nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2011‒10‒15
seventeen papers chosen by
Erik Jonasson
Lund University

  1. Returns to education in India: Some recent evidence By Tushar Agrawal
  2. Immigration and Wages: Evidence from Construction By Bernt Bratsberg; Oddbjørn Raaum
  3. Earning Inequalities Between and Within Nests: A Multilevel Modeling Approach Applied to the Case of France By Jean-Pascal Guironnet, University of Caen Basse-Normandie, France - CREM-CNRS; Matthieu Bunel, University of Caen Basse-Normandie - CREM-CNRS
  4. Flexicurity, wage dynamics and inequality over the life-cycle By Lorenzo Cappellari
  5. Aggregate real wages: macro fluctuations and micro drivers By Mary C. Daly; Bart Hobijn; Theodore S. Wiles
  6. Wage spillovers across sectors in Eastern Europe By Gaetano D’Adamo
  7. Earnings Differentials between the Public and Private Sectors in China: Exploring Changes for Urban Local Residents in the 2000s By Sylvie Demurger; Shi Li; Juan Yang
  8. The returns to education in Mexico By Eduardo Morales-Ramos
  9. Firing Regulations and Firm Size in the Developing World: Evidence from Differential Enforcement By Almeida, Rita K.; Susanli, Z. Bilgen
  10. Career Interruptions : How Do They Impact Pension Rights ?. By El Mekkaoui de Freitas, Najat; Duc, Cindy; Briard, Karine; Mage-Bertomeu, Sabine; Legendre, Berangère
  11. Does high involvement management improve worker wellbeing? By Böckerman, Petri; Bryson, Alex; Ilmakunnas, Pekka
  12. Life-cycle bias and the returns to schooling in current and lifetime earnings By Manudeep Bhuller, Magne Mogstad and Kjell G. Salvanes
  13. Tasks and Heterogeneous Human Capital By Shintaro Yamaguchi
  14. Labor markets and labor market institutions in transition economies By H. Lehmann; A. Muravyev
  15. Do production subsidies have a wage incidence in wind power? By De Silva, Dakshina G.; McComb, Robert P.; Schiller, Anita R.
  16. The Effect of Emigration on Unemployment: Evidence from the Central and Eastern European EU Member States By Pryymachenko, Yana; Fregert, Klas; Andersson, Fredrik N. G.
  17. European versus non-European immigrants on the Swedish labour market during the recession By Ekberg, Jan

  1. By: Tushar Agrawal (Indira Gandhi Institute of Development Research)
    Abstract: This paper estimates returns to education in India using a nationally representative survey. We estimate the standard Mincerian wage equation separately for rural and urban sectors. To account for the possibility of sample selection bias, Heckman two-step procedure is used. The findings indicate that returns to education increase with the level of education and differ for rural and urban residents. Private rates of returns are higher for graduation level in both the sectors. In general, the disadvantaged social groups of the society tend to earn lower wages. We find family background is an important determinant affecting the earnings of individuals. Using quantile regression method, we show the effect of education is not the same across the wage distribution. Returns differ considerably within education groups across different points of the wage distribution. Returns to education are positive at all quantiles. The results show that the returns are lower at the bottom quantiles and are higher at the upper quantiles.
    Keywords: Returns to Education; Wage Differential; Quantile Regression; India
    JEL: C13 I20 I21 J24 J31
    Date: 2011–09
  2. By: Bernt Bratsberg (Ragnar Frisch Centre for Economic Research); Oddbjørn Raaum (Ragnar Frisch Centre for Economic Research)
    Abstract: To identify relative wage impacts of immigration, we make use of certification and licensing requirements in the Norwegian construction sector that give rise to exogenous variation in immigrant employment shares across trades. Individual panel data reveal substantially lower wage growth for workers in trades with rising immigrant employment than for other workers. Selective attrition from the sector masks the causal wage impact unless accounted for by individual fixed effects. For low and semi-skilled workers, effects of new immigration are comparable for natives and older immigrant cohorts, consistent with perfect substitutability between native and immigrant labor within trade. Finally, we present evidence that immigration reduces price inflation, as price increases over the sample period were significantly lower in activities with growth in the immigrant share than in activities with no or small change in immigrant employment.
    Date: 2011–10
  3. By: Jean-Pascal Guironnet, University of Caen Basse-Normandie, France - CREM-CNRS; Matthieu Bunel, University of Caen Basse-Normandie - CREM-CNRS
    Abstract: This paper presents a simultaneously study of the impact of gender and localization inequalities on the earnings of under-graduates. Using multilevel modeling, the framework draws both individual-level (i.e., pertaining to the individual elements of groups) and aggregate-level (i.e., pertaining to the group as a whole) data under a single specification, in order to study their potential interactions. These inequalities are studied with respect to young workers who left higher education in 2004 and who had a full-time job in the private sector three years after graduation (i.e., in 2007). To take into account the process of selection for employment, our multilevel model uses the Heckman two-step procedure. Following this approach, Occupational Groups (OG) are found to capture 59.4% of the earning heterogeneity whereas Employment Area (EA) nests capture 7.6%. This 59.4% figure is explained by two phenomena: (i) OG are dominated by seniors, and (ii) OG are dominated by males with higher earnings. These group characteristics also influence gender inequalities: there is a higher wage penalty for females in (i) OG dominated by males, and (ii) OG dominated by senior workers. In contrast to the gender gap, immigrant inequalities manifest closer links to EA. Policy implications are derived from our results.
    Keywords: Multilevel Models, Earnings, Gender Inequality, Local Labor Market
    JEL: I23 R23 D31 J31
    Date: 2011–10
  4. By: Lorenzo Cappellari (DISCE, Università Cattolica)
    Abstract: We investigate the relationship between life-cycle wages and flexicurity in Denmark. We separate permanent from transitory wages and characterise flexicurity using membership of unemployment insurance funds. We find that flexicurity is associated with lower wage growth heterogeneity over the life-cycle and greater wage instability, changing the nature of wage inequality from permanent to transitory. While we are in general unable to formally test for moral hazard against adverse selection into unemployment insurance membership, robustness checks suggest that moral hazard is the relevant interpretation.
    Keywords: Unemployment insurance, wage dynamics, wage inequality, wage instability.
    JEL: J31 J65
    Date: 2011–10
  5. By: Mary C. Daly; Bart Hobijn; Theodore S. Wiles
    Abstract: Using data from the Current Population Survey from 1980 through 2010 we examine what drives variation and cyclicality in the growth rate of real wages over time. We employ a novel decomposition technique that allows us to divide the time series for median weekly earnings growth into the part associated with the wage growth of persons employed at the beginning and end of the period (the wage growth effect) and the part associated with changes in the composition of earners (the composition effect). The relative importance of these two effects varies widely over the business cycle. When the labor market is tight job switchers get high wage increases, making them account for half of the variation in median weekly earnings growth over our sample. Their wage growth, as well as that of job-stayers, is procyclical. During labor market downturns, this procyclicality is largely offset by the change in the composition of the workforce, leading aggregate real wages to be almost noncyclical. Most of this composition effect works through the part-time employment margin. Remarkably, the unemployment margin neither accounts for much of the variation nor for much of the cyclicality of median weekly earnings growth.
    Keywords: Wages ; Labor market
    Date: 2011
  6. By: Gaetano D’Adamo (Department of Economic Structure, University of Valencia, Spain)
    Abstract: This paper studies the interactions between wages in the public sector, the traded private sector and the closed sector in ten EU Transition Countries during the period 2000-2010. The theoretical literature on wage spillovers, as well as the Balassa-Samuelson hypothesis, suggest that the internationally traded sector should be the leader in wage setting, with sheltered and public sector wages adjusting. Using a Cointegrated VAR approach we show that a large heterogeneity across countries is present, and non-traded and public sector wages are often leaders in wage determination or at least affect traded sector wages in the short run. In some countries, public sector wages are weakly exogenous, with the private sectors adjusting. This result is relevant from a policy perspective since wage spillovers, leading to costs growing faster than productivity, may affect the international cost competitiveness of the traded sector and thus the catching-up process may be accompanied by accumulation of large international imbalances.
    Keywords: Cointegrated VAR, wage setting, public sector
    JEL: C32 E62 J31
    Date: 2011–09
  7. By: Sylvie Demurger (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure de Lyon); Shi Li (School of Economics and Business Administration - Beijing Normal University / Beijing); Juan Yang (School of Economics and Business Administration - Beijing Normal University / Beijing)
    Abstract: This paper analyzes the changes in public-private sector earnings differentials for local residents in urban China between 2002 and 2007. We find that earnings gaps across ownership sectors decreased during this period and that the convergence trend has been in favor of the private and semi-public sectors as opposed to the public sector. This trend is in sharp contrast to what occurred at the turn of the 21st century when employees the government and state-owned enterprises were found to enjoy a privileged situation. Differences in endowments are found to play a growing role in explaining earnings differentials. However, although it is becoming less of an issue, segmentation across ownership remains important, especially for high-wage earners.
    Keywords: labor market; earnings differentials; segmentation; enterprise ownership; China
    Date: 2011
  8. By: Eduardo Morales-Ramos
    Abstract: This paper estimates private returns to education in Mexico by means of the Mincer model. The natural ability bias that the literature reports in this type of estimations is tried to be solved using the control function method. Through this method some variables relevant to wage determination are included in the model, such as natural ability index, mother's education, household infrastructure, height and health. Results suggest that the returns to education by year of schooling in Mexico are between 8.2 % and 8.4 %. On the other hand, results by level of education suggest that more education is associated with higher returns. The highest return to education in both absolute and relative terms is provided by Postgraduate education followed by Graduate education. In general, results suggest that there is a convex relationship between education level and wage.
    Keywords: Private returns to education, natural ability bias, natural ability index, mother's education, Mexico.
    JEL: I21 J24 J31
    Date: 2011–09
  9. By: Almeida, Rita K. (World Bank); Susanli, Z. Bilgen (Isik University)
    Abstract: This paper examines how stringent de facto firing regulations affect firm size throughout the developing world. We exploit a large firm level dataset across 63 countries and within country variation in the enforcement of the labor codes in countries with very different de jure firing regulations. Our findings strongly suggest that firms facing a stricter enforcement of firing regulations are on average smaller. We interpret this finding as supportive of the fact that more stringent de facto firing regulations tend to reduce average employment. We also find robust evidence that this effect is stronger for more labor intensive manufacturing firms, especially those operating in low-technology sectors. Evidence also shows that this negative correlation does not hold in countries with a very weak rule of law.
    Keywords: firing regulations, developing countries, labor markets, enforcement, micro data
    JEL: J21 J24 K20
    Date: 2011–10
  10. By: El Mekkaoui de Freitas, Najat; Duc, Cindy; Briard, Karine; Mage-Bertomeu, Sabine; Legendre, Berangère
    Abstract: The aim of this article is to analyse the question of career interruptions and to evaluate their impact on pension retirement for French private sector workers. Using the last French survey on households' wealth (2003-2004), we first study the career set-backs for individuals born between 1937 and 1949. We highlight the new trends in professional paths. The risk of unemployment and job flexibility has sharply risen. As a consequence, some cohorts appear to be more exposed to career interruptions. Second, we determine how pension rights for French employees are affected by different career accidents. We consider unemployment, part-time employment and inactivity periods. Our results show how, by compensating for some career accidents, the French legislation allows individuals to receive, in some cases, the same level of social security pension that they would have received with a smooth professional path.
    Keywords: France; Social Security; Retirement; Pension; Part Time;
    JEL: J32 J22 D14 H55 E24 J26
    Date: 2011–07
  11. By: Böckerman, Petri; Bryson, Alex; Ilmakunnas, Pekka
    Abstract: Employees exposed to high involvement management (HIM) practices have higher subjective wellbeing, fewer accidents but more short absence spells than “like” employees not exposed to HIM. These results are robust to extensive work, wage and sickness absence history controls. We present a model which highlights the possibility of higher short-term absence in the presence of HIM because it is more demanding than standard production and because multi-skilled HIM workers cover for one another’s short absences thus reducing the cost of replacement labour faced by the employer. We find direct empirical support for the assumptions in the model. Consistent with the model, because long-term absences entail replacement labour costs for HIM and non-HIM employers alike, long-term absences are independent of exposure to HIM.
    Keywords: health; subjective wellbeing; sickness absence; job satisfaction; high involvement management; high performance work system
    JEL: M53 J81 J28 M54 M52 I10
    Date: 2011–10–03
  12. By: Manudeep Bhuller, Magne Mogstad and Kjell G. Salvanes (Statistics Norway)
    Abstract: This paper uses a unique data set with nearly career-long earnings histories to provide evidence on the returns to schooling in current and lifetime earnings. We use these results to assess the importance of life-cycle bias in earnings regressions using current earnings as a proxy for lifetime earnings. To account for the endogeneity of schooling, we apply three commonly used identification strategies. Our estimates demonstrate a strong life-cycle bias, often exceeding the bias from assuming that schooling is exogenous. We further explore the problems caused by life-cycle bias in research on the economic returns to schooling, and discuss possible remedies.
    Keywords: Returns to schooling; life-cycle bias; lifetime earnings; current earnings; errors-in-variables model
    JEL: J31
    Date: 2011–10
  13. By: Shintaro Yamaguchi
    Abstract: This paper proposes a new approach to modeling heterogeneous human capital using task data from the Dictionary of Occupational Titles. The key feature of the model is that it departs from the Roy model, which treats occupations as distinct categories, and conceives of occupations as bundles of tasks. The advantages of this approach are that it can accommodate many occupations without computational burden and provide a clear interpretation as to how and why skills are differently rewarded across occupations. The model is structurally estimated by the Kalman filter using the NLSY79.
    Keywords: Roy model, task approach, human capital, occupational choice, Kalman filter, structural estimation.
    JEL: J24 J32
    Date: 2011–09
  14. By: H. Lehmann; A. Muravyev
    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.
    JEL: J21 P20
    Date: 2011–09
  15. By: De Silva, Dakshina G.; McComb, Robert P.; Schiller, Anita R.
    Abstract: Employment in electricity generation from renewable resources has expanded rapidly in the US and in Texas during the last decade. Availability of the Production Tax Credit has been an important driver of this growth. Using a fully-disclosed establishment-level employment and payroll data set for Texas at the NAICS-6 level, we analyze the differences in average wages between firms generating electricity from fossil fuels and those generating electricity from wind power. We compare relative average wages before and after the rapid expansion of wind power development that followed the ex ante renewal of the Production Tax Credit (PTC) in 2006. Using QCEW data, our main finding using both least squares and the nonparametric estimation technique proposed by Racine and Li (2004), is that average payrolls for wind power generators increased relative to fossil fuel-based electricity generators after 2006. As far as we know, this is the first paper that attempts to estimate the indirect impact of the PTC on wind energy industry wages.
    Keywords: Wages; Production Tax Credits; Wind energy; Clean Energy
    JEL: J31 Q28 Q20
    Date: 2011–10–03
  16. By: Pryymachenko, Yana (Department of Economics, Lund University); Fregert, Klas (Department of Economics, Lund University); Andersson, Fredrik N. G. (Department of Economics, Lund University)
    Abstract: This paper contributes to the scant empirical literature on the effects of emigration on source countries’ labour markets. Using a novel dataset by Brücker et al. (2009), we investigate whether emigration from the Central and Eastern European (CEE) members of European Union (EU) during the period 2000 to 2007 has contributed to the decline in unemployment observed in these countries. We find that along with structural changes that occurred in the CEE economies during the last decade, emigration indeed had a strong negative effect on unemployment in these countries. A 10 per cent increase in emigration rate leads to around 5 per cent decrease in unemployment rate. Given the minor effect of immigration on host countries’ unemployment found in the literature (including the studies examining the East-West European migration), this paper’s results indicate that the opening up of labour markets following the enlargement of EU in 2004 mainly has had positive effects.
    Keywords: emigration; unemployment; Central and Eastern Europe
    JEL: J21 J31 J61
    Date: 2011–10–06
  17. By: Ekberg, Jan (Centre for Labour Market Policy Research (CAFO))
    Abstract: Since the end of 2008 there is an economic recession in the world inducing a contraction in the Swedish economy. The recession has to a great extent been a recession in the manufactory sector. During the same period the number employed in the Swedish manufactory sector decreased by about 14 percent. A recovery started in 2010. The study shows that while immigrants born in Europe have not suffered more than natives since late 2008, immigrants born outside Europe have experienced a sharp deterioration in labour market situation compared to natives. The study presents some explanations. From late 2010 the situation has stabilized. There is also a comparison with the labour market situation for immigrants during the recession in the beginning of 1990s. The employment gap between natives and immigrants born outside Europe has not widened as much in the recession 2008 – 2010 as it did during the early 1990s.
    Keywords: Recession; Immigration
    JEL: J01
    Date: 2011–05–01

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