nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2013‒12‒15
thirteen papers chosen by
Joseph Marchand
University of Alberta

  1. Lovely and lousy jobs By Alan Manning
  2. Economic Transition and Private-Sector Labor Demand: Evidence from Urban China By Lakshmi Iyer; Xin Meng; Nancy Qian; Xiaoxue Zhao
  3. Overeducation at a Glance: Determinants and Wage Effects of the Educational Mismatch, Looking at the AlmaLaurea Data By Caroleo, Floro Ernesto; Pastore, Francesco
  4. Booze and women: Gendering labor market outcomes of secular consumption patterns in a Muslim society By KIZILCA, F. Kemal
  5. U.S. versus Sweden : The effect of alternative in-work tax credit policies on labour supply of single mothers By Rolf Aaberge; Lennart Flood
  6. Are Sunk Costs Irrelevant? Evidence from Playing Time in the National Basketball Association By Leeds, Daniel; Leeds, Michael A.; Motomura, Akira
  7. Producing Higher Quality Jobs: Enforcement of Mandated Benefits across Brazilian Cities between 1996-2007 By Rita Almeida; Pedro Carneiro, Renata Narita
  8. Accounting for Income Changes over the Great Recession (2007-2010) Relative to Previous Recessions: The Importance of Taxes and Transfers By Jeff Larrimore; Richard V. Burkhauser; Philip Armour
  9. What is a fair wage? Reference points, Entitlements and Gift Exchange By Eleonora Bottino; Cintia Goddio; Praveen Kujal
  10. Incentives in the Public Sector: Evidence from a Government Agency By Ratto, Marisa; Tominey, Emma; Propper, Carol; Burgess, Simon M.
  11. Self Employment in Developing Countries: a Search-Equilibrium Approach By Renata Narita
  12. Gender and Competition: Evidence from Academic Promotions in France By Clément Bosquet; Pierre-Philippe Combes; Cecilia Garcia-Peñalosa
  13. Are Females Scared of Competing with Males? Results from a Field Experiment By De Paola, Maria; Gioia, Francesca; Scoppa, Vincenzo

  1. By: Alan Manning
    Abstract: The phenomenon of 'job polarisation' is increasing inequality as the labour market splits into high- and low-wage work. According to Alan Manning, who coined the term a decade ago, we cannot ignore job polarisation - but with sensible policies, we can manage it. Aiming for greater equality in the distribution of human capital is as important as ever. The most compelling explanation for job polarisation lies in the nature of technical progress: machines and software programs have been replacing employees in many routine jobs in the middle of the income distribution. But as Manning explains, while technology will undoubtedly continue to displace humans in some tasks, there is no reason to think that the jobs affected will always be the middle-skill ones.
    Keywords: Labor Demand and Technology, Inequality
    JEL: J21
    Date: 2013–12
  2. By: Lakshmi Iyer; Xin Meng; Nancy Qian; Xiaoxue Zhao
    Abstract: This paper studies the policy determinants of economic transition and estimates the demand for labor in the infant private sector in urban China. We show that a reform that untied access to housing in urban areas from working for the state sector accounts for more than a quarter of the overall increase in labor supply to the private sector during 1986-2005. Using the reform to instrument for private-sector labor supply, we find that private-sector labor demand is very elastic. We provide suggestive evidence that the reform equalized wages across sectors and reduced private-sector rents.
    JEL: J2 O18 P2 P3
    Date: 2013–12
  3. By: Caroleo, Floro Ernesto (University of Naples Parthenope); Pastore, Francesco (University of Naples II)
    Abstract: This paper provides the first available evidence on overeducation/overskilling based on AlmaLaurea data. We focus on jobs held 5 years after graduation by pre-reform graduates in 2005. Overeducation/overskilling are relatively high – at 11.4 and 8% – when compared to EU economies. Ceteris paribus they tend to be more frequent among children of parents with lower educational levels, through school tracking. Most arts degrees and social sciences, but also Geology and Biology are associated to both types of the educational mismatch. The quality of education is also a factor, suggesting that in addition to the low demand for skills, one should also reckon the inability of the educational system to provide work-related skills. Moreover, we find a non-conditional wage penalty of 20% and 16% and a conditional one of about 12% and of 7%, respectively. Heckit returns a sample selection corrected penalty slightly higher, supporting not only the job competition and job assignment models, but also the human capital model.
    Keywords: university-to-work transition, overeducation, overskilling, sample selection bias, AlmaLaurea, Italy
    JEL: C25 C26 C33 I2 J13 J24
    Date: 2013–11
  4. By: KIZILCA, F. Kemal
    Abstract: This study explores the effect of religion on female labor force participation (FLFP) in a Muslim country, Turkey, by using the information in the consumption data as a signal of secularity. A household is categorized as secular, if its members report that they consume goods that contradict the conservative interpretations of Islam. This information is then used in FLFP estimations. The analysis is carried out for married and single females, separately. The results show that, living in a secular household has a positive and highly significant effect on the probability of FLFP in the urban areas. Secularity is also associated with a reduction in unpaid work, which is the most widespread form of female employment in rural areas in Turkey. For the single females, whose mean age is lower, the estimations provide some weaker evidence on the positive effect of secularity on the probability of educational participation, while no significant direct effect on paid work is found.
    Keywords: Female labor force participation, religion
    JEL: J16 Z12
    Date: 2013–12–01
  5. By: Rolf Aaberge; Lennart Flood (Statistics Norway)
    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
  6. By: Leeds, Daniel (University of Michigan); Leeds, Michael A. (Temple University); Motomura, Akira (Stonehill College)
    Abstract: The relevance of sunk costs in decision making is one of the major sources of disagreement between neoclassical economists and behavioral economists. We test the importance of sunk costs by examining the role of a player's draft position on his playing time in the National Basketball Association. Specifically, we ask whether players taken as "lottery picks" or in the first round of the draft are treated differently from otherwise identical players who are chosen later. We build on previous studies in three ways. First, we study a time period that had a stronger contrast between the financial commitment to first and second-round draft picks. Second, we use a better measure of playing time by accounting fully for the time a player loses to injury, suspension, or other exogenous factor. Finally and most importantly, we use a more sophisticated methodology – regression discontinuity – to test for whether teams treat lottery picks or first-round picks differently from later picks. Our results find little or no impact of draft round or lottery status on playing time. Hence, our findings strongly support the neoclassical outlook.
    Keywords: sunk costs, behavioral economics, basketball, regression discontinuity
    JEL: D03 J23 L83
    Date: 2013–12
  7. By: Rita Almeida; Pedro Carneiro, Renata Narita
    Abstract: There is an open debate on how governments can help the creation of higher quality jobs. This paper explores unique administrative data on the enforcement of labor market regulations across Brazilian cities between 1996 and 2006 to analyze this topic. We proxy job quality with several attributes going beyond wages and formality of the work contract. In the context of a strictly regulated labor market, we find robust evidence of (i) a strong trade-off between the provision of mandated non-wage benefits and wage levels, on the one hand, and the provision of optional job benefits on the other, and (ii) more formality leads to higher mean wages in the economy. We argue that enforcement policies can increase welfare depending on how workers value the benefits they get through formal channels vis-à-vis wages and optional benefits.
    Keywords: Enforcement of labor regulations; Informal sector; Job quality
    JEL: J2 J3 K31 O17
    Date: 2013–11–28
  8. By: Jeff Larrimore; Richard V. Burkhauser; Philip Armour
    Abstract: With data from the March CPS and using shift-share analysis, we analyze the factors that account for changes in post-tax post-transfer income during each of the past four recessions. What distinguishes the Great Recession is that drops in employment rather than wage earnings drove income declines. In addition, taxes and transfers played a much greater role in offsetting market income losses —a result largely missed in analyses that do not account for taxes and transfers. This is particularly so among the bottom quintile of the distribution where lower and increased transfers offset more than one-half of the market income declines.
    JEL: D31 H24 J3
    Date: 2013–12
  9. By: Eleonora Bottino; Cintia Goddio; Praveen Kujal
    Abstract: Society adopts institutions that can change incentives, reference points and entitlements for the economic agents. In this paper we look at two stylized wage setting institutions and their effect on wage offers and effort in the classic gift exchange experiments of Fehr, Kirchsteiger and Riedl (1993). The first one is the exogenously imposed minimum wage institution (first instituted in New Zealand in 1894). The second institution we look is an endogenous wage proposal institution where workers first make wage proposals. We find that the imposition of an exogenous minimum wage floor at the competitive outcome lowers average wage offers. However, workers do not negatively reciprocate and continue to offer high effort. In the second institution workers make non-binding (endogenous) minimum wage proposals. The introduction of endogenous minimum wage proposals marginally increases wage offers while, average effort decreases when wage proposals are not matched. Finally, relative to the baseline, overall efficiency with the non-binding minimum wage decreases, while, efficiency is only slightly higher under endogenous minimum wage proposals. We find that clear evidence that the institutional structure has important implications towards wage offers, effort and efficiency.
    JEL: J2 J3
    Date: 2013
  10. By: Ratto, Marisa; Tominey, Emma; Propper, Carol; Burgess, Simon M.
    Abstract: This paper addresses a lack of evidence on the impact of performance pay in the public sector by evaluating a pilot scheme of incentives in a major government agency. The incentive scheme was based on teams and covered quantity and quality targets, measured with varying degrees of precision. We use data from the agency's performance management system and personnel records plus matched labour market data. We focus on three main issues: whether performance pay matters for public service worker productivity, what the team basis of the scheme implies, and the impact of the differential measurement precision. We show that the use of performance pay had no impact at the mean, but that there was significant heterogeneity of response. This heterogeneity was patterned as one would expect from a free rider versus peer monitoring perspective. We found that the incentive scheme had a substantial positive effect in small teams, and a negative response in large teams. We found little impact of the scheme on quality measures, which we interpret as due to the differential measurement technology. We show that the scheme in small teams had non-trivial effects on output, and our estimates suggest that the use of incentive pay is much more cost effective than a general pay rise.
    Keywords: Incentives; public sector; teams; performance; personnel economics;
    JEL: J33 J45 D23
    Date: 2012–07
  11. By: Renata Narita
    Abstract: Self employment comprises around thirty percent of the workforce in Latin America. Most self employed evade payroll taxes, have low education, and run small businesses requiring low skills. I develop and estimate a life cycle search model where workers can be wage earners in the formal or informal sector, self employed or unemployed. Firms in the formal sector pay payroll and severance taxes, and in the informal sector, they can be fined. The estimated model (i) reproduces well the composition of workers over the life cycle as observed in Brazilian Labour Force data, and (ii) shows that the job value of the self employed is similar to that of informal wage earners. The model is used as a tool to evaluate the welfare impact of labour market policies, where self employment may be an option. When simulating an increase in the cost of informality by ten percent, results showed (i) small impact on employment composition and informality; (ii) significant cost pass-through to wages in the informal sector, meaning a reduction in the lowest wages in the economy, hence higher wage inequality. On the other hand, (iii) it led to substantial improvement in the welfare of formal firms and of all workers. These results prove that taking into account labour market frictions is important in welfare analyses of policies in multisectoral labour markets. As simulations which increase the cost of informality suggest, stricter enforcement of labour regulations (at least to a certain degree) can be a way towards efficient labor markets.
    Keywords: Self employment; Occupational choice; Informal Sector; Job Search; Labour market welfare
    JEL: J30 J24 O17 J42 J60
    Date: 2013–11–28
  12. By: Clément Bosquet; Pierre-Philippe Combes (Groupement de Recherche en Économie Quantitative d'Aix-Marseille); Cecilia Garcia-Peñalosa
    Abstract: Differences in promotion across genders are still prevalent in many occupations.Recent work based on experimental evidence indicates that women participate less in or exert lower effort during contests. We exploit the unique features of the promotion system for French academics to look at women's attitudes towards competition in an actual labour market. Using data for academic economists over the period 1991-2008 we find that, conditional on entering the competition, there is no difference in promotions across the genders, which is difficult to reconcile with either discrimination or a poorer performance of women in contests. In contrast, women have a substantially lower probability than men to enter the promotion contest. Our data does not support that this gap is due to differences in costs or in preferences concerning department prestige, indicating that women are less willing than men to take part in contests.
    Keywords: gender gaps, promotions, academic labour markets
    JEL: J16 J7 I23
    Date: 2013–11
  13. By: De Paola, Maria (University of Calabria); Gioia, Francesca (University of Calabria); Scoppa, Vincenzo (University of Calabria)
    Abstract: We conducted a field experiment involving 720 Italian undergraduate students to investigate the existence of gender differences in performance in competitive settings and whether performance is affected by one's opponent gender. The experimental design was aimed at disentangling gender differences in taste for competition from other differences in psychological attitudes, such as self-confidence and risk aversion. Students were invited to undertake a midterm exam under a tournament scheme having as a prize some bonus points to add to the final grade. Students competed in pairs of equal predicted ability but different gender composition. We find that females are as likely as males to take part in the competition and to obtain a good performance. The gender of one's competitor does not play any role in shaping students' behavior. Men and women perform similarly both in the competitive and in the non-competitive environment.
    Keywords: gender differences, attitude toward competition, psychological differences, tournaments, field experiment, student achievements
    JEL: J16 J24 J70 C93
    Date: 2013–12

This nep-lma issue is ©2013 by Joseph Marchand. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.