nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2013‒09‒28
twelve papers chosen by
Erik Jonasson
National Institute of Economic Research

  1. Bargaining and the Gender Wage Gap: A Direct Assessment By Card, David; Cardoso, Ana Rute; Kline, Patrick
  2. The Heterogeneous Effects of Workforce Diversity on Productivity, Wages and Profits By Garnero, Andrea; Kampelmann, Stephan; Rycx, François
  3. Wage Inequality of Chinese Rural-Urban Migrants Between 2002 and 2007 By Zhong Zhao; Zhaopeng Qu
  4. Educational Attainment, Wages and Employment of Second-Generation Immigrants in France By Gabin Langevin; David Masclet; Fabien Moizeau; Emmanuel Peterle
  5. Validating Longitudinal Earnings in Dynamic Microsimulation Models: The Role of Outliers By Melissa M. Favreault; Owen Haaga
  6. DON’T QUIT YOUR DAY JOB: USING WAGE AND SALARY EARNINGS TO SUPPORT A NEW BUSINESS By M´onica Garc´ia-P´erez; Christopher Goetz; John Haltiwanger; Kristin Sandusky
  7. The effect of firms' partial retirement policies on the labour market outcomes of their employees By Huber, Martin; Lechner, Michael; Wunsch, Conny
  8. Employer education, agglomeration and workplace training: poaching vs knowledge spillovers By Giuseppe Croce; Edoardo Di Porto; Emanuela Ghignoni; Andrea Ricci
  9. Compulsory Education and the Benefits of Schooling By Melvin Stephens, Jr.; Dou-Yan Yang
  10. Measuring Investment in Human Capital Formation: An Experimental Analysis of Early Life Outcomes By Orla Doyle; Colm Harmon; James J. Heckman; Caitriona Logue; Seong Moon
  11. A Reverse Holdup Problem: When workers’ lack of bargaining power slows economic adjustments By Estache, Antonio; Foucart, Renaud
  12. Productivity or Employment: Is It a Choice? By Andrea De Michelis; Marcello M. Estevão; Beth Anne Wilson

  1. By: Card, David (University of California, Berkeley); Cardoso, Ana Rute (IAE Barcelona (CSIC)); Kline, Patrick (University of California, Berkeley)
    Abstract: An influential recent literature argues that women are less likely to initiate bargaining with their employers and are (often) less effective negotiators than men. We use longitudinal wage data from Portugal, matched to balance sheet information on employers, to measure the relative bargaining power of men and women and assess the impact of the gender gap in bargaining strength on the male-female wage gap. We show that a model with additive fixed effects for workers and gender-specific fixed effects for firms provides a close approximation to the wage structure for both men and women. Building on this model we present three complementary approaches to identifying the impact of differential bargaining strength. First, we perform a simple decomposition by assigning the firm-specific wage premiums for one gender to the other. Second, we relate the wage premiums for men and women to measures of employer profitability. Third, we show that changes in firm-specific profitability have a smaller effect on the wage growth of female than male employees. All three approaches suggest that women are paid only 85-90% of the premiums that men earn at more profitable firms. Overall, we estimate that the shortfall in women‘s relative bargaining power explains around 3 percentage points – or 10-15% – of the gender wage gap in Portugal.
    Keywords: wage differentials, discrimination, gender, linked employer-employee data
    JEL: J16 J31 J71
    Date: 2013–08
  2. By: Garnero, Andrea; Kampelmann, Stephan; Rycx, François
    Abstract: We estimate the impact of workforce diversity on productivity, wages and productivity-wage gaps (i.e. profits) using detailed Belgian linked employer-employee panel data. Findings show that educational (age) diversity is beneficial (harmful) for firm productivity and wages. While gender diversity is found to generate significant gains in high-tech/knowledge intensive sectors, the opposite result is obtained in more traditional industries. Estimates neither vary substantially with firm size nor point to sizeable productivity-wage gaps except for age diversity.
    Keywords: labour diversity; productivity; wages; linked panel data; GMM
    JEL: D24 J24 J31 M12
    Date: 2013–09
  3. By: Zhong Zhao; Zhaopeng Qu
    Abstract: The paper studies the levels and changes in wage inequality among Chinese rural-urban migrants from 2002 to 2007. We use the Chinese Household Income Project dataset and the Rural to Urban Migration in China dataset to construct a unique dataset that allows us to document changing wage inequality among migrants and among urban natives between 2002 and 2007. We find that wage inequality among migrants decreased significantly between 2002 and 2007, whereas it increased among urban natives during the same period. Our results show that the high-wage migrants experienced slower wage growth than middle- and low-wage migrants, a primary cause of declining inequality among migrants. We used distributional decomposition methods, and find that the overall between-group effect (coefficient effect) dominates in the whole wage distribution of the migrants, which means that the change in returns to the characteristics (education and experience) play a key role, but on the upper tails of the wage distribution, the within group effect (residual price effect) dominates which implies that the unobservable factors or institutional barriers do not favor the migrants at the top tail of the wage distribution.
    Keywords: rural to urban migrants, wage inequality, quantity decomposition, China
    JEL: J30 J45 J61
    Date: 2013
  4. By: Gabin Langevin (CREM UMR CNRS 6211, University of Rennes 1, France); David Masclet (CREM UMR CNRS 6211, University of Rennes 1 and CIRANO, France); Fabien Moizeau (CREM UMR CNRS 6211, University of Rennes 1 and IUF, France); Emmanuel Peterle (CREM UMR CNRS 6211, University of Rennes 1, France)
    Abstract: We use data from the Trajectoires et Origines survey to analyze the labor-market outcomes of both second-generation immigrants and their French native counterparts. Second-generation immigrants have on average a lower probability of employment and lower wages than French natives. We find however considerable differences between second-generation immigrants depending on their origin: while those originating from Northern Africa, Sub-Saharan Africa and Turkey are less likely to be employed and receive lower wages than French natives, second-generation immigrants with Asian or Southern- and Eastern-European origins do not differ significantly from their French native counterparts. The employment gap between French natives and second-generation immigrants is mainly explained by differences in their education; education is also an important determinant of the ethnic wage gap. Finally we show that these differences in educational attainment are mainly explained by family background. Although the role of discrimination cannot be denied, our findings do point out the importance of family background in explaining lifelong ethnic inequalities.
    Keywords: labor-market discrimination, second-generation immigrants, educational attainment, family background, decomposition methods
    JEL: I2 J15 J24 J41
    Date: 2013–09
  5. By: Melissa M. Favreault; Owen Haaga
    Abstract: Rapid growth in the earnings of the highest earners over the past two and a half decades has contributed to strains on Social Security’s finances and made projecting lifetime earnings on a year-by-year basis – already a complicated technical problem – even more challenging. This project uses various descriptive techniques and high-quality administrative earnings data matched to household surveys to explore related questions about the changing wage distribution. We first describe the characteristics of high earners, both at a point in time and over longer periods (from 1983 through 2010). We then evaluate how well SSA’s MINT7 dynamic microsimulation model projects inequality in the earnings distribution and the long-term characteristics of earnings paths.
    Date: 2013–09
  6. By: M´onica Garc´ia-P´erez; Christopher Goetz; John Haltiwanger; Kristin Sandusky
    Abstract: This paper makes use of a newly constructed Census Bureau dataset that follows the universe of sole proprietors, employers and non-employers, over 10 years and links their transitions to their activity as employees earning wage and salary income. By combining administrative data on sole proprietors and their businesses with quarterly administrative data on wage and salary jobs held by the same individuals both preceding and concurrent with business startup, we create the unique opportunity to quantify significant workforce dynamics that have up to now remained unobserved. The data allow us to take a first glimpse at these business owners as they initiate business ventures and make the transition from wage and salary work to business ownership and back. We find that the barrier between wage and salary work and self-employment is extremely fluid, with large flows occurring in both directions. We also observe that a large fraction of business owners takeon both roles simultaneously and find that this labor market diversification does have implications for the success of the businesses these owners create. The results for employer transitions to exit and non-employer suggest that there is a ”don’t quit your day job” effect that is present for new businesses. Employers are more likely to stay employers if they have a wage and salary job in the year just prior to the transitions that we are tracking. It is especially important to have a stable wage and salary job but there is also evidence that higher earnings from the wage and salary job makes transition less likely. For nonemployers we find roughly similar patterns but there are some key differences. We find that having recent wage and salary income (and having higher earnings from such wage and salary activity) increases the likelihood of survival. Having recent stable wage and salary income decreases the likelihood of a complete exit but increases the likelihood of transiting to be an employer. Having recent wage and salary income in the same industry as the non-employer business has a large and positive impact on the likelihood of transiting to being a non-employer business.
    Keywords: firm survival, self-employment, startups, firm dynamics
    Date: 2013–09
  7. By: Huber, Martin; Lechner, Michael; Wunsch, Conny
    Abstract: In this paper, we assess the impact of firms introducing part-time work schemes for gradual labour market exit of elderly workers on their employees’ labour market outcomes. The analysis is based on unique linked employer-employee data that combine high-quality survey and administrative data. Our results suggest that partial or gradual retirement options offered by firms are an important tool to alleviate the negative effects of low labour market attachment of elderly workers in ageing societies. When combined with financial incentives to hire unemployed or young jobseekers as replacement, they seem to be particularly beneficial, especially when labour market conditions are difficult. Under such circumstances, they can even have positive spill-over effects on younger workers. Firms should thus be encouraged to offer such schemes.
    Keywords: elderly employees; matching; part-time work; treatment effects
    JEL: C21 J14 J26
    Date: 2013–07
  8. By: Giuseppe Croce; Edoardo Di Porto; Emanuela Ghignoni; Andrea Ricci
    Abstract: This paper analyzes the role of the employer in workplace training, a novelty with respect to the literature on this topic. Taking advantage of a unique dataset on Italy, we study how individual employer profile and the agglomeration of employers influence firms’ propensity to invest in training. Our findings show that highly educated employers have a greater propensity to invest in workplace training. Moreover, we are able to capture the effect of employers’ human capital agglomeration on the training decision. We assert that such agglomeration leads to two different alternative scenarios: 1) a poaching effect may prevail, therefore competition among employers induces less propensity to train workers; 2) a positive knowledge spillover effect may prevail leading to a greater propensity to engage in training. We test these two options discovering that in the Italian case, where small businesses are prominent, the first effect is stronger. Several econometrics issues are considered in our empirical strategy: the skewed and bounded nature of the training decision indicator, the endogeneity issues derived from the agglomeration effect as well as the cross section dependence problems affecting standard errors.
    Keywords: workplace training; poaching; knowledge spillovers; entrepreneurship cluster, employer’s education, social capital, proximity.
    JEL: J24 O15 O18 R23
    Date: 2013–09
  9. By: Melvin Stephens, Jr.; Dou-Yan Yang
    Abstract: Causal estimates of the benefits of increased schooling using U.S. state schooling laws as instruments typically rely on specifications which assume common trends across states in the factors affecting different birth cohorts. Differential changes across states during this period, such as relative school quality improvements, suggest that this assumption may fail to hold. Across a number of outcomes including wages, unemployment, and divorce, we find that statistically significant causal estimates become insignificant and, in many instances, wrong-signed when allowing year of birth effects to vary across regions.
    JEL: J24
    Date: 2013–08
  10. By: Orla Doyle; Colm Harmon; James J. Heckman; Caitriona Logue; Seong Moon
    Abstract: The literature on skill formation and human capital development clearly demonstrates that early investment in children is an equitable and efficient policy with large returns in adulthood. Yet little is known about the mechanisms involved in producing these long-term effects. This paper presents early evidence on the nature of skill formation based on an experimentally designed, five-year home visiting program in Ireland targeting disadvantaged families - Preparing for Life (PFL). We examine the impact of investment between utero to 18 months of age on a range of parental and child outcomes. Using the methodology of Heckman et al. (2010a), permutation testing methods and a stepdown procedure are applied to account for the small sample size and the increased likelihood of false discoveries when examining multiple outcomes. The results show that the program impact is concentrated on parental behaviors and the home environment, with little impact on child development at this early stage. This indicates that home visiting programs can be effective at offsetting deficits in parenting skills within a relatively short timeframe, yet continued investment may be required to observe direct effects on child development. While correcting for attrition bias leads to some changes in the precision of estimates, overall the results are quite similar.
    JEL: C12 C93 J13 J24
    Date: 2013–08
  11. By: Estache, Antonio; Foucart, Renaud
    Abstract: In a model of horizontal matching on the labor market, we show that increasing workers’ bargaining power may increase some employers’ incentive to switch to new production activities. In particular, this could lead to (i) higher wages, (ii) more jobs, (iii) better jobs and (iv) higher profits. Paradoxically, the median voter may object to the economic adjustments because search costs could cut the surplus for a majority of workers, even when it creates jobs for the other ones and increases aggregate surplus.
    JEL: C78 J3 J6
    Date: 2013–05
  12. By: Andrea De Michelis; Marcello M. Estevão; Beth Anne Wilson
    Abstract: Traditionally, shocks to total factor productivity (TFP) are considered exogenous and the employment response depends on their effect on aggregate demand. We raise the possibility that in response to labor supply shocks firms adjust efficiency, rendering TFP endogenous to firms’ production decisions. We present robust cross-country evidence of a strong negative correlation between growth in TFP and labor inputs over the medium to long run. In addition, when using instruments to capture changes in hours worked that are independent of TFP shocks, we find that cross-country increases in labor input cause reductions in TFP growth. These results have important policy implications, including that low productivity growth in some countries may partly be a side effect of strong labor market performance. By the same token, countries facing a declining workforce, say, because of aging, may see accelerating TFP as firms find better ways of employing workers.
    Keywords: Productivity;Employment;Labor supply;External shocks;Labor productivity;total factor productivity, employment performance, technology choices
    Date: 2013–05–03

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