nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2013‒10‒11
thirteen papers chosen by
Erik Jonasson
National Institute of Economic Research

  1. Foreign direct investment and wages: does the level of ownership matter? By Cagatay Bircan
  2. The immigrant-native pay gap in Germany By Humpert, Stephan
  3. Migration and Increasing Wage Inequality: Can Imperfect Competition Explain the Link? By Korpi, Martin
  4. Age-dependent Taxation, Retirement Behavior, and Work Hours Over the Life Cycle By Julian Diaz Saavedra
  5. Informal versus Formal Search: Which Yields a Better Pay? By Tumen, Semih
  6. Will Ugly Betty ever find a job in Italy? By Giovanni BUSETTA; Fabio FIORILLO
  7. Offshoring and relative labor demand from a task perspective By Hogrefe, Jan
  8. Taxation and Labor Force Participation: The Case of Italy By Fabrizio Colonna; Stefania Marcassa
  9. The determinants of Job Access Channels: Evidence from the Youth Labor Market in France By Jihan Ghrairi
  10. Oversupply of Labor and Other Peculiarities of Arts Labor Market By Popović, Milenko; Ratković, Kruna
  11. Earnings Adjustment Frictions: Evidence from the Social Security Earnings Test By Alexander M. Gelber; Damon Jones; Daniel W. Sacks
  12. Migration from Ukraine: Brawn or Brain? New Survey Evidence By Simon Commander; Olexandr Nikolaychuk; Dmytro Vikhrov
  13. Labor Market Frictions, Firm Growth, and International Trade By Pablo D. Fajgelbaum

  1. By: Cagatay Bircan (EBRD)
    Abstract: This study hypothesises that the level of foreign equity participation is a key determinant of the multinational wage premium. In particular, the breakdown of equity in a foreign investment project determines the extent to which a multinational parent company transfers proprietary assets to its affiliate, directly impacting worker productivity. Moreover, it indicates multinationals’ desire to restrict labour turnover and preserve human capital in light of organisational changes and training. Using detailed plant-level data from Turkey, the study finds strong support for these mechanisms. The results show that up to 15 percentage points of the multinational wage premium can be explained by the level of foreign ownership per se. They also indicate that greater foreign equity participation leads to greater transfer of both tangible and intangible assets and thus higher wage premia, especially for skilled workers. This relationship is better approximated as linear rather than binary in contrast to previous literature.
    Keywords: foreign direct investment, wages, censoring, ownership structure
    JEL: C33 F23 J31
    Date: 2013–05
  2. By: Humpert, Stephan
    Abstract: This note analyzes income differences between foreigners and natives in Germany. Using social survey data (ALLBUS) for 2012, I use Mincer style quantile regressions and Oaxaca-Blinder decompositions to estimate the size of the income differential. People not born in Germany, have an income lose for about 6,5 to 10 per cent. People with a foreign citizenship have even higher income losses. They face penalties between 8 to 14 percent. Decomposition shows a 9,2 percent difference for immigrants, while most of the gap is unexplained. Individuals without German citizenship have a 15,8 percent difference. Here more of the half remain unexplained.
    Keywords: immigration; income; pay gap; Germany; ALLBUS;
    JEL: F22 J24 J31 J61
    Date: 2013–10
  3. By: Korpi, Martin (Ratio)
    Abstract: In this paper, we test two hypotheses as regarding potential effects of domestic and international migration on wage inequality. One related to the possibility of wage competition, and another alternative hypothesis related to fixed set-up costs and indivisibilities for different types of industries within the local labour market. Using detailed information on Swedish local labour markets, derived from Swedish full population data, for 1993 and 2003, a panel model of percent changes in inequality is estimated. Thereby controlling for local level fixed effects as well as other competing explanations, the results suggest that positive net migration may affect income dispersion regardless of possible negative wage competition.
    Keywords: Income inequality; local labour markets; business diversification; international migration
    JEL: D61 F22 J31 J40 R12
    Date: 2013–09–24
  4. By: Julian Diaz Saavedra (Department of Economic Theory and Economic History, University of Granada.)
    Abstract: We use a computable overlapping generations model economy, which matches the stylized facts con- cerning retirement behavior, to analyze the consequences of three reforms designed to reduce tax rates on the labor supply of older workers. We nd that these reforms increase the participation rates of the elderly and show that the gains, in terms of old age work hours, are non-trivial. However, we also nd that the total labor supply response to the reforms is not so much an increase in total lifetime hours as it is a reallocation of hours over the life cycle. Finally, we show that these reforms, designed to increase the length of the working life of individuals, may not increase output.
    Keywords: Computable general equilibrium, labor supply, retirement, age-dependent taxation.
    JEL: C68 J22 J26 H31
    Date: 2013–09–25
  5. By: Tumen, Semih
    Abstract: Estimates on the effect of job contact method -- i.e., informal versus formal search -- on wage offers vary considerably across studies, with some of them finding a positive correlation between getting help from informal connections and obtaining high-paying jobs, while others finding a negative one. In this paper, I investigate the sources of discrepancies in these empirical results. Using a formal job search framework, I derive an equilibrium wage distribution which reveals that the informal search yields for some groups higher and for some others lower wages than formal search. The key result is the existence of nonmonotonicities in wage offers. Two potential sources of these nonmonotonicities exist: (i) peer effects and (ii) unobserved worker heterogeneity in terms of the inherent cost of maintaining connections within a productive informal network. The model predicts that a greater degree of unobserved heterogeneity tilts the estimates toward producing a positive correlation between informal search and higher wages, whereas stronger peer influences tend to yield a negative correlation. This conclusion informs the empirical research in the sense that identification of the true correlation between job contact methods and wage offers requires a careful assessment of the unobserved heterogeneity and peer influences in the relevant sample.
    Keywords: Job search; informal networks; peer effects; heterogeneity; nonmonotonicities.
    JEL: D85 J31 J64
    Date: 2013–10–01
  6. By: Giovanni BUSETTA (Universit… di Messina, Department of Economics, Business, Environmental Sciences, and Quantitative Methods); Fabio FIORILLO (Universit… Politecnica delle Marche, Dipartimento di Scienze Economiche e Sociali)
    Abstract: This paper evaluates the impact of beauty on employability, stressing the first stage of the hiring process. In particular, we studied the Italian labor market in order to ascertain whether there exists a preference for attractive applicants according to gender and racial characteristics. The sample analyzed consists of observations collected by sending 11008 curricula vitae (henceforth CVs) to firms looking for workers in response to advertised job postings.;Positive responses were obtained by 3278 CVs (almost 30% of the sample). We then compared response rates of different categories, obtaining the following results: those who receive the highest levels of positive responses are attractive subjects; most of the responses to plain subjects involve unqualified jobs; beauty appears to be essential for front clerical work; racial discrimination appears to be significant, but less so than discrimination based on physical features, especially for women.
    Keywords: beauty premium, experimental economics, racial discrimination
    JEL: C93 J71 J78
    Date: 2013–10
  7. By: Hogrefe, Jan
    Abstract: This paper provides new evidence on how offshoring shifts relative labor demand for tasks at the industry level. A novel theoretical mechanism, based on sorting of heterogeneous workers into occupations with task dependent offshoring cost, guides estimation. Cost shares of tasks are linked to offshoring in a panel estimation using German data for 1998-2007. It is shown that offshoring shifts home country relative labor demand towards more complex tasks with higher relocation cost. This demand shift holds when controlling for an industry's skill composition and is particularly strong for offshoring to non-OECD countries. --
    Keywords: trade,offshoring,tasks,relative labor demand
    JEL: F16 J23
    Date: 2013
  8. By: Fabrizio Colonna (Banca d'Italia - Banca d'Italia); Stefania Marcassa (THEMA - Théorie économique, modélisation et applications - CNRS : UMR8184 - Université de Cergy Pontoise)
    Abstract: Italy has the lowest labor force participation of women among European countries. Moreover, the participation rate of married women is positively correlated to their husbands' income. We show that a high tax schedule together with tax credits and transfers raise the burden of two-earner households, generating disincentives to work. We estimate a structural labor supply model for women, and use the estimated parameters to simulate the effects of alternative revenue-neutral tax systems. We find that joint taxation implies a drop in the participation rate. Conversely, working tax credit and gender-based taxation boost it, with the effects of the former concentrated on low educated women.
    Keywords: female labor force participation, Italian tax system, second earner tax rate, joint taxation, gender-based taxation, working tax credit
    Date: 2013–10–02
  9. By: Jihan Ghrairi (ERMES - Equipe de recherche sur les marches, l'emploi et la simulation - CNRS : UMR7017 - Université Paris II - Panthéon-Assas, TEPP - Travail, Emploi et Politiques Publiques - CNRS : FR3435 - Université Paris-Est Marne-la-Vallée (UPEMLV))
    Abstract: This article aims to study youth employability on the job access channel that provided their entry into the labor market. We examine the determinants of the formal and informal job access channels. For this purpose, we estimate a Multinomial Logit model of access channels controlling for selection bias. We use the youth sample of the French National Labor Force Survey (Enquête "Emploi") conducted by the INSEE. Our data provide a set of relevant variables required to identify the model which allows us to study different characteristics of young individuals that affect their access to the current job through a particular channel. First, we notice that young graduates access to their current jobs more often through direct applications and social networks. We find that, in 2010, referred young workers are more likely to be less educated man immigrants, living in rural areas and hired by large firms. However, immigrants were less likely to obtain a job through public employment agencies while the origin effect was not significant in 2007. Moreover, we find that the probability of finding a job through professional contacts increases significantly with the education level for both years (stronger effects for university graduates).
    Keywords: job access channels; social networks ; multinomial logit ; selection bias
    Date: 2013–06
  10. By: Popović, Milenko; Ratković, Kruna
    Abstract: There are several striking peculiarities of the arts labor market that have attracted the attentions of researchers in the last several decades: first is constant long run excess supply of arts labor; second, artists are more likely to be multiple-job-holders than other professions; third, artists pay significant earning penalties; finally, there are huge variations in artists earnings and huge inequalities among artists themselves. In order to explain these peculiarities, in this paper we developed two dynamic models of an artist’s behavior and arts labor supply. In the first model proposed here an artist is depicted as someone who is hired on the arts labor market and paid for his artistic time. In the second model an artist is described as someone who sells his products, like paintings for instance, on the market for artistic products. In order to make these models dynamic, an artist’s productivity is here supposed to be a function of accumulated human capital of the artist. As a consequence, the supply of labor in the arts market appears as the result of an inter-temporal process of resources allocation. Both models end with the same result: the cost of producing a unit of an artistic commodity in a particular year should be equal to the present value of expected streams of all monetary and nonmonetary benefits generated by production of a given artistic unit. This result appears to be pretty suitable for formalization of several existing hypotheses aimed at explaining arts labor market peculiarities. Especially, by referring to the stream of expected nonmonetary benefits, models developed here are able to formalize the most promising among these hypotheses according to which an artist’s need for self-discovery and self-actualization is the driving force in explaining the oversupply of arts labor. --
    Keywords: household production function,allocation of time,arts,expected benefits
    JEL: Z10 Z11 J22 J24
    Date: 2013–09
  11. By: Alexander M. Gelber; Damon Jones; Daniel W. Sacks
    Abstract: We study frictions in adjusting earnings to changes in the Social Security Annual Earnings Test (AET) using a panel of Social Security Administration microdata on one percent of the U.S. population from 1961 to 2006. Individuals continue to "bunch" at the convex kink the AET creates even when they are no longer subject to the AET, consistent with the existence of earnings adjustment frictions in the U.S. We develop a novel framework for estimating an earnings elasticity and an adjustment cost using information on the amount of bunching at kinks before and after policy changes in earnings incentives around the kinks. We apply this method in settings in which individuals face changes in the AET benefit reduction rate, and we estimate in a baseline case that the earnings elasticity with respect to the implicit net-of-tax share is 0.23, and the fixed cost of adjustment is $152.08.
    JEL: H20 H31 J14 J26
    Date: 2013–10
  12. By: Simon Commander (Altura Partners, EBRD, IE Business School); Olexandr Nikolaychuk (CERGE-EI, Prague); Dmytro Vikhrov (CERGE-EI, Prague)
    Abstract: This paper studies selection and labour market outcomes among Ukrainian migrants using unique data from a survey conducted in Ukraine between August and October 2011. We found that migrants are positively selected in terms of age and education yetthis is not associated, as might be expected, with their labour market outcomes. Notably, around half of the migrants are employed in occupations for which they are over-qualified. We suggest that this downshifting in occupation can be partly explained by the absence of the conventional link between education and skills in Ukraine. We compare pre- and post-migration labour market outcomes and find that the probability of downshifting decreases with the duration of stay in a foreign country and knowledge of English or the local language. Significantly, someone who downshifted prior to migration in their home country was more likely to downshift abroad. Further, we found that migrants to the EU are more likely to downshift when compared to other destinations.
    Keywords: migration, selection, occupation downshift, survey data
    JEL: F22 J24
    Date: 2013–04
  13. By: Pablo D. Fajgelbaum
    Abstract: This paper develops a model to study the aggregate effects of labor market frictions in an open economy through their impact on the growth and investment decisions of firms. The model features interactions between firms' dynamic fixed investments in exporting and search frictions with job-to-job mobility. Search frictions induce slow firm growth and are a source of dispersion in firm size and export status. Job-to-job transitions are a crucial ingredient of the analysis, as in their absence search frictions do not affect outcomes per worker. The model is tractable for general-equilibrium analysis and accommodates several extensions which are useful for quantitative work. A calibration to Argentina's economy suggests that frictions in job-to-job mobility may have considerable effects on firm growth and aggregate income, and that barriers to worker mobility across firms may be relevant to measure the gains from international trade.
    JEL: D92 F16 J62 L11
    Date: 2013–10

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