nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2012‒06‒13
twelve papers chosen by
Erik Jonasson
Lund University

  1. Tall or Taller, Pretty or Prettier: Is Discrimination Absolute or Relative? By Daniel S. Hamermesh
  2. Workfare for the old and long-term unemployed By Bennmarker, Helge; Nordström Skans, Oskar; Vikman, Ulrika
  3. Ageing and Employability. Evidence from Belgian Firm-Level Data By Mariann RIGO; Vincent VANDENBERGHE; Fabio WALTENBERG
  4. Marriage Stability, Taxation and Aggregate Labor Supply in the U.S. vs. Europe By Chakraborty, Indraneel; Stepanchuk, Serhiy; Holter, Hans A.
  5. WP 13 Flexicurity, wage dynamics and inequality over the life-cycle By Paul Bingley; Lorenzo Cappellari; Niels Westergård-Nielsen
  6. Estimating Heterogeneous Returns to Education in Germany via Conditional Heteroskedasticity By Nils Saniter
  7. Long-Run Costs of Piecemeal Reform: Wage Inequality and Returns to Education in Vietnam By Phan, Diep; Coxhead, Ian
  8. Explaining Changes in Earnings and Labour Costs During the Recession By Bergin, Adele; Kelly, Elish; McGuinness, Seamus
  9. Taxation and Labor Force Participation: The Case of Italy By Colonna, Fabrizio; Marcassa, Stefania
  10. National minimum wage and labour market outcomes of young workers By Jan Fidrmuc; Juan de Dios Tena
  11. Education, Experience, and Tenure: Intra-FirmWage Dynamics in the Japanese Steel Industry By NAKABAYASHI, Masaki
  12. Outsourcing, occupational restructuring, and employee well-being: Is there a silver lining? By Petri Böckerman; Mika Maliranta

  1. By: Daniel S. Hamermesh
    Abstract: Using several microeconomic data sets from the United States and the Netherlands, and the examples of height and beauty, this study examines whether: 1) Absolute or relative differences in a characteristic are what affect labor-market and other outcomes; and 2) The effects of a characteristic change when all agents acquire more of it—become taller or better-looking. Confronted with a choice among individuals, decision-makers respond more to absolute than to relative differences among them. Also, an increase in the mean of a characteristic’s distribution does not alter market responses to differences in it.
    JEL: J71 J78
    Date: 2012–06
  2. By: Bennmarker, Helge (IFAU - Institute for Evaluation of Labour Market and Education Policy); Nordström Skans, Oskar (IFAU - Institute for Evaluation of Labour Market and Education Policy); Vikman, Ulrika (IFAU - Institute for Evaluation of Labour Market and Education Policy)
    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 exhausted 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
  3. By: Mariann RIGO (Department of Economics, Central European University, Budapest and UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)); Vincent VANDENBERGHE (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)); Fabio WALTENBERG (Departamento de Economia and Centro de Estudos sobre Desigualdade e Desenvolvimento (CEDE), Universidade Federal Fluminense (UFF), Brazil)
    Abstract: The Belgian population is ageing due to demographic changes; so does the workforce of firms active in the country. Such a trend is likely to remain for the foreseeable future. And it will be reinforced by the willingness of public authorities to expand employment among individuals aged 50 or more. But are older workers employable? The answer depends to a large extent on the gap between older workers’ productivity and their cost to employers. To address this question we use a production function that is modified to reflect the heterogeneity of labour with workers of different age potentially diverging in terms of marginal products. Using unique firm-level panel data we produce robust evidence on the causal effect of ageing on productivity (value added) and labour costs. We take advantage of the panel structure of data and resort to first-differences to deal with a potential time-invariant heterogeneity bias. Moreover, inspired by recent developments in the production function estimation literature, we also address the risk of simultaneity bias (endogeneity of firms’ age-mix choices in the short run) using i) the structural approach suggested by Ackerberg, Caves & Frazer (2006), ii) alongside more traditional system-GMM methods (Blundell & Bond, 1998) where lagged values of labour inputs are used as instruments. Our results indicate a negative impact of larger shares of older workers on productivity that is not compensated by lower labour costs, resulting in a lower productivity-labour costs gap. An increment of 10%-points of their share causes a 1.3-2.8% contraction of this gap. We conduct several robustness checks that largely confirm this result. This is not good news for older individuals’ employability and calls for interventions in the Belgian private economy aimed at combating the decline of productivity with age and/or better adapting labour costs to age-productivity profiles.
    Keywords: Ageing, Old Labour Productivity and Employability, Panel Data Analysis
    JEL: J24 C33 D24
    Date: 2012–06–04
  4. By: Chakraborty, Indraneel (Department of Economics); Stepanchuk, Serhiy (Magyar Nemzeti Bank); Holter, Hans A. (Department of Economics)
    Abstract: Americans work more than Europeans. Using micro data from the U.S. and 17 European countries, we study the contributions from demographic subgroups to these aggregate level dierences. We document that women are typically the largest contributors to the discrepancy in work hours. We also document a negative empirical correlation between hours worked and dierent measures of taxation, driven by men, and a positive correlation between hours worked and divorce rates, driven by women. Motivated by these observations, we develop a life-cycle model with heterogeneous agents, marriage and divorce and use it to study the impact of two mechanisms on labor supply: (i) dierences in marriage stability and (ii) dierences in tax systems. We calibrate the model to U.S. data and study how labor supply in the U.S. changes as we introduce European tax systems, and as we replace the U.S. divorce and marriage rates with their European equivalents. We nd that the divorce and tax mechanisms combined explain 58% of the variation in labor supply between the U.S. and the European countries in our sample.
    Keywords: Aggregate Labor Supply; Taxation; Marriage; Divorce; Heterogeneous Households
    JEL: E24 E62 H24 H31 J21 J22
    Date: 2012–05–27
  5. By: Paul Bingley; Lorenzo Cappellari; Niels Westergård-Nielsen
    Abstract: We investigate the relationship between life-cycle wages and flexicurity in Denmark. We separate permanent from transitory wages and characterise flexicurity using membership of unemployment insurance funds. We find that flexicurity is associated with lower wage growth heterogeneity over the life-cycle and greater wage instability, changing the nature of wage inequality from permanent to transitory. While we are in general unable to formally test for moral hazard against adverse selection into unemployment insurance membership, robustness checks suggest that moral hazard is the relevant interpretation.
    Keywords: Unemployment insurance, wage dynamics, wage inequality, wage instability.
    JEL: J31 J65
    Date: 2012–03
  6. By: Nils Saniter
    Abstract: In this paper I investigate the causal returns to education for different educational groups in Germany by employing a new method by Klein and Vella (2010) that bases identification on the presence of conditional heteroskedasticity. Compared to IV methods, key advantages of this approach are unbiased estimates in the absence of instruments and parameter interpretation that is not bounded to local average treatment effects. Using data from the German Socio-Economic Panel Study (SOEP) I find that the causal return to education is 8.5% for the entire sample, 2.3% for graduates from the basic school track and 11% for graduates from a higher school track. Across these groups the endogeneity bias in simple OLS regressions varies significantly. This confirms recent evidence in the literature on Germany. Various robustness checks support the findings.
    Keywords: Return to education, wage equation, control function approach, second moment exclusion restriction
    JEL: C3 I21 J31
    Date: 2012
  7. By: Phan, Diep (Beloit College); Coxhead, Ian (University of WI)
    Abstract: "Shock therapy" transitions in Eastern Europe facilitated movement of skilled workers into privatized industries offering high wage premia relative to state industries. Other transitional economies (notably China and Vietnam) have been slower to relinquish control over key industries and factor markets. Some costs of this piecemeal approach are now becoming apparent. We examine the spillover of continuing capital market distortions into the market for a complementary factor, skilled labor. Using Vietnamese data we find that capital market segmentation creates a two-track market for skills, in which state sector workers earn high salaries while non-state workers face lower demand and lower compensation. Growth is reduced directly by diminished allocative efficiency and incentives to acquire education, and indirectly by higher wage inequality and rents for workers with access to state jobs.
    JEL: F16 J31 P23
    Date: 2012–05
  8. By: Bergin, Adele; Kelly, Elish; McGuinness, Seamus
    Abstract: This paper utilises data from the National Employment Surveys to analyse movements in both earnings and labour costs during the period 2006 through to 2009. It finds that, despite an unprecedented fall in output and rise in unemployment, both average earnings and average labour costs increased marginally over the period. Although some factors, such as a rise in the incidence of part-time working and falls in construction employment, served to depress wages, these influences were more than outweighed by increases in both the share of and returns to graduate employment and a rising return to large firm employment. This analysis suggests that a good deal of the downward wage rigidity observed within Irish private sector employment since the onset of the recession has largely been driven by factors consistent with continued productivity growth. Nevertheless, particularly within the male labour market, a substantial proportion of the movements in wages cannot be explained by changes in either labour market composition or the returns to individual/job characteristics. The large unexplained component in the data is attributed to a general reluctance of firms to cut wages in order to avoid productivity losses associated with worker dissatisfaction or higher rates of labour turnover. In support of this view, the study demonstrates that firms will adopt strategies such as reducing staff numbers, hours worked and bonus payments, in preference to reducing wages.
    Keywords: cost/recession/data/employment/unemployment/wages/Productivity/growth/labour market
    Date: 2012–04
  9. By: Colonna, Fabrizio; Marcassa, Stefania
    Abstract: Italy has the lowest labor force participation of women among European countries. Moreover, the participation rate of married women is positively correlated to their husbands’ income. We show that a high tax schedule together with tax credits and transfers raise the burden of two-earner households, generating disincentives to work. We estimate a structural labor supply model for women, and use the estimated parameters to simulate the effects of alternative revenue-neutral tax systems. We find that joint taxation implies a drop in the participation rate. Conversely, working tax credit and gender-based taxation boost it, with the effects of the former concentrated on low educated women.
    Keywords: female labor force participation; Italian tax system; second earner tax rate; joint taxation; gender-based taxation; working tax credit
    JEL: J21 J22 H31
    Date: 2012–06
  10. By: Jan Fidrmuc; Juan de Dios Tena
    Abstract: We analyze the impact of the national minimum wage (NMW) in the UK on the employment of young workers. We utilize the regression discontinuity approach to assess the impact of age-related increases in the NMW when workers turn 18 and 22. The previous literature has found little evidence of an adverse impact of the NMW on the UK labour market, both when considering the age-related increases or the regular annual increases that apply to all NMW rates. We fail to find any effect of turning 22 on employment. However, we find a significant and negative effect of male workers turning 21. We also find a negative effect for both genders upon turning 18. The age-related NMW rates may have an adverse effect on employment of young workers, with this effect possibly occurring already well in advance of reaching the threshold age.
    Keywords: Minimum wage, Employment, Unemployment, Young workers
    Date: 2012–06
  11. By: NAKABAYASHI, Masaki (Education, Experience, and Tenure: Intra-FirmWage Dynamics in the Japanese Steel Industry)
    Abstract: Contemporary major Japanese firms recruit new graduates and promote from within, providing a rare example of the gports of entryh policy, and were once recognized as innovative organizations. This microanalysis of a steel company in the 1930-60s shows that 1) the internal labor market had been enhanced, but 2) mid-career recruiting was active and employeesf fertility decision depended on previous experience as well as tenure B3by the 1960s, while 3) the return on education surged and in-house training was linked to educational background from the 1950s, indicating that extended schooling replaced mid-career experience after the 1970s under technology-education complementarity.
    Keywords: employer Internal labor markets; return on schooling; specific human capital; Japan.
    JEL: J31 J24 N35
    Date: 2011–09
  12. By: Petri Böckerman; Mika Maliranta
    Abstract: This paper explores the effects of outsourcing on employee well-being through the use of the Finnish linked employer-employee data. The direct negative effect of outsourcing is attributable to greater job destruction and worker outflow. In terms of perceived well-being, the winners in international outsourcing are those who are capable of performing interactive tasks (i.e., managers, professionals and experts), especially when offshoring involves closer connections to other developed countries.
    JEL: J28 F23
    Date: 2012–04–19

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