nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2014‒06‒02
thirteen papers chosen by
Joseph Marchand
University of Alberta

  1. Search, Flows, Job Creations and Destructions By Cahuc, Pierre
  2. Do Informal Referrals Lead to Better Matches? Evidence from a Firm's Employee Referral System By Brown, Meta; Setren, Elizabeth; Topa, Giorgio
  3. "Recent Stagnation of Married Women’s Labor Supply: A Life-Cycle Structural Model" By SEONYOUNG PARK
  4. How to Stimulate Single Mothers on Welfare to Find a Job: Evidence from a Natural Experiment By Knoef, Marike; van Ours, Jan C.
  5. The Effect of Public Insurance Coverage for Childless Adults on Labor Supply By Dague, Laura; DeLeire, Thomas; Leininger, Lindsey
  6. Work and Tax Evasion Incentive Effects of Social Insurance Programs: Evidence from an Employment-Based Benefit Extension By Bergolo, Marcelo; Cruces, Guillermo
  7. Availability of Family-Friendly Work Practices and Implicit Wage Costs: New Evidence from Canada By Fakih, Ali
  8. When Does Education Matter? The Protective Effect of Education for Cohorts Graduating in Bad Times By David Cutler; Wei Huang; Adriana Lleras-Muney
  9. Skills at Work: How Skills and their Use Matter in the Labour Market By Glenda Quintini
  10. Human Capital Mobility: Implications for Efficiency, Income Distribution, and Policy By Wildasin, David
  11. Growth and Structural Change in a Dynamic Lagakos-Waugh Model By Huikang Ying
  12. Racial Discrimination in the U.S. Labor Market: Employment and Wage Differentials by Skill By Daniel Borowcyzk-Martins; Jake Bradley; Linas Tarasonis
  13. The Gender-Career Estimation Gap By Kaiser, Lutz C.

  1. By: Cahuc, Pierre (Ecole Polytechnique, Paris)
    Abstract: This paper presents a short overview of dynamic models of labor markets with transaction costs. It shows that these models have deeply renewed the understanding of job search, job flows, job creations and destructions, unemployment and wage formation. It argues that this renewal provides a very useful toolkit for analyzing important economic policy issues such as the optimal level of unemployment benefits, the funding of unemployment insurance and the impact of employment protection legislation.
    Keywords: job search, job flows, workers flows, unemployment
    JEL: J6 J31 J38
    Date: 2014–05
  2. By: Brown, Meta (Federal Reserve Bank of New York); Setren, Elizabeth (MIT); Topa, Giorgio (Federal Reserve Bank of New York)
    Abstract: Using a new firm-level dataset that includes explicit information on referrals by current employees, we investigate the hiring process and the relationships among referrals, match quality, wage trajectories and turnover for a single U.S. corporation, and test various predictions of theoretical models of labor market referrals. We find that referred candidates are more likely to be hired; experience an initial wage advantage which dissipates over time; and have longer tenure in the firm. Further, the variances of the referred and non-referred wage distributions converge over time. The observed referral effects appear to be stronger at lower skill levels. The data also permit analysis of the role of referrer-referee pair characteristics.
    Keywords: referrals, human resources, turnover, wage trajectory
    JEL: J30 J63 J64
    Date: 2014–05
  3. By: SEONYOUNG PARK (Department of Economics,University of Delaware)
    Abstract: This study investigates the effects of changes in various determinants of labor supply on the dramatic changes from the older (the 1950s and earlier) cohorts to the younger (the 1960s and later) cohorts in life-cycle labor supply behavior, and ultimately provides a model-based quantitative explanation of the recent decline in the aggregate labor supply of married women. On the basis of the Current Population Survey data, it first documents that, while life- cycle labor supply profiles are non-overlapping and bell-shaped for the older cohorts, they are roughly flat for the younger cohorts, and from the mid-thirties of the life-cycle, the younger cohorts continue to supply less labor than the 1950s cohort does. Then in a life-cycle model of women’s labor supply, the behavioral changes are explained by a combination of changes in various labor supply determinants, with the opportunity cost of childbearing (as represented by returns to work experience and the rate of human capital depreciation during a nonworking period) being the dominant contributor. In particular, relative to the older cohorts, the higher opportunity cost for the younger cohorts makes them supply more labor at the early stage of the life-cycle, delay childbearing to a later stage, and upon childbearing, stay out of the labor force, other things being constant. A calibration of the model demonstrates that the aggregate labor supply of married women would increase by 1.96 percentage points from 2000 to 2010 if there were no changes between the older and the younger cohorts in the labor supply determinants; however changing the determinants for the same period actually results in a reduction of aggregate labor supply by 1.36 percentage points. Of the 3.32 percentage points of the pseudo-reduction of married women’s aggregate labor supply (difference between the hypothetical 1.96 percentage point increase and the actual 1.36 percentage point reduction), 67 percent is explained by the increased opportunity cost for the younger cohorts, and the rest is accounted for by a combination of changes in the tax code, business cycle conditions, and preferences, among others.
    Keywords: Labor Supply, Married Women, Recent Decline, Cohort, Returns to Experience
    JEL: D1 J13 J22 J24
    Date: 2014
  4. By: Knoef, Marike (Leiden University); van Ours, Jan C. (Tilburg University)
    Abstract: We present the results from a natural experiment in which single mothers on welfare were stimulated to find a job. Two policy instruments were introduced: an earnings disregard and job creation. The experiment was performed at the level of municipalities in The Netherlands, a country with relatively high benefits and low incentives for single mothers to leave welfare for work. In our analysis, we make a distinction between native and immigrant welfare recipients. For immigrant single mothers and some groups of native single mothers we find a positive employment effect of an earnings disregard. Job creation in addition to the earnings disregard increased working hours for some groups of single mothers. Although the outflow from welfare was not affected, welfare expenditures were reduced.
    Keywords: welfare, single mothers, natural experiment
    JEL: C41 C93 I38 J64
    Date: 2014–05
  5. By: Dague, Laura (Texas A&M University); DeLeire, Thomas (Georgetown University); Leininger, Lindsey (University of Illinois at Chicago)
    Abstract: This study provides plausibly causal estimates of the effect of public insurance coverage on the employment of non-elderly, non-disabled adults without dependent children ("childless adults"). We use regression discontinuity and propensity score matching difference-in-differences methods to take advantage of the sudden imposition of an enrollment cap, comparing the labor supply of enrollees to eligible applicants on a waitlist. We find enrollment into public insurance leads to sizable and statistically meaningful reductions in employment up to at least 9 quarters later, with an estimated size of from 2 to 10 percentage points depending upon the model used.
    Keywords: health insurance, labor supply
    JEL: I13 J22
    Date: 2014–05
  6. By: Bergolo, Marcelo (IECON, Universidad de la República); Cruces, Guillermo (CEDLAS-UNLP)
    Abstract: This article studies how social insurance programs shape individual's incentives to take up registered employment and to report earnings to the tax authorities. The analysis is based on a social insurance reform in Uruguay that extended healthcare coverage to the dependent children of registered private-sector workers. The identification strategy relies on a comparison between individuals with and without dependent children before and after the reform. The reform increased benefit-eligible registered employment by 1.6 percentage points (about 5 percent above the pre-reform level), mainly due to an increase in labor force participation rather than to movement from unregistered to registered employment. The shift was greater for parents with younger children and for cohabiting adults whose partners' jobs did not provide the couples' children with access to the benefit. Finally, the reform increased the incidence of underreporting of salaried earnings by about 4 percentage points (25 percent higher than the pre-reform level), mostly for workers employed at small firms. The increase in fiscal revenue from higher levels of registered employment was several orders of magnitude greater than the loss of revenue due to an increase in underreporting.
    Keywords: labor supply, work incentives, social insurance, tax evasion
    JEL: J22 H26 O17
    Date: 2014–05
  7. By: Fakih, Ali (Lebanese American University)
    Abstract: Using Canadian linked employer-employee data covering the period 1999-2005, I examine the determinants of the availability of family-friendly "care" practices and the impact of such practices on wages. The results show that the provision of family-friendly practices is not mainly derived from socio-demographic characteristics of workers but rather from job- and firm-related factors. The findings also reveal that there is a trade-off between the provision of family-friendly practices and earnings indicating the existence of an implicit market in which workers face reductions in their wages. This result supports the hypothesis that family-friendly benefits are to some extent conceived as a gift or a signal that employers care about employees' family responsibilities and, in return, employees are willing to “buy” these practices and thus accept a wage offset.
    Keywords: family-friendly "care" practices, linked employer-employee data, simultaneous probit model, wage equation
    JEL: J13 J32 J70
    Date: 2014–05
  8. By: David Cutler; Wei Huang; Adriana Lleras-Muney
    Abstract: Using Eurobarometer data, we document large variation across European countries in education gradients in income, self-reported health, life satisfaction, obesity, smoking and drinking. While this variation has been documented previously, the reasons why the effect of education on income, health and health behaviors varies is not well understood. We build on previous literature documenting that cohorts graduating in bad times have lower wages and poorer health for many years after graduation, compared to those graduating in good times. We investigate whether more educated individuals suffer smaller income and health losses as a result of poor labor market conditions upon labor market entry. We confirm that a higher unemployment rate at graduation is associated with lower income, lower life satisfaction, greater obesity, more smoking and drinking later in life. Further, education plays a protective role for these outcomes, especially when unemployment rates are high: the losses associated with poor labor market outcomes are substantially lower for more educated individuals. Variation in unemployment rates upon graduation can potentially explain a large fraction of the variance in gradients across different countries.
    JEL: I12 I20 J11
    Date: 2014–05
  9. By: Glenda Quintini
    Abstract: Human capital is key for economic growth. Not only is it linked to aggregate economic performance but also to each individual’s labour market outcomes. However, a skilled population is not enough to achieve high and inclusive growth, as skills need to be put into productive use at work. Thanks to the availability of measures of both the proficiency and the use of numerous types of skills, the Survey of Adult Skills offers a unique opportunity to advance knowledge in this area and this paper presents and discusses evidence on both these dimensions with a particular focus on their implications for labour market policy. This paper explores the role played in the labour market by skill proficiency in the areas of literacy, numeracy and problem solving in technology-rich environments. It also shows how skills use, not only proficiency, affects a number of key labour market phenomena, such as the gender wage gap. Finally, the paper combines information on skill proficiency, educational attainment, skill use and qualification requirements to construct indicators of qualification and skills mismatch and to explore their causes and consequences. Le capital humain est fondamental pour la croissance économique. Non seulement, il est lié à la performance économique à niveau agrégé mais il contribue aussi à la réussite individuelle sur le marché du travail. Toutefois, une population aux compétences élevées ne suffit pas pour obtenir une croissance soutenue et équitable, car les compétences doivent être utilisées de façon productive au travail. Grâce à la disponibilité de données sur les compétences dans plusieurs domaines et leurs utilisation au travail, l’Enquête sur les Compétences des Adultes (PIAAC) offre une opportunité unique d’améliorer les connaissances à ce sujet. Ce papier présente et discute ces deux dimensions en prêtant une attention particulière aux implication pour les politiques du marché du travail. Il analyse le rôle que les compétences en littératie, numératie et résolution de problème dans un environnement riche en technologie jouent sur le marché du travail. Il montre aussi comment l’utilisation de ces compétences, et non seulement leur niveau, impacte sur un nombre important de phénomènes du marché du travail, comme par exemple la différence entre la rémunération des femmes et des hommes. Pour conclure, ce papier joint l’information concernant les compétences en littératie et numératie et leur utilisation au travail ainsi que le niveau d’éducation des travailleurs et celui demandé dans leurs postes pour dériver des indicateurs d’apparemment entre l’offre et la demande de compétences et qualifications et en analyser les causes et les conséquences.
    JEL: I25 J08 J21 J24 J31
    Date: 2014–05–13
  10. By: Wildasin, David (University of Kentucky)
    Abstract: Mobility of highly-skilled workers affects and is affected by labor market conditions, taxes, and other policies. This paper documents the demographic and fiscal importance of international migration, especially in aging societies, reviews the efficiency and distributional effects of mobility, and analyzes the economic incidence of fiscal transfers to low-skilled workers that are financed by taxes on imperfectly-mobile high-skilled workers in a dynamic model, distinguishing the short-run, transitional, and long-run gains and losses to contributors and beneficiaries.
    Keywords: migration, taxes, redistribution, dynamic incidence
    JEL: J11 J24 J61 H2 H5
    Date: 2014–05
  11. By: Huikang Ying
    Abstract: This paper proposes a dual growth model built on a mechanism of self-selection whereby heterogeneous workers choose their optimal sectors based on comparative advantage. It shows that economic growth shifts workers’ comparative advantage, and this shift induces rural-urban structural change. Following this mechanism, the model shows that average individual productivity in agriculture increases, while that in the non-agriculture sector decreases during structural change. Findings from simulations suggests an inverse correlation between the speed of structural change and dispersion of productivity across workers, and present improved predictions on transitional dynamics compared to the standard neoclassical growth model. The analysis of wage dynamics suggests that inequality over time does not necessarily follow an inverted-U curve when structural transformation takes place.
    Keywords: structural change, self-selection, labor productivity, wage dynamics
    JEL: J24 J31 O11 O15 O40
    Date: 2014–05
  12. By: Daniel Borowcyzk-Martins; Jake Bradley; Linas Tarasonis
    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: 2014–05
  13. By: Kaiser, Lutz C. (North Rhine-Westphalia University of Applied Sciences)
    Abstract: The paper discusses gender differences with regard to the self- and reciprocal estimation of career expectations. Firstly, the theoretical background and the literature are identified. Within this frame, the instance of self-under-estimated career prospects of female workers and statistical discrimination in the labor market are described. Both aspects are jointly assessed as a self-fulfilling prophecy-phenomenon redounded to women's disadvantage on the labor market. Secondly, the empirical part analysis the respective self- and reciprocal estimation of female and male career prospects for public sector workers in Germany. The results display obvious discrepancies between self- and reciprocally estimated career expectations that constitute a gender-career estimation gap. As the German public sector contains specific devices to equalising career chances of male and female employees, the findings even underpin the insistency of under-estimated career prospects of female workers despite the existing public sector regime of equality. Finally, approaches of how to equalize male and female career chances are critically reviewed.
    Keywords: self- and reciprocal estimation of career opportunities, self-fulfilling prophecy, gender-career estimation gap, statistical discrimination, public sector
    JEL: J16 J24 J4 J71 J78
    Date: 2014–05

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