nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2011‒10‒09
eighteen papers chosen by
Erik Jonasson
Lund University

  1. Enforcement of labor regulation and informality By Rita Almeida; Pedro Carneiro
  2. Sexual orientation and wage discrimination in France: the hidden side of the rainbow By LAURENT, THIERRY; MIHOUBI, FERHAT
  3. Returns to education across Europe: A comparative analysis for selected EU countries By Glocker, Daniela; Steiner, Viktor
  4. A Distributional Analysis of the Gender Wage Gap in Bangladesh By Salma Ahmed; Pushkar Maitra
  5. Racial Disparities in Job Finding and Offered Wages By Roland G. Fryer, Jr; Devah Pager; Jörg L. Spenkuch
  6. Job protection renders minimum wages less harmful By Schöb, Ronnie; Thum, Marcel
  7. On The Cyclicality of Real Wages and Wage Di¤erentials By Christopher Otrok; Panayiotis M. Pourpourides
  8. Does institutional diversity account for pay rules in Germany and Belgium? By Stephan K. S. Kampelmann; François Rycx
  9. Non-employment duration and subsequent wage losses in the Brazilian labour market By Paulo Aguiar do Monte; Hilton Martins de Brito Ramalho; Ignácio Tavares de Araújo Júnior
  10. Declining labor turnover and turbulence By Shigeru Fujita
  11. Job Polarization and Task-Biased Technological Change: Sweden, 1975–2005 By Adermon, Adrian; Gustavsson, Magnus
  12. The Fallacy of Composition Bias in the RealWage Cyclicality Puzzle By Cyrus Farsian
  13. Productivity, Wages and Marriage: The Case of Major League Baseball By Francesca Cornaglia; Naomi E. Feldman
  14. Do Foreign Experts Increase the Productivity of Domestic Firms? By Nikolaj Malchow-Møller; Jakob R. Munch; Jan Rose Skaksen
  15. Age and productivity: Sector differences? By Göbel, Christian; Zwick, Thomas
  16. Substitution Between Immigrants, Natives, and Skill Groups By George J. Borjas; Jeffrey Grogger; Gordon H. Hanson
  17. International migration and local employment: analysis of self-selection and earnings in Tajikistan By Atamanov, Aziz; Berg, Marrit van den
  18. Human Capital and Organizational Performance: Evidence from the Healthcare Sector By Ann P. Bartel; Ciaran S. Phibbs; Nancy Beaulieu; Patricia Stone

  1. By: Rita Almeida; Pedro Carneiro (Institute for Fiscal Studies and University College London)
    Abstract: <p>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.</p>
    Date: 2011–09
    Abstract: This article is the first study to present an econometric evaluation of wage discrimination based on sexual orientation in the French labor market. Having identified same-sex couples using the French Employment Survey, we estimate the wage gap related to sexual orientation in the private and public sectors, in order to analyze whether or not lesbians and gays suffer a wage penalty. The results obtained show the existence of a wage penalty for homosexual male workers, as compared with their heterosexual counterparts, in both the private and public sectors; the magnitude of this discrimination varies from about -6.5% in the private sector, to -5.5% in the public sector. In the private sector, the wage penalty suffered by gay employees is higher for skilled workers than for the unskilled, and – in both sectors – the wage penalty is higher for older workers than for younger ones. Discrimination is also lower in Paris than in the rest of France. As with many other countries, we do not find any evidence of the existence of a wage discrimination against lesbians.
    Keywords: Wage discrimination; Sexual orientation; Gay and Lesbians
    JEL: J7
    Date: 2011–09–01
  3. 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: Returns to education,unemployment,EU-SILC
    JEL: I21 J31 H42
    Date: 2011
  4. By: Salma Ahmed; Pushkar Maitra
    Abstract: This paper decomposes the gender wage gap along the entire wage distribution into an endowment effect and a discrimination effect, taking into account possible selection into full-time employment. Applying a new decomposition approach to the Bangladesh Labour Force Survey (LFS) data we find that women are paid less than men every where on the wage distribution and the gap is higher at the lower end of the distribution. Discrimination against women is the primary determinant of the wage gap. We also find that the gap has widened over the period 1999 - 2005. Our results intensify the call for better enforcement of gender based affirmative action policies.
    Keywords: Gender wage Gap, Discrimination Effect, Selection, Unconditional Quantile Regression, Bangladesh
    JEL: C21 J16 J24 J31 J71
    Date: 2011–09
  5. By: Roland G. Fryer, Jr; Devah Pager; Jörg L. Spenkuch
    Abstract: The extent to which discrimination can explain racial wage gaps is one of the most divisive subjects in the social sciences. Using a newly available dataset, this paper develops a simple empirical test which, under plausible conditions, provides a lower bound on the extent of discrimination in the labor market. Taken at face value, our estimates imply that differential treatment accounts for at least one third of the black-white wage gap. We argue that the patterns in our data are consistent with a search-matching model in which employers statistically discriminate on the basis of race when hiring unemployed workers, but learn about their marginal product over time. However, we cannot rule out other forms of discrimination.
    JEL: J01 J15 J71
    Date: 2011–09
  6. By: Schöb, Ronnie; Thum, Marcel
    Abstract: Individual labour productivities are often unobservable for firms when hiring new workers. Job protection may prevent firms ex post from using information about labour productivities. We show that a binding minimum wage introduced in the presence of job protection will lead to lower unemployment levels than predicted by the standard labour market model with heterogeneous labour and full information. --
    Keywords: Minimum wages,unemployment,hidden information,labour market regulation
    JEL: J2 J3 H5 L5
    Date: 2011
  7. By: Christopher Otrok (Department of Economics, University of Missouri-Columbia); Panayiotis M. Pourpourides
    Abstract: In this paper we investigate the cyclicality of real wages. The approach we take is to search for the largest possible common cyclical component in a statistical sense. This contrasts with the existing literature which uses observable variables to proxy for a common cycle. We do so by using a Bayesian dynamic latent factor model and longitudinal microdata. We find that the comovement of real wages can be related to a common factor that exhibits a significant but far from perfect correlation with the national unemployment rate. Our findings indicate that (i) the common factor explains, on average, no more than 9% of wage variation, (ii) the common factor accounts for 20% or less of the wage variability for 88% of the workers in the sample and (iii) roughly half of the wages move procyclically while half move countercyclically. These facts are inconsistent with claims of a strong systematic relationship between real wages and the business cycle. We show that these results are inconsistent with models of Walrasian labor markets typically used in DSGE models. We also confirm findings of previous studies in which skilled and unskilled wages exhibit roughly the same degree of cyclical variation.
    Keywords: Wages, Wage Di¤erentials, Business Cycles, Bayesian Analysis
    JEL: C11 C13 C22 C23 C81 C82 J31
    Date: 2011–09–27
  8. By: Stephan K. S. Kampelmann; François Rycx
    Abstract: This paper examines the relationship between institutions and the remuneration of different jobs by comparing the German and Belgian labour markets with respect to a typology of institutions (social representations, norms, conventions, legislation, and organisations). The observed institutional differences between the two countries lead to the hypotheses of (I) higher overall pay inequality in Germany; (II) higher pay inequalities between employees and workers in Belgium; and (III) higher (lower) impact of educational credentials (work-post tenure) on earnings in Germany. We provide survey-based empirical evidence supporting hypotheses I and III, but find no evidence for hypothesis II. These results underline the importance of institutional details: although Germany and Belgium belong to the same "variety of capitalism", we provide evidence that small institutional disparities within Continental-European capitalism account for distinct structures of pay.
    Keywords: Labour market institutions; wage inequality; rules; collective bargaining.
    JEL: J31 J51 J52 J53
    Date: 2011–09
  9. By: Paulo Aguiar do Monte; Hilton Martins de Brito Ramalho; Ignácio Tavares de Araújo Júnior
    Abstract: This paper analyses the relationship between unemployment and its respective duration on subsequent salary. Despite of being a topic of intense debate in the labour market literature, there is little empirical evidence to support this perspective in the Brazilian labour market. Drawing on data from the Monthly Employment Survey (2008, 2009) and following the methodology proposed by Tunali (1986), plus an analysis of wage differential, the findings go in the same direction of earlier studies (e.g. Keltzer, 1998; Burda and Mertens, 2001; Arulampalam 2001; Arranz et al., 2010) by highlighting that unemployment duration generates a cost to employees represented in a subsequent wage loss. In other words, it seems that workers who have recently experienced unemployment spell have disadvantages in terms of wages compared to those who remained employed throughout the period under inquiry.
    Keywords: Unemployment,Wages,Bivariate Probit
    JEL: J20 J30 J64
    Date: 2011
  10. By: Shigeru Fujita
    Abstract: The purpose of this paper is to identify possible sources of the secular decline in the aggregate job separation rate over the last three decades. The author first shows that aging of the labor force alone cannot account for the entire decline. To explore other sources, he uses a simple labor matching model with two types of workers, experienced and inexperienced, where the former type faces a risk of skill obsolescence during unemployment. When the skill depreciation occurs, the worker is required to restart his career and thus suffers a drop in earnings. The author shows that a higher skill depreciation risk results in a lower aggregate separation rate and a smaller earnings loss. The key mechanisms are that the experienced workers accept lower wages in exchange for keeping the job and that the reluctance to separate from the job produces a larger mass of low-quality matches. He also presents empirical evidence consistent with these predictions.
    Date: 2011
  11. By: Adermon, Adrian (Department of Economics); Gustavsson, Magnus (Department of Economics)
    Abstract: This paper investigates the connection between the Swedish wage profile of net job creation and Autor, Levy, and Murnane’s (2003) proposed substitutability between routine tasks and technology. We first show that between 1975 and 2005, Sweden exhibited a pattern of job polarization with expansions of the highest and lowest paid jobs compared to middle-wage jobs. We then use cross-sectional and longitudinal analyses of job-specific employment to map out the importance of routine versus nonroutine tasks for these changes. Results are consistent with substitutability between routine tasks and technology as an important explanation for the observed job polarization during the 1990s and 2000s, but not during the 1970s and 1980s. In particular, the overrepresentation of routine tasks in middle-wage jobs can potentially explain 44 percent of the growth of low-wage jobs relative to middle-wage jobs after 1990 but largely lacks explanatory power in earlier years.
    Keywords: Inequality; Job Mobility; Skill Demand; Skill-Biased Technological Change
    JEL: E24 J21 J23 J62 O33
    Date: 2011–09–21
  12. By: Cyrus Farsian
    Abstract: Composition bias in aggregate wages is often a scapegoat for the apparent unresponsiveness of wages over the cycle. Since Bils (1985) and in particular Solon et al. (1994), who find that that real wages are highly pro-cyclical a general consensus has emerged that the observed ‘mild’ cyclicality in real wages is due to composition effects which cause counter-cyclical biases because low wage jobs are the first to be destroyed during recessions (Pissarides, 2009). In this paper, it is argued that the results of Solon et al. (1994) and other papers using similar techniques cannot possibly disentangle the true effect of composition bias. This is because the assignment of fixed weights used to keep the composition of the work force constant is arbitrary and imposes a particular direction to the bias. Thus, rather than determining the bias it only serves to show the possible magnitude once having assumed the way the bias works. As in Blundell et al. (2003) we can unravel the bias into three interpretable parts. That is biases due to individual movement in and out of work, changes in the variation of hours worked and changes in the variance of wages over the cycle. The findings show that aggregate real wages become cyclically less responsive over the cycle and no evidence of ‘counter-cyclical’ composition bias.
    Keywords: Aggregate Real Wage Index; Endogenous Selection; Composition Bias; Wage Dispersion
    JEL: C34 E24 J31
    Date: 2011–10
  13. By: Francesca Cornaglia; Naomi E. Feldman
    Abstract: The effect of marriage on productivity and, consequently, wages has been long debated in economics. A primary explanation for the impact of marriage on wages has been through its impact on productivity, however, there has been no direct evidence for this. In this paper, we aim to fill this gap by directly measuring the impact of marriage on productivity using a sample of professional baseball players from 1871 - 2007. Our results show that only lower ability men see an increase in productivity, though this result is sensitive to the empirical specification and weakly significant. In addition, despite the lack of any effect on productivity, high ability married players earn roughly 16 - 20 percent more than their single counterparts. We discuss possible reasons why employers may favor married men.
    Keywords: Productivity, wage gap, marriage, and baseball
    JEL: J31 J44 J70
    Date: 2011–09
  14. By: Nikolaj Malchow-Møller (University of Southern Denmark and CEBR); Jakob R. Munch (University of Copenhagen and CEBR); Jan Rose Skaksen (Copenhagen Business School and CEBR)
    Abstract: While most countries welcome (and some even subsidise) high-skilled immigrants, there is very limited evidence of their importance for domestic firms. To guide our empirical analysis, we first set up a simple theoretical model to show how foreign experts may impact on the productivity and wages of domestic firms. Using matched worker-firm data from Denmark and a difference-in-differences matching approach, we then find that firms that hire foreign experts - defined as employees eligible for reduced taxation under the Danish "Tax scheme for foreign researchers and key employees" both become more productive (pay higher wages) and increase their exports of goods and services.
    Keywords: Foreign experts, export, immigrants, productivity, difference-in-differences matching
    JEL: F22 J24 J31 J61 L2
    Date: 2011–09
  15. By: Göbel, Christian; Zwick, Thomas
    Abstract: In most industrialised countries, the workforce is ageing rapidly. If ageing workforces affect sectors differently, the total impact of ageing will depend on the industrial structure of an economy. This paper measures the impact of changes in the age structure of establishments on productivity using representative linked employeremployee panel data. We argue that establishment age-productivity profiles might differ for various reasons. For example, the importance of physical strength and possibilities to compensate deficits in skills differ between sectors. We investigate differences in the age-productivity profiles between the (metal) manufacturing and services sectors. However, in our preferred specification that controls for several potential sources of estimation biases, we find no significant differences in the ageproductivity profiles between these sectors. --
    Keywords: Ageing workforce,age,productivity,linked employer employee data,sectors
    JEL: J11 J14 J21
    Date: 2011
  16. By: George J. Borjas; Jeffrey Grogger; Gordon H. Hanson
    Abstract: The wage impact of immigration depends crucially on the elasticity of substitution between similarly skilled immigrants and natives and the elasticity of substitution between high school dropouts and graduates. This paper revisits the estimation of these elasticities. The U.S. data indicate that equally skilled immigrants and natives are perfect substitutes. The value of the second elasticity depends on how one controls for changes in demand that have differentially affected high school dropouts and graduates. The groups are imperfect substitutes under standard trend assumptions, but even slight deviations from these assumptions can lead to an outright rejection of the CES framework.
    JEL: J61
    Date: 2011–09
  17. By: Atamanov, Aziz (Maastricht Graduate School of Governance, Maastricht University); Berg, Marrit van den (Wageningen University, The Netherlands)
    Abstract: This paper addresses the issue of self-selection of individuals in international labour migration, non-agricultural and agricultural employment in Tajikistan and its link to earnings from these activities. Unlike most empirical studies, we could attribute selection bias on unobservable characteristics to the allocation of individuals to alternative employment sectors and analyse its impact on earnings abroad and at home. We have found positive selection in migration against local non-agricultural activities and positive selection in local non-agricultural activities against local agricultural activities. This indicates that the most capable individuals with regards to unobservable characteristics choose to migrate, while the somewhat less able choose non-agricultural activities, and individuals with the worst capabilities stay in poorly-paid agricultural activities. Controlling for self-selection, labour income returns to education of migrants and individuals in non-agricultural activities are slightly lower than those from Ordinary Least Squares (OLS).
    Keywords: international migration, self-selection, earnings, Tajikistan
    JEL: J24 J31 F22 O15
    Date: 2011
  18. By: Ann P. Bartel; Ciaran S. Phibbs; Nancy Beaulieu; Patricia Stone
    Abstract: This paper contributes to the literature on the relationship between human capital and organizational performance. We use detailed longitudinal monthly data on nursing units in the Veterans Administration hospital system to identify how the human capital (general, hospital-specific and unit or team-specific) of the nursing team on the unit affects patients' outcomes. Since we use monthly, not annual, data, we are able to avoid the omitted variable bias and endogeneity bias that could result when annual data are used. Nurse staffing levels, general human capital, and unit-specific human capital have positive and significant effects on patient outcomes while the use of contract nurses, who have less specific capital than regular staff nurses, negatively impacts patient outcomes. Policies that would increase the specific human capital of the nursing staff are found to be cost-effective.
    JEL: I11 I12 J24
    Date: 2011–09

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