nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2014‒02‒02
thirteen papers chosen by
Joseph Marchand
University of Alberta

  1. College wage premium over time: trends in Europe in the last 15 years. By Elena Crivellaro
  2. Too Rich to Do the Dirty Work?: Wealth Effects on the Demand for Good Jobs By Luke Haywood
  3. Skills and the graduate recruitment process: Evidence from two discrete choice experiments By Velden R.K.W. van der; Humburg M.
  4. Firm Age, Investment Opportunities, and Job Creation By Manuel Adelino; Song Ma; David T. Robinson
  5. The impact of worker’s age on the consequences of occupational accidents: empirical evidence using Spanish data By Bande, Roberto; López-Mourelo, Elva
  6. Changes in Global Trade Patterns and Women's Employment in Manufacturing: an Analysis over the Period of Asianization and De-industrialization By Burca Kizilirmak; Emel Memis; Sirin Saracoglu; Ebru Voyvoda
  7. Finance Sector Wage Growth and the role of Human Capital By Joanne Lindley; Steven McIntosh
  8. Distributional effects of a minimum wage in a welfare state: The case of Germany By Müller, Kai-Uwe; Steiner, Viktor
  9. A Contribution to the Empirics of Reservation Wages By Alan B. Krueger; Andreas I. Mueller
  10. Using the Pareto Distribution to Improve Estimates of Topcoded Earnings By Philip Armour; Richard V. Burkhauser; Jeff Larrimore
  11. How Risky Are Recessions for Top Earners? By Fatih Guvenen; Greg Kaplan; Jae Song
  12. The cyclical behaviour of employers' monopsony power and workers' wages By Hirsch, Boris; Jahn, Elke J.; Schnabel, Claus
  13. Productivity Response to a Contract Change By Rajshri Jayaraman; Debraj Ray; Francis de Vericourt

  1. By: Elena Crivellaro (Department of Economics, University Of Venice Cà Foscari)
    Abstract: While there has been intense debate in the empirical literature over the evolution of the college wage premium in the United States, its evolution in Europe has received little attention. This paper investigates the causes of the evolution of the college wage premium in 12 european countries from 1994 to 2009. I use cross country variation in relative supply, demand, and labour market institutions to examine their effects on the trend in wage inequality. I address possible concerns of endogeneity of the relative supply using an IV strategy exploiting the differential legislations of university autonomy and their variations over time. In explaining the evolution of wage inequality, both market and non-market factors matter: an increase in relative supply decreases the college wage premium; the minimum wage also has a sign?cant and negative effect.
    Keywords: College wage premium, Inequality, Relative supply.
    JEL: J24 J31 I24
  2. By: Luke Haywood
    Abstract: Jobs offer different wages and different non-monetary working conditions. This paper investigates how the demand for non-monetary aspects evolves over changing wealth levels. Wages do not perfectly compensate individuals for differential utility of jobs in a labour market with informational frictions. Changes in wealth may then affect preferences for different jobs. Willingness to pay for non-monetary aspects of jobs (measured by job satisfaction for work "in itself") is found to increase with wealth shocks. Duration models are estimated based on the reduced form of a search model. Wealth may play an important role in labour market choices.
    Keywords: Labor supply, wealth, job satisfaction, duration models
    JEL: J21 J28 J32 J64
    Date: 2014
  3. By: Velden R.K.W. van der; Humburg M. (ROA)
    Abstract: In this study we elicit employers preferences for a variety of CV attributes and types of skills when recruiting university graduates. Using two discrete choice experiments, we simulate the two common steps of the graduate recruitment process 1 the selection of suitable candidates for job interviews based on CVs, and 2 the hiring of graduates based on observed skills. We show that in the first step, employers attach most value to CV attributes which signal a high stock of occupation-specific human capital indicating low training costs and short adjustment periods; attributes such as relevant work experience and a good match between the field of study and the job tasks. In line with the preferences in the first step, employers actual hiring decision is mostly influenced by graduates level of professional expertise and interpersonal skills. Other types of skills also play a role in the hiring decision but are less important, and can therefore not easily compensate for a lack of occupation-specific human capital and interpersonal skills.
    Keywords: Analysis of Education; Human Capital; Skills; Occupational Choice; Labor Productivity;
    JEL: J24 I21
    Date: 2014
  4. By: Manuel Adelino; Song Ma; David T. Robinson
    Abstract: This paper asks whether startups react more to changing investment opportunities than more mature firms do. We use the fact that a region's pre-existing industrial structure creates exogenous variation in the severity of its exposure to nation-wide manufacturing shocks to develop an instrument for changing investment opportunities, and examine employment creation in the non-tradable sector as a response to those opportunities. Startups are much more responsive to changing local economic conditions than older firms. Moreover, their responsiveness doubles in areas with better access to small business finance, suggesting that financing constraints are an important brake on job creation in the startup sector. Although we focus mostly on the non-tradable sector for empirical identification, our results extend to other sectors of the economy, indicating that the mechanisms we uncover are economically pervasive. This suggests that factors like organizational flexibility and innovativeness may be important drivers of job creation among startups.
    JEL: G21 G3 J2 J21 J23 J63
    Date: 2014–01
  5. By: Bande, Roberto; López-Mourelo, Elva
    Abstract: This paper examines the impact of worker’s age on the consequences of occupational injuries. Using data from the Spanish Statistics on Accidents at Work for 2004-2010, a multinomial model is estimated in order to analyse the impact of the age on the probability of suffering a severe or fatal accident. Further, a duration model is used to assess the effect of worker’s age on the length of sick leave caused by occupational injuries. The analysis shows that the probability of suffering a severe or fatal accident, as well as the duration of the sick leave, increases with the worker’s age once personal, job, and accident characteristics are controlled for. From a policy perspective, the results point out that decisions about delaying the retirement age require additional measures, such as the occupational reallocation of these older workers towards tasks with lower incidence rates, in order to minimise these effects
    Keywords: occupational accidents, ageing, sick leave
    JEL: J14 J28 J81
    Date: 2014
  6. By: Burca Kizilirmak (Department of Economics, Ankara University); Emel Memis (Department of Economics, Ankara University); Sirin Saracoglu (Department of Economics, METU); Ebru Voyvoda (Department of Economics, METU)
    Abstract: The purpose of this study is to explore the employment effects of changes in manufacturing output resulting from changes in trade patterns over the period 1995-2006. For 30 countries (21 OECD and 9 non-OECD countries) we estimate the changes in embodied labor content due to trade using the factor-content analysis by breaking up the sources of these changes between the trade with the North, the South and China. We also decompose changes in employment into its components as changes within and across sectors. Our results present a net negative impact of trade on total employment in 30 countries over the period of analysis (despite employment gains in 17 countries). In all countries (except for Philippines and Republic of Korea) trade with China has a negative impact on total employment with a stronger negative effect on women’s employment. Employment losses in the South due to surge in imports from China are coupled with declining exports to the North as many countries in the North shift their imports to emerging economies in Asia. Decomposition results indicate that decline in the share of women’s employment is mainly due to shifts between sectors rather than within sector changes. Changes in women’s employment are still highly dependent on the movements in ‘traditional’ manufacturing sectors including food, textiles and wearing apparel.
    Keywords: North-South trade, decomposition analysis, factor content analysis, gender bias.
    JEL: F16 J16 J21
    Date: 2014–01
  7. By: Joanne Lindley (Department of Management, Faculty of Social Science and Public Policy, King’s College); Steven McIntosh (Department of Economics, The University of Sheffield)
    Abstract: Given the UK finance sector is one of the largest in the world, it provides the perfect setting for a study into the nature of the finance sector wage premium. We reveal the pervasiveness of this premium, across all sub-sectors of finance, and across all occupations within finance, and with the very highest rewards going to 40-49 year old men working in London. Moreover, the UK premium has continued to rise despite the recent financial crisis. Consequently, this study uses rich data from the UK to investigate potential explanations. We find that the financial sector is more skill intensive but also that financial sector workers have higher childhood test scores vis-à-vis non-finance workers. So we investigate to what extent these higher qualifications and higher cognitive skills can explain the financial pay differential. We then go on to consider whether the financial premium is a consequence of differences in job characteristics and thus whether technological change can explain the growth in the premium. While each of these factors has some role to play, we find that none can fully explain the wage premium found in the financial sector, which we find to be pervasive across 17 OECD countries, including the US. We therefore attribute to this to rent-sharing.
    Keywords: wage inequality; financial services; cognitive skills; bonuses
    JEL: J20 J31 I24
    Date: 2014
  8. By: Müller, Kai-Uwe; Steiner, Viktor
    Abstract: A popular argument for a federal minimum wage is that it will prevent in-work poverty and reduce income inequality. We examine this assertion for Germany, a welfare state with a relative generous means-tested social minimum and high marginal tax rates. Our analysis is based on a microsimulation model that accounts for the interactions between wages, the tax-benefit system and net incomes at the household level as well as employment and price effects on the distribution of incomes induced by the introduction of a minimum wage. We show that the impact of even a relatively high federal minimum wage on disposable incomes is small because low wage earners are scattered over the whole income distribution and wage increases would to a large extent be offset by reductions in means-tested welfare transfers and high marginal tax rates. Taking into account negative employment effects and increases in consumer prices induced by the minimum wage would wipe out any positive direct effects on net incomes of households affected by the minimum wage. --
    Keywords: minimum wage,employment effects,income distribution,inequality,microsimulation
    JEL: I32 H31 J31
    Date: 2013
  9. By: Alan B. Krueger; Andreas I. Mueller
    Abstract: This paper provides evidence on the behavior of reservation wages over the spell of unemployment using high‐frequency longitudinal data. Using data from our survey of unemployed workers in New Jersey, where workers were interviewed each week for up to 24 weeks, we find that self‐reported reservation wages decline at a modest rate over the spell of unemployment, with point estimates ranging from 0.05 to 0.14 percent per week of unemployment. The decline in reservation wages is driven primarily by older individuals and those with personal savings at the start of the survey. The longitudinal nature of the data also allows us to test the relationship between job acceptance and the reservation wage and offered wage, where the reservation wage is measured from a previous interview to avoid bias due to cognitive dissonance. Job offers are more likely to be accepted if the offered wage exceeds the reservation wage, and the reservation wage has more predictive power in this regard than the pre-displacement wage, suggesting the reservation wage contains useful information about workers’ future decisions. In addition, there is a discrete rise in job acceptance when the offered wage exceeds the reservation wage. In comparison to a calibrated job search model, the reservation wage starts out too high and declines too slowly, on average, suggesting that many workers persistently misjudge their prospects or anchor their reservation wage on their previous wage.
    JEL: E0 H0
    Date: 2014–01
  10. By: Philip Armour; Richard V. Burkhauser; Jeff Larrimore
    Abstract: Inconsistent censoring of top earnings in the public-use March Current Population Survey (CPS) is an important limitation in using it to measure labor earnings trends. Using less-censored internal CPS data, combined with Pareto estimates from it for internally censored observations, we create an enhanced cell-mean series to capture top earnings in the public-use CPS. We find previous common approaches for imputing topcoded earnings systematically understate top earnings. Annual earnings inequality trends since 1963 using our series closely approximate the substantial increase in earnings inequality observed in Social Security Administration data for working-age commerce and industry workers by Kopczuk, Saez, and Song (2010). However, when considering all workers the level of earnings inequality is higher but the increase over this time has been more modest.
    JEL: C81 D31 J01 J31
    Date: 2014–01
  11. By: Fatih Guvenen; Greg Kaplan; Jae Song
    Abstract: How sensitive are the earnings of top earners to business cycles? And, how does the business cycle sensitivity of top earners vary by industry? We use a confidential dataset on earnings histories of US males from the Social Security Administration. On average, individuals in the top 1% of the earnings distribution are slightly more cyclical than the population average. But there are large differences across sectors: Top earners in Finance, Insurance, and Real Estate (FIRE) and Construction face substantial business cycle volatility, whereas those in Services (who make up 40% of individuals in the top 1 percent) have earnings that are less cyclical than the average worker.
    JEL: E2 G12 J31
    Date: 2014–01
  12. By: Hirsch, Boris; Jahn, Elke J.; Schnabel, Claus
    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. -- In diesem Papier untersuchen wir das zyklische Verhalten von Monopsonmacht und Löhnen. Unter Verwendung administrativer deutscher Arbeitgeber Arbeitnehmer-Daten für die Jahre 1985-2010 und eines Schätzansatzes basierend auf Verweildauermodellen konstruieren wir eine Zeitreihe der Arbeitsangebotselastizität auf Firmenebene und untersuchen deren Zusammenhang mit der aggregierten Arbeitslosenquote. Im Einklang mit der Theorie finden wir, dass die Monopsonmacht der Firmen in konjunkturellen Schwächephasen ausgeprägter ist, selbst wenn für unbeobachtete Heterogenität seitens der Beschäftigten kontrolliert wird. Zudem zeigen wir, dass zyklische Schwankungen in den Einstiegslöhnen eine ähnliche Größe aufweisen wie unter monopsonistischer Lohnsetzung prognostiziert. Beides deutet darauf hin, dass Monopsonmacht bei Analysen und Lohnzyklizitäten berücksichtigt werden sollte.
    Keywords: monopsony power,business cycle,entry wages
    JEL: J42 J31
    Date: 2013
  13. By: Rajshri Jayaraman; Debraj Ray; Francis de Vericourt
    Abstract: This paper studies the productivity impact of a contract change for tea pluckers in an Indian plantation. The contract, implemented at the end of a three-year cycle in which contracts are generally revised, was (a) the joint outcome of negotiations between twenty unions and plantations, (b) mandated to respect a state government notification stipulating a new minimum wage for plantation workers statewide, and (c) applicable equally to all the plantations in the local region. The contract raised the baseline wage by 30% but lowered marginal incentives, by shifting the existing piece rates to higher minimum thresholds and eliminating an existing penalty per unit for low output. In the one month following the contract change, output increased by a factor between 30-60%, the exact number depending on the choice of counterfactual and the set of controls applied. This large and contrarian response to a flattening of marginal incentives is at odds with the standard model, including one that incorporates dynamic incentives, and it can only be partly accounted for by higher supervisory effort. We conclude that the increase is a “behavioral” response. Yet in subsequent months, the increase is comprehensively reversed. In fact, an entirely standard model with no behavioral or dynamic features that we estimate off the pre-change data, fits the observations four months after the contract change remarkably well. While not an unequivocal indictment of the recent emphasis on “behavioral economics,” the findings suggest that non-standard responses may be ephemeral, especially in employment contexts in which the baseline relationship is delineated by financial considerations in the first place. From an empirical perspective, therefore, it is ideal to examine responses to a contract change over an substantial period of time.
    JEL: J43 L14 O13
    Date: 2014–01

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