nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2012‒05‒02
fifteen papers chosen by
Erik Jonasson
Lund University

  1. Minimum Wages as a Barrier to Entry: Evidence from Germany By Bachmann, Ronald; Bauer, Thomas; Kroeger, Hanna
  2. Wage and Employment Determination in Volatile Times: Sweden 1913–1939 By Holmlund, Bertil
  3. The Effect of Host Society Culture on Migrant Wage Discrimination: Approaching the Roestigraben By Pierre Kohler
  4. The estimation of urban premium wage using propensity score analysis: some considerations from the spatial perspective By Dusan Paredes; Marcelo Lufin; Patricio Aroca
  5. Lifetime Labor Income and the Erosion of Seniority-Based Wages in Japan: Evidence Based on Administrative Data Records By Hori, Masahiro; Iwamoto, Koichiro
  6. Does the gender wage gap exist among male and female workers with similar human capital? A Coarsened Exact Matching for Chile between 1992 and 2009 By Dusan Paredes
  7. Comparing Real Wages By Orley C. Ashenfelter
  8. Taxing Childcare: Effects on Family Labor Supply and Children By Christina Gathmann ; Björn Sass
  9. Performance Related Pay and Firm Productivity: New Evidence from a Quasi-Natural Experiment in Italy By Lucifora, Claudio; Origo, Federica
  10. Alternative theories for explaining the spatial wage inequality: a multilevel competition among human capital, NEG and amenities By Dusan Paredes
  11. Workfare for the old and long-term unemployed By Bennmarker, Helge; Nordström Skans, Oskar; Vikman, Ulrika
  12. Local Multipliers and Human Capital in the US and Sweden By Moretti, Enrico; Thulin, Per
  13. Gender differences and dynamics in competition: the role of luck By Gill, David; Prowse, Victoria
  14. Does Competition Induce Hiring Equity ?. By Clémence Berson
  15. What is the cost of retaining and attracting exceptional talents? Evidence from the Canada Research Chair program By Pascal Courty; John Sim

  1. By: Bachmann, Ronald (RWI); Bauer, Thomas (RWI); Kroeger, Hanna (RWI)
    Abstract: This study analyses employers' support for the introduction of industry-specific minimum wages as a cost-raising strategy in order to deter market entry. Using a unique data set consisting of 800 firms in the German service sector, we find some evidence that high-productivity employers support minimum wages. We further show that minimum wage support is higher in industries and regions with low barriers to entry. This is particularly the case in East Germany, where the perceived threat of low-wage competition from Central and Eastern European Countries is relatively high. In addition, firms paying collectively agreed wages are more strongly in favour of minimum wages if union coverage is low and the mark-up of union wage rates is high.
    Keywords: minimum wage, product market competition, service sector
    JEL: J38 J50 L41 L80
    Date: 2012–04
  2. By: Holmlund, Bertil (Department of Economics)
    Abstract: The paper studies wage and employment determination in the Swedish business sector from the mid-1910s to the late 1930s. This period includes the boom and bust cycle of the early 1920s as well as the Great Depression of the early 1930s. The events of the early 1920s are particularly intriguing, involving inflation running at an annual rate of 30 percent followed by a period of sharp deflation where nominal wages and prices fell by 30 percent and unemployment increased from 5 to 30 percent. We examine whether relatively standard wage and employment equations can account for the volatile economic development during the interwar years. By and large, the answer is a qualified yes. Industry wages were responsive to industry-specific firm performance, suggesting a significant role for “insider forces” in wage determination. Unemployment had a strong downward impact on wages. There is evidence that reductions in working time added to wage pressure; yet estimates of labor demand equations suggest that cuts in working time may have slightly increased employment as firms substituted workers for hours.
    Keywords: Wage determination; labor demand; interwar labor markets
    JEL: J23 J31 N14 N34
    Date: 2012–04–18
  3. By: Pierre Kohler (Graduate Institute of International Studies)
    Abstract: This paper investigates whether host society culture affects migrant wage discrimination, i.e. whether migrant wage discrimination is more intense in host societies where culture is more inward-looking. The motivation for this investigation in the Swiss context stems from two stylized facts showing that (i) political preferences on issues related to migration, asylum and naturalization of foreigners are markedly more conservative in the German region and (ii) that average wage differences between migrants and natives are larger in the German region. Building on this, the paper begins with a comparison of returns to factors (for eight migrant groups compared to natives) using a human capital model of wage determination. It then performs an Oaxaca decomposition of wage differentials in order to compare its unexplained component across groups and regions. The last step consists in implementing a regression discontinuity design approach to establish whether host society culture is one of the determinants explaining differences in migrant wage discrimination across the language border. Results show returns to factors of wage-earning migrants are lower in the German region for a preponderant majority of migrant groups. The analysis of wage differentials and the associated unexplained parts also support the hypothesis that wage discrimination is more pronounced in this region of the Swiss labor market. Finally, results of the regression discontinuity design approach confirm that host society culture is one of the determinants of wage discrimination endured by migrants.
    Keywords: immigration, migration, labour market, culture, political preferences, wage discrimination, Switzerland
    JEL: F22 J15 J31 J60 J68 J71 Z10 Z13
    Date: 2012–04–22
  4. By: Dusan Paredes (IDEAR - Department of Economics, Universidad Católica del Norte - Chile); Marcelo Lufin (IDEAR - Department of Economics, Universidad Católica del Norte - Chile); Patricio Aroca (IDEAR - Department of Economics, Universidad Católica del Norte - Chile)
    Abstract: This paper estimates the Urban Wage Premium for the Chilean case, but proposing three contributions to the literature. First, the geographical space is reconfigured using functional regions instead administrative regions. This process is carried out using techniques from the spatial econometric literature. Second, we exploit the use of micro data. We estimate the wage equation using a survey at individual level that avoids problems associated with regional aggregated specifications. Finally, we set the comparability among observations using matching comparison. Thus, we isolate the urban effect from other alternative sources. Our results suggest a Urban Wage Premium between 4 and 21%.
    Keywords: Size and Spatial Distributions of Regional Economic Activity
    JEL: R12
    Date: 2012–04
  5. By: Hori, Masahiro; Iwamoto, Koichiro
    Abstract: This paper examines the impact of the erosion in seniority-based wages on lifetime labor income in Japan. Despite the importance of this issue, studies to date have not been able to address it directly because reliable datasets long enough to cover individuals’ entire careers were not available. Taking advantage of administrative data records on individuals’ careers, which became available with the introduction of Pension Coverage Regular Notices, Takayama et al. (2012) constructed a panel dataset of career records covering a period of more than 30 years. We use the dataset to derive wage profiles throughout individuals’ careers. Moreover, using the estimated wage profiles for individuals with different sets of characteristics, we calculate the lifetime labor income (over a 35-year period) for those individuals to examine the impact of the erosion of Japan’s seniority wages on lifetime income. We confirm that the wage-age profile of lifetime employees over their working life has been gradually flattening in recent years. The flattening is particularly prominent among middle-aged and elderly white-collar workers with a college background, and it appears to have decreased their lifetime labor income by about 10 to 30 percent.
    Keywords: Seniority-based wages, Lifetime labor income, Japan
    JEL: C81 D31 J31
    Date: 2012–04
  6. By: Dusan Paredes (IDEAR - Department of Economics, Universidad Católica del Norte - Chile)
    Abstract: This paper estimates the gender wage gap for Chile between 1992-2009, but using by first time a matching comparison. In order to contribute to the empirical literature, this paper uses a novel technique called Coarsened Exact Matching which imposes the comparison among comparable workers. The results suggest that the wage gap exists, but it is lower than previous estimations, specially when only comparable workers are considered. This result opens the discussion about how well estimated is the gap when exist a high heterogeneity between male and female workers. The results also show a increment in wage gap from 2000. Finally, only the 58% of comparable male workers earns more wage than similar females workers. However, this 58% presents larger differential than its comparable 42% of female workers. This differential is also growing during the last years.
    Keywords: Gender wage gap, matching comparison, Coarsened Exact Matching
    Date: 2012–04
  7. By: Orley C. Ashenfelter
    Abstract: A real wage rate is a nominal wage rate divided by the price of a good and is a transparent measure of how much of the good an hour of work buys. It provides an important indicator of the living standards of workers, and also of the productivity of workers. In this paper I set out the conceptual basis for such measures, provide some historical examples, and then provide my own preliminary analysis of a decade long project designed to measure the wages of workers doing the same job in over 60 countries—workers at McDonald’s restaurants. The results demonstrate that the wage rates of workers using the same skills and doing the same jobs differ by as much as 10 to 1, and that these gaps declined over the period 2000-2007, but with much less progress since the Great Recession.
    JEL: J3 O40 O57
    Date: 2012–04
  8. By: Christina Gathmann ; Björn Sass
    Abstract: Previous studies report a wide range of estimates for how female labor supply responds to childcare prices. We shed new light on this question using a reform that raised the prices of public daycare. Parents respond by reducing public daycare and increasing childcare at home. Parents also reduce informal childcare indicating that public daycare and informal childcare are complements. Female labor force participation declines and the response ist strongest for single parents and low-income households. The short-run effects on cognitive and non-cognitive skills are mixed, but negative for girls. Spillover effects on older siblings suggest that the policy affects the whole household, not just targeted family members.
    Keywords: Childcare, Labor supply, Cognitive skills, Family Policy, Germany
    JEL: J13 J22 J18
    Date: 2012
  9. By: Lucifora, Claudio (Università Cattolica del Sacro Cuore); Origo, Federica (University of Bergamo)
    Abstract: This paper investigates the causal effect of a switch from fixed wages to collective performance-related pay on firm productivity, exploiting an exogenous variation in the institutional environment regulating collective bargaining. We find that the introduction of collective performance related pay significantly increases productivity by around 3-5 per cent, but such effect varies greatly by firm size, industry and union density. We show that the design of the PRP scheme – in terms of number and type of parameters used – is also relevant for firm productivity.
    Keywords: performance related pay, productivity, unions
    JEL: J31 J33 J52 L61
    Date: 2012–04
  10. By: Dusan Paredes (IDEAR - Department of Economics, Universidad Católica del Norte - Chile)
    Abstract: This paper presents an empirical framework for analyzing the spatial wage inequality in a Latin American country: Chile. This country is mainly characterized by two stylized facts: the high spatial concentration around metropolitan areas and the key role of natural resources. We consider both elements with a competition between NEG versus amenity framework. Both theories are combined with human capital through a Multilevel Analysis. The results show the low performance of NEG for Chile and how the natural resources are a winner causal mechanism for the case. Additionally, the spatial wage variability is extremely small when it is compared with the wage variation at individual level.
    Keywords: Spatial wage inequality, spatial concentration, natural resources, NEG, amenity framework, wage variation at individual level
    Date: 2012–04
  11. By: Bennmarker, Helge (IFAU); Nordström Skans, Oskar (Uppsala Center for Labor Studies); Vikman, Ulrika (Uppsala Center for Labor Studies)
    Abstract: We estimate the effects of conditioning benefits on program participation among older long-term unemployed workers. We exploit a Swedish reform which reduced UI duration from 90 to 60 weeks for a group of older unemployed workers in a setting where workers who ex-hausted their benefits received unchanged transfers if they agreed to participate in a work practice program. Our results show that job finding increased as a result of the shorter duration of passive benefits. The time profile of the job-finding effects suggests that the effects are due to deterrence effects during the program-entry phase. We find no evidence of wage reductions, suggesting that the increased job-finding rate was driven by increased search intensity rather than lower reservation wages.
    Keywords: Activation; program evaluation; UI; duration
    JEL: J26 J64 J65 J68
    Date: 2012–04–11
  12. By: Moretti, Enrico (Department of Economics); Thulin, Per (Swedish Entrepreneurship Forum)
    Abstract: We show that every time a local economy generates a new job by attracting a new business in the traded sector, a significant number of additional jobs are created in the non-traded sector. This multiplier effect is particularly large for jobs with high levels of human capital and for high tech industries. These findings are important for local development policies, as they suggest that in order to increase local employment levels, municipalities should target high tech employers with high levels of human capital.
    Keywords: Local multipliers; Local labor markets; Labor demand
    JEL: J23 R11 R12 R23
    Date: 2012–04–13
  13. By: Gill, David; Prowse, Victoria
    Abstract: In a real effort experiment with repeated competition we find striking differences in how the work effort of men and women responds to previous wins and losses. For women losing per se is detrimental to productivity, but for men a loss impacts negatively on productivity only when the prize at stake is big enough. Responses to luck are more persistent and explain more of the variation in behavior for women, and account for about half of the gender performance gap in our experiment. Our findings shed new light on why women may be less inclined to pursue competition-intensive careers.
    Keywords: Real effort experiment; Gender differences; Gender gap; Competition aversion; Tournament; Luck; Win; Loss; Competitive outcomes
    JEL: J33 C91 J16
    Date: 2012–01–24
  14. By: Clémence Berson (Centre d'Economie de la Sorbonne - Paris School of Economics et CEE)
    Abstract: This paper tests the impact of competition on the hiring process in the French retail sector. Following the Becker's theory, higher the competition, lower is discrimination. Using local Herfindhal-Hirschman indexes, a correspondence study ensures to observe how competition affects discrimination. A strong employment gap is observable between French natives and second generation immigrants. Concerning gender, women are favored as cashiers. The impact of competition depends on the target population : competition reinforces preference for women, whereas discrimination due to origin is follows the Becker's theory. However, increasing competition to fight against discrimination is not a solution, as it will enhance bad condition of women in the labor market and an increase of awareness of human resources department to equality of treatment is more efficient.
    Keywords: Discrimination, hiring, competition.
    JEL: J71 C93
    Date: 2012–01
  15. By: Pascal Courty (University of Victoria); John Sim (Queen's University)
    Abstract: The compensation of a professor who is awarded an internal Canada Research Chair (CRC) increases by 6.3 percent on average in our sample. This gain is large initially but quickly erodes over CRC tenure. The gain is slightly larger for professors who change university to obtain a CRC Chair. Assuming that the CRC program has achieved its goal of attracting and retaining top talents, we infer that the compensation cost of doing so is modest. In addition, only a small fraction of the CRC grants have been passed through to professors as compensation increases. This is despite the fact that universities report spending more than half of the CRC grants on chairholder compensation.
    Keywords: Compensation, Brain Drain, Crowding Out, Canada Research Chair
    JEL: J3 J23
    Date: 2012–02

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