nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2011‒12‒19
nineteen papers chosen by
Erik Jonasson
Lund University

  1. Working in family firms: less paid but more secure? Evidence from French matched employer-employee data By Andrea Bassanini; Eve Caroli; Antoine Rebérioux; Thomas Breda
  2. Wage Dispersion and Decentralization of Wage Bargaining By Christian M. Dahl; Daniel le Maire; Jakob R. Munch
  3. The Career Costs of Children By Adda, Jerome; Dustmann, Christian; Stevens, Katrien
  4. Changes in Job Structure and Rising Wage Inequality in Urban China, 1995-2007 By Xing, Chunbing
  5. Minimum Wages, Labor Market Institutions, and Female Employment By Addison, John T.; Ozturk, Orgul Demet
  6. Wage-Tenure Profiles and Mobility By Anja Deelen
  7. Manager impartiality? Worker-firm matching and the gender wage gap By Hensvik, Lena
  8. Are homosexuals discriminated against in the hiring process? By Ahmed, Ali; Andersson, Lina; Hammarstedt, Mats
  9. Firm Market Power and the Earnings Distribution By Douglas Webber
  10. The Intensive and Extensive Margin of European Labour Supply By Hanna Kröger; Sandra Schaffner
  11. Decomposing the Sources of Earnings Inequality: Assessing the Role of Reallocation By Andersson, Fredrik; Davis, Elizabeth E.; Freedman, Matthew L.; Lane, Julia; McCall, Brian P.; Sandusky, L. Kristin
  12. Wage inequality in trade-in-tasks models By Hugo Rojas-Romagosa
  13. Work Values in Western and Eastern Europe By Benno Torgler
  14. Reforming an Insider-Outsider Labor Market: The Spanish Experience By Bentolila, Samuel; Dolado, Juan José; Jimeno, Juan F.
  15. Does Labor Diversity affect Firm Productivity? By Pierpaolo Parrotta; Dario Pozzoli; Mariola Pytlikova
  16. A counterfactual decomposition analysis of immigrants-natives earnings in Malaysia By Anees, Muhammad; Sajjad, Muhammad; Ahmed, Ishfaq
  17. Costless Discrimination and Unequal Achievements in a Labour Market Experiment By Filippin, Antonio; Guala, Francesco
  18. Efficient Learning, Job Turnover and Wage Dispersion By Fei Li
  19. The Labour Market Effects of Unemployment Compensation in Brazil By Alexander Hijzen

  1. By: Andrea Bassanini; Eve Caroli; Antoine Rebérioux; Thomas Breda
    Abstract: We study compensation packages in family and non-family firms. Using French matched employer-employee data, we first show that family firms pay on average lower wages. We find that part of this wage gap is due to low wage workers sorting into family firms and high wage workers sorting into non-family firms. However, we also find evidence that company wage policies differ according to ownership status, so that the same worker is paid differently under family and non-family firm ownership. We also find evidence that family firms are characterised by lower job insecurity, as measured by dismissal rates and by the subjective risk of dismissal perceived by workers. In addition, family firms appear to rely less on dismissals – and more on hiring reductions – than non-family firms when they downsize. We show that compensating wage differentials account for a substantial part of the inverse relationship between the family/non-family gaps in wages and job security.
    Keywords: family firms, wages, job security, compensating wage differentials, linked employer-employee data
    JEL: G34 J31 J33 J63 L26
    Date: 2011
  2. By: Christian M. Dahl (University of Southern Denmark and CREATES); Daniel le Maire (Department of Economics, University of Copenhagen); Jakob R. Munch (Department of Economics, University of Copenhagen)
    Abstract: This paper studies how decentralization of wage bargaining from sector to firm-level influences wage levels and wage dispersion. We use detailed panel data covering a period of decentralization in the Danish labor market. The decentralization process provides variation in the individual worker's wage-setting system that facilitates identification of the effects of decentralization. We find a wage premium associated with firm-level bargaining relative to sector-level bargaining, and that the return to skills is higher under the more decentralized wage-setting systems. Using quantiel regression, we also find that wages are more dispersed under firm-level bargaining compared to more centralized wage-setting systems.
    Keywords: Wage bargaining, decentralization, wage dispersion
    JEL: J31 J51 C23
    Date: 2011–11–30
  3. By: Adda, Jerome; Dustmann, Christian; Stevens, Katrien
    Abstract: This paper analyzes the life-cycle career costs associated with child rearing and decomposes their effects into unearned wages (as women drop out of the labor market), loss of human capital, and selection into more child-friendly occupations. We estimate a dynamic life-cycle model of fertility, occupational choice, and labor supply using detailed survey and administrative data for Germany for numerous birth cohorts across different regions. We use this model to analyze both the male-female wage gap as it evolves from labor market entry onward and the effect of pro-fertility policies. We show that a substantial portion of the gender wage gap is explainable by realized and expected fertility and that the long-run effect of policies encouraging fertility are considerably lower than the short-run effects typically estimated in the literature.
    Keywords: Fertility; gender wage gap; labour supply; occupational choice
    JEL: J13 J22 J31
    Date: 2011–12
  4. By: Xing, Chunbing (Beijing Normal University)
    Abstract: We use household surveys from 1995, 2002, and 2007 to examine how changes in job structure contributed to China's rising urban wage inequality, considering three job characteristics: occupation, industry, and firm ownership. The explanatory power of job structure for wage inequality increased between 1995 and 2007. Both the change in relative number of jobs (composition effect) and the change in between-job and within-job wage gaps (price effect) contributed to rising wage inequality. Price effect was the major contributor, whereas composition effect played a larger role in the 1995-2002 period than in the 2002-2007 period, and at the lower-half distribution. Between-job inequality played a major role in the first period, and within-job inequality played a major role in the second period. Our results suggest that both technological change and institutional features influence job structure and wage inequality.
    Keywords: job structure, wage inequality, urban China, decomposition
    JEL: C21 J31 O15
    Date: 2011–12
  5. By: Addison, John T. (Department of Economics, Moore School of Business, University of South Carolina, Columbia, USA); Ozturk, Orgul Demet (Department of Economics, Moore School of Business, University of South Carolina, Columbia, USA)
    Abstract: The authors investigate the employment consequences of minimum wage regulation in 16 OECD countries, 1970-2008. Their treatment is motivated by Neumark and Wascher’s (2004) seminal cross-country study. Apart from the longer time interval examined, a major departure is the authors’ focus on prime-age females, a group often neglected in the minimum wage literature. Another is their deployment of time-varying policy and institutional regressors. The average effects they report are consistent with minimum wages causing material employment losses among the target group. Their secondary finding is that minimum wage increases are more associated with (reduced) participation rates than with elevated joblessness. Further, although the authors find common ground with Neumark and Wascher as regards the role of some individual labor market institutions and policies, they do not observe the same patterns in the institutional data. Specifically, prime-age females do not exhibit stronger employment losses in countries with the least regulated markets.
    Keywords: Minimum wages, minimum wage institutions, prime-age females, disemployment, participation, unemployment, employment protection, labor standards, labor market policies, unions
    JEL: J20 J38 J48 J58 J88
    Date: 2011–12
  6. By: Anja Deelen
    Abstract: <p>The Dutch labour market is characterized by low job mobility and high average unemployment duration. This study investigates the role of wage-tenure profiles in explaining patterns of job mobility.</p><p>Based on a large administrative database, the estimates show that wage-tenure profiles in the Netherlands are relatively steep. Furthermore, industries with high returns to tenure appear to have a high share of older workers, as well as high average job tenure. This implies that steep wage-tenure profiles are related to low levels of mobility.</p>
    JEL: J31 J62
    Date: 2011–12
  7. By: Hensvik, Lena (IFAU - Institute for Labour Market Policy Evaluation)
    Abstract: This paper examines whether women benefit from working under female management using Swedish matched employer-employee panel data. I account for unobserved heterogeneity among both workers and firms potentially correlated with manager gender. The results show a substantial negative and statistically significant correlation between the proportion of female managers and the establishment’s gender wage gap. However, estimates that account for sorting on unobserved worker skills do not support that that managers favor same-sex workers in wage setting. Additional results show female-led organizations recruit more non-managerial, high-wage women but this is primarily due to (unobserved) firm attributes rather than gender-specific management practices.
    Keywords: Gender wage gap; managers; worker sorting
    JEL: J24 J31 J53
    Date: 2011–11–30
  8. By: Ahmed, Ali (Linnaeus University); Andersson, Lina (Linnaeus University); Hammarstedt, Mats (Linnaeus University)
    Abstract: This paper presents the first field experiment on sexual orientation discrimination in the hiring process in the Swedish labor market. Job applications were sent to about 4,000 employers in 10 different occupations in Sweden. Gender and sexual orientation were randomly assigned to applications. The results show that sexual orientation discrimi-nation exists in the Swedish labor market. The discrimination against gays and lesbian varies across different occupations and appears only in the private sector. The results also seem to suggest a new dimension of traditional gender roles; the gay applicant was discriminated against in typical male-dominated occupations whereas the lesbian applicant was discriminated against in typical female-dominated occupations. Thus, the results suggest that gays to some extent face the same obstacles on the labor market as heterosexual women.
    Keywords: Labor market discrimination; sexual orientation; field experiment
    JEL: C93 J15 J71
    Date: 2011–11–28
  9. By: Douglas Webber
    Abstract: Using the Longitudinal Employer Household Dynamics (LEHD) data from the United States Census Bureau, I compute firm-level measures of labor market (monopsony) power. To generate these measures, I extend the dynamic model proposed by Manning (2003) and estimate the labor supply elasticity facing each private non-farm firm in the US. While a link between monopsony power and earnings has traditionally been assumed, I provide the first direct evidence of the positive relationship between a firm\'s labor supply elasticity and the earnings of its workers. I also contrast the semistructural method with the more traditional use of concentration ratios to measure a firm\'s labor market power. In addition, I provide several alternative measures of labor market power which account for potential threats to identification such as endogenous mobility. Finally, I construct a counterfactual earnings distribution which allows the effects of firm market power to vary across the earnings distribution. I estimate the average firm\'s labor supply elasticity to be 1.08, however my findings suggest there to be significant variability in the distribution of firm market power across US firms, and that dynamic monopsony models are superior to the use of concentration ratios in evaluating a firm\'s labor market power. I find that a one-unit increase in the labor supply elasticity to the firm is associated with wage gains of between 5 and 18 percent. While nontrivial, these estimates imply that firms do not fully exercise their labor market power over their workers. Furthermore, I find that the negative earnings impact of a firm\'s market power is strongest in the lower half of the earnings distribution, and that a one standard deviation increase in firms\' labor supply elasticities reduces the variance of the earnings distribution by 9 percent.
    Date: 2011–12
  10. By: Hanna Kröger; Sandra Schaffner
    Abstract: Labour supply is determined by two factors: the participation of workers in the labour market (extensive margin), and the number of hours supplied by those working (intensive margin). Based on the European Union Labour Force Survey (EU-LFS), we analyse which margin is more decisive in determining overall labour supply in 24 Member States. The results reveal large diff erences between countries, even after controlling for composition effects in terms of socio-demographic and household characteristics. In addition to individual labour supply, our focus is on differences between EU Member States concerning household labour supply. Joint determination of the number of hours worked between spouses can be observed for dual-income couples in Austria, the Netherlands and Spain.
    Keywords: Female labour supply; household labour supply; European Union; EU-LFS
    JEL: J22 J21 J16
    Date: 2011–11
  11. By: Andersson, Fredrik (U.S. Department of the Treasury); Davis, Elizabeth E. (University of Minnesota); Freedman, Matthew L. (Cornell University); Lane, Julia (National Science Foundation); McCall, Brian P. (University of Michigan); Sandusky, L. Kristin (U.S. Census Bureau)
    Abstract: This paper exploits longitudinal employer-employee matched data from the U.S. Census Bureau to investigate the contribution of worker and firm reallocation to changes in earnings inequality within and across industries between 1992 and 2003. We find that factors that cannot be measured using standard cross-sectional data, including the entry and exit of firms and the sorting of workers across firms, are important sources of changes in earnings distributions over time. Our results also suggest that the dynamics driving changes in earnings inequality are heterogeneous across industries.
    Keywords: inequality, linked employer-employee data, sorting
    JEL: J0 J30
    Date: 2011–11
  12. By: Hugo Rojas-Romagosa
    Abstract: <p>Recent trade-in-tasks models suggest that relative low-skill wages may increase when low-skill tasks are offshored. However, using extensive numerical simulations of these models we find that wage inequality is increasing for almost all endowment combinations when we use a broad range of parameter values and model specifications. </p><p>The most common exception is when the country is relatively small and cannot affect international prices. In the case of relatively poor lowskill abundant countries, we find that offshoring is always welfare improving, but wage inequality effects are ambiguous. Finally, we find that a trade-intasks model with three skill-types can also account for wage polarization when we allow medium-skill tasks to be offshored.</p>
    JEL: F11 F16 J31
    Date: 2011–12
  13. By: Benno Torgler
    Abstract: The paper reports on work values in Europe. At the country level we find that job satisfaction is related to lower working hours, higher well-being, and a higher GDP per capita. Moving to the micro level, we turn our attention from job satisfaction to analyse empirically work centrality and work value dimensions (without exploring empirically job satisfaction) related to intrinsic and extrinsic values, power and social elements. The results indicate substantial differences between Eastern and Western Europe. Socio-demographic factors, education, income, religiosity and religious denomination are significant influences. We find additional differences between Eastern and Western Europe regarding work-leisure and work-family centrality that could be driven by institutional conditions. Furthermore, hierarchical cluster analyses report further levels of dissimilarity among European countries.
    Keywords: work values; job satisfaction; work-leisure relationship; work-family centrality; Eastern Europe; Western Europe
    JEL: P20 D10 J28 J17 J22
    Date: 2011–12
  14. By: Bentolila, Samuel (CEMFI, Madrid); Dolado, Juan José (Universidad Carlos III de Madrid); Jimeno, Juan F. (Banco de Espana)
    Abstract: This paper presents a case study on reforming a very dysfunctional labor market with a deep insider-outsider divide, namely the Spanish case. We show how a dual market, with permanent and temporary employees makes real reform much harder, and leads to purely marginal changes that do not alter the fundamental features of labor market institutions. While the Great Recession and the start of the sovereign debt crisis triggered two labor reforms, the political economy equilibrium has not allowed them to be transformational enough.
    Keywords: temporary contracts, dualism, labor market reform, political economy, Great Recession
    JEL: H29 J23 J38 J41 J64
    Date: 2011–12
  15. By: Pierpaolo Parrotta (Aarhus University and University of Lausanne); Dario Pozzoli (Aarhus University, Department of Economics and Centre for Research in Integration and Marginalization (CIM)); Mariola Pytlikova (Aarhus Univserity, Centre for Corporate Performance (CCP) and Centre for Research in Integration and Marginalization (CIM))
    Abstract: Using a matched employer-employee data-set, we analyze how workforce diversity in cultural background, education and demographic characteristics affects productivity of firms in Denmark. Implementing a structural estimation of the firms' production function (Ackerberg et al., 2006) we find that labor diversity in education significantly enhances a firm's value added. Hence, the negative effects, coming from communication and integration costs connected to a more culturally and demographically diverse workforce, seem to outweigh the positive effects coming from creativity and knowledge spillovers.
    Keywords: Labor diversity, skill complementarity, communication barriers, total factor productivity.
    JEL: C23 J24 L20
    Date: 2011–12
  16. By: Anees, Muhammad; Sajjad, Muhammad; Ahmed, Ishfaq
    Abstract: Economics of discrimination has been the topic of interest of many in the last decade or two. Human capital theory describes wage determination as a function of labour human capital and should be determined based on marginal productivity theorem of labour economics. Islamic theology also dictates paying labour well in time and equal to their productivity not based on his colour, race, gender, nationality health status and other non-economic factors. The current study analyses the immigrants-natives wage gap to find the extent of potential discrimination against the immigrants. Using employees' level data from the Enterprise Surveys by the World Bank in 2007, standard Oaxaca-Blinder technique and Machado-Mata counterfactual decomposition is applied. Findings indicate an existence of earning's differential in favour of natives or the Malaysian citizens and immigrants have a disadvantage. On the other hand, the differential increases until the middle of income distribution and the start declining. It suggests higher-income groups have a low level of discriminatory disadvantage. Labour market productivity could be increased if this differential is reduced, which motivates the employees. --
    Keywords: Labour market discrimination,Oaxaca-Blinder decomposition,Machado-Mata decomposition,quantile regression,earnings differential,enterprise survey,World Bank,Malaysia
    JEL: J J1 J3 J7
    Date: 2011
  17. By: Filippin, Antonio (University of Milan); Guala, Francesco (University of Milan)
    Abstract: We investigate the emergence of discrimination in an experiment where individuals affiliated to different groups compete for a monetary prize, submitting independent bids to an auctioneer. The auctioneer receives perfect information about the bids (i.e. there is no statistical discrimination), and she has no monetary incentive to favour the members of her own group (the bidders are symmetric). We observe nonetheless some discrimination by auctioneers, who tend to assign the prize more frequently to a member of their own group when two or more players put forward the highest bid. Out-group bidders react to this bias and reduce significantly their bids, causing an average decay of their earnings throughout the game, with cumulative effects that generate strongly unequal outcomes. Because the initial bias is costless, such mechanism can survive even in competitive market, providing a rationale for a well-known puzzle in the literature, i.e. the long-run persistence of discrimination.
    Keywords: discrimination, tournament, groups, experiment
    JEL: J71 D44 C9
    Date: 2011–12
  18. By: Fei Li (Department of Economics, University of Pennsylvania)
    Abstract: This paper studies the aggregate consequences of individual learning in the labor market. Specifically, I examine this issue in a model of directed search on the job. Once matched, a firm-worker pair gradually learns the match-specific quality, taking the history of realized production as signals. Heterogeneity in beliefs about the match quality and in the job search behavior of workers naturally occurs, resulting from a variety of individual histories. I describe the efficient learning and searching strategy and implement the efficient allocations through a market mechanism in which the labor contract depends deterministically on tenure. Consistent with the stylized facts, the model successfully predicts the tenure effect on both the job separation rate and the probability of on-the-job search, and when search frictions are small, the model generates a dispersed wage distribution with a at tail, along the lines of observations.
    Keywords: Learning, Directed Search, Block Recursive Equilibrium, Turnover, Wage Dispersion
    JEL: D83 J31
    Date: 2011–11–28
  19. By: Alexander Hijzen
    Abstract: This paper analyses the impact of unemployment insurance and severance pay on the duration of nonemployment and transitions from non-employment to formal salaried employment, informal salaried employment and self-employment. It makes use of panel data from the Pesquisa Mensal de Emgrego, a monthly survey for six large cities in Brazil, for the period 2002M3 to 2010M10. The impact of income support to job losers is identified by means of a difference-in-differences approach that exploits eligibility conditions for income support in combination with proportional hazard models that take account of the spell-based nature of the data. A key aspect of the analysis is that it attempts to assess the role of moral hazard while controlling for the role of liquidity effects. The aggregate results indicate that income support has an important impact on the duration of non-employment. This largely appears to be driven by liquidity effects, while the role of moral hazard is limited. By contrast, the analysis by destination state suggests that moral hazard effects dominate liquidity effects associated with income support. The apparent inconsistency between the two sets of results is due to the fact that the aggregate analysis only accounts for moral hazard effects that increase the duration of nonemployment, while the analysis by destination state captures both moral hazard effects in the form of reduced work incentives per se and those in the form of increased incentives to work informally during the period of benefit receipt. In practice, the latter effect may reflect the tendency for firms to employ benefit recipients informally until their benefits expire.<BR>Ce document analyse l’impact de l’assurance chômage et des indemnités de licenciement sur la durée du chômage et la transition vers un emploi salarié dans le secteur formel ou informel, ou vers un emploi indépendant. L’analyse repose sur des données de panel comprises entre M3 2003 et M10 2010 tirées de l’enquête mensuelle sur l’emploi Pesquisa Mensal de Emprego qui concerne six grande zone urbaines du Brésil. Le test de l’incidence du soutien de revenu pour les chômeurs s’appuie sur la méthode de la différence des différences, exploitant les conditions d’éligibilité aux indemnités de soutien de revenu en combinaison avec des modèles de risque proportionnels qui tiennent compte de la nature épisodique des données. Un point essentiel de l’analyse est de tenter d’évaluer le rôle de l’aléa moral tout en tenant compte du rôle des effets de liquidités. Les résultats au niveau agrégé indiquent que le soutien des revenus a un impact important sur la durée du chômage. Il semble que ce résultat soit largement dû aux effets de liquidités, le rôle de l’aléa moral étant limité. En revanche, l’analyse par type d’emploi retrouvé suggère que les effets d’aléa moral dominent les effets de liquidité associés à la garantie de revenu. Cette contradiction apparente entre les deux groupes de résultats s’explique par le fait que l’analyse au niveau agrégé ne prend en compte que les effets d’aléa moral qui augmentent la durée du chômage, alors que l’analyse par destination capture à la fois les effets d’aléa moral qui se manifestent sous la forme d’une incitation réduite à reprendre un emploi, mais aussi ceux associés à l’incitation plus forte à travailler dans le secteur informel pendant la période d’indemnisation. En pratique, ce dernier effet pourrait refléter une tendance des entreprises à employer de manière informelle les bénéficiaires de prestations jusqu’à ce que leurs droits à indemnisation cessent.
    Date: 2011–12–12

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