
    Keywords: family firms, wages, job security, compensating wage differentials, linked employer-employee data
    JEL: G34 J31 J33 J63 L26
    Date: 2011–07
  2. By: Nordman, Christophe J.; Nguyen, Huu Chi; Roubaud, François
    Abstract: In spite of its predominant economic weight in developing countries, little is known about informal sector income dynamics vis-à-vis the formal sector. Some works have been done in this field using household surveys, but they only consider some emerging Latin American countries and a few African countries. As a matter of consequence, there is still no way to generalize the (diverging) results to other part of the developing world. Taking advantage of the rich VHLSS dataset in Vietnam, in particular its three waves panel data (2002, 2004, 2006), we assess the magnitude of various formal/informal earnings gaps while addressing heterogeneity issues at three different levels: the worker, the job (wage employment vs. selfemployment) and the earnings distribution.We estimate fixed effects and quantile regressions to control for unobserved individual characteristics. Our results suggest that the informal sector earnings gap highly depends on the workers' job status and on their relative position in the earnings distribution. Penalties may in some cases turn into premiums. By comparing our results with studies in other developing countries, we draw conclusions highlighting the Vietnam's labour market specificity. --
    Keywords: informal employment,earnings gap,transition matrix,quantile regressions,panel data,Vietnam
    JEL: J21 J23 J24 J31 O17
    Date: 2011
  3. By: Cathy J. Bradley; David Neumark; Meryl I. Motika
    Abstract: We study how men’s dependence on their own employer for health insurance affects labor supply responses and loss of health insurance coverage when faced with a serious health shock. Men with employment-contingent health insurance (ECHI) are more likely to remain working following some kinds of adverse health shocks, and are more likely to lose insurance. With the passage of health care reform, the tendency of men with ECHI as opposed to other sources of insurance to remain employed following a health shock may be diminished, along with the likelihood of losing health insurance.
    JEL: I18 J22 J38
    Date: 2011–07
  4. By: Simonetta Longhi (Institute for Social and Economic Research, University of Essex and IZA)
    Abstract: This paper combines individual data from the British Household Panel Survey and yearly population estimates for England to analyse the impact of cultural diversity on individual wages and on different aspects of job satisfaction. Do people living in more diverse areas have higher wages and job satisfaction after controlling for other observable characteristics? The results show that cultural diversity is positively associated with wages, but only when cross-section data are used. Panel data estimations show that there is no impact of diversity. Using instrumental variables to account for endogeneity also show that diversity has no impact.
    Keywords: Cultural Diversity, Wages, Job Satisfaction.
    JEL: J28 J31
    Date: 2011–07
  5. By: Frigyes Ferdinand Heinz (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.); Desislava Rusinova (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.)
    Abstract: In this paper we estimate the degree of real wage flexibility in 19 EU countries in a wage Phillips curve panel framework. We find evidence for a reaction of wage growth to unemployment and productivity growth. However, due to unemployment persistence, over time the real wage response weakens substantially. Our results suggest that the degree of real wage flexibility tends to be larger in the central and eastern European (CEE) countries than in the euro area; weaker in downturns than during upswings. Moreover, there exists an inflation threshold, below which real wage flexibility seems to decrease. Finally, we find that part of the heterogeneity in real wage flexibility and unemployment might be related to differences in the wage bargaining institutions and more specifically the extent of labour market regulation in different country groups within the EU. JEL Classification: J31, J38, P5.
    Keywords: real wage flexibility, bargaining institutions, central and eastern Europe, euro area, panel heterogeneity.
    Date: 2011–07
  6. By: Ragni Hege Kitterød, Marit Rønsen and Ane Seierstad (Statistics Norway)
    Abstract: Considering the high female part-time rates in Norway, one may envisage a sizeable additional labour supply if more part-time working women would switch to full time. In view of an ageing population and increased demand for labour in the future, we investigate this issue by studying married and cohabiting women’s transitions from part-time to full-time work based on panel data from 2003-2009. Contrary to evidence from other countries with well-established support for working mothers, we find that young children in the household still restrain Norwegian women’s mobility to full-time work. On the other hand, there is a strong trend of higher full-time transition rates over our study period, which may reflect a vast expansion of the day care sector with more and cheaper day care, as well as a booming economy. Part timers who work in typical female occupations such as nursing, and sales and services are also less likely to switch to full time. Whether this is a result of true preferences or constraints is difficult to say, but previous research suggest that involuntary part time may be substantial. Voluntariness may further be a matter of degree, and “chosen” part timers may also switch to full time if conditions were right.
    Keywords: Female labour supply; part-time; full-time transitions
    JEL: J21 J22 J24 J13 J16
    Date: 2011–07
  7. By: Pieters, Janneke; Klasen, Stephan
    Abstract: In the past twenty years, India's economy has grown at increasingly faster rates and now belongs to the fastest-growing economies in the world. One would think that in such economic conditions, women are increasingly being pulled into the labour force by attractive pay and employment conditions. This paper examines trends and drivers of female labour force participation in urban India between 1987 and 2004; we do this using aggregate and unit level data and estimate econometric participation models. Our paper shows a much more nuanced picture than one might expect. While we find, as expected, that cultural and social factors strongly influence female labour force participation rates, among the somewhat unexpected findings are:- Only in the period between 1999 and 2004 did female labour force participation rates increase in urban areas; before, rates remained flat due to offsetting effects of increases among some groups and decreases among others;- At lower levels of education, increases in female labour force participation are driven more by distress than by increasing economic opportunities; this is linked to stagnant real wages at this level;- At mid-levels of education, the income effect of rising male incomes served to reduce female labour force participation rates considerably; while we find some evidence of a positive own wage effect, the income effect of husband's earning remains a very strong driver of female labour force participation;- Only at the highest education levels do we see some evidence from pull factors drawing women into the labour force at attractive employment and pay conditions; this affects, by 2004, only a tiny minority of India's women.As a result, the economic boom has offered remarkably few opportunities to women in India. In fact, for all but the very well-educated, it appears that the labour market conditions have not improved at all, or even deteriorated. --
    Date: 2011
  8. By: Andrés Erosa (IMDEA Social Sciences Institute); Luisa Fuster (IMDEA Social Sciences Institute); Gueorgui Kambourov (University of Toronto)
    Abstract: We document various facts about the labor supply decisions of male workers in the US over their life cycle. We then build a neoclassical model of labor markets with non-linear wages and heterogeneous agents. The key model feature for delivering periods of non-participation is the non-linear mapping between hours of work and earnings. We show that our model can go a long way towards capturing salient features of individual labor supply over the life cycle. Moreover, the aggregate response of labor supply to a one time unanticipated wage shock is much larger than predicted by the Frisch elasticity of labor supply.
    Keywords: aggregate labor supply; intensive margin; extensive margin; heterogeneous agents; life cycle
    JEL: D9 E2 E13 E62 J22
    Date: 2011–07–13
  9. By: Dan Wheatley and Zhongmin Wu
    Abstract: Dual career households have the potential to be the most egalitarian of all households. However, while paid work is increasingly distributed evenly between career men and women, household time remains a social constraint for many women. This paper considers the distribution of work among dual career households, using weekly time-use trends, reflecting on the fit of household models and the effectiveness of current work-focused policy. Descriptive analysis, random-effects probit regression, and case households provide an empirical focus on a post-industrial economy - the UK - using the 1993-2009 British Household Panel Survey. Long hours, especially overtime, persist in managerial and professional occupations. Meanwhile, housework burdens women with up to fourteen hours of additional work per week. Preferences for shorter hours remain greater among women, reflecting the impact of household time on paid work. The evidence presented in this paper suggests that the distribution of household labor renders dual career households less than egalitarian.
    Keywords: Dual career households, time-use, equality, work-time, household time
    JEL: J16 J22
    Date: 2011–07
  10. By: Grassi, Emanuele; Di Cintio, Marco
    Abstract: We propose a modified version of the Shapiro-Stiglitz’s (1984) efficiency wage model by introducing temporary contracts in the standard setup. New theoretical insights emerge on the incentive problem faced by workers and firms. We argue that the existence of temporary contracts broaden the incentive menu available to employers and that the optimal incentive structure can be sustained as an equi- librium outcome only if permanent contracts do not disappear. We also provide an alternative explanation of the wage penalty suffered by temporary workers even if standard models of efficiency wages would predict higher compensations for workers facing a higher job loss risk.
    Keywords: Dual labour market; efficiency wages; wage differentials
    JEL: J41 J31 J63
    Date: 2011–07
  11. By: Sara Connolly (School of Economics, University of East Anglia); Susan Long (School of Economics, University of East Anglia)
    Abstract: The groundbreaking MIT report (1999) was the first study to quantify the disadvantages faced by female scientists. This has been followed by studies of gender pay differentials amongst academics working in the humanities (US), economics (UK and US) and the sciences (US). This paper provides the first detailed study of gender pay differentials amongst scientists working in the UK. Our data allows us to contrast the experiences of scientists working in Higher Education (academic scientists) with those working in Research Institutes (research scientists). We find that there is a gender pay differential of 22% (?6-7,000), most of which can be accounted for in terms of age, grade, subject, research esteem, workplace and domestic responsibilities, but a significant proportion remains unexplained (19% in academic and 30% in research science). Our results suggest that across grades, if female scientists were to receive the same returns as male scientists, the gender pay gap would narrow significantly and would close at the bottom end of the distribution.
    Keywords: occupation, pay, decomposition, institutions
    JEL: J16 J31 J44 J71
    Date: 2011–07–18
  12. By: Danzer, Alexander M.
    Abstract: This paper uses an unanticipated, exogenous doubling of the legal minimum pension in Ukraine as a unique quasi-experiment to evaluate the income effect on various aspects of labor supply among the elderly. In contrast to previous studies, the unusually simple pension eligibility rule allows estimating a pure causal income effect. Applying difference-indifferences and regression discontinuity methods on two nationally representative data sets yields a retirement elasticity of 0.3. Men and women respond at different margins of labor supply but with similar overall effect. Despite retirement incentives being disproportionally large for low income earners old-age poverty declined significantly. --
    Keywords: pure income effect,benefit generosity,labor supply,retirement,poverty,wage effect
    Date: 2011
  13. By: Rudolf Winter-Ebmer; Mario Schnalzenberger (Department of Economics, Johannes Kepler University Linz, Austria); Nicole Schneeweis; Martina Zweimüller
    Abstract: We study the relationship between job quality and retirement using panel data for European countries (SHARE). While previous studies looked at the impact of bad working conditions on retirement intentions, we can use the panel dimension to study actual retirement as well as other pathways out of a job. As indicators for job quality we use three different approaches: overall job sat- isfaction, over- and undereducation for a particular job as well as effort-reward imbalance which measures the imbalance between a worker's effort and the re- wards he or she receives in turn.
    Keywords: retirement, job quality, job satisfaction, educational mismatch, effort- reward imbalance, SHARE
    JEL: J14 J18 J26 J28
    Date: 2011–07
  14. By: Stefan Staubli; Josef Zweimüller
    Abstract: This paper studies how an increase in the minimum retirement age affects the labor market behavior of older workers. Between 2000 and 2006 the Austrian government gradually increased the early retirement age from 60 to 62.2 for men and from 55 to 57.2 for women. Using administrative data on the universe of Austrian private-sector employees, the results from the empirical analysis suggest that this policy change reduced retirement by 19 percentage points among affected men and by 25 percentage points among affected women. The decline in retirement was accompanied by a sizeable increase in employment of 7 percentage points among men and 10 percentage points among women, but had also a important spillover effects into the unemployment insurance program. Specifically, the unemployment rate increased by 10 percentage points among men and 11 percentage points among women. In contrast, the policy change had only a small impact on the share of individuals claiming disability or partial retirement benefits.
    Keywords: Early retirement, retirement age, labor supply, policy reform
    JEL: J14 J26
    Date: 2011–07
  15. By: Basu, Arnab K; Chau, Nancy H; Kanbur, Ravi
    Abstract: Two stylized representations are often found in the academic and policy literature on informality and formality in developing countries. The first is that the informal (or unregulated) sector is more competitive than the formal (or regulated) sector. The second is that contract enforcement is easier in the formal sector than in the informal sector, precisely because the formal sector comes under the purview of state regulation. The basic contention of this paper is that these two representations are not compatible with each other. We develop a search-theoretic model of contractual dualism in the labor market where the inability to commit to contracts in the informal sector leads to employer market power in equilibrium, while an enforced minimum wage in the formal sector provides employers with a commitment technology but which reduces their market power in equilibrium. The contributions of this paper are three-fold. It (i) provides the micro-underpinnings for endogenous determination of employer market power in the formal and informal sectors due to contractual dualism in the two sectors, (ii) offers a unified and coherent setup whereby a host of salient features of developing country labor markets can be explained together, and (iii) places the original Stiglerian prescription of the optimal (unemployment minimizing) minimum wage in the broader context of labor markets where formal job creation is costly, and where formal employment, informal employment, and unemployment co-exist.
    Keywords: Contractual Dualism; Employer Market Power; Informality; Wage Dualism
    JEL: J3 J6 O17
    Date: 2011–07
  16. By: Datta Gupta, Nabanita (Aarhus School of Business); Kleinjans, Kristin J. (California State University, Fullerton); Larsen, Mona (SFI - Danish National Centre for Social Research)
    Abstract: We study how severe acute health shocks affect the probability of not working in the U. S. versus in Denmark. The results not only provide insight into how relative disease risk affects labor force participation at older ages, but also into how different types of health care and health insurance systems affect individual decisions of labor force participation. We find that the effect of an acute health shock on labor force participation is stronger in the U.S. than in Denmark, and provide compelling evidence that this is the result of health care system-related differential mortality and baseline health differences.
    Keywords: health shock, health care regimes, work
    JEL: I12 I18 J26
    Date: 2011–07
  17. By: Sánchez-Sánchez, Nuria; McGuinness, Seamus
    Abstract: This paper uses the REFLEX dataset to test the hypothesis that the generally observed negative impacts of overeducation and overskilling on both job satisfaction and earnings can be attributed to under-utilisation in specific job related skills. We find that the penalties to both forms of mismatch are insensitive to the inclusion of controls for overskilling in a wide range of job specific competencies. The research suggests that the problem of mismatch relates to an inability for fully utilise general or innate ability as opposed to specific areas of acquired learning. The analysis suggests the problem of mismatch can only be effectively addressed by raising general levels of job quality within economies and this, in turn, presents serious challenges for policy.
    Keywords: data/impacts/Overeducation/Overskilling/skills/Competencies/Policy
    Date: 2011–07
  18. By: David Neumark; Hans P. Johnson; Marisol Cuellar Mejia
    Abstract: The impending retirement of the baby boom cohort represents the first time in the history of the United States that such a large and well-educated group of workers will exit the labor force. This could imply skill shortages in the U.S. economy. We develop medium-term labor force projections of the educational demands on the workforce and the supply of workers by education to assess the potential for skill imbalances to emerge. Based on our formal projections, we see little likelihood of skill shortages emerging by the end of this decade. More tentatively, though, skill shortages are more likely as all of the baby boomers retire in later years, and skill shortages are more likely in the medium-term in states with large and growing immigrant populations. We discuss conflicting evidence on skill shortages based on alternative projections as well as criticisms of the definition of skill requirements, concluding that our projections are likely the most reasonable.
    JEL: J11 J24
    Date: 2011–07
  19. By: Pasquier-Doumer, Laure
    Abstract: Abstract Social reproduction is the highest for self-employed as shown by an extensive literature from developed and developing countries. Very few studies however document the reason for this high intergenerational correlation of the self-employed status. The rare studies that have been done concern the US and show that children of self-employed benefit from an advantage when they are themselves self-employed. The purpose of this paper is to test in the African context if the second-generation of self-employed has an advantage related to the first-generation. It aims at highlighting the debate between two visions: the first of informal sector as the less-advantaged sector of a dualistic labour market, and the second as a sector of personal choice and dynamic entrepreneurship. Using 1-2-3 surveys collected in the commercial capitals of seven West African countries in 2001-2002, this paper shows that the second-generation of informal self-employed does not have better outcomes than the first one, except when they choose a familial tradition in the same sector of activity. Thus, in the African context, having a self-employed father does not provide any advantage in terms of profit or sales and is not sufficient for the transmission of a valuable informal human capital. On the other hand, informal entrepreneurs who have chosen a specific enterprise based on familial tradition have a comparative advantage. Their comparative advantage is partly explained by the transmission of enterprise-specific human capital, acquired thanks to experiences in the same type of activity and by the transmission of social capital that guarantees a better clientele and a reputation. --
    Keywords: informal sector,entrepreneurship,intergenerational link
    JEL: L26 J24 J62
    Date: 2011
  20. By: Olivier l’Haridon (Greg-HEC, Institut Universitaire de France and University Paris Sorbonne.); Franck Malherbet (Université de Rouen, CECO – Ecole Polytechnique, IZA and fRDB.); Sébastien Pérez-Duarte (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.)
    Abstract: In this article, we use a stylized model of the labor market to investigate the effects of three alternative and well-known bargaining solutions. We apply the Nash, the Egalitarian and the Kalai-Smorodinsky bargaining solutions in the small firm's matching model of unemployment. To the best of our knowledge, this is the first attempt to implement and systematically compare these solutions in search-matching economies. Our results are twofold. First from the theoretical and methodological viewpoint, we extend a somewhat flexible search-matching economy to alternative bargaining solutions. In particular, we prove that the Egalitarian and the Kalai-Smorodinsky solutions are easily implementable within search-matching economies. Second, our results show that even though the traditional results of bargaining theory apply in this context, they are generally qualitatively different from the standard results, and the differences are quantitatively weaker than expected. This is of particular relevance in comparison with the results established in the earlier literature. JEL Classification: C71, C78, J20, J60.
    Keywords: Search and matching models, Bargaining theory, Nash, Egalitarian, Kalai-Smorodinsky.
    Date: 2011–07

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