nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2012‒04‒23
eleven papers chosen by
Erik Jonasson
Lund University

  1. Is There Monopsonistic Discrimination against Immigrants? First Evidence from Linked Employer-Employee Data By Hirsch, Boris; Jahn, Elke J.
  2. Exports and Wages: Rent Sharing, Workforce Composition or Returns to Skills? By Macis, Mario; Schivardi, Fabiano
  3. Robust Estimation of Wage Dispersion with Censored Data: An Application to Occupational Earnings Risk and Risk Attitudes By Pollmann, Daniel; Dohmen, Thomas; Palm, Franz C.
  4. Institutions, Informality, and Wage Flexibility: Evidence from Brazil By Marcello M. Estevão; Irineu E. Carvalho Filho
  5. Real Wage, Labor Productivity, and Employment Trends in South Africa: A Closer Look By Nir Klein
  6. Pro-Social Missions and Worker Motivation: An Experimental Study By Fehrler, Sebastian; Kosfeld, Michael
  7. The Role of Performance Appraisals in Motivating Employees By Jurjen J.A. Kamphorst; Otto H. Swank
  8. Labor Regulations and the Firm Size Distribution in Indian Manufacturing By Rana Hasan; Karl Robert L. Jandoc
  9. Repeated Selection with Heterogenous Individuals and Relative Age Effects By Dawid, Herbert; Muehlheusser, Gerd
  10. Employment effect of innovation: microdata evidence from Bangladesh and Pakistan By Waheed, Abdul
  11. THE CREATIVE CLASS AND THE CRISIS By Gabe, Todd; Florida, Richard; Mellander, Charlotta

  1. By: Hirsch, Boris (University of Erlangen-Nuremberg); Jahn, Elke J. (Institute for Employment Research (IAB), Nuremberg)
    Abstract: This paper investigates immigrants' and natives' labour supply to the firm within a semi-structural approach based on a dynamic monopsony framework. Applying duration models to a large administrative employer–employee data set for Germany, we find that once accounting for unobserved worker heterogeneity immigrants supply labour less elastically to firms than natives. Under monopsonistic wage setting the estimated elasticity differential predicts a 4.7 log points wage penalty for immigrants thereby accounting for almost the entire unexplained native-immigrant wage differential of 2.9-5.9 log points. Our results imply that discriminating against immigrants is profitable rather than costly.
    Keywords: discrimination, native-immigrant wage differential, monopsony, Germany
    JEL: J42 J61 J71
    Date: 2012–04
  2. By: Macis, Mario (Johns Hopkins University); Schivardi, Fabiano (University of Cagliari)
    Abstract: We use linked employer-employee data from Italy to explore the relationship between exports and wages. Our empirical strategy exploits the 1992 devaluation of the Italian Lira, which represented a large and unforeseen shock to Italian firms' incentives to export. The results indicate that the export wage premium is due to exporting firms both (1) paying a wage premium above what their workers would earn in the outside labor market – the "rent-sharing" effect, and (2) employing workers whose skills command a higher price after the devaluation – the "skill composition" effect. The latter effect only emerges once we allow for the value of individual skills to differ in the pre- and post-devaluation periods. In fact, using a fixed measure of skills, as typically done in the literature, we would attribute the wage increase only to rent sharing. We also document that the export wage premium is larger for workers with more export-related experience. This indicates that the devaluation increased the demand for skills more useful for exporting, driving their relative price up.
    Keywords: export wage premium, linked employer employee data, exports, wages, returns to skills, rent sharing
    JEL: F16 J31
    Date: 2012–04
  3. By: Pollmann, Daniel (ROA, Maastricht University); Dohmen, Thomas (ROA, Maastricht University); Palm, Franz C. (Maastricht University)
    Abstract: We present a semiparametric method to estimate group-level dispersion, which is particularly effective in the presence of censored data. We apply this procedure to obtain measures of occupation-specific wage dispersion using top-coded administrative wage data from the German IAB Employment Sample (IABS). We then relate these robust measures of earnings risk to the risk attitudes of individuals working in these occupations. We find that willingness to take risk is positively correlated with the wage dispersion of an individual's occupation.
    Keywords: dispersion estimation, earnings risk, censoring, quantile regression, occupational choice, sorting, risk preferences, SOEP, IABS
    JEL: C14 C21 C24 J24 J31 D01 D81
    Date: 2012–03
  4. By: Marcello M. Estevão; Irineu E. Carvalho Filho
    Abstract: Even though institutions are created to protect workers, they may interfere with labor market functioning, raise unemployment, and end up being circumvented by informal contracts. This paper uses Brazilian microeconomic data to show that the institutional changes introduced by the 1988 Constitution lowered the sensitivity of real wages to changes in labor market slack and could have contributed to the ensuing higher rates of unemployment in the country. Moreover, the paper shows that states that faced higher increases in informality (i.e., illegal work contracts) following the introduction of the new Constitution tended to have smaller drops in wage responsiveness to macroeconomic conditions, thus suggesting that informality serves as a escape valve to an over-regulated environment.
    Keywords: Brazil , Economic models , Labor markets , Unemployment , Wages ,
    Date: 2012–03–21
  5. By: Nir Klein
    Abstract: The paper looks at the dynamics of employment in South Africa and examines the factors that contributed to the job-shedding observed during the recent financial crisis. The paper finds that the rapid growth of the real wage, which outpaced the labor productivity growth in most sectors, played an important role in suppressing employment creation. The paper also finds that while there is a co-integrating link between the real wage and labor productivity, the deviations from equilibrium are persistent and thus contribute to a weak link between real wage growth and labor productivity growth in the short term. This finding is also supported by a cross-country analysis, which shows that in South Africa the link between the real wage and labor productivity is substantially weaker than in other emerging markets, even after controlling for labor market tightness indicators.
    Keywords: Employment , Labor markets , Labor productivity , Unemployment , Wages ,
    Date: 2012–04–03
  6. By: Fehrler, Sebastian (University of Zurich); Kosfeld, Michael (Goethe University Frankfurt)
    Abstract: Do employees work harder if their job has the right mission? In a laboratory labor market experiment, we test whether subjects provide higher effort if they can choose the mission of their job. We observe that subjects do not provide higher effort than in a control treatment. Surprised by this finding, we run a second experiment in which subjects can choose whether they want to work on a job with their preferred mission or not. A subgroup of agents (roughly one third) is willing to do so even if this option is more costly than choosing the alternative job. Moreover, we find that these subjects provide substantially higher effort. These results suggest that relatively few workers can be motivated by missions and that selection into mission-oriented organizations is important to explain empirical findings of lower wages and high motivation in the latter.
    Keywords: motivation, effort provision, contract choice, sorting, lab experiment
    JEL: C92 J33 M52
    Date: 2012–04
  7. By: Jurjen J.A. Kamphorst (Erasmus University Rotterdam); Otto H. Swank (Erasmus University Rotterdam)
    Abstract: In many organizations, reward decisions depend on subjective performance evaluations. However, evaluating an employee's performance is often difficult. In this paper, we develop a model in which the employee is uncertain about his own performance and about the manager's ability to assess him. The manager gives an employee a performance appraisal with a view of affecting the employee's self perception, and the employee's perception of the manager's ability to assess performance. We examine how performance appraisals affect the employee's future performance. The predictions of our model are consistent with various empirical findings. These comprise (i) the observation that managers tend to give positive appraisals, (ii) the finding that on average positive appraisals motivate more than negative appraisals, and (iii) the observation that the effects of appraisals depend on the employee's perception of the manager's ability to assess performance accurately.
    Keywords: Subjective Performance Appraisal; Credibility; Cheap Talk
    JEL: M52 M54 D82 D83
    Date: 2012–04–10
  8. By: Rana Hasan; Karl Robert L. Jandoc
    Abstract: We use data from Indian manufacturing to describe the distribution of firm size in terms of employment and discuss implications for public policy, especially labor regulations. A unique feature of our analysis is the use of nationally representative establishment-level data from both the registered (formal) and unregistered (informal) segments of the Indian manufacturing sector. While we find there to be little difference in the size distribution of firms across states believed to have flexible labor regulations versus those with inflexible labor regulations, restricting attention to labor-intensive industries changes the picture dramatically. Here, we find greater prevalence of larger sized firms in states with flexible labor regulations. Moreover, this differential prevalence is higher among firms that commenced production after 1982, when a key aspect of Indian labor regulations was tightened. Overall, our findings are consistent with the argument that labor regulations have affected firm size adversely.
    Keywords: India, Labor regulations, Firm size distribution, manufacturing, employment, public policy
    Date: 2012–01
  9. By: Dawid, Herbert (University of Bielefeld); Muehlheusser, Gerd (University of Hamburg)
    Abstract: In contexts such as education and sports, skill-accumulation of individuals over time crucially depends on the amount of training they receive, which is often allocated on the basis of repeated selection. We analyze optimal selection policies in a model of endogenous skill formation where, apart from their ability to transform training into skills, individuals also differ with respect to relative age. The latter has been identified by recent empirical research as a major determinant for performance differentials within cohorts. We find that the optimal policy is pro-competitive at later selection stages in the sense of selecting the individuals with the higher skill signals. All eventual corrections due to relative age occur at early stages, where selection is either counter-competitive (i.e. individuals with low skill signals are selected) or even avoided at all. Thereby, the induced selection quality is non-monotone in the degree of ex-ante asymmetry due to relative age. Finally, the (empirical) observation of persistent relative age effects does in general not hint at suboptimal selection policies.
    Keywords: skill formation, human capital, selection, heterogeneity, age effects, training, education
    JEL: J24 M53 I25 I28
    Date: 2012–04
  10. By: Waheed, Abdul (UNU-MERIT/MGSoG, Maastricht University)
    Abstract: The analysis of the impact of innovation on employment growth is an important topic for policy makers, because (un)employment is an important social topic, and the effects of innovation on employment are often poorly understood. Despite the significant importance of this relationship, very few studies on this topic for developing countries are yet available compared with developed ones. This paper contributes to this scanty literature by investigating the employment effect of innovation for two South Asian developing countries: Bangladesh and Pakistan. We further analyze whether this relationship shows country-specific and industry-specific differences. Finally, we investigate whether complementarity between process and product innovation exists or which effect (displacement or compensation) of one particular innovation type dominates the other, in order to influence employment. One of the striking findings of our analysis is that both product and process innovation spur employment in this region as a whole, regardless of low-tech and high-tech industries, even after controlling for a number of firm-specific characteristics. Moreover, although both innovation types also have significantly positive impacts on employment growth of all Bangladeshi and of all Pakistani firms separately, they are important factors for employment growth of only high-tech Bangladeshi firms and of only low-tech Pakistani firms. Moreover, we observe a strong complementarity between both innovation types in order to stimulate employment. Contrary to the most previous studies, we witness an insignificantly negative effect of labour cost on employment change, perhaps owing to the availability of labour force to hire at cheaper rates compared with developed countries. We notice that some of the innovation determinants exert different influences across industries and across both countries. The same is the case for the determinants of employment growth.
    Keywords: Bangladesh, Employment growth, Pakistan, Product innovation, Process innovation Process innovation
    JEL: J23 O31 O33
    Date: 2012
  11. By: Gabe, Todd (University of Maine); Florida, Richard (University of Toronto); Mellander, Charlotta (Jönköping International Business School)
    Abstract: The economic crisis contributed to sharp increases in U.S. unemployment rates for all three of the major socio-economic classes. Results from regression models using individual-level data from the 2006-2011 U.S. Current Population Surveys indicate that members of the Creative Class had a lower probability of being unemployed over this period than individuals in the Service and Working Classes, and that the impact of having a creative occupation became more beneficial in the two years following the recession. These patterns, if they continue, are suggestive of a structural change occurring in the U.S. economy—one that favors knowledge-based creative activities.
    Keywords: Economic Crisis; Great Recession; Creative Class; Service Class; Working Class; Unemployment
    JEL: J24 J60 R00
    Date: 2012–04–12

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