nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2011‒09‒22
nineteen papers chosen by
Erik Jonasson
Lund University

  1. Climbing the Job Ladder: New Evidence of Gender Inequity By Johnston, David W.; Lee, Wang-Sheng
  2. Fewer Jobs or Smaller Paychecks? Aggregate Crisis Impacts in Selected Middle-Income Countries By Khanna, Gaurav; Newhouse, David; Paci, Pierella
  3. Over-Qualified or Under-Skilled: A Review of Existing Literature By Glenda Quintini
  4. Right for the Job: Over-Qualified or Under-Skilled? By Glenda Quintini
  5. Wage setting in Hungary: evidence from a firm survey By Gábor Kézdi; István Kónya
  6. Accounting for changes in the Spanish wage distribution: the role of employment Composition effects By Raquel Carrasco; Juan F. Jimeno; A. Carolina Ortega
  7. Emigration and Wages: The EU Enlargement Experiment By Benjamin Elsner;
  8. The impact of the minimum wage on Spanish youth: Evidence from a natural experiment By Antón, José Ignacio; Muñoz de Bustillo, Rafael
  9. Returns to Education across Europe By Glocker, Daniela; Steiner, Viktor
  10. Reconciling Micro and Macro Labor Supply Elasticities: A Structural Perspective By Michael P. Keane; Richard Rogerson
  11. Assessing the Distributive Impact of More than Doubling the Minimum Wage: The Case of Uruguay By Fernando Borraz; Nicolás Gonzalez Pampillón
  12. The Minimum Wage and Inequality - The Effects of Education and Technology By Zsófia L. Bárány
  13. Rising Wage Inequality and Postgraduate Education By Joanne Lindley; Stephen Machin
  14. Why Are So Few Females Promoted into CEO and Vice-President Positions? Danish Empirical Evidence 1997-2007 By Smith, Nina; Smith, Valdemar; Verner, Mette
  15. Instead of Bowling Alone? Unretirement of Old-Age Pensioners By Pettersson, Jan
  16. Why Ex(Im)porters Pay More: Evidence from Matched Firm-Worker Panels By Pedro Martins; Luca David Opromolla
  17. Aggregate Hours Worked in OECD Countries: New Measurement and Implications for Business Cycles By Lee E. Ohanian; Andrea Raffo
  18. Job assignment and promotion under statistical discrimination: evidence from the early careers of lawyers By Lehmann, Jee-Yeon
  19. The Stability of Big-Five Personality Traits By Deborah Cobb-Clark; Stefanie Schurer

  1. By: Johnston, David W. (Monash University); Lee, Wang-Sheng (RMIT University)
    Abstract: An explanation for the gender wage gap is that women are less able or less willing to 'climb the job ladder.' However, the empirical evidence on gender differences in job mobility has been mixed. Focusing on a subsample of younger, university-educated workers from an Australian longitudinal survey, we find strong evidence that the dynamics of promotions and employer changes worsen women's labour market position.
    Keywords: promotions, job changes, gender, wage gap
    JEL: J16 J33 J71
    Date: 2011–09
  2. By: Khanna, Gaurav (University of Michigan); Newhouse, David (World Bank); Paci, Pierella (World Bank)
    Abstract: This paper reviews evidence from 44 middle income countries on how the recent financial crisis affected jobs and workers' income. 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 GDP was associated with a sharp decline in output per worker, particularly in the industrial sector. In several counties, hours per workers declined and hourly wages changed little. But both the magnitude and nature of the adjustments varied considerably across countries. For a given drop in GDP, 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 GDP growth. These findings have implications that go beyond the recent financial crisis as they highlight (i) the limitations of focusing policies responses on maintaining jobs and providing alterative employment or replacement income for the unemployed and (ii) the critical role of fast-track data systems, capable of monitoring ongoing labor market adjustment during economic downturns, in supporting the design of effective policy responses.
    Keywords: middle-income countries, labor markets, recession
    JEL: E24 E32 J21
    Date: 2011–09
  3. By: Glenda Quintini
    Abstract: Mismatches between workers’ competences and what is required by their job are widespread in OECD countries. Studies that use qualifications as proxies for competences suggest that as many as one in four workers could be over-qualified and as many as one in three could be under-qualified for their job. However, there is significant variation across countries and socio-demographic groups. Our meta-analysis of country studies suggests that over 35% of workers are over-qualified in Sweden compared with just 10% in Finland, with most other OECD countries located between these two extremes. There is also extensive evidence that youth are more likely to be over-qualified than their older counterparts and the same is found to be true for immigrant workers compared with a country’s nationals. On the other hand, no definitive evidence has been found of the persistence of qualification mismatch, with some papers showing that over-qualification is just a temporary phenomenon that most workers overcome through career mobility and others finding infrequent transitions between over-qualification and good job matches. Across the board, over-qualified workers are found to earn less than their equally-qualified and well-matched counterparts but more than appropriately-qualified workers doing the same job. Under-qualified workers are found to earn more than their equally-qualified and well-matched counterparts but less than appropriately-qualified workers doing the same job. Over-qualified workers are also found to be less satisfied about their job and more likely to leave their work than well-matched workers with the same qualifications….
    Date: 2011–09
  4. By: Glenda Quintini
    Abstract: Ensuring a good match between skills acquired in education and on the job and those required in the labour market is essential to make the most of investments in human capital and promote strong and inclusive growth. Unfortunately, in the OECD on average, about one in four workers are over-qualified – i.e. they possess higher qualifications than those required by their job – and just over one in five are under-qualified – i.e. they possess lower qualifications than those required by their job. In addition, some socio-demographic groups are more likely than others to be over-qualified – notably, immigrants and new labour market entrants who take some time to sort themselves into appropriate jobs – or under-qualified – notably, experienced workers lacking a formal qualification for the skills acquired on the labour market…
    Date: 2011–09
  5. By: Gábor Kézdi (Central European University, Nador u. 9, 1051 Budapest, Hungary; IEHAS and Magyar Nemzeti Bank.); István Kónya (Magyar Nemzeti Bank, 1054 Szabadság tér 8/9, 1850 Budapest and Central European University.)
    Abstract: This paper presents new evidence on the flexibility of the Hungarian labor market, with special emphasis on wages. The results are based on a new survey on wage setting among Hungarian firms. The survey is part of the Eurosystem Wage Dynamics Network (WDN), and it is a harmonized questionnaire administered in 17 countries in Europe, including almost all Euro Area countries as well as five Central and Eastern European countries. The survey results show that the Hungarian labor market, while institutionally flexible, appears to be surprisingly rigid. The survey evidence points to low turnover and possibly more rigid wages than previously thought. JEL Classification: C83, J01, J30.
    Keywords: Wage setting, survey, wage dynamics network, Hungary.
    Date: 2011–09
  6. By: Raquel Carrasco (Universidad Carlos III); Juan F. Jimeno (Banco de España); A. Carolina Ortega (Universidad Nacional de Tucumán)
    Abstract: Despite a rapid decrease in unemployment and strong GDP and employment growth, real wages barely increased in Spain over the period 1995-2006. An explanation of this lack of growth may rely on employment composition effects derived from structural changes, such as the rise in the weights of employment in the construction and services sectors, the increase in female employment participation, and the arrival of large immigration inflows. Using data from three waves of the Structure of Earnings Survey, we break down observed wage changes into those due to varying worker and job characteristics and variations of the returns to those characteristics. Quantile regressions are used to estimate wage equations at different percentiles and to construct the counterfactual wage distributions that would have been observed had individual and job characteristics remain constant over time. Our main finding is that the lack of growth of Spanish real wages over the period 1995-2006 is mainly due to the decrease of returns to characteristics, specially education and labour market experience, which is more noticeable at the upper deciles of the wage distribution, and not to changes in employment composition, which when taken over a wide set of worker and job characteristics, had positive effects on wages.
    Keywords: keyword, Wage structure, quantile regressions, composition effects
    JEL: J31 J21
    Date: 2011–09
  7. By: Benjamin Elsner (Department of Economics, Trinity College Dublin);
    Abstract: This paper studies the impact of a large emigration wave on real wages in the source country. Following EU enlargement in 2004, a large share of the workforce of the Central and Eastern Europe emigrated to Western Europe. Using data from Lithuania for the calibration of a factor demand model I show that emigration had a significant short-run impact on real wages in the source country. In particular, emigration led to a change in the wage distribution between young and old workers. The wages of young workers increased by 6%, whereas the wages of old workers decreased by around 1%. On the contrary, I find no effect on the wage distribution between workers of different education levels.
    Keywords: Emigration, EU Enlargement, European Integration, Wage Distribution
    JEL: F22 J31 O15 R23
    Date: 2011–01
  8. By: Antón, José Ignacio; Muñoz de Bustillo, Rafael
    Abstract: This work assesses the impact of the minimum wage on youth employment, unemployment and education enrolment in Spain. Using a difference-in-differences approach, we take advantage of the fact that the minimum wage for people aged 16 and 17 years old, which was approximately two thirds the level of the standard minimum wage, was raised to reach full convergence with the latter in a period of three years (from 1995 to 1998). The empirical analysis suggests that this policy intervention depressed the employment levels of the affected group, raised unemployment among them and decreased the probability of remaining in formal education.
    Keywords: minimum wage; Spain; difference-in-differences; employment
    JEL: J38 J24 J23
    Date: 2011–09
  9. By: Glocker, Daniela; Steiner, Viktor
    Abstract: Incentives to invest in higher education are affected by both the direct wage effect of human capital investments and the indirect wage effect resulting from lower unemployment risks and shorter spells in unemployment associated with higher educated. We analyse the returns to education in Austria, Germany, Italy, Sweden and the United Kingdom, countries which differ significantly regarding both their education systems and labour market structure. We estimate augmented Mincerian wage equations accounting for the effects of unemployment on individual wages using EU-SILC data. Across countries we find a high variation of the effect of education on unemployment duration. Overall, the returns to education are estimated to be the highest in the UK, and the lowest for Sweden. A wage decrease due to time spent in unemployment results in a decline in the hourly wages in Austria, Germany and Italy.
    Keywords: EU-SILC; returns to education; unemployment
    JEL: H42 I21 J31
    Date: 2011–09
  10. By: Michael P. Keane; Richard Rogerson
    Abstract: The response of aggregate labor supply to various changes in the economic environment is central to many economic issues, especially the optimal design of tax policies. This paper surveys recent work that uses structural models and micro data to evaluate the size of this response. Whereas the earlier literature on this issue often concluded that aggregate labor supply elasticities were small, recent work has identified three key reasons that the aggregate elasticity may be quite large. First, earlier estimates abstracted from several key features, including human capital accumulation, leading to estimates that are dramatically negatively biased. Second, failure to understand that aggregate labor supply adjustments can occur along both the hours per worker and employment margins has led economists to misinterpret the implications of previous estimates for aggregate labor supply. Third, structural estimation of responses along the extensive (i.e., employment) margin are typically quite large.
    JEL: E24 J22
    Date: 2011–09
  11. By: Fernando Borraz (Banco Central del Uruguay y Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República); Nicolás Gonzalez Pampillón (Universidad de Montevideo)
    Abstract: This paper analyzes the role of the sharply increases in the minimum wage after 2004 in Uruguay in the slight decrease on wage inequality. We Önd no impact of the miminum wage increases on wage inequality. This results can be explained by the low starting level of the minimum wage or lack of compliance with it. The Uruguayan experience shows that the minimum wage is not always e§ective as a redistribution instrument.
    Keywords: minimum wage, wage inequality, IV, semiparametric estimation
    JEL: J20 J31 J38
    Date: 2011–08
  12. By: Zsófia L. Bárány
    Abstract: While there has been intense debate in the empirical literature about the effects of minimum wages on inequality in the US, its general equilibrium effects have been given little attention. In order to quantify the full effects of a decreasing minimum wage on inequality, I build a dynamic general equilibrium model, based on a two-sector growth model where the supply of high-skilled workers and the direction of technical change are endogenous. I find that a permanent reduction in the minimum wage leads to an expansion of low-skilled employment, which increases the incentives to acquire skills, thus changing the composition and size of high-skilled employment. These permanent changes in the supply of labour alter the investment flow into R&D, thereby decreasing the skill-bias of technology. The reduction in the minimum wage has spill-over effects on the entire distribution, affecting upper-tail inequality. Through a calibration exercise, I find that a 30 percent reduction in the real value of the minimum wage, as in the early 1980s, accounts for 15 percent of the subsequent rise in the skill premium, 18.5 percent of the increase in overall inequality, 45 percent of the increase in inequality in the bottom half, and 7 percent of the rise in inequality at the top half of the wage distribution.
    Keywords: Minimum wage, education, technology, wage inequality
    JEL: E24 E65 J31
    Date: 2011–09
  13. By: Joanne Lindley; Stephen Machin
    Abstract: This paper considers what has hitherto been a relatively neglected subject in the wage inequality literature, albeit one that has been becoming more important over time, namely the role played by increases in postgraduate education. We document increases in the number of workers with a postgraduate qualification in the United States and Great Britain. We also show their relative wages have risen over time as compared to all workers and more specifically to graduates with only a college degree. Consideration of shifts in demand and supply shows postgraduates and college only workers to be imperfect substitutes in production and that there have been trend increases over time in the relative demand for postgraduate vis-à-vis college only workers. These relative demand shifts are significantly correlated with technical change as measured by changes in industry computer usage and investment. Moreover, the skills sets possessed by postgraduates and the occupations in which they are employed are significantly different to those of college only graduates. Over the longer term period when computers have massively diffused into workplaces, it turns out that the principal beneficiaries of this computer revolution has not been all graduates, but those more skilled workers who have a postgraduate qualification. This has been an important driver of rising wage inequality amongst graduates over time.
    Keywords: Wage inequality, postgraduate education, computers
    JEL: J24 J31
    Date: 2011–09
  14. By: Smith, Nina (University of Aarhus); Smith, Valdemar (Aarhus School of Business); Verner, Mette (Danish School of Media and Journalism)
    Abstract: In most OECD countries, only very few women succeed in reaching top executive positions. In this paper, the probability of promotion into VP and CEO positions is estimated based on employer-employee data on all Danish companies observed during the period 1997-2007. After controlling for a large number of family-related variables, including take-up history of maternity and paternity leave and proxies for 'female-friendly' companies, there is still a considerable gap in the promotion probabilities for CEO positions, but not for VP positions. Thus, the results cannot confirm recent theories on 'belief flipping' or disappearance of statistical discrimination against women who succeed getting into career track positions. The results reflect that the hiring decision and the decision to enter a top position as 'number one', i.e. CEO, in the organization is very different from the decision to hire or become VP, i.e. 'number two' or lower.
    Keywords: promotion, top executive positions, statistical discrimination
    JEL: G34 J16 J24 M51
    Date: 2011–09
  15. By: Pettersson, Jan (Department of Economics)
    Abstract: We study re-entry to the workforce of fully retired persons, so-called unretirement, and whether the decision to resume work depends primarily on social or economic reasons. Using Swedish register data for already retired individuals older than 55, we find unretirement to vary between 6 and 14 per cent under two different definitions. Our results largely support an interpretation that unretirement is a life-style decision rather than a response to a realized negative economic situation post retirement. However, economic motives seem to be more important for younger pensioners.
    Keywords: Retirement; Unretirement; Pensions; Labour supply
    JEL: J14 J26
    Date: 2011–09–09
  16. By: Pedro Martins; Luca David Opromolla
    JEL: F16 J31 F15
    Date: 2011
  17. By: Lee E. Ohanian; Andrea Raffo
    Abstract: We build a new quarterly dataset of aggregate hours worked consistent with standard NIPA constructs for 14 OECD countries over the last fifty years. We find that cyclical features of labor markets across countries differ markedly from the accepted empirical facts reported in the literature based on either just U.S. hours data, or based on cross-country employment data. We document that total hours worked in many OECD countries are about as volatile as output, that a relatively large fraction of labor market adjustment takes place along the intensive margin outside the United States, and that the volatility of total hours relative to output volatility has increased over time in almost all countries. We use these data to re-assess productivity and labor wedges during the Great Recession and during prior recessions. We find that the Great Recession in many OECD countries is a significant puzzle in that labor wedges are quite small, while those in the U.S. Great Recession - and those in previous European recessions - are much larger. These new data indicate that understanding cyclical labor fluctuations in OECD countries requires understanding why hours fluctuate so much more than previously considered, how and why labor markets changed so much in the last few years, why cyclical adjustment of hours per worker in countries with large firing costs is not even larger than observed, and why the Great Recession differs so much across countries.
    JEL: E0 F41 J22
    Date: 2011–09
  18. By: Lehmann, Jee-Yeon
    Abstract: Minorities continue to be severely underrepresented at the top levels of most occupations despite making dramatic gains in initial access to them. This fact is particularly striking in the legal profession where blacks are well represented in each associate class yet face significantly lower probabilities of making partner. To explain this divergence in the career paths of blacks and whites, I develop a dynamic model of statistical discrimination in which firms diversify their workforce by lowering the hiring standard for blacks. Despite such a diversity goal at hiring, task assignment and promotion decisions are not constrained by this policy. In this institutional setting, the model predicts that although blacks are more likely to be hired compared to observably similar whites, they are more likely to be placed in worse tasks and less likely to be promoted conditional on the same set of observables. However, conditional on task assignment, blacks and whites face similar promotion rates. I test the model's predictions using new data from the After the JD study -- a unique longitudinal survey tracking the professional lives of more than 4,000 lawyers. Compared to whites of similar credentials, blacks are much more likely to be hired into the best law firms. However, they are assigned to worse tasks and are less likely to be a partner. This black-white difference in promotion rates can be explained by quality differences in task assignments early in the associates' careers even controlling for measures of effort and career preferences. Results from this paper provide a unique explanation for the underrepresentation of minorities at the top of professional ladders by revealing how incompatible strategies in job assignment can reduce the number of minority promotions compared to the case without affirmative action.
    Keywords: Discrimination; Job assignment; promotion; lawyers; statistical discrimination; inequality
    JEL: J0 J7
    Date: 2011–08
  19. By: Deborah Cobb-Clark (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne; and Institute for the Study of Labor (IZA)); Stefanie Schurer (School of Economics and Finance, Victoria University of Wellington)
    Abstract: We use a large, nationally-representative sample of working-age adults to demonstrate that personality (as measured by the Big Five) is stable over a four-year period. Average personality changes are small and do not vary substantially across age groups. Intra-individual personality change is generally unrelated to experiencing adverse life events and is unlikely to be economically meaningful. Like other non-cognitive traits, personality can be modeled as a stable input into many economic decisions.
    Keywords: Non-cognitive skills, Big-Five personality traits, stability
    JEL: J24
    Date: 2011–08

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