nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2012‒07‒23
fourteen papers chosen by
Erik Jonasson
Lund University

  1. Time is Money – The Influence of Parenthood Timing on Wages By Michael Kind; Jan Kleibrink
  2. The Employment Effect of Industry-Specific, Collectively-Bargained Minimum Wages By Hanna Frings
  3. Born to Run Behind? Persistent Relative Age Effects on Earnings By Roed Larsen, Erling; Solli, Ingeborg
  4. Better Workers Move to Better Firms: A Simple Test to Identify Sorting By Cristian Bartolucci; Francesco Devicienti
  5. Estimating Heterogeneous Returns to Education in Germany via Conditional Heteroskedasticity By Nils Saniter
  6. Gender Segregation and Gender Wage Differences during the Early Labour Market Career By Peggy Bechara
  7. Returns to Education in Sri Lanka: A Pseudo Panel Approach By Rozana Himaz; Harsha Aturupane
  8. Trends in Time Allocation: A Cross-Country Analysis By Gimenez, Jose Ignacio; Sevilla-Sanz, Almudena
  9. Business taxation and wages: evidence from individual panel data By Thomas K. Bauer; Tanja Kasten; Lars-H. R. Siemers
  10. Health and Work At Older Ages: Using Mortality To Assess Employment Capacity Across Countries By Kevin S. Milligan; David A. Wise
  11. The Tenuous Relationship between Effort and Performance Pay By Kvaløy, Ola; Olsen, Trond E.
  12. A Gift of Time By Kawaguchi, Daiji; Lee, Jungmin; Hamermesh, Daniel S.
  13. Citizenship acquisition, employment prospects and earnings: comparing two cool countries By Pieter Bevelander and Ravi Pendakur
  14. Effects Of The Cap Reform On Off‐Farm Labour Participation By Corsi, Alessandro; Salvioni, Cristina

  1. By: Michael Kind; Jan Kleibrink
    Abstract: This paper studies the effect of parenthood timing on future wages. Using data from the German Socio-Economic Panel (SOEP), we employ an instrumental variable approach to identify the causal effect of delaying parenthood on wages of mothers and fathers. Consistent with previous studies, we provide evidence for a positive delaying effect on wages. We further study the underlying mechanisms of the wage premium, paying particular attention to the relationship between career stage and fertility timing. We find that delaying parenthood by one additional year during the career implies a wage premium of 7%.
    Keywords: Fertility; wage differentials; career path
    JEL: J13 J24 J31
    Date: 2012–06
  2. By: Hanna Frings
    Abstract: This paper estimates the employment effects of industry-specific, collectively-bargained minimum wages in Germany for two occupations associated with the construction sector. I propose a truly exogenous control group in contrast to the control group design used in the literature. Further, a difference-in-differences-in-differences estimator is presented as a robustness test for occupation-specific and/or industry-specific, timevarying, unobserved heterogeneity. I do not find a significantly negative employment effect, even though the minimum wage is binding in (East) Germany. This result can be explained by substitution effects, noncompliance and models of monopsonic competition.
    Keywords: Minimum wage; monopsonic competition; difference-in-differences
    JEL: J38 J42
    Date: 2012–07
  3. By: Roed Larsen, Erling; Solli, Ingeborg (UiS)
    Abstract: The relative age effect is an established phenomenon in the literature, but estimates of its strength and duration vary. In order to study the economic magnitude of the effect, we use Norwegian registry data to investigate how birth month affects earnings throughout the full course of life for all Norwegian males born during the period 1940-1949. We examine earnings from 20 to 68 years of age. Our findings suggest that the youngest within a cohort have a relative age disadvantage in early career years that translates into a relative age advantage during late career years. When observing non-discounted life earnings, we find that the two effects cancel out and leave no relative age imprint on life earnings.
    Keywords: Birth date effects; life earnings;
    JEL: C12 D03 I20 J30
    Date: 2012–05–30
  4. By: Cristian Bartolucci; Francesco Devicienti
    Abstract: We propose a test that uses information on workers’ mobility, wages and firms’ profits to identify the sign and strength of assortative matching. The basic intuition underlying our empirical strategy is that, in the presence of positive (negative) assortative matching, good workers are more (less) likely to move to better firms than bad workers. Assuming that agents’ payoffs are increasing in their own types allows us to use within-firm variation on wages to rank workers by their types and firm profits to rank firms. We exploit a panel data set that combines Social Security earnings records for workers in the Veneto region of Italy with detailed balance-sheet information for employers. We find robust evidence that positive assortative matching is a pervasive phenomenon in the labor market. This result is in contrast with what we find from correlating the worker and firm fixed effects in standard Mincerian wage equations.
    Keywords: Assortative matching, workers’ mobility, matched employer-employee data.
    JEL: J6 J31 L2
    Date: 2012
  5. 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
  6. By: Peggy Bechara
    Abstract: Using German linked employer-employee data this paper investigates the gender wage gap at the time of entering the labour market and its development during workers’ early career. The analysis contributes to the existing research on gender wage differentials among young workers by providing evidence on the impact of women’s disproportionate concentration in lower-paying industries, occupations, establishments and job-cells, i.e. occupations within establishments. The estimation results reveal that all types of segregation and particularly job-cell segregation are significant determinants of the gender wage gap, while skill endowments and differences in work histories are found to be of minor importance. At the time of labour market entry women’s wage disadvantages can almost entirely be explained by the fact that they start their working career in lower-paying occupations and establishments. With progressing labour market experience, however, gender segregation becomes less important and cannot fully account for a slight widening of the wage differential among young men and women. Therefore, part of the early career wage gap remains unexplained.
    Keywords: Gender wage gap; early career; labour market segregation
    JEL: J16 J24 J31 J62
    Date: 2012–07
  7. By: Rozana Himaz; Harsha Aturupane
    Abstract: This study employs the pseudo-panel approach to estimate returns to education among income earners in Sri Lanka. Pseudo-panel data are constructed from nine repreated cross-sections of Sri Lanka’s Labor Force Survey data from 1997-2008 for workers born during 1953-1974. The results show that for males, one extra year of education increases monthly earnings by about 5 per cent using the pseudo panel estimation rather than 8 per cent as in the OLS estimation. This indicates that not controlling for unobservables such as ability and motivation bias the OLS estimation of returns upwards by about 3 per cent on average. It also suggests that males with higher ability seem to be acquiring more years of education contrary to what has been observed recently in countries such as Thailand (Warunsiri and McKnown 2010) where the opportunity cost of education seems to be high.
    Keywords: Sri Lanka, Education, Returns, Pseudo panels, Synthetic cohorts
    JEL: I00 I20 I25 C23
    Date: 2012
  8. By: Gimenez, Jose Ignacio (University of Zaragoza); Sevilla-Sanz, Almudena (Queen Mary, University of London)
    Abstract: Using detailed time-use data for seven industrialized countries from the 1970s until today we document general decreases in men's market work coupled with increases in men's unpaid work and child care, and increases in women's paid work and child care coupled with decreases in unpaid work. We also find almost universal increases in the time devoted to watching television over this period, and uncover a widespread increase in leisure inequality in favor of lower educated adults. Trends in leisure inequality mirror the general increase in income and earnings inequality experienced in most countries over this period, especially after the mid-1980s. All these findings are consistent with previous results for the US. However, in contrast to the increases in leisure found for the US, we fail to find common trends in leisure time across countries over the period analyzed.
    Keywords: time use survey, leisure inequality
    JEL: D12 D13 J2
    Date: 2012–07
  9. By: Thomas K. Bauer; Tanja Kasten; Lars-H. R. Siemers
    Abstract: Empirical evidence on the degree of business-tax shifting to employees via the wage level is highly controversial and rare. It remains open to which extent the tax burden is shifted, whether there are differences for tax increases and decreases, or whether there exists some treatment heterogeneity, that drive the respective results. Using a large administrative panel data set, we exploit the regional variation of the German business income taxation to address these issues. Our results suggest an elasticity of wages with respect to business taxes that ranges between -0.28 to -0.46, once we control for invariant unobserved regional and individual characteristics. Workers with low bargaining power, e.g., low-skilled, are affected most from business tax shifting, indicating that business-tax incidence involves distributional effects. Finally, we find evidence for an asymmetric tax incidence.
    Keywords: tax incidence, profit taxation, wages, asymmetric effects
    JEL: H22 H25 J31 J38
    Date: 2012
  10. By: Kevin S. Milligan; David A. Wise
    Abstract: While longevity increased substantially over the last 50 years and health at older ages has improved, labor force participation at older ages has declined. We use mortality rates as a marker for the “health capacity” to work at older ages in 12 OECD countries. Mortality rates can be compared across countries and over time within the same country. For a given level of mortality, we find employment rates of older men vary substantially through time and across countries. At each mortality rate in 2007, if men in France worked as much as men in the United States, they would work 4.6 years more over ages 55 to 69 than they actually did. Comparing the work and mortality of American men in 2007 to the base year of 1977, the same calculation yields 3.7 years more work. These findings suggest a large increase in the health capacity to work, as measured by mortality. The relationship between cross-country mortality and changes in work over time at older ages is weak, suggesting the take-up of this extra capacity to work has varied. However, the dispersion in employment given mortality is strongly influenced by the retirement incentives inherent in public pension programs.
    JEL: J14 J26
    Date: 2012–07
  11. By: Kvaløy, Ola (UiS Business School, University of Stavanger); Olsen, Trond E. (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration)
    Abstract: When a worker is offered performance related pay, the incentive effect is not only determined by the shape of the incentive contract, but also by the probability of contract enforcement. We show that weaker enforcement may reduce the worker's effort, but lead to higher-powered incentive contracts. This creates a seemingly negative relationship between effort and performance pay.
    Keywords: Effort; performance pay; incentive contract
    JEL: J30
    Date: 2012–07–10
  12. By: Kawaguchi, Daiji (Hitotsubashi University); Lee, Jungmin (Sogang University); Hamermesh, Daniel S. (University of Texas at Austin)
    Abstract: How would people spend time if confronted by permanent declines in market work? We identify preferences off exogenous cuts in legislated standard hours that raised employers' overtime costs in Japan around 1990 and Korea in the early 2000s. Using time-diaries from before and after these shocks, we estimate the probability that an individual would have been affected by the reform. Reduced-form estimates show that the direct effect on a newly-constrained worker was a substantial reduction in market time, with the free-up time in Japan reallocated to leisure and personal maintenance, while in Korea the results are mixed, showing some impact on household production. Simulations using GMM estimates of a Stone-Geary utility function defined over time use suggest no effect on household production in either country. Estimation of a household model shows only slight evidence that spouses shared the time gift, nor that one spouse's allocation of non-market time changed when the other spouse's market work was permanently and exogenously reduced.
    Keywords: time use, household production, freedom from work, household bargaining
    JEL: J22 D13
    Date: 2012–07
  13. By: Pieter Bevelander and Ravi Pendakur
    Abstract: Direct country comparisons on the effect of citizenship are rare. The aim of this paper is to analyse the citizenship effect on both employment probabilities and the relative income of work of immigrants in two countries, Canada and Sweden. We ask 'Is there a citizenship effect and if any, in which country is it that we find the largest effect and for which immigrant groups'. Using Instrumental Variable Regression to assess the clean effect of citizenship acquisition on data from the 2006 Canadian census and the 2006 Swedish registry we find that citizenship has a positive impact on both characteristics, and that it is often stronger in Sweden than in Canada.
    Keywords: citizenship
    Date: 2012–07–15
  14. By: Corsi, Alessandro; Salvioni, Cristina
    Abstract: The process of change in the EU Common Agricultural Policy (CAP) from trade and market distorting measures to more neutral interventions has been long, but in this process the 2003 reform (the so-called Fischler reform) has been the most important step, abolishing most coupled support and introducing the fully decoupled Single Farm Payment Scheme (SFP). In this paper, we try to assess its effects on off-farm labour participation of farmers, an issue also relevant in terms of rural development effects. We estimate a random effects probit model of operators’ off-farm labour participation from a panel of Italian COP farms drawn from the FADN, thus controlling for unobserved heterogeneity. The results suggest that the effects of the reform on off-farm labour participation, if any, are weak. No variable directly related to the CAP reform is significant. These results are not in contrasts with the theoretical considerations, since the reform entails both wealth and substitution effects that tend to offset each other.
    Keywords: CAP reform, off-farm work, farm household, Agricultural and Food Policy, J220, J430, Q120, Q180,
    Date: 2012

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