nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2013‒11‒02
twenty papers chosen by
Erik Jonasson
National Institute of Economic Research

  1. Minimum Wage in a Deflationary Economy: The Japanese Experience, 1994–2003 By Ryo Kambayashi; Daiji Kawaguchi; Ken Yamada
  2. Maternity Leave and the Responsiveness of Female Labor Supply to a Household Shock By Emma Tominey
  3. Returns to Tenure or Seniority By Sebastian Buhai; Miguel Portela; Coen Teulings; Aico van Vuuren
  4. Does It Pay to Work for Free? Wage Returns and Gender Differences in the Market for Volunteers By Cozzi, Guido; Mantovan, Noemi; Sauer, Robert M.
  5. Aggregation and Labor Supply Elasticities By Kneip, Alois; Merz, Monika; Storjohann, Lidia
  6. Steady-State Labor Supply Elasticities: A Survey By Bargain, Olivier; Peichl, Andreas
  7. Internationalisation of Education and Returns in the Labour Market By Poot, Jacques; Roskruge, Matthew
  8. The Returns to Occupational Foreign Language Use: Evidence from Germany By Tobias Stoehr
  9. Survey evidence on price and wage rigidities in Portugal By Fernando Martins
  10. The Formal Sector Wage Premium and Firm Size for Self-employed Workers By Olivier Bargain; Eliane El Badaoui; Prudence Kwenda; Eric Strobl; Frank Walsh
  11. Laterborns Don't Give Up: The Effects of Birth Order on Earnings in Europe By Bertoni, Marco; Brunello, Giorgio
  12. What If You Had Been Less Fortunate: The Effects of Poor Family Background on Current Labor Market Outcomes By Cho, Sungwook; Heshmati, Almas
  13. The Role of Retiree Health Insurance in the Early Retirement of Public Sector Employees By John B. Shoven; Sita Slavov
  14. The make-up of a regression coefficient: gender gaps in the European labor market By M. Grazia Pittau; Shlomo Yitzhaki; Roberto Zelli
  15. U.S. versus Sweden: The Effect of Alternative In-Work Tax Credit Policies on Labour Supply of Single Mothers By Aaberge, Rolf; Flood, Lennart
  16. Educational Inequality and the Returns to Skills By Shelly Lundberg
  17. Heterogeneous Sports Participation and Labour Market Outcomes in England By Lechner, Michael; Downward, Paul
  18. Full Childcare Coverage: Higher Maternal Labour Supply and Childcare Usage? By Pieter VANLEENHOVE
  19. Labour market discrimination against former juvenile delinquents: evidence from a field experiment By S. BAERT; E. VERHOFSTADT
  20. Career Lesbians. Getting Hired for Not Having Kids? By S. BAERT

  1. By: Ryo Kambayashi (Institute of Economic Research, Hitotsubashi University); Daiji Kawaguchi (Faculty of Economics, Hitotsubashi University); Ken Yamada (Singapore Management University, School of Economics)
    Abstract: The statutory minimum wage in Japan has increased continuously for a few decades until the early 2000s even during a period of deflation. This paper examines the impact of the minimum wage on wage and employment outcomes under this unusual circumstance. We find that the minimum-wage increase resulted in the compression of the lower tail of the wage distribution among women and that the wage compression is only partially attributable to the loss of employment. The continuous increase in the minimum wage accounts for one half of the reduction in lower-tail inequality that occurred among women during the period between 1994 and 2003.
    Keywords: minimum wage, wage inequality, employment loss, truncated distribution, deflation
    JEL: J23 J31 J38
    Date: 2013–10
  2. By: Emma Tominey (University of York)
    Abstract: Female labor supply can insure households against shocks to paternal employment. The paper estimates whether the female labor supply response to a paternal employment shock differs by eligibility to maternity employment protection. We exploit time-state variation in the implementation of unpaid maternity leave through the Family and Medical Leave Act (FMLA) in the US which increased employment protection from 0 to 12 weeks. We find that mothers eligible for FMLA speed up their return to work in response to a paternal shock, with a conditional probability of being in work 53% higher than in households with no paternal shock. In contrast, there was a negligible insurance response for mothers with no employment protection.
    Keywords: female labor supply, insurance, maternity leave
    JEL: I30 J13 J20 J64
    Date: 2013–10
  3. By: Sebastian Buhai; Miguel Portela; Coen Teulings; Aico van Vuuren
    Abstract: This study documents two empirical facts using matched employer-employee data for Denmark and Portugal. First, workers who are hired last, are the first to leave the firm. Second, workers’ wages rise with seniority (= a worker’s tenure relative to the tenure of her colleagues). The identification problems for the wage return to tenure are shown not to apply to the return to seniority because seniority is not a deterministic function of time. Controlling for tenure, the probability of leaving the firm decreases with seniority. The increase in expected seniority with tenure explains a large part of the negative duration dependence of the hazard. Using a variety of estimation methods, we show that a 10% increase in seniority raises your wage by 0.1-0.2%, depending on the country and the method applied. Conditional on ten years of tenure, one standard deviation of seniority raises your wage by 0.5 to 1.6 percent. Forthcoming in Econometrica.
    Keywords: wage dynamics, tenure, seniority, LIFO
    JEL: J31 J41 J63
    Date: 2013–10–07
  4. By: Cozzi, Guido (University of St. Gallen); Mantovan, Noemi (Bangor University); Sauer, Robert M. (Royal Holloway, University of London)
    Abstract: Working as a volunteer is a widespread phenomenon that has both individual and societal benefits. In this paper, we identify the wage returns to working for free by exploiting exogenous variation in rainfall across local area districts in England, Scotland and Wales. Instrumental variables estimates reveal large returns for both men and women. However, the returns are differentially greater for men and account for a substantial proportion of the gender earnings gap. A comparison of OLS and IV estimates also indicates negative selection into volunteering for both genders. In a model of optimal volunteering, negative selection implies that a reduction in the cost of volunteering will lead to an expanded and higher-skilled pool of volunteers, and greater societal benefits. A policy that has the effect of reducing the cost relatively more for women may also narrow the gender earnings gap.
    Keywords: volunteering, altruism, gender differences, discrimination, instrumental variables, rainfall, negative selection
    JEL: C26 D64 H41 J16 J31 J71
    Date: 2013–10
  5. By: Kneip, Alois (University of Bonn); Merz, Monika (University of Vienna); Storjohann, Lidia (University of Bonn)
    Abstract: The aggregate Frisch elasticity of labor supply has played a key role in business cycle analysis. This paper develops a statistical aggregation procedure which allows for worker heterogeneity in observables and unobservables and is applicable to an individual labor supply function with non-employment as a possible outcome. Performing a thought experiment in which all offered or paid wages are subject to an unanticipated temporary change, we can derive an analytical expression for the aggregate Frisch elasticity and illustrate its main components: (i) the intensive and extensive adjustment of hours worked, (ii) the extensive adjustment of wages, and (iii) the aggregate employment rate. We use individual-specific data from the German Socio-Economic Panel (SOEP) for males at working-age in order to quantify each component. This data base provides indirect evidence on non-employed workers' reservation wages. We use this variable in conjunction with a two-step conditional density estimator to retrieve the extensive adjustment of hours worked and wages paid. The intensive hours' adjustment follows from estimating a conventional panel data model of individual hours worked. Our estimated aggregate Frisch elasticity varies between .63 and .70. These results are sensitive to the assumed nature of wage changes.
    Keywords: aggregation, reservation wage distribution, labor supply, extensive and intensive margin of adjustment, time-varying Frisch elasticities
    JEL: C51 E10 J22
    Date: 2013–10
  6. By: Bargain, Olivier (University of Aix-Marseille II); Peichl, Andreas (ZEW Mannheim)
    Abstract: Previous reviews of static labor supply estimations concentrate mainly on the evidence from the 1980s and 1990s, Anglo-Saxon countries and early generations of labor supply modeling. This paper provides a fresh characterization of steady-state labor supply elasticities for Western Europe and the US. We also investigate the relative contribution of different methodological choices in explaining the large variation in elasticity size observed across studies. While some recent studies show that genuine preference heterogeneity across countries explains only a modest share of this variation (Bargain et al., 2013), we focus here on time changes and estimation methods as key contributors of the differences across studies. Both factors can explain larger elasticities in older studies (i.e. an increase in female labor market attachment over time and a switch from the Hausman estimation approach to discrete-choice models with tax-benefit simulations). Meta-analysis evidence suggests that smaller elasticities in the recent period may be due to the time factor, i.e. a likely change in work preferences, both in the US and in Europe.
    Keywords: household labor supply, elasticity, taxation, Europe, US
    JEL: C25 C52 H31 J22
    Date: 2013–10
  7. By: Poot, Jacques (University of Waikato); Roskruge, Matthew (University of Waikato)
    Abstract: The education services provided in any given country increasingly contribute to human capital that is employed in another country. On the one hand, graduates may seek to obtain the highest return to the knowledge they gained in their home country by working abroad. On the other hand, some students purchase educational services abroad and will subsequently work abroad, or return home to utilize the internationally acquired knowledge in the domestic labour market. In this paper we use data from the 2006-07 Adult Literacy and Life Skills survey in New Zealand to examine how years of foreign and domestic education affect earnings in the labour market. We account for differences in innate ability by aggregating subjective responses to pertinent questions in the survey and by incorporating parents' educational background. Our findings reconfirm the extensive evidence that education gained in a country of birth has generally a lower return in a foreign labour market than the native born receive in this labour market for the equivalent education. Post-settlement education in the host country has a higher return for migrants than for comparable native born. We also find that the highest returns are obtained among those who, after studying abroad, return home to work – a fact for which there has been to date scarce evidence. Thus, exposure to foreign education can lead to a triple gain: for the country where the education is obtained, for the students' home country and for the students themselves.
    Keywords: international education, human capital, earnings, selection effects
    JEL: F22 I24 J24 J31
    Date: 2013–10
  8. By: Tobias Stoehr
    Abstract: This paper analyses the wage premia associated with workers' occupational use of foreign languages in Germany. After eliminating time-invariant unobserved heterogeneity and other confounding factors, sizable returns of about 10 percent to applying fluent English skills are found. Returns to occupational use of other foreign languages are, if anything, restricted to a few specialized occupations. Compared to non-migrants, immigrants receive more than twice the return for using English. Returns depend crucially on speaking German well, thus excluding many first generation migrants and are found to occur particularly in service occupations that involve international factor flows. In such occupations it is likely that migrants can apply complementary skills such as international experience that their non-migrant counterparts lack. As immigrants do not earn significant wage premia for applying their native language on the job in addition to those for English, their trade-fostering potential seems to be unlocked by complementary fluency in the two business languages German and English
    Keywords: foreign language skills, Migration, wage structure, human capital, occupational choice
    JEL: J24 F22 J30
    Date: 2013–10
  9. By: Fernando Martins
    Abstract: This paper exploits the information collected from a survey conducted on a sample of Portuguese firms to study the patterns of firms’ price and wage adjustments and the extent of nominal price and wage rigidities. The evidence shows that the frequency of price changes varies substantially across sectors and depends on a number of factors such as the intensity of competition, the share of labour costs and firms’ price reviewing behaviour. The results also show that wages are more flexible in those firms where the fraction of permanent and high-skilled workers is lower and where the share of flexible pay components is higher.
    JEL: D21 E30 J31
    Date: 2013
  10. By: Olivier Bargain (Aix-Marseille School of Economics); Eliane El Badaoui (Université de Cergy-Pontoise); Prudence Kwenda (University College Dublin); Eric Strobl (Ecole Polytechnique Paris); Frank Walsh (University College Dublin)
    Abstract: We develop a model where workers may enter self-employment or search for jobs as employees and where there is heterogeneity across workers’ managerial ability. Workers with higher skills will manage larger firms while workers with low managerial ability will run smaller firms and will be in self-employment only when they cannot find a salaried job. For these workers self-employment is a secondary/informal form of employment. The Burdett and Mortensen (1998) equilibrium search model is used for illustration as a special case of our more general framework. Empirical evidence from Mexico is provided and demonstrates that firm size wage effects for employees and selfemployed workers are broadly consistent with the model.
    Keywords: Self-employment, Managerial ability, Informal sector
    JEL: J31 O17
    Date: 2013–10–23
  11. By: Bertoni, Marco (University of Padova); Brunello, Giorgio (University of Padova)
    Abstract: While it is well known that birth order affects educational attainment, less is known about its effects on earnings. Using data from eleven European countries for males born between 1935 and 1956, we show that firstborns enjoy on average a 13.7 percent premium over laterborns in their wage at labour market entry. However, this advantage is short lived, and disappears by age 30, between 10 and 15 years after labour market entry. While firstborns start with a better match, partly because of their higher education, laterborns quickly catch up by switching earlier and more frequently to better paying jobs. We argue that a key factor driving our findings is that laterborns are more likely to engage in risky behaviours.
    Keywords: birth order, earnings, risk aversion, Europe
    JEL: D13 J12 J24
    Date: 2013–10
  12. By: Cho, Sungwook (Sogang University); Heshmati, Almas (Sogang University)
    Abstract: This study examines the correlation between childhood poverty and its influence on adulthood wage distribution, where childhood poverty refers to experience of poverty or poor family background during one's childhood. With the data from Korean Labor Income Panel Study, KLIPS, quantile regression technique and decomposition method are conducted to identify and decompose the wage gap between low (poor) and middle class income group along the whole current wage distribution, based on a simulated counterfactual distribution. The results show that, those who had been less fortunate during their childhood likely had less opportunity to gain labor market favored characteristics such as a higher level of education, and even earn lower returns to their labor market characteristics in the current labor market. This leads to a discount of about fifteen percentages points off of the wage on average in total for those with underprivileged backgrounds during childhood compared to those with the middle class background, and that disadvantage is observed heterogeneously, greater at the lower quantiles than the higher quantiles of the current wage distribution. Then this research contributes to the literature by providing a partial understanding of poverty in Korea and its possible causes, in particular, in form of poor family background or childhood poverty, with which the implication of intergenerational effect issue is considered.
    Keywords: labor market outcome, family background, childhood poverty, wage inequality, wage distribution, decomposition, quantile regression, Korea
    JEL: C21 E24 J13 J31 J62 O15
    Date: 2013–10
  13. By: John B. Shoven; Sita Slavov
    Abstract: Most private sector workers with employer-provided health insurance have a strong incentive to continue working until Medicare eligibility in order to maintain group health coverage. However, most government employees have access to retiree health coverage, which allows them access to group health coverage even if they retire before Medicare eligibility. We study the impact of retiree health coverage on the probability of stopping work among public sector workers between the ages of 55 and 64. We find that, for state and local government employees, retiree health coverage raises the probability of stopping work by 5.1 percentage points (around 28 percent) between ages 60 and 64. However, we find no evidence that retiree health coverage influences state and local employees’ decisions to stop work at ages 55-59, or that such coverage has an effect on the probability of stopping work for federal and military employees.
    JEL: I1 J2 J3 J4
    Date: 2013–10
  14. By: M. Grazia Pittau (Sapienza Universita' di Roma); Shlomo Yitzhaki (The Hebrew University of Jerusalem and Central Bureau of Statistics); Roberto Zelli (Sapienza Universita' di Roma)
    Abstract: We provide a comprehensive picture of the relationship between labor market outcomes and age by gender in all the 28 European countries covered by the European Statistics on Income and Living Conditions (EU-SILC). The analysis is based on a somewhat unconventional approach that refers to concentration curves in the context of Gini regression framework. It allows to identify ranges in the explanatory variables where local slopes change sign and/or size, i.e. the components that \make up" a regression coecient. The European countries are clustered into five groups according to their employment, hours of work and earnings age-profiles by gender, as identified by the concentration curves. The most relevant differences in age proles concern working-hours-patterns: some countries are characterized by an almost specular behavior in men and women; other countries instead show similar patterns. Generally, earnings increase with age for both men and women. However, local regression coefficients are not monotonic over the entire age range and can even be locally negative in some countries.
    Keywords: Gini, OLS, Concentration curves, Regression decomposition, European labor market.
    JEL: C30 J16 J21
    Date: 2013–10
  15. By: Aaberge, Rolf (Statistics Norway); Flood, Lennart (University of Gothenburg)
    Abstract: An essential difference between the design of the Swedish and the US in-work tax credit systems relates to their functional forms. Where the US earned income tax credit (EITC) is phased out and favours low and medium earnings, the Swedish system is not phased out and offers 17 and 7 per cent tax credit for low and medium low incomes and a lump-sum tax deduction equal to approximately 2300 USD for medium and higher incomes. The purpose of this paper is to evaluate the efficiency and distributional effects of these two alternative tax credit designs. We pay particular attention to labour market exclusion; i.e. individuals within as well as outside the labour force are included in the analysis. To highlight the importance of the joint effects from the tax and the benefit systems it appears particular relevant to analyse the labour supply behaviour of single mothers. To this end, we estimate a structural random utility model of labour supply and welfare participation. The model accounts for heterogeneity in consumption-leisure preferences as well as for heterogeneity and constraints in job opportunities. The results of the evaluation show that the Swedish system without phase-out generates substantial larger labour supply responses than the US version of the tax credit. Due to increased labour supply and decline in welfare participation we find that the Swedish reform is self-financing for single mothers, whereas a 10 per cent deficit follows from the adapted EITC version used in this study. However, where income inequality rises modestly under the Swedish tax credit system, the US version with phase-out leads to a significant reduction in the income inequality.
    Keywords: labour supply, single mothers, in-work tax credit, social assistance, random utility model
    JEL: J22 I38
    Date: 2013–10
  16. By: Shelly Lundberg (University of California, Santa Barbara)
    Abstract: Research and policy discussion about the diverging fortunes of children from advantaged and disadvantaged households have focused on the skill disparities between these children-how they might arise and how they might be remediated. Analysis of data from the National Longitudinal Study of Adolescent Health reveals another important mechanism in the determinants of educational attainment-differential returns to skills for children in different circumstances. Though the returns to cognitive ability are generally consistent across family background groups, personality traits have very different effects on educational attainment for young men and women with access to different levels of parental resources. These results are consistent with a model in which the provision of focused effort in school is complementary with parental inputs while openness, associated with imagination and exploration, is a substitute for information provision by educated parents and thus contributes to resilience in low-resource environments. In designing interventions to improve outcomes for disadvantaged children, we need to be cognizant of interactions between a child's skills and their circumstances.
    Keywords: Education, inequality, personality
    JEL: I24 J24
    Date: 2013–10
  17. By: Lechner, Michael (University of St. Gallen); Downward, Paul (Loughborough University)
    Abstract: Based on a unique composite dataset measuring heterogeneous sports participation, labour market outcomes and local facilities provision, this paper examines for the first time the association between different types of sports participation on employment and earnings in England. Clear associations between labour market outcomes and sports participation are established through matching estimation whilst controlling for some important confounding factors. The results suggest a link between different types of sports participation to initial access to employment and then higher income opportunities with ageing. However, these vary between the genders and across sports. Specifically, the results suggest that team sports contribute most to employability, but that this varies by age across genders and that outdoor activities contribute most towards higher incomes.
    Keywords: sports participation, human capital, labour market, matching estimation
    JEL: I12 I18 J24 L83 C21
    Date: 2013–10
  18. By: Pieter VANLEENHOVE
    Abstract: According to many studies, childcare is important for its pedagogical, economical and social function for both children and parents. However, many households are still confronted with availability constraints in childcare. In the recent past, many governments implemented policy reforms in order to increase the coverage rate of childcare. The empirical part of this paper focuses on the Flemish childcare market and analyzes how maternal labour supply and childcare usage is affected by a new Flemish decree which provides full childcare coverage. This paper adopts a modeling framework for analyzing labour supply developed by Aaberge, Colombino and Strøm (1999) and Dagsvik (1994). To account for the possible interaction between labour supply and childcare choices the model also treats childcare type as an endogenous variable. The results of the policy reform analysis show that households switch to formal childcare when confronted with higher childcare availability. Total labour supply also increases but these effects are less pronounced as some households also reduce working hours.
    Date: 2013–10
    Abstract: In view of policy action to integrate ex-offenders into society, it is important to identify the underlying mechanisms of the negative relationship between criminal record on the one hand and later employment and earnings on the other hand. Therefore we identify hiring discrimination against former juvenile delinquents in a direct way. To this end we conduct a field experiment in the Belgian labour market. We find that labour market discrimination is indeed a major barrier in the transition to work for former juvenile delinquents. Labour market entrants disclosing a history of juvenile delinquency get about 22 percent less callback compared to their counterparts without a criminal record. This discrimination is more outspoken among the low-educated.
    Keywords: juvenile delinquency, hiring discrimination, field experiments
    JEL: C93 J2 J71
    Date: 2013–10
  20. By: S. BAERT
    Abstract: Using a field experiment, we investigate whether discrimination based on women's sexual orientation differs by age and family constraints. We find weakly significant evidence of discrimination against young heterosexual women because of their potential to have children. This effect is driven by age rather than by motherhood. We do not find any unequal treatment at older ages. This age effect is consistent with our theoretical expectation that, relative to lesbian women, young heterosexual women are penalised for having children more frequently and taking on, on average, more at-home-caring tasks.
    Keywords: experiments, labour market discrimination, motherhood, sexual orientation.
    JEL: C93 J13 J16 J71
    Date: 2013–07

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