nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2013‒08‒31
thirteen papers chosen by
Erik Jonasson
National Institute of Economic Research

  1. The Market for "Rough Diamonds": Information, Finance and Wage Inequality By Theodore Koutmeridis
  2. Geographic Differences in the Earnings of Economics Majors By John V. Winters; Weineng Xu
  3. Older Workers and Working Time By Bell, David N.F.; Rutherford, Alasdair C.
  4. Testosterone and the gender wage gap By Anne C. Gielen; Jessica Holmes; Caitlin Myers
  5. Do volatile firms pay volatile earnings? Evidence using linked worker-firm data By Michael R. Strain
  6. Assessing education's contribution to productivity using firm-level evidence By Lara LEBEDINSKI; Vincent VANDENBERGHE
  7. What explains the stagnation of female labor force participation in urban India? By Stephan Klasen; Janneke Pieters
  8. Gender Differences in Occupational Mobility – Evidence from Portugal By Crespo, Nuno; Simoes, Nadia; Moreira, Sandrina B.
  9. The Household Revolution: Childcare, Housework, and Female Labor Force Participation By Emanuela Cardia; Paul Gomme
  11. Immigrants, Household Production and Women's Retirement By Peri, Giovanni; Romiti, Agnese; Rossi, Mariacristina
  12. Trends in Hours Worked across Countries: Evidence using Micro Data By Nicola Fuchs-Schuendeln; Bettina Brueggemann; Alexander Bick
  13. Self-employment and the local business cycle By Svaleryd, Helena

  1. By: Theodore Koutmeridis (University of St. Andrews)
    Abstract: During the past four decades both between and within group wage inequality increased significantly in the US. I provide a microfounded justification for this pattern, by introducing private employer learning in a model of signaling with credit constraints. In particular, I show that when financial constraints relax, talented individuals can acquire education and leave the uneducated pool, this decreases unskilled-inexperienced wages and boosts wage inequality. This explanation is consistent with US data from 1970 to 1997, indicating that the rise of the skill and the experience premium coincides with a fall in unskilled-inexperienced wages, while at the same time skilled or experienced wages do not change much. The model accounts for: (i) the increase in the skill premium despite the growing supply of skills; (ii) the understudied aspect of rising inequality related to the increase in the experience premium; (iii) the sharp growth of the skill premium for inexperienced workers and its moderate expansion for the experienced ones; (iv) the puzzling coexistence of increasing experience premium within the group of unskilled workers and its stable pattern among the skilled ones. The results hold under various robustness checks and provide some interesting policy implications about the potential conflict between inequality of opportunity and substantial economic inequality, as well as the role of minimum wage policy in determining the equilibrium wage inequality.
    Keywords: wage inequality, experience premium, skill premium, employer learning, signaling, financial constraints, minimum wages
    JEL: D31 D82 E44 J31
    Date: 2013–08–01
  2. By: John V. Winters (Oklahoma State University); Weineng Xu (Department of Finance, University of Arkansas)
    Abstract: Economics has been shown to be a relatively high earning college major, but geographic differences in earnings have been largely overlooked. This paper uses the American Community Survey to examine geographic differences in both absolute earnings and relative earnings for economic majors. We find that there are substantial geographic differences in both the absolute and relative earnings of economics majors even controlling for individual characteristics such as age and advanced degrees. We argue that mean earnings in specific labor markets are a better measure of the benefits of majoring in economics than simply looking at national averages.
    Keywords: economics major; earnings differentials; college education; local labor markets
    JEL: I23 J24 J31 R23
    Date: 2013–08
  3. By: Bell, David N.F. (University of Stirling); Rutherford, Alasdair C. (University of Stirling)
    Abstract: Contrary to much of the established literature, this paper finds that though many older workers would prefer to reduce their working hours (the overemployed), there is a significant group who would like to work longer hours (the underemployed). And contrary to the assumption that the self-employed are more easily able than employees to select a desired combination of hours and the wage rate, this paper finds that older self-employed workers are more likely to wish to adjust their hours, both upward and downward than are employees. A new index of underemployment is used to show that for the UK, since the onset of the Great Recession, underemployment among older workers has been growing more rapidly than unemployment. Using longitudinal data from the UK Labour Force Survey, the paper investigates the effects of overemployment and underemployment on transitions from employment and self-employment into other labour market states. It confirms that overemployment is a significant predictor of retirement among employees while underemployed employees are less likely to retire.
    Keywords: retirement, working time, overemployment, underemployment, self-employment
    JEL: J01 J11 J21 J22 J23 J38 J64
    Date: 2013–08
  4. By: Anne C. Gielen; Jessica Holmes; Caitlin Myers
    Abstract: Testosterone, which induces sexual differentiation of the male fetus, is believed to transfer from males to their littermates in placental mammals. Among humans, individuals with a male twin have been found to exhibit greater masculinization of sexually dimorphic attributes relative to those with a female twin. We therefore regard twinning as a plausible natural experiment to test the link between prenatal exposure to testosterone and labor market earnings. For men, the results suggest positive returns to testosterone exposure. For women, however, the results indicate that prenatal testosterone does not generate higher earnings and may even be associated with modest declines.
    Keywords: testosterone, twins, gender gap
    JEL: J30 J71
    Date: 2013–08
  5. By: Michael R. Strain (American Enterprise Institute)
    Abstract: The instability of labor earnings in the United States contributes to earnings inequality and may diminish household welfare. Despite the importance of earnings instability little is known about its correlates or causes. This paper seeks to better understand earnings instability by studying whether volatile firms pay volatile earnings.
    Keywords: Labor economics,AEI Economic Policy Working Paper Series
    JEL: A H J
    Date: 2013–03
  6. By: Lara LEBEDINSKI (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)); Vincent VANDENBERGHE (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))
    Abstract: There is plenty of individual-level evidence, based on the estimation of Mincerian equations, showing that better-educated individuals earn more. This is usually interpreted as a proof that education raises labour productivity. Some macroeconomists, analysing cross-country time series, also support the idea that the continuous expansion of education has contributed positively to growth. Surprisingly, most economists with an interest in human capital have neglected the level of the firm to study the education-productivity-wage nexus. And the few published works considering firm-level evidence are lacking a proper strategy to cope with the endogeneity problem inherent to the estimation of production and wage functions. This paper taps into a rich, firm-level, Belgian panel database that contains information on productivity, labour cost and the workforce’s educational attainment. It aims at providing estimates of the causal effect of education on productivity and wage/labour costs. Therefore, it exclusively resorts to within firm changes to deal with time-invariant heterogeneity bias. What is more, it addresses the risk of simultaneity bias (endogeneity of firms’ education-mix choices in the short run) using the structural approach suggested by Ackerberg, Caves & Frazer (2006), alongside more traditional system-generalized method of moments (GMM) methods (Blundell & Bond, 1998) where lagged values of labour inputs are used as instruments. Results suggest that human capital, in particular larger shares of university-educated workers inside firms, translate into significantly higher firm-level labour productivity, and that labour costs are relatively well aligned on education-driven labour productivity differences. In other words, we find evidence that the Mincerian relationship between education and individual wages is driven by a strong positive link between education and firm-level productivity.
    Keywords: Education, Human capital, Firm-Level Productivity and Labour Cost, Cobb-Douglas, CES, imperfect substitutability
    JEL: J24 E24 C51
    Date: 2013–08–26
  7. By: Stephan Klasen (Georg-August University Göttingen); Janneke Pieters (Institute for the Study of Labor (IZA))
    Abstract: We study the surprisingly low level and stagnation of female labor force participation rates in urban India between 1987 and 2009. Despite rising growth, fertility decline, and rising wages and education levels, women's labor force participation stagnated at around 18%. Using five large cross-sectional micro surveys, we find that a combination of supply and demand effects have contributed to this stagnation. The main supply side factors were rising household incomes, husband's education, stigmas against educated women engaging in menial work, and falling selectivity of highly educated women. On the demand side, employment in sectors appropriate for educated women grew less than the supply of educated workers, leading many women to withdraw from the labor force.
    Keywords: female labor force participation; education; India
    JEL: J20 J16 I25 O15
    Date: 2013–08–29
  8. By: Crespo, Nuno; Simoes, Nadia; Moreira, Sandrina B.
    Abstract: In this paper we evaluate if gender influences the pattern of upward and downward occupational mobility. With data for Portugal in the period 1998-2009, we find that women have a lower probability of upward mobility and a higher probability of downward mobility. The results also reveal the importance of some other determinant factors, especially education and initial occupation. Additionally, considering an analysis by quartiles (taking as reference a ranking based on average wages), we confirm that the determinants of occupational mobility depend on the ranking of the initial occupation. This analysis allows us to conclude that the unfavorable pattern of occupational mobility in the case of women is due, essentially, to the disadvantage they have at the bottom of the distribution. On the contrary, in the top occupations, the results suggest the existence of equality between genders.
    Keywords: Occupational mobility, Gender, Determinant factors, Portugal
    JEL: J24 J62
    Date: 2013
  9. By: Emanuela Cardia; Paul Gomme
    Abstract: Over the twentieth century, the allocation of womens' time changed dramatically. This paper explores the implications for the allocation of married womens' time stemming from: (1) the household revolution associated with the introduction of a variety of labor-saving devices in the home; (2) the remarkable increase in the relative wage of women; and (3) changes in childcare requirements associated with changes in fertility patterns. To do so, we construct a life-cycle model with home production and childcare constraints. The parameters of the childcare production function are estimated using micro evidence from U.S. time use data. We find that the increase in the relative wage of women is the most important explanation of the increase in married womens' market work time over the twentieth century. Changes in fertility had large effects up to 1980, but little effect thereafter. The declining price of durables has an appreciable effect only since 1980, an effect that is consistent with a broader interpretation of durable goods re ecting the marketization of home production.
    Keywords: Household technology, childcare, women labor force participation, home production
    Date: 2013
  10. By: Korpi, Martin (Ratio & EHFF); Clark, William (California Center for Population Research, UCLA)
    Abstract: Empirical studies on internal labor migration are usually based on observed patterns of net flows into local labor markets with relatively lower unemployment and relatively higher real wages. Evidence here suggests that internal migrants move to enhance returns to their labor. In contrast, major surveys in the USA, the UK and Australia show that less than a third of internal migrants are motivated primarily by employment reasons. A possible explanation for this disconnect revolves around average and individual outcomes from migration. Using a sample of 39 000 Swedish regional migrants, this paper addresses this disconnect by examining the distribution of short and long term migrant income changes, and the factors that predict their placement within this distribution. We show that returns to migration do matter, especially for the more educated migrants. Overall, however, about a third of all migrants had negative short term returns to migration and about 40 percent make below median gains even in the long run. The data support a view that average outcomes are an insufficient way to measure the role of human capital motivated migration.
    Keywords: migration; human capital; labor mobility; urban rural
    JEL: J24 J31 J61 R12
    Date: 2013–08–19
  11. By: Peri, Giovanni (University of California, Davis); Romiti, Agnese (Institute for Employment Research (IAB), Nuremberg); Rossi, Mariacristina (University of Turin)
    Abstract: Women contribute disproportionately to household production, especially in Southern European countries. As a consequence of population aging assistance to elderly parents, rather than child care, has become a prevalent activity in home-production services. Immigrant labor has increasingly become a substitute for women labor in those services. Their presence, therefore, may allow women over 55 to work more outside of the house and retire later. We use a unique database of Italian households to identify the effect of local availability of foreign workers on planned retirement age and labor supply of Italian women. We find that an exogenous increase by one point in the immigrant percentage of the local population increased the planned retirement age of women over 55 by two months relative to similar men. For women with old parents the increase was four months and if they were in low-wealth households the increase was one full year. The same inflow of immigrants also increased the probability that women over 55 work outside the home by nine percentage points, relative to men.
    Keywords: international migration, retirement, labor supply, home production, elderly care
    JEL: J22 J26 F22
    Date: 2013–08
  12. By: Nicola Fuchs-Schuendeln (Goethe University Frankfurt); Bettina Brueggemann (Goethe University Frankfurt); Alexander Bick (Arizona State University)
    Abstract: We use three different micro data sets, the European Labor Force Survey, the Current Population Survey, and the German Microcensus, to obtain annual hours worked for various demographic subgroups in the US and 18 European countries. One major difficulty in constructing annual hours from micro data sets is the fact that hours are only reported for selected reference weeks, which are not distributed evenly over the year. As a consequence, hours lost due to public holidays or annual leave are mis-measured. Consequently, we use external data sources to account for these hours. We compare the generated time series of aggregate annual hours worked to the data series provided by the OECD and the Conference Board. In 29 out of 38 cases, average deviations amount to less than 10 percent, in 20 out of 38 cases to less than 5 percent. It is worthwhile pointing out that there are also non-negligible differences between the OECD and the Conference Board. We also decompose hours worked in an intensive and an extensive margin, and compare both to OECD and Conference Board data, as well as checking internal consistency of different possible extensive margin definitions. Finally, we document a set of stylized facts on hours worked (conditional on working and unconditional) over time and across countries for different demographic subgroups distinguished by marital status, gender, and age.
    Date: 2013
  13. By: Svaleryd, Helena (Department of Economics, Uppsala University)
    Abstract: The business cycle is likely to be of importance for self-employment rates. When the economy is growing, business opportunities open up and encourage the set-up of new firms. In downturns, self-employment may be a way to avoid unemployment. The strength of these pull and push factors may depend on the amount of human capital a person has. The findings in this paper show that although the local business cycle is of minor importance for total self-employment rates in Sweden, there are heterogeneous effects across groups. People with higher human capital endowments are more likely to be pulled into self-employment, while those with lower human capital endowments are to a larger extent pushed into self-employment. This pattern is particularly strong for women.
    Keywords: Self-employment; local business cycle; panel data
    JEL: J21 J24
    Date: 2013–08–08

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