nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2011‒11‒14
fifteen papers chosen by
Erik Jonasson
Lund University

  1. Is there a motherhood penalty? Decomposing the family wage gap in Colombia By Luis Fernando Gamboa; Blanca Zuluaga
  2. Informal-Formal Worker Wage Gap in Turkey: Evidence From A Semi-Parametric Approach By Yusuf Soner Baskaya; Timur Hulagu
  3. Aggregate Real Wages: Macro Fluctuations and Micro Drivers By Mary C. Daly; Bart Hobijn; Theodore S. Wiles
  4. Work and Wage Dynamics around Childbirth By Ejrnæs, Mette; Kunze, Astrid
  5. Wage flexibility and local labour markets: homogeneity of the wage curve in Spain By Victor Montuenga; Roberto Bande; Melchor Fernandez
  6. Bounds on Average and Quantile Treatment Effects of Job Corps Training on Wages By Blanco, German; Flores, Carlos A.; Flores-Lagunes, Alfonso
  7. Mind the Gap: A Detailed Picture of the Immigrant-Native Earnings Gap in the UK Using Longitudinal Data Between 1978 and 2006 By Lemos, Sara
  8. Marriage with labor supply. By Nicolas Jacquemet; Jean-Marc Robin
  9. The happy artist? An empirical application of the work-preference model By Lasse Steiner; Lucian Schneider
  10. Self-employment transitions at older ages in different local labor markets By Hannu Tervo; Hannu Niittykangas
  11. Firm Performance and Wages: Evidence from Across the Corporate Hierarchy By Brian Bell; John Van Reenen
  12. The lifetime gender gap in Italy. Do the pension system countervails labour market outcomes? By Roberto Leombruni; Michele Mosca
  13. Employment trends in Indonesia over 1996-2009: Casualization of the labour market during an era of crises, reforms and recovery By Makiko Matsumoto; Sher Verick
  14. International Labour Force Participation Rates by Gender: Unit Root or Structural Breaks? By Ozdemir, Zeynel Abidin; Balcilar, Mehmet; Tansel, Aysit
  15. The impact of civil status on women’s wages in Brazil By Madalozzo, Regina; Gomes, Carolina Flores

  1. By: Luis Fernando Gamboa (Universidad del Rosario, Bogotá, Colombia); Blanca Zuluaga (Universidad Icesi, Cali, Colombia)
    Abstract: The aim of this paper is to provide an estimation and decomposition of the motherhood wage penalty in Colombia. Our empirical strategy is based on the matching procedure designed by Ñopo (2008) for the case of gender wage gaps. This is an alternative procedure to the well-known Blinder-Oaxaca decomposition method. The cross-section data of the Colombian Living Standard Survey allows us to decompose the wage gap in four components, according to the characteristics of mothers and non-mothers. We found that mothers earn, in average, 1:73% less than their counterparts without children and that this gap slightly decreases as the group includes older women. Taking into account that this procedure is sensitive to the set of variables included in the matching, several specifications are tested. The main result of the paper is obtained when considering schooling as a matching variable. Once schooling is included, the unexplained part of the gap considerably decreases and turns non significant. Thus, we do not find evidence of wage discrimination against mothers in Colombia.
    Keywords: Family wage gap; childbearing costs; female wages.
    JEL: J31 J16
    Date: 2011
  2. By: Yusuf Soner Baskaya; Timur Hulagu
    Abstract: Using individual level data from Turkstat Household Labor Force Survey for 2005-2009 period and a variety of parametric and semi-parametric techniques, we test two hypothesis regarding formal and informal labor markets: whether there is a wage gap between formal and informal workers and whether this gap is sensitive to variations in unemployment rates across regions and over time, where the formality of employment is defined with respect to registry status of the individuals to compulsory Social Security System. In line with most studies, the formal workers earn more than informal workers, as suggested by standard wage regressions, conditional on workers' observed individual characteristics. On the other hand, considering the limitations of parametric methods and possibility of misleading results due to the different distributional characteristics of formal and informal workers, we alternatively implement propensity score matching. In contrast with the recent studies for other developing countries showing that the wage gap estimates with propensity score matching is insignificant, we do find large and sizable wage gaps between formal and informal workers in Turkey. While parametric methods give similar estimates for formal-informal wage gap within gender groups, the semi-parametric estimates suggest that the observed formal-informal wage gap is larger among females compared to males. Finally, we show that although the parametric methods, such as wage curve regressions, suggest that wages of informal workers decreases and wages of formal workers do not change with higher unemployment rates, the semi-parametric methods show that these gaps are insensitive to unemployment rate variations across regions or over time. Keywords: Formal/Informal Employment, Wage Gap, Propensity Score Matching, Regional Labor Markets. JEL classification: C14; J30; J42; J60; O17
    Date: 2011–09
  3. By: Mary C. Daly (Federal Reserve Bank of San Francisco); Bart Hobijn (Federal Reserve Bank of San Francisco, and VU University Amsterdam); Theodore S. Wiles (The Analysis Group)
    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: Business cycle; labor market dynamics; wages.
    JEL: E24 J3 J6
    Date: 2011–11–08
  4. By: Ejrnæs, Mette (University of Copenhagen); Kunze, Astrid (Norwegian School of Economics (NHH))
    Abstract: This study investigates how the first childbirth affects the wage processes of highly attached women. We estimate a flexible fixed effects wage regression model extended with post-birth fixed effects by the control function approach. Register data on West Germany are used and we exploit the expansionary family policy during the late 1980s and 1990s for identification. On the return to work after the birth, mothers' wages drop by 3 to 5.7 per cent per year of leave. We find negative selection back to full-time work after birth. We discuss policy implications regarding statistical discrimination and results on family gap.
    Keywords: wages, parental leave, human capital, return to work, non-random selection
    JEL: C23 J18 J22 J24 J31
    Date: 2011–10
  5. By: Victor Montuenga; Roberto Bande; Melchor Fernandez
    Abstract: In this paper we analyse wage flexibility in Spain and its regional differences, departing from the estimation of wage curves. Specifically, and using as the main data source the Wage Structure Survey, we proceed to estimate for each Spanish region a wage equation, which explains observed wage received by workers to a group of personal and job characteristics, as well as the unemployment rate. This analysis allows to test hypothesis concerning the possible changes that may have occurred in each region in the degree of wage flexibility between the two years considered in the Survey. Also, we test the existence of regional differences in the degree of wage flexibility, which may have an important influence in the evolution of regional unemployment, given its impact on the ability of the local labour market to absorb negative shocks. The paper also allows to analyse the variability of the wage flexibility estimation with respect to the dependent variable, which could explain opposite results in the existing literature
    Date: 2011–09
  6. By: Blanco, German (Binghamton University, New York); Flores, Carlos A. (University of Miami); Flores-Lagunes, Alfonso (Binghamton University, New York)
    Abstract: We assess the effectiveness of Job Corps (JC), the largest job training program targeting disadvantaged youth in the United States, by constructing nonparametric bounds for the average and quantile treatment effects of the program on wages. Our preferred estimates point toward convincing evidence of positive effects of JC on wages both at the mean and throughout the wage distribution. For the different demographic groups analyzed, the statistically significant estimated average effects are bounded between 4.6 and 12 percent, while the quantile treatment effects are bounded between 2.7 and 11.7 percent. Furthermore, we find that the program's effect on wages varies across quantiles and groups. Blacks likely experience larger impacts in the lower part of their wage distribution, while Whites likely experience larger impacts in the upper part of their distribution. Non-Hispanic Females show statistically significant impacts in the upper part of their distribution but not in the lower part.
    Keywords: training programs, wages, bounds, quantile treatment effects
    JEL: J24 I38 C21
    Date: 2011–10
  7. By: Lemos, Sara (University of Leicester)
    Abstract: Using the underexplored, sizeable and long Lifetime Labour Market Database (LLMDB) we estimated the immigrant-native earnings gap across the entire earnings distribution, across continents of nationality and across cohorts of arrival in the UK between 1978 and 2006. We exploited the longitudinal nature of our data to separate the effect of observed and unobserved individual characteristics on earnings. This helped us to prevent selectivity biases such as cohort bias and survivor bias, which have been long standing unresolved identification issues in the literature. In keeping with the limited existing UK literature, we found a clear and wide dividing line between whites and non-whites in simple comparable models. However, in our more complete models we found a much narrower and subtler dividing line. This confirms the importance of accounting for unobservable individual characteristics, which is an important contribution of this paper. It also suggests that the labour market primarily rewards individual characteristics other than immigration status. We also found that the lowest paid immigrants, whom are disproportionately non-white, suffer an earnings penalty in the labour market, whereas higher paid immigrants, whom are disproportionately white, do not. Finally, we found less favourable earning gaps for cohorts that witnessed proportionately larger non-white and lower paid white immigration.
    Keywords: immigration, wages, earnings, earnings-gap, UK
    JEL: J24 J31 J61 J71 J82 F22
    Date: 2011–10
  8. By: Nicolas Jacquemet (Centre d'Economie de la Sorbonne); Jean-Marc Robin (Sciences Po - Département d'Economie)
    Abstract: We propose a search-matching model of the marriage market that extends Shimer and Smith (2000) to allow for labor supply. We characterize the steady-state equilibrium when exogenous divorce is the only source of risk. The estimated matching probabilities that can be derived from the steady-state flow conditions are strongly increasing in both male and female wages. We estimate that the share of marriage surplus appropriated by the man increases with his wage and that the share appropriated by the woman decreases with her wage. We find that leisure is an inferior good for men and a normal good for women.
    Keywords: Marriage search model, collective labor supply, structural estimation.
    JEL: C78 D83 J12 J22
    Date: 2011–09
  9. By: Lasse Steiner; Lucian Schneider
    Abstract: The artistic labor market is marked by several adversities, such as low wages, above-average unemployment, and constrained underemployment. Nevertheless, it attracts many young people. The number of students exceeds the available jobs by far. A potential explanation for this puzzle is that artistic work might result in exceptionally high job satisfaction, a conjecture that has been mentioned at various times in the literature. We conduct the first direct empirical investigation of artists’ job satisfaction. The analysis is based on panel data from the German Socio-Economic Panel Survey (SOEP). Artists on average are found to be considerably more satisfied with their work than non-artists, a finding that corroborates the conjectures in the literature. Differences in income, working hours, and personality cannot account for the observed difference in job satisfaction. Partially, but not fully, the higher job satisfaction can be attributed to the higher self-employment rate among artists. Suggestive evidence is found that superior “procedural” characteristics of artistic work, such as increased variety and on-the-job learning, contribute to the difference in job satisfaction.
    Keywords: Job satisfaction, artists, work-preference, cultural economics
    JEL: Z10 J24 J28 J31
    Date: 2011–10
  10. By: Hannu Tervo; Hannu Niittykangas
    Abstract: Workforce is aging in most developed countries, but still needed in productive work. Entrepreneurship at older ages is an option for many aging individuals. As existing and future generations are healthier and more able to work than previous generations, working careers can, and also have been extended. Various reasons such as age, health, gender and education, family status, accumulated savings and organizational factors can affect the choice between full-time work, bridge employment and retirement. But bridge employment as well as career choices may also be affected by many environmental factors. Regions with strong traditions of entrepreneurship may be more favourable to bridge employment in the form of self-employment than other regions. On the other hand, demand conditions may also account for possibilities to bridge employment. Regions with a low level of demand may not be favourable to self-employment at older ages. While some studies have focused on transitions into self-employment among older workers, the question of the motives and background still need clarification. This paper analyzes those who start a business at older ages in different regions in Finland. Who are they, and what is their background? What is the effect of human and financial capital on self-employment decisions? What is the role of previous experience in entrepreneurship - are those without experience from entrepreneurship different from those who have it? Is self-employment at older ages a real alternative only for serial and habitual entrepreneurs? In the analysis, we utilize a large longitudinal micro data to examine transfers of workers and those out of employment aged 55-74 into self-employment in Finland in 1998-2004. The data set represents a 7 percent sample of all Finns in 2001 of whom we have a lot of register-based and other data even from the year 1970 onward. Note: An alternative choice was : theme N: enterpreuneurship, networks and innovation
    Date: 2011–09
  11. By: Brian Bell; John Van Reenen
    Abstract: Does it matter whether you work for a successful company? And if so, does it matter who you are? To answer these questions we construct a unique panel dataset covering the pay of all CEOs, senior managers and a fully representative sample of workers for a large group of publicly-listed companies covering just under 90% of the market capitalization of the UK stock market. We show that senior management appear to have pay that is strongly associated with various measures of firm performance (such as shareholder return), while workers' pay is only weakly associated with such measures. A 10% increase in firm value is associated with an increase of 3% in CEO pay but only 0.2% in average workers' pay. Falls in firm performance are also followed by CEO pay cuts (but not as aggressively as upside rewards) and significantly more CEO firings. This is essentially a result of the responsiveness of flexible pay to performance and only senior executives have a large enough share of pay in bonuses to generate a sizeable overall effect on pay. Accounting for firm performance over the last decade can potentially explain between one-quarter and one-half of the rise in the gap between CEO pay and the pay of workers.
    Date: 2011–11
  12. By: Roberto Leombruni; Michele Mosca
    Abstract: In Italy large work career gender gaps currently exists, particularly regarding wages and activity rates. The paper investigates the issue looking at lifetime incomes, where from the one side all the career gaps tend to accumulate, from the other the redistribution acted by the pension system may mitigate the differences. Exploiting an original database on the entire work careers, we document how the pay gap constantly opens with age and how women tend to cumulate lower seniority. Both gaps have an impact in the pension calculation, so that the day after retirement gender differences are even higher. By means of a microsimulation model we show that the pension system partially countervails labour market outcomes, implying lower differences in lifetime incomes. However, due to the current transition to an actuarially neutral system, the effect is going to vanish in following decades, posing some concerns about future prospects of gender income inequality.
    Date: 2011
  13. By: Makiko Matsumoto (International Labour Office, Country Employment Policy Unit); Sher Verick (International Labour Office, Employment Analysis and Research Unit)
    Abstract: The East Asian financial crisis of 1997-1998 hit Indonesia hard, resulting in a winding back of the substantial economic and social gains made during the previous two decades. However, that crisis did not result in a large fall in employment and a commensurate rise in unemployment; rather, the economic contraction of over 13 per cent was accompanied by considerable transitions within employment,namely, from formal sector to informal and agricultural employment, particularly among women. The years following were characterized by slow growth and weak formal job creation, which has often been attributed to such factors as rigid labour regulations, especially the enactment of the Manpower Law in 2003. The economic and labour market situation in Indonesia only began to consistently improve over the last five years, notably during the boom years leading up to the global financial crisis. During this period, unemployment fell from its 2005 peak and employment increased. When the global financial crisis spread in late 2008 to emerging economies like Indonesia, it was expected that these countries would be severely affected. However, in contrast to the East Asian financial crisis, Indonesia proved to be rather resilient despite the fact that exports collapsed by almost 18 per cent from 2008 to 2009. This paper presents estimates that confirm the milder labour market impact of the most recent crisis. At the same time, the move towards more flexible and less protected forms of employment, as reflected by the increase in casualization, notably among the less-skilled, appear to be part of longer term trends. In this respect, labour market regulations, notably the Manpower Law of 2003, may have contributed to this trend, but the Law alone is not the main problem for employers in Indonesia. Overall, despite the apparent resilience to the global financial crisis, Indonesia continues to face a number of substantial challenges at both the macroeconomic and labour market level.
    Keywords: employment / unemployment / labour force participation / employment status / economic recession / economic recovery / trend / Indonesia
    Date: 2011
  14. By: Ozdemir, Zeynel Abidin (Gazi University); Balcilar, Mehmet (Eastern Mediterranean University); Tansel, Aysit (Middle East Technical University)
    Abstract: This paper examines the possibility of unit roots in the presence of endogenously determined multiple structural breaks in the total, female and male labour force participation rates (LFPR) for Australia, Canada and the USA. We extend the procedure of Gil-Alana (2008) for single structural break to the case of multiple structural breaks at endogenously determined dates using the principles suggested by Bai and Perron (1998). We use the Robinson (1994) LM test to determine the fractional order of integration. We find that endogenously determined structural breaks render the total, female and male LFPR series stationary or at best mean-reverting.
    Keywords: fractional integration, gender, labour force participation rates, structural breaks
    JEL: C22 E24 J16 J21
    Date: 2011–10
  15. By: Madalozzo, Regina; Gomes, Carolina Flores
    Date: 2011–10

This nep-lma issue is ©2011 by Erik Jonasson. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.