nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2011‒08‒02
thirteen papers chosen by
Erik Jonasson
Lund University

  1. Does Raising the Retirement Age Increase Employment of Older Workers? By Staubli, Stefan; Zweimüller, Josef
  2. Contractual Dualism, Market Power and Informality By Basu, Arnab K.; Chau, Nancy; Kanbur, Ravi
  3. Health Impaired Employees' Job Satisfaction: New Evidence from Athens, Greece By Drydakis, Nick
  4. Regional wage differences in the Netherlands: Micro-evidence on agglomeration externalities By Stefan Groot; Henri de Groot
  5. Urban Density, Human Capital, and Productivity: An empirical analysis using wage data By MORIKAWA Masayuki
  6. The Portability of New Immigrants' Human Capital: Language, Education and Occupational Matching By Goldmann, Gustave; Sweetman, Arthur; Warman, Casey
  7. Wage inequality in the Netherlands: Evidence, trends and explanations By Stefan Groot; Henri de Groot
  8. Estimating the rate of return to education in Sudan By Nour, Samia
  9. Who benefits the most from peer effects within ethnic group ? Empirical evidence on the South African Labour Market. By Gaëlle Ferrant; Yannick Bourquin
  10. Prospective Analysis of a Wage Subsidy for Cape Town Youth By James A. Levinsohn; Todd Pugatch
  11. Explaining Differences in Job Search Outcomes Between Employed and Unemployed Job Seekers By Longhi, Simonetta; Taylor, Mark
  12. The outcome of coaching and training for self-employment : A statistical evaluation of non-financial support schemes for unemployed business founders in Germany By Oberschachtsiek, Dirk; Scioch, Patrycja
  13. Education, vocational training and R&D: towards new forms of labor market regulation By Lopes, Margarida

  1. By: Staubli, Stefan (University of St. Gallen); Zweimüller, Josef (University of Zurich)
    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 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
  2. By: Basu, Arnab K. (College of William and Mary); Chau, Nancy (Cornell University); Kanbur, Ravi (Cornell University)
    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, wage dualism, employer market power, informality
    JEL: J3 J6 O17
    Date: 2011–07
  3. By: Drydakis, Nick (University of Patras)
    Abstract: By utilizing the 2008 Athens Area Study (AAS) data set, this study investigates four aspects of job satisfaction – total pay, promotion prospects, respect received from one’s supervisor, and total job satisfaction – between healthy and heath-impaired employees. Health impaired employees are found to be less satisfied according to all job satisfaction measures even when a large number of productivity features, and job characteristics are controlled for. The outcomes suggest also that women are more satisfied with their jobs than men are, regardless of health status. Moreover, the estimations show that health impaired employees' job satisfaction is affected more than healthy employees' job satisfaction by adverse mental health symptoms (life dissatisfaction). Finally, health impaired employees are found to become more satisfied with their jobs with time after disability onset. The study concludes that health impaired employees may have higher expectations about what they will obtain from their work, and that they may have job satisfaction adjustments.
    Keywords: two-step quasi-likelihood exogeneity test, health impairments, job satisfaction, ordered probit model, switching regression model
    JEL: J10 J28
    Date: 2011–07
  4. By: Stefan Groot; Henri de Groot
    Abstract: <p>Based on micro-data on individual workers for the period 2000–2005, we show that regional wage differentials in the Netherlands are small but present. </p><p>A large part of these differentials can be attributed to individual characteristics of workers. Remaining effects are partially explained by variations in employment density, with an elasticity of about 3.8 percent and by Marshall-Arrow-Romer externalities, where doubling the share of a (2-digit NACE) industry results in a 2.4 percent higher productivity.</p><p>We find evidence for a negative effect of competition (associated with Porter externalities) and diversity (associated with Jacobs externalities).</p>
    JEL: J24 O12 R11 R23
    Date: 2011–07
  5. By: MORIKAWA Masayuki
    Abstract: Numerous studies have indicated that densely populated cities enhance the productivity of workers through knowledge spillover and superior matching with employers in the labor market. This paper quantitatively analyzes the relationship among urban density, human capital, and wages by using micro data from the <i>Basic Survey on Wage Structure</i> for the years from 1990 to 2009. According to the estimation of standard wage functions augmented with population density, the agglomeration premium is larger for workers with higher observable skills such as education, tenure, and potential experience, which suggests rapid learning and superior matching in densely populated cities. Under structural changes such as a declining population and the trend toward a knowledge-based service economy, forming densely populated areas by facilitating the migration of workers has desirable effects throughout Japan on both individual wages and firm productivity.
    Date: 2011–07
  6. By: Goldmann, Gustave (University of Ottawa); Sweetman, Arthur (McMaster University); Warman, Casey (Queen's University)
    Abstract: The implications of human capital portability – including interactions between education, language skills and pre- and post-immigration occupational matching – for earnings are explored for new immigrants to Canada. Given the importance of occupation-specific skills, as a precursor we also investigate occupational mobility and observe convergence toward the occupational skill distribution of the domestic population, although four years after landing immigrants remain less likely have a high skilled job. Immigrants who are able to match their source and host country occupations obtain higher earnings. However, surprisingly, neither matching nor language skills have any impact on the return to pre-immigration work experience, which is observed to be statistically significantly negative. Crucially, English language skills are found to have an appreciable direct impact on earnings, and to mediate the return to pre-immigration education but not labour market experience.
    Keywords: immigration, human capital portability, occupation, language, education
    JEL: J24 J61 J62
    Date: 2011–07
  7. By: Stefan Groot; Henri de Groot
    Abstract: <p>Using detailed micro data on the entire wage distribution in the Netherlands, this paper examines trends in Dutch (real pre-tax) wage inequality between 2000 and 2008. </p><p>For many years, the Netherlands has been considered an exception to the general trend of growing wage inequality that most OECD countries have experienced since the 1980s. This OECD trend is generally explained by increasing relative demand for skilled labour due to skill biased technological progress and – to a lesser extent – by globalization.</p><p>Using detailed micro data on the entire wage distribution in the Netherlands, this paper examines trends in Dutch (real pre-tax) wage inequality between 2000 and 2008. We show that the aggregate flatness of the distribution hides dynamics between different groups and regions. We find that inequality, after correcting for observed worker characteristics, decreased somewhat at the lower half of the wage distribution, while increasing slightly at most of the upper half (both before and after correcting for differences in human capital). Residual wage inequality is high and increasing in most larger cities, which is in line with recent evidence on the increasing importance of agglomeration externalities.</p>
    JEL: D31 E24 J31 O15 R23
    Date: 2011–07
  8. By: Nour, Samia (UNU-MERIT, Maastricht University, and Khartoum University)
    Abstract: This paper examines the rate of return to education in Sudan. One advantage and interesting element in our analysis in this paper is that we explain three stylised facts on the rate of return to education using new primary data in Sudan: first, positive but low rate of return to education and correlations between education, experience, its square and wages for men and women defined by gender, second, positive and significant rate of return to education and correlations between education, experience, its square and wages defined by firm size and industry at the micro level across industrial firms and third, an increase in skill levels and firm size leads to improved relationship between actual education, required education, experience, its square and wages at the micro level across industrial firms. Our paper is relevant and consistent with the recent growing interest in the literature that confirms the importance of investment in education and rate of return to education. Different from the Sudanese literature that estimates the return to human capital at the macro level, we investigate the rate of return to education using new primary data at the micro level. A novel element of our analysis is that we use new primary survey data at the micro level obtained from the university survey (2009) and the firm survey (2010), we present a new contribution and fill the gap in the Sudanese literature by estimating first the rate of return to education for men and women and explaining differences defined by gender and second for industrial firms and explaining differences defined by firm size and industry, since these issues are not adequately discussed in the Sudanese literature. Our findings indicate the importance of investment in education to facilitate enhancing educational attainment and improvement of the rate of return to education in Sudan.
    Keywords: Education, returns to education, gender, industry, Sudan
    JEL: J01 J16 J21 J24 J31 I21
    Date: 2011
  9. By: Gaëlle Ferrant (Centre d'Economie de la Sorbonne); Yannick Bourquin (Centre d'Economie de la Sorbonne)
    Abstract: This paper provides evidence that local social interactions within etnic groups may explain the puzzling variations in labour-market outcomes across individuals. Peer effects work first by creating pressure on labor-market participation, second, by conveying information about job opportunities and by raising wages. These effects differ through a selection effect : gender and ethnic groups who are less integrated in the labour market benefit more from peer effect. Finally, networks exhibit decreasing returns. The problems of endogeneity and simultaneity of local peer effects are addressed by using (i) data aggregated at the province level, (ii) the distribution of the sex of the peers' siblings as an instrumental variable and (iii) a quasi-panel data approach relying on the Hausman-Taylor estimator. The importance of social interactions in the labour market suggests that a social multiplier exists and our estimates show that any labour-market shock is magnified with an elasticity of 0.5.
    Keywords: Peer efects, development economics, labour, South Africa.
    JEL: J15 J16 O18 Z13
    Date: 2011–07
  10. By: James A. Levinsohn; Todd Pugatch
    Abstract: Recognizing that a credible estimate of a wage subsidy's impact requires a model of the labor market that itself generates high unemployment in equilibrium, we estimate a structural search model that incorporates both observed heterogeneity and measurement error in wages. Using the model to examine the impact of a wage subsidy, we find that a R1000/month wage subsidy paid to employers leads to an increase of R660 in mean accepted wages and a decrease of 15 percentage points in the share of youth experiencing long-term unemployment.
    JEL: J64 J68
    Date: 2011–07
  11. By: Longhi, Simonetta (ISER, University of Essex); Taylor, Mark (University of Essex)
    Abstract: We use individual data for Great Britain over the period 1992-2009 to compare the probability that employed and unemployed job seekers find a job and the quality of the job they find. The job finding rate of unemployed job seekers is 50 percent higher than that of employed job seekers, and this difference remains even when controlling for differences in observable worker characteristics and job search behaviour. We present evidence suggesting that these differences in the job finding probability is caused by behavioural differences between employed and unemployed job seekers rather than differences in characteristics. Consistent with search theory, we find that employed job seekers are more selective in evaluating job offers and are therefore less likely to find a job offer acceptable; for example, they are less likely to accept low-wage and temporary jobs, or jobs that do not meet their working hour requirements.
    Keywords: on-the-job search, unemployment, job-finding rate
    JEL: J01 J20 J29 J62 J64
    Date: 2011–07
  12. By: Oberschachtsiek, Dirk; Scioch, Patrycja (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany])
    Abstract: "This paper focuses on the question of whether improving the competence of new business founders by means of coaching and training programs enhances the dura-tion of self-employment. In our analysis we focus on support activities that are pro-vided in addition to a financial subsidy and which mainly focus on providing external expertise for founders who started a business from a position of unemployment. We find that the inflow into the related schemes is strongly determined by regional pat-terns and time while individual characteristics are less important. This reflects a par-ticular regional specialization in the set-up of the promotion of self-employment. A statistical matching approach is used to control for selectivity and is performed in a way that explicitly takes into account differences across regions and over time. The results show that treatment effects tend to be insignificant in statistical and economic terms. We also find evidence that external expertise reduces the duration of self-employment." (Author's abstract, IAB-Doku) ((en))
    JEL: J68 J23
    Date: 2011–07–26
  13. By: Lopes, Margarida
    Abstract: Abstract Labor market regulation and its relations with education and training have been performing an historical trajectory which closely intertwined with developments in economic thought. Under the form of human capital theories, neo-classical economics set the bridge between labor market equilibrium and education outputs for decades. The functionalist approach behind that lasting relationship was to be challenged by economic crises and globalization, which imposed the unquestionable supremacy of the demand for skilled work. Likewise, even if only that more strict perspective of education would prevail, which fortunately is not the case, time and hazard came to undertake its denigration on the grounds of a severe loss of regulatory efficiency as globalization was setting up. In this paper we shed light on the increasing role which innovation is called to perform in labor market hetero regulation in the present phase of globalization. Depending on the institutional design throughout which R&D become embedded in nowadays societies, evidence clearly reveals how innovation strategies are to be found so asymmetrically implemented between developed and developing countries, thereby leading to the enlarging divide between the “new North” and “new South” globalization off springs.
    Keywords: Key Words: labor market regulation; education and training; innovation; knowledge.
    JEL: J08 D84 A23 I21
    Date: 2011–05–07

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