nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2013‒01‒26
fifteen papers chosen by
Erik Jonasson
Lund University

  1. Gender differences in German wage mobility By Aretz, Bodo
  2. Fair wages and effort provision: Combining evidence from the lab and the field By Alain Cohn; Ernst Fehr; Lorenz Goette
  3. Minimum Wage in a Deflationary Economy: The Japanese Experience, 1994–2003 By Ryo Kambayashi; Daiji Kawaguchi; Ken Yamada
  4. The "Task Approach" to Labor Markets: An Overview By David H. Autor
  5. Gender Wage-Productivity Differentials and Global Integration in China By Dammert, Ana; Ural Marchand, Beyza; Wan, Chi
  6. Partial Equal Treatment in Wage Offers By Kohei Kawamura (University of Edinburgh) and Jozsef Sakovics(University of Edinburgh)
  7. Who Earns Minimum Wages in Europe? New Evidence Based on Household Surveys By François Rycx; Stephan K. S. Kampelmann
  8. Work and Play Pave the Way: The Importance of Part Time Work in a Lifecycle Model By Ricky Kanabar; Peter Simmons
  9. Foreign ownership wage premium: Does financial health matter? By Maria Bas
  10. Occupational Choice and Self-Employment: Are They Related? By Alina Sorgner; Michael Fritsch
  11. The effect of high-tech services offshoring on skilled employment: intra-firm evidence By Tamayo, M. P.; Huergo, E.
  12. Wage effects of high-skilled migration : international evidence By Grossmann, Volker; Stadelmann, David
  13. Offshoring and Occupational Specificity of Human Capital By Moritz Ritter
  14. Mismatch, Sorting and Wage Dynamics By Jeremy Lise; Costas Meghir; Jean-Marc Robin
  15. Dying to Retire: Adverse Selection and Welfare in Social Security By Andrew Beauchamp; Mathis Wagner

  1. By: Aretz, Bodo
    Abstract: This paper analyzes the evolution of wage inequality and wage mobility separately for men and women in West and East Germany over the last four decades. Using a large administrative data set which covers the years 1975 to 2008, I find that wage inequality increased and wage mobility decreased for male and female workers in East and West Germany. Women faced a higher level of wage inequality and a lower level of wage mobility than men in both parts of the country throughout the entire observation period. The mobility decline was sharper in East Germany so that the level of wage mobility has fallen below that of West Germany over time. Looking at long-term mobility, a slowly closing gap between men and women is observed. --
    Keywords: Wage Mobility,Wage Inequality,Administrative Data
    JEL: J31 D63
    Date: 2013
  2. By: Alain Cohn; Ernst Fehr; Lorenz Goette
    Abstract: The presence of workers who reciprocate higher wages with greater effort can have important consequences for labor markets. Knowledge about the determinants of reciprocal effort choices is, however, incomplete. We investigate the role of fairness perceptions and social preferences in workers’ performance in a field experiment in which workers were hired for a one-time job. We show that workers who perceive being underpaid at the base wage increase their performance if the hourly wage increases, while those who feel adequately paid or overpaid at the base wage do not change their performance. Moreover, we find that only workers who display positive reciprocity in a lab experiment show reciprocal performance responses in the field, while workers who lack positive reciprocity in the lab do not respond to the wage increase even if they feel underpaid at the base wage. Our findings suggest that fairness perceptions and social preferences are key in workers’ performance response to a wage increase. They are the first direct evidence of the fair-wage effort hypothesis in the field and also help interpret previous contradictory findings in the literature.
    Keywords: Fairness perception, positive reciprocity, field experiment, wage increase
    JEL: C93 J31 M52
    Date: 2013–01
  3. By: Ryo Kambayashi (Institute of Economic Research, Hitotsubashi University); Daiji Kawaguchi (Faculty of Economics, Hitotsubashi University); Ken Yamada (Singapore Management University, School of Economics)
    Abstract: The statutory minimum wage in Japan has steadily increased over the past few decades even during a period of deflation. This paper examines the impact of the minimum wage on wage and employment outcomes under this unusual circumstance. We find that the increased bite of the minimum wage resulted in the compression of the lower tail of the wage distribution among women and that the wage compression is partially attributed to employment loss resulting from the minimum-wage increase. The increased bite of the minimum wage accounts for one half of the reduction in lowertail inequality that occurred among women during the period between 1994 and 2003.
    Keywords: minimum wage, wage inequality, employment loss, truncated distribution, deflation
    JEL: J23 J31 J38
    Date: 2012–11
  4. By: David H. Autor
    Abstract: An emerging literature argues that changes in the allocation of workplace “tasks” between capital and labor, and between domestic and foreign workers, has altered the structure of labor demand in industrialized countries and fostered employment polarization—that is, rising employment in the highest and lowest paid occupations. Analyzing this phenomenon within the canonical production function framework is challenging, however, because the assignment of tasks to labor and capital in the canonical model is essentially static. This essay sketches an alternative model of the assignment of skills to tasks based upon comparative advantage, reviews key conceptual and practical challenges that researchers face in bringing the “task approach” to the data, and cautions against two common pitfalls that pervade the growing task literature. I conclude with a cautiously optimistic forecast for the potential of the task approach to illuminate the interactions among skill supplies, technological capabilities, and trade and offshoring opportunities, in shaping the aggregate demand for skills, the assignment of skills to tasks, and the evolution of wages.
    JEL: J23 J24 J31
    Date: 2013–01
  5. By: Dammert, Ana (Carleton University); Ural Marchand, Beyza (University of Alberta, Department of Economics); Wan, Chi (University of Massachusetts)
    Abstract: In the absence of discrimination, there should be no wage-productivity differentials as relative wages should be equal to the relative marginal productivity levels of workers. This paper investigates the role of globalization on the structure and evolution of gender differentials in China by simultaneously estimating demand-side wage and productivity outcomes using nonlinear least squares. The analyses are based on a comprehensive population-wide panel survey of manufacturing firms between the years of 2004 and 2007, covering 94 percent of total industry output and providing an accurate representation of labor demand. The results suggest that more exposure to globalization through increased exports is associated with lower gender wage-productivity differentials, and more exposure through increased foreign investment leads to differentials in favor of female workers. On the other hand, gender discrimination is found to be prevalent among domestically owned and non-exporting firms.
    Keywords: China; gender wage discrimination; globalization; firm ownership
    JEL: D22 F21 J16 J31
    Date: 2013–01–01
  6. By: Kohei Kawamura (University of Edinburgh) and Jozsef Sakovics(University of Edinburgh)
    Abstract: We analyse a labour matching model with wage posting, where ?- refl?ecting institutional constraints - firms cannot differentiate their wage offers within certain subsets of workers. Inter alia, we fi?nd that the presence of impersonal wage offers leads to wage compression, which propagates to the wages for high productivity workers who receive personalised offers.
    Date: 2013–01–16
  7. By: François Rycx; Stephan K. S. Kampelmann
    Abstract: This paper aims to provide a comprehensive, evidence-based, and up-to-date assessment of minimum wages in a range of European countries. A first step towards a better understanding of where Europe stands today on this issue requires to grasp the diversity of European minimum wage systems, a key objective of the paper at hand. The second objective is to document international differences in the so-called "bite" of the minimum wage. This leads to questions such as "how do national minimum wages compare to the overall wage distribution?" and "how many people earn minimum wages in each country?" that are assessed for a set of nine countries from Western, Central and Eastern Europe: Belgium, Bulgaria, Germany, Hungary, Ireland, Poland, Romania, Spain, and the United Kingdom. This sample was designed to include countries for which recent evidence has been missing prior to this paper. What is more, the study also overcomes the narrow focus of extant overviews that have typically focussed only on full-time employment. Crucially, the study improves on existing work by looking beyond aggregate numbers; it provides a detailed panorama of the population of minimum wage earners in each country under investigation, notably by describing their composition in terms of a range of socio-demographic characteristics.
    Keywords: Minimum wage systems; Socio-economic consequences; Europe
    Date: 2013–01–10
  8. By: Ricky Kanabar; Peter Simmons
    Abstract: US males labour force behaviour shows lifecycle effects. We develop a lifecycle model of individual labour supply, with a single financial asset and non labour income. With widely used preferences, we derive the analytical form of the value function and optimal labour participation for any period, t. Consumption and savings switches its form as participation changes. A spell of part time work has strong implications for earlier decisions on participation, consumption, savings and the marginal value of leisure and wealth. We apply our framework to explain the increasing prevalence of non standard retirement noted in the literature.
    Keywords: Lifecycle, Labour supply decision, Retirement, Unretirement
    JEL: J22 J26
    Date: 2013–01
  9. By: Maria Bas
    Abstract: Microeconometric studies have shown that foreign-owned firms pay a wage premium in developing countries. This paper investigates one of the possible channels that explain why foreign firms pay higher wages than their domestic counterparts in developing economies. Under imperfect financial markets, foreign affiliates have a greater access to funds to finance high-technology investments and to compensate their workers. The empirical analysis relies on firm-level data from Romania during the 1998-2006 period. The identification strategy exploits the financial sector reform in Romania during this period as a proxy of an exogenous shock of improvement of financial resources. Changes in the IMF financial reform index across manufacturing industries are related to the ownership status of the firm to investigate how the differential access to finance of foreign firms shapes wages. The findings suggest that a one-standarddeviation increase in the financial reform index increases firms’ wages by 7 percent for domestic firms and 11.2 percent for foreign affiliates. These results are mainly driven by foreign firms from developed countries that might benefit from connections with foreign-owned banks. These findings are stable and robust to different sensitivity tests related to the financial reform indicator, other reforms and industry trends.
    Keywords: foreign-wage premium;financial reform;developing countries;firm level data
    JEL: O10 O12
    Date: 2012–10
  10. By: Alina Sorgner; Michael Fritsch
    Abstract: Often, a person will become an entrepreneur only after a period of dependent employment, suggesting that occupational choices precede entrepreneurial choices. We investigate the relationship between occupational choice and self-employment. The findings suggest that the occupational choice of future entrepreneurs at the time of labor market entry is partly guided by a taste for skill variety, the prospect of high<br /> earnings, and occupational earnings risk. Entrepreneurial intentions may also emerge after gaining work experience in a chosen occupation. We find that occupations characterized by high levels of unemployment and earnings risk, relatively many job opportunities, and high self-employment rates foster the founding of an own business. Also, people who fail to achieve an occupation-specific income have a tendency for selfemployment.
    Keywords: Entrepreneurial choice, occupation-specific determinants of entrepreneurship, risk preferences, taste for variety
    JEL: L26 J24 D01
    Date: 2013
  11. By: Tamayo, M. P.; Huergo, E.
    Abstract: The offshoring of high-tech services has greatly increased in recent years, with consequences for firms demand for skilled employment in firms. This paper specifically analyzes the relationship between R&D offshoring and the demand for R&D employment using firm-level data for Spanish manufacturing and services companies during the period 2004-2009. Estimating different specifications with panel data techniques, we find that this association is statistically positive. In particular, for services firms a 1 percentage point increase in R&D offshoring raises the demand for researchers by about 11%. This suggests the existence of complementarity among them as productive inputs.
    Keywords: R&D offshoring; wages; skilled employment
    JEL: F16 O32 L24
    Date: 2013
  12. By: Grossmann, Volker; Stadelmann, David
    Abstract: The international migration of high-skilled workers may trigger productivity effects at the macro level such that the wage rate of skilled workers increases in host countries and decrease in source countries. The authors exploit data on international bilateral migration flows and provide evidence consistent with this theoretical hypothesis. They propose various instrumentation strategies to identify the causal effect of skilled migration on log differences of GDP per capita, total factor productivity, and the wages of skilled workers between pairs of source and destination countries. These strategies aim to address the endogeneity problem that arises when international wage differences affect migration decisions.
    Keywords: Population Policies,Labor Markets,International Migration,Labor Policies,Human Migrations&Resettlements
    Date: 2013–01–01
  13. By: Moritz Ritter (Department of Economics, Temple University)
    Abstract: I document that workers in newly tradable service occupations possess more occupation-specific human capital and are more highly educated than workers in previously tradable occupations. Motivated by this observation, I develop a dynamic equilibrium model with labor market frictions and specific human capital to study the labor adjustment process after a trade shock. When calibrated to match the increase in U.S. trade between 1990 and 2010, the model suggests that (1) output increases immediately after a trade shock and converges quickly to the steady state; (2) labor market institutions play a larger role in the adjustment process than specific human capital; (3) the short run distributional effects are small if the labor market is flexible, even in the presence of specific human capital.
    Keywords: Offshoring, Sectoral Labor Reallocation, Human Capital
    JEL: E24 F16 J24 J62
    Date: 2012–12
  14. By: Jeremy Lise; Costas Meghir; Jean-Marc Robin
    Abstract: We develop an empirical search-matching model which is suitable for analyzing the wage, employment and welfare impact of regulation in a labor market with heterogeneous workers and jobs. To achieve this we develop an equilibrium model of wage determination and employment which extends the current literature on equilibrium wage determination with matching and provides a bridge between some of the most prominent macro models and microeconometric research. The model incorporates productivity shocks, long-term contracts, on-the-job search and counter-offers. Importantly, the model allows for the possibility of assortative matching between workers and jobs due to complementarities between worker and job characteristics. We use the model to estimate the potential gain from optimal regulation and we consider the potential gains and redistributive impacts from optimal unemployment insurance policy. Here optimal policy is defined as that which maximizes total output and home production, accounting for the various constraints that arise from search frictions. The model is estimated on the NLSY using the method of moments.
    JEL: C15 C63 D04 J08 J3 J63 J64 J65
    Date: 2013–01
  15. By: Andrew Beauchamp (Boston College); Mathis Wagner (Boston College)
    Abstract: Despite facing some of the same challenges as private insurance markets, little is known about the role of adverse selection in social insurance programs. This paper studies adverse selection in Social Security retirement choices using data from the Health and Retirement Study. We find robust evidence that people who live longer choose larger annuities by delaying the age they first claim benefits, a form of adverse selection. To quantify welfare consequences we develop and estimate a simple model of annuity choice. We exploit variation in longevity, the underlying source of private information, to identify the key structural parameters: the coefficient of relative risk aversion and the discount rate. We estimate that adverse selection reduces social welfare by 2.3-3.5 percent, and increases the costs to the Social Security Trust Fund by 2.1-2.5 percent, relative to the first best allocation. Counterfactual simulations suggest program adjustments could generate both economically significant decreases in costs and small increases in social welfare. We estimate an optimal non-linear accrual rate which would result in welfare gains of 1.4 percent, and cost reductions of 6.1 percent of current program costs.
    Keywords: Adverse Selection, Social Security, Optimal Policy
    JEL: J26 D82
    Date: 2012–12–31

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