nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2014‒06‒07
nine papers chosen by
Joseph Marchand
University of Alberta

  1. Quantifying the Lasting Harm to the U.S. Economy from the Financial Crisis By Robert E. Hall
  2. Recent extensions of U.S. unemployment benefits: search responses in alternative labor market states By Valletta, Robert G.
  3. "The Great Recession and Unpaid Work Time in the United States: Does Poverty Matter?" By Tamar Khitarishvili; Kijong Kim
  4. The Career Prospects of Overeducated Americans By Brian Clark; Clément Joubert; Arnaud Maurel
  5. Husband’s Unemployment and Wife’s Labor Supply – The Added Worker Effect across Europe By Julia Bredtmann; Sebastian Otten; Christian Rulff
  6. The Effect of Shocks to Labour Market Flows on Unemployment and Participation Rates By Dixon, Robert; Lim, Guay C.; van Ours, Jan C.
  7. Bouncing Back from Health Shocks: Locus of Control, Labor Supply, and Mortality By Schurer, Stefanie
  8. Labour-Market Institutions and the Dispersion of Wage Earnings By Salverda, Wiemer; Checchi, Daniele
  9. Can Arts-Based Interventions Enhance Labor Market Outcomes among Youth? Evidence from a Randomized Trial in Rio de Janeiro By Carla Calero; Veronica Gonzales; Yuri Soares; Jochen Kluve; Carlos Henrique Corseuilt

  1. By: Robert E. Hall
    Abstract: The financial crisis and ensuing Great Recession left the U.S. economy in an injured state. In 2013, output was 13 percent below its trend path from 1990 through 2007. Part of this shortfall—2.2 percentage points out of the 13—was the result of lingering slackness in the labor market in the form of abnormal unemployment and substandard weekly hours of work. The single biggest contributor was a shortfall in business capital, which accounted for 3.9 percentage points. The second largest was a shortfall of 3.5 percentage points in total factor productivity. The fourth was a shortfall of 2.4 percentage points in labor-force participation. I discuss these four sources of the injury in detail, focusing on identifying state variables that may or may not return to earlier growth paths. The conclusion is optimistic about the capital stock and slackness in the labor market and pessimistic about reversing the declines in total factor productivity and the part of the participation shortfall not associated with the weak labor market.
    JEL: E22 E32 J21 J60 O4
    Date: 2014–05
  2. By: Valletta, Robert G. (Federal Reserve Bank of San Francisco)
    Abstract: In response to the 2007-09 “Great Recession,” the maximum duration of U.S. unemployment benefits was increased from the normal level of 26 weeks to an unprecedented 99 weeks. I estimate the impact of these extensions on job search, comparing them with the more limited extensions associated with the milder 2001 recession. The analyses rely on monthly matched microdata from the Current Population Survey. I find that a 10-week extension of UI benefits raises unemployment duration by about 1.5 weeks, with little variation across the two episodes. This estimate lies in the middle-to-upper end of the range of past estimates.
    Keywords: unemployment benefits; job search
    Date: 2014–05
  3. By: Tamar Khitarishvili; Kijong Kim
    Abstract: In times of economic crises, household production, and the unpaid work time associated with it, can serve as a coping mechanism for absorbing the impact of shocks. Evidence from the Great Recession has been supportive of this possibility, and has revealed the presence of gender asymmetries stemming from men having experienced disproportionately high job losses. In this paper, we further examine the presence of poverty-based asymmetries in the unpaid work time changes of men and women given that the role of household production as a coping mechanism may vary by poverty status. We use the 2003-12 American Time Use Survey and conduct the Oaxaca Blinder decompositions of the changes in the unpaid work time along the business cycle. Our findings reveal that the changes in men's and women's unpaid work time indeed varied by poverty status. In particular, the reduction in women's unpaid work time was driven by nonpoor women. Among men, the lack of the change masked the increase in poor men's unpaid work time and the decrease in nonpoor men's unpaid work time. The decomposition results indicate that, in addition to the shifts in own employment status, shifts in spousal employment status also played a considerable role in explaining the gender differences in unpaid work time changes. In turn, varied shifts in the household structure were important drivers of the poverty-based differences in the unpaid work time changes. Furthermore, the forces underlying the changes in unpaid work time were not limited to the shifts in individual and household characteristics, as the portion of the unpaid work time changes unexplained by these characteristics remained sizable. This finding supports the hypothesis of poverty-based variation in unpaid work time adjustments in that, even without shifts in characteristics, poor and nonpoor individuals appeared to have responded to the recession in different ways.
    Keywords: Time Use; Household Production; Poverty; Gender; Great Recession
    JEL: J22 D13 I32 J16
    Date: 2014–05
  4. By: Brian Clark; Clément Joubert; Arnaud Maurel
    Abstract: In this paper we analyze career dynamics for the large share of U.S. workers who have more schooling than their peers in the same occupation. We use data from the NLSY79 combined with the CPS to analyze transitions into and out of overeducated employment, together with the corresponding effects on wages. Overeducation is a fairly persistent phenomenon at the aggregate and individual levels, with 66% of workers remaining overeducated after one year. Overeducation is not only more common, but also more persistent among blacks and low-AFQT individuals. Further, the hazard rate out of overeducation drops by about 60% during the first 5 years spent overeducated. However, the estimation of a mixed proportional hazard model suggests that this is attributable to selection on unobservables rather than true duration dependence. Finally, overeducation is associated with lower current as well as future wages, which points to the existence of scarring effects.
    JEL: J24 J31 J62
    Date: 2014–05
  5. By: Julia Bredtmann; Sebastian Otten; Christian Rulff
    Abstract: This paper investigates the responsiveness of women’s labor supply to their husband’s loss of employment – the so-called added worker effect. While previous empirical literature on this topic mainly concentrates on a single country, we take an explicit internationally comparative perspective and analyze whether the added worker effect varies across the European countries.
    Keywords: Added worker effect; labor supply; unemployment; cross-country analysis
    JEL: J22 J64 J82
    Date: 2014–05
  6. By: Dixon, Robert (University of Melbourne); Lim, Guay C. (University of Melbourne); van Ours, Jan C. (Tilburg University)
    Abstract: This paper presents an analysis of labour market dynamics, in particular of flows in the labour market and how they interact and affect the evolution of unemployment rates and participation rates, the two main indicators of labour market performance. Our analysis has two special features. First, apart from the two labour market states - employment and unemployment - we consider a third state - out of the labour force. Second, we study net rather than gross flows, where net refers to the balance of flows between any two labour market states. Distinguishing a third state is important because the labour market flows to and from that state are quantitatively important. Focussing on net flows simplifies the complexity of interactions between the flows and allows us to perform a dynamic analysis in a structural vector-autoregression framework. We find that a shock to the net flow from unemployment to employment drive the unemployment rate and the participation rate in opposite directions while a shock to the net flow from not in the labour force to unemployment drives the rates in the same direction.
    Keywords: net labour market flows, unemployment rate, participation rate
    JEL: E17 E24 J21 J64
    Date: 2014–05
  7. By: Schurer, Stefanie (University of Sydney)
    Abstract: Policy-makers worldwide are embarking on school programmes aimed at boosting students' resilience. One facet of resilience is a belief about cause and effect in life, locus of control. I test whether positive control beliefs work as a psychological buffer against health shocks in adulthood. To identify behavioural differences in labour supply, I focus on a selected group of full-time employed men of working age and similar health. Men with negative control beliefs, relative to men with positive beliefs, are 230-290% more likely to work part-time or drop out of the labour market after a health shock. In old age men with negative control beliefs are by a factor of 2.7 more likely to die after a health shock. The heterogeneous labour supply responses are also observed for other non-cognitive skills, but only for the ones which correlate with control beliefs. Interventions aimed at correcting inaccurate beliefs and negative perceptions may be a low-cost tool to moderate rising public expenditures on social protection and health care.
    Keywords: non-cognitive skills, locus of control, labor supply, mortality, health shocks, SOEP
    JEL: I12 J24
    Date: 2014–05
  8. By: Salverda, Wiemer (University of Amsterdam); Checchi, Daniele (University of Milan)
    Abstract: Considering the contribution of the distribution of individual wages and earnings to that of household incomes we find two separate literatures that should be brought together, and bring 'new institutions' into play. Growing female employment, rising dual-earnership and part-time employment underline its relevance. We discuss the measurement of wage inequality, data sources, and stylized facts of wage dispersion for rich countries. The literature explaining the dispersion of wage rates and the role of institutions is evaluated, from the early 1980s to the recent literature on job polarization and tasks as well as on the minimum wage. Distinguishing between supply-and-demand approaches and institutional ones, we find the former challenged by the empirical measurement of technological change and a risk of ad hoc additions, without realizing their institutional preconditions. The institutional approach faces an abundance of institutions without a clear conceptual delineation of institutions and their interactions. Empirical cross-country analysis of the correlation between institutional measures and wage inequality incorporates unemployment and working hours dynamics, discussing the problems of matching individuals to their relevant institutional framework. Minimum wage legislation and active labour market policies come out negatively correlated to earnings inequality in US and EU countries.
    Keywords: labour-market institutions, household labour supply, hourly wages, hours worked, annual earnings, dispersion, inequality measures, household incomes, minimum wage, unions, employment protection
    JEL: D02 D13 D31 J22 J31 J51 J52
    Date: 2014–05
  9. By: Carla Calero; Veronica Gonzales; Yuri Soares; Jochen Kluve; Carlos Henrique Corseuilt
    Abstract: This paper provides findings of a small-scale, innovative labor training program that uses expressive arts and theatre as a pedagogical tool. The corresponding life skills training component is combined with a technical component teaching vocational skills. To our knowledge, this is the first paper to rigorously evaluate the effectiveness of a training program constructed around expressive arts. Using a randomized assignment of favela youth into program and control groups, we look at the short-run treatment effects on a comprehensive set of outcomes including employment and earnings as well as measures of personality traits and risk behavior.
    Keywords: Labor market training; youths; randomized controlled trial; life skills
    JEL: J24 J68 I38
    Date: 2014–05

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