nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2012‒07‒29
nineteen papers chosen by
Erik Jonasson
Lund University

  1. Does the minimum wage affect employment ? evidence from the manufacturing sector in Indonesia By Del Carpio, Ximena; Nguyen, Ha; Wang, Liang Choon
  2. Wages in the Netherlands: a Micro Approach By Stefan Groot
  3. Is There an Informal Employment Wage Premium? Evidence from Tajikistan By Arabsheibani, Reza; Staneva, Anita V.
  4. Comparing Labor Supply Elasticities in Europe and the US: New Results By Bargain, Olivier; Orsini, Kristian; Peichl, Andreas
  5. Female Employment and Fertility - The Effects of Rising Female Wages By Christian Siegel
  6. Soft skills or hard cash ? the impact of training and wage subsidy programs on female youth employment in Jordan By Groh, Matthew; Krishnan, Nandini; McKenzie, David; Vishwanath, Tara
  7. Returns to Education in Russia: Where There Is Risky Sexual Behaviour There Is Also an Instrument By Arabsheibani, Reza; Staneva, Anita V.
  8. Differences in Employment Outcomes for College Town Stayers and Leavers By Winters, John V.
  9. Maids and School Teachers: Low Skill Migration and High Skill Labor Supply By Tiago Freire
  10. Discretion, Productivity and Work Satisfaction By Bartling, Björn; Fehr, Ernst; Schmidt, Klaus M.
  11. Labor supply on the eve of retirement. Disparate effects of immediate and postponed rewards to working By Christian N. Brinch, Erik Hernæs and Zhiyang Jia
  12. Using Differences in Knowledge Across Neighborhoods to Uncover the Impacts of the EITC on Earnings By Raj Chetty; John N. Friedman; Emmanuel Saez
  13. Are firms willing to employ a greying and feminizing workforce? By Vincent VANDENBERGHE
  14. On-the-Job Learning and Earnings: Comparative Evidence from Morocco and Senegal By Nordman, Christophe Jalil; Wolff, François-Charles
  15. Business Taxation and Wages: Evidence from Individual Panel Data By Bauer, Thomas K.; Kasten, Tanja; Siemers, Lars
  16. Regional patterns of the recruitment of foreign labour: Differences in the methods of matching foreign labour in Denmark By Torben Dall Schmidt; Peter Sandholt Jensen
  17. Additive Decompositions with Interaction Effects By Biewen, Martin
  18. Expert Leaders in a Fast-Moving Environment By Goodall, Amanda H.; Pogrebna, Ganna
  19. Commuters' effect on local labour markets: A german case study By Giovanni Russo; Peter Nijkamp; Aura Reggiani; Federico Tedeschi

  1. By: Del Carpio, Ximena; Nguyen, Ha; Wang, Liang Choon
    Abstract: Using survey data from the Indonesian manufacturing industry, this paper investigates the impact of minimum wage on employment and wages offered by Indonesian manufacturing firms from 1993 to 2006. It shows that the estimated effects of minimum wage on employment are positive within a province (i.e., with province fixed effects), but negative within a firm (i.e., with firm fixed effects), indicating the importance of using firm panel data to reduce the endogeneity bias in estimates. It finds significant heterogeneous effects of minimum-wage changes on employment. The employment effects of minimum wages are significant and negative among small firms and less educated workers, but not among large firms and workers with high school education and above. The negative employment impact is more severe for non-production workers than for production workers. The analysis also shows that the minimum wage disproportionally affects women: most of the non-production job losses are experienced by female workers. Lastly, the paper finds that the minimum wage is more correlated with the average wage of small firms than that of large firms, suggesting that minimum wages are more binding in small firms.
    Keywords: Labor Markets,Labor Policies,Microfinance,Corporate Social Responsibility,Tertiary Education
    Date: 2012–07–01
  2. By: Stefan Groot
    Abstract: Many OECD countries have experienced growing wage inequality since the 1980s. This trend is generally explained by increasing relative demand for skilled labor due to skill biased technological progress and, to some extent, globalization. By using micro data from Statistics Netherlands, this paper examines trends in Dutch (real pre-tax) wage inequality between 2000 and 2005, thus extending the previous literature by covering recent years. We find that inequality, after correcting for observed worker characteristics, decreased somewhat at the lower half of the wage distribution, while increasing slightly at most of the upper half, and relatively strong at the highest few percentiles. Wage growth was also higher for occupation categories with a higher initial wage level, and for workers in the Randstad agglomerations. It is shown that changes in the wage structure are to a large extent explained by prices and quantities of worker characteristics, while changes in the residual wage distribution play a role at the highest percentiles.
    Date: 2011–09
  3. By: Arabsheibani, Reza (Swansea University); Staneva, Anita V. (Swansea University)
    Abstract: This paper defines informal sector employment and decomposes the difference in earnings distributions between formal and informal sector employees in Tajikistan for 2007. Using the quantile regression decomposition technique proposed by Machado and Mata (2005), we find a significant informal employment wage premium across the whole earnings distribution. This contrast with earlier studies and casts doubt on the recent literature showing that the informal sector is poorly rewarded. It seems to be the case that the informal employment in Tajikistan is the main source of income.
    Keywords: formal/informal employment, quantile regression decomposition
    JEL: C14 J21 J30
    Date: 2012–07
  4. By: Bargain, Olivier (University of Aix-Marseille II); Orsini, Kristian (K.U.Leuven); Peichl, Andreas (IZA)
    Abstract: We suggest the first large-scale international comparison of labor supply elasticities for 17 European countries and the US, separately by gender and marital status. Measurement differences are netted out by using a harmonized empirical approach and comparable data sources. We find that own-wage elasticities are relatively small and much more uniform across countries than previously thought. Differences exist nonetheless and are found not to arise from different tax-benefit systems or demographic compositions across countries. Thus, we cannot reject that countries have genuinely different preferences. Three other results, important for welfare analysis, are consistent over all countries: the extensive (participation) margin dominates the intensive (hours) margin; for singles, this leads to larger labor supply responses in low-income groups; income elasticities are extremely small everywhere. Finally, the results for cross-wage elasticities in couples are opposed between regions, consistent with complementarity in spouses' leisure in the US versus substitution in spouses' household production in Europe.
    Keywords: household labor supply, elasticity, taxation, Europe, US
    JEL: C25 C52 H31 J22
    Date: 2012–07
  5. By: Christian Siegel
    Abstract: Increases in female employment and falling fertility rates have often been linked to rising female wages. However, over the last 30 years the US total fertility rate has been fairly stable while female wages have continued to grow. Over the same period, we observe that women's hours spent on housework have declined, but men's have increased. I propose a model with a shrinking gender wage gap that can capture these trends. While rising relative wages tend to increase women's labor supply and, due to higher opportunity cost, lower fertility, they also lead to a partial reallocation of home production from women to men, and a higher use of labor-saving inputs into home production. I find that both these trends are important in understanding why fertility did not decline to even lower levels. As the gender wage gap declines, a father's time at home becomes more important for raising children. When the disutilities from working in the market and at home are imperfect substitutes, fertility can stabilize, after an initial decline, in times of increasing female market labor. That parents can acquire more market inputs into child care is what I find important in matching the timing of fertility. In a mode l extension, I show that the results are robust to intrahousehold bargaining.
    Keywords: Fertility, female labor supply, household production, intrahousehold allocations
    JEL: D13 E24 J13 J22
    Date: 2012–07
  6. By: Groh, Matthew; Krishnan, Nandini; McKenzie, David; Vishwanath, Tara
    Abstract: Throughout the Middle East, unemployment rates of educated youth have been persistently high and female labor force participation, low. This paper studies the impact of a randomized experiment in Jordan designed to assist female community college graduates find employment. One randomly chosen group of graduates was given a voucher that would pay an employer a subsidy equivalent to the minimum wage for up to 6 months if they hired the graduate; a second group was invited to attend 45 hours of employability skills training designed to provide them with the soft skills employers say graduates often lack; a third group was offered both interventions; and the fourth group forms the control group. The analysis finds that the job voucher led to a 40 percentage point increase in employment in the short-run, but that most of this employment is not formal, and that the average effect is much smaller and no longer statistically significant 4 months after the voucher period has ended. The voucher does appear to have persistent impacts outside the capital, where it almost doubles the employment rate of graduates, but this appears likely to largely reflect displacement effects. Soft-skills training has no average impact on employment, although again there is a weakly significant impact outside the capital. The authors elicit the expectations of academics and development professionals to demonstrate that these findings are novel and unexpected. The results suggest that wage subsidies can help increase employment in the short term, but are not a panacea for the problems of high urban female youth unemployment.
    Keywords: Tertiary Education,Labor Markets,Labor Policies,Primary Education,Access to Finance
    Date: 2012–07–01
  7. By: Arabsheibani, Reza (Swansea University); Staneva, Anita V. (Swansea University)
    Abstract: Finding an instrument that is orthogonal to the disturbance term in the wage equation has been a topic of great deal of debate. Recently, Chesson et al. (2006) proposed that higher discount rates are significantly associated with a range of sexual behaviours, including having sex before age of 16 years. Following their paper, we use unprotected sexual behaviour and earlier age of sexual intercourse as alternative instrumental variables to account for endogeneity in schooling. The Bound et al. (1995) F-test indicates that our instruments are strongly correlated with schooling. We fail to reject the test of over-identifying restrictions, which demonstrates that the proposed instruments are valid and not correlated with the current earnings. In line with previous studies, our results suggest that the IV estimates of the returns to schooling are higher than the OLS estimates. In addition to the conditional mean, the proposed instruments are applied over the wage distribution using Chernozhukov and Hansen (2008) instrumental variable quantile approach.
    Keywords: return to education, risky sexual behaviour, instrumental variables
    JEL: I20 I22 J30
    Date: 2012–07
  8. By: Winters, John V. (University of Cincinnati)
    Abstract: Areas surrounding colleges and universities are often able to build their local stock of human capital by retaining recent graduates in the area after they finish their education. This paper classifies 41 U.S. metropolitan areas as "college towns" and investigates differences in employment outcomes between college graduates who stay in the college town where they obtained their degree and college graduates who leave after completing their degree. We find that college town stayers experience less favorable employment outcomes along multiple dimensions. On average, stayers earn lower annual and hourly wages and work in less educated occupations.
    Keywords: migration, human capital, education, college towns, wages
    JEL: I20 J24 R23
    Date: 2012–07
  9. By: Tiago Freire
    Abstract: Over the 40 years the pattern of migration has changed significantly with an increase in the share of female migrants, and especially low skill female migrants. These low skilled women migrants often work in the domestic service sector, a close substitute for household work. This paper analyzes how low skill rural-urban migration in Brazil from 1986 to 2000 lead to an increase in the labor supply of high skill women living in urban areas. In our model we show how large inflows of low skill women migrants decrease the relative price of domestic services. The largest beneficiaries of this trend are high skill women, who respond to the decrease in the cost of domestic services by joining the labor force and working more hours. We use Census data from Brazil from 1991 and 2000 to test this hypothesis. Using weather shocks in rural areas, and historical patterns of migrations, we are able to build an exogenous migration shock by skill to cities. Using this as an instrument for the price of domestic services and local wages we find that a 10% decrease in the wage of domestic workers increases the labor participation of high skill women by 3%.
    Date: 2011–09
  10. By: Bartling, Björn; Fehr, Ernst; Schmidt, Klaus M.
    Abstract: In Bartling, Fehr and Schmidt (2012) we show theoretically and experimentally that it is optimal to grant discretion to workers if (i) discretion increases productivity, (ii) workers can be screened by past performance, (iii) some workers reciprocate high wages with high effort and (iv) employers pay high wages leaving rents to their workers. In this paper we show experimentally that the productivity increase due to discretion is not only sufficient but also necessary for the optimality of granting discretion to workers. Furthermore, we report representative survey evidence on the impact of discretion on workers’ welfare, confirming that workers earn rents.
    Keywords: high-performance work systems; wages; discretion; gift exchange; job satisfaction
    JEL: M5 J3
    Date: 2012–06
  11. By: Christian N. Brinch, Erik Hernæs and Zhiyang Jia (Statistics Norway)
    Abstract: We study two recent changes in incentives to work facing 67-69 year old workers in Norway: an earnings test reform which increases current earnings from work, and a pension system maturation which removes pension accrual from work. Within a difference-in-differences framework, we exploit these changes to investigate the effects of economic incentives. We find the earnings test reform has large effects, while the pension system maturation has no significant effects. The findings confirm that 67-69 year olds can adjust their work efforts to economic incentives, but do so only to thoses related to current income and not to future pensions.
    Keywords: labor supply; retirement earnings test; social security wealth; difference-indifferences
    JEL: J14 H55
    Date: 2012–07
  12. By: Raj Chetty; John N. Friedman; Emmanuel Saez
    Abstract: We develop a new method of estimating the impacts of tax policies that uses areas with little knowledge about the policy's marginal incentives as counterfactuals for behavior in the absence of the policy. We apply this method to characterize the impacts of the Earned Income Tax Credit (EITC) on earnings using administrative tax records covering all EITC-eligible filers from 1996-2009. We begin by developing a proxy for local knowledge about the EITC schedule – the degree of "sharp bunching" at the exact income level that maximizes EITC refunds by individuals who report self-employment income. The degree of self-employed sharp bunching varies significantly across geographical areas in a manner consistent with differences in knowledge. For instance, individuals who move to higher-bunching areas start to report incomes closer to the refund-maximizing level themselves, while those who move to lower-bunching areas do not. Using this proxy for knowledge, we compare W-2 wage earnings distributions across neighborhoods to uncover the impact of the EITC on real earnings. Areas with high self-employed sharp bunching (i.e., high knowledge) exhibit more mass in their W-2 wage earnings distributions around the EITC plateau. Using a quasi-experimental design that accounts for unobservable differences across neighborhoods, we find that changes in EITC incentives triggered by the birth of a child lead to larger wage earnings responses in higher bunching neighborhoods. The increase in EITC refunds comes primarily from intensive-margin increases in earnings in the phase-in region rather than reductions in earnings in the phase-out region. The increase in EITC refunds is commensurate to a phase-in earnings elasticity of 0.14 on average across the U.S. and 0.58 in high-knowledge neighborhoods.
    JEL: H26 H31
    Date: 2012–07
  13. By: Vincent VANDENBERGHE (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES), Economics School of Louvain (ESL),)
    Abstract: Are employers willing to employ more older individuals, in particular older women? Higher employment among the older segments of the population will only materialise if firms are willing to employ them. Although several economists have started considering the demand side of the labour market for older individuals, few have considered its gender dimension properly; despite evidence that lifting the overall senior employment rate in the EU requires significantly raising that of women older than 50. In this paper, we posit that labour demand and employability depend to a large extent on how the age/gender composition of the workforce affects firm’s profits. Using unique firm-level panel data we produce robust evidence on the causal effect of age/gender on productivity (value added per worker), total labour costs and gross profits. 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 firm’s age-gender mix choices in the short run) by combining first differences with i) the structural approach suggested by Ackerberg, Caves & Frazer (2006), ii) alongside more traditional IV-GMM methods (Blundell & Bond, 1998) where lagged values of labour inputs are used as instruments. Results suggest no negative impact of rising shares of older men on firm’s gross profits, but a large negative effect of larger shares of older women. Another interesting result is that the vast and highly feminized services industry does not seem to offer working conditions that mitigate older women’s productivity and employability disadvantage, on the contrary. This is not good news for older women’s employability and calls for policy interventions in the Belgian private economy aimed at combating women’s decline of productivity with age and/or better adapting labour costs to age-gender productivity profiles.
    Keywords: ageing workforce, gender, productivity, profitability, linked employer-employee data, endogeneity and simultaneity bias
    JEL: J11 J14 J21
    Date: 2012–07–18
  14. By: Nordman, Christophe Jalil (IRD, DIAL, Paris); Wolff, François-Charles (University of Nantes)
    Abstract: In this paper, we consider a model of on-the-job learning where workers learn informally by watching and imitating colleagues. We estimate the rate of knowledge diffusion inside the firm using two matched worker-firm data sets from Morocco and Senegal. We rely on non-linear least squares to estimate the structural parameters of the informal learning model and account for firm heterogeneity using firm factors derived from a principal component analysis. We find that the rate of knowledge diffusion is around 7 percent in Morocco and Senegal, but part of the learning-by-watching returns stems from firm heterogeneity. Informal training significantly affects the shape of returns to tenure in these two countries. Finally, we estimate an extended model with both learning-by-watching and learning-by-doing and find significant benefits from imitating colleagues in Morocco.
    Keywords: earnings functions, informal training, learning-by-watching, learning-by-doing, returns to tenure, Morocco, Senegal
    JEL: J24 J31 O12
    Date: 2012–07
  15. By: Bauer, Thomas K. (RWI); Kasten, Tanja (RWI); Siemers, Lars (University of Siegen)
    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: 2012–07
  16. By: Torben Dall Schmidt; Peter Sandholt Jensen
    Abstract: In recent years, foreign labour has become an essential issue in Western Europe. Recent research suggests that foreign labour has implications for regional growth patterns and employment opportunities of native workers. Yet, few studies go into the dimension of the regional determinants of recruitment of foreign labour underlying these regional growth effects. Therefore, this paper considers determinants of the regional location of foreign labour. Specifically, we investigate the role of social networks for the spatial distribution of work permits in the context of the Danish regions. We first investigate motives for recruiting foreign labour by analysing the particular case of Southern Denmark relying on recently collected employer survey data with roughly 2,000 records. We also analyse on regional differences in work permits across all Danish regions.
    Date: 2011–09
  17. By: Biewen, Martin (University of Tuebingen)
    Abstract: This paper proposes a comprehensive, path-independent decomposition formula of changes into ceteris paribus effects and interaction effects. The formula implies a reassessment of sequential decomposition methods that are widely used in the literature and that are restrictive in how they treat interaction effects. If counterfactual outcomes are correctly specified, it may also be viewed as a description of certain aspects of causality in the situation where more than one causal influence is present.
    Keywords: ceteris paribus effects, interaction effects, Oaxaca-Blinder decomposition
    JEL: J31 J71 C02 D31
    Date: 2012–07
  18. By: Goodall, Amanda H. (IZA); Pogrebna, Ganna (University of Sheffield)
    Abstract: This paper is an attempt to understand the effects of leaders on organizational performance. We argue for an ‘expert leader’ model of leadership. We differentiate between four kinds of leaders according to their level of inherent knowledge and industry experience. After controlling for confounding variables, teams led by leaders with extensive knowledge of the core business perform better than others. Our study collects and analyses 60 years of data from one of the world’s most competitive high-technology sectors (Formula 1 competition) in which each organization’s performance can be measured objectively. We show that the most successful team leaders in F1 motor racing are more likely to have started their careers as drivers and mechanics compared with leaders who were principally managers or engineers with degrees. There is a notable association between driving and later success as a leader. Within the sub-sample of former drivers, those with the longest driving careers go on to be the most successful leaders.
    Keywords: expert leaders, leadership, organizational performance, high-tech, teams
    JEL: J33 M5 D22 O32 J24
    Date: 2012–07
  19. By: Giovanni Russo; Peter Nijkamp; Aura Reggiani; Federico Tedeschi
    Abstract: This paper offers an exploratory investigation of the effects of inbound commuter flows on employment in regional labour markets in Germany. For this purpose, we distinguish three channels that could transmit the effects concerned: a crowding-out mechanism, and two labour demand effects (the first is an aggregate demand effect, while the second is a positive externality on vacancy creation). To this end, we develop a stepwise commuting impact model. Our results bring to light that, on the whole, commuter flows have a positive and robust effect on both employment and the number of jobs in the receiving labour market districts, but a distinctly negative effect on the share of jobs filled by resident workers. We then interpret the implications of our results, and, finally, we suggest ways in which the analysis could be improved and expanded.
    Date: 2011–09

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