nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2014‒04‒18
thirteen papers chosen by
Joseph Marchand
University of Alberta

  1. The Great Compression of the French Wage Structure, 1969-2008 By Verdugo, Gregory
  2. Interindustry Wage Differentials, Technology Adoption, and Job Polarization By Myungkyu Shim; Hee-Seung Yang
  3. Structural change and wage inequality: Evidence from German micro data By Henze, Philipp
  4. Health Status, Disability and Retirement Incentives in Belgium By Alain Jousten; Mathieu Lefebvre; Sergio Perelman
  5. Retirement, Early Retirement and Disability: Explaining Labor Force Participation after 55 in France By Luc Behaghel; Didier Blanchet; Muriel Roger
  6. Voluntary work and wages By Bruna Bruno; Damiano Fiorillo
  7. Labor Informality: Choice or Sign of Segmentation? A Quantile Regression Approach at the Regional Level for Colombia By Garcia Cruz, Gustavo Adolfo
  8. Who Gets Money First? Monetary Expansion, Ownership Structure and Wage Inequality in China By Peiwen Bai; Wenli Cheng
  9. Your Loss Is My Gain: A Recruitment Experiment With Framed Incentives By Jonathan de Quidt
  10. Women labour force participation and domestic violence: Evidence from India By Paul, Sohini
  11. Linguistic Barriers in the Destination Language Acquisition of Immigrants By Isphording, Ingo E.; Otten, Sebastian
  12. Place-Based Policies By David Neumark; Helen Simpson
  13. Chartbook of economic inequality By Anthony B. Atkinson; Salvatore Morelli

  1. By: Verdugo, Gregory (Bank of France)
    Abstract: Wage inequality decreased continuously in France from 1969 to 2008. In contrast to the US and the UK, this period was also characterised by a substantial increase in the educational attainment of the labour force. This paper investigates whether differences in the timing of educational expansion over the last forty years can explain the divergent evolution of upper tail wage inequality in France relative to other countries. Using a model with imperfect substitution between experience groups, the estimates suggest that the rapid increase in the supply of educated workers during the 1970s and 1990s produced a substantial decline in the skill premium within cohorts. As a result, between a third and half of the decline in wage inequality at the top of the distribution in France during this period is explained by the increase in the educational attainment of the labour force.
    Keywords: wage inequality, France
    JEL: J31
    Date: 2014–03
  2. By: Myungkyu Shim; Hee-Seung Yang
    Abstract: This paper explores the relationship between job polarization and interindustry wage differentials. Using the U.S. Census and EU KLEMS data, we find that the progress of job polarization between 1980 and 2009 was more evident in industries that initially paid a high wage premium to workers than in industries that did not. With a two-sector neoclassical growth model to highlight the key mechanism, we argue that this phenomenon can be explained as a dynamic response of firms to interindustry wage differentials: firms with a high wage premium seek alternative ways to cut production costs by replacing workers who perform routine tasks with Information, Communication, and Technology (ICT) capital. The replacement of routine workers with ICT capital has become more pronounced as the price of ICT capital has fallen over the past 30 years. As a result, firms that are constrained to pay a relatively high wage premium have experienced slower growth of employmentof routine workers than firms in low-wage industries, which led to heterogeneity in job polarization across industries.
    Keywords: Job Polarization, Interindustry Wage Differentials, Two Sector Growth Model, Endogenous Technology Adoption
    JEL: E24 J24 J31 O33 O41
    Date: 2014–04
  3. By: Henze, Philipp
    Abstract: This paper measures the impact of sectoral composition, international trade and technological progress on the rising wage gap in Germany. I find a positive effect of the increasing importance of services on the rising wage gap in Germany that is comparable to the effects of international trade and technological change. To quantify the causal relationship between the structural change of the German economy and the wage premium, I use the Establishment History Panel (in German: Betriebs-Historik-Panel - BHP), a detailed establishment-level data set provided by the German Federal Employment Office covering the period 1975-2010. This empirical work puts the focus on an important cause of the rising wage gap that so far has been largely ignored by the literature. --
    Keywords: income inequality,structural change,international trade,technological change
    JEL: F16 J31 O15 O30
    Date: 2014
  4. By: Alain Jousten; Mathieu Lefebvre; Sergio Perelman
    Abstract: Many Belgian retire well before the statutory retirement age. Numerous exit routes from the labor force can be identified: old-age pensions, conventional early retirement, disability insurance, and unemployment insurance are the most prominent ones. We analyze the retirement decision of Belgian workers adopting an option value framework, and pay special attention to the role of health status. We estimate probit models of retirement using data from SHARE. The results show that health and incentives matter in the decision to exit from the labor market. Based on these results, we simulate the effect of potential reforms on retirement.
    JEL: H55 J21 J26
    Date: 2014–04
  5. By: Luc Behaghel; Didier Blanchet; Muriel Roger
    Abstract: We analyze the influence of health and financial incentives on the retirement behavior of older workers in France, building upon Stock and Wise (1990) option value approach. The model accounts for three main retirement routes: the normal retirement, disability insurance (DI) and unemployment/preretirement pathways, and is estimated with a combination of microeconomic datasets that include the French data of the European SHARE survey. The estimates confirm that a decrease in the generosity of the pension and DI schemes induces people to stay longer in the labor market, and that people with better health tend to retire later. We present extreme situations simulating what individual's retirement behavior would have been if only one retirement route had existed and in the absence of constraints on work capabilities. We show that average years of work between 55 and 64 are nearly 14% greater when regular retirement incentives are applied to the whole population than when it is DI rules that are systematically applied.
    JEL: H55 J14 J26
    Date: 2014–04
  6. By: Bruna Bruno; Damiano Fiorillo
    Abstract: The effects of voluntary work on earnings have recently been studied for some developed countries such as Canada, France and Austria. This paper extends this line of research to Italy, using data from the European Union Statistics on Income and Living Conditions (EU-SILC) dataset. A double methodological approach is used in order to control for unobserved heterogeneity: Heckman and IV methods are employed to account for unobserved worker heterogeneity and endogeneity bias. Empirical results show that, when the unobserved heterogeneity is taken into account, a wage premium of 2.7 percent emerges, quite small if compared to previous investigations on Canada and Austria. The investigation into the channels of influence of volunteering on wages gives support to the hypotheses that volunteering enables the access to fruitful informal networks, avoids the human capital deterioration and provides a signal for intrinsically motivated individuals.
    Keywords: Voluntary work, wages, Mincer equation, selection bias, instrumental variables, Italy.
    JEL: C31 C36 J31
    Date: 2014–04–05
  7. By: Garcia Cruz, Gustavo Adolfo
    Abstract: The labor market in developing countries is remarkably heterogeneous with a small productive formal sector, enjoying high wages and attractive employment conditions and another large informal sector with low productivity and volatile wages. The informal sector is particularly diverse. In this paper we examine the heterogeneity of the informal sector at regional level in Colombia. In general, our findings suggest that, both voluntary and involuntary informal employment co-exist by choice and as a result of labor market segmentation. We also find that there are striking differences in labor market characteristics between cities, in particular in the traditional informal segment.
    Keywords: Informality, local labor markets, quantile regression, selection bias, formal/informal wage gap decomposition
    JEL: C21 J31 J42 O17
    Date: 2014–04–01
  8. By: Peiwen Bai; Wenli Cheng
    Abstract: With the help of a simple model this paper formulates a hypothesis that a monetary expansion in the Chinese context of a segmented labor market has the effect of widening the wage gap between state and non-state workers. We argue that the reason for the increase in wage differential is that SOEs are in a privileged position to receive new money first which means the wage rate of SOE workers are raised first. It is only after the new money reaches the non-state sector via spending, does the wage rate of non-state workers rise with a delay and probably to a lesser extent. Our empirical analysis based on 10 sectors in China over the period 1990 to 2011 supports our hypothesis.
    Keywords: monetary expansion, labor market segmentation, wage differential between state and non-state workers in China
    JEL: E51 J31
    Date: 2014–04
  9. By: Jonathan de Quidt
    Abstract: Empirically, labor contracts that financially penalize failure induce higher effort provision than economically identical contracts presented as paying a bonus for success, an effect attributed to loss aversion. This is puzzling, as penalties are infrequently used in practice. The most obvious explanation is selection: loss averse agents are unwilling to accept such contracts. I formalize this intuition, then run an experiment to test it. Surprisingly, I find that workers were 25 percent more likely to accept penalty contracts, with no evidence of adverse or advantageous selection. Consistent with the existing literature, penalty contracts also increased performance on the job by 0.2 standard deviations. I outline extensions to the basic theory that are consistent with the main results, but argue that more research is needed on the long-term effects of penalty contracts if we want to understand why firms seem unwilling to use them.
    Keywords: loss aversion, reference points, framing, selection, Mechanical Turk
    JEL: D03 J41 D86
    Date: 2014–04
  10. By: Paul, Sohini
    Abstract: Domestic violence is recognised as a serious violation of women’s basic rights. Conventional economic models of domestic violence suggest that higher participation by women in the labour force leads to a decrease in domestic violence. In this paper, we study the relationship between women employment and domestic violence in India. We used a nationally representative database, National Family Health Survey Data III (2005–06), for our analysis. We found that employed women are more exposed to intimate partner violence. We argue that the higher emotional cost of men through the violation of traditional gender norm leads to increased domestic violence.
    Keywords: Gender; Domestic Violence; Labour force participation; India
    JEL: J16 J21 K14
    Date: 2014–03–27
  11. By: Isphording, Ingo E. (IZA); Otten, Sebastian (Ruhr University Bochum)
    Abstract: There are various degrees of similarity between the languages of different immigrants and the language of their destination country. This linguistic distance is an obstacle to the acquisition of a language, which leads to large differences in the attainments of the language skills necessary for economic and social integration in the destination country. This study aims at quantifying the influence of linguistic distance on the language acquisition of immigrants in the US and in Germany. Drawing from comparative linguistics, we derive a measure of linguistic distance based on the automatic comparison of pronunciations. We compare this measure with three other linguistic and non-linguistic approaches in explaining self-reported measures of language skills. We show that there is a strong initial disadvantage from the linguistic origin for language acquisition, while the effect on the steepness of assimilation patterns is ambiguous in Germany and the US.
    Keywords: immigrants, language skills, linguistic distance, human capital
    JEL: F22 J15 J24 J40
    Date: 2014–04
  12. By: David Neumark; Helen Simpson
    Abstract: Place-based policies commonly target underperforming areas, such as deteriorating downtown business districts and disadvantaged regions. Principal examples include enterprise zones, European Union Structural Funds, and industrial cluster policies. Place-based policies are rationalized by various hypotheses in urban and labor economics, such as agglomeration economies and spatial mismatch – hypotheses that entail market failures and often predict overlap between poor economic performance and disadvantaged residents. The evidence on enterprise zones is very mixed. We need to know more about what features of enterprise zone policies make them more effective or less effective, who gains and loses from these policies, and how we can reconcile the existing findings. Some evidence points to positive benefits of infrastructure expenditure, and also investment in higher education and university research – likely because of the public-goods nature of these policies. But to better guide policy we need to know more about what policies create self-sustaining longer-run gains.
    JEL: H23 H71 J23 J38 R12
    Date: 2014–04
  13. By: Anthony B. Atkinson (Nuffield College, Oxford, LSE and Institute for New Economic Thinking at the Oxford Martin School); Salvatore Morelli (CSEF – University of Naples – Federico II and Institute for New Economic Thinking at the Oxford Martin School)
    Abstract: The purpose of this Chartbook is to present a summary of evidence about long-run changes in economic inequality – primarily income, earnings, and wealth – for 25 countries covering more than one hundred years. There is a range of countries and they account for more than a third of the world’s population: Argentina, Brazil, Australia, Canada, Finland, France, Germany, Iceland, India, Indonesia, Italy, Japan, Malaysia, Mauritius, Netherlands, New Zealand, Norway, Portugal, Singapore, South Africa, Spain, Sweden, Switzerland, the UK and the US. The results are presented in 25 charts, one for each country, together with a description of the sources. The underlying figures are available for download at
    Date: 2014–03

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.