nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2013‒04‒20
seventeen papers chosen by
Erik Jonasson
National Institute of Economic Research

  1. "What Drives the Urban Wage Premium? Evidence along the Wage Distribution" By Alessia Matano; Paolo Naticchioni
  3. The Costs of Involuntary Job Loss: Impacts on Workers’ Employment and Earnings By Sylvia Dixon; Maré, David C
  4. Wage-led or profit-led supply : wages, productivity and investment By Storm, Servaas; Naastepad, C.W.M
  5. Flexibilisation without Hesitation? Temporary Contracts and Workers’ Satisfaction By Adrian Chadi; Clemens Hetschko
  6. Wage protection legislation in Africa By Ghosheh, Najati
  7. Estimation of a Roy/Search/Compensating Differential Model of the Labor Market By Christopher Taber
  8. Micro-components of aggregate wage dynamics By Kauhanen, Antti; Maliranta, Mika
  9. Just the Facts, Ma'am: Postsecondary Education and Labor Market Outcomes in the U.S. By Holzer, Harry J.; Dunlop, Erin
  10. Wages, Job Queues, and Skills By Ronald Wolthoff; Ioana Marinescu
  11. The Geography of Inequality: Difference and Determinants of Wage and Income Inequality across US Metros By Florida , Richard; Mellander , Charlotta
  12. Productivity Effects of Knowledge Transfers through Labour Mobility By Johannes Pöschl; Neil Foster
  13. Working-week flexibility: Implications for employment and productivity By Osuna, Victoria
  14. Entrepreneurs’ education and different variable pay schemes in Italian firms By Damiani, Mirella; Ricci, Andrea
  15. An Anatomy of Public Sector Unions By Hirsch, Barry T.
  16. Why have wage shares fallen? A panel analysis of the determinants of functional income distribution: for the International Labour Organisation (ILO) project "New Perspectives on Wages and Economic Growth" By Stockhammer, Engelbert
  17. What Do Participation Fluctuations Tell Us About Labor Supply Elasticities? By Michael Reiter; Christian Haefke

  1. By: Alessia Matano (Faculty of Economics, University of Barcelona); Paolo Naticchioni (University of Cassino, University of Rome “La Sapienza”, CeLEG-Luiss)
    Abstract: This paper aims at disentangling the role played by different theoretical explanations in accounting for the urban wage premium along the wage distribution. We analyze the wage dynamics of migrants from low-to-high-density areas in Italy, using quantile regression and individual panel data to control for the sorting of workers. The results show that skilled workers enjoy a higher wage premium when they migrate (wage level effect), in line with the agglomeration externalities explanation, while unskilled workers benefit more from a wage premium accruing over time (wage growth effect). Further, investigating the determinants of the wage growth effect in greater depth, we find that for unskilled workers the wage growth is mainly due to human capital accumulation over time, consistently with the “learning” hypothesis, while for skilled workers it is the “coordination” hypothesis that matters..
    Keywords: Urban Wage Premium, Human Capital, Spatial Sorting, Wage Distribution, Quantile Fixed Effects. JEL classification: J31, J61, R23
    Date: 2012–01
  2. By: Elaine Liu (University of Houston); Shu Zhang (University of Houston)
    Abstract: This paper performs a meta-analysis to investigate how changes over time, model specifications, differences in data sets, and variable definitions could contribute to the differences in estimates of returns to education in China. The results show that approximately 10 percent of the variation can be explained by changes in labor market over time, while the other 45 percent can be explained by differences in samples used and empirical methods. Return to education has increased approximately 0.2 percentage points a year since the economic reform, and increases more quickly as the reform progresses; however, this accelerating trend has reached a stop in the last few years when the global recession hit China. We also find that returns to education for rural-to-urban migrant workers are 2.3 percentage points lower than that of urban workers. We conclude that the increasing reward for human capital accumulation over time signals that China is moving toward a well functioning labor market.
    Keywords: Returns to Education, China, Meta-Analysis
    JEL: I20 J3 O12
    Date: 2013–04–08
  3. By: Sylvia Dixon (Labour Group, Ministry of Business, Innovation and Employment); Maré, David C (Motu Economic and Public Policy Research)
    Abstract: This paper examines the incidence of involuntary job loss and its impact on the employment and earnings of affected workers, using data from the Survey of Families, Incomes and Employment (SoFIE) for the 2002–09 period. It focusses on employees who had been working in their job for at least one year before the job loss. The impact of displacement on employment and earnings was estimated by using a propensity score-matching approach to select similar non-displaced workers and then compare their outcomes. We find that the employment rate of displaced workers was on average 27 percentage points lower 0–1 years after displacement, 14 percentage points lower 1–2 years after, and 8 percentage points lower 2–3 years after, than that of the matched comparison group. The average wage of re-employed displaced workers was 12 percent lower 0–1 years after displacement, 11 percent lower 1–2 years after and 7 percent lower 2–3 years after. Other impacts included increases in unemployment and self-employment, reductions in average weekly hours, and reductions in weekly and annual earnings.
    Keywords: Displaced workers; redundancy; SoFIE; propensity matching
    JEL: J63 J64 J65
    Date: 2013–04
  4. By: Storm, Servaas; Naastepad, C.W.M
    Keywords: wages, labour productivity, employment, OECD countries, salaire, productivité du travail, emploi, pays de l'OCDE, salario, productividad del trabajo, empleo, países de la OCDE
    Date: 2012
  5. By: Adrian Chadi (Institute for Labour Law and Industrial Relations in the EU, University of Trier); Clemens Hetschko (School of Business and Economics, Freie Universitaet Berlin)
    Abstract: Fixed-term contracts are often considered a key policy tool for increasing employment. As we show that contract limitation lowers job satisfaction using data from the German Socio- Economic Panel study, we detect a drawback of promoting temporary employment that has not been identified so far. We find that the “honeymoon-hangover” effect of a new job must be taken into account to reveal this result. We examine reasons why employees suffer from temporary contracts and analyse the “Flexicurity” idea of compensating workers with security. Our findings contribute to research on workers’ well-being as well as to the debate on labour market flexibilisation.
    Keywords: labour market flexibilisation, job satisfaction, temporary contracts
    JEL: J28 J41
    Date: 2013–03
  6. By: Ghosheh, Najati
    Keywords: wages, wage policy, labour legislation, comment, Africa, salaire, politique des salaires, législation du travail, commentaire, Afrique, salario, política salarial, legislación del trabajo, comentario, Africa
    Date: 2013
  7. By: Christopher Taber (University of Wisconsin-Madison)
    Abstract: The four most important models of post-schooling wage determination in economics are al- most certainly human capital, the Roy model, the compensating differentials model, and the search model. All four lead to wage heterogeneity. While separating human capital accumulation from the others is quite common, we know remarkably little about the relative importance of the other three sources of inequality. The key aspect of the Roy model is comparative advantage in which some workers earn more than others as a result of different skill levels at labor market entry. Workers choose the job for which they achieve the highest level of earnings. By contrast, in a compensating wage differentials model a worker is willing to be paid less in order to work on a job that they enjoy more. Thus, workers with identical talent can earn different salaries. Finally, workers may have had poor luck in finding their ideal job. This type of search friction can also lead to heterogeneity in earnings as some workers may work for higher wage firms. In short, one worker may earn more than another a) because he has more talent at labor market entry (Roy Model), b) because he has accu- mulated more human capital while working (human capital), c) because he has chosen more unpleasant job (compensating differentials), or d) because he has had better luck in finding a good job (search frictions). The goal of this work is to uncover the contribution of these different components to overall earnings inequality.
    Date: 2012
  8. By: Kauhanen, Antti; Maliranta, Mika
    Abstract: Abstract: We propose an approach for measuring and analyzing the dynamics of standard aggregate wage growth of macro statistics with micro-data. Our method decomposes aggregate wage growth to the wage growth of job stayers and to various terms related to job and worker restructuring. This method produces explicit expressions with clear interpretations for the various restructuring components and therefore opens new opportunities for a deeper analysis of various micro-level mechanisms and their cyclicality. The methodology also allows us to study many topics simultaneously that have previously been studied in isolation. Using comprehensive longitudinal employer-employee data over an extended period of time, we study how job and worker restructuring influences aggregate wage growth and its cyclicality. We show that wage formation is significantly more flexible than suggested by the aggregate numbers, and we identify the microlevel mechanisms that explain the greater flexibility. This version: December 7, 2012
    Date: 2012
  9. By: Holzer, Harry J. (Georgetown University); Dunlop, Erin (American Institutes for Research)
    Abstract: In this paper, we provide a comprehensive and up-to-date snapshot of the most important postsecondary education and labor market outcomes in the U.S. using two nationally representative sources of data: The Survey of Income and Program Participation (SIPP) and The National Educational Longitudinal Survey (NELS). We find that postsecondary educational attainment has risen modestly among young Americans over the past two decades, with greater gains in BA attainment in the 1990s and in certificate and AA attainment since 2000 (though attainment rose during the Great Recession at all levels). Both younger and older cohorts of blacks and Hispanics have made relative progress in the attainment of certificates and AAs but still lag behind whites in the entry into and completion of BA programs; completion rates in BA programs also lag substantially for those from low-income families or with weak academic achievement in high school. Young women (especially among whites and blacks) now achieve sub-BA and BA degrees at higher levels than their male counterparts and generally have higher achievement. There are labor market returns for all postsecondary credentials, including certificates and AA degrees, though these vary across field of study. Large gender gaps exist in field of study, with men more concentrated in high-paying fields. Lastly, we find that high school achievement measures can account for much of the racial gaps in BA completion and earnings and some of the gaps by family background, though they account for little of the continuing gender gap favoring young men in earnings.
    Keywords: postsecondary education, earnings, labor market
    JEL: I23 I24 J24
    Date: 2013–03
  10. By: Ronald Wolthoff (University of Toronto); Ioana Marinescu (University of Chicago)
    Abstract: We study the relationship between wages and the number and quality of applicants that a vacancy attracts. Using data from a large US employment website, we show that higher wages attract better applicants. Surprisingly, higher wages are associated with fewer applications, and this is robust to controlling for industry and occupation fixed effects. Only within specific job titles are higher wages associated with more applications. Our theoretical model shows that such a pattern is consistent with skills demanded by firms being highly job specific. The model has additional testable implications about rent sharing and unemployment rates by skill.
    Date: 2012
  11. By: Florida , Richard (University of Toronto); Mellander , Charlotta (Jönköping International Business School)
    Abstract: This paper examines the geographic variation in inequality, and it distinguishes between wage and income inequality. Wage inequality is associated with skills, human capital, technology and metro size - in line with the literature on skill-biased technical change. Income inequality is instead more closely associated with race, poverty, lower levels of unionization and lower taxes. This suggests that income inequality is a product not only of skill-biased technical change, but also of the enduring legacy of race and poverty at the bottom of the socio-economic order, as well as the unraveling of the post-war social compact between capital and labor.
    Keywords: inequality; income; wage; high-tech; skills
    JEL: J24 O10 O33 R00
    Date: 2013–04–12
  12. By: Johannes Pöschl; Neil Foster
    Abstract: The paper addresses the link between productivity and labour mobility. The hypothesis tested is that technology is transmitted across industries through the movement of skilled workers embodying human capital. The embodied knowledge is then diffused within the new environment creating spillovers and leading to productivity improvements. The empirical analysis is based on household survey and industry-level data for a sample of 12 EU countries covering the years 1995-2005. The estimates document the importance of positive cross-sectoral knowledge spillovers and indicate that labour mobility has considerable beneficial effects on industry productivity. Possible endogeneity problems related to labour mobility are tackled by employing a two stage instrumental variables approach. Moreover we show that the spillover effects vary considerably by technology level of the giving industry. While workers moving away from high and medium-tech industries are found to produce positive productivity effects for the receiving industry, no effect is found for those coming from low-tech industries.
    Keywords: Knowledge Spillovers, Labour Mobility, Productivity, Human Capital, Industry Level
    JEL: J24 J60 O47
    Date: 2013–04
  13. By: Osuna, Victoria
    Abstract: This paper evaluates the implications for employment, productivity and wages of allowing for more flexibility in weekly hours worked introduced in the recent Spanish labour market reform (the 2012 reform). A crucial aspect of the model will be the extent to which firms will be able to choose the workweek when subject to demand shocks. The model is calibrated so that it reproduces the cross-sectional distribution of workweeks across plants and households and some features of the Spanish economy. The author compares the status quo steady-state, where a 40 hour workweek is imposed and no flexibility is allowed, with the steady state of economies with a higher degree of flexibility in weekly hours: the 2012 Reform, the Work sharing and the Full flexibility scenarios. She finds that the 2012 reform preserves employment and generates a 1.72% increase in productivity. In the work sharing scenario, the increase in employment (1.86%) comes at the expense of a lower productivity increase (1.31%) and a decrease in weekly hours worked (4%). Finally, the full flexibility scenario preserves employment and generates a substantial increase in productivity (2.6%) by allowing firms to completely adapt to changing economic conditions, by expanding or contracting the working week. --
    Keywords: workweek,wages,employment,productivity
    JEL: E24 E60 J21
    Date: 2013
  14. By: Damiani, Mirella; Ricci, Andrea
    Abstract: In this paper, we investigate the influence of the education of entrepreneurs, which we hypothesise to be a signal of talent, on the adoption of variable pay (VP) schemes in the Italian economy. We estimate to what extent differences in the diffusion of VP between Italian firms reflect differences in the quality of entrepreneurs. Our estimates, which we obtained by taking both endogeneity and unobserved heterogeneity into account, validate hypotheses about the direct positive effects of entrepreneurs’ education on the adoption of VP schemes. Furthermore, we ascertain the role of entrepreneurs’ education by examining its influence on the choice between different types of VP bonuses at the individual, group, or establishment levels. Our results suggest that highly educated entrepreneurs are more likely to use individual or collective forms of VP schemes at the establishment level rather than team VP incentives.
    Keywords: Variable pay, education
    JEL: J33 J50
    Date: 2013–04–13
  15. By: Hirsch, Barry T. (Georgia State University)
    Abstract: Public sector unionism grew rapidly during the late 1960s and early 1970s following the passage of state collective bargaining laws. During the last thirty years, public sector membership has grown at roughly the same rate as the overall workforce. This paper provides a descriptive overview of union membership growth and economy-wide employment shares in the U.S. federal (non-postal), Postal Service, state, and local government sectors. More limited evidence is provided on changes in relative public/private and union/nonunion wages. Observations are provided on the current debates regarding public/private pay and the role of public sector unions.
    Keywords: union membership, public sector unions, public sector pay, employment
    JEL: J45 J5
    Date: 2013–03
  16. By: Stockhammer, Engelbert
    Keywords: income distribution, wages, data collecting, methodology, developed countries, developing countries, répartition du revenu, salaire, collecte des données, méthodologie, pays développés, pays en développement, distribución del ingreso, salario, recopilación de datos, metodología, países desarrollados, países en desarrollo
    Date: 2013
  17. By: Michael Reiter (Institute for Advanced Studies); Christian Haefke (Institut for Advanced Studies)
    Abstract: In this paper we use information on the cyclical variation of labor market participation to learn about the aggregate labor supply elasticity. For this purpose, we extend the standard labor market matching model to allow for endogenous participation. A model that is calibrated to replicate the variability of unemployment and participation, and the negative correlation of unemployment and GDP, implies an aggregate labor supply elasticity along the extensive margin of around 0.3 for men and 0.5 for women. This is in line with recent microeconometric estimates.
    Date: 2012

This nep-lma issue is ©2013 by Erik Jonasson. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.