nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2012‒01‒10
nineteen papers chosen by
Erik Jonasson
Lund University

  1. The Wage Premium of Globalization: Evidence from European Mergers and Acquisitions By Oberhofer, Harald; Stöckl, Matthias; Winner, Hannes
  2. The Effects of Social Security Taxes and Minimum Wages on Employment: Evidence from Turkey By Papps, Kerry L.
  3. Employer Attitudes, the Marginal Employer and the Ethnic Wage Gap By Carlsson, Magnus; Rooth, Dan-Olof
  4. Wage effects of on-the-job training. A meta-analysis By Haelermans Carla; Borghans Lex
  5. Detecting Wage Under-reporting Using a Double Hurdle Model By Elek, Peter; Kollo, Janos; Reizer, Balázs; Szabó, Péter A.
  6. Tax Evasion, Minimum Wage Non-Compliance and Informality By Basu, Arnab K.; Chau, Nancy; Siddique, Zahra
  7. Gender Differences in Rates of Job Dismissal: Why Are Men More Likely to Lose Their Jobs? By Wilkins, Roger; Wooden, Mark
  8. Retirement and Home Production: A Regression Discontinuity Approach By Stancanelli, Elena G. F.; van Soest, Arthur
  9. Severance pay compliance in Indonesia By Brusentsev, Vera; Newhouse, David; Vroman, Wayne
  10. The Effects of California's Paid Family Leave Program on Mothers' Leave-Taking and Subsequent Labor Market Outcomes By Rossin-Slater, Maya; Ruhm, Christopher J.; Waldfogel, Jane
  11. Educational Upgrading and Returns to Skills in Latin America: Evidence from a Supply-Demand Framework, 1990-2010 By Gasparini, Leonardo; Galiani, Sebastián; Cruces, Guillermo; Acosta, Pablo A.
  12. Gender wage gaps within a public sector: Evidence from personnel data By S Bradley; Colin Green; J Mangan
  13. Flexible contracts and human capital investments By Fouarge Didier; Grip Andries de; Smits Wendy; Vries Robert de
  14. Labor Mobility across the Formal/Informal Divide in Turkey: Evidence from Individual Level Data By Aysit Tansel; Elif Oznur Kan
  15. Labour Contracts and Performance of Cameroonian Firms By Fomba Kamga, Benjamin
  16. The effect of the l’Aquila earthquake on labour market outcomes By Giorgio Di Pietro; Toni Mora
  17. Does Retiree Health Insurance Encourage Early Retirement? By Steven Nyce; Sylvester Schieber; John B. Shoven; Sita Slavov; David A. Wise
  18. Excess Worker Turnover and Fixed-Term Contracts: Causal Evidence in a Two-Tier System By Centeno, Mario; Novo, Alvaro A.
  19. Trust-Based Working Time and Organizational Performance: Evidence from German Establishment-Level Panel Data By Michael Beckmann; Istvàn Hegedüs

  1. By: Oberhofer, Harald (University of Salzburg); Stöckl, Matthias (University of Salzburg); Winner, Hannes (University of Salzburg)
    Abstract: We provide evidence on the impact of globalization on labor market outcomes analyzing pay differences between foreign-acquired and domestically-owned firms. For this purpose, we use firm level data from 16 European countries over the time period 1999 to 2006. Applying propensity score matching techniques we estimate positive wage premia of cross-boarder merger and acquisitions (M&As), suggesting that foreign acquired firms exhibit higher short-run (post-acquisition) wages than their domestic counterparts. The observed wage disparities are most pronounced for low paying firms (with average wages below the median). Finally, we find systematic wage premia in Western European countries, but not so in Eastern Europe.
    Keywords: Globalization; mergers and acquisitions; wage effects; propensity score matching
    JEL: C21 F15 G34 J31
    Date: 2012–01–03
  2. By: Papps, Kerry L. (University of Bath)
    Abstract: Worker-level panel data are used to analyse the separate employment effects of increases in the social security taxes paid by employers and increases in the minimum wage in Turkey between 2002 and 2005. Variation over time and among low-wage workers in the ratio of total labour costs to the gross wage gives rise to a natural experiment. Regression estimates indicate that a given increase in social security taxes has a larger negative effect on the probability of a worker remaining employed in the next quarter than an equal-sized increase in the minimum wage. This result is incompatible with the textbook model of labour supply and demand and suggests that workers may increase effort in response to an increase in wages. Consistent with this explanation, it is found that groups with the least access to the informal sector experience the smallest disemployment effects of the minimum wage.
    Keywords: minimum wages, payroll taxes, employment, Turkey
    JEL: J32
    Date: 2011–12
  3. By: Carlsson, Magnus (Linnaeus University); Rooth, Dan-Olof (Linnaeus University)
    Abstract: Ethnic minorities have lower wages compared to the ethnic majority in most EU-countries. However, to what extent these wage gaps are the result of prejudice toward ethnic minority workers is virtually unknown. This study sets out to examine what role prejudice play in the creation of the ethnic wage gap in one of Europe's most egalitarian countries, Sweden. The analysis takes into account the important distinction between average employer attitudes and the attitude of the marginal employer. Our results confirm that the attitudes of the marginal employer – but not those of the average employer – are important for the ethnic wage gap. This relationship becomes even stronger when potential measurement error and other forms of endogeneity are accounted for by controlling for a rich set of variables and implementing instrumental variable techniques.
    Keywords: attitudes, prejudice, marginal employer, ethnic wage gap
    JEL: J64 J71
    Date: 2011–12
  4. By: Haelermans Carla; Borghans Lex (ROA rm)
    Abstract: A meta-analysis is used to study the average wage effects of on-the-job training. This study shows that the average reported wage effect of on-the-job training, corrected for publication bias, is 2.6 per cent per course. The analyses reveal a substantial heterogeneity between training courses, while wage effects reported in studies based on instrumental variables and panel estimators are substantially lower than estimates based on techniques that do not correct for selectivity issues. Appropriate methodology and the quality of the data turn out to be crucial to determine the wage returns.
    Keywords: Economics ;
    Date: 2011
  5. By: Elek, Peter (Eötvös Lorand University); Kollo, Janos (Hungarian Academy of Sciences); Reizer, Balázs (Central European University, Budapest); Szabó, Péter A. (Reformed Presbyterian Church of Central and Eastern Europe)
    Abstract: We estimate a double hurdle (DH) model of the Hungarian wage distribution assuming censoring at the minimum wage and wage under-reporting (i.e. compensation consisting of the minimum wage, subject to taxation, and an unreported cash supplement). We estimate the probability of under-reporting for minimum wage earners, simulate their genuine earnings and classify them and their employers as 'cheaters' and 'non-cheaters'. In the possession of the classification we check how cheaters and non-cheaters reacted to the introduction of a minimum social security contribution base, equal to 200 per cent of the minimum wage, in 2007. The findings suggest that cheaters were more likely to raise the wages of their minimum wage earners to 200 per cent of the minimum wage thereby reducing the risk of tax audit. Cheating firms also experienced faster average wage growth and slower output growth. The results suggest that the DH model is able to identify the loci of wage under-reporting with some precision.
    Keywords: tax evasion, double hurdle model, Hungary
    JEL: C34 H26 J38
    Date: 2011–12
  6. By: Basu, Arnab K. (College of William and Mary); Chau, Nancy (Cornell University); Siddique, Zahra (IZA)
    Abstract: We study the impact of tax and minimum wage reforms on the incidence of informality. To gauge the incidence of informality, we use measures of the extent of tax evasion, the extent of minimum wage non-compliance, and the size of the informal workforce. Our approach allows us to examine (i) the distinction between determinants of firm-level reported wage distribution and actual wage distribution, (ii) the complementarity of tax and minimum wage enforcement, (iii) the impact that a minimum wage reform has on tax and minimum wage compliance, and (iv) the impact that a tax policy reform has on tax and minimum wage compliance. We conclude with the design of optimal minimum wage and tax policies (even in the complete absence of minimum wage enforcement). We do so based on two objectives derived from popular concerns associated with an unchecked expansion of informality: tax revenue maximization, and poverty alleviation among workers.
    Keywords: tax evasion, minimum wage reform, flat tax reform, poverty, informality
    JEL: J3 J6 O17
    Date: 2011–12
  7. By: Wilkins, Roger (Melbourne Institute of Applied Economic and Social Research); Wooden, Mark (Melbourne Institute of Applied Economic and Social Research)
    Abstract: Empirical studies have consistently reported that rates of involuntary job separation, or dismissal, are significantly lower among female employees than among males. Only rarely, however, have the reasons for this differential been the subject of detailed investigation. In this paper, household panel survey data from Australia are used that also find higher dismissal rates among men than among women. This differential, however, largely disappears once controls for industry and occupation are included. These findings suggest that the observed gender differential primarily reflects systematic differences in the types of jobs into which men and women select.
    Keywords: dismissals, gender differentials, involuntary job separations, HILDA Survey, Australia
    JEL: J16 J63 J71
    Date: 2011–12
  8. By: Stancanelli, Elena G. F. (University of Cergy-Pontoise); van Soest, Arthur (Tilburg University)
    Abstract: Existing studies show that individuals who retire replace some private consumption by home production, but do not consider joint behaviour of couples. Here we analyze the causal effect of retirement of each partner on hours of home production of both partners in a couple. Our identification strategy exploits the earliest age retirement laws in France, enabling a fuzzy regression discontinuity approach. We find that own retirement significantly increases own hours of home production and the effect is larger for men than for women. Moreover, retirement of the female partner significantly reduces male hours of home production but not vice versa.
    Keywords: time allocation, house work, couples
    JEL: J22 J26 J14
    Date: 2011–12
  9. By: Brusentsev, Vera; Newhouse, David; Vroman, Wayne
    Abstract: This paper contributes new evidence from two large household surveys on the compliance of firms with severance pay regulations in Indonesia, and the extent to which changes in severance pay regulations could affect employment rigidity. Compliance appears to be low, as only one-third of workers entitled to severance pay report receiving it, and on average workers only collect 40 percent of the payment due to them. Eligible female and low-wage workers are least likely to report receiving payments. Widespread non-compliance is consistent with trends in employment rigidity, which remained essentially unchanged following the large increases in severance mandated by the 2003 law. These results suggest that workers may benefit from a compromise that relaxes severance pay regulations while improving enforcement of severance pay statutes, and possibly establishing a system of unemployment benefits.
    Keywords: Labor Markets,Wages, Compensation&Benefits,Social Protections&Assistance,Labor Policies,Labor Management and Relations
    Date: 2012–01–01
  10. By: Rossin-Slater, Maya (Columbia University); Ruhm, Christopher J. (University of Virginia); Waldfogel, Jane (Columbia University)
    Abstract: This analysis uses March Current Population Survey data from 1999-2010 and a differences-in-differences approach to examine how California's first in the nation paid family leave (PFL) program affected leave-taking by mothers following childbirth, as well as subsequent labor market outcomes. We obtain robust evidence that the California program more than doubled the overall use of maternity leave, increasing it from around three to six or seven weeks for the typical new mother – with particularly large growth for less advantaged groups. We also provide suggestive evidence that PFL increased the usual weekly work hours of employed mothers of one-to-three year-old children by 6 to 9% and that their wage incomes may have risen by a similar amount.
    Keywords: parental leave, maternity leave, leave-taking, paid leave, maternal employment
    JEL: J2 J13 J18
    Date: 2011–12
  11. By: Gasparini, Leonardo (CEDLAS-UNLP); Galiani, Sebastián (Washington University, St. Louis); Cruces, Guillermo (CEDLAS-UNLP); Acosta, Pablo A. (World Bank)
    Abstract: It has been argued that a factor behind the decline in income inequality in Latin America in the 2000s was the educational upgrading of its labor force. Between 1990 and 2010, the proportion of the labor force in the region with at least secondary education increased from 40 to 60 percent. Concurrently, returns to secondary education completion fell throughout the past two decades, while the 2000s saw a reversal in the increase in the returns to tertiary education experienced in the 1990s. This paper studies the evolution of wage differentials and the trends in the supply of workers by educational level for 16 Latin American countries between 1990 and 2000. The analysis estimates the relative contribution of supply and demand factors behind recent trends in skill premia for tertiary and secondary educated workers. Supply-side factors seem to have limited explanatory power relative to demand-side factors, and are only relevant to explain part of the fall in wage premia for high-school graduates. Although there is significant heterogeneity in individual country experiences, on average the trend reversal in labor demand in the 2000s can be partially attributed to the recent boom in commodity prices that could favor the unskilled (non-tertiary educated) workforce, although employment patterns by sector suggest that other within-sector forces are also at play, such as technological diffusion or skill mismatches that may reduce the labor productivity of highly-educated workers.
    Keywords: skill premia, supply and demand of labor, income inequality, Latin America
    JEL: J2 D3 I2 O5
    Date: 2011–12
  12. By: S Bradley; Colin Green; J Mangan
    Abstract: A standard finding in the literature on gender wage gaps is that the public sector exhibits much lower gaps than in the private sector. This finding is generally attributed to the existence of less gender discrimination in the public sector. In this paper we show that this conclusion is flawed because the standard finding for the public sector is biased by the dominating influence of large feminised occupational groups, such as those in nursing and teaching, both of which have relatively flat job hierarchies and hence low overall wage variance. However, when we examine other occupations within the public sector, there is evidence of sizeable wage gaps, much of which cannot be explained by observable or unobservable workplace or worker characteristics. This finding implies that gender discrimination is substantial in some occupations in the public sector.
    Date: 2011
  13. By: Fouarge Didier; Grip Andries de; Smits Wendy; Vries Robert de (ROA rm)
    Abstract: As suggested by human capital theory, workers with flexible contracts participate lessoften in training than those with permanent contracts. We find that this is merely dueto the fact that flexworkers receive less employer–funded training, a gap they can onlypartly compensate for by their own training investments. Flexworkers particularlyparticipate less in firm–specific training that is meant to keep up with new skilldemands than workers with permanent contracts. However, for those who participatein employer–funded firm–specific training, a temporary contract appears to facilitatethe transition to a permanent contract with the same employer. However, this doesnot hold for participation in self–paid training. This training, which is usually generaltraining, does not help in finding a better job.
    Keywords: education, training and the labour market;
    Date: 2011
  14. By: Aysit Tansel (Middle East Technical University, Institute for the Study of Labor (IZA), Germany and Economic Research Forum (ERF), Egypt); Elif Oznur Kan (Cankaya University)
    Abstract: Informality has long been a salient phenomenon in developing country labor markets, thus has been addressed in several theoretical and empirical research. Turkey, given its economic and demographic dynamics, provides rich evidence for a growing, heterogeneous and multifaceted informal labor market. However, the existing evidence on labor informality in Turkey is mixed and scant. Along these lines, we aim to extend the existing literature by providing a diagnosis of dynamic worker flows across distinct labor market states and identifying the effects of certain individual and job characteristics on variant mobility patterns. More specifically, we first develop and discuss a set of probability statistics based on annual worker transitions across distinct employment states utilizing Markov transition processes. As Bosch and Maloney (2007:3) argue: “labor status mobility can be assumed as a process in which changes in the states occur randomly through time, and probabilities of moves between particular states are governed by Markov transition matrices”. Towards this end, we will use the novel Income and Living Conditions Survey (SILC) panel data set to compute the transition probabilities of individuals moving across the labor market states of formal-salaried, informal-salaried, formal self-employed, informal self-employed, unemployed and inactive. The transitions analysis is conducted separately for two, three and four year panels pertaining to 2006 to 2007, 2006 to 2008 and 2006 to 2009 transitions; for total, male and female samples; and lastly for total and non-agricultural samples. In this way, we aim to contribute to the limited body of stylized facts available on mobility and informality in the Turkish labor market. Next, we conduct multinomial logit regressions individually for each set of panel to identify the impact of individual characteristics (i.e. gender, age, education level, work experience, sector of economic activity, firm size, number of other household members, having/not having children, rural/urban) underlying worker transitions. The results reveal several relationships between the covariates and likelihood of variant transitions, and are of remarkable importance for designing policy to address labor informality and reduce its negative externalities.
    Keywords: Labor market dynamics, informality, Markov processes, multinomial logit, Turkey
    JEL: J21 J24 J40 J63 O17
    Date: 2012–01
  15. By: Fomba Kamga, Benjamin (University of Yaounde II)
    Abstract: The aim of this study is to evaluate employees' productivity in relation to their contract status. This study uses (a) survey data collected among manufacturing sector firms, having more than 15 employees, in Cameroon between April and May 2006 and (b) information issued by the National Institute of Statistics. Information collected concerned 45 firms spanning the period 2003 to 2005. This study uses the stochastic production frontier, distinguishing employees holding fixed-term contract (FTC) from employees that do not have fixed-term contracts (indefinite-term contract (ITC)). Results are estimated in 2 stages. First, we evaluate the determinants of the utilisation of FTC workers and second, we estimate the level of efficiency and productivity of two types of workers. Empirical results indicate that employees holding FTC are twice more productive than those holding ITC. Likewise, parameters indicating returns to scale are 1.3. This parameter, though not significant, is greater than one indicating constant returns to scale in the firm production function.
    Keywords: labour contract, fixed-term contract, indefinite-term contract, production frontier
    JEL: J41 J82 L25
    Date: 2011–12
  16. By: Giorgio Di Pietro (University of Westminster & IZA); Toni Mora (Universitat Internacional de Catalunya & IEB)
    Abstract: Using Labour Force Survey individual-level data recently released by the Italian Institute of Statistics (ISTAT) where information is for the first time at available at provincial level, this paper looks at the short-term effects of the L’Aquila earthquake on labour market outcomes. Our estimates are based on a difference-in-differences (DiD) strategy that compares residents of L’Aquila with residents of a control area before and after the earthquake. The empirical results suggest that while the earthquake had no significant effect on the employment-population ratio, it led to a modest, but significant, reduction in labour force participation. There is also evidence of significant heterogeneous effects by gender and level of education.
    Keywords: Disaster, labour force participation, employment-population ratio, difference-in-differences
    JEL: J21
    Date: 2011
  17. By: Steven Nyce; Sylvester Schieber; John B. Shoven; Sita Slavov; David A. Wise
    Abstract: The strong link between health insurance and employment in the United States may cause workers to delay retirement until they become eligible for Medicare at age 65. However, some employers extend health insurance benefits to their retirees, and individuals who are eligible for such retiree health benefits need not wait until age 65 to retire with group health coverage. We investigate the impact of retiree health insurance on early retirement using employee-level data from 64 diverse firms that are clients of Towers Watson, a leading benefits consulting firm. We find that retiree health coverage has its strongest effects at ages 62 and 63, resulting in a 3.7 percentage point (21.2 percent) increase in the probability of turnover at age 62 and a 5.1 percentage point (32.2 percent) increase in the probability of turnover at age 63; it has a more modest effects for individuals under the age of 62. A more generous employer contribution of 50 percent or more raises turnover by 1-3 percentage points at ages 56-61, by 5.9 percentage points (33.7 percent) at age 62, and by 6.9 percentage points (43.7 percent) at age 63. Overall, an employer contribution of 50 percent or more reduces the total number of person-years worked between ages 56 and 64 by 9.6 percent relative to no coverage.
    JEL: I11 J26 J32 J63
    Date: 2011–12
  18. By: Centeno, Mario (Banco de Portugal); Novo, Alvaro A. (Banco de Portugal)
    Abstract: Portuguese firms engage in intense reallocation, most employers simultaneously hire and separate from workers, resulting in high excess worker turnover flows. These flows are constrained by the employment protection gap between open-ended and fixed-term contracts. We explore a reform that increased the employment protection of open-ended contracts and generated a quasi-experiment. The causal evidence points to an increase in the share and in the excess turnover of fixed-term contracts in treated firms. The excess turnover of open-ended contracts remained unchanged. This result is consistent with a high degree of substitution between open-ended and fixed-term contracts. At the firm level, we also show that excess turnover is quite heterogeneous and quantify its association with firm, match, and worker characteristics.
    Keywords: excess worker turnover, two-tier systems, quasi-experiment, fixed-term contracts
    JEL: J21 J23 J63
    Date: 2011–12
  19. By: Michael Beckmann; Istvàn Hegedüs (University of Basel)
    Keywords: Trust-based working time, working time flexibility, firm performance
    JEL: J24 J81 M50
    Date: 2011

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