nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2012‒01‒18
ten papers chosen by
Erik Jonasson
Lund University

  1. Labor Market Return to Computer Skills: Using Microsoft Certification to Measure Computer Skills By Ganna Vakhitova; Christopher R. Bollinger
  2. Adjusting to Really Big Changes: The Labor Market in China, 1989-2009 By Wei Chi; Richard B. Freeman; Hongbin Li
  3. Including Jobs in Benefit-Cost Analysis By Timothy J. Bartik
  4. Return to Experience and Initial Wage Level: Do Low Wage Workers Catch Up? By Kenneth L. Sørensen; Rune Vejlin
  5. Paying for Performance: Incentive Pay Schemes and Employees' Financial Participation By Alex Bryson; Richard Freeman; Claudio Lucifora; Michele Pellizzari; Virginie Perotin
  6. Beaches, sunshine, and public-sector pay: theory and evidence on amenities and rent extraction by government workers By Jan K. Brueckner; David Neumark
  7. The Labour Market in CGE Models By Stefan Boeters
  8. Prizes Versus Wages with Envy and Pride By Pradeep K. Dubey; John Geanakoplos; Ori Haimanko
  9. The Change of Job Opportunities: the Role of Computerization and Institutions By V. Nellas; E. Olivieri
  10. How Do Industries and Firms Respond to Changes in Local Labor Supply? By Christian Dustmann; Albrecht Glitz

  1. By: Ganna Vakhitova (Kyiv School of Economics, Kyiv Economic Institute); Christopher R. Bollinger (University of Kentucky)
    Abstract: Using data from a Microsoft survey and the Current Population Survey, we examine the returns to Microsoft Certification in early 2000’s. The formal structure of Microsoft Certification provides a well documented external measure of computer skills rather than the ad-hoc self reports used in other research. We find that the wage premium for MS certification may be over 30% in the full labor market. When certificate holders are compared to only individuals in IT occupations, the overall wage premium falls to a range of 3-7%. We find that the hierarchical structure of Microsoft Certification is reflected in the wage premium associated with specific certificates, further supporting the claim that these certificates measure skills valued in the labor market. We also find that different IT occupations have different values for these skills. The similarity between the return to certification and the return to general education is examined.
    Keywords: Computer skills; human capital; Microsoft certification; IT wage premium
    JEL: J24 J30 J31
    Date: 2011–12
  2. By: Wei Chi; Richard B. Freeman; Hongbin Li
    Abstract: China’s emerging labor market was buffeted by changes in demand and supply and institutional changes in the last two decades. Using the Chinese Urban Household Survey data from 1989 to 2009, our study shows that the market responded with substantial changes in the structure of wages and in employment and types of jobs that workers obtained that mirrors the adjustments found in labor markets in advanced economies. However, the one place where the Chinese labor market appears to diverge from the labor markets in advanced countries is the rapid convergence in earnings and occupational positions of cohorts who entered the job market under more or less favorable conditions. On this dimension, China’s labor market seems more flexible than those in other countries. Three related factors may explain this pattern: (1) the rapid growth of China’s economy; (2) the high rate of employee turnover; (3) the relative weakness of internal labor markets in China. Bottom line, the Chinese labor market has responded about as well as one could expect to the changes in the demand and supply factors and institutional shocks in this critical period in Chinese economic history.
    JEL: J3
    Date: 2012–01
  3. By: Timothy J. Bartik (W.E. Upjohn Institute for Employment Research)
    Abstract: Public policies may affect employment by directly creating jobs, facilitating job creation, or augmenting labor supply. In labor markets with high unemployment, such employment changes may have significant net efficiency benefits, which should be included in benefit-cost analyses. The research literature offers diverse recommendations on measuring employment benefits. Many of the recommendations rely on arbitrary assumptions. The resulting employment benefit estimates vary widely. This paper reviews this literature, and offers recommendations on how to better measure employment benefits using estimable parameters. Guidance is provided on measuring policy-induced labor demand, estimating the demand shock’s impact on labor market outcomes, and translating labor market impacts into efficiency benefits. Two measures are proposed for efficiency benefits, one relying on adjusted reservation wage gains, the other on adjusted earnings gains.
    Keywords: Reservation wages, unemployment, occupational upgrading
    JEL: H43 J68 Q28
    Date: 2011–11
  4. By: Kenneth L. Sørensen (Department of Economics and Business, Aarhus University, Denmark); Rune Vejlin (Department of Economics and Business, Aarhus University, Denmark)
    Abstract: This paper estimates the relationship between initial wage and return to experience. We use a Mincer-like wage model to nonparametrically estimate this relationship allowing for an unobservable individual permanent effect in wages and unobservable individual return to experience. The relationship between return to experience and unobservable individual ability is negative when conditioning on educational attainment while the relationship between return to experience and educational attainment is positive. We link our finding to two main theories of wage growth, namely search and human capital. We are able to test if search frictions are the main driver of the negative relationship, but we find this is not the case.
    Keywords: Wage growth, initial wage, return to experience, nonparametric estimation
    JEL: J3 J24
    Date: 2012–01–04
  5. By: Alex Bryson; Richard Freeman; Claudio Lucifora; Michele Pellizzari; Virginie Perotin
    Abstract: We present new comparable data on the incidence of performance pay schemes in Europe and the USA. We find that the percentage of employees exposed to incentive pay schemes ranges from around 10-15 percent in some European countries to over 40 percent in Scandinavian countries and the US. Individual pay and profit/gain sharing schemes are widely diffused, whereas share ownership schemes are much less common, particularly in Europe. We document a number of empirical regularities. Incentive pay is less common in countries with a higher share of small firms. Higher product and labour market regulation are associated with lower use of incentive pay. Capital market development is a necessary requirement for a wider diffusion of incentive pay, particularly sharing and ownership schemes. When we control for a large set of individual characteristics and company attributes, we find that the probability that a worker is covered by an incentive scheme is higher in large firms and in high-skilled occupations, while it is much lower for females.
    Keywords: performance pay, financial participation, institutions
    JEL: J24 J33 D31
    Date: 2012–01
  6. By: Jan K. Brueckner (University of California, Irvine); David Neumark (University of California, Irvine & National Bureau of Economic Research)
    Abstract: The absence of a competitive market and the presence and strength of public-sector labor unions make it likely that public-sector pay reflects an element of rent extraction by government workers. In this paper, we test a specific hypothesis that connects such rent extraction to the level of local amenities. Specifically, although migration of taxpayers limits the extent of rent-seeking, public-sector workers may be able to extract higher rents in regions where high amenities mute the migration response. We develop a theoretical model that predicts such a link between public-sector wage differentials and local amenities, and we test the model’s predictions by analyzing variation in these wage differentials and amenities across states. The evidence reveals that public-sector wage differentials are, in fact, larger in the presence of high amenities, with the effect being stronger for unionized public-sector workers, who are likely better able to exercise political power in extracting rents.
    Keywords: Public-sector pay, unions, amenities
    JEL: J3 J45 R12
    Date: 2011
  7. By: Stefan Boeters
    Abstract: <p>This paper reviews options of labour market-modelling in a CGE framework. </p><p>On the labour-supply side, two principal modelling options are distinguished and discussed: aggregated, representative households and microsimulation based on individual household data.</p><p>On the labour-demand side, we focus on the substitution possibilities between different types of labour in production.</p><p>With respect to labour-market coordination, we discuss several wage-forming mechanisms and involuntary unemployment.<br /> </p>
    JEL: C68 D58 J20 J64
    Date: 2012–01
  8. By: Pradeep K. Dubey; John Geanakoplos; Ori Haimanko
    Date: 2012–01–09
  9. By: V. Nellas; E. Olivieri
    Abstract: This paper studies the pattern of job opportunities over the last two decades in European countries. We find that the share of high-skilled jobs have been expanding over time, while the share of medium- skilled jobs have been declining. These changes are in line with the US patterns and, according to the previous literature, they come from recent technological changes. However, our data show an interesting difference between the US and Europe: in Europe there is not any increase in the share of low-skilled employment. Moreover, we find that the difference between the proportion of employment hired in low-skilled and medium-skilled jobs is negatively correlated with both the unemployment rate and the degree of employment protection in the labour market. We propose a theoretical model to study the effects of a technological shock on the employment structure in a unionized economy. By accounting for the collective bargaining process, our model may fit Continental Europe better than the previous ones. We conclude that the definition of the union policy is crucial in order to explain observed cross-country heterogeneity in low-skilled employment.
    JEL: J2 J51 O3
    Date: 2012–01
  10. By: Christian Dustmann (Department of Economics, University College London); Albrecht Glitz (Department of Economics and Business, Universitat Pompeu Fabra)
    Abstract: In this paper, we investigate how changes in the skill mix of local labor supply are absorbed by the economy. We distinguish between three adjustment mechanisms: through factor prices, through an expansion in the size of those production units that use the more abundant skill group more intensively, and through more intensive use of the more abundant skill group within production units. We investigate which of these channels is dominant. We contribute to the existing literature by analyzing these adjustments on the level of firms, rather than industries, and by assessing the role of new firms in the absorption process of labor supply shocks. Our analysis is based on administrative data, comprising the entirety of firms in Germany over a 10 year period. We find that, while factor price adjustments are important in the non-tradable sector, labor supply shocks do not induce factor price changes in the tradable sector. In this sector, most of the adjustment to changes in relative factor supplies takes place within firms by changing relative factor intensities. Given the non-response of factor prices, this finding points towards changes in production technology. Our results further show, that firms that enter and exit the market are an important additional channel of adjustment. Finally, we demonstrate that an industry level analysis is likely to over-emphasize technology-based adjustments.
    Keywords: Immigration, Endogenous Technological Change, Firm Structure
    JEL: F1 J2 J61 L2 O3
    Date: 2012–01

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