nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2011‒11‒28
thirteen papers chosen by
Erik Jonasson
Lund University

  1. Labor Earnings Respond Differently to Income-Tax and to Payroll-Tax Reforms By Lehmann, Etienne; Marical, François; Rioux, Laurence
  2. The Exporter Wage Premium Reconsidered Destinations, Distances and Linked Employer-Employee Data By Achim Schmillen
  3. Worktime Regulations and Spousal Labor Supply By Dominique Goux; Eric Maurin; Barbara Petrongolo
  4. The Returns to Four-Year College for Academically Marginal Students By Zimmerman, Seth
  5. The Employment Dynamics of Less Educated Men in the United States: The Role of Self-Employment By Taehyun Ahn
  6. Estimating the Effect of Immigration on Wages By Christian Dustmann; Ian Preston
  7. Welfare, Labor Supply and Heterogeneous Preferences: Evidence for Europe and the US By Bargain, Olivier; Decoster, André; Dolls, Mathias; Neumann, Dirk; Peichl, Andreas; Siegloch, Sebastian
  8. The Role of the Spouse in Early Retirement Decisions for Older Workers By Malene Kallestrup-Lamb
  9. Labor Supply and Government Programs: A Cross-Country Analysis By Andres Erosa; Luisa Fuster; Gueorgui Kambourov
  10. Work for Image and Work for Pay By Dessi, Roberta; Rustichini, Aldo
  11. Beauty and Productivity:The Case of the Ladies Professional Golf Association By Seung Chan Ahn; Young Hoon Lee
  12. Transitions to Entrepreneurship and Industry-Specific Barriers By Lofstrom, Magnus; Bates, Timothy; Parker, Simon C.
  13. HRM and Workplace Motivation: Incremental and Threshold Effects By Alex Bryson; Michael White

  1. By: Lehmann, Etienne (CREST-INSEE); Marical, François (INSEE); Rioux, Laurence (CREST-INSEE)
    Abstract: We estimate the responses of gross labor earnings with respect to marginal and average net-of-tax rates in France over the period 2003-2006. We exploit a series of reforms to the income-tax and the payroll-tax schedules that affect individuals who earn less than twice the minimum wage. Our estimate for the elasticity of gross labor earnings with respect to the marginal net-of-income-tax rate is around 0.2, while we find no response to the marginal net-of-payroll-tax rate. The elasticity with respect to the average net-of-tax rates is not significant for the income-tax schedule, while it is close to -1 for the payroll-tax schedule. A plausible explanation is the existence of significant labor supply responses to the income-tax schedule, combined with a short-term rigidity of the hourly taxable wage (i.e. the gross wage minus payroll taxes), casting doubts about public finance analysis that assumes perfect competition on the labor market. Finally, the effect of the net-of-income-tax rate seems to be driven by labor supply participation decisions, in particular those of females.
    Keywords: labor earnings, payroll tax, income tax
    JEL: H24 H31 J22 J38
    Date: 2011–11
  2. By: Achim Schmillen (Osteuropa-Institut, Regensburg (Institut for East European Studies))
    Abstract: This study uses detailed, reliable and up-to-date linked employer-employee data that take account of both the demand and the supply side of the labor market to challenge the conventional wisdom of a universal exporter wage premium. It investigates whether for German establishments an exporter wage premium can be found irrespective of export destination and the distance between export origin and destination. As expected, it finds that exporters generally pay higher wages than non-exporters. But it also shows that only exporting to certain countries is associated with a wage premium. Moreover, such a premium exists only for establishments that ship goods over a relatively long distance.
    Keywords: Exporter wage premium, Export destinations, Linked employer-employee data
    JEL: F14 J31
    Date: 2011–11
  3. By: Dominique Goux; Eric Maurin; Barbara Petrongolo
    Abstract: We investigate cross-hour effects in spousal labor supply exploiting independent variation in hours worked generated by the introduction of the short workweek in France in the late 1990s. We find that female and male employees treated by the shorter legal workweek reduce their weekly labor supply by about 2 hours, and do not experience any reduction in their monthly earnings. While wives of treated men do not seem to adjust their working time at either the intensive or extensive margins, husbands of treated wives respond by cutting their labor supply by about half an hour to one hour per week, according to specifications and samples. Further tests reveal that husbands' labor supply response did not entail the renegotiation of usual hours with employers or changes in earnings, but involved instead a reduction in (unpaid) work involvement, whether within a given day, or through an increase in the take-up rate of paid vacation and/or sick leave. These margins of adjustment are shown to have no detrimental impact on men's (current) earnings. The estimated cross-hour effects are consistent with the presence of spousal leisure complementarity for husbands, though not for wives.
    Keywords: Spousal labor supply, cross-hour effects, workweek reduction
    JEL: J22 J12 J48
    Date: 2011–11
  4. By: Zimmerman, Seth (Yale University)
    Abstract: I combine a regression discontinuity design with rich data on academic and labor market outcomes for a large sample of Florida students to identify the returns to four-year college for students on the academic margin of college admission. In addition, I develop a theoretical model of college choice with and without credit constraints that allows for intuitive tests of the importance of credit constraints within this population. I find that students who obtain high school grades just above the threshold value for admissions eligibility at a large public university in Florida are much more likely to attend a four-year college and much less likely to attend a community college than students with grades just below the threshold. The earnings returns to a year of four-year college for affected students are 8.7 percent, nearly identical to returns to college for the population of Florida high school students. Consistent with the credit constraints hypothesis, poorer students who are more likely to be credit constrained work more while in college and realize higher post-college returns.
    Keywords: returns to college, credit constraints, community college
    JEL: I20 J30
    Date: 2011–11
  5. By: Taehyun Ahn (Department of Economics, Sogang University, Seoul)
    Abstract: Using data from the 1979 National Longitudinal Survey of Youth, I construct a sample of less educated men, all of whom are observed from age 22 to age 41, and examine the employment dynamics with a particular focus on the role of self-employment. I find that ¡°ever self-employed¡± workers tend to spend less time in nonemployment after they experience self-employment. The results from my dynamic logit model confirm the positive aspects of self-employment by indicating that men who were self-employed in the previous year are less likely than those who were paid workers to be nonemployed in the next year.
    Keywords: self-employment; less educated men
    JEL: J20 J60
    Date: 2011
  6. By: Christian Dustmann (University College London and CReAM); Ian Preston (University College London and CReAM)
    Abstract: We discuss approaches to estimating the effect that immigration has on wages of native workers which assume a three-level CES model, where immigrants and natives are allowed to be imperfect substitutes within an age-education cell, and predict the wage impact based on estimates of the elasticities of substitution at each level. We argue that this approach is sensitive to immigrants downgrading at arrival, and we illustrate the possible bias in estimating the elasticity of substitution between immigrants and natives.
    Date: 2011–11
  7. By: Bargain, Olivier (University of Aix-Marseille II); Decoster, André (K.U.Leuven); Dolls, Mathias (IZA); Neumann, Dirk (IZA); Peichl, Andreas (IZA); Siegloch, Sebastian (IZA)
    Abstract: Following the report of the Stiglitz Commission, measuring and comparing well-being across countries has gained renewed interest. Yet, analyses that go beyond income and incorporate non-market dimensions of welfare most often rely on the assumption of identical preferences to avoid the difficulties related to interpersonal comparisons. In this paper, we suggest an international comparison based on individual welfare rankings that fully retain preference heterogeneity. Focusing on the consumption-leisure trade-off, we estimate discrete choice labor supply models using harmonized microdata for 11 European countries and the US. We retrieve preference heterogeneity within and across countries and analyze several welfare criteria which take into account that differences in income are partly due to differences in tastes. The resulting welfare rankings clearly depend on the normative treatment of preference heterogeneity with alternative metrics. We show that these differences can indeed be explained by estimated preference heterogeneity across countries – rather than demographic composition.
    Keywords: welfare measures, preference heterogeneity, labor supply, Beyond GDP
    JEL: C35 D63 H24 H31 J22
    Date: 2011–11
  8. By: Malene Kallestrup-Lamb (Department of Economics and Business and CREATES)
    Abstract: This paper investigates the determinants of older workers' early retirement behavior in Denmark. Instead of considering dual retirement we recognize the importance of the spouse in the early retirement decision by assessing the effect of a rich number of spousal variables. Given the grouped nature of the data we set up a semi-parametric single risk grouped duration proportional hazard model accounting for right censoring and allows for time-varying covariates, a nonparametric baseline and unobserved heterogeneity. We find that spousal characteristics do influence the retirement decision and significant gender asymmetries also exist in the effects of spouse's characteristics.Classification-JEL: J26, C41.
    Keywords: Early Retirement, Gender Asymmetries, Spousal Effects, Duration analysis, Grouped data, Unobserved heterogeneity.
    Date: 2011–11–16
  9. By: Andres Erosa; Luisa Fuster; Gueorgui Kambourov
    Abstract: There are substantial cross-country differences in labor supply late in the life cycle (age 50+). A theory of labor supply and retirement decisions is developed to quantitatively assess the role of social security, disability insurance, and taxation for understanding differences in labor supply late in the life cycle across European countries and the United States. The findings support the view that government policies can go a long way towards accounting for the low labor supply late in the life cycle in the European countries relative to the United States, with social security rules accounting for the bulk of these effects.
    Keywords: Social security, disability insurance, labor supply, heterogeneity, life cycle
    JEL: D9 E2 E6 H2 H55 J2
    Date: 2011–11–15
  10. By: Dessi, Roberta (Toulouse School of Economics (IDEI and GREMAQ), and CEPR); Rustichini, Aldo (University of Minnesota)
    Abstract: Standard economic models with complete information predict a positive, monotonic relationship between pay and performance. This prediction does not always hold in experimental tests: offering a small payment may result in lower performance than not offering any payment. We test experimentally two main explanations that have been put forward for this result: the "incomplete contract" hypothesis views the payment rule as a signal given to subjects on purpose of the activity. The "informed principal" hypothesis views it as a signal concerning the characteristics of the agent or of the task. The incomplete contract view appears to offer the best overall explanation for our results. We also find that high-powered monetary incentives do not "crowd out" intrinsic motivation, but may elicit "too much" effort when intrinsic motivation is very high.
    Date: 2011–09–10
  11. By: Seung Chan Ahn (Department of Economics, Arizona State University, Tempe, AZ 85287-9801, U.S.A & Department of Economics, Sogang University, Seoul); Young Hoon Lee (Department of Economics, Sogang University, Seoul)
    Abstract: There is much evidence that attractive looking workers earn more than average-looking workers, even after controlling for a variety of individual characteristics. The presence of such beauty premiums may influence the labor supply decisions of attractive workers. For example, if one unit of a product by an attractive worker is more rewarded than that by her less attractive coworker, the attractive worker may put more effort into improving her productivity. We examine this possibility by analyzing panel data for individual female golfers participating in the Ladies Professional Golf Association (LPGA) tour. We find that attractive golfers record lower average scores and earn more prize money than average-looking players, even when controlling for player experience and other variables related to their natural talents. This finding is consistent with the notion that physical appearance is associated with individual workers' accumulation of human capital or skills. If the human capital of attractive workers is at least partly an outcome of favoritism toward beauty, then the premium estimates obtained by many previous studies may have been downwardly biased.
    JEL: J3 J7 L8
    Date: 2011
  12. By: Lofstrom, Magnus (Public Policy Institute of California); Bates, Timothy (Wayne State University, Detroit); Parker, Simon C. (University of Western Ontario)
    Abstract: Drivers of entrepreneurial entry are investigated in this study by examining how entry into small-business ownership is shaped by industry-specific constraints. The human- and financial-capital endowments of potential entrepreneurs entering firms in various industries are shown to differ profoundly, depending on the type of venture entered. The educational credentials of highly educated potential entrepreneurs, in particular, predict avoidance of small-firm ownership in some industries as well as attraction to others. Recognizing that individuals choose an industry sector jointly with their decision to enter entrepreneurship, we find that the conventional practice of conflating different industry types in empirical analyses of transitions to entrepreneurship generates misleading findings about the determinants of entrepreneurship.
    Keywords: entrepreneurship, self-employment, capital constraints, transitions, entry barriers, business start-ups
    JEL: J24 L26 M13
    Date: 2011–11
  13. By: Alex Bryson; Michael White
    Abstract: The HRM-performance linkage often invokes an assumption of increased employee commitment to the organization and other positive effects of a motivational type. We present a theoretical framework in which motivational effects of HRM are conditional on its intensity, utilizing especially the idea of HRM 'bundling'. We then analyse the association between HRM practices and employees' organisational commitment (OC) and intrinsic job satisfaction (IJS). HRM practices have significantly positive relationships with OC and IJS chiefly at high levels of implementation, but with important distinctions between the domain-level analysis (comprising groups of practices for specific domains such as employee development) and the across-domain or HRM-system level. Findings support a threshold interpretation of the link between HRM domains and employee motivation, but at the system-level both incremental and threshold models receive some support.
    Keywords: Human resource management, high performance, organizational commitment
    JEL: J28 L23 M12 M54
    Date: 2011–11

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