nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2013‒11‒09
seven papers chosen by
Erik Jonasson
National Institute of Economic Research

  1. Steady-state labor supply elasticities: A survey By Bargain, Olivier; Peichl, Andreas
  2. Analyzing Zero Returns to Education in Germany: Heterogeneous Effects and Skill Formation By Daniel A. Kamhöfer; Hendrik Schmitz
  3. Do Immigrants Displace Native Workers? Evidence from Matched Panel Data By Pedro S. Martins, Matloob Piracha and José Varejão
  4. Who works for startups? The relation between firm age, employee age, and growth By Paige Ouimet; Rebecca Zarutskie
  5. Size-dependent regulations, firm size distribution, and reallocation By François Gourio; Nicolas Roys
  6. Decoupling of Wage Growth and Productivity Growth? Myth and Reality By Joao Paulo Pessoa; John Van Reenen
  7. Distributional effects of hiring through networks By Yoske Igarashi

  1. By: Bargain, Olivier; Peichl, Andreas
    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
  2. By: Daniel A. Kamhöfer; Hendrik Schmitz
    Abstract: We analyze the effect of education on wages using German Socio-Economic Panel data and regional variation in mandatory years of schooling and the supply of schools. This allows us to estimate more than one local average treatment effect and heterogeneous effects for different groups of compliers. Our results are in line with previous studies that do not find an effect of compulsory schooling on wages in Germany. We go beyond these studies and test a potential reason for it, namely that basic skills are learned earlier in Germany and additional years of schooling are not effective anymore. This is done by also estimating the effect of education on cognitive skills. The results suggest that education after the eighth year does not seem to have a causal effect on cognitive skills in Germany. This is consistent with the explanation for zero effects of schooling on earnings.
    Keywords: Returns to education, Skills, IV estimation
    JEL: I21 J24 C26
    Date: 2013
  3. By: Pedro S. Martins, Matloob Piracha and José Varejão
    Abstract: Using matched employer-employee data, we analyse the impact of immigrants on natives’ employment in Portugal. Using different model specifications, we show that the natives and immigrants are ‘complements’ at most occupation levels, in the sense that both types are hired when the number of immigrants is increasing. Controlling for different skill-level groups as well as for temporary and permanent jobs, the estimates show that, contrary to the evidence from some existing literature, the natives at the lower end of the skills spectrum are not affected by the presence of immigrants as well. There is, however, some evidence that when the number of immigrants in the firm is decreasing, natives tend to replace immigrants.
    Keywords: matched employer-employee data, displacement, immigrants.
    JEL: J15 J61
    Date: 2013–10
  4. By: Paige Ouimet; Rebecca Zarutskie
    Abstract: Young firms disproportionately employ young workers, controlling for firm size, industry, geography and time. The same positive correlation between young firms and young employees holds when we look just at new hires. On average, young employees in young firms earn higher wages than young employees in older firms. Further, young employees disproportionately join young firms with greater innovation potential and that exhibit higher growth, conditional on survival. These facts are consistent with the argument that the skills, risk tolerance, and career dynamics of young workers are contributing factors to their disproportionate share of employment in young firms. Finally, we show that an increase in the regional supply of young workers is positively related to the rate of new firm creation, especially in high tech industries, suggesting a causal link between the supply of young workers and new firm creation.
    Date: 2013
  5. By: François Gourio; Nicolas Roys
    Abstract: In France, firms with 50 employees or more face substantially more regulation than firms with less than 50. As a result, the size distribution of firms is visibly distorted: there are many firms with exactly 49 employees. We model the regulation as the combination of a sunk cost that must be paid the first time the firm reaches 50 employees, and a payroll tax that is paid each period thereafter when the firm operates with more than 50 employees. We estimate the model using indirect inference by fitting the discontinuity of the size distribution. The key finding is that the regulation is equivalent to a combination of a sunk cost approximately equal to about one year of an average employee salary, and a small payroll tax of 0.04%. Our structural model fits well the discontinuity in the size distribution. Removing the regulation improves labor allocation across firms, leading in steady-state to an increase in output per worker slightly less than 0.3%, holding the number of firms fixed. However, if firm entry is elastic, the steady-state gains are an order of magnitude smaller.
    Keywords: Employment (Economic theory) ; Wages
    Date: 2013
  6. By: Joao Paulo Pessoa; John Van Reenen
    Abstract: It is widely believed that in the US wage growth has fallen massively behind productivity growth. Recently, it has also been suggested that the UK is starting to follow the same path. Analysts point to the much faster growth of GDP per hour than median wages. We distinguish between "net decoupling" - the difference in growth of GDP per hour deflated by the GDP deflator and average compensation deflated by the same index - and "gross decoupling" - the difference in growth of GDP per hour deflated by the GDP deflator and median wages deflated by a measure of consumer price inflation. We would expect that over the long-run real compensation growth deflated by the producer price (the labour costs that employers face) should track real labour productivity growth (value added per hour), so net decoupling should only occur if labour's share falls as a proportion of gross GDP, something that rarely happens over sustained periods. We show that over the past 40 years that there is almost no net decoupling in the UK, although there is evidence of substantial gross decoupling in the US and, to a lesser extent, in the UK. This difference between gross and net decoupling can be accounted for essentially three factors (i) compensation inequality (which means the average compensation is growing faster than the median compensation), (ii) the wedge between compensation (which includes employer-provided benefits like pensions and health insurance) and wages which do not and (iii) differences in the GDP deflator and the consumer price deflator (i.e. producer wages and consumption wages). These three factors explain basically ALL of the gross decoupling leaving only a small amount of "net decoupling". The first two factors are important in both countries, whereas the difference in price deflators is only important in the US.
    Keywords: Decoupling, Wages, Productivity, Compensation, Labour Income Share.
    JEL: E24 J20 J30
    Date: 2013–10
  7. By: Yoske Igarashi (Department of Economics, University of Exeter)
    Abstract: How would a policy that bans the use of networks in hiring (e.g., anti-old boy network laws) affect welfare? To answer this question, we examine a variant of Galenianos (2013), a version of a random search model with two matching technologies: a standard matching function and worker networks. Our model has two types of workers, networked workers and non-networked workers. It is shown that the effects of such a policy on non-networked workers can be either positive or negative, depending on model parameters. In our calibration such a policy would make non-networked workers slightly worse off and networked workers substantially worse off.
    Keywords: random search, network, referral, policy analysis, welfare, dynamics.
    JEL: C78 E24 E60 I3 J20 J30
    Date: 2013

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