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

  1. The Lemons Problem in a Labor Market with Intrinsic Motivation. When Higher Salaries Pay Worse Workers By F. Barigozzi; D. Raggi
  2. Cyclical changes in the wage structure of the United Kingdom: a historical review of the GHS 1972-2002 By Peng, Fei; Kang, Lili
  3. Service offshoring and wages: worker-level evidence from Italy By Elisa Borghi; Rosario Crinò
  4. Wages of childhood immigrants in Sweden – education, returns to education and overeducation By Katz, Katarina; Österberg, Torun
  5. Wage Effects of Unionization and Occupational Licensing Coverage in the United States By Maury Gittleman; Morris M. Kleiner
  6. Deunionization and Pay Inequality in OECD Countries: A Panel Granger Causality Approach By Unal Tongur; Adem Yavuz Elveren
  7. The Role of Institutions and Firm Heterogeneity for Labour Market Adjustment: Cross-Country Firm-Level Evidence By Gal, Peter N.; Hijzen, Alexander; Wolf, Zoltan
  8. Retirement incentives in Belgium: estimations and simulatins using SAHRE data By alain Jousten; Mathieu Lefebvre
  9. Overtime Working and Contract Efficiency By Hart, Robert A; Ma, Yue
  10. Post Schooling Human Capital Investments and the Life Cycle Variance of Earnings By Magnac, Thierry; Pistolesi, Nicolas; Roux, Sébastien
  11. Skill Development in Middle Level Occupations: The Role of Apprenticeship Training By Lerman, Robert I.
  12. Home Ownership and Job Satisfaction By Semih Tumen; Tugba Zeydanli
  13. Making College Worth It: A Review of Research on the Returns to Higher Education By Philip Oreopoulos; Uros Petronijevic
  14. Working Conditions and Job Satisfaction of China's New Generation of Migrant Workers: Evidence from an Inland City By Wang, Huashu; Pan, Lei; Heerink, Nico
  15. The labor market impact of mobility restrictions : evidence from the West Bank By Cali, Massimiliano; Miaari, Sami H.
  16. Couple?s Behaviour in the Brazilian Labour Market: the Influence of Social Security and Individual Characteristics on Married Individuals? Labour Supply Decisions By Bernardo Queiroz; Laetícia Rodrigues de Souza
  17. Impact of Trade Liberalization on Wage Skill Premium in Philippine Manufacturing By Rafaelita M. Aldaba

  1. By: F. Barigozzi; D. Raggi
    Abstract: We study the Lemons Problem when workers have private information on both their skills and their intrinsic motivation for the job offered by firms in the labor market. We first show that, when workers are motivated, inefficiencies due to adverse selection are mitigated. More interestingly, depending on the association between productivity and motivation, higher salaries affect the pool of candidates in three possible ways: they can attract (i) more skilled but less motivated applicants, as expected; (ii) more skilled and more motivated applicants; (iii) less skilled and less motivated applicants. The last two counterintuitive effects can only occur when a positive correlation exists between productivity and motivation. Our results are relevant in the policy debate on whether it is possible to improve the quality of workers in vocational markets by changing their wage rate and allow to reconcile the different empirical evidence provided so far on motivated workers as teachers, nurses, public servants and politicians.
    JEL: J24 D82 D40
    Date: 2013–05
  2. By: Peng, Fei; Kang, Lili
    Abstract: This paper aims to investigate the cyclical changes in the wage structure of the United Kingdom over the period 1972-2002 using the General Household Survey (GHS). Wage structure of the UK shows a cyclical pattern, which may be from the different wage cyclicality of the top, middle and bottom percentile groups. Higher educated male workers have experienced a faster growth of the education premiums so that the wages of males have become more dispersed after the 1970s. However, female workers with only primary education have faster wage growth than higher educated ones. Moreover, the experience premiums of females have grown faster than males and become similar to males in recent years. Changes in the skill endowments and market valuation can account for the cyclical changes in female earnings structure over the entire period. The residual earnings inequality accounts for more than half changes in overall earnings inequality of males, which cannot be explained by changes in skill endowments and market returns. The evolution of the wage structure, including changes in gender gap, overall wage inequality, skill premiums as well as residual wage inequality are affected by business cycle.
    Keywords: wage inequality, skill premiums, business cycle
    JEL: E32 J24 J31
    Date: 2013–05–01
  3. By: Elisa Borghi; Rosario Crinò
    Abstract: We study the effects of service offshoring on the wages of Italian workers. To this purpose, we build up a novel data set combining information from two different sources: (1) matched employer-employee data based on administrative records from the Italian National Social Security Institute; and (2) industry-level indicators of service offshoring based on Import Matrices released by the Italian Statistical Office. We estimate worker-level wage regressions controlling for a number of employee, firm and industry characteristics. In line with previous studies, we find that service offshoring does not cause significant reductions in workers’ wages. We also find, however, that service offshoring contributes to widening the wage gap between more and less skilled employees. Finally, we document heterogeneity in the effects of service offshoring depending on the type of activities relocated abroad. Specifically, our results show that offshoring of business services exerts moderately negative effects on workers’ wages, whereas offshoring of other services has virtually no impact on individual earnings.
    Date: 2013–04
  4. By: Katz, Katarina (Karlstad university); Österberg, Torun (University of Gothenburg)
    Abstract: We analyse full-time monthly wages of employees with parents born in Sweden and of childhood immigrants who arrived before the end of compulsory school-age. We use a detailed disaggregation of background countries, which shows considerable hetero-geneity, in overeducation, in returns to education and in birth-country coefficients, unexplained by wage models. Both the non-European childhood immigrants and of those from Southern Europe suffer a wage disadvantage relative to natives, men to a larger extent than women. Returns to education are generally lower for non-European childhood immigrants than for natives. Comparison with workers, who immigrated as adults, shows that the childhood immigrants of most nationalities run lower risk of being overeducated and have a smaller wage disadvantage. The child/adult immigrant difference is larger, the larger the disadvantage of the adult immigrants from a country of origin. But for male childhood immigrants from some of the labour transmitter countries, the risk of overeducation is larger than it is for adult immigrants and the difference in adjusted wages between childhood immigrants and adult immigrants also tends to be smaller than for other countries of origin.
    Keywords: Wages; immigrants; childhood immigrants; returns to education; overeducation
    JEL: I24 J15 J31 J61
    Date: 2013–04–04
  5. By: Maury Gittleman (U.S. Bureau of Labor Statistics); Morris M. Kleiner (Humphrey School of Public Affairs, Universityof Minnesota)
    Abstract: Recent estimates in standard models of wage determination for both unionization and occupational licensing have shown wage effects that are similar across the two institutions. These cross-sectional estimates use specialized data sets, with small sample sizes, for the period 2006 through 2008. Our analysis examines the impact of unions and licensing coverage on wage determination using new data collected on licensing statutes that are then linked to longitudinal data from the National Longitudinal Survey of Youth (NLSY79) from 1979 to 2010. We develop several approaches, using both cross-sectional and longitudinal analyses, to measure the impact of these two labor market institutions on wage determination. Our estimates of the economic returns to union coverage are greater than those for licensing requirements.
    Keywords: Occupational Licensing, Unionization, Wage Effects
    JEL: J31 J44 J51
    Date: 2013–05
  6. By: Unal Tongur (Department of Economics, METU); Adem Yavuz Elveren (Department of Economics, METU and Sutcu Imam University)
    Abstract: The impact of unionization on wage inequality has been examined by a vast literature. Focusing mostly on the US and the UK in time series analyses or on OECD countries in panel data analyses, a bulk of these studies have found a negative impact of deunionization (i.e. decline in the union density rate) on distribution of wages. By utilizing two inequality data sets both provided by the University of Texas Inequality Project this paper contributes to the literature, analyzing the causality relationship between deunionization and pay inequality for 24 OECD countries for the 1963-2000 period within a panel Granger structure. Our findings show not only that there is causality from union density to income inequality but also, perhaps more importantly, point out that there is causality running from income inequality to union density for various set of countries and time periods.
    Keywords: Union membership, Pay Inequality, Income Inequality, Panel Granger
    JEL: C33 J31 J51
    Date: 2013–05
  7. By: Gal, Peter N. (Tinbergen Institute); Hijzen, Alexander (OECD); Wolf, Zoltan (U.S. Census Bureau)
    Abstract: This paper investigates the role of policies and institutions for aggregate labour market dynamics during the recent financial crisis using firm-level data. First, it provides comparable estimates on firm-level labor adjustment by country, industry and firm size. Second, using variance decomposition methods, it shows that differences in firm-level labor adjustment accounts for about 40% of the cross-country variation in aggregate employment growth at the outset of the crisis. We interpret this as evidence that differences in institutional settings accounted for a substantial part of the variation in aggregate employment growth. Third, we find that stronger protection for regular workers is associated with lower (higher) employment (earnings-per-worker) response in the wake of output shocks. This suggests employment protection shifts the burden of adjustment from the extensive to the intensive margin. However, in explaining the diverse cross-country patterns in employment adjustment during the crisis, the impact of employment protection alone seems to be small.
    Keywords: global financial crisis, employment protection, labour market adjustment, firm-level data
    JEL: E24 J23
    Date: 2013–05
  8. By: alain Jousten; Mathieu Lefebvre
    Abstract: The paper studies retirement behavior of wage-earners in Belgium for the first time using rich survey data to explore retirement incentives as faced by individuals. Specifically, we use SHARE data to estimate a model à la Stock and Wise (1990). Exploring the longitudinal nature of SHARELIFE, we construct measures of financial and non financial incentive. Our analysis explicitly takes into account the different take up rates of the various early retirement exit paths across time and ages. The results show that financial incentives play a strong role. Health and education also matter, as does regional variation though the latter in an unexpected way. A set of policy simulations illustrate the scope and also the limits associated with selective parametric reforms
    Date: 2013
  9. By: Hart, Robert A; Ma, Yue
    Abstract: We present a wage-hours contract designed to minimize costly turnover given investments in specific training combined with firm and worker information asymmetries. It may be optimal for the parties to work ‘long hours' remunerated at premium rates for guaranteed overtime hours. Based on British plant and machine operatives, we test three predictions. First, trained workers with longer tenure are more likely to work overtime. Second, hourly overtime pay exceeds the value of marginal product while the basic hourly wage is less than the value of marginal product. Third, the basic hourly wage is negatively related to the overtime premium.
    Keywords: Paid overtime, wage-hours contract, plant and machine operatives
    Date: 2013–05
  10. By: Magnac, Thierry (University of Toulouse I); Pistolesi, Nicolas (Toulouse School of Economics); Roux, Sébastien (CREST-INSEE)
    Abstract: We propose an original model of human capital investments after leaving school in which individuals differ 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 effect 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 affected 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 I24 J24 J31
    Date: 2013–05
  11. By: Lerman, Robert I. (Urban Institute)
    Abstract: Concerns about the polarization of the labor market are widespread. However, countries vary widely in strategies for strengthening jobs at intermediate levels of skill. This paper examines the diversity of approaches to apprenticeship and related training for middle-level occupations. We begin by defining and describing middle-skills occupations, largely in terms of education and experience. The next step is to describe skill requirements and alternative approaches to preparing and upgrading the skills of individuals for these occupations. Programs of academic education and apprenticeship programs emphasizing work-based learning have often competed for the same space but the full picture reveals significant numbers of complementarities. Third, we consider the evidence on the costs and effectiveness of apprenticeship training in several countries. The final section highlights empirical and policy research results concerning the advantages of apprenticeship training for intermediate level skills, jobs, and careers.
    Keywords: training, apprenticeship, skills
    JEL: J23 J24 I21
    Date: 2013–05
  12. By: Semih Tumen; Tugba Zeydanli
    Abstract: This paper investigates the link between job satisfaction and home ownership. We explicitly focus on the effect of a transition from non-ownership to ownership on the self-reported job satisfaction scores. In other words, we concentrate on the change in job satisfaction response for individuals observed right before and after the transition. Utilizing the panel feature of the British Household Panel Survey (BHPS), we find that transition to ownership reduces job satisfaction within a year following the purchase|controlling for observed variation and unobserved heterogeneity. The reduction in job satisfaction is sharper when the purchase is financed through a mortgage. We also test if this pattern persists over years. We show that the initial reduction in job satisfaction is more than doubled within three years after the transition for both categories of ownership. We conclude that home ownership may be a constraint for the career prospects of the employed workers, since it reduces mobility and forces them to become more dependent on the local labor market conditions. These concerns are deeper in case of a debt-financed ownership.
    Keywords: Home ownership ; job satisfaction ; BHPS ; panel data ; fixed effects
    JEL: J28 R21 C23
    Date: 2013
  13. By: Philip Oreopoulos; Uros Petronijevic
    Abstract: Recent stories of soaring student debt levels and under-placed college graduates have caused some to question whether a college education is still a sound investment. In this paper, we review the literature on the returns to higher education in an attempt to determine who benefits from college. Despite the tremendous heterogeneity across potential college students, we conclude that the investment appears to payoff for both the average and marginal student. During the past three decades in particular, the earnings premium associated with a college education has risen substantially. Beyond the pecuniary benefits of higher education, we suggest that there also may exist non-pecuniary benefits. Given these findings, it is perhaps surprising that among recent cohorts college completion rates have stagnated. We discuss potential explanations for this trend and conclude by succinctly interpreting the evidence on how to make the most out of college.
    JEL: I21 J24
    Date: 2013–05
  14. By: Wang, Huashu (Guizhou University); Pan, Lei (Wageningen University); Heerink, Nico (Wageningen University)
    Abstract: China is experiencing notable changes in rural-urban migration. Young, more educated migrants with different attitudes towards living and working form an increasing share of the migrant labour force. At the same time, the destinations of migrants are changing as a result of government policies and the global financial crisis. More migrants than before find jobs in medium and small size cities, often located in western and central China. Understanding the characteristics and attitudes of the changing migrant labour force is becoming a major challenge in sustainably managing migration flows and urbanization. Little hard evidence is available on the working conditions and job attitudes of migrant workers, particularly for inland China. The purpose of this paper is to provide insights into the characteristics, working conditions and job attitudes of the new generation of migrants, defined as those born in the 1980s and 1990s, as compared to the traditional generation in a typical medium-size city in western China. Data collected through a household survey conducted among 1,048 migrants in Guiyang City, capital of Guizhou Province, are used for this purpose. We find significant differences in occupational characteristics and working conditions between the two generations. Contrary to popular beliefs, we find that the level of job satisfaction is higher among the new generation of migrants. Using an ordered logit model to examine factors contributing to job satisfaction, we find that age and gender do not have a significant impact for young migrants, while working conditions play a major role. Among these, it is not so much the income level that matters for young migrants, but other working conditions. Using a Blinder-Oaxaca decomposition, we derive that it is mainly the difference in working conditions and other endowments that explains the higher job satisfaction of young migrants, not the differences between generations in the valuations of these endowments.
    Keywords: migrant workers, new generation, working conditions, job satisfaction, China
    JEL: J61 O15
    Date: 2013–05
  15. By: Cali, Massimiliano; Miaari, Sami H.
    Abstract: Using data on Israeli closures inside the West Bank, this paper provides new evidence on the labor market effects of conflict-induced restrictions to mobility. To identify the effects, the analysis exploits the fact that the placement of physical barriers by Israel was exogenous to local labor market conditions and uses a measure of conflict intensity to control for the likely spurious correlation between local unrest, labor market conditions, and the placement of barriers. The study finds that these barriers to mobility have a significant negative effect on employment, wages, and days worked per month. The barriers had a positive impact on the number of hours per working day. These effects are driven mainly by checkpoints while other barriers, such as roadblocks and earth mounds, have a much more limited impact. Only a tiny portion of the effects is due to direct restrictions on workers'mobility, suggesting that these restrictions affect the labor market mainly by depressing firms'production and labor demand. Despite being an underestimation of the actual effects, the overall costs of the barriers on the West Bank labor market are substantial: in 2007, for example, these costs amounted to 6 percent of gross domestic product. Most of these costs are due to lower wages, thus suggesting that the labor market has adjusted to the restrictions more through prices than quantities.
    Keywords: Labor Markets,Labor Policies,Transport Economics Policy&Planning,Markets and Market Access,Banks&Banking Reform
    Date: 2013–05–01
  16. By: Bernardo Queiroz (Cedeplar/UFMG); Laetícia Rodrigues de Souza (IPC-IG)
    Abstract: In recent years, a large number of studies have investigated the relationship between social security benefits and male retirement decisions in developed countries. However, women?s and couples? labour supply decisions and the patterns of withdrawal from the labour force in emerging economies are much less studied. This paper uses Brazilian data from 1998 to 2008 to examine how social security financial incentives and personal characteristics affects one?s own and spouses? retirement decisions. Our results suggested that couples synchronize retirement and that they respond similarly to their own characteristics. We also find that wives are more responsive to husbands? incentives than vice-versa. (?)
    Keywords: Couple?s Behaviour in the Brazilian Labour Market: the Influence of Social Security and Individual Characteristics on Married Individuals? Labour Supp
    Date: 2013–04
  17. By: Rafaelita M. Aldaba (Philippine Institute for Development Studies (PIDS))
    Abstract: The paper aims to examine how trade liberalization affect wage premium at the firm level. Using effective protection rate as trade proxy, the paper assumes that in the face of increasing competition, an import-substituting firm may decide to remain at the low value added stage of the production process which requires relatively less skilled workers and suggests a decline in the wage premium. On the other hand, a firm may move away from the product whose protection rate has fallen and shift and expand toward a higher value added activity. This would require relatively more skilled workers suggesting an increase in the wage premium. The main findings of the paper show that : First, trade liberalization lowers the wage premium. A firm responds to import competition by shifting to the manufacture of products with lower value added and importing intermediate inputs rather than producing these within the plant. Second, using ASEAN tariff rates as trade proxy, the same results are obtained, however, when ASEAN tariff is interacted with skill intensity, the results show that tariff reduction on skill intensive products is associated with rising wage skill premium. Third, firm characteristics such as skill intensity, firm size, and capital labor ratio matter in assessing the impact of trade reform on the wage premium. Lastly, exports are associated with increasing wage premium at the firm level the higher their skill intensity. In the literature, greater openness is associated with skill biased technological change with export-oriented and technology intensive activities as channels.
    Keywords: wage skill premium, Trade Liberalization, Philippine manufacturing, labor market
    Date: 2013–05

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.