nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2011‒09‒16
eighteen papers chosen by
Erik Jonasson
Lund University

  1. Cycles of Wage Discrimination By Biddle, Jeff E.; Hamermesh, Daniel S.
  2. Immigration and Distribution of Wages in Austria By Gerard Thomas Horvath
  3. Are occupations paid what they are worth? An econometric study of occupational wage inequality and productivity By François Rycx; Stephan K. S. Kampelmann
  4. Teachers' Salaries in Latin America: How Much Are They (Under or Over) Paid? By Mizala, Alejandra; Nopo, Hugo
  5. Scarring Effects of Remaining Unemployed for Long-Term Unemployed School-Leavers By Cockx, B.; Picchio, M.
  6. Evidence of Nominal Wage Rigidity and Wage Setting from Icelandic Microdata By Jósef Sigurdsson; Rannveig Sigurdardottir
  7. Taxes, Wages and Working Hours By Ericson, Peter; Flood, Lennart
  8. Does expanding health insurance beyond formal-sector workers encourage informality ? measuring the impact of Mexico's Seguro Popular By Aterido, Reyes; Hallward-Driemeier, Mary; Pages, Carmen
  9. Ladies first ? firm-level evidence on the labor impacts of the East Asian crisis By Hallward-Driemeier, Mary; Rijkers, Bob; Waxman, Andrew
  10. Wage Dynamics along the Life-Cycle of Manufacturing Plants By Emin Dinlersoz; Henry Hyatt; Sang Nguyen
  11. Labor matching: putting the pieces together By Anton A. Cheremukhin
  12. Fewer jobs or smaller paychecks ? aggregate crisis impacts in selected middle-income countries By Khanna, Gaurav; Newhouse, David; Paci, Pierella
  13. Essays on Labor Force Participation, Aging, Income and Health. By Knoef, M.G.
  14. Changing identity: Retiring from unemployment By Hetschko, Clemens; Knabe, Andreas; Schöb, Ronnie
  15. Globalization and Imperfect Labor Market Sorting By Davidson, Carl; Heyman, Fredrik; Matusz, Steven; Sjöholm, Fredrik; Zhu, Susan Chun
  16. Exports and Job Creation in Indonesia Before and After the Asian Financial Crisis By Haryo Aswicahyono; Chris Manning
  17. How Heavy Is A Job?: A Critical Survey of Job Evaluation as a Payment Device By Monojit Chatterji; Stephen Devlin
  18. On the identification of the “middle class” By Anthony B. Atkinson; Andrea Brandolini

  1. By: Biddle, Jeff E. (Michigan State University); Hamermesh, Daniel S. (University of Texas at Austin)
    Abstract: Using CPS data from 1979-2009 we examine how cyclical downturns and industry-specific demand shocks affect wage differentials between white non-Hispanic males and women, Hispanics and African-Americans. Women's and Hispanics' relative earnings are harmed by negative shocks, while the earnings disadvantage of African-Americans may drop with negative shocks. Negative shocks also appear to increase the earnings disadvantage of bad-looking workers. A theory of job search suggests two opposite-signed mechanisms that affect these wage differentials. It suggests greater absolute effects among job-movers, which is verified using the longitudinal component of the CPS.
    Keywords: women, minorities, beauty, search models
    JEL: E29 J71
    Date: 2011–08
  2. By: Gerard Thomas Horvath
    Abstract: Using detailed micro data on earnings and employment, I analyze the effects of immigration on the wage distribution of native male workers in Austria. I find that immigration has heterogeneous effects on wages, differing by type of work as well as the wage level. While there are small , but insignificant, negative effects for blue collar workers at the lower end of the wage distribution there are positive effects on wages at higher percentiles. For white collar workers positive effects occur at most percentiles. The estimated effects of immigration are relatively small in size and not significant for most workers. Overall it seems that most of potentially adverse effects of immigration on natives' wages are offset by complementarities stemming from immigration of workers with different skill levels.
    Keywords: Immigration, Labor market, Wage distribution
    JEL: J31 J61
    Date: 2011–09
  3. By: François Rycx; Stephan K. S. Kampelmann
    Abstract: Labour economists typically assume that pay differences between occupations can be explained with variations in productivity. The empirical evidence on the validity of this assumption is surprisingly thin and subject to various potential biases. The authors use matched employer-employee panel data from Belgium for the years 1999-2006 to examine occupational productivity-wage gaps. They find that occupations play distinct roles for remuneration and productivity: while the estimations indicate a significant upward-sloping occupational wage-profile, the hypothesis of a flat productivity-profile cannot be rejected. The corresponding pattern of over- and underpayment stands up to a series of robustness tests.
    Keywords: Labour productivity; wages; occupations; production function; matched employer-employee data
    JEL: J24 J31 J44
    Date: 2011–08–30
  4. By: Mizala, Alejandra (University of Chile); Nopo, Hugo (Inter-American Development Bank)
    Abstract: This paper documents the extent to which teachers are underpaid vis-à-vis workers in other professional and technical occupations in Latin America circa 2007. These labor earnings differences, attributed to observable socio-demographic and job characteristics, are assessed using a matching methodology (Ñopo, 2008). Teachers' underpayment is found to be stronger than what has been previously reported in the literature, especially among pre-school and primary teachers. Nonetheless, behind the region averages there is an important cross-country heterogeneity. Teachers' underpayment is more pronounced among males, older workers, household heads, part-timers, formal workers, those who work in the private sector, and (mostly) among those with complete tertiary education. Two amenities of the teaching profession, namely the longer job tenure and the flexible job schedules within the year, are also explored. Even after accounting for the possible compensating differentials of these two amenities, teachers' underpayment vis-à-vis that of other professional and technicians prevail.
    Keywords: wage differentials, professional labor markets, Latin America
    JEL: J31 J44 J8 O54
    Date: 2011–08
  5. By: Cockx, B.; Picchio, M. (Tilburg University, Center for Economic Research)
    Abstract: This study investigates whether and to what extent further unemployment experience for youths who are already long-term unemployed imposes a penalty on subsequent labor market outcomes. We propose a flexible method for analyzing the effect on wages aside of transitions from unemployment and employment within a multivariate duration model that controls for selection on observables and unobservables. We find that prolonging unemployment drastically decreases the chances of finding employment, but hardly affects the quality of subsequent employment. The analysis suggests that negative duration dependence in the job finding rate is induced by negative signaling and not by human capital depreciation.
    Keywords: scarring effect of unemployment duration;employment quality;wage in multivariate duration model;selectivity.
    JEL: C33 C41 J62 J64
    Date: 2011
  6. By: Jósef Sigurdsson; Rannveig Sigurdardottir
    Abstract: This paper presents new evidence about wage stickiness and the nature of wage setting. We use a unique micro dataset on monthly frequency, covering wages in the Icelandic private sector for the period from 1998-2010, and draw the following conclusions. First, the mean frequency of wage change is 10.8% per month. When weighted for heterogeneity across industries and occupations the result is almost identical; the frequency of change is 10.5% per month. Second, only 0.5% of monthly wage changes are decreases. Third, the mean duration of wage spells is 8.9 months. Onefifth of wage spells last longer than a year while other spells last for one year or shorter. Fourth, wage setting displays strong features of time-dependence: half of all wage changes are synchronised in January, but other adjustments are staggered through the year. Fifth, there is limited evidence of state-dependence: frequency of wage increases, size of increases, frequency of wage decreases and size of decreases do not correlate with inflation. However, both frequency and size of wage decreases have significant correlation with unemployment. Sixth, the hazard function for wages is mostly flat during the first months but has a large twelve-month spike. These facts align with a model of time-dependent wage contracts of fixed duration.
    Date: 2011–08
  7. By: Ericson, Peter (Sim Solution); Flood, Lennart (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: This paper presents estimates of individuals’ responses in hourly wages to changes in marginal tax rates. Estimates based on register panel data of Swedish households covering the period 1992 to 2007 produce significant but relatively small net-of-tax rate elasticities. The results vary with family type, with the largest elasticities obtained for single males and the smallest for married/cohabitant females. Despite these seemingly small elasticities, evaluation of the effects of a reduced state tax using a microsimulation model shows that the effort effect matters. The largest effect is due to changes in number of working hours yet including the effort effect results in an almost self-financed reform. As a reference to the earlier literature we also estimate taxable income elasticities. As expected, these are larger than for the hourly wage rates. However, both specifications produce significantly and positive income effects.<p>
    Keywords: income taxation; hourly wage rates; work effort; micro simulation
    JEL: D31 H24 J22 J31
    Date: 2011–08–31
  8. By: Aterido, Reyes; Hallward-Driemeier, Mary; Pages, Carmen
    Abstract: Seguro Popular was introduced in 2002 to provide health insurance to the 50 million Mexicans without Social Security. This paper tests whether the program has had unintended consequences, distorting workers'incentives to operate in the informal sector. The analysis examines the impact of Seguro Popular on disaggregated labor market decisions, taking into account that program coverage depends not only on the individual's employment status, but also that of other household members. The identification strategy relies on the variation in Seguro Popular's rollout across municipalities and time, with the difference-in-difference estimation controlling for household fixed effects. The paper finds that Seguro Popular lowers formality by 0.4-0.7 percentage points, with adjustments largely occurring within a few years of the program's introduction. Rather than encouraging exit from the formal sector, Seguro Popular is associated with a 3.1 percentage point reduction (a 20 percent decline) in the inflow of workers into formality. Income effects are also apparent, with significantly decreased flows out of unemployment and lower labor force participation. The impact is larger for those with less education, in larger households, and with someone else in the household guaranteeing Social Security coverage. However, workers pay for part of these benefits with lower wages in the informal sector.
    Keywords: Health Monitoring&Evaluation,Labor Markets,Labor Policies,Housing&Human Habitats,Population Policies
    Date: 2011–08–01
  9. By: Hallward-Driemeier, Mary; Rijkers, Bob; Waxman, Andrew
    Abstract: In a crisis, do employers place the burden of adjustment disproportionately on female employees? Relying on household and labor force data, existing studies of the distributional impact of crises have not been able to address this question. This paper uses Indonesia's census of manufacturing firms to analyze employer responses and to identify mechanisms by which gender differences in impact may arise, notably differential treatment of men and women within firms as well as gender sorting across firms that varied in their exposure to the crisis. On average, women experienced higher job losses than their male colleagues within the same firm. However, the aggregate adverse effect of such differential treatment was more than offset by women being disproportionately employed in firms hit relatively less hard by the crisis. The null hypothesis that there were no gender differences in wage adjustment is not rejected. Analyzing how employer characteristics impact labor market adjustment patterns contributes to the understanding of who is vulnerable in volatile times.
    Keywords: Labor Markets,Gender and Development,Labor Policies,Population Policies,Gender and Law
    Date: 2011–09–01
  10. By: Emin Dinlersoz; Henry Hyatt; Sang Nguyen
    Abstract: This paper explores the evolution of wages along the life-cycle of U.S. manufacturing plants. Real wages start out low for new plants, and increase along with productivity as plants survive and age. As plants experience productivity decline and approach exit, real wages fall. However, for failing plants real wages do not fall as quickly as they rise in the case of new entrants. These empirical regularities are captured in a dynamic model of labor quality and quantity choice by plants subject to adjustment costs in wages and employment. The model’s parameters are estimated to assess the magnitude of adjustment costs and the degree of asymmetry in the cost of upward versus downward adjustments.
    Date: 2011–08
  11. By: Anton A. Cheremukhin
    Abstract: The original Mortensen-Pissarides model possesses two elements that are absent from the commonly used simplified version: the job destruction margin and training costs. I find that these two elements enable a model driven by a single aggregate shock to simultaneously explain most movements involving unemployment, vacancies, job destruction, job creation, the job finding rate and wages. The job destruction margin's role in propagating aggregate shocks is to create an additional pool of unemployed at the onset of a recession. The role of training costs is to explain the simultaneous decline in vacancies and slow response of job creation.
    Keywords: Unemployment ; Job creation ; Employment ; Business cycles
    Date: 2011
  12. By: Khanna, Gaurav; Newhouse, David; Paci, Pierella
    Abstract: This paper reviews evidence from 44 middle-income countries on how the recent financial crisis affected jobs and workers'incomes. In addition to providing a rare assessment of the magnitude of the impact across several middle-income countries, the paper describes how labor markets adjusted and how the adjustments varied for different types of countries. The main finding is that the crisis affected the quality of employment more than the number of jobs. Overall, the slow-down in earning growth was considerably higher than that in employment, and the decline in gross domestic product was associated with a sharp decline in output per worker, particularly in the industrial sector. In several counties, hours per worker declined and hourly wages changed little. But both the magnitude and nature of the adjustments varied considerably across countries. For a given drop in gross domestic product, earnings declined more in countries with larger manufacturing sectors, smaller export sectors, and more stringent labor market regulations. In addition, overall employment became more sensitive to growth in gross domestic product. These findings have implications that go beyond the recent financial crisis as they highlight (i) the limitations of focusing policy responses on maintaining jobs and providing alterative employment or replacement income for the unemployed, and (ii) the critical role of fast-track data systems that are capable of monitoring ongoing labor market adjustment during economic downturns, in supporting the design of effective policy responses.
    Keywords: Labor Markets,Labor Policies,Banks&Banking Reform,Markets and Market Access,Labor Management and Relations
    Date: 2011–09–01
  13. By: Knoef, M.G. (Universiteit van Tilburg)
    Date: 2011
  14. By: Hetschko, Clemens; Knabe, Andreas; Schöb, Ronnie
    Abstract: Using data from the German Socio-Economic Panel from 1984-2009, we follow persons from their working life into their retirement years and find that, on average, employed people maintain their life satisfaction upon retirement, while long-term unemployed people report a substantial increase in their life satisfaction when they retire. These results are robust to controlling for changes in other life circumstances and suggest that retiring is associated with a switch in the relevant social norms that causes an increase in identity utility for the formerly unemployed. This is supportive of the idea that, by including identity in the utility function, results from the empirical life satisfaction literature can be reconciled with the economic theory of individual utility. --
    Keywords: life satisfaction,retirement,unemployment,identity,social norm
    JEL: I31 J26
    Date: 2011
  15. By: Davidson, Carl (Michigan State University); Heyman, Fredrik (The Research Institute of Industrial Economics); Matusz, Steven (Michigan State University); Sjöholm, Fredrik (Department of Economics, Lund University); Zhu, Susan Chun (Michigan State University)
    Abstract: This paper focuses on the ability of the labor market to correctly match heterogeneous workers to jobs within a given industry and the role that globalization plays in that process. Using matched worker-firm data from Sweden, we find strong evidence that openness improves the matching between workers and firms in industries with greater comparative advantage. This suggests that there may be significant gains from globalization that have not been identified in the past – globalization may improve the efficiency of the matching process in the labor market. These results remain unchanged after adding controls for technical change at the industry level or measures of domestic anti-competitive regulations and product market competition. Our results are also robust to alternative measures of the degree of matching, openness, or the trade status of an industry
    Keywords: Matching; Globalization; Firms; Workers; Multinational Enterprises; International Trade
    JEL: F14 F16 J20
    Date: 2011–07–15
  16. By: Haryo Aswicahyono; Chris Manning
    Abstract: Employment generation has been a challenge in Indonesia since the Asian Financial Crisis (AFC), especially in labor-intensive manufacturing. We examine the direct and indirect impact of exports on jobs, based on an analysis of input-output tables over the period 1985-2005, and compare these findings with the earlier pre-crisis period. The paper finds that fewer jobs were created through exports in manufacturing industries in after the AFC, because of slower growth in manufacturing exports and a shift away from light industry. However, there was an increase in service sector jobs, partly because of linkages with the main export industries in manufacturing and primary industry. Besides intensified competition from other lower-middle income Asian economies, the main constraints to job creation through exports appear to have been on the supply side; these include too poor infrastructure, an uncertain investment climate and tight labor regulations.
    Keywords: exports, employment creation, manufacturing growth, input-output analysis, Indonesia, Southeast Asia
    JEL: F16 J23 O14
    Date: 2011
  17. By: Monojit Chatterji; Stephen Devlin
    Abstract: This paper provides a summary of the purpose, practice and history of job evaluation in its primary role as a compensation system. It critically reviews the implicit assumptions made in the construction and application of the procedure with specific reference to PwC’s evaluation of the salary structure of the Welsh Assembly in 2004.
    Keywords: job evaluation, compensation systems
    JEL: J31 J33
    Date: 2011–09
  18. By: Anthony B. Atkinson (Nuffield College); Andrea Brandolini (Bank of Italy)
    Abstract: The paper examines the identification of the “middle class” using data from LIS and LWS. It first considers definitions based purely on income, examining the rationale for different approaches and illustrating the implications for changes over time. It argues that the concept of “class” requires the examination of other dimensions beyond income. The paper considers the role of property and, drawing on the sociological literature, of occupations.
    Keywords: class structure, income distribution
    JEL: J31 D33
    Date: 2011

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