nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2013‒03‒02
thirteen papers chosen by
Erik Jonasson
National Institute of Economic Research

  1. Why Does the Minimum Wage Have No Discernible Effect on Employment? By John Schmitt
  2. Career Progression, Economic Downturns, and Skills By Jerome Adda; Christian Dustmann; Costas Meghir; Jean-Marc Robin
  3. Employment Duration and Shifts into Retirement in the EU By Ted Aranki; Corrado Macchiarelli
  4. The Impact on Earnings when Entering Self-Employment: Evidence for Germany By Johannes Martin
  5. Equal matches are only half the story: Why German female graduates earn 27 % less than males By Boll, Christina; Leppin, Julian Sebastian
  6. The Causal Effect of Deficiency at English on Female Immigrants’ Labour Market Outcomes in the UK By Alfonso Miranda; Yu Zhu
  7. Workplace Heterogeneity and the Rise of West German Wage Inequality By Card, David; Heining, Jörg; Kline, Patrick
  8. Post schooling human capital investments and the life cycle variance of earnings By Magnac, Thierry; Pistolesi, Nicolas; Roux, Sébastien
  9. Female Labour Force Participation in MENA's Manufacturing Sector: The Implications of Firm-Related and National Factors By Fakih, Ali; Ghazalian, Pascal L.
  10. Do parents drink their children's welfare? A joint analysis of intra-household allocation of time. By Gianna Claudia Giannelli; Lucia Mangiavacchi; Luca Piccoli
  11. Economic and employment growth in Germany: The sectoral elements of Verdoorn's Law with regional data By Oelgemöller, Jens
  12. Labor Market Effects of Social Programs: Evidence from India's Employment Guarantee By Clément Imbert; John Papp
  13. Salaries and Work Effort: An Analysis of the European Union Parliamentarians By Naci Mocan; Duha T. Altindag

  1. By: John Schmitt
    Abstract: The employment effect of the minimum wage is one of the most studied topics in all of economics. This report examines the most recent wave of this research – roughly since 2000 – to determine the best current estimates of the impact of increases in the minimum wage on the employment prospects of low-wage workers. The weight of that evidence points to little or no employment response to modest increases in the minimum wage.
    Keywords: minimum wage, labor, employment, inequality, poverty
    JEL: J J2 J3 J31 J38 J6 J8 D
    Date: 2013–02
  2. By: Jerome Adda (European University Institute); Christian Dustmann (University College London); Costas Meghir (Cowles Foundation, Yale University); Jean-Marc Robin (Sciences Po, Paris and University College London)
    Abstract: This paper analyzes the career progression of skilled and unskilled workers, with a focus on how careers are affected by economic downturns and whether formal skills, acquired early on, can shield workers from the effect of recessions. Using detailed administrative data for Germany for numerous birth cohorts across different regions, we follow workers from labor market entry onwards and estimate a dynamic life-cycle model of vocational training choice, labor supply, and wage progression. Most particularly, our model allows for labor market frictions that vary by skill group and over the business cycle. We find that sources of wage growth differ: learning-by-doing is an important component for unskilled workers early on in their careers, while job mobility is important for workers who acquire skills in an apprenticeship scheme before labor market entry. Likewise, economic downturns affect skill groups through very different channels: unskilled workers lose out from a decline in productivity and human capital, whereas skilled individuals suffer mainly from a lack of mobility.
    Keywords: Wage determination, Skills, Business cycles, Apprenticeship Training, Job Mobility, Human Capital
    JEL: J24 J31 J62 J63 I24
    Date: 2013–02
  3. By: Ted Aranki; Corrado Macchiarelli
    Abstract: The decision to cease working is traditionally influenced by a wide set of socio-economic and environmental variables. In this paper, we study transitions out of work for 26 EU countries over the period 2004-2009 in order to investigate the determinants of retirement based on the Eurostat Survey on Income and Living Conditions (EU-SILC). Applying standard survivor analysis tools to describe exits into retirement, we do not find any significant differences in the patterns into retirement between the average euro area and EU non-euro area countries. Moreover, we find that shifts into retirement have increased during the onset of the 2009 economic and financial crisis. Income, together with flexible working arrangements, is found to be important as regards early retirement decisions, compared to retiring beyond the legal retirement age. Finally, we show that institutional measures (such as, state/health benefits, minimum retirement age) could not be sufficient alone if individuals withdraw earlier from the labour market due to a weakening of their health. Especially, these latter results are of importance for structural and macroeconomic policy, for instance, in increasing the employment of both people and hours worked against the background of population ageing.
    Keywords: Retirement, ageing population, hazard model, duration analysis, EU countries
    JEL: J14 J26 C41
    Date: 2013–02
  4. By: Johannes Martin
    Abstract: Using data of the German Socio-Economic Panel (GSOEP) earnings differentials between self-employed and wage-employed workers in the German labor market are explored. Previous research based on US data reports lower incomes for entrepreneurs. In contrast to that, the findings of this contribution suggest the opposite for German entrepreneurs. They have considerably higher earnings than wage-employed workers. Furthermore, there is a significant and positive effect on earnings when entering self-employment. This holds true when it is also taken into account that workers usually report a smaller firm size and work longer after beginning an entrepreneurial occupation.
    Keywords: Self-employment, Human Capital, Earnings, GSOEP, Entrepreneurship
    JEL: L26 J31 J32
    Date: 2013
  5. By: Boll, Christina; Leppin, Julian Sebastian
    Abstract: Germany's occupational and sectoral change towards a knowledge-based economy calls for high returns on education. Nevertheless, female graduates are paid much less than their male counterparts. We find an overall unadjusted gender pay gap among German graduates of 27 %. This corresponds to an approximate wage gap of 32.5 % thereof 20,3 % account for different endowments and 12,2 % for different remunerations of characteristics. Suboptimal job matches of females tied in family and partner contexts are supposed to account for at least part of the gendered wage drift. But overeducation does not matter in this regard. Instead, females earn 4 % less because they work on jobs with fewer years of required education. Furthermore, solely males are granted breadwinner wage premiums and only men successfully avoid wage cuts when reducing working hours. We conclude that the price effect of the gap reflects employers' attributions of gender stereotypes, gendered work attitudes as well as noticeable unobserved heterogeneity within and between sexes. --
    JEL: J31 C33 J71
    Date: 2013
  6. By: Alfonso Miranda; Yu Zhu
    Abstract: Using the first wave of the UK Household Longitudinal Survey, we investigate the extent to which deficiency at English as measured by English as Additional Language (EAL), contribute to the immigrant-native wage gap for female employees in the UK, after controlling for age, region of residence, educational attainment and ethnicity. We allow for endogeneity of EAL and correct for bias arising from self-selection into employment using a 3-step estimation procedure. We find very strong evidence of negative selection of EAL into employment. Moreover, we also present evidence of self-selection bias on the wage equation, which if uncorrected, would result in significant underestimation of the causal effect of EAL on the immigrant-native wage gap for women.
    Keywords: English as Additional Language (EAL); immigrant-native wage gap; selectivity bias
    JEL: J15 J31 J61
    Date: 2013–02
  7. By: Card, David (University of California, Berkeley); Heining, Jörg (Institute for Employment Research (IAB), Nuremberg); Kline, Patrick (University of California, Berkeley)
    Abstract: We study the role of establishment-specific wage premiums in generating recent increases in West German wage inequality. Models with additive fixed effects for workers and establishments are fit in four sub-intervals spanning the period from 1985 to 2009. We show that these models provide a good approximation to the wage structure and can explain nearly all of the dramatic rise in West German wage inequality. Our estimates suggest that the increasing dispersion of West German wages has arisen from a combination of rising heterogeneity between workers, rising dispersion in the wage premiums at different establishments, and increasing assortativeness in the assignment of workers to plants. In contrast, the idiosyncratic job-match component of wage variation is small and stable over time. Decomposing changes in mean wages between different education groups, occupations, and industries, we find that increasing plant-level heterogeneity and rising assortativeness in the assignment of workers to establishments explain a large share of the rise in inequality along all three dimensions.
    Keywords: wage inequality, assortative matching
    JEL: J00 J31 J40
    Date: 2013–02
  8. By: Magnac, Thierry (TSE); Pistolesi, Nicolas (TSE); Roux, Sébastien (CREST INSEE, Paris)
    Abstract: We propose an original model of human capital investments after leaving school in which individuals di¤er in their initial human capital obtained at school, their rate of return, their costs of human capital investments and their terminal values of human capital at a fixed date in the future. We derive a tractable reduced form Mincerian model of log earnings profiles along the life cycle which is written as a linear factor model in which levels, growth and curvature of earnings profiles are individual-specific. Using panel data from a single cohort of French male wage earners observed over a long span of 30 years, a random effect model is estimated first by pseudo maximum likelihood methods. This step is followed by a simple second step fixed e¤ect method by which individual-specific structural parameters are estimated. This allows us to test restrictions, compute counterfactual profiles and evaluate how earnings inequality over the life-cycle is a¤ected by changes in structural parameters. Under some conditions, even small changes in life expectancy seem to imply large changes in earnings inequality.
    Keywords: human capital investment, earnings dynamics, post-schooling earnings growth, dynamic panel data
    JEL: C33 D91 J24 J31
    Date: 2013–01
  9. By: Fakih, Ali (Lebanese American University); Ghazalian, Pascal L. (University of Lethbridge)
    Abstract: The Middle East and North Africa (MENA) region falls behind several other geo-economic regions in terms of women's participation rates in the labour market. This paper examines the implications of firm-related and national factors for Female Labour Force Participation (FLFP) rates in manufacturing firms located in the MENA region. The empirical investigation uses data derived from the World Bank's Enterprise Surveys database and applies fractional logit models to carry out the estimations. The results reveal positive implications of many firm-related factors, mainly private foreign ownership and exporting activities, for FLFP rates. National factors, such as economic development and gender equality, are also found to promote FLFP rates. These effects are generally found to be more important for women's overall labour participation rates than for women's non-production labour participation rates.
    Keywords: female labour force participation, fractional logit model, manufacturing firms, MENA region
    JEL: J16 J21 J23 J82
    Date: 2013–02
  10. By: Gianna Claudia Giannelli (Department of Economics-University of Florence and IZA); Lucia Mangiavacchi (Universitat de les Illes Balears); Luca Piccoli (Universitat de les Illes Balears)
    Abstract: The aim of this paper is to investigate whether excessive parental alcohol consumption leads to a reduction of child welfare. To this end, we analyse whether alcohol consumption decreases time spent by parents looking after their children and working. Using the Russia Longitudinal Monitoring Survey, the study focuses on mono-nuclear families with children under fifteen years of age, for whom we estimate a model of intra-household allocation of time. We find that husbands' alcohol consumption has a negative impact on their weekly hours spent doing child care, while no significant effect is observed for mothers' alcohol consumption. We interpret these findings as evidence of a negative impact of fathers' alcohol consumption on child welfare.
    Keywords: Child care, Time allocation, Alcohol consumption, Labor supply, Russia.
    JEL: D1 I1 J13 J22
    Date: 2013
  11. By: Oelgemöller, Jens
    Abstract: A major aspect of employment growth is discussed in relation to economic growth. This paper deals with the question as to whether the relationship between economic and employment growth, subsumed under the idiom Verdoorn's Law, holds true at the sectoral level. For this reason, the German labor market is divided into regional functionally delineated labor markets. The employees are differentiated into sectoral affiliation, education, national status and part-time employment. The economy is split into six sectors. The labor demand function is derived from the cost-function of companies, and factor prices (interest rates and wages) are considered. It is evident that the construction sector still has intense connections to the labor market concerning output changes. This cannot be verified in the finance, insurance and service sector. Part-time work increased during the economic crisis. The elasticity to factor-prices holds true for most types of employment. It is found that, regional labor market performance is directly linked to industrial structure. The fixed an random-effects estimations used here deliver satisfying results to most investigations. However, some concerns about the results regarding characteristics of employees remain. --
    Keywords: Verdoorn,sectoral growth,regional growth,employment elasticity
    JEL: J21 J23 O11 R11
    Date: 2013
  12. By: Clément Imbert; John Papp
    Abstract: Using the gradual roll out of a large rural workfare program in India, we estimate its e ect on private employment and wages by comparing districts that received the program earlier relative to those that received it later. Our results suggest that public sector hiring crowds out private sector work and increases private sector wages. We compute the implied welfare gains of the program by consumption quintile. Our calculations show that the welfare gains to the poor from the equilibrium increase in private sector wages are large in absolute terms and large relative to the gains received solely by program participants.
    Date: 2013
  13. By: Naci Mocan; Duha T. Altindag
    Abstract: Prior to July 2009, salaries of the members of the European Parliament were paid by their home country and there were substantial salary differences between parliamentarians representing different EU countries. Starting in July 2009, the salary of each member of the Parliament is pegged to 38.5% of a European Court judge’s salary, paid by the EU. This created an exogenous change in salaries, the magnitude and direction of which varied substantially between parliamentarians. Parliamentarians receive per diem compensation for each meeting day attended during plenary sessions, but salaries constitute fixed income as they are independent of attendance to the Parliament. Using detailed information on each parliamentarian of the European Parliament between 2004 and 2011 we show that an increase in salaries reduces attendance to plenary sessions. An increase in salaries has also a negative impact on questions asked by parliamentarians in plenary sessions but it has no impact on other job-related activities.
    Date: 2013–02

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