nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2013‒12‒06
thirteen papers chosen by
Joseph Marchand
University of Alberta

  1. How selective are real wage cuts? A micro-analysis using linked employer-employee data By Hirsch, Boris; Zwick, Thomas
  2. Aggregation and Labor Supply Elasticities By Alois Kneip; Monika Merz; Lidia Storjohann
  3. Wage Flexibility and the Great Recession: The Response of the Irish Labour Market By Aedin Doris; Donal O'Neill; Olive Sweetman
  4. The Cyclical Behaviour of Employers' Monopsony Power and Workers' Wages By Hirsch, Boris; Jahn, Elke J.; Schnabel, Claus
  5. Public, Private or Both? Analysing Factors Influencing the Labour Supply of Medical Specialists By Cheng, Terence Chai; Kalb, Guyonne; Scott, Anthony
  7. After-School Care and Parents' Labor Supply By Felfe, Christina; Lechner, Michael; Thiemann, Petra
  8. Non-standard Employment, Working Time Arrangements, Establishment Entry and Exit By Jochen Späth
  9. Old is Gold? The Effects of Employee Age on Innovation and the Moderating Effects of Employment Turnover By Schubert , Torben; Andersson , Martin
  10. The Skill Complementarity of Broadband Internet By Akerman, Anders; Gaarder, Ingvil; Mogstad, Magne
  11. The glass drop ceiling: composition effects or implicit discrimination? By Claudia Biancotti; Giuseppe Ilardi; Clair Lavinia Moscatelli
  12. Couples' Labour Supply Responses to Job Loss: Boom and Recession Compared By Bryan, Mark L.; Longhi, Simonetta
  13. Does Apprenticeship Improve Job Opportunities? A Regression Discontinuity Approach By Matteo PICCHIO; Stefano STAFFOLANI

  1. By: Hirsch, Boris; Zwick, Thomas
    Abstract: Using linked employer-employee panel data for Germany, this paper investigates whether firms implement real wage reductions in a selective manner. In line with insider-outsider and several strands of efficiency wage theory, we find strong evidence for selective wage cuts with high-productivity workers being spared even when controlling for permanent differences in firms' wage policies. In contrast to some recent contributions stressing fairness considerations, we also find that wage cuts increase wage dispersion among peers rather than narrowing it. Notably, the same selectivity pattern shows up when restricting our analysis to firms covered by collective agreements or having a works council. --
    Keywords: real wage rigidity,real wage cuts,selectivity,Germany
    JEL: J30 J31
    Date: 2013
  2. By: Alois Kneip; Monika Merz; Lidia Storjohann
    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 twostep 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
  3. By: Aedin Doris (Economics,Finance and Accounting National University of Ireland, Maynooth); Donal O'Neill (Economics,Finance and Accounting National University of Ireland,); Olive Sweetman (Economics,Finance and Accounting National University of Ireland,)
    Abstract: There is considerable debate about the role of wage rigidity in explaining unemployment. Despite a large body of empirical work, no consensus has emerged on the extent of wage rigidity. Previous attempts to empirically examine wage rigidity have been hampered by small samples and measurement error. In this paper we examine nominal wage flexibility in Ireland both in the build up to, and during the Great Recession. The Irish case is particularly interesting because it has been one of the countries most affected by the crisis. Our main analysis is based on earnings data for the entire population of workers in Ireland taken from tax returns, which are free of reporting error. We find a substantial degree of downward wage flexibility in the pre-crisis period. We also observe a significant change in wage dynamics since the crisis began; the proportion of workers receiving wage cuts more than doubled and the proportion receiving wage freezes increased substantially. However, there is considerable heterogeneity in wage changes, with a significant proportion of workers continuing to receive pay rises at the same time as other were receiving pay cuts.
    Keywords: Wage Flexibility, Great Recession
    JEL: J31 J38 D31
    Date: 2013
  4. By: Hirsch, Boris (University of Erlangen-Nuremberg); Jahn, Elke J. (Institute for Employment Research (IAB), Nuremberg); Schnabel, Claus (University of Erlangen-Nuremberg)
    Abstract: This paper investigates the behaviour of employers' monopsony power and workers' wages over the business cycle. Using German administrative linked employer-employee data for the years 1985-2010 and an estimation framework based on duration models, we construct a time series of the firm-level labour supply elasticity and estimate its relationship to the aggregate unemployment rate. In line with theory, we find that firms possess more monopsony power during economic downturns, which shows to be robust to controlling for time-invariant unobserved worker heterogeneity. We also document that cyclical changes in workers' entry wages are of similar magnitude as those predicted under monopsonistic wage setting, suggesting that monopsony power should not be neglected when analysing wage cyclicality.
    Keywords: monopsony power, business cycle, entry wages
    JEL: J42 J31
    Date: 2013–11
  5. By: Cheng, Terence Chai (Melbourne Institute of Applied Economic and Social Research); Kalb, Guyonne (Melbourne Institute of Applied Economic and Social Research); Scott, Anthony (Melbourne Institute of Applied Economic and Social Research)
    Abstract: This paper investigates the factors influencing the allocation of time between public and private sectors by medical specialists. A discrete choice structural labour supply model is estimated, where specialists choose from a set of job packages that are characterised by the number of working hours in the public and private sectors. The results show that medical specialists respond to changes in earnings by reallocating working hours to the sector with relatively higher earnings, while leaving total working hours unchanged. The magnitudes of the own-sector and cross-sector earnings elasticities fall in the range of 0.21-0.54, and are larger for male than for female specialists. The labour supply response varies by doctors' age and medical specialty. Family circumstances such as the presence of young dependent children influence the hours worked by female specialists but not male specialists. We illustrate the relevance of our findings by simulating the impact of recent trends in earnings growth in the public and private sectors.
    Keywords: labour supply, elasticities, medical specialists, public-private mix
    JEL: I10 I11 J22 J24
    Date: 2013–11
  6. By: Matthias Kehrig; Nicolas Ziebarth
    Abstract: We separate changes in labor supply and demand through changes in higher-order moments of the wage distribution. We illustrate this idea in a study of the effects of oil price shocks, which generate a predictable labor demand adjustment across regions. Empirically, oil price shocks decrease average wages, particularly skilled wages, and increase wage dispersion, particularly unskilled wage dispersion. In a model with spatial energy intensity differences and nontradables, labor demand shifts, while explaining the response of average wages to oil price shocks, have counterfactual implications for the response of wage dispersion. Only shifts in labor supply can explain this latter fact.
    Date: 2013–11
  7. By: Felfe, Christina (University of St. Gallen); Lechner, Michael (University of St. Gallen); Thiemann, Petra (University of St. Gallen)
    Abstract: Does after-school care provision promote mothers' employment and balance the allocation of paid work among parents of schoolchildren? We address this question by exploiting variation in cantonal (state) regulations of after-school care provision in Switzerland. To establish exogeneity of cantonal regulations with respect to employment opportunities and preferences of the population, we restrict our analysis to confined regions along cantonal borders. Using semi-parametric instrumental variable methods, we find a positive impact of after-school care provision on mothers' full-time employment, but a negative impact on fathers' full-time employment. Thus, the supply of after-school care fosters a convergence of parental working hours.
    Keywords: childcare, parents' labor supply, semi-parametric estimation methods
    JEL: J13 J22 C14
    Date: 2013–11
  8. By: Jochen Späth
    Abstract: This paper addresses the issue if and to what extent young firms differ from incumbents regarding the use of non-standard employment, trust-based working time arrangements and overtime hours in the light of the qualitative changes of employment structures that are taking place in industrialized countries, such as rising shares of non-standard employment and borders between work and private life that become increasingly blurred. Based on a microeconometric analysis of the IAB Establishment Panel, a representative survey of about 16,000 employers in Germany, we find that young establishments rely significantly more often on limited contracts and freelance work than incumbent businesses in order to hedge the higher risks and uncertainties of young firms. Likewise, trust-based working time arrangements and overtime hours are more an issue in young than in incumbent firms, indicating a higher level of subjectivated work in young firms. Additionally, we provide basic evidence that these differences are not purely transitory but on the contrary rather stable as the firms grow older, which makes young firms contribute a substantial part to the ongoing qualitative changes of employment structures.
    Keywords: start-ups, trust-based working hours, overtime, team work, job quality, non-standard employment
    JEL: L26 J23 D22
    Date: 2013–11
  9. By: Schubert , Torben (Fraunhofer Institute for Systems and Innovation Research (ISI) And CIRCLE, Lund University, Sweden); Andersson , Martin (CIRCLE, Lund University, Sweden and Blekinge Institute of Technology)
    Abstract: There is consistent evidence in the literature that average employee age is negatively related to firm-level innovativeness. This observation has been explained by older employees working with outdated technological knowledge and being characterized by reduced cognitive flexibility. We argue that firms can mitigate this effect through employee turnover. In particular turnover of R&D workers is deemed a vehicle for transfer of external knowledge to the firm, which can compensate for lower cognitive flexibility and up-to-date knowledge among older workers. We use a matched employer-employee dataset based on three consecutive CIS surveys for Sweden to test our predictions. Our results suggest a) that overall employee age impacts negatively on product innovation activities (both in terms of propensity and success), b) that the effect of em-ployee staying rate (measured by the share of employees that remain in the firm from one year to the next) on innovation follows an inverted U-shape implying an ‘optimal’ level of employment turnover, and c) that this ‘optimal’ value is lower for firms with older employees. The latter suggests that firms with older employees can at least partially compensate an aged workforce by increased employment turnover.
    Keywords: ageing; employee age; innovation; firm performance; R&D; human capita
    JEL: D22 J21 J24 L25
    Date: 2013–11–25
  10. By: Akerman, Anders (Stockholm University); Gaarder, Ingvil (European University Institute); Mogstad, Magne (University College London)
    Abstract: Does adoption of broadband internet in firms enhance labor productivity and increase wages? And is this technological change skill biased or factor neutral? We exploit rich Norwegian data with firm-level information on value added, factor inputs and broadband adoption to answer these questions. We estimate production functions where firms can change their technology by adopting broadband internet. A public program with limited funding rolled out broadband access points, and provides plausibly exogenous variation of broadband adoption in firms. This enables us to address endogeneity of broadband adoption and examine how it shifts the production technology and changes the productivity and labor outcomes of different types of workers. We find that broadband adoption favors skilled labor by increasing its relative productivity. The increase in productivity of skilled labor is especially large for college graduates in fields such as science, technology, engineering and business. By comparison, broadband internet is a substitute for workers without high school diploma, lowering their marginal productivity. Consistent with the estimated changes in labor productivity, wage regressions show the expansion of broadband internet improves (worsens) the labor outcomes of skilled (unskilled) workers. We explore several possible explanations for the skill bias of broadband internet. We find suggestive evidence that broadband internet complements skilled workers in executing nonroutine abstract tasks, and substitutes for unskilled workers in performing routine tasks. When we use our production function estimates to construct measures of firm level productivity, we find that broadband internet accounts for a few percent of the standard deviation in total factor productivity across firms. Taken together, our findings have important implications for the ongoing policy debate over government investment in broadband infrastructure to encourage productivity and wage growth.
    Keywords: broadband internet, labor productivity, tasks, technological change, skill bias
    JEL: J23 J24 J31 O33
    Date: 2013–11
  11. By: Claudia Biancotti (Bank of Italy); Giuseppe Ilardi (Bank of Italy); Clair Lavinia Moscatelli (Bank of Italy)
    Abstract: We analyze data from the Bank of Italy's most recent recruitment rounds, in an effort to explain why men consistently score better than women. We focus on the pre-screening stage of the hiring process, a multiple-choice test, where men acquire a preliminary advantage. After observing a higher incidence of questions left blank for women, and a negative correlation between the share of unanswered questions and the final score, we run an experiment on scoring formulas to check for implicit discrimination linked to risk aversion; no evidence of such discrimination is found. Based on a follow-up questionnaire, we also study the role of composition effects. Nearly 40 per cent of the gap in test scores depends on the quality of the candidates: male graduates appear to self-select into the applicant pool more frequently than females do. A further 34 per cent is explained by the fact that the same characteristics tend to produce different effects based on gender. The remaining 26 per cent remains unexplained
    Keywords: implicit discrimination, risk aversion, self-esteem, gender, multiple-choice tests.
    JEL: J71 J45 C93
    Date: 2013–06
  12. By: Bryan, Mark L. (University of Essex); Longhi, Simonetta (ISER, University of Essex)
    Abstract: We examine how couples' labour supply behaviour in the UK responds to a job loss by one partner, using the Labour Force Survey to compare the period of growth of 1995-2007 to the Great Recession and its aftermath of 2008-11. In single earner couples during the recession, both men and women substantially increased their job search activity following a partner's job loss, while the increase in search during the boom was smaller (and non-existent for men). However, the increase in job search during recession did not appear to translate into more success in finding work for either men or women. Among dual earner couples, we find little evidence that individuals searched for alternative jobs or tried to increase their hours if their partner lost their job, except that women working part-time were more likely to start looking for another job. Both men and women were more likely to quit their job voluntarily if their partner lost their job, but the recession seems to have made people more cautious about voluntarily quitting their job. We find little evidence that people react in advance of job losses, suggesting that unemployment typically comes as a surprise.
    Keywords: added-worker effect, recession, employment, household labour supply
    JEL: J22 J64
    Date: 2013–11
  13. By: Matteo PICCHIO (Universit… Politecnica delle Marche, Dipartimento di Scienze Economiche e Sociali); Stefano STAFFOLANI (Universit… Politecnica delle Marche, Dipartimento di Scienze Economiche e Sociali)
    Keywords: Apprenticeship, hazard function, permanent work, regression discontinuity, temporary work
    JEL: C36 C41 J24 J41
    Date: 2013–11

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