nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2013‒02‒03
twenty-two papers chosen by
Erik Jonasson
Lund University

  1. The Effects of Living Wage Laws on Low-Wage Workers and Low-Income Families: What Do We Know Now? By Neumark, David; Thompson, Matthew; Koyle, Leslie
  2. Simulating the Economic Impacts of Living Wage Mandates Using New Public and Administrative Data: Evidence for New York City By Neumark, David; Thompson, Matthew; Brindisi, Francesco; Koyle, Leslie; Reck, Clayton
  3. Everything You Always Wanted to Know about Sex Discrimination By Cardoso, Ana Rute; Guimaraes, Paulo; Portugal, Pedro
  4. Female Labor Supply: Why is the US Falling Behind? By Blau, Francine D.; Kahn, Lawrence M.
  5. Do Employers Discriminate Less If Vacancies Are Difficult to Fill? Evidence from a Field Experiment By Baert, Stijn; Cockx, Bart; Gheyle, Niels; Vandamme, Cora
  6. In-Work Benefits and the Nordic Model By Kolm, Ann-Sofie; Tonin, Mirco
  7. Who Suffers the Penalty? A Panel Data Analysis of Earnings Gaps in Vietnam By Nguyen, Huu Chi; Nordman, Christophe Jalil; Roubaud, François
  8. The Effect of Tip Credits on Earnings and Employment in the U.S. Restaurant Industry By Even, William E.; Macpherson, David A.
  9. FDI and Wages: Evidence from Firm-Level and Linked Employer-Employee Data in Hungary, 1986-2008 By Earle, John S.; Telegdy, Álmos; Antal, Gábor
  10. Wage Growth through Job Hopping in China By Ariga, Kenn; Ohtake, Fumio; Sasaki, Masaru; Wu, Zheren
  11. Understanding Urban Wage Inequality in China 1988-2008: Evidence from Quantile Analysis By Appleton, Simon; Song, Lina; Xia, Qingjie
  12. Changes in Returns to Task-Specific Skills and Gender Wage Gap By Shintaro Yamaguchi
  13. Base Salaries, Bonus Payments, and Work Absence among Managers in a German Company By Pfeifer, Christian
  14. The Effects of the State Sector on Wage Inequality in Urban China: 1988–2007 By Xia, Qingjie; Song, Lina; Li, Shi; Appleton, Simon
  15. Learning by Doing: Skills and Jobs in Urban Ghana By Kim Lehrer; Monazza Aslam
  16. Immigrant skills and employment. Cross-country evidence from the Adult Literacy and Life Skills Survey By Bernt Bratsberg, Torbjørn Hægeland and Oddbjørn Raaum
  17. Human Capital and Competition: Strategic Complementarities in Firm-based Training By Margaret Stevens
  18. Voluntary work and labour income By Bruno, Bruna; Fiorillo , Damiano
  19. What Happens When Canadian Aggregate Rates of Employment and Unemployment Change? A Note on the Differences in Response Patterns Across Age and Sex Groups By Frank T. Denton; Byron G. Spencer
  20. Drivers of Self-Employment - A Multivariate Decomposition Analysis for the Case of Germany By Michael Fritsch; Alexander Kritikos; Alina Sorgner
  21. Decomposing the labor market earnings inequality: the public and private sectors in Vietnam, 1993-2006 By Imbert, Clement
  22. Estimating Returns to Education when the IV Sample is Selective By Wang, Le

  1. By: Neumark, David (University of California, Irvine); Thompson, Matthew (Charles River Associates); Koyle, Leslie (Charles River Associates)
    Abstract: We provide updated evidence on the effects of living wage laws in U.S. cities, relative to the earlier research covering only the first six or seven years of existence of these laws. There are some challenges to updating the evidence, as the CPS data on which it relies changed geographic coding systems in the mid-2000s. The updated evidence is broadly consistent with the conclusions reached by prior research, including Holzer's (2008) review of that earlier evidence. Living wage laws reduce employment among the least-skilled workers they are intended to help. But they also increase wages for many of them. This implies that living wage laws generate both winners and losers among those affected by them. For broader living wage laws that cover recipients of business or financial assistance from cities, the net effects point to modest reductions in urban poverty.
    Keywords: living wage, wages, employment, poverty
    JEL: J23 J38
    Date: 2012–12
  2. By: Neumark, David (University of California, Irvine); Thompson, Matthew (Charles River Associates); Brindisi, Francesco (New York City Office of Management and Budget); Koyle, Leslie (Charles River Associates); Reck, Clayton (Charles River Associates)
    Abstract: Policy researchers often have to estimate the future effect of imposing a policy in a particular location. There is often evidence on the effects of similar policies in other jurisdictions, but no information on the effects of the policy in the jurisdiction in question. And the policy may have specific features not reflected in the experiences of other areas. It is then necessary to combine the evidence from other locations with detailed information and data specific to the jurisdiction in question, with which to simulate the effects of the policy in the new jurisdiction. We illustrate and use this approach in estimating the impact of a proposed living wage mandate for New York City, emphasizing how our ex ante simulations make use of detailed location-specific information on workers, families, and employers using administrative data and other new public data sources.
    Keywords: living wage, employment, poverty
    JEL: J23 J38 R51
    Date: 2012–12
  3. By: Cardoso, Ana Rute (IAE Barcelona (CSIC)); Guimaraes, Paulo (University of Porto); Portugal, Pedro (Banco de Portugal)
    Abstract: Earlier literature on the gender pay gap has taught us that occupations matter and so do firms. However, the role of the firm has received little scrutiny; occupations have most often been coded in a rather aggregate way, lumping together different jobs; and the use of samples of workers prevents any reliable determination of either the extent of segregation or the relative importance of access to firms versus occupations. Our contribution is twofold. We provide a clear measure of the impact of the allocation of workers to firms and to job titles shaping the gender pay gap. We also provide a methodological contribution that combines the estimation of sets of high-dimensional fixed effects and Gelbach's (2009) unambiguous decomposition of the conditional gap. We find that one fifth of the gender pay gap results from segregation of workers across firms and one fifth from job segregation. We also show that the widely documented glass ceiling effect operates mainly through worker allocation to firms rather than occupations.
    Keywords: gender wage gap, high-dimensional fixed effects, segregation
    JEL: J31 J16 J24 J71
    Date: 2012–12
  4. By: Blau, Francine D. (Cornell University); Kahn, Lawrence M. (Cornell University)
    Abstract: In 1990, the US had the sixth highest female labor participation rate among 22 OECD countries. By 2010, its rank had fallen to 17th. We find that the expansion of "family-friendly" policies including parental leave and part-time work entitlements in other OECD countries explains 28-29% of the decrease in US women's labor force participation relative to these other countries. However, these policies also appear to encourage part-time work and employment in lower level positions: US women are more likely than women in other countries to have full time jobs and to work as managers or professionals.
    Keywords: labor supply, gender
    JEL: J16 J22
    Date: 2013–01
  5. By: Baert, Stijn (Ghent University); Cockx, Bart (Ghent University); Gheyle, Niels (Ghent University); Vandamme, Cora (Ghent University)
    Abstract: We empirically test the relationship between hiring discrimination and labour market tightness at the level of the occupation. To this end, we conduct a correspondence test in the youth labour market. In line with theoretical expectations, we find that, compared to natives, candidates with a foreign sounding name are equally often invited to a job interview if they apply for occupations for which vacancies are difficult to fill, but they have to send twice as many applications for occupations for which labour market tightness is low. Our findings are robust against various sensitivity checks.
    Keywords: hiring discrimination, ethnic discrimination, labour market tightness, field experiments
    JEL: C93 J15 J21 J24 J42 J71
    Date: 2013–01
  6. By: Kolm, Ann-Sofie (Stockholm University); Tonin, Mirco (University of Southampton)
    Abstract: Welfare benefits in the Nordic countries are often tied to employment. We argue that this is one of the factors behind the success of the Nordic model, where a comprehensive welfare state is associated with high employment. In a general equilibrium setting, the underlining mechanism works through wage moderation and job creation. The benefits make it more important to hold a job, thus lower wages will be accepted, and more jobs created. Moreover, we show that the incentive to acquire higher education improves, further boosting employment in the long run. These positive effects help counteracting the negative impact of taxation.
    Keywords: Nordic model, in-work benefits, wage adjustment, unemployment, education, skill formation, earnings
    JEL: H24 J21 J24
    Date: 2012–12
  7. By: Nguyen, Huu Chi (IRD, DIAL, Paris); Nordman, Christophe Jalil (IRD, DIAL, Paris); Roubaud, François (IRD, DIAL, Paris)
    Abstract: In spite of its predominant economic weight in developing countries, little is known about the informal sector earnings structure compared to that of the formal sector. Taking advantage of the VHLSS dataset in Vietnam, in particular its three wave panel data (2002, 2004, 2006), we assess the magnitude of various formal-informal earnings gaps while addressing heterogeneity at three different levels: the worker, the job (wage employment vs. self-employment) and the earnings distribution. We estimate fixed effects and quantile regressions to control for unobserved individual characteristics. Our results suggest that the informal sector earnings gap highly depends on the workers' job status and on their relative position in the earnings distribution. Penalties may in some cases turn into premiums. By comparing our results with studies in other developing countries, we draw conclusions highlighting the Vietnam's labour market specificity.
    Keywords: informal employment, earnings gap, transition matrix, panel data, Vietnam
    JEL: J21 J23 J24 J31 O17
    Date: 2013–01
  8. By: Even, William E. (Miami University); Macpherson, David A. (Trinity University)
    Abstract: According to federal law in 2012, employers can take a credit of up to $5.13 for tips received by workers in satisfying the minimum wage requirement of $7.25. This study uses interstate variation in laws regarding tip credits and minimum wages to identify the effects of reducing or eliminating the tip credit on employment and earnings in the U.S. restaurant industry. Using data from the Quarterly Census of Employment and Wages and the Current Population Survey, we find that a reduction in the tip credit increases weekly earnings but reduces employment in the full services restaurant industry and for tipped workers. The results are robust to controls for spatial heterogeneity in employment trends and are supported by a series of falsification tests.
    Keywords: tip credit, minimum wage, tipped workers, cash wage, earnings, employment
    JEL: J30 J31 J38
    Date: 2012–12
  9. By: Earle, John S. (George Mason University); Telegdy, Álmos (Institute of Economics, Budapest); Antal, Gábor (Central European University)
    Abstract: We estimate the wage effects of foreign direct investment (FDI) with universal firm-level and linked employer-employee panel data containing 4,926 foreign acquisitions in Hungary. Matching on pre-acquisition data and controlling for fixed effects for firms and detailed worker groups, we find 12-28 percent effects on average wages. The wage effect mostly reverses for 983 foreign acquisitions later divested to domestic owners. We find positive effects for all worker types, occupations, and wage quantiles. The evidence implies little role for either measurement problems or residual selection, but suggests a strong cross-firm association of FDI wage premia with similar differentials in productivity.
    Keywords: foreign acquisitions, FDI, earnings, wage differentials, productivity, difference-in-differences matching, employer effects, Hungary
    JEL: F23 J31
    Date: 2012–12
  10. By: Ariga, Kenn (Kyoto University); Ohtake, Fumio (Osaka University); Sasaki, Masaru (Osaka University); Wu, Zheren (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 relocations are frequent and they are closely correlated. We find that 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 differentials 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 unobservable characteristics associated with risk taking, active and optimistic personality, as well as the implied economic incentives to migrate and keep searching for better jobs.
    Keywords: wage growth, migration, school to work transition
    JEL: J31 J61 J62
    Date: 2012–12
  11. By: Appleton, Simon (University of Nottingham); Song, Lina (University of Nottingham); Xia, Qingjie (Peking University)
    Abstract: This paper examines change in wage gaps in urban China by estimating quantile regressions on CHIPS data. It applies the Machado and Mata (2005) decomposition, finding sharp increases in inequality from 1988 to 1995 and from 2002 to 2008 largely due to changes in the wage structure. The analysis reports how the returns to education and experience vary across wage quantiles, along with wage differentials by sex and party membership. The role of industrial structure, ownership reform and occupational change are also estimated. In the recent period, 2002 to 2008, falls in the returns to education and experience have been equalising. However, changes in every other category of observed wage differential – by sex, occupation, ownership, industrial sector and province – have served to widened inequality. The gender gap continued to rise, as did the gap between white collar and blue collar workers, and between manufacturing and most other industrial sectors.
    Keywords: China, labour, wages, quantile regression, inequality
    JEL: J31 J42 O15 P23
    Date: 2012–12
  12. By: Shintaro Yamaguchi
    Abstract: How did skilled-biased technological change affect wage inequality, particularly between men and women? To answer that question this paper constructs a task-based Roy model in which workers possess a bundle of basic skills, and occupations are characterized as a bundle of basic tasks. The model is structurally estimated using the task data from the Dictionary of Occupational Titles and the PSID. The main empirical finding is that men have more motor skills than women, but the returns to motor skills have dropped significantly, accounting for more than 40% of the narrowing gender wage gap.
    Keywords: Roy model, task-based approach, occupational choice, skill-biased technological change, soft skills.
    JEL: J24 J31
    Date: 2013–01
  13. By: Pfeifer, Christian (Leuphana University Lüneburg)
    Abstract: Questions about compensation structures and incentive effects of pay-for-performance components are important for firms' Human Resource Management as well as for economics in general and labor economics in particular. This paper provides scarce insider econometric evidence on the structure and the incentive effects of fixed base salaries, paid bonuses, and agreed bonuses under a Management-by-Objectives (MBO) incentive scheme. Six years of personnel data of 177 managers in a German company are analyzed. The main findings are: (1) base salaries increase significantly with age, whereas bonuses decrease with age; (2) larger agreed bonuses are correlated with fewer absent working days.
    Keywords: absenteeism, bonus, effort, incentives, insider econometrics, wages
    JEL: J22 J24 J31 J33 M12 M52
    Date: 2012–12
  14. By: Xia, Qingjie (Peking University); Song, Lina (University of Nottingham); Li, Shi (Beijing Normal University); Appleton, Simon (University of Nottingham)
    Abstract: This paper examines the effects of state sector domination on wage inequality in urban China. Using Chinese Household Income Project surveys, we conduct two exercises: with quantile regression analysis, we identify wage gaps across the distribution and over time; and we employ the Machado and Mata (2005) decomposition to investigate how urban wage inequality was affected by the changes in wage structure and employment share of the state sector. We find that since the radical state sector reforms designed to reduce over-staffing and improve efficiency since the late 1990s, urban wage gaps were narrowed due to the reduction of employment share in the state sector; the wage premium of the state sector in comparison with the non-state sector increased significantly; and changes in the wage structure of the labour market caused the rise in urban wage inequality.
    Keywords: China, state sector, wage inequality, quantile regression, counterfactual analysis
    JEL: J31 J42 O15 P23
    Date: 2013–01
  15. By: Kim Lehrer; Monazza Aslam
    Abstract: This paper investigates the relationship between skills acquisition and job characteristics using a panel dataset of individuals in urban Ghana by analyzing on-the-job skills acquisition and exploring the link between mathematics skills and jobs which involve the handling of money.  These mathematics skills are important, not only, in the workplace but also more generally.  Survey respondents were administered a short mathematics test involving a number of theoretical and practical math questions.  The relationship between skills and jobs is identified by examining individuals who changed jobs between survey rounds while controlling for individual time invariant characteristics.  We argue that the process of job choice in Ghana allows us to identify causal impacts.  The findings show that money handling is positively associated with higher math skills for women.  These results are not driven by differences in mathematics scores between self-employed individuals and wage employed individuals and are robust to changes in the classification of money handling jobs.  Moreover, the findings show that working in a job involving the handling of money is positively associated with higher math scores among women with high levels of education.  This suggests that individuals at the low end of the distribution of years of education are not acquiring mathematics skills through money handling jobs.  It is only the 36% of women who are already quite highly educated in the Ghanaian context who are acquiring these skills on the job.
    Date: 2012–10–19
  16. By: Bernt Bratsberg, Torbjørn Hægeland and Oddbjørn Raaum (Statistics Norway)
    Abstract: This paper studies the distributions of literacy skills, education, and employment of immigrants and natives in three host countries: Canada, the United States, and Norway. For natives, we uncover remarkably stable relations between literacy skills, schooling, and employment across countries. For immigrants, the relations differ strongly: whereas literacy skills form only a weak determinant of immigrant employment in the North American labor markets, in Norway literacy is much more important for immigrant than native employment. We investigate various sources of this discrepancy and fail to uncover evidence that the finding reflects differential immigrant sorting across host countries. Instead, results show that literacy skills are particularly important for groups characterized by low employment in the Norwegian labor market, consistent with the hypothesis that a compressed wage structure, employment protection, and social insurance with high replacement ratios create adverse employment effects for immigrants.
    Keywords: Immigrants; literacy skills; employment
    JEL: J15 J24 J61
    Date: 2013–01
  17. By: Margaret Stevens
    Abstract: Vocational training systems differ markedly between countries. A model of firm-based human capital investment predicts equilibria characterised by particular patterns of training and job-to-job mobility, consistent with observed cross-country differences. Incentives to invest in human capital are determined jointly with labour turnover and the intensity of competition between employers for skilled workers, and the dependence of labour market conditions on human capital leads to strategic complementarity between training decisions. Depending on the extent of market frictions and match heterogeneity, we may expect to see either equilibria characterised by general training, steep wage profiles and high mobility; or equilibria in which both general and specific investment may occur, but turnover is low and wage profiles are relatively flat. Multiple equilibria are possible, in which case high turnover equilibria generate higher welfare.  
    Keywords: Human capital, labor turnover, specific training, general training, search, matching
    JEL: J24 J63
    Date: 2012–11–05
  18. By: Bruno, Bruna; Fiorillo , Damiano
    Abstract: The paper studies the effect of voluntary work on labour income for Italian employees. The Heckman and Instrumental Variables methods are used in order to control for self-selection bias of participation in labour market and endogeneity of volunteering. The results show that a wage premium of 3 - 4 percent of annual income emerges, when selection and endogeneity problems are taken into account
    Keywords: Voluntary work; labour income; Heckman model; instrumental variables; Italy
    JEL: C36 J31 C31
    Date: 2013–01–25
  19. By: Frank T. Denton; Byron G. Spencer
    Abstract: The paper considers age-sex patterns of fluctuation of employment, unemployment, labour force participation, hours worked per employee, and hours worked per capita. The patterns are extracted (by regression) from annual data for the period 1976-2011 and expressed in the form of group-to-aggregate elasticities. An additive relationship among the elasticities is noted and used to decompose the variation of per capita hours worked into source contributions. On that basis, participation and employee hours are found to be significant contributors generally over the working age range, but especially among young workers. The results suggest a considerable amount of "hidden" unemployment during cyclical downturns.
    Keywords: Cyclical labour force behaviour, age-sex employment and unemployment rates, hidden unemployment
    JEL: J20 J21
    Date: 2012–12
  20. By: Michael Fritsch (School of Economics and Business Administration, Friedrich-Schiller-University Jena); Alexander Kritikos (German Institute for Economic Research (DIW Berlin), and University of Potsdam); Alina Sorgner (School of Economics and Business Administration, Friedrich-Schiller-University Jena)
    Abstract: We analyze the sources of the rise in the levels of self-employment in Germany since reunification by applying the non-linear Blinder-Oaxaca decomposition technique. This analysis is performed separately for East and West Germany in order to account for the East German recovery of entrepreneurship after 40 years of socialist regime. We find different results for self-employed people with employees and solo- entrepreneurs. The main factors determining changes in the level of self-employment are demographic developments, the shift toward service sector employment, and a higher share of population holding a tertiary degree. The analysis also suggests that changes in personal attitudes toward self-employment might be responsible for the particular increase of solo-entrepreneurship.
    Keywords: Self-employment, non-linear Blinder-Oaxaca decomposition technique, entrepreneurship, Germany
    JEL: L26 D22
    Date: 2013–01–17
  21. By: Imbert, Clement
    Abstract: In contrast with the typical transition to a market economy, earnings inequality in Vietnam between 1993 and 2006 appears to have decreased, and the earnings gap in favor of public employees appears to have widened. The paper uses a comparative advantage model to disentangle the effect of sorting workers across sectors from the effect of the differences in returns to workers'skills. The selection of the best workers into the public sector is clearly an important component of the explanation for the public-private sector earnings gap, but the widening of this gap over time is primarily due to changes in the compensation patterns. The paper finds that, in the 1990s, public employees were underpaid compared with their earning potential in the private sector whereas, in the early 2000s, public employees earned similar returns to their comparative advantage in the public and private sectors. The increasing homogeneity in returns to skills in the Vietnamese labor market appears to explain both the increase in the public-private pay gap and the decrease in overall inequality.
    Keywords: Labor Markets,Public Sector Economics,Public Sector Management and Reform,Inequality,Government Procurement
    Date: 2013–01–01
  22. By: Wang, Le (University of New Hampshire)
    Abstract: The literature estimating returns to education has often utilized spousal education and parental education as instrument variables (IV). However, due to usual survey designs, both IVs are available only for the individuals whose spouse or parents are present in the same household. The IV estimates based on these selective sub-samples may be inconsistent, even when the IVs satisfy the standard assumptions. In this paper, we examine the empirical relevance of this issue in the Chinese context. To our surprise, unlike the selection issue in other situations, this kind of selection does not appear particularly worrisome, suggesting that the previous IV results are robust. In particular, using China Household Income Project 1995 and 2002, we find that correcting for this potential issue has only a modest impact on the magnitude of the standard IV estimates using parental education as an IV, but a negligible impact on those using spousal education. Using the specification tests proposed, we find that these impacts are generally not statistically significant. These results are further confirmed by our analysis using U.S. data. We believe that these results are of use to both policymakers and practitioners.
    Keywords: instrument variable estimation, sample selection, returns to education, Chinese labor market
    JEL: J24 I21 C14 C31 P52
    Date: 2012–12

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