nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2012‒11‒03
twelve papers chosen by
Erik Jonasson
Lund University

  1. Minimum wages: do they really hurt young people? By Sofía Galán; Sergio Puente
  2. Driving Up Wages: The Effects of Road Construction in Great Britain By Rosa Sanchis-Guarner
  3. University Quality and Labour Market Outcomes of Canadian Youth By Joniada Milla
  4. The Careers of Immigrants By Ana Damas de Matos
  5. Trends in China’s gender employment and pay gap: estimating gender pay gaps with employment selection By Chi, Wei; Li, Bo
  6. Stature and life-time labor market outcomes: Accounting for unobserved differences By Bockerman, Petri; Vainiomäki, Jari
  7. A “Human Growth” Perspective on Organizational Resources and Firm Performance By Silvia Sacchetti; Ermanno C. Tortia
  8. Informal incentive labour contracts and product market competition By Nicola Meccheri; Luciano Fanti
  9. Managerial delegation schemes in a duopoly with endogenous production costs: a comparison By Nicola Meccheri; Luciano Fanti
  10. Endogenous labour supply, habits and aspirations By Luciano Fanti
  11. Consequences of a boost of mandatory retirement age on long run income and PAYG pensions By Luciano Fanti
  12. PAYG pensions and fertility drop: some (pleasant) arithmetic By Luciano Fanti

  1. By: Sofía Galán (Banco de España); Sergio Puente (Banco de España)
    Abstract: We estimate the effects of a significant increase in the minimum wage in Spain between 2004 and 2010 on the individual probability of losing employment, using a large panel of social security records. Our main finding is that older people experienced the largest increase in the probability of losing their job, when compared with other age groups, including young people. The intuition is simple: among the affected (low-productivity) workers, young people are expected to increase their productivity more than older ones, who are in the flat part of their life-cycle productivity curve. Consequently, an employer facing a uniform increase in the minimum wage may find it profitable to retain young employees and to fire older ones
    Keywords: Minimum wage, labour demand, firing
    JEL: J23 J38 J63
    Date: 2012–10
  2. By: Rosa Sanchis-Guarner
    Abstract: This paper estimates the effects of road construction on individual labour market outcomes using micro-data from Great Britain between 2002 and 2008. To capture these effects, I use a measure of accessibility to employment through the road network at a very detailed geographical level. I test the effect of accessibility changes on weekly wages and hours worked. In order to tackle potential sources of bias, I use an instrumental variable which exploits the variation in employment accessibility stemming only from changes in minimum travel times between locations. I argue that, conditional on controls, small scale spatial variation in the accessibility impact of road construction can be considered to be exogenous because road schemes are aimed to improve connectivity and reduce congestion for wider and more distant areas. I further use home and work location specific individual fixed-effects to control for endogenous sorting of workers and I also restrict the sample to workers who are located very close to the projects. I find a positive impact of accessibility from work location on weekly wages and total hours worked but no effect of accessibility from home neither on wages nor hours, conditional on commuting time. These effects are not due to selection into employment as a result of road construction. I also find evidence of accessibility from home reducing commuting travel time. Increased spatial competition or agglomeration externalities are potential explanations for the findings.
    Keywords: Job accessibility, labour markets, roads, spatial sorting
    JEL: J31 R12
    Date: 2012–10
  3. By: Joniada Milla (Department of Economics, University of Guelph)
    Abstract: This paper estimates the wage returns to the Canadian university reputation and quality by using the Maclean's magazine Best Overall Reputation ranking and a quality ranking based on an index constructed by the Principal Component Analysis of a set of university characteristics. The main data source is Youth in Transition Survey and the outcome of interest is the hourly wage rate of Canadian youth between 2003-2005. Using matching methods we draw some main results from this analysis. First, we find that returns to having a Bachelor's degree from a higher versus lower ranking university is 10.3% for women and 13.4% for men. The returns are higher when comparing the wages in the top and bottom tails of the reputation ranking distribution. Second, there are returns to university quality but the results are mixed. Third, the ranking premiums are higher for men than women. The results are robust through different specifications, sample exclusions and estimators.
    Keywords: Returns to Education, University Quality, Reputation, Wage Rates
    JEL: C21 I21 J16 J30
    Date: 2012
  4. By: Ana Damas de Matos
    Abstract: I use a unique linked employer employee panel covering all wage earners in the private sector in Portugal to shed new light on the careers of immigrants. During the first ten years in the country immigrants close one third of the initial immigrant-native wage gap. I show that one third of this wage catch-up is accounted for by firm heterogeneity: Immigrants remain in the same occupations but get jobs with better paying _rms. Over time immigrants move to larger, more productive firms and with a higher share of native workers. These patterns are similar for all the recent immigrants irrespective of their origin and in particular of whether their mother tongue is the host country's language. Motivated by these new stylized facts, I suggest an economic assimilation mechanism which highlights imperfect information about immigrant productivity. I build an employer learning model with firm heterogeneity and complementarities between worker and firm type. The initial uncertainty over immigrants' productivity prevents them from getting access to the best jobs. Over time, productivity is revealed and immigrants obtain better firm matches. I derive predictions on the immigrant wage distributions over time, on their mobility patterns and on the productivity distribution of firms they are matched with. The predictions of the model are in line with the data and are not trivially derived from competing explanations.
    Keywords: Wage differentials, wage convergence, job mobility, immigration, linked employer-employee panel data
    JEL: J31 J61 J63
    Date: 2012–10
  5. By: Chi, Wei; Li, Bo
    Abstract: In contrast to the United States and European countries, China has witnessed a widening gender pay gap in the past two decades. Nevertheless, the size of the gender pay gap could still be underestimated as a result of not accounting for the low-wage women who have dropped out of the labor force. As shown by a large and representative set of household survey data in China, since the 1980s the female employment rate has been falling and the gap between male and female employment rates has been increasing. We estimate the bounds of the raw gender pay gap in China, taking into consideration the different male and female employment rates. To tighten the bounds, we use an instrumental variable, having a child aged less than 6 years. The results support the view that the raw gender pay gap, as large as it has been, is still underestimated.
    Keywords: Gender pay gap; gender employment gap; bounds; instrumental variable
    JEL: J3
    Date: 2012–10
  6. By: Bockerman, Petri; Vainiomäki, Jari
    Abstract: We use twin data matched to register-based individual information on earnings and employment to examine the effect of height on life-time labor market outcomes. The use of twin data allows us to remove otherwise unobserved ability and other differences. The twin pair difference estimates from instrumental variables estimation for genetically identical twins reveal a significant height-wage premium for women but not for men. This result implies that cognitive ability explains the effect of height on life-time earnings for men. Additional findings using capital income as the outcome variable suggest that discrimination against short persons may play a role for women.
    Keywords: Height; Weight; BMI; Height premium; Earnings; Employment
    JEL: J31 J23 I10
    Date: 2012–10–25
  7. By: Silvia Sacchetti; Ermanno C. Tortia
    Abstract: We define immaterial satisfaction as the degree of wellbeing that workers derive from creativity, autonomy, and personal growth, overall self-fulfillment. These are dimensions of satisfaction that we relate, from American pragmatism, to the use of creative intelligence. The paper deals with the mediating role of immaterial satisfaction between organizational processes (defined by teamwork, on-the-job autonomy and involvement) and organizational performance (defined in terms of improvements in product quality and innovation). We address this relationship in the Italian social service sector. To this end, we implement a structural equation model including both observed and latent variables using a survey dataset that concerns 4134 workers and 320 not-for-profit social cooperatives. The analysis of direct, indirect and total effects in the structural model shows that autonomous innovation positively influences performance. It also shows that impact immaterial satisfaction adds to the impact of worker involvement in making involvement bear positively on performance, while it also reduces the negative impact of task-autonomy. Common method bias is controlled for by resorting to post-hoc testing and by introducing three distal sources of subjective data from directors, managers and paid workers
    Keywords: Dewey, satisfaction, creativity, autonomy, involvement, firm performance
    JEL: J28 J81 L15 L25 L84 M54
    Date: 2012
  8. By: Nicola Meccheri; Luciano Fanti
    Abstract: This paper studies the dynamic interaction between product market competition and incentives against shirking. It is shown that efficiency wages can both increase and decrease when competition becomes fiercer. Instead, discretionary bonuses do not vary with competition but there exists an upper threshold for the number of competing firms, over which such schemes are no longer sustainable as equilibrium. Finally, industry profits under bonuses are generally higher than under eciency wages, but the reverse actually applies when information about firms’ misbehaviour flows at a low rate and the number of firms exceeds the critical threshold.
    Keywords: eciency wages, discretionary bonuses, competition, industry profits
    JEL: J33 J41 L13
    Date: 2012–06–01
  9. By: Nicola Meccheri; Luciano Fanti
    Abstract: In this paper we study how managerial delegation schemes in a duopoly product market interact with wage decisions taken by a monopoly central (industry-wide) union in the labour market. We analyse a model where, at the first stage, firms’ owners optimally choose for their managers a delegation contract that can be “sales delegation” or “relative profit delegation”; at the second stage, the union fixes the wage for all (non-managerial) workers in the industry; and finally, at the third stage, managers compete in the product market. Interestingly, our results prove to be more varied with respect to findings by the managerial delegation literature with exogenous production costs for firms. Most notably, it is pointed out that, in equilibrium, both firm profitability and welfare outcomes can be superior under both sales delegation and relative profit delegation, depending on various factors such as the degree of product differentiation and the competition regime.
    Keywords: sales delegation, relative profit delegation, unionised duopoly, endogenous wage.
    JEL: J33 J51 L13
    Date: 2012–06–01
  10. By: Luciano Fanti
    Abstract: Motivated by the increasing literature on endogenous preferences, this paper investigates the implications of the introduction of habit and aspiration formation when labour supply is endogenous, in an OLG small open economy. In contrast with models with exogenous labour supply where aspirations always reduce economic performance, we show that in a model with endogenous labour supply greater aspirations lead to a higher long run savings and economic performance, through their impact on the labour/leisure choice.
    Keywords: Endogenous preferences; Fertility; OLG model.
    JEL: J22 O41
    Date: 2012–09–01
  11. By: Luciano Fanti
    Abstract: In this paper we study the effects of a boost of the mandatory retirement age, which is largely advocated in most countries facing with both the decline in the labour force participation of elderly workers and the increasing population ageing. It is shown, in the basic two-period overlapping generations model of growth (Diamond, 1965), that the postponement of the retirement age may be harmful for long run income and when the capital’s share is sufficiently high even PAYG pensions are reduced. In conclusion, since it is shown that the age of retirement might be reduced obtaining a higher income and even higher pension benefits, then our results suggest that the idea that a higher mandatory age of retirement is always beneficial in the long run for income and pension payments is theoretically controversial.
    Keywords: Retirement age; Pensions; OLG model
    JEL: J26 O41
    Date: 2012–09–01
  12. By: Luciano Fanti
    Abstract: This paper explores whether the common belief that the currently observed fertility drop is a threat (or, conversely, the invoked fertility recovery is beneficial) for PAYG pensions is really always validated by the basic accounting of the PAYG pension budget. It is shown, through a simple arithmetic, that, rather surprisingly, in the long run a fertility drop may be beneficial, while, conversely, a fertility recovery may be harmful for pensions, under rather realistic conditions as regards both fertility changes and time costs of childrearing. Furthermore, this result also holds a fortiori in the short run.
    Keywords: Fertility; PAYG pension; OLG model.
    JEL: J26 O41
    Date: 2012–09–01

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