nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2012‒12‒22
thirteen papers chosen by
Erik Jonasson
Lund University

  1. Nash Bargaining and the Wage Consequences of Educational Mismatches By Hartog, Joop; Sattinger, Michael
  2. The Minimum Wage Affects Them All: Evidence on Employment Spillovers in the Roofing Sector By Aretz, Bodo; Arntz, Melanie; Gregory , Terry
  3. What Explains the Decline in Wage Mobility in the German Low-Wage Sector? By Aretz, Bodo; Gürtzgen, Nicole
  4. Immigrant Wage and Employment Assimilation: A Comparison of Methods By Cobb-Clark, Deborah A.; Hanel, Barbara; McVicar, Duncan
  5. GINI DP 24: On gender gaps and self-fulfilling expectations: An alternative approach based on paid-for-training By Sara Rica; Juan Dolado; Cecilia Garcia Peñalosa
  6. The effects of being out of the labor market on subsequent wages: evidence for Uruguay By Verónica Amarante; Rodrigo Arim; Andrés Dean
  7. Wage Inequality and Wage Mobility in Europe By Ronald Bachmann; Peggy Bechara; Sandra Schaffner
  8. Worker Productivity and Wages: Evidence from Linked Employer-Employee Data By Lopes, Ana Sofia; Teixeira, Paulino
  9. Preferences for lifetime earnings, earnings risk and nonpecuniary attributes in choice of higher education By Lars Johannessen Kirkebøen
  10. Are Skills a Constraint on Firms? New Evidence from Russia By Commander, Simon; Denisova, Irina
  11. Indian Labour Markets and Returns to Education, 1983 to 2009-10 By Kamal Vatta; Takahiro Sato
  12. Learning by working in big cities By de la Roca, Jorge; Puga, Diego
  13. Higher Wages, Overstaffing or Both? The Employer's Assessment of Problems Regarding Wage Costs and Staff Level in Co-Determined Establishments By Gralla, Rafael; Kraft, Kornelius

  1. By: Hartog, Joop (University of Amsterdam); Sattinger, Michael (University at Albany, SUNY)
    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, Nash bargaining, qualitative mismatches, Mincer earnings function, wages
    JEL: J31 J24 C78 C51
    Date: 2012–11
  2. By: Aretz, Bodo (ZEW Mannheim); Arntz, Melanie (ZEW Mannheim); Gregory , Terry (ZEW Mannheim)
    Abstract: This paper contributes to the sparse literature on employment spillovers on minimum wages by exploiting the minimum wage introduction and subsequent increases in the German roofing sector that gave rise to an internationally unprecedented hard bite of a minimum wage. We look at the chances of remaining employed in the roofing sector for workers with and without a binding minimum wage and use the plumbing sector that is not subject to a minimum wage as a suitable benchmark sector. By estimating the counterfactual wage that plumbers would receive in the roofing sector given their characteristics, we are able to identify employment effects along the entire wage distribution. The results indicate that the chances for roofers to remain employed in the sector in eastern Germany deteriorated along the entire wage distribution. Such employment spillovers to workers without a binding minimum wage may result from scale effects and/or capital-labour substitution.
    Keywords: minimum wage, Germany, capital-labour substitution, labour-labour substitution, scale effect
    JEL: J38 J21 J23
    Date: 2012–11
  3. By: Aretz, Bodo (ZEW Mannheim); Gürtzgen, Nicole (ZEW Mannheim)
    Abstract: In this paper, we study how wage mobility in the low-wage sector has changed in western Germany between 1984 and 2004. Using German individual register data, we document a clear upward trend in the persistence of low-wage employment for both men and women. Next to compositional shifts of the low-wage sector relative to the high-wage sector, this trend may be explained by an increase in "genuine" state dependence, which occurs if low-wage employment today causes low-wage employment in the future for reasons of, e.g., stigmatization or human capital depreciation. To isolate the latter, we model low-pay transitions by estimating a series of multivariate probit models. We address the initial conditions problem and the endogeneity of earnings attrition in our estimation approach by accounting for the selection into low-wage employment and earnings retention. Our findings for men and women point to an upward trend of genuine state dependence among low-paid workers especially since the beginning of the 1990s. Using decomposition techniques, we show that between 35 and 54 per cent of the increase in genuine state dependence during the 1990s is accounted for by compositional effects.
    Keywords: wage mobility, trivariate probit, administrative data
    JEL: C23 J31 L13
    Date: 2012–11
  4. By: Cobb-Clark, Deborah A. (University of Melbourne); Hanel, Barbara (Melbourne Institute of Applied Economic and Social Research); McVicar, Duncan (Melbourne Institute of Applied Economic and Social Research)
    Abstract: We compare alternative methods for estimating immigrant wage and employment assimilation using unique panel data over 2001–2009 for a large, nationally-representative sample of immigrants. Previous assimilation estimates have been mainly based on cross-sectional data and have therefore suffered from a range of potential biases. We find that a fixed-effects model generates estimated employment assimilation profiles that are flatter and significantly different to those produced by cross-sectional and synthetic cohort methods. However, there are no significant differences in the wage assimilation profiles across alternative methods.
    Keywords: immigration, immigrant assimilation, employment, wages, Australia
    JEL: J15 J61
    Date: 2012–12
  5. By: Sara Rica (DFAE II, Universidad del Pais Vasco); Juan Dolado (Universidad Carlos III); Cecilia Garcia Peñalosa (Centre de la Vieille Charité, GREQAM)
    Abstract: This paper presents a model of self-fulfilling expectations by firms and households which generates multiplicity of equilibria in pay and housework time allocation for ex-ante identical spouses. Multiplicity arises from statistical discrimination exerted by firms in the provision of paid-for training to workers, rather than from incentive problems in the labor market. Employers´ beliefs about differences in spouses´ reactions to housework shocks lead symmetric (ungendered) and asymmetric (gendered) equilibria. We find that: (i) the ungendered equilibrium tends to prevail as aggregate productivity in the economy increases (regardless of the generosity of family aid policies), (ii) the ungendered equilibrium could yield higher welfare under some scenarios, and (iii) gender-neutral job subsidies are more effective that gender-targeted ones in removing the gendered equilibrium. JEL Classification: J16 and J71.
    Keywords: gender wage gaps, housework shares, multiple equilibria
    Date: 2012–05
  6. By: Verónica Amarante (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía); Rodrigo Arim (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía); Andrés Dean (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía)
    Abstract: Based on administrative data combining workers’ earnings histories and unemployment insurance benefits, we document short and long term wage losses for a large sample of Uruguayan formal workers with high tenure. We are able to study how wage losses vary across age groups, gender, industry and size of the firm. We also assess differences between switchers and non switchers, and consider the effect of the economic cycle. Our data allows providing original evidence about the smoothing role of the unemployment insurance program, even in a developing country. Our main findings indicate that workers loose around 48% of their pre-displacement wages in the first quarter after displacement, and after five years, losses are still 3%.
    Keywords: Wage losses, Displacement
    JEL: J31 J63 J65
    Date: 2012–09
  7. By: Ronald Bachmann; Peggy Bechara; Sandra Schaffner
    Abstract: Using data from the European Union Statistics on Income and Living Conditions (EU-SILC), this paper investigates wage inequality and wage mobility in Europe. Decomposing inequality into within and between group inequality, we analyse to what extent wage inequality and mobility can be explained by observable characteristics. Furthermore, we investigate which individual and household characteristics determine transitions within the wage distribution. Finally, we examine the importance of institutions for wage inequality, wage mobility, and wage transitions. We find that overall, mobility reduces wage inequality. While a large part of wage inequality is due to unobservable characteristics, the equalizing effect of mobility mainly occurs within groups. Furthermore, both personal and household characteristics play an important role for wage transitions. Finally, our findings reveal large cross-country differences across Europe, which are partly linked to the institutional set-up of the national labour markets.
    Keywords: Wage inequality; wage mobility; wage transitions; cross-country analysis
    JEL: J6 J31 P52
    Date: 2012–12
  8. By: Lopes, Ana Sofia (Polytechnic Institute of Leiria); Teixeira, Paulino (University of Coimbra)
    Abstract: This study compares the determinants of productivity and wages at both firm and worker level. In the firm-level analysis, we follow Hellerstein, Neumark and Troske (1999) and provide improved estimates based on an extended set of covariates including the intensity of firm-provided training. In the worker-level analysis we take a new turn and generate a proxy for unobserved worker productivity. Our results point to the presence of sizeable spillover effects from schooling and training as their impact is bigger on firm-level productivity equations than on the corresponding worker-level equations. In turn, our fully disaggregated model at worker level shows that, by using all possible combinations of worker attributes, we obtain that the wage differences across different worker groups are mostly productivity based and that the gap can be as high as 33%.
    Keywords: worker productivity, wages, human capital, LEED
    JEL: C23 D24 J31
    Date: 2012–11
  9. By: Lars Johannessen Kirkebøen (Statistics Norway)
    Abstract: Expected earnings are considered to influence individuals' choice of education. However, the presence of nonpecuniary attributes and the different choice set available to prospective students make identification of this relationship difficult. This paper employs a conditional logit model on exceptionally rich application data, which are likely to reflect the actual preferences of the applicants, given their individual choice sets. Controlling for several nonpecuniary attributes, average lifetime earnings is shown to strongly influence educational choice. A one-percent earnings increase for a given education increases the number of male applicants by about 5 percent and female applicants by about 2 percent. However, other attributes also matter, in particular earnings risk. Increasing both earnings and risk as they correlate in the cross section has essentially no effect on the number of female applicants. Difference in earnings and risk preferences both contribute to a gender earnings differential. Finally, there is some preference heterogeneity by education chosen.
    Keywords: Rank-ordered logit; nested logit; field of study
    JEL: J24 J31 C25
    Date: 2012–12
  10. By: Commander, Simon (EBRD, London); Denisova, Irina (CEFIR, New Economic School, Moscow)
    Abstract: The paper uses a unique survey of recruitment firms to look at how Russian firms perceive the supply of skills in the labour market and how well those skills match to their demand for labour. Firms invest significant amounts of time in search to fill vacancies and search time is unambiguously increasing in skills. These skill gaps are associated with significant wage premia and are perceived to have negative consequences for the output mix and productivity. A small job postings experiment also finds that search time increased yet further for activities considered relatively innovative. Further, using Russian Ministry of Labour data for all legal migrant applications in 2010 and matching the migrant to the sponsoring firm, we find that there is some – albeit limited - evidence of firms using migrants to address high skill shortages. However, the overwhelming majority of migrants are skilled or unskilled workers; a reflection of the low underlying rates of innovation and associated demand for high skill jobs.
    Keywords: job search, vacancies, skills
    JEL: J31 J61
    Date: 2012–11
  11. By: Kamal Vatta (RIEB, Kobe University (Japan) and Department of Economics and Sociology, Punjab Agricultural University (India)); Takahiro Sato (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan)
    Abstract: The present study is an attempt to examine the trends in returns to education in light of the long-term economic growth in India during 1983 to 2009-10. It outlines various forms of inequality issues prevalent in Indian labour markets, with respect to the rural/urban areas, gender, caste and nature of work. The unit level data from 6 rounds of National Sample Survey during 1983, 1987-88, 1993-94, 1999-2000, 2004-05 and 2009-10 were used for this study. Mincer wage function was estimated by using the OLS method and the results were also compared to the median wage equation, which proved the consistency of these estimates. The casual wage markets for males provided incentives for higher education till some intermediate levels in the form of higher wage earnings than their illiterate or below primary educated counterparts but no additional advantage for secondary or graduate levels of education. Higher education could not translate into better wage earnings for female casual workers. The returns to all education levels were converging at low levels with the returns for secondary and graduate levels for urban casual male workers declining over time. There was a decline in the returns to secondary and graduate level of education for rural male regular workers with almost no change in the pattern of returns for urban male regular workers. The returns to education for graduation for female workers increased tremendously due to increased employment opportunities for better educated females in the India during the last decade of fast economic growth, led largely by the growth of the service sector. While there is need to enhance public investment in education for improving higher education opportunities in India, there is also a need to reorient rural education by focusing on imparting working skills between middle level of education and secondary levels. The education curriculum must ensure that higher education translates into better wage earnings for the unskilled or semi-skilled majority of the rural workforce in the long run.
    Date: 2012–12
  12. By: de la Roca, Jorge; Puga, Diego
    Abstract: Individual earnings are higher in bigger cities. We consider three reasons: spatial sorting of initially more productive workers, static advantages associated with workers' current location, and learning by working in big cities. Using rich administrative data for Spain, we find that workers in bigger cities do not have higher unobserved initial ability, as reflected in individual fixed-effects. Instead, they obtain an immediate static premium while working in bigger cities and also accumulate more valuable experience, which increases their earnings faster. The additional value of experience accumulated in bigger cities persists even after workers move away and is even stronger for those with higher unobserved initial ability. This combination of effects explains both the higher mean and the greater dispersion of earnings in bigger cities.
    Keywords: agglomeration economies; city size; earnings premium; learning
    JEL: J31 R10 R23
    Date: 2012–12
  13. By: Gralla, Rafael (TU Dortmund); Kraft, Kornelius (TU Dortmund)
    Abstract: This study examines the differences in the likelihood of overpayment and overemployment in establishments with and without works councils. In contrast to other studies, we use assessments by the management concerning the existence of such problems. Furthermore, we also analyze how different types of works councils influence the probability of overemployment and overpayment. Using the wave 2006 of the IAB Establishment Panel, we show that establishments with works councils that are prepared to interfere with the management are more likely to suffer from overemployment but do not differ in the likelihood of overpayment compared to establishments without works councils. Establishments with works councils that are in line with the management, however, do not differ from establishments without a works council with regard to the likelihood of overemployment but have a lower likelihood of overpayment.
    Keywords: works councils, wages, employment
    JEL: J23 J31 J53
    Date: 2012–11

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