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on Labor Markets - Supply, Demand, and Wages |
| By: | Benjamin Elsner (Institute for International Integration Studies, 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: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:iis:dispap:iiisdp379&r=lma |
| By: | David Hummels; Rasmus Jørgensen; Jakob R. Munch; Chong Xiang |
| Abstract: | We estimate how offshoring and exporting affect wages by skill type. Our data match the population of Danish workers to the universe of private-sector Danish firms, whose trade flows are broken down by product and origin and destination countries. Our data reveal new stylized facts about offshoring activities at the firm level, and allow us to both condition our identification on within-job-spell changes and construct instruments for offshoring and exporting that are time varying and uncorrelated with the wage setting of the firm. We find that within job spells, (1) offshoring tends to increase the high-skilled wage and decrease the low-skilled wage; (2) exporting tends to increase the wages of all skill types; (3) the net wage effect of trade varies substantially across workers of the same skill type; and (4) conditional on skill, the wage effect of offshoring exhibits additional variation depending on task characteristics. We then track the outcomes for workers after a job spell and find that those displaced from offshoring firms suffer greater earnings losses than other displaced workers, and that low-skilled workers suffer greater and more persistent earnings losses than high-skilled workers. |
| JEL: | F16 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17496&r=lma |
| By: | Raquel Fernández; Joyce Cheng Wong |
| Abstract: | Women born in 1935 went to college significantly less than their male counterparts and married women’s labor force participation (LFP) averaged 40% between the ages of thirty and forty. The cohort born twenty years later behaved very differently. The education gender gap was eliminated and married women’s LFP averaged 70% over the same ages. In order to evaluate the quantitative contributions of the many significant changes in the economic environment, family structure, and social norms that occurred over this period, this paper develops a dynamic life-cycle model calibrated to data relevant to the 1935 cohort. We find that the higher probability of divorce and the changes in wage structure faced by the 1955 cohort are each able to explain, in isolation, a large proportion (about 60%) of the observed changes in female LFP. After combining all economic and family structure changes, we find that a simple change in preferences towards work can account for the remaining change in LFP. To eliminate the education gender gap requires, on the other hand, for the psychic cost of obtaining higher education to change asymmetrically for women versus men. |
| JEL: | D91 E2 J12 J16 J22 Z1 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17508&r=lma |
| By: | Longhi, Simonetta; Taylor, Mark P. |
| Abstract: | We use data from the Labour Force Survey to show that employed and unemployed job seekers in Great Britain originate from different occupations and find jobs in different occupations. We find substantial differences in occupational mobility between job seekers: employed job seekers are most likely to move to occupations paying higher average wages relative to their previous occupation, while unemployed job seekers are most likely to move to lower paying occupations. Employed and unemployed job seekers exhibit different patterns of occupational mobility and, therefore, do not accept the same types of jobs. |
| Date: | 2011–10–10 |
| URL: | http://d.repec.org/n?u=RePEc:ese:iserwp:2011-25&r=lma |
| By: | Gabriela López Noria |
| Abstract: | Taking advantage of the liberalization process under NAFTA, this paper assesses the relative importance of the degree of trade openness and Foreign Direct Investment (FDI) in explaining inter-industry wage differentials for the case of Mexico. Using INEGI's National Survey of Urban Employment for the period 1994-2004, the empirical analysis is conducted on two stages. In the first stage, individual wages are regressed on worker characteristics, job and firm attributes, informality and a set of industry indicators. In the second stage, inter-industry wage differentials (derived from the coefficient estimates of the industry indicators) are regressed on trade and FDI variables. The main findings show that trade openness does not have a robust and statistically significant effect on inter-industry wage differentials, whereas for the case of FDI, a positive nonlinear relationship is found to exist. |
| Keywords: | Wage Inequality, Trade Liberalization, Foreign Direct Investment, NAFTA. |
| JEL: | F16 G31 J23 M52 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:bdm:wpaper:2011-10&r=lma |
| By: | Cervini, María; Ramos , Xavier; Silva, José I. |
| Abstract: | We study wage effects of two important elements of non-wage labour costs: firing costs and payroll taxes. We exploit a reform that introduced substantial reduction in these two provisions for unemployed workers aged less than thirty and over forty five years. Theoretical insights are gained with a matching model with heterogeneous workers, which predict a positive effect on wages for new entrant workers but an ambiguous effect for incumbent workers. Difference-in-differences estimates, which account for the endogeneity of the treatment status, are consistent with our model predictions and suggest that decreased firing costs and payroll taxes have a positive effect on wages of new entrants. We find larger effects for older than for younger workers and for men than for women. Calibration and simulation of the model corroborate such positive effect for new entrants and also show a positive wage effect for incumbents. The reduction in firing costs accounts, on average, for one third of the overall wage increase. |
| Keywords: | Dismissal costs; payroll tax; evaluation of labour market reforms; difference-in-difference; matching model; Spain |
| JEL: | D31 J31 C23 |
| Date: | 2011–10–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:34033&r=lma |
| By: | Eric A. Hanushek; Ludger Woessmann; Lei Zhang |
| Abstract: | Policy debates about the balance of vocational and general education programs focus on the school-to-work transition. But with rapid technological change, gains in youth employment from vocational education may be offset by less adaptability and thus diminished employment later in life. To test our main hypothesis that any relative labor-market advantage of vocational education decreases with age, we employ a difference-in-differences approach that compares employment rates across different ages for people with general and vocational education. Using micro data for 18 countries from the International Adult Literacy Survey, we find strong support for the existence of such a trade-off, which is most pronounced in countries emphasizing apprenticeship programs. Results are robust to accounting for ability patterns and to propensity-score matching. |
| JEL: | I20 J24 J31 J64 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17504&r=lma |
| By: | Paige Ouimet; Rebecca Zarutskie |
| Abstract: | We present evidence that young employees are an important ingredient in the creation and growth of firms. Our results suggest that young employees possess attributes or skills, such as willingness to take risk or innovativeness, which make them relatively more valuable in young, high growth, firms. Young firms disproportionately hire young employees, controlling for firm size, industry, geography and time. Young employees in young firms command higher wages than young employees in older firms and earn wages that are relatively more equal to older employees within the same firm. Moreover, young employees disproportionately join young firms that subsequently exhibit higher growth and raise venture capital financing. Finally, we show that an increase in the regional supply of young workers increases the rate of new firm creation. Our results are relevant for investors and executives in young, high growth, firms, as well as policymakers interested in fostering entrepreneurship. |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:cen:wpaper:11-31&r=lma |
| By: | Paige Ouimet; Rebecca Zarutskie |
| Abstract: | We present evidence that some firms pursue M&A activity with the objective of obtaining a larger workforce. Firms most likely to be acquired for their large labor force, firms with the largest ex ante employment, are associated with more positive post-merger employment outcomes. Moreover, we find this relation is strongest when acquiring labor outside of an M&A is likely to be most difficult, due to tight labor conditions, or most valuable, in high human capital industries. We further find that high employment target firms are associated with relatively greater post-merger wage increases and lower post-merger employee turnover. We find no evidence that the positive relation between target ex ante employment and ex post employment change is driven by target asset size, market capitalization, industry, profitability or acquirer characteristics. Our findings do not exclude the possibility that a different subset of M&A activity may be motivated to penalize managers who have tolerated over-employment. Indeed, we find evidence consistent with this disciplinary motivation when considering acquisitions of targets in declining industries. |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:cen:wpaper:11-32&r=lma |
| By: | Gete, Pedro; Porchia, Paolo |
| Abstract: | We study the optimal hiring and firing decisions of a firm under two different firing costs regulations: 1) Dual labor markets characterized by high firing costs for workers with seniority above a threshold ("permanent workers") and by low costs for "temporary workers". 2) The Single Labor Contract, a policy proposal to make firing costs increasing in seniority at the job. We focus on the option value implied by the regulations and obtain some new results: the optimal firing rule is a constant function of worker's productivity only for permanent workers. For temporary workers it varies with seniority at the job because the firm tries to keep alive the option to fire at low cost. In the Dual regulation the workers more likely to be fired are those close to become permanent. On the contrary, the Single Contract transfers that maximum firing to the new hires. Thus, fired workers are fired sooner under the Single Contract. However, if both regulations have the same average firing cost for workers who become permanent, temporary workers are less likely to be fired in the Single Contract. Moreover, this new regulation increases hiring and average employment duration. It also reduces turnover among temporary workers, but at the expense of higher turnover among permanent workers who are more often replaced by temporary workers. |
| Keywords: | Real Options; Dual Labor; Single Contract |
| JEL: | D21 J40 E24 D20 J01 D92 A10 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:34055&r=lma |
| By: | Freije, Samuel; Lopez-Acevedo, Gladys; Rodriguez-Oreggia, Eduardo |
| Abstract: | The 2008-09 economic crisis has had a long-lasting negative impact on the Mexican economy. This paper examines labor market dynamics in Mexico in light of the crisis. The labor market has been characterized in recent years by low relative unemployment, but high levels of informal jobs, low-growth, and almost stagnant real wages. In this context, the crisis destroyed a wide number of formal jobs, and even informal, increasing the unemployment rates to pre-crisis levels. Manufacturing was the sector that endured the largest job losses during the crisis and wages decreased for all sectors. The government of Mexico implemented a variety of programs to cope with the crises. However, these measures were too limited to counteract the large negative impact of the crisis on labor markets. |
| Keywords: | Labor Markets,Labor Policies,Population Policies,Labor Standards,Economic Theory&Research |
| Date: | 2011–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:5840&r=lma |
| By: | Taylor, Mark P. |
| Abstract: | We identify patterns of self-employment entry, exit and survival in a sample of EU countries and examine factors that explain individuals self-employment experiences within and between countries. We estimate a range of models, including dynamic random effects models that endogenise the initial condition. Our results highlight similarities and differences between countries, and illustrate the importance of age and previous labour market experiences in determining self-employment flows. We also find a high degree of persistence in self-employment across countries, which is most pronounced in France and Germany and least pronounced in Spain. Our results suggest that flows into self-employment are positively associated with the strictness of employment protection legislation. |
| Date: | 2011–10–10 |
| URL: | http://d.repec.org/n?u=RePEc:ese:iserwp:2011-26&r=lma |
| By: | Robert A. Pollak |
| Abstract: | In an efficient household if the spouses' time inputs are perfect substitutes, then spouses will “specialize" regardless of their preferences and the governance structure. That is, both spouses will not allocate time to both household production and the market sector. The perfect substitutes assumption implies that spouses' "unilateral" production functions (i.e., the household production function when only one spouse allocates time to home production) are closely related, satisfying a highly restrictive condition that I call "compatibility." I introduce the “correspondence assumption,” which postulates that the unilateral production functions in a newly formed household coincide with individuals’ production functions before they enter marriage. The correspondence assumption provides a plausible account of the genesis of household technology and simplifies its estimation. I introduce the "additivity assumption” which postulates that the household production function is the sum of the spouses' unilateral production functions and argue that additivity is implicit in much of the new home economics. Together, the correspondence and additivity assumptions imply that individuals’ technologies reveal the entire household technology. I show that perfect substitutes, additivity and concavity imply that the household production function is of the same form as the unilateral production functions, exhibits constant returns to scale, and depends on the spouses' total time inputs, measured in efficiency units. |
| JEL: | D13 J22 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17529&r=lma |