nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2012‒09‒09
ten papers chosen by
Erik Jonasson
Lund University

  1. Wages and Informality in Developing Countries By Costas Meghir; Renata Narita; Jean-Marc Robin
  2. Skills for the 21st century: Implications for education By Allen Jim; Velden Rolf van der
  3. Why to employ both migrants and natives? A study on task-specific substitutability By Anette Haas; Michael Lucht; Norbert Schanne
  4. Revisiting wage, earnings, and hours profiles By Rupert, Peter; Zanella, Giulio
  5. Returns To College Over Time: Trends In Europe In The Last 15 Years. Stuck On The Puzzle. By Elena Crivellaro
  6. Decomposing wage discrimination in Germany and Austria with counterfactual densities By Thomas Grandner; Dieter Gstach
  7. The returns to education for opportunity entrepreneurs, necessity entrepreneurs, and paid employees By Fossen, Frank M.; Büttner, Tobias J. M.
  8. Promotion policy, wage and firm size By Zax, Ori
  9. Estimating the External Returns to Education: Evidence from China By Wen Fan; Yuanyuan Ma
  10. Employability-miles and worker employability awareness By Gerards Ruud; Grip Andries de; Witlox Maaike

  1. By: Costas Meghir; Renata Narita; Jean-Marc Robin
    Abstract: It is often argued that informal labor markets in developing countries promote growth by reducing the impact of regulation. On the other hand informality may reduce the amount of social protection offered to workers. We extend the wage-posting framework of Burdett and Mortensen (1998) to allow heterogeneous firms to decide whether to locate in the formal or the informal sector, as well as set wages. Workers engage in both off the job and on the job search. We estimate the model using Brazilian micro data and evaluate the labor market and welfare effects of policies towards informality.
    JEL: J24 J3 J42 J6 O17
    Date: 2012–08
  2. By: Allen Jim; Velden Rolf van der (ROA rm)
    Abstract: The world is changing rapidly in a lot of ways, but the dominant change is in ICT.Changing technology has far-reaching implications for how we act and interact at work,in education, in civic life and at home. Furthermore, this change is in large part the drivingforce behind many of the other major changes, such as globalization and flexibilizationThese changes have led many scholars to point to a new set of skills – the so-called21st century skills – that are thought to be essential for people’s ability to functionand participate fully in today’s world. While we do not dispute the importance of these21st century skills, we do caution against blindly pursuing these skills and neglectingother more traditional classes of skill, such as basic skills (reading and math) as well asspecialized knowledge and abilities – the so-called specific skills.Educational policy and practice should proceed from the insight that skills of individualhuman beings form a complete interdependent package of all these three kinds ofskills: basic skills, specific skills and 21st century skills. It is far more fruitful to view 21stcentury skills in relation to the basic skills that underlie them and the specific skills thatthey combine with in concrete purposive action.In this essay we present a framework for the evaluation of what we know about ourcurrent situation in terms of various kinds of skills and learning which alerts us to gapsin our knowledge that need to be filled for future policy purposes. It also performs asimilar function when looking at the challenges facing education and what educationcan do to meet these challenges.
    Keywords: labour market entry and occupational careers;
    Date: 2012
  3. By: Anette Haas (Institut für Arbeitsmarkt- und Berufsforschung (IAB)); Michael Lucht (Institut für Arbeitsmarkt- und Berufsforschung (IAB)); Norbert Schanne (Institut für Arbeitsmarkt- und Berufsforschung (IAB))
    Abstract: This paper analyzes the performance of migrants on the German labor market and its dependence on the tasks performed on their jobs. Recent work suggests quantifying the imperfect substitutability relationship between migrants and natives as a measure for the hurdles migrants have to face. Our theoretical work adopts that migrant shares are very heterogeneous across firms which is hard to reconcile with an aggregate production function. We argue that the ability to integrate migrants may form a competitive advantage for firms. We show in a Melitz-type framework that the output reaction to wage changes varies across firms. Hence, substitution elasticities of an aggregate production function can be quite different from those individual firms are faced with. Finally we estimate elasticities of substitution for different aggregate CES-nested production functions for Germany between 1993 and 2008 using administrative data and taking into account the task approach. We find significant variation in the substitutability between migrants and natives across qualification levels and tasks. We show that especially interactive tasks seem to impose hurdles for migrants on the German labor market.
    Keywords: Heterogeneity, Migrants, Substitution Elasticity, Tasks
    JEL: J15 J24 J31
    Date: 2012–08
  4. By: Rupert, Peter; Zanella, Giulio
    Abstract: We document empirical life cycle profiles of wages, earnings, and hours of work for pay from the Panel Study of Income Dynamics, following the same workers for up to four decades along the intensive margin of labor supply. For six of the eight cohorts we analyze the wage profile does not decline with age, while the earnings profile always does. The discrepancy is explained by a sharp drop of the hours profile beginning shortly after age 50, when many workers start a smooth transition into retirement by working progressively fewer hours. This pattern is not an artifact of staggered abrupt retirement, and is robust to attrition- and selection correction (i.e., to taking into account that the composition of our sample, for a given cohort, changes over time). We explore the nontrivial restrictions on dynamic models of the aggregate economy that this evidence suggests, and we provide numerical profiles that can be readily used in quantitative macroeconomic analysis.
    Keywords: Economics, General, Economics, Other, International Economics, life cycle, wage profile, labor supply, intensive margin human capital, preretirement
    Date: 2012–08–29
  5. By: Elena Crivellaro (University of Padova)
    Abstract: While there has been intense debate in the empirical literature about the evolution of the college wage premium in the US, its evolution in Europe has been given little attention. This paper aims to investigate the evolution of the returns to higher education in 12 European countries from 1994 to 2009. In particular, it explores how does this evolution affect wage inequality and how it differs across age cohorts. The period of interest has seen higher education participation rate increasing dramatically: graduate supply considerably outstripped demand which ought to imply a fall in the premium. I use cross country variation in relative supply, demand and labour market institutions to look at their effects on the trend in the college wage gap. I address possible concerns of endogeneity of relative supply by an instrumental variable strategy. Results show a significant decline of college returns in countries with higher relative supply of skilled workers and a marked fall in college returns for recent cohorts for both men and women in all European countries. find evidence that both market and non market factors matter in explaining wage inequality. More specifically, the estimated growth in the wage gap appears negatively correlated to changes in relative supply and positively correlated with the relative demand index, in particular, in countries with higher relative supply of skilled workers, that present a stronger decline in the returns to college. Institutional constraints also matter.
    JEL: J24 J31 D31 I24
    Date: 2012–07
  6. By: Thomas Grandner (Vienna University of Economics and Business); Dieter Gstach (Vienna University of Economics and Business)
    Abstract: Using income and other individual data from EU-SILC for Germany and Austria, we analyze wage discrimination for three break-ups: gender, sector of employment, and country of origin. Using the method of Machado and Mata [2005] the discrimination over the whole range of the wage distribution is estimated. Significance of results is checked via confidence interval estimates along the lines of Melly [2006]. To narrow down the extent of discrimination both basic decomposition possibilities are compared. The economies of Germany and Austria appear structurally very similar. Especially the institutional setting of the labor markets seem to be closely comparable. One would, therefore, expect to find similar levels and structures of wage discrimination. Our findings deviate from this conjecture significantly.
    Keywords: Wage discrimination, decomposition, quantile-regression
    JEL: J31 J71
    Date: 2012–08
  7. By: Fossen, Frank M.; Büttner, Tobias J. M.
    Abstract: We assess the relevance of formal education for the productivity of the self-employed and distinguish between opportunity entrepreneurs, who voluntarily pursue a business opportunity, and necessity entrepreneurs, who lack alternative employment options. We expect differences in the returns to education between these groups because of different levels of control. We use the German Socio-economic Panel and account for the endogeneity of education and non-random selection. The results indicate that the returns to a year of education for opportunity entrepreneurs are 3.5 percentage points higher than the paid employees' rate of 8.1%, but 6.5 percentage points lower for necessity entrepreneurs. --
    Keywords: returns to education,opportunity,necessity,entrepreneurship
    JEL: J23 J24 J31 I20 L26
    Date: 2012
  8. By: Zax, Ori
    Abstract: In contrast to the predictions of conventional economic theory, it is well documented that similar workers receive wages positively correlated with the size of the firm employing them. To explain these findings the author augments the Waldman framework (Job Assignments, Signaling, and Efficiency, 1984) by adding a size variable and construct a dynamic model of promotion and workers' transitions where the firms' competition over workers is via the promotion policy and the wage levels. In equilibrium, managers in larger firms are on average better, thus commanding and receiving a higher wage than their counterparts in smaller firms, while the laborers of the larger firms receive higher wages to compensate them for the lower promotion rates in such firms. Hence the wage-size correlation is shown to be consistent with conventional economic theory in a large class of plausible environments. --
    Keywords: Firm size and wages,promotion decisions,hierarchies
    JEL: J30 J31 M51
    Date: 2012
  9. By: Wen Fan (University College Dublin); Yuanyuan Ma (University College Dublin)
    Abstract: Good understanding on the human capital externalities is important for both policy makers and social science researchers. Economists have speculated for at least a century that the social returns to education may exceed the private returns. In this paper, using the longitudinal data from China Health and Nutrition Survey (CHNS), we examine how individual wage changes associated with the share of college graduates in the same province across years for a person who has never moved by implementing individual fixed effects estimates. The individual fixed effect model shows that the external returns to education in China appear to be negative and on the order of -2%, which might be biased by potential endogeneity. Concerned with this problem, we then implement the IV fixed effect estimates and find positive external returns to education at about 10%. We also find this returns differ across individual heterogeneity.
    Keywords: Education, Externalities, Spillover, Signalling, China
    JEL: J0 J24 O15
    Date: 2012–08–29
  10. By: Gerards Ruud; Grip Andries de; Witlox Maaike (ROA rm)
    Abstract: This article studies the use and impact of a firm-sponsored training (“Employabilitymiles”)voucher scheme that aims to stimulate employees to develop a more activeattitude toward their own employability. Using data from two surveys of the firm’sworkforce, we find that voucher use is related to various personality traits and personalcharacteristics. In particular, a worker’s ambition, goal setting, and education level arepositively related to voucher use. In addition, women and those with longer tenure spendtheir vouchers more often. Conversely, workers with a more positive self-image as wellas those who are negatively reciprocal spend their vouchers less often. The negativerelation between voucher use and negative reciprocity suggests that workers whoare more negatively reciprocal perceive the voucher as a threat. Further, we find thatvoucher use positively affects worker employability awareness and willingness to train.Remarkably, participation in non-voucher training shows little relation to personalitytraits. From a human resources perspective, this finding suggests that by employing avoucher scheme, the firm makes training participation more dependent on employeepersonality and individual characteristics instead of human resources practices.
    Keywords: education, training and the labour market;
    Date: 2012

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