nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2013‒03‒30
nine papers chosen by
Erik Jonasson
National Institute of Economic Research

  1. The Great Reversal in the Demand for Skill and Cognitive Tasks By Paul Beaudry; David A. Green; Benjamin M. Sand
  2. Employment Duration and Shifts into Retirement in the EU By Ted Aranki & Corrado Macchiarelli
  3. Job Polarization in Aging Economies By Eva Moreno - Galbis; Thepthida Sopraseuth
  4. Retirement Plan Type and Employee Mobility: The Role of Selection and Incentive Effects By Gopi Shah Goda; Damon Jones; Colleen Flaherty Manchester
  5. How Far Do England’s Second-Order Cities Emulate London as Human-Capital ‘Escalators’? By Tony Champion; Mike Coombes; Ian Gordon
  6. The Recent Decline in Employment Dynamics By Henry R. Hyatt; James Spletzer
  7. Social networks and wages in Senegal’s formal sector. By Berardi, N.
  8. Market-based incentives By Grochulski, Borys; Zhang, Yuzhe
  9. Labor Market Search and Schooling Investment By Christopher Flinn; Joseph Mullins

  1. By: Paul Beaudry; David A. Green; Benjamin M. Sand
    Abstract: What explains the current low rate of employment in the US? While there has been substantial debate over this question in recent years, we believe that considerable added insight can be derived by focusing on changes in the labor market at the turn of the century. In particular, we argue that in about the year 2000, the demand for skill (or, more specifically, for cognitive tasks often associated with high educational skill) underwent a reversal. Many researchers have documented a strong, ongoing increase in the demand for skills in the decades leading up to 2000. In this paper, we document a decline in that demand in the years since 2000, even as the supply of high education workers continues to grow. We go on to show that, in response to this demand reversal, high-skilled workers have moved down the occupational ladder and have begun to perform jobs traditionally performed by lower-skilled workers. This de-skilling process, in turn, results in high-skilled workers pushing low-skilled workers even further down the occupational ladder and, to some degree, out of the labor force all together. In order to understand these patterns, we offer a simple extension to the standard skill biased technical change model that views cognitive tasks as a stock rather than a flow. We show how such a model can explain the trends in the data that we present, and offers a novel interpretation of the current employment situation in the US.
    JEL: J2 J31 O33
    Date: 2013–03
  2. 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.
    Date: 2013–02–12
  3. By: Eva Moreno - Galbis; Thepthida Sopraseuth (GRANEM (University of Angers); THEMA, Universite de Cergy-Pontoise)
    Abstract: This paper extends on French data a previous finding on US data: employment growth has been more important in the lower and upper tail of the job quality distribution. The originality of the paper is to argue that the diffusion of ICT cannot explain alone the polarization at the lower tail of the distribution. However, when combined with population aging, our framework predicts a progressive concentration of employment in the service sector (bottom tail of the job quality distribution). This results from a purely demand shift, since, as revealed by our estimations goods and services are complementary for seniors. The decrease in the relative price of goods induced by ICT diffusion is thus associated with an increased demand for services if the proportion of seniors is increasing.
    Keywords: Job Polarization, Occupational Structure, Aging
    JEL: J14 J21 J24 O33
    Date: 2013
  4. By: Gopi Shah Goda; Damon Jones; Colleen Flaherty Manchester
    Abstract: Employer-provided pension plans may affect employee mobility both through an “incentive effect,” where the bundle of benefit characteristics such as vesting rules, pension wealth accrual, risk, and liquidity affect turnover directly, and a “selection effect,” where employees with different underlying mobility tendencies select across plans or across firms with different types of plans. In this paper, we quantify the role of selection by exploiting a natural experiment at a single employer in which an employee’s probability of transitioning from a defined benefit (DB) to a defined contribution (DC) pension plan was exogenously affected by default rules. Using regression discontinuity as well as differences-in-regression-discontinuities (DRD) methods, we find evidence that employees with higher mobility tendencies self-select into the DC plan. Our results suggest that selection likely contributes to the observed positive relationship between the transition from DB to DC plans and employee mobility in settings where employees sort into plans or employers. Counter to conventional wisdom, we find a negative direct effect of the DC plan on turnover relative to the DB plan, which underscores the multi-dimensional difference between these plans.
    JEL: H0 J26 J32
    Date: 2013–03
  5. By: Tony Champion; Mike Coombes; Ian Gordon
    Abstract: In the urban resurgence accompanying the growth of the knowledge economy, second-order cities appear to be losing out to the principal city, especially where the latter is much larger and benefits from substantially greater agglomeration economies. The view that any city can make itself attractive to creative talent seems at odds with the idea of a country having just one 'escalator region' where the rate of career progression is much faster, especially for in-migrants. This paper takes the case of England, with its highly primate city-size distribution, and tests how its second- order cities (in size order, Birmingham, Manchester, Leeds, Newcastle, Bristol, Sheffield, Liverpool, Nottingham and Leicester) compare with London as human- capital escalators. The analysis is based on the ONS Longitudinal Study of linked census records, primarily for 1991-2001, and uses one key indicator of upward social mobility, the transition from White Collar Non-core to White Collar Core. For non- migrants, the transition rates for all the second-order cities are found to fall well short of London's. In only one case - Manchester - is the rate significantly higher than the average for other areas outside the Greater South East (GSE) and its performance is matched by the non-London part of the GSE. Those moving to the second-order cities during the decade experienced much stronger upward social mobility than their non-migrants. This 'migrant premium' was generally similar to that for London, suggesting that it results from people moving only after they have secured a better job. If so, second-order cities cannot rely on the speculative migration of talented people but need suitable jobs ready for them to access.
    Keywords: human-capital escalator, second-order cities, England, ONS Longitudinal Study, career progression, city region
    JEL: J24 J61 J62 R23
    Date: 2013–03
  6. By: Henry R. Hyatt; James Spletzer
    Abstract: In recent years, the rate at which workers and businesses exchange jobs has declined in the United States. Between 1998 and 2010, rates of job creation, job destruction, hiring, and separation declined dramatically, and the rate of job-to-job flows fell by about half. Little is known about the nature and extent of these changes, and even less about their causes and implications. In this paper, we document and attempt to explain the recent decline in employment dynamics. Our empirical work relies on the four leading datasets of quarterly employment dynamics in the United States – the Longitudinal Employer-Household Dynamics (LEHD), the Business Employment Dynamics (BED), the Job Openings and Labor Turnover Survey (JOLTS), and the Current Population Survey (CPS). We find that changes in the composition of the labor force and of employers explain relatively little of the decline. Exploiting some identities that relate the different measures to each other, we find that job creation and destruction could explain as much of a third of the decline in hires and separations, while job-to-job flows may explain more of the decline. We end our paper with a discussion of different possible explanations and their relative merits.
    Date: 2013–03
  7. By: Berardi, N.
    Abstract: We develop a theoretical framework that considers the role played by moral hazard and the diversity of networks and cultures in the choice of hiring channel. In favoritism contexts social networks, and particularly strong ties, are adopted as hiring channels for unskilled jobs and result in wage penalties, while otherwise the opposite happens. We estimate an endogenous switching model for the case of Senegal's manufacturing formal sector and find, consistently with our theoretical predictions in case of favoritism, that informal hiring channels are preferred to fill unskilled vacancies and are associated with a wage penalty, especially when ties are stronger.
    Keywords: Social networks, Hiring channel, Wage differential.
    JEL: O12 J31
    Date: 2013
  8. By: Grochulski, Borys; Zhang, Yuzhe
    Abstract: We study optimal incentives in a principal-agent problem in which the agent's outside option is determined endogenously in a competitive labor market. In equilibrium, strong performance increases the agent's market value. When this value becomes sufficiently high, the threat of the agent's quitting forces the principal to give the agent a raise. The prospect of obtaining this raise gives the agent an incentive to exert effort, which reduces the need for standard incentives, like bonuses. In fact, whenever the agent's option to quit is close to being ``in the money,'' the market-induced incentive completely eliminates the need for standard incentives.
    Keywords: Market-based incentive, Career Concerns, Endogenous outside option, Limited commitment, Private information, Wage contract
    JEL: D82 D86 J31 J33 M12 M52
    Date: 2013–03–25
  9. By: Christopher Flinn; Joseph Mullins
    Abstract: We generalize the standard search, matching, and bargaining framework to allow individuals to acquire productivity-enhancing schooling prior to labor market entry. As is wellknown, search frictions and weakness in bargaining position contribute to under-investment from an efficiency perspective. In order to evaluate the sensitivity of schooling investments to “hold up,” the model is estimated using Current Population Survey data. We focus on the impact of bargaining power on schooling investment, and find that the effects are large in the partial equilibrium version of the model. However, large increases in bargaining power in the general equilibrium version of the model choke off firm vacancy creation and actually reduce the level of schooling investment.
    Keywords: Labor market search; schooling choice; hold-up; Nash bargaining.
    JEL: J24 J3 J64
    Date: 2013

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