nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2011‒08‒22
thirteen papers chosen by
Erik Jonasson
Lund University

  1. Enforcement of Labor Regulation and Informality By Almeida, Rita K.; Carneiro, Pedro
  2. Equilibrium Wage and Employment Dynamics in a Model of Wage Posting without Commitment By Coles, Melvyn; Mortensen, Dale T.
  3. A Simple Theory of Managerial Talent, Pay Contracts and Wage Distribution By Yanhui Wu
  4. Continuous Training, Job Satisfaction and Gender: An Empirical Analysis Using German Panel Data By Claudia Burgard; Katja Görlitz
  5. Comparative Essay on Returns to Education in Palestine and Turkey By Tansel, Aysit; Daoud, Yousef
  6. The Signalling Role of Promotion in Japan By Kazuaki Okamura
  7. Housewives in a dual-earner society Who is a housewife in contemporary Norway? By Ragni Hege Kitterød and Marit Rønsen
  8. What happens to the husband’s retirement decision when the wife’s retirement incentives change? By Selin, Håkan
  9. "Employment Effects of the 2009 Minimum Wage Increase: Evidence from State Comparisons of At-Risk Workers (Revised Version)" By Saul D. Hoffman; Chenglong Ke
  10. "Wage Inequality and the Labor Market Impact of Economic Transformation: Croatia, 1970-2008" By Saul D. Hoffman; Ivo Bicanic; Oriana Vukoja
  11. Performance Pay and Information: Reducing Child Malnutrition in Urban Slums By Singh, Prakarsh
  12. Labor Markets and Labor Market Institutions in Transition Economies By Lehmann, Hartmut; Muravyev, Alexander
  13. Racial Discrimination and Competition By Ross Levine; Alexey Levkov; Yona Rubinstein

  1. By: Almeida, Rita K. (World Bank); Carneiro, Pedro (University College London)
    Abstract: Enforcement of labor regulations in the formal sector may drive workers to informality because they increase the costs of formal labor. But better compliance with mandated benefits makes it attractive to be a formal employee. We show that, in locations with frequent inspections workers pay for mandated benefits by receiving lower wages. Wage rigidity prevents downward adjustment at the bottom of the wage distribution. As a result, lower paid formal sector jobs become attractive to some informal workers, inducing them to want to move to the formal sector.
    Keywords: informality, labor regulation
    JEL: J2 J3
    Date: 2011–08
  2. By: Coles, Melvyn (University of Essex); Mortensen, Dale T. (Northwestern University)
    Abstract: A rich but tractable variant of the Burdett-Mortensen model of wage setting behavior is formulated and a dynamic market equilibrium solution to the model is defined and characterized. In the model, firms cannot commit to wage contracts. Instead, the Markov perfect equilibrium to the wage setting game, characterized by Coles (2001), is assumed. In addition, firm recruiting decisions, firm entry and exit, and transitory firm productivity shocks are incorporated into the model. Given that the cost of recruiting workers is proportional to firm employment, we establish the existence of an equilibrium solution to the model in which wages are not contingent on firm size but more productive employers always pay higher wages. Although the state space, the distribution of workers over firms, is large in the general case, it reduces to a scalar that can be interpreted as the unemployment rate in the special case of homogenous firms. Furthermore, the equilibrium is unique. As the dimension of the state space is equal to the number of firms types in general, an (approximate) equilibrium is computable.
    Keywords: wage dispersion, wage setting, rank-preserving equilibrium
    JEL: D21 D49 E23 J42 J64
    Date: 2011–08
  3. By: Yanhui Wu
    Abstract: This paper develops a simple theory of pay structures and pay levels across heterogeneous agents by bringing together optimal contracts inside the firm and competitive resource allocation in the market. The central idea is that more talented people tend to create greater value but face larger conflicts of interest in their employment relationship, and different pay contracts are optimally designed to mitigate different levels of agency problems. Sorted by their talent, people are stratified into production workers, self-employed, salaried managers with low-powered performance pay, and CEOs with high-powered equity-based pay. In a general equilibrium framework, I show that the sorting of managerial talent into pay contracts is tied to firm size. The theory highlights that high-powered incentive pay and large scales of operations cause the disproportionately large wage earnings at the top, and are the main source of income inequality. Market forces that reallocate resources from smaller to larger firms tend to increase the threshold talent for becoming a manager, increase the prevalence of high-powered incentive pay, raise the top earnings, and spread out the wage distribution.
    Keywords: Managerial Talent, Limited Liability, Provision of Incentives, Pay Structure, CEOPay, Wage Distribution
    JEL: D2 J3 L1 L2 M5
    Date: 2011–08
  4. By: Claudia Burgard; Katja Görlitz
    Abstract: Using data from the German Socio-Economic Panel (SOEP), this paper analyzes the relationship between training and job satisfaction focusing in particular on gender differences. Controlling for a variety of socio-demographic, job and firm characteristics, we find a difference between males and females in the correlation of training with job satisfaction which is positive for males but insignificant for females. This difference becomes even more pronounced when applying individual fixed effects. To gain insights into the reasons for this difference, we further investigate training characteristics by gender. We find that financial support and career-orientation of courses only seems to matter for the job satisfaction of men but not of women.
    Keywords: Training, job satisfaction, gender differences, fixed effects
    JEL: I29 J24 J28 M53
    Date: 2011
  5. By: Tansel, Aysit (Middle East Technical University); Daoud, Yousef (Birzeit University Palestine)
    Abstract: This study exposes a comparative treatment of the private returns to education in Palestine and Turkey over the period 2004-2008. Comparable data, similar definitions and same methodology are used in the estimations. The estimates are provided first for average returns to education second for returns at different levels of schooling and finally for returns by different sectors of employment. The results suggest that returns to schooling are higher for Turkey at the various levels of education for Females and males and for both years 2004 and 2008. It is believed that the relative size of the Palestinian economy the uniqueness of subjugation to military occupation contribute greatly to this result. In 2008, returns are lower than 2004 levels for all levels of education; the pattern is less obvious for Turkey across the various levels. However, the 2008 crisis seems to have influenced the more educated more severely (MA and above) in both countries. Female returns to education are higher for women than men in both countries; the gender gap has worsened in 2008, but more so for Palestine. The median ratio of male to female return is 0.55 (university) in 2004 and decreased to 0.17 (high school) in 2008 in Palestine. The corresponding figures for Turkey are 0.79 and .082 (both for high school).Finally, it was found that the selectivity corrected return estimates are lower than the OLS estimates in Palestine while they are higher than the OLS estimates in Turkey.
    Keywords: returns to education, Mincer equation, gender, Palestine, Turkey
    JEL: J16 J24 J31 J45 O31
    Date: 2011–08
  6. By: Kazuaki Okamura (Department of Economics and Social Sciences, Faculty of Humanities and Economics, Kochi University)
    Abstract: Under asymmetric information conditions regarding worker productivity between current and prospective employers, a worker's promotion signals his/her productivity. In this Paper, we tested the signalling role of promotion, using Japanese micro-level data. We found that among lower-level positions, promotion seems to signal a worker's ability, and both the business cycle and foreign-capital ratio of his/her company significantly strengthen this effects. These results suggest that external labour market conditions (i.e. asymmetric information regarding a worker's abilities between a current and prospective employer) affect the economic differences among workers in the internal labour market.
    Keywords: Strategically delayed promotion, Signalling, Wage growth, Japan.
    JEL: C23 J31 L22
    Date: 2011–08
  7. By: Ragni Hege Kitterød and Marit Rønsen (Statistics Norway)
    Abstract: The number of housewives has declined significantly in most Western countries, but there is now a renewed interest in the homemaker role in the media and public discourse. Utilising representative survey data from 2007 we examine the prevalence and characteristics of the housewife role in present Norway, a social-democratic country with high gender-equality ambitions. Irrespective of the definition used, being a housewife is clearly a minority practice in Norway. About one out of ten partnered women of prime working age either look upon themselves as housewives or work for pay less than 20 hours per week. Housewives are overrepresented among the less educated, those with health restrictions, women with many children and young children, non-Western immigrants and those with a partner with fairly high income. The partners’ aggregate income is lower in housewife couples than in other couples, though. Housewives are usually in charge of most domestic chores and report high levels of satisfaction with their division of labour and domestic economy. The analysis does not support the popular notion that today’s housewife is primarily a highly educated woman who puts her career on halt, or a rich man’s wife who spends her time on leisure activities.
    Keywords: Housewife; gender; equality; labour market; unpaid work.
    JEL: J13 J21 J22 J23
    Date: 2011–08
  8. By: Selin, Håkan (Uppsala Center for Fiscal Studies)
    Abstract: Several studies have documented a strong correlation in the timing of spouses’ retirement decisions. However, considerably less is known about the causal impact of one spouse’s retirement incentives on the retirement decision of the other spouse. Before, but not after, 2001 broad categories of Swedish local government workers in female dominated occupations were entitled to retire with full pension benefits already at the age of 63. In this paper, we utilize this reform – together with a micro data set covering the total Swedish population – to estimate the effect of a change in the wife’s incentive on the husband’s retirement behavior. We document a sharp decrease in pension benefit withdrawals among 63 year old wives in the local government sector in the years following the reform. However, we do not find any evidence of a response among husbands. This finding is at odds with some earlier results in the literature.
    Keywords: Joint retirement; retirement age; occupational pensions
    JEL: H55 J13 J21
    Date: 2011–07–11
  9. By: Saul D. Hoffman (Department of Economics,University of Delaware); Chenglong Ke (Department of Economics,University of Delaware)
    Abstract: In July, 2009, the U.S. Federal minimum wage was increased from $6.55 to $7.25. Individuals in some states were unaffected by this increase, since the state minimum wage already exceeded $7.25. We use this variation to make comparisons of the employment of “at-risk” workers with their peers across states and with workers within states who were arguably unaffected by the increase. Our data come from the 2009 CPS, four and five months before and after the increase. We find little evidence of negative employment effects for teens or less- educated adults, but some stronger evidence of a negative effect for young adults with a high school degree or less. Control for demographic characteristics reduces the size and significance of the estimated effects.
    Keywords: Minimum Wage
    JEL: J08 J21 J38
    Date: 2011
  10. By: Saul D. Hoffman (Department of Economics,University of Delaware); Ivo Bicanic (Department of Economics,University of Zagreb); Oriana Vukoja (Department of Economics,University of Zagreb)
    Abstract: In this paper, we examine wage inequality and wage differentials in Croatia from 1970 to 2008 using two long aggregate time series on the distribution of income. We focus especially on changing income inequality related to educational and vocational attainment, changing income inequality within those groups, and how these two components of inequality were affected by the economic transformation from Socialism to capitalism. We find that income inequality between groups rose moderately post-transformation, while overall inequality increased more sharply. This finding is consistent with a growing importance of individual rather than group productivity in labor market compensation, a change broadly consistent with the economic transformation of the Croatian labor market.
    Keywords: Croatia, Economics of Transition, Inequality, Gini coefficient
    JEL: J3 P2 P23
    Date: 2011
  11. By: Singh, Prakarsh
    Abstract: This paper provides evidence for the effectiveness of performance pay to government workers and how performance pay interacts with demand-side information. In an experiment covering 145 child day-care centres, I implement three separate treatments. First, I engineer an exogenous change in compensation for childcare workers from fixed wages to performance pay. Second, I only provide mothers with information without incentivizing the workers. Third, I combine the first two treatments. This helps us identify if performance pay and public information are complements or substitutes in reducing child malnutrition. I find that combining incentives to workers and information to mothers reduces weight-for-age malnutrition by 4.2% in 3 months, although individually the effects are negligible. This complementarity is shown to be driven by better mother-worker communication and the mother feeding more calorific food at home. There is also a sustained long-run positive impact of the combined treatment after the experiment concluded.
    Keywords: Performance pay; Child malnutrition; Public health; Information; Complementarity; Nutrition; Public sector; Urban slums
    JEL: J13 I12 H41 M52 L38 D12 H75 I18 I38 D61 J33
    Date: 2011–07
  12. By: Lehmann, Hartmut (University of Bologna); Muravyev, Alexander (IZA)
    Abstract: This paper summarizes the evolution of labor markets and labor market institutions and policies in the countries of Central and Eastern Europe as well as of Central Asia over the last two decades. The main focus is on the evolution of labor market institutions, which are among candidate explanations for the very diverse trajectories of labor markets in the region. We consider recent contributions that attempt to assess the effect of labor market institutions on labor market performance of TEs, including the policy-relevant issue of complementarity of institutions.
    Keywords: transition economies, unemployment, labor market institutions, labor markets
    JEL: J21 P20
    Date: 2011–08
  13. By: Ross Levine; Alexey Levkov; Yona Rubinstein
    Abstract: We provide the first assessment of whether an intensification of product market competition reduces the racial wage gap exactly where taste-based theories predict that competition will reduce labor market discrimination. in economies where employers have strong racial prejudices. We use bank deregulation across the U.S. states to identify an intensification of competition among banks, which in turn lowered entry barriers facing nonfinancial firms, especially firms that depend heavily on bank credit. Consistent with taste-based theories, we find that competition boosted blacks' relative residual wages within the banking industry and bank-dependent industries, but only in states with strong tastes for discrimination.
    Keywords: Discrimination, imperfect competition, banks, regulation
    JEL: J7 J31 D43 D3 G21 G28
    Date: 2011–08

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