nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2014‒04‒05
seven papers chosen by
Joseph Marchand
University of Alberta

  1. Why Stars Matter By Ajay Agrawal; John McHale; Alexander Oettl
  2. On the Role of Group Size in Tournaments: Theory and Evidence from Lab and Field Experiments By John A. List; Daan Van Soest; Jan Stoop; Haiwen Zhou
  3. Misallocation, informality, and human capital: understanding the role of institutions By D'Erasmo, Pablo; Moscoso Boedo, Herman J.; Senkal, Asli
  4. The Nature of Surgeon Human Capital Depreciation By Jason M. Hockenberry; Lorens A. Helmchen
  5. Health information, treatment, and worker productivity: Experimental evidence from malaria testing and treatment among Nigerian sugarcane cutters By Andrew Dillon; Jed Friedman; Pieter Serneels
  6. The impact of local minimum wages on employment: evidence from Italy in the 1950s By Guido de Blasio; Samuele Poy
  7. Collective Reputation and the Dynamics of Statistical Discrimination By Kim, Young-Chul; Loury, Glenn

  1. By: Ajay Agrawal; John McHale; Alexander Oettl
    Abstract: The growing peer effects literature pays particular attention to the role of stars. We decompose the causal effect of hiring a star in terms of the productivity impact on: 1) co-located incumbents and 2) new recruits. Using longitudinal university department-level data we report that hiring a star does not increase overall incumbent productivity, although this aggregate effect hides offsetting effects on related (positive) versus unrelated (negative) colleagues. However, the primary impact comes from an increase in the average quality of subsequent recruits. This is most pronounced at mid-ranked institutions, suggesting implications for the socially optimal spatial organization of talent.
    JEL: I23 J24 O31
    Date: 2014–03
  2. By: John A. List; Daan Van Soest; Jan Stoop; Haiwen Zhou
    Abstract: Both private and public organizations constantly grapple with incentive schemes to induce maximum effort from agents. We begin with a theoretical exploration of optimal contest design, focusing on the number of competitors. Our theory reveals a critical link between the distribution of luck and the number of contestants. We find that if there is considerable (little) mass on good draws, equilibrium effort is an increasing (decreasing) function of the number of contestants. Our first test of the theory implements a laboratory experiment, where important features of the theory can be exogenously imposed. We complement our lab experiment with a field experiment, where we rely on biological models complemented by economic models to inform us of the relevant theoretical predictions. In both cases we find that the theory has a fair amount of explanatory power, allowing a deeper understanding of how to effectively design tournaments. From a methodological perspective, our study showcases the benefits of combining data from both lab and field experiments to deepen our understanding of the economic science.
    JEL: C9 C91 C93 H41
    Date: 2014–03
  3. By: D'Erasmo, Pablo (Federal Reserve Bank of Philadelphia); Moscoso Boedo, Herman J. (University of Virginia); Senkal, Asli (University of Virginia)
    Abstract: Accepted for publication, Journal of Economic Dynamics and Control The aim of this paper is to quantify the role of formal-sector institutions in shaping the demand for human capital and the level of informality. We propose a firm dynamics model where firms face capital market imperfections and costs of operating in the formal sector. Formal firms have a larger set of production opportunities and the ability to employ skilled workers, but informal firms can avoid the costs of formalization. These firm-level distortions give rise to endogenous formal and informal sectors and, more importantly, affect the demand for skilled workers. The model predicts that countries with a low degree of debt enforcement and high costs of formalization are characterized by relatively lower stocks of skilled workers, larger informal sectors, low allocative efficiency, and measured TFP. Moreover, we find that the interaction between entry costs and financial frictions (as opposed to the sum of their individual effects) is the main driver of these differences. This complementarity effect derives from the introduction of skilled workers, which prevents firms from substituting labor for capital and in turn moves them closer to the financial constraint.
    Keywords: Financial Structure; Informal Sector; Productivity; Policy Distortions; Human Capital;
    JEL: D24 E26 J24 L11 O16 O17
    Date: 2014–03–24
  4. By: Jason M. Hockenberry; Lorens A. Helmchen
    Abstract: To test how practice interruptions affect worker productivity, we estimate how temporal breaks affect surgeons’ performance of coronary artery bypass grafting (CABG). Using a sample of 188 surgeons who performed 56,315 CABG procedures in Pennsylvania between 2006 and 2010, we find that a surgeon’s additional day away from the operating room raised patients’ inpatient mortality risk by up to 0.067 percentage points (2.4% relative effect) but reduced total hospitalization costs by up to 0.59 percentage points. In analyses of 93 high-volume surgeons treating 9,853 patients admitted via an emergency department, where temporal distance effects are most plausibly exogenous, an additional day away raised mortality risk by 0.398 percentage points (11.4% relative effect) but reduced cost by up to 1.396 percentage points. These estimates imply a cost per life-year saved ranging from $7,871 to $18,500, rendering additional treatment intensity within surgery cost-effective at conventional cutoffs. Our findings are consistent with the hypothesis that after returning from temporal breaks surgeons may be less likely to recognize and address life-threatening complications, in turn reducing resource use. This form of human capital loss would explain the decrease in worker productivity and the simultaneous reduction in input use.
    JEL: I10 J24
    Date: 2014–03
  5. By: Andrew Dillon; Jed Friedman; Pieter Serneels
    Abstract: Agricultural and other physically demanding sectors are important sources of growth in developing countries but prevalent diseases such as malaria adversely impact the productivity, labor supply, and occupational choice of workers in these sectors by reducing physical capacity. This study identifies the impact of malaria on worker earnings, labor supply, and daily productivity by randomizing the temporal order at which piece-rate workers at a large sugarcane plantation in Nigeria are offered malaria testing and treatment. The results indicate a significant and substantial intent to treat effect of the intervention – the offer of a workplace based malaria testing and treatment program increases worker earnings by approximately 10% over the weeks following the mobile clinic visit. The study further investigates the effect of health information by contrasting program effects by workers revealed health status. For workers who test positive for malaria, the treatment of illness increases labor supply, leading to higher earnings. For workers who test negative, and especially for those workers most likely to be surprised by the healthy diagnosis, the health information also leads to increased earnings via increased productivity. Possible mechanisms for this response include selection into higher return occupations as a result of changes in the perceived cost of effort. A model of the worker labor decision that includes health perceptions in the decision to supply effort suggests that, in endemic settings with poor quality health services, inaccurate health perceptions may lead workers to misallocate labor thus resulting in sub-optimal production and occupational choice. The results underline the importance of medical treatment but also of access to improved information about one’s health status, as the absence of either may lead workers to deliver lower than optimal effort levels in lower return occupations.
    Keywords: malaria, labor supply, labor productivity, randomized experiment
    JEL: I12 J22 J24 O12
    Date: 2014
  6. By: Guido de Blasio (Bank of Italy); Samuele Poy (FBK-IRVAPP)
    Abstract: This paper measures the impact of wage zones – minimum wage differentials at the province level – on Italy's local labor markets during the 1950s. Using a spatial regression discontinuity design, it finds that for the industrial sectors covered under wage zones there was an increase in employment when one crossed the border from a high-wage province into a low-wage one; the effect diminished, however, as the distance from the boundary increased. The paper also illustrates that the impact on the overall (non-farm) private sector, which includes both covered and uncovered sectors, was basically zero. On balance, the scheme generated some reallocation of economic activity, albeit confined to areas close to the province border.
    Keywords: minimum wages, regional economic activity, regression discontinuity
    JEL: C14 J38 R11
    Date: 2014–03
  7. By: Kim, Young-Chul; Loury, Glenn
    Abstract: Economists have developed theoretical models identifying self-fulfilling expectations as an important source of statistical discrimination in labor markets (Arrow, 1973). The static models dominating the literature of statistical discrimination, however, may leave the false impression that a bad equilibrium is as fragile as a "bubble" and can burst at any moment when expectations flip. Such models thus understate the adversity that disadvantaged groups face in seeking to escape bad equilibria. By developing a dynamic version of a statistical discrimination model based on Coate and Loury's (1993) original setup, we clarify the limits of expectations-related fragility. We show that when a group is strongly affected by negative reputational externalities, the group cannot escape a low skill investment trap, regardless of how expectations are formed. By examining the evolution of stereotypes in this way, we also provide new insights into egalitarian policies.
    Keywords: Statistical Discrimination, Collective Reputation, Reputation Trap, Forward-Looking Behavior
    JEL: D63 D82 J15 J7
    Date: 2012–08–12

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