nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2012‒12‒15
nine papers chosen by
Erik Jonasson
Lund University

  1. Nash Bargaining and the Wage Consequences of Educational Mismatches By Joop Hartog; Michael Sattinger
  2. Wage growth through job hopping in China By Kenn Ariga; Fumio Ohtake; Masaru Sasaki; Zheren Wu
  3. Job displacement and labor market outcomes by skill level By David Seim
  4. Labour Supply Responses to Paid Parental Leave By Karimi, Arizo; Lindahl, Erica; Skogman Thoursie, Peter
  5. Offshoring, Wages and Job Security of Temporary Workers By Holger Görg; Dennis Görlich
  6. Risk-sorting and preference for team piece rates By Vanessa Mertins; Agnes Baeker
  7. Estimating the Returns to Education Using a Sample of Twins - The case of Japan - By NAKAMURO Makiko; INUI Tomohiko
  8. Neighborhood Quality and Labor Market Outcomes: Evidence from Quasi-Random Neighborhood Assignment of Immigrants By Anna Piil Damm
  9. Antecedents of Attitudes Towards Risky Career Choices By Verena Jung; Sascha L. Schmidt; Benno Torgler

  1. By: Joop Hartog (University of Amsterdam); Michael Sattinger (University at Albany)
    Abstract: The paper provides a theoretical foundation for the empirical regularities observed in estimations of wage consequences of overeducation and undereducation. Workers with more education than required for their jobs are observed to suffer wage penalties relative to workers with the same education in jobs that only require their educational level. Similarly, workers with less education than required for their jobs earn wage rewards. These departures from the Mincer human capital earnings function can be explained by Nash bargaining between workers and employers. Under fairly mild assumptions, Nash bargaining predicts a wage penalty for overeducation and a wage reward for undereducation, and further predicts that the wage penalty will exceed the wage reward. This paper reviews the established empirical regularities and then provides Nash bargaining results that explain these regularities.
    Keywords: Overeducation, Undereducation,; Overeducation; Undereducation; Nash bargaining; Qualitative mismatches; Mincer earnings function; Wages
    JEL: J31 J24 C78 C51
    Date: 2012–11–27
  2. By: Kenn Ariga (Institute of Economic Research,Kyoto University); Fumio Ohtake (The Institute of Social and Economic Research of Osaka University); Masaru Sasaki (The Graduate School of Economics at Osaka University); Zheren Wu (Faculty of Economics,Kinki University)
    Abstract: This paper uses a unique survey of the Chinese youth to construct a panel data in which we keep track of geographical and job mobilities. Our estimation results deliver the following major findings. (1) The sample individuals are highly mobile. Job quits and relo- cations are frequent and they are closely correlated. We find the job hopping to be highly productive as our estimates indicate each job quit generates more than .2 log increase in monthly wage. .(2) The migrant disadvantage in urban labor market is compensated by their higher job mobility. After four jobs, the expected earnings di¤erentials essentially disappear. We also find that migration and job mobility are highly selective processes. Our evidence indicates that the migrants are positively selected. (3) Job and location mobilities are highly dependent upon family back ground and personal traits which we interpret as representing un- observable characteristics associated with risk taking, active and opti- mistic personality, as well as the implied economic incentives to migrate and keep searching for better jobs.
    JEL: J31 J61 J62
    Date: 2012–11
  3. By: David Seim
    Abstract: This paper investigates the effects of displacement on outcomes such as annual earnings, unemployment, wages and hours worked. It relies on previously unexplored administrative data on all displaced workers in Sweden in 2002, 2003 and 2004 which are linked to employer-employee matched data at the individual level. By linking the data to military enlistment records, the paper assesses the selection into displacement and finds that workers with low cognitive and noncognitive skills are significantly more likely to be displaced than high-skilled workers. The analysis of displacement effects shows evidence of large and long-lasting welfare costs from displacement. Moreover, studying the heterogenous impacts of job displacement in terms of cognitive and noncognitive skills reveals that although workers with high skills fare better than low-skilled workers in absolute terms, there are no significant differences in the recovery rates between skill groups. Finally, by using administrative data on displacements, it is possible to assess quantitatively the bias that results from not being able to separate quits from layoffs in earlier studies
    Keywords: job displacement, cognitive and noncognitive skills, employer-employee data
    JEL: J60 J63 J65 I21 C23
    Date: 2012–12–03
  4. By: Karimi, Arizo (Uppsala Center for Labor Studies); Lindahl, Erica (Institute for evaluation of labour market and education policy); Skogman Thoursie, Peter (Department of Economics, Stockholm University)
    Abstract: Women account for the majority of parental leave take-up, which is likely one of the major reasons for the gender gap in income and wages. Consequently, many countries exert effort to promote a more gender equal division of parental leave. Indeed, the last decades have seen an increase in fathers’ take-up of parental leave benefits, but the gender earnings gap has remained fairly constant. In this paper we re-evaluate the labour supply responses of both mothers and fathers to three major reforms in the Swedish parental leave system, recognizing that take up of paid parental leave might not fully reflect actual time off from work in a system where job-protection exceeds paid leave. We find that both mothers and fathers decreased their labour supply to the same extent as a response to an increase in paid parental leave without gender restrictions. In contrast, we find no support for any changes in fathers’ labour supply due to reforms introducing gender quotas in paid leave.
    Keywords: natural experiment; parental leave; labour supply
    JEL: J13 J16 J22 J48
    Date: 2012–11–30
  5. By: Holger Görg; Dennis Görlich
    Abstract: We investigate the impact of offshoring on individual level wages and unemployment probabilities and pay particular attention to the question of whether workers on temporary contracts are affected differently than workers on permanent contracts. Data are taken from the German Socio-Economic Panel (SOEP), linked with industry-level data on offshoring of materials and services inputs calculated from the World Input Output Database (WIOD). In manufacturing we find that temporary workers face a significant reduction in wages as materials offshoring increases, while permanent workers’ wages are unaffected or even tend to increase. Offshoring of core activities generally also tends to reduce the probability of becoming unemployed, and more so for temporary than for permanent workers. By contrast, offshoring of services inputs does not have any statistically significant effects on either wages or employment probabilities in manufacturing. In the service industries, workers are affected in terms of employment probabilities from offshoring of services inputs only, although, in contrast to manufacturing industries, there are no statistically significant effects on individual wages from any type of offshoring.
    Date: 2012
  6. By: Vanessa Mertins; Agnes Baeker (Institute for Labour Law and Industrial Relations in the EU, University of Trier)
    Abstract: Incentive schemes not only influence the effort provision of workers, but might also induce sorting. As drivers of self-selection, the literature mainly focuses on measures of productivity; however, other variables, such as preferences, beliefs and personality, also play a role. With this paper, we contribute to the literature on drivers of self-selection by analyzing the role of perceived wage risks as potential influences on the sorting decision. To this end, we study a sorting decision between two variable compensation systems, where both options carry wage risks. Specifically, we look at sorting between individual piece rates and team piece rates. Using experimental data, we find evidence for both risk diversification considerations and free-riding concerns (i.e., risk of teaming-up with low-productive teammates) as drivers of self-selection. However, our data does not support the concern of our experimental subjects that others actually reduce their effort when working under team compensation, as compared to individual-based compensation.
    Keywords: Risk perception, Sorting, Preferred rewards, Productivity
    JEL: M52 J33 C91 D81
    Date: 2012–10
  7. By: NAKAMURO Makiko; INUI Tomohiko
    Abstract: The objective of this paper is to measure the causal effect of education on earnings using a sample of twins in Japan, with information collected through a web-based survey. The empirical results show that although the conventional OLS estimate is 10.0%, we obtain 9.3% as the estimated rate of return to education after the omitted ability bias and measurement errors in self-reported schooling were corrected. Our findings suggest that the conventional OLS estimate is not largely contaminated by potential biases.
    Date: 2012–12
  8. By: Anna Piil Damm (Aarhus University)
    Abstract: Using survey information about characteristics of personal contacts linked with administrative register information on employment status one year later, I show that unemployed survey respondents with many employed acquaintances have a higher job finding rate. Settlement in a socially deprived neighborhood may, therefore, hamper individual labor market outcomes because of lack of employed contacts. I investigate this hypothesis by exploiting a unique natural experiment that occurred between 1986 and 1998 when refugee immigrants to Denmark were assigned to municipalities quasirandomly, which successfully addresses the methodological problem of endogenous neighborhood selection. Taking account of location sorting, living in a socially deprived neighborhood does not affect labor market outcomes of refugee men. Furthermore, their labor market outcomes are not affected by the overall employment rate of men living in the neighborhood, but positively affected by the employment rate of non-Western immigrant men and co-national men living in the neighborhood. This is strong evidence that immigrants find jobs in part through their employed immigrant and co-ethnic contacts in the neighborhood of residence and that a high quality of contacts increases the individual’s employment chances and annual earnings.
    Keywords: Residential job search networks, referral, contacts, neighborhood quality, labor market outcomes.
    JEL: J60 J31 R30
    Date: 2012–11
  9. By: Verena Jung; Sascha L. Schmidt; Benno Torgler
    Abstract: We explore the attitude towards risky career choices of young people in highly competitive environments. We empirically test which factors influence young elite athletes' tendency towards choosing a high-risk career option over a lower risk one; looking at the attitudes, of close to 1000 soccer players in the German "Bundesliga" professional clubs' Youth Academies, towards making real-life decisions. Generally, they face the decision early on as to whether or not they should risk quitting school to solely focus on a professional soccer career. Our study confirms that elements of expected utility, assessment of the likelihood of achievement of the aspired career as well as the potential benefit derived from this decision, explain risk-taking in competitive environments. The longer an individual survives the continuous selection process in the competitive environment, the more he thinks that he will eventually succeed - despite the increasing opportunity costs of quitting a low-risk alternative career. Initial success in the selection processes is a key trigger for the tendency to choose a career in winner-take-all markets.
    Keywords: Career choices; Risk attitude; Risk perception; Professional athletes; Young athletes; Opportunity cost; integration
    JEL: J24 J15 D81 D83 D84 L83
    Date: 2012–12

This nep-lma issue is ©2012 by Erik Jonasson. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.