nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2014‒05‒24
thirteen papers chosen by
Joseph Marchand
University of Alberta

  1. Social Security Programs and Retirement Around the World: Disability Insurance Programs and Retirement - Introduction and Summary By Courtney Coile; Kevin S. Milligan; David A. Wise
  2. Pathways to Retirement and the Role of Financial Incentives in Sweden By Per Johansson; Lisa Laun; Mårten Palme
  3. The Intensity of Job Search and Search Duration By Faberman, R. Jason; Kudlyak, Marianna
  4. The effects of cancer in the English labour market By David Candon
  5. Natural disasters and labour markets By Martina Kirchberger
  6. When Pay Increases are Not Enough: The Economic Value of Wage Delegation in the Field By Vanessa Mertins; Sabrina Jeworrek
  7. Negotiated wage increases and the labor market outcomes of low-wage workers: evidence from the Swedish public sector By Eliasson, Tove; Nordström Skans, Oskar
  8. Immigration, Search, and Redistribution: A Quantitative Assessment of Native Welfare By Michele Battisti; Gabriel Felbermayr; Giovanni Peri; Panu Poutvaara
  9. Evaluating the Impact of the Post-2008 Employment Subsidy Program in Turkey By Binnur Balkan; Yusuf Soner Baskaya; Semih Tumen
  10. The Ups and Downs in Women's Employment: Shifting Composition or Behavior from 1970 to 2010? By Kristin E. Smith
  11. Racial Discrimination in the U.S. Labor Market: Employment and Wage Differentials by Skill By Daniel Borowczyk-Martins; Jake Bradley; Linas Tarasonis
  12. Endophilia or Exophobia: Beyond Discrimination By Feld, Jan; Salamanca, Nicolás; Hamermesh, Daniel S.
  13. Can Variation in Subgroups' Average Treatment Effects Explain Treatment Effect Heterogeneity? Evidence from a Social Experiment By Marianne P. Bitler; Jonah B. Gelbach; Hilary W. Hoynes

  1. By: Courtney Coile; Kevin S. Milligan; David A. Wise
    Abstract: This is the introduction and summary to the sixth phase of an ongoing project on Social Security Programs and Retirement Around the World. The first phase described the retirement incentives inherent in plan provisions and documented the strong relationship across countries between social security incentives to retire and the proportion of older persons out of the labor force. The second phase documented the large effects that changing plan provisions would have on the labor force participation of older workers. The third phase demonstrated the consequent fiscal implications that extending labor force participation would have on net program costs—reducing government social security benefit payments and increasing government tax revenues. The fourth phase presented analyses of the relationship between the labor force participation of older persons and the labor force participation of younger persons in twelve countries. We found no evidence that increasing the employment of older persons will reduce the employment opportunities of youth and no evidence that increasing the employment of older persons will increase the unemployment of youth. The fifth phase on “Historical Trends in Mortality and Health, Employment, and Disability Insurance Participation and Reforms” was intended to set the stage for this current phase. This sixth phase of the ongoing ISS project is particularly related to the fifth phase (Wise, 2012) and the second phase (Gruber and Wise, 2004) of the project. This volume continues the focus of the previous volume on DI programs while extending the methodology to study retirement behavior used in the second phase to focus in particular on the effects of the DI programs. The key question this volume seeks to address is: given health status, to what extent are differences in labor force participation across countries determined by the provisions of disability insurance programs?
    JEL: H31 H55 I19 J14 J26
    Date: 2014–05
  2. By: Per Johansson; Lisa Laun; Mårten Palme
    Abstract: We study how economic incentives affect labor force exit through different income security programs, old-age pensions as well as income taxes in Sweden. We use the option value for staying in the labor force as a measure of economic incentives and estimate an econometric model for the choice of leaving the labor market. Besides old-age pension, we focus on the Disability Insurance (DI), which is the most important exit path before age 65. By simulating the effect of different probabilities to be admitted DI we show how changes in the stringency of DI admittance affects labor supply among older workers through economic incentives.
    JEL: J14 J26
    Date: 2014–05
  3. By: Faberman, R. Jason (Federal Reserve Bank of Chicago); Kudlyak, Marianna (Federal Reserve Bank of Richmond)
    Abstract: We use micro data on applications to job openings by individuals on a job search website to study the relationship between search intensity and search duration. Our data allow us to control for several factors that can affect the measured relationship between intensity and duration, including the composition of job seekers and changes in the number of available job openings over the duration of search. We find that a job seeker sends fewer applications per week as search continues. We also find that job seekers who search on the website longer tend to send more applications in every period. We attribute this finding to job seeker heterogeneity. Controlling for the local stock of vacancies does little to affect the result, mainly because job seekers continue to apply to older vacancies well into their search spell.
    Keywords: Job applications; vacancies; labor market search effort; search duration
    JEL: E24 J24 J31
    Date: 2014–05–15
  4. By: David Candon (School of Economics and Geary Institute, University College Dublin)
    Abstract: The continued rise in overall cancer survival rates has ignited a field of research which examines the effect that cancer has on survivors’ employment. Previous estimates of the effect of cancer on labour market outcomes, using U.S. data, show a significant reduction in employment and hours of work in the first 6 months after diagnosis. However, this impact has been found to dissipate after 2 years. I use data from the English Longitudinal Study of Ageing (ELSA) and find that, not only does cancer have a negative impact in the first 6-month period following diagnosis, but also in the second 6-month period. I estimate that, in the second 6-month period after diagnosis, respondents with cancer are 20.7 percentage points less likely to work and work 24% less hours a week when compared to matched, healthy controls. This suggests that the negative effects from cancer can persist for longer than the 6 months identified in previous studies. Results are significant at the 1% level. These results have implications for government policy and employers, because it increases both the length of time that survivors may be on government supported sick pay and the expected time that workers will be absent from work due to illness.
    Keywords: Labour market; Cancer; Employment; Hours worked
    JEL: I10 J21 J22
    Date: 2014–05–09
  5. By: Martina Kirchberger
    Abstract: While it is clear that natural disasters have serious welfare consequences for affected populations, less is known with respect to how local labour markets in low income countries adjust to such large shocks, in particular the general equilibrium effects of the increase in the demand for construction as well as the inflow of resources in the aftermath of natural disasters. Combining data from the Indonesia Family Life Survey, the Desinventar database, the US Geological Survey and district level employment indicators, this paper explores how a large earthquake in Indonesia affected local labour markets, in particular the evolution of wages and employment across sectors. We find that wage growth in the agriculture sector is significantly higher in earthquake affected areas. We propose two mechanisms for this result: a higher growth rate of the price of rice in agricultural communities which switch from being net sellers to net buyers of rice and a downward shift in the supply of workers in the agricultural sector. We show evidence for both mechanisms.
    Keywords: Local labour markets, natural disasters
    JEL: J20 Q54 O10
    Date: 2014
  6. By: Vanessa Mertins (Institute for Labour Law and Industrial Relations in the EU, University of Trier); Sabrina Jeworrek (Institute for Labour Law and Industrial Relations in the EU, University of Trier)
    Abstract: By conducting a natural field experiment, we test whether a managerial policy of allowing employees to self-determine their wages is as successful as recently suggested by laboratory evidence. We find that this policy indeed enhances performance. However, our data is clearly at odds with the conjecture of Pareto improvements, since labor costs grow even faster. Admittedly, the performance change is remarkable given that a considerable pay increase has no effect at all. Surprisingly, the data suggests that explicitly denying parts of the workforce this choice boosts performance, too. Additional experimental and survey data provides important insights into employees' underlying motivations.
    Keywords: Field experiment, Delegation, Reciprocity, Responsibility alleviation, Compensation, Worker empowerment, Workplace democracy
    JEL: C91 C93 J33 M52 M54
    Date: 2014–05
  7. By: Eliasson, Tove (Uppsala University, Department of Economics,); Nordström Skans, Oskar (Uppsala University, Department of Economics)
    Abstract: This paper investigates the impact of a collective agreement stipulating a one shot increase in establishment-specific wage levels in a public-sector setting where wages otherwise are set according to individualized wage bargaining. The agreement stipulated that wages should increase in proportion to the number of low-paid females within each establishment. We find that actual wages among incubents responded to the share of females with a wage below the stipulated threshold, conditional on the separate effects of the share of low wage earners, and the share of females. We find clear evidence of path-dependence in wages, covered workers remained on higher wage levels 4 years after the agreement took effect. The increase in wages resulted in a reduced probability of exit among young workers with relatively good grades and a lower frequency of new hires at the establishment level.
    Keywords: Collective bargaining; wage growth; turnover; wage rigidity; hours of work; labor costs
    JEL: J23 J31 J52 J63
    Date: 2014–05–09
  8. By: Michele Battisti; Gabriel Felbermayr; Giovanni Peri; Panu Poutvaara
    Abstract: We study the effects of immigration on native welfare in a general equilibrium model featuring two skill types, search frictions, wage bargaining, and a redistributive welfare state. Our quantitative analysis suggests that, in all 20 countries studied, immigration attenuates the effects of search frictions. These gains tend to outweigh the welfare costs of redistribution. Immigration has increased native welfare in almost all countries. Both high-skilled and low-skilled natives benefit in two thirds of countries, contrary to what models without search frictions predict. Median total gains from migration are 1.19% and 1.00% for high and low skilled natives, respectively.
    JEL: F22 J31 J61 J68
    Date: 2014–05
  9. By: Binnur Balkan; Yusuf Soner Baskaya; Semih Tumen
    Abstract: The Turkish government started an employment subsidy program in 2008 to generate new employment for younger men and all women, which are the relatively disadvantaged groups in the Turkish labor market. In this paper, we use a nationally representative micro-level dataset and a difference-in-differences approach to evaluate the effects of this subsidy program. Our results indicate that, on aggregate, the subsidy program seems to be ineffective in increasing the employment probabilities of those individuals in the target group. However, when heterogeneity is accounted for by dividing the treatment group into several sub-groups, we observe that the program has been notably effective on some of those sub-groups. In particular, we find that the increase in employment probability is more pronounced for older women, while a weaker positive effect is observed for younger women and almost no effect is detected for younger men. The effect on older women is subject to further heterogeneity : the subsidy program has increased the employment probabilities of low-educated and/or low-skill older women rather than the high-educated and/or high-skill ones.
    Keywords: Employment subsidies; treatment effects; difference-in-differences; Turkish micro data.
    JEL: C21 H24 J21 J68
    Date: 2014
  10. By: Kristin E. Smith (University of New Hampshire)
    Abstract: This paper tracks factors contributing to the ups and downs in women’s employment from 1970 to 2010 using regression decompositions focusing on whether changes are due to shifts in the means (composition of women) or due to shifts in coefficients (inclinations of women to work for pay). Compositional shifts in education exerted a positive effect on women’s employment across all decades, while shifts in the composition of other family income, particularly at the highest deciles, depressed married women’s employment over the 1990s contributing to the slowdown in this decade. A positive coefficient effect of education was found in all decades, except the 1990s, when the effect was negative, depressing women’s employment. Further, positive coefficient results for other family income at the highest deciles bolstered married women’s employment over the 1990s. Models are run separately for married and single women demonstrating the varying results of other family income by marital status. This research was supported in part by an Upjohn Institute Early Career Research Award.
    Keywords: women’s employment, other family income, stalled gender revolution, regression decomposition
    JEL: J11 J21
    Date: 2014–05
  11. By: Daniel Borowczyk-Martins (University of Bristol); Jake Bradley (University of Bristol); Linas Tarasonis (Aix-Marseille University (Aix-Marseille School of Economics), CNRS & EHESS)
    Abstract: In the US labor market the average black worker is exposed to a lower employment rate and earns a lower wage compared to his white counterpart. Lang and Lehmann (2012) argue that these mean differences mask substantial heterogeneity along the distribution of workers’ skill. In particular, they argue that black-white wage and employment gaps are smaller for high-skill workers. In this paper we show that a model of employer taste-based discrimination in a labor market characterized by search frictions and skill complementarities in production can replicate these regularities. We estimate the model with US data using methods of indirect inference. Our quantitative results portray the degree of employer prejudice in the US labor market as being strong and widespread, and provide evidence of an important skill gap between black and white workers. We use the model to undertake a structural decomposition and conclude that discrimination resulting from employer prejudice is quantitatively more important than skill differences to explain wage and employment gaps. In the final section of the paper we conduct a number of counterfactual experiments to assess the effectiveness of different policy approaches aimed at reducing racial differences in labor market outcomes.
    Keywords: employment and wage differentials, discrimination, job search
    JEL: J31 J64 J71
    Date: 2014–04
  12. By: Feld, Jan (Department of Economics, School of Business, Economics and Law, Göteborg University); Salamanca, Nicolás (Ph.D. candidate in economics, Maastricht University); Hamermesh, Daniel S. (Sue Killam Professor of Economics, University of Texas at Austin; prof in economics, Royal Holloway University of London; and research assoc, IZA and NBER)
    Abstract: The discrimination literature treats outcomes as relative. But does a differential arise because agents discriminate against others—exophobia—or because they favor their own kind—endophilia? Using a field experiment that assigned graders randomly to students' exams that did/ did not contain names, on average we find favoritism but no discrimination by nationality, and some evidence of favoritism for the opposite gender. We identify distributions of individuals' preferences for favoritism and discrimination. We show that a changing correlation between them generates perverse changes in market differentials and that their relative importance informs the choice of a base group in adjusting wage differentials.
    Keywords: favoritism; discrimination; field experiment; wage differentials; economics of education
    JEL: B40 I24 J71
    Date: 2014–05
  13. By: Marianne P. Bitler; Jonah B. Gelbach; Hilary W. Hoynes
    Abstract: In this paper, we assess whether welfare reform affects earnings only through mean impacts that are constant within but vary across subgroups. This is important because researchers interested in treatment effect heterogeneity typically restrict their attention to estimating mean impacts that are only allowed to vary across subgroups. Using a novel approach to simulating treatment group earnings under the constant mean-impacts within subgroup model, we find that this model does a poor job of capturing the treatment effect heterogeneity for Connecticut’s Jobs First welfare reform experiment using quantile treatment effects. Notably, ignoring within-group heterogeneity would lead one to miss evidence that the Jobs First experiment’s effects are consistent with central predictions of basic labor supply theory.
    JEL: H75 I38 J18
    Date: 2014–05

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