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on Labor Markets - Supply, Demand, and Wages |
| By: | Antoni, Manfred (Institute for Employment Research (IAB), Nuremberg); Heineck, Guido (University of Bamberg) |
| Abstract: | Is there a reward for basic skills in the German labor market? To answer this question, we examine the relationship between literacy, numeracy and monthly gross earnings of full-time employed workers. We use data from the ALWA survey, augmented by test scores on basic cognitive skills as well as administrative earnings data. Our results indicate that earnings are positively related to both types of skills. There furthermore is no evidence for non-linearity in this relationship and only little heterogeneity when differentiating by sub-groups. |
| Keywords: | literacy, numeracy, earnings, administrative data, Germany, ALWA |
| JEL: | I21 J31 |
| Date: | 2012–09 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp6882&r=lma |
| By: | Richard Blundell; Luigi Pistaferri; Itay Saporta-Eksten |
| Abstract: | In this paper we examine the link between wage inequality and consumption inequality using a life cycle model that incorporates household consumption and family labor supply decisions. We derive analytical expressions based on approximations for the dynamics of consumption, hours, and earnings of two earners in the presence of correlated wage shocks, non-separability and asset accumulation decisions. We show how the model can be estimated and identified using panel data for hours, earnings, assets and consumption. We focus on the importance of family labour supply as an insurance mechanism to wage shocks and find strong evidence of smoothing of males and females permanent shocks to wages. Once family labor supply, assets and taxes are properly accounted for their is little evidence of additional insurance. |
| JEL: | E21 J22 |
| Date: | 2012–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:18445&r=lma |
| By: | Uwe Blien; Susanne Messmann; Mark Trappmann |
| Abstract: | Reservation wages indicate the wage threshold for which individual workers are inclined to supply their working capacity. In important theoretical approaches it is assumed that this threshold depends on the unemployment rate. If this is true, the variation of reservation wages might be an important force behind the regional 'wage curve', which has been estimated in many empirical studies. Up to now, the connection to reservation wages has not been tested, since research are rather limited, since they depend on the availability of survey data. With the 'Labour Market and Social Security' study (PASS), a new large panel survey in Germany, information on re-gional reservation wages is available. PASS provides many variables usually expected to determine wages, such as gender, age, qualification etc. The data available therefore provides an excellent opportunity to test the relationship between unemployment and reservations wages. The analysis opens up the 'black box' of the wage generation process and delivers insights about its determining factors. J31, C20, R10 wage curve, reservation wage, regional labour markets |
| Date: | 2012–10 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa12p662&r=lma |
| By: | Piopiunik, Marc (Ifo Institute for Economic Research); Schwerdt, Guido (Ifo Institute for Economic Research); Woessmann, Ludger (Ifo Institute for Economic Research) |
| Abstract: | Many countries use centralized exit exams as a governance devise of the school system. While abundant evidence suggests positive effects of central exams on achievement tests, previous research on university-bound students shows no effects on subsequent earnings. We suggest that labor-market effects may be more imminent for students leaving school directly for the labor market and, on rigid labor markets, for unemployment. Exploiting variation in exit-exam systems across German states, we find that central exams are indeed associated with higher earnings for students from school types directly bound for the labor market, as well as with lower unemployment. |
| Keywords: | unemployment, earnings, central exit exams, Germany |
| JEL: | I20 J24 J31 J64 |
| Date: | 2012–09 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp6889&r=lma |
| By: | Joyce Burnette |
| Abstract: | In spite of the large literature on labor market discrimination, the quantity of solid evidence on discrimination is relatively limited. This is because evidence of discrimination is difficult to obtain. Two individuals may be treated equally, but this does not prove discrimination unless we can show that the differences in treatment were not justified by differences in productivity. The method most commonly used to identify wage discrimination, the Oaxaca decomposition, is flawed because any omitted variables that are correlated with gender will contribute to the unexplained portion of the wage gap, leading to an over- or under-estimation of wage discrimination. Audit studies provide more direct evidence of differential treatment, but are costly to carry out. Only a small number of studies attempt to measure worker productivity to see if wage differences are justified. This may be because the data needed to measure productivity are difficult to obtain. This paper tests for wage discrimination by gender and race by estimating relative productivity from 2002 Census of Manufacturing data linked to demographic information on workers from Longitudinal Employer-Household Dynamics (LEHD) files. Comparing the estimated productivity ratios to the observed wage ratios, I conclude that females and blacks face wage discrimination in US manufacturing. |
| Date: | 2012–09 |
| URL: | http://d.repec.org/n?u=RePEc:cen:wpaper:12-23&r=lma |
| By: | John K. Dagsvik and Zhiyang Jia (Statistics Norway) |
| Abstract: | This paper discusses a modeling framework in which workers are assumed to choose their preferred job from latent worker-specific choice sets. This point of departure yields a framework that formalizes the widely used ad hoc approaches (fixed cost of working and dummies at peak hours) in the literature of discrete labor supply models. We discuss the conditions under which the preferences and job opportunity restrictions can be separated using conventional data on hours and wages only. Subsequently, we show that the framework is consistent with stochastic choice sets and a relaxation of the IIA assumption. An empirical model version for married/cohabiting couples is estimated using Norwegian micro data. Based on the empirical model, we discuss further important empirical issues, such as functional form, prediction performance and simulation of counterfactual policy reforms. |
| Keywords: | Labor supply; non-pecuniary job attributes; latent choice sets; random utility models. |
| JEL: | J22 C51 |
| Date: | 2012–10 |
| URL: | http://d.repec.org/n?u=RePEc:ssb:dispap:709&r=lma |
| By: | João Pereira; Aurora Galego |
| Abstract: | The issue of regional wage differentials is relevant both for policy proposes and general public discussion. A sound knowledge of the distribution of wage inequalities and their causes is essential for defining policy measures for reducing spatial income inequalities. A range of empirical studies have analysed regional wage differentials for a number of countries (Blackaby and Manning, 1990; Blackaby and Murphy, 1995; Duranton and Monastiriotis, 2002; GarcÃÂa and Molina, 2002). Typically, these studies are based on OLS estimates and the decomposition method devised by Blinder (1973) and Oaxaca (1973), which focuses on the analysis of wages differences at the mean of the conditional earnings distribution. This approach provides a reasonable description of wage distributions when they are unimodal, symmetric and have similar variances (Butcher and Dinardo, 2002). However, in general, these conditions may be not fulfilled. Therefore, wage differentials should be analysed along the entire wage distribution. This paper seeks to build on previous research in a number of different ways. Firstly, unlike most previous studies, we estimate regional wage equations by quantile regression in order to analyse the effect of covariates at several points on the wage distribution. Secondly, we apply the quantile-based decomposition method suggested by Machado and Mata (2005) and Melly (2005a, 2006) to decompose regional wage differentials at several points of the wage distribution. This method is of a semi-parametric nature, which allows for the estimation of significance tests and confidence intervals of wage decomposition effects (characteristics and returns). This marks a clear difference in relation to the non-parametric method suggested by Dinardo et al. (1996) and Butcher and Dinardo (2002) and applied by Motellón et al. (2011), which does not allow such significance tests to be performed. To the best of our knowledge, this is the first application of the methods proposed by Machado and Mata (2005) and Melly (2005a, 2006) in the context of regional wage differentials. We consider the case of Portugal, a small country with significant and quite stable regional wage differentials (Vieira et al., 2006; Pereira and Galego, 2011). Our findings reveal that coefficients estimates along the wage distribution for each region and between the various regions are not stable. Moreover, these findings confirm previous evidence as to the existence of significant regional wage differences between the Lisboa region and the other regions, and also reveal increasing differentials across the wage distribution. Finally, with regard to the regional wage decomposition, we conclude that both the part relating to differences in characteristics and the part relating to differences in returns to these characteristics are in general statistically significant and increase across the entire wage distribution. |
| Date: | 2012–10 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa12p19&r=lma |
| By: | Alejandro GarcÃa-Pozo; Andrés J. Marchante-Mera; José Luis Sánchez-Ollero; José López-Rubio; Carlos G. Benavides-Chicón |
| Abstract: | In this paper, the diversity of job characteristics and wage gaps in the Spanish hotel industry due to different employer size have been studied. A labour market in which wages depend on employer size means the characteristics of the same job differs between firms. In the hotel industry the data indicate significant differences in the nature of the job according to the size of the establishment. This topic has been analysed for many economic sectors but, as far as we know, not for the hotel industry. Using data from the research project “Mismatch in education, productivity and wages in the Andalusian tourism sectorâ€, the first aim was to establish whether there was a similar positive relationship between employer size and wages in the hotel industry. The second aim was to account for wage premia earned by workers employed by larger hotels taking into account the specific characteristics of each establishment. The results have shown that even after controlling for the workers’ observable characteristics and the other determinants of our wage equation, a substantial wage differential remained between large and small establishments. To achieve these aims four hypotheses on productivity, labour quality, working conditions and internal labour markets was tested. Based on adding the productivity measure, the results show that this variable accounts for 17.8% of the establishment-size wage premium. Similar results were obtained when adding our own measures of working conditions. However, the size-wage relationship remains almost unaffected when controlling for labour quality and internal labour market variables. It is also possible that large establishments pay higher wages simply because they employ workers with more unobserved abilities. To take into account the workers’ unobserved heterogeneity, we need to specify a model that allows for the potential self-selection by workers of hotels of various sizes, and this is a task that cannot be achieved with the available data. However, bearing in mind that different explanatory hypotheses of wage differences between different size hotels have different implications for the management of human resources, identifying the sources of the wage-establishment size effect is a relevant question for future research. Key words: Hotel industry, employer size, segmented labour markets, wage gaps, productivity and working conditions. JEL codes: J31, L83, R23. |
| Date: | 2012–10 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa12p285&r=lma |
| By: | Klaus Nowotny |
| Abstract: | Stylized facts show that migrants more often face overqualified employment than natives. As shown by previous research, one third of the employed foreign born with tertiary education in the EU-15 are overqualified, with levels reaching up to 57.6%, compared to 20.9% among natives. Among the employed foreign born with medium education levels (ISCED 3-4), about one fifth (19.8%) is overqualified in the EU-15, compared to 7.4% of the natives. For the U.S., research shows that among employed migrants with tertiary education who immigrated in the 1990s only 21-76% obtained skilled jobs, depending on the country of origin. Whether this 'brain waste' is 'involuntary', e.g., the result of labor market discrimination or due to limited transferability of qualifications, or 'voluntary' is, however, unresolved; migrants may be willing to accept a job-skill-mismatch as long as they receive a compensation for working in overqualified employment. This paper therefore analyzes the impact of the willingness to accept overqualified employment on the reservation wage of prospective medium and highly skilled migrants. The empirical analysis uses individual level data surveyed in 2010 in Austria, the Czech Republic, Slovakia and Hungary. The survey was designed to identify migration and cross-border commuting intentions in these four countries and is especially suited to the analysis in this paper because it avoids the selection problems which would be associated with estimating migrants' reservation wages after migration. The theoretical and empirical models in this paper show that overqualified employment is not necessarily the outcome of labor market discrimination of migrants in the host country, but can also represent the migrant's rational choice as long as she is compensated for the disutility of the job-skill mismatch by a higher wage: according to the empirical estimates the compensation required for accepting overqualified employment abroad is about 11% of the income the individual could earn at home. Furthermore, the relative reservation wage increases with age. A higher income at home on the other hand decreases the relative reservation wage, but the income variable is only significant at the 10% level. The estimated parameters of the country fixed effects show that even after controlling for individual characteristics the relative reservation wage in the CEECs considered (the Czech Republic, Slovakia and Hungary) is considerably higher than in Austria: according to the regression results, potential migrants from the CEE countries require a relative reservation wage that is 100-150% higher than those of prospective Austrian migrants. Keywords: brain waste, overqualification, migration, reservation wage, interval regression JEL codes: 15, J24, J31, F22, C24 |
| Date: | 2012–10 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa12p287&r=lma |
| By: | Hildegunn Stokke; Jørn Rattsø; Fredrik Carlsen |
| Abstract: | Income levels are higher in cities. The evidence for the income gap between urban and rural areas is overwhelming, but the agglomeration effect is hard to identify. Recent advances make use of individual level data to separate out sorting and instrumentation to handle the endogeneity of population density. We offer an analysis based on the whole working population in Norway with complete description of their education level. The data allow for estimation of the agglomeration effect for different education groups and the results show that agglomeration economies are increasing with education level. The elasticity of income with respect to population size and density is significantly lower for individuals with lower education. The result is robust to alternative instruments of urbanization and inclusion of amenity effects. JEL codes: J24, J31, J61, R12, R23 Key words: Agglomeration economies, urban wage premium, sorting, education groups |
| Date: | 2012–10 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa12p459&r=lma |
| By: | Johanna Wallenius (Stockholm School of Economics); Richard Rogerson (Princeton University) |
| Abstract: | We show that a life cycle model with home production implies a tight relationship between key preference parameters and the changes in time allocated to home production and leisure at retirement. We derive this relationship and use data from the ATUS to explore its quantitative implications. Our method implies that the intertemporal elasticity of substitution for leisure is quite large, in excess of one and possibly as high as two. |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed012:41&r=lma |
| By: | Terhi Maczulskij |
| Abstract: | This paper examines the role of genetic factors and shared environment in explaining the choice of working in the public sector and public-private sector pay gaps. The analyses are done using data for Finnish twins that span the period from 1990 to 2004. The data are based on two sources. The first data are Finnish Twin Cohort conducted by Department of Public Health in University of Helsinki. These data have been matched with the Finnish Longitudinal Employer-Employee Data (FLEED) kept by Statistics Finland. The standard behavioural genetics decomposition and DF (DeFries and Fulker 1985) analyses indicate that public sector employment is broadly influenced by the genetic factors by around 40 per cent, while the role of shared environment remains statistically zero. The results are robust across gender and different specifications. In the extended DF-analysis, the inclusion of potential confounders drops the point estimate of heritability to some 30 per cent for both sexes, and the education years and education field play a notable part of this respect. In other words, genetic factors might affect individuals to engage public sector employment through at least one obvious mechanism – educational outcomes. The model that treats all twins as individuals suggests that females receive a pay disadvantage of 4 per cent in the public sector, while the pay gap is somewhat higher for males being 7 per cent. The within-twin pair model for males yields a pay gap of zero – both in statistical and economical sense – and the difference in estimated pay gaps is mainly caused by the genetic factors, such as ability. This result indicates that private sector attracts relatively more able male workers that do the public sector. The results for females indicate that the pay gap is also zero, when all the family-specific effects are held constant in the analysis. However, the point estimate is -0.048, which give some evidence that there is an economical significance in the pay gap of approximately 5 per cent, and that neither the role of genetics nor shared environment plays a significant role in understanding the pay gap between the public and private sectors for females. Keywords: public sector employment; behavioural genetics; twin studies JEL classifications: J45; J13; J24 |
| Date: | 2012–10 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa12p755&r=lma |
| By: | Wolfgang Nagl; Stefan Arent |
| Abstract: | Using the introduction of fixed long-term unemployment benefits in Germany in 2005 as a unique experiment we find strong evidence that lower unemployment benefit has an adverse effect on wages. We use panel data to identify and estimate the effect of this structural break. In western Germany the effect is higher for men and increases with the skill level. In eastern Germany there is no systematic difference between men and women but the negative impact on wages is confirmed. |
| Date: | 2012–10 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa12p78&r=lma |
| By: | Zvi Eckstein (Tel Aviv University) |
| Abstract: | The major increase in the employment rate of married women while that of men remained almost unchanged is one of the most dramatic socioeconomic changes to have taken place during the last century. In this paper, we argue that shifts in social norms regarding household interaction in determining a married couple’s labor supply can provide an explanation. Specifically, we formulate and estimate a dynamic discrete-choice labor supply model, assuming that there are two types of households – Classical and Modern. The Classical household follows a Stackelberg leader game in which the wife’s labor supply decision follows her husband’s already-known employment outcome. The Modern family is characterized by a symmetric and simultaneous game that determines their joint labor supply and has a Nash equilibrium. The family type – Modern or Classical – is exogenously determined when the couple gets married but is not observable for estimation. The model is estimated using the Simulated Moments Method (SMM) and data from the Panel Study of Income Dynamics (PSID) survey for the years 1983-93. The estimated model accurately predicts employment rates and produces a good fit of mean wages to the data. We estimate that 38 percent of families are Modern and that the participation rate of women in those households is almost 80 percent. The employment rate of women in Classical families is 10 percent lower than that while the employment rates of men is almost identical in the two household types. These results support our hypothesis that part of the increase in labor supply of married women may be due to an increase in the share of Modern families in the population. |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed012:18&r=lma |
| By: | Biavaschi, Costanza (IZA); Eichhorst, Werner (IZA); Giulietti, Corrado (IZA); Kendzia, Michael J. (IZA); Muravyev, Alexander (St. Petersburg University GSOM and IZA); Pieters, Janneke (IZA); Rodríguez-Planas, Núria (IZA, IAE-CSIC and UPF); Schmidl, Ricarda (IZA); Zimmermann, Klaus F. (IZA and University of Bonn) |
| Abstract: | This paper focuses on the determinants of the labor market situation of young people in developed countries and the developing world, with a special emphasis on the role of vocational training and education policies. We highlight the role of demographic factors, economic growth and labor market institutions in explaining young people's transition into work. We then assess differences in the setup and functioning of the vocational education and training policies in major world regions, as an important driver of differential labor market situation of youth. Based on our analysis we argue in favor of vocational education and training systems combining work experience and general education and give some policy recommendations regarding the implementation of education and training systems adapted to a country's economic and institutional context. |
| Keywords: | vocational education and training, dual vocational training, youth employment, youth unemployment |
| JEL: | J24 I25 O17 |
| Date: | 2012–10 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp6890&r=lma |
| By: | Adrian Masters |
| Abstract: | Wage dispersion is generated in a sequential search environment through heterogeneity in firm productivity along with an individual wage-effort trade-off. For a given degree of TFP dispersion, the framework can generate any amount of wage dispersion. Calibrated to generate realistic gains from trade, it is able to generate the kind of wage dispersion observed in data. |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:nya:albaec:12-07&r=lma |
| By: | Edward P. Lazear; James R. Spletzer |
| Abstract: | The recession of 2007-09 witnessed high rates of unemployment that have been slow to recede. This has led many to conclude that structural changes have occurred in the labor market and that the economy will not return to the low rates of unemployment that prevailed in the recent past. Is this true? The question is important because central banks may be able to reduce unemployment that is cyclic in nature, but not that which is structural. An analysis of labor market data suggests that there are no structural changes that can explain movements in unemployment rates over recent years. Neither industrial nor demographic shifts nor a mismatch of skills with job vacancies is behind the increased rates of unemployment. Although mismatch increased during the recession, it retreated at the same rate. The patterns observed are consistent with unemployment being caused by cyclic phenomena that are more pronounced during the current recession than in prior recessions. |
| Date: | 2012–09 |
| URL: | http://d.repec.org/n?u=RePEc:cen:wpaper:12-28&r=lma |