nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2013‒04‒06
fourteen papers chosen by
Erik Jonasson
National Institute of Economic Research

  1. The Employment Effects of State Hiring Credits During and After the Great Recession By David Neumark; Diego Grijalva
  2. Wages and informailty in developing countries By Costas Meghir; Renata Narita; Jean-Marc Robin
  3. Transactions Costs and the Employment Contract in the US Economy By MacLeod, W. Bentley; Parent, Daniel
  4. Market Thickness and the Early Labor Market Career of University Graduates- An urban advantage? By Ahlin, Lina; Andersson, Martin; Thulin, Per
  5. The assignment of workers to tasks with endogenous supply of skills By DUPUY Arnaud
  6. Compensating Wage Differentials in Stable Job Matching Equilibrium By Seungjin Han; Shintaro Yamaguchi
  7. Decomposing immigrant wage assimilation - the role of workplaces and occupations By Eliasson, Tove
  8. Comparing Labor Supply Elasticities in Europe and the US: New Results By Olivier Bargain; Kristian Orsini; Andreas Peichl
  9. Persistence of regional inequality in China By Christopher Candelaria; Mary Daly; Galina Hale
  10. Management-Employee Relations, Firm Size and Job Satisfaction By Tansel, Aysit; Gazioglu, Saziye
  11. Mincer Equation, Power Law of Learning, and Efficient Education Policy By Richter, Wolfram F.
  12. Social Security Earnings Test and the Labor Supply of the Elderly: New evidence from unique survey responses in Japan By SHIMIZUTANI Satoshi
  13. Revisiting the Labor Supply Effect of Social Security Earnings Test: New evidence from its elimination and reinstatement in Japan By SHIMIZUTANI Satoshi; OSHIO Takashi
  14. Steady-State Labor Supply Elasticities: An International Comparison By Olivier Bargain; Andreas Peichl

  1. By: David Neumark; Diego Grijalva
    Abstract: State and federal policymakers grappling with the aftermath of the Great Recession have sought ways to spur job creation, in many cases adopting hiring credits to encourage employers to create new jobs. However, there is virtually no evidence on the effects of these kinds of counter-recessionary hiring credits – the only evidence coming from much earlier studies of the New Jobs Tax Credit from the 1970s. This paper provides evidence on the effect on job growth of hiring credits adopted during the Great Recession. For many of the types of hiring credits we examine we do not find positive effects on job growth. However, some specific types of hiring credits – including those targeting the unemployed and those that allow states to recapture credits when job creation goals are not met – appear to have succeeded in boosting job growth. At the same time, some credits appear to generate hiring without increasing employment or to generate much more hiring than net employment growth, consistent with these credits leading to churning of employees that raises the costs of producing jobs via hiring credits.
    JEL: J23 J38
    Date: 2013–03
  2. By: Costas Meghir (Institute for Fiscal Studies and Yale University); Renata Narita; Jean-Marc Robin (Institute for Fiscal Studies and Sciences Po)
    Abstract: It is often argued that informal labour markets in developing countries are the engine of growth because their existence allows firms to operate in an environment where wage and regulatory costs are lower. On the other hand informality means that the amount of social protection offered to workers is lower. In this paper we extend the wage-posting framework of Burdett and Mortensen (1998) to allow for two sectors of employment. Firms are heterogeneous and decide endogenously in which sector to locate. Workers engage in both off the job and on the job search and decide which offers to accept. Direct transitions across sectors are permitted, which matches the evidence in the data about job mobility. Our empirical analysis uses Brazilian labour force surveys. We use the model to discuss the relative merits of alternative policies towards informality. In particular, we evaluate the impact of a tighter regulatory framework on employment in the formal and the informal sector on the distribution of wages.
    Date: 2013–03
  3. By: MacLeod, W. Bentley (Columbia University); Parent, Daniel (HEC Montreal)
    Abstract: In this paper we adapt the model of MacLeod (2007) to provide one way to formally implement some of Williamson's ideas regarding the effect of transactions costs upon employment relationship. We then explore the empirical implications of this model with a data set that measures job characteristics using the Dictionary of Occupational Titles (DOT), and merge this data set with the Panel Study on Income Dynamics (PSID). We find that viewing the data through the lens of transactions costs economics provide a useful way to organize the data on compensation in the US labor market.
    Keywords: compensation, transactions costs, labor markets
    JEL: J33
    Date: 2013–03
  4. By: Ahlin, Lina (CIRCLE, Lund University); Andersson, Martin (CIRCLE, Lund University); Thulin, Per (Royal Institute of Technology and Swedish Entrepreneurship Forum)
    Abstract: We analyze the influence of market thickness for skills on initial wages and subsequent wage development of university graduates. Using Swedish micro-level panel data on a cohort of graduates, we show that two out of three graduates move to large cities upon graduation. Large cities yield higher rewards to human capital and a stronger early job market career. The premium on initial wages for urban graduates is in the interval of 6-12 percent, and we estimate a wage-growth premium of about 3 percent. Thicker markets for skills appear as a key reason for the concentration of university graduates to larger cities.
    Keywords: human capital; university graduates; urban wage premium; market thickness; matching; agglomeration economies; migration; job switching
    JEL: J31 J61 R10 R12
    Date: 2013–02–14
  5. By: DUPUY Arnaud
    Abstract: This paper presents a general equilibrium assignment model of workers to tasks with endogenous supply of skills. The model has 2 key features. First, skills are endogenous and multidimensional. Second, two types of assignment occur; workers self-select the type of skills to supply and firms assign workers to tasks/machines. Equilibrium is characterized by two functions mapping skills of each type to tasks and two wage functions, one for each type of skills, so that the wage distributions generally overlap. The model shows that the impact of any given skill-biased technical change on wage inequality is tightly related to the distribution of skills in the population. Productivity effects can be over or under estimated by wage data when the supply of skills is endogenous. The model also shows that Johnson?s (1997) distinction between intensive and extensive technical change is impossible when supply is endogenous.
    Keywords: tasks assignment; endogenous supply of skills; multidimensional skills; human capital; technical change and usage distribution
    JEL: D30 J21 J23 J31
    Date: 2013–03
  6. By: Seungjin Han; Shintaro Yamaguchi
    Abstract: This paper studies implicit pricing of non-wage job characteristics in the labour market using a two-sided matching model. It departs from the previous literature by allowing worker heterogeneity in productivity, which gives rise to a double transaction problem in a hedonic model. Deriving sufficient conditions under which assortative matching is the unique stable job-worker matching, we show that observed wage differentials between jobs reflect not only compensating wage differentials, but also worker productivity gaps between the jobs. We find that the job-worker matching pattern determines the extent to which compensating wage differentials are confounded with the worker productivity gap effect.
    Keywords: hedonic model, heterogeneity, two-sided matching, matching pattern, wage differential, equalizing difference, worker productivity
    JEL: C78 J31
    Date: 2013–03
  7. By: Eliasson, Tove (Department of Economics, Uppsala University)
    Abstract: This article uses a matched employer-employee panel data of the Swedish labor market to study immigrant wage assimilation, decomposing the wage catch-up into parts which can be attributed to relative wage growth within and between workplaces and occupations. This study shows that failing to control for selection into employment when studying wage assimilation of immigrants is very likely to under-estimate wage catch-up. The results further show that both poorly and highly educated immigrants catch up through relative wage growth within workplaces and occupations, suggesting that employer-specic learning plays an important role for the wage catch-up. The highly educated suffers from not benefiting from occupational mobility as much as the natives do. This could be interpreted as a lack of access to the full range of occupations, possibly explained by difficulties in signaling specific skills.
    Keywords: Firm sorting; occupational mobility; wage assimilation; host country specific human capital; employer learning
    JEL: D22 D31 J01 J31 J71
    Date: 2013–03–14
  8. By: Olivier Bargain (AMSE - Aix-Marseille School of Economics - Aix-Marseille Univ. - Centre national de la recherche scientifique (CNRS) - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole Centrale Marseille (ECM), IZA - Institute for the Study of Labor); Kristian Orsini (CES - Center for Economic Studies - Université Catholique de Louvain (UCL) - Belgique); Andreas Peichl (IZA - Institute for the Study of Labor, University of Cologne - University of Cologne, CESifo - CESifo, ISER - University of Essex)
    Abstract: We suggest the first large-scale international comparison of labor supply elasticities for 17 European countries and the US, separately by gender and marital status, with measurement differences netted out by using a harmonized empirical approach and comparable data sources. We find that own-wage elasticities are relatively small and much more uniform across countries than previously considered. Nonetheless, such differences do exist, and are found not to arise from different tax-benefit systems, wage/hour level or demographic compositions across countries, suggesting genuine differences in work preferences across countries. Furthermore, three other important results for welfare analysis are consistent across countries: the extensive (participation) margin dominates the intensive (hours) margin; for singles, this leads to larger labor supply responses in low-income groups; and income elasticities are extremely small everywhere. Finally, the results for cross-wage elasticities in couples are opposed between regions, consistent with complementarity in spouses' leisure in the US versus substitution in their household production in Europe.
    Keywords: household labor supply; elasticity; taxation; Europe; US
    Date: 2012–07
  9. By: Christopher Candelaria; Mary Daly; Galina Hale
    Abstract: Regional inequality in China appears to be persistent and even growing in the last two decades. We study potential explanations for this phenomenon. After making adjustments for the difference in the cost of living across provinces, we find that some of the inequality in real wages could be attributed to differences in quality of labor, industry composition, labor supply elasticities, and geographical location of provinces. These factors, taken together, explain about half of the cross-province real wage difference. Interestingly, we find that inter-province redistribution did not help offset regional inequality during our sample period. We also demonstrate that inter-province migration, while driven in part by levels and changes in wage differences across provinces, does not offset these differences. These results imply that cross-province labor market mobility in China is still limited, which contributes to the persistence of cross-province wage differences.
    Keywords: China ; Wages ; Labor market ; Labor supply
    Date: 2013
  10. By: Tansel, Aysit (Middle East Technical University); Gazioglu, Saziye (Middle East Technical University)
    Abstract: This paper investigates the job satisfaction in relation to managerial attitudes towards employees and firm size using the linked employer-employee survey results in Britain. We first investigate the management-employee relationships and the firm size using maximum likelihood probit estimation. Next various measures of job satisfaction are related to the management-employee relations via maximum likelihood ordered probit estimates. Four measures of job satisfaction that have not been used often are considered. They are satisfaction with influence over job; satisfaction with amount of pay; satisfaction with sense of achievement and satisfaction with respect from supervisors. Main findings indicate that management-employee relationships are less satisfactory in the large firms than in the small firms. Job satisfaction levels are lower in large firms. Less satisfactory management-employee relationships in the large firms may be a major source of the observed lower level of job satisfaction in them. These results have important policy implications from the point of view of the firm management while achieving the aims of their organizations in particular in the large firms in the area of management-employee relationships. Improving the management-employee relations in large firms will increase employee satisfaction in many respects as well as increase productivity and reduce turnover. The nature of the management-employee relations with firm size and job satisfaction has not been investigated before.
    Keywords: job satisfaction, managerial attitudes, firm size, linked employer-employee data, Britain
    JEL: J28 J5 J21 D23
    Date: 2013–03
  11. By: Richter, Wolfram F. (TU Dortmund)
    Abstract: The basis for the empirical research on earnings determination is the Mincer equation. Individuals are assumed to make schooling decisions by maximizing earnings. Leisure costs of schooling and labour supply are neglected which has some empirically implausible implications. This paper shows a way of deriving a Mincer-type earnings function from the more standard assumption of utility maximization. The implications are less questionable. The approach allows one to analyse the efficiency of education policy in Ramsey's tradition. Distortive wage taxation is shown to provide reason for subsidizing education in effective terms. Second-best policy is confronted with empirical evidence on OECD countries.
    Keywords: Mincer equation, earnings determination, maximizing utility vs. earnings, power law of learning, second-best taxation in Ramsey's tradition, education elasticity rule
    JEL: J24 H21 I28
    Date: 2013–03
  12. By: SHIMIZUTANI Satoshi
    Abstract: This study proposes an alternative approach of utilizing direct responses to a survey on the social security earnings test for the elderly to provide new evidence on the sensitivity of the labor supply decision of workers aged between 60 and 64 with respect to the test. Our empirical results show a discouraging effect on working in a large proportion of these workers in Japan, even after correcting for the observed attributes of individuals who reported to be either affected or unaffected.
    Date: 2013–03
  13. By: SHIMIZUTANI Satoshi; OSHIO Takashi
    Abstract: We explore the labor supply effect of the social security earnings test in Japan on those aged 65-69 years through a combined examination of the elimination of the earnings test in 1985 and its reinstatement in 2002. We present evidence showing that the effects of changes in the earnings test on the labor supply of the elderly are not symmetric, controlling for changes in the attributes of workers and firms. The repeal of the earnings test in 1985 did affect the earnings distribution of the elderly (especially for men), while its reinstatement in 2002 did not alter the earnings distribution.
    Date: 2013–03
  14. By: Olivier Bargain (AMSE - Aix-Marseille School of Economics - Aix-Marseille Univ. - Centre national de la recherche scientifique (CNRS) - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole Centrale Marseille (ECM), IZA - Institute for the Study of Labor); Andreas Peichl (IZA - Institute for the Study of Labor, University of Cologne - University of Cologne, CESifo - CESifo, ISER - University of Essex)
    Abstract: This note provides an extensive survey of studies estimating steady-state labor supply elasticities for Western Europe and the US. Differences are driven by the heterogeneity in work preferences across countries and by methodological difference across studies (data, selection or model estimation and specification). While the former exists but is shown to be relatively small (Bargain et al., 2013), we focus here on modeling choices: Large elasticities are mainly found in studies estimated in the 1980s and relying on the Hausman approach. More recent estimates based on discrete-choice models with tax-benefit simulations show smaller and more similar estimates across countries. While we confirm that elasticities decline over time in the US, there is some evidence that both time effect and modeling choices affect estimates for Europe.
    Keywords: household labor supply; elasticity; taxation; Europe; US
    Date: 2013–03

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