nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2014‒02‒15
thirteen papers chosen by
Joseph Marchand
University of Alberta

  1. How Effects of Local Labor Demand Shocks Vary with Local Labor Market Conditions By Timothy J. Bartik
  2. Exporting and labor demand: Micro-level evidence from Germany By Lichter, Andreas; Peichl, Andreas; Siegloch, Sebastian
  3. How do e-verify mandates affect unauthorized immigrant workers? By Orrenius, Pia M.; Zavodny, Madeline
  4. The effect of unemployment duration on future earnings and other outcomes By Cooper, Daniel
  5. Why Do Large Firms Willingly Pay High Wages in Developing Countries? By Cai, Hongbin; Wang, Miaojun; Yan, Se
  6. Causal pitfalls in the decomposition of wage gaps By Huber, Martin
  7. Expanding Federal Family and Medical Leave Coverage: Who Benefits from Changes in Eligibility Requirements? By Helene Jorgensen; Eileen Appelbaum
  8. When Work Disappears: Racial Prejudice and Recession Labour Market Penalties By David W. Johnston; Grace Lordan
  9. Short-run Effects of Job Loss on Health Conditions, Health Insurance, and Health Care Utilization By Jessamyn Schaller; Ann Huff Stevens
  10. Scale and Skill in Active Management By Lubos Pastor; Robert F. Stambaugh; Lucian A. Taylor
  11. The Protestant Ethic and Entrepreneurship: Evidence from Religious Minorities from the Former Holy Roman Empire By Nunziata, Luca; Rocco, Lorenzo
  12. Le marché du travail en Haïti après le séisme : quelle place pour les jeunes ? By Zanuso, Claire; Torelli, Constance; Roubaud, François

  1. By: Timothy J. Bartik (W.E. Upjohn Institute for Employment Research)
    Abstract: This paper estimates how effects of shocks to local labor demand on local labor market outcomes vary with initial local economic conditions. The data are on U.S. metro areas from 1979 to 2011. The paper finds that demand shocks to local job growth have greater effects in reducing local unemployment rates if the local economy is initially depressed than if the local economy is booming. Demand shocks have greater effects on local wage rates if the local unemployment rate is initially low, but lesser effects if local job growth is initially high. These different effects of local demand shocks imply that social benefits of adding jobs are two to three times greater per job in more depressed local labor markets, compared to more booming local labor markets.
    Keywords: Local labor markets, labor demand, social benefits of job creation
    JEL: R23 H43 J64
    Date: 2014–01
  2. By: Lichter, Andreas; Peichl, Andreas; Siegloch, Sebastian
    Abstract: It is widely believed that globalization affects the extent of employment and wage responses to economic shocks. To provide evidence for this, we analyze the effect of firms' exporting behavior on the elasticity of labor demand. Using rich, German administrative linked employer-employee panel data from 1996 to 2008, we explicitly control for self-selection into exporting and endogeneity concerns. In line with our theoretical model, we find that exporting at both the intensive and extensive margins significantly increases the (absolute value of the) unconditional own-wage labor demand elasticity. This is not only true for the average worker, but also for different skill groups. For the median firm, the elasticity is three-quarters higher when comparing exporting to nonexporting firms. --
    Keywords: trade,export,labor demand,wage elasticity,administrative microdata
    JEL: F16 J23
    Date: 2014
  3. By: Orrenius, Pia M. (Federal Reserve Bank of Dallas); Zavodny, Madeline (Federal Reserve Bank of Dallas)
    Abstract: A number of states have adopted laws that require employers to use the federal government’s E-Verify program to check workers’ eligibility to work legally in the United States. Using data from the Current Population Survey, this study examines whether such laws affect labor market outcomes among Mexican immigrants who are likely to be unauthorized. We find evidence that E-Verify mandates reduce average hourly earnings among likely unauthorized male Mexican immigrants while increasing labor force participation and employment among likely unauthorized female Mexican immigrants. In contrast, the mandates appear to lead to better labor market outcomes among workers likely to compete with unauthorized immigrants. Employment and earnings rise among male Mexican immigrants who are naturalized citizens in states that adopt E-Verify mandates, and earnings rise among U.S.-born Hispanic men.
    Keywords: unauthorized immigration; immigration policy; electronic verification; E-Verify
    JEL: J15 J31 J61
    Date: 2014–02–13
  4. By: Cooper, Daniel (Federal Reserve Bank of Boston)
    Abstract: One of the distinguishing features of the Great Recession and its aftermath has been the spike in the number of individuals experiencing long-duration unemployment spells, defined as lasting more than 26 weeks. This paper analyzes the effect of unemployment duration on individual's future earnings and other outcomes, such as homeownership and wealth, using data from the Panel Study of Income Dynamics (PSID). The results show a negative relationship between a worker's most recent unemployment spell and his or her current earnings. The earnings of displaced workers do not catch up to those of their nondisplaced counterparts for nearly 20 years. The effect of unemployment on earnings is even more substantial for workers unemployed 26 weeks or more. Unemployment spells also negatively impact future homeownership—this finding suggests that the consequences of the recent spike in unemployment duration could affect more than individuals' expected lifetime earnings. Given the costs of long-term unemployment, policies aimed at reducing the unemployment rate—such as the Federal Reserve's quantitative easing program—could have the added benefit of limiting the negative consequences of long-duration unemployment through fostering faster re-employment.
    JEL: J31 J64 J68
    Date: 2014–01–13
  5. By: Cai, Hongbin; Wang, Miaojun; Yan, Se
    Abstract: Using a simple game-theoretical model, this paper provides a new explanation for why large firms in developing economies may willingly pay higher wages than market wage rate. We show that large firms can strategically create entry barriers to the modern sector by setting high wage standards. They may do so to reduce competition or to distort the government's resource allocation. Focusing on the latter case, we also show that the size of the primitive sector will be larger than the efficient level, and public resource allocation will be biased in favor of incumbent large businesses despite the benevolent nature of the government. Using a survey of Chinese industrial firms, we find that industrial concentration is positively correlated with the size-wage effect, and such effect is stronger in less developed provinces. These findings are consistent with our theoretical prediction.
    Keywords: size-wage effect; entry deterrence; government resource allocation
    JEL: J21 J31 J42 L11
    Date: 2014–02
  6. By: Huber, Martin
    Abstract: The decomposition of gender or ethnic wage gaps into explained and unexplained components (often with the aim to assess labor market discrimination) has been a major research agenda in empirical labor economics. This paper demonstrates that conventional decompositions, no matter whether linear or non-parametric, are equivalent to assuming a (probably too) simplistic model of mediation (aimed at assessing causal mechanisms) and may therefore lack causal interpretability. The reason is that decompositions typically control for post-birth variables that lie on the causal pathway from gender/ ethnicity (which are determined at or even before birth) to wage but neglect potential endogeneity that may arise from this approach. Based on the newer literature on mediation analysis, we therefore provide more attractive identifying assumptions and discuss non-parametric identification based on reweighting.
    Keywords: Wage decomposition, causal mechanisms, mediation
    JEL: J31 J71 C21 C14
    Date: 2014–02
  7. By: Helene Jorgensen; Eileen Appelbaum
    Abstract: The Family and Medical Leave Act provides job-protected, unpaid leave to employees in firms with 50 or more employees. However, coverage and eligibility restrictions result in 49.3 million employees (44.1 percent) in the private sector being ineligible for leave in 2012. This paper looks at eligibility by demographic characteristics and finds that the probability of being eligible increases with educational attainment. Young men with high school degrees or less had the lowest rate of FMLA eligibility of all the demographic groups. Our analysis of the FMLA Employee and Workplace surveys examines various proposals to expand eligibility coverage. Expanding FMLA coverage to smaller employers and to employees working fewer hours would increase access to job-protected leave for 1.4 million to 8.3 million more employees in the private sector. Women of childbearing age would especially benefit from an expansion in eligibility coverage.
    Keywords: FMLA, family leave, medical leave
    JEL: I I1 H J J8 J83 J88 J3 J33 J38
    Date: 2014–02
  8. By: David W. Johnston; Grace Lordan
    Abstract: This paper assesses whether racial prejudice and labour market discrimination is counter-cyclical. This may occur if prejudice and discrimination are partly driven by competition over scarce resources, which intensifies during periods of economic downturn. Using British Attitudes Data spanning three decades, we find that prejudice does increase with unemployment rates. We find greater counter-cyclical effects for highly-educated, middle-aged, full-time employed men. For this group, a 1%-point increase in unemployment raises self-reported racial prejudice by 4.1%-points. This result suggests that non-White workers are more likely to encounter racially prejudiced employers and managers in times of higher unemployment. Consistent with the estimated attitude changes, we find using the British Labour Force Survey that racial employment and wage gaps increase with unemployment. The effects for both employment and wages are largest for high-skill Black workers. For example, a 1%-point increase in unemployment increases Black-White employment and wage gaps for the highly educated by 1.3%-points and 2.5%. Together, the attitude and labour market results imply that non-Whites disproportionately suffer during recessions. It follows that recessions exacerbate existing racial inequalities.
    Keywords: Prejudice, Attitudes, Recessions, Racism, Discrimination
    JEL: J7
    Date: 2014–02
  9. By: Jessamyn Schaller; Ann Huff Stevens
    Abstract: Job loss in the United States is associated with long-term reductions in income and long-term increases in mortality rates. This paper examines the short- to medium-term changes in health, health care access, and health care utilization after job loss that lead to these long-term effects. Using a sample with more than 9800 individual job losses and longitudinal data on a wide variety of health-related measures and outcomes, we show that job loss results in worse self-reported health, including mental health, but is not associated with statistically significant increases in a variety of specific chronic conditions. Among the full sample of workers, we see reductions in insurance coverage, but little evidence of reductions in health care utilization after job loss. Among the subset of displaced workers for whom the lost job was their primary source of insurance we do see reductions in doctor’s visits and prescription drug usage. These results suggest that access to health insurance and care may be an important part of the health effects of job loss for some workers. The pattern of results is also consistent with a significant role for stress in generating long-term health consequences after job loss.
    JEL: I1 J63
    Date: 2014–02
  10. By: Lubos Pastor; Robert F. Stambaugh; Lucian A. Taylor
    Abstract: We empirically analyze the nature of returns to scale in active mutual fund management. We find strong evidence of decreasing returns at the industry level: As the size of the active mutual fund industry increases, a fund's ability to outperform passive benchmarks declines. At the fund level, all methods considered indicate decreasing returns, but estimates that avoid econometric biases are insignificant. We also find that the active management industry has become more skilled over time. This upward trend in skill coincides with industry growth, which precludes the skill improvement from boosting fund performance. Finally, we find that performance deteriorates over a typical fund's lifetime. This result can also be explained by industry-level decreasing returns to scale.
    JEL: G10 G23 J24
    Date: 2014–02
  11. By: Nunziata, Luca; Rocco, Lorenzo
    Abstract: We propose a new methodology for identifying the causal effect of Protestantism versus Catholicism on the decision to become an entrepreneur. Our quasi-experimental research design exploits religious minorities' strong attachment to religious ethics and the exogenous historical determination of religious minorities' geographical distribution in the regions of the former Holy Roman Empire in the 1500s. We analyse European Social Survey data, collected in four waves between 2002 and 2008, and find that religious background has a significant effect on the individual propensity for entrepreneurship, with Protestantism increasing the probability to be an entrepreneur by around 5 percentage points with respect to Catholicism. Our findings are stable across a number of robustness checks, including accounting for migration patterns and a placebo test. We also provide an extended discussion of the assumptions' validity at the basis of our research design. This paper is one of the first attempts to identify a causal effect, rather than a simple correlation, of religious ethics on economic outcomes.
    Keywords: Entrepreneurship, Religion, Culture, Protestantism, Catholicism.
    JEL: J21 J24 Z12 Z13
    Date: 2014–02–11
  12. By: Zanuso, Claire; Torelli, Constance; Roubaud, François
    Abstract: In January 2010, Haiti has been hit by the worst earthquake in its dramatic history. It was followed by an unprecedented international mobilization. Since then, a succession of natural disasters has struck the country (floods, epidemics, etc.). At the commemoration of the fourth anniversary of the seism, we examine the place and the role played by the Youth in this context of exception. This paper focuses on the insertion of the Youth on the labour market. Labour markets are the transmission belt between the macroeconomic dynamics and household living conditions, as the job earnings constitute the main households resources in developing countries, especially the poor. The thorough analysis of their situation is guided by a key thread: have they been spared, compared to their elders, whether through family solidarity or through international assistance; or conversely, have the Youth been sacrificed as the generational "weak link". Our analysis is based on the first socioeconomic survey post-earthquake. Conducted at the national level the last quarter of 2012 by the National Statistics Office of Haiti with the scientific support of the authors, the results are available for the first time. To study the dynamics, they are compared with those from a comparable survey conducted in 2007 by the same partners. Our results show that young people, and those from disadvantaged social origin in the first place, were the main victims of the downward adjustment caused by the earthquake. The sharp deterioration of their labour market conditions is not only iniquitous but it also compromises the development of Haiti in the medium term.
    Keywords: Labour market; natural disasters; Youth; inequality; social origin; Haïti; Inégalités; Marché du travail; Catastrophes naturelles; Jeunes; origine sociale;
    JEL: J13 J21 D1 I20 Q54
    Date: 2014–01
  13. By: Dorsett, Richard (National Institute of Economic and Social Research); Oswald, Andrew J (Department of Economics, University of Warwick)
    Abstract: Many politicians believe they can intervene in the economy to improve people’s lives. But can they? In a social experiment carried out in the United Kingdom, extensive in-work support was randomly assigned among 16,000 disadvantaged people. We follow a sub-sample of 3,500 single parents for 5 ensuing years. The results reveal a remarkable, and troubling, finding. Long after eligibility had ceased, the treated individuals had substantially lower psychological wellbeing, worried more about money, and were increasingly prone to debt. Thus helping people apparently hurt them. We discuss a behavioral framework consistent with our findings and reflect on implications for policy Key words: JEL classification: I31 ; D03 ; D60 ; H11 ; J38
    Date: 2014

This nep-lma issue is ©2014 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.