nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2014‒06‒14
thirteen papers chosen by
Joseph Marchand
University of Alberta

  1. Cross-Sectors Skill Intensity, Productivity and Temporary Employment By Lisi, Domenico; Malo, Miguel
  2. Firm Dynamics and Assortative Matching By Leland D. Crane
  3. Job Displacement Insurance: An Overview By Parsons, Donald O.
  4. Income Inequality, Social Mobility, and the Decision to Drop Out of High School By Melissa S. Kearney; Phillip B. Levine
  5. Math matters: education choices and wage inequality By Andrew Rendall; Michelle Rendall
  6. Personality, IQ, and Lifetime Earnings By Gensowski, Miriam
  7. Compensating the losers of free trade By Zareh Asatryan; Sebastian Braun; Wolfgang Lechthaler; Mariya Mileva; Catia Montagna
  8. The Market for Mules: Risk and Compensation of Cross-Border Drug Couriers By Bjerk, David; Mason, Caleb
  9. Match Made at Birth? What Traits of a Million Swedes Tell Us about CEOs By Keloharju, Matti; Knüpfer, Samuli
  10. Intrinsic Motivations of Public Sector Employees: Evidence for Germany By Dur, Robert; Zoutenbier, Robin
  11. Migration, Education and the Gender Gap in Labour Force Participation By Abdulloev, Ilhom; Gang, Ira N.; Yun, Myeong-Su
  12. Gender Differences in Sorting By Merlino, Luca Paolo; Parrotta, Pierpaolo; Pozzoli, Dario
  13. Employer Attitudes towards Refugee Immigrants By Lundborg, Per; Skedinger, Per

  1. By: Lisi, Domenico; Malo, Miguel
    Abstract: In this article, we study the impact of temporary employment (TE) on productivity and, in particular, we wonder if it differs according to sectors skill intensity. Our data set is an ad-hoc industry-level panel of European countries, which allows to deal with endogeneity problems. Our main result is that TE has a negative impact on productivity, but it is more damaging in skilled sectors. While an increase of 10 percentage points of the share of TE in skilled sectors decrease labour productivity growth about 1-1.5%, in unskilled sectors the decrease would be 0.5-0.8%. This result is robust to changes in the skill intensity index and in the sample composition. We also discuss policy implications of this result for labour market regulation.
    Keywords: Labour productivity, Temporary employment, Skill intensity, Differential effect.
    JEL: J24 J41 O47
    Date: 2014–06–05
  2. By: Leland D. Crane
    Abstract: I study the relationship between firm growth and the characteristics of newly hired workers. Using Census microdata I obtain a novel empirical result: when a given firm grows faster it hires workers with higher past wages. These results suggest that productive, fast-growing firms tend to hire more productive workers, a form of positive assortative matching. This contrasts with prior research that has found negligible or negative sorting between workers and firms. I present evidence that this difference arises because previous studies have focused on cross-sectional comparisons across firms and industries, while my results condition on firm characteristics (e.g. size, industry, or firm fixed effects). Motivated by the empirical findings I develop a search model with heterogeneous workers and firms. The model is the first to study worker-firm sorting in an environment with worker heterogeneity, firm productivity shocks, multi-worker firms, and search frictions. Despite this richness the model is tractable, allowing me to characterize assortative matching, compositional dynamics and other properties analytically. I show that the model reproduces the positive firm growth-quality of hires correlation when worker and firm types are strong complements in production (i.e. the production function is strictly log-supermodular).
    Keywords: Assortative Matching, Firm Growth, Wages, Unemployment, Vacancies, Search Theory, Microdata
    JEL: E24 J31 J63 J64
    Date: 2014–05
  3. By: Parsons, Donald O. (George Washington University)
    Abstract: Earnings losses from permanent job separations are a serious threat to the financial security of long-tenured workers. Job displacement insurance is presumably designed to offset these losses, but evidence suggests that consumption smoothing among the long-tenured displaced is seriously incomplete, at least in lightly regulated labor markets. Unemployment and reemployment wage insurance could fully cover these losses, but are costly to provide. Severance pay has emerged as a supplemental, if much criticized, instrument. Moral hazard limitations on unemployment insurance generosity mean that severance pay functions as scheduled (partial) unemployment insurance and scheduled wage insurance. Consumption smoothing over time through savings and borrowing is less efficient than ideal insurance, but may be preferred in second-best situations. Long-tenured separated workers are older on average, which introduces special problems, but also additional policy options, including early access to retirement accounts.
    Keywords: job displacement, unemployment insurance, wage insurance, severance pay, insurance adequacy, early retirement
    JEL: J65 J41 J33 J08
    Date: 2014–05
  4. By: Melissa S. Kearney; Phillip B. Levine
    Abstract: This paper considers the role that high levels of income inequality and low rates of social mobility play in driving the educational attainment of youth in low-income households in the United States. Using high school degree status from five individual-level surveys, our analysis reveals that low-socioeconomic status (SES) students, and particularly boys, who grow up in locations with greater levels of lower-tail income inequality and lower levels of social mobility are relatively more likely to drop out of high school, conditional on other individual characteristics and contextual factors. The data indicate that this relationship does not reflect alternative characteristics of the place, such as poverty concentration, residential segregation, or public school financing. We propose that the results are consistent with a class of explanations that emphasize a role for perceptions of one’s own identity, position in society, or chances of success. In the end, our empirical results indicate that high levels of lower-tail income inequality and low levels of social mobility hinder educational advancement for disadvantaged youth.
    JEL: D31 I24 J24
    Date: 2014–06
  5. By: Andrew Rendall; Michelle Rendall
    Abstract: SBTC is a powerful mechanism in explaining the increasing gap between educated and uneducated wages. However, SBTC cannot mimic the US within-group wage inequality. This paper provides an explanation for the observed intra-college group inequality by showing that the top decile earners' significant wage growth is underpinned by the link between ex ante ability, math-heavy college majors and highly quantitative occupations. We develop a general equilibrium model with multiple education outcomes, where wages are driven by individuals' ex ante abilities and acquired math skills. A large portion of within-group and general wage inequality is explained by math-biased technical change (MBTC).
    Keywords: Wage inequality, SBTC, college majors, occupations, mathematics abilities
    JEL: E20 E24 E25 I20 I24 J24 J31
    Date: 2014–05
  6. By: Gensowski, Miriam (University of Copenhagen)
    Abstract: Talented individuals are seen as drivers of long-term growth, but how do they realize their full potential? In this paper, I show that even in a group of high-IQ men and women, lifetime earnings are substantially influenced by their education and personality traits. I identify a previously undocumented interaction between education and traits in earnings generation, which results in important heterogeneity of the net present value of education. Personality traits directly affect men's earnings, with effects only developing fully after age 30. These effects play a much larger role for the earnings of more educated men. Personality and IQ also influence earnings indirectly through educational choice. Surprisingly, education and personality skills do not always raise the family earnings of women in this cohort, as women with very high education and IQ are less likely to marry, and thus have less income through their husbands. To identify personality traits, I use a factor model that also serves to correct for prediction error bias, which is often ignored in the literature. This paper complements the literature on investments in education and personality traits by showing that they also have potentially high returns at the high end of the ability distribution.
    Keywords: personality traits, social skills, cognitive skills, returns to education, life-time earnings, Big Five, human capital, factor analysis
    JEL: J24 I24 J16
    Date: 2014–06
  7. By: Zareh Asatryan; Sebastian Braun; Wolfgang Lechthaler; Mariya Mileva; Catia Montagna
    Abstract: Fears of rising wage inequality and job loss loom large in current debates on free trade. Surprisingly, however, there exists little academic research on how to compensate those who lose from free trade. This policy paper reviews the existing theoretical literature on trade and compensation, and derives guidelines on how to design compensation schemes in practice. The existing theoretical literature suggests that active labour market policies, targeted to workers who lose from free trade, are a promising way of compensation. In line with this theoretical recommendation, we find that countries open to free trade also spend more on active labour market policies.
    Keywords: Challenges for welfare system, Globalisation, Labour markets, Policy options, Welfare state
    JEL: F10 F20 J30 J60
    Date: 2014–06
  8. By: Bjerk, David (Claremont McKenna College); Mason, Caleb (Miller Barondess, LLP)
    Abstract: This paper uses a unique dataset to examine the economics of cross-border drug smuggling. Our results reveal that loads are generally quite large (median 30 kg), but with substantial variance within and across drug types. Males and females, as well as U.S. citizens and non-U.S. citizens are all well represented among mules. We also find that mule compensation is substantial (median $1,313), and varies with load characteristics. Specifically, for mules caught with cocaine and meth, pay appears to be strongly correlated to expected sentence if caught, while pay appears to be primarily correlated with load size for marijuana mules, who generally smuggle much larger loads than those smuggling cocaine and meth. We argue that our results suggest that this underground labor market generally acts like a competitive labor market, where a risk-sensitive, reasonably well-informed, and relatively elastic labor force is compensated for higher risk tasks.
    Keywords: illegal markets, compensating wage differentials, drug smuggling, sentencing
    JEL: K42
    Date: 2014–05
  9. By: Keloharju, Matti (Aalto University); Knüpfer, Samuli (London Business School)
    Abstract: This paper analyzes the role three personal traits—cognitive and non-cognitive ability, and height—play in the market for CEOs. We merge data on the traits of more than one million Swedish males, measured at age 18 in a mandatory military enlistment test, with comprehensive data on their income, education, profession, and service as a CEO of any Swedish company. We find that the traits of large-company CEOs are at par or higher than those of other high-caliber professions. For example, large-company CEOs have about the same cognitive ability, and about one-half of a standard deviation higher non-cognitive ability and height than medical doctors. Their traits compare even more favorably with those of lawyers. The traits contribute to pay in two ways. First, higher-caliber CEOs are assigned to larger companies, which tend to pay more. Second, the traits contribute to pay over and above that driven by firm size. We estimate that 2758 percent of the effect of traits on pay comes from CEO’s assignment to larger companies. Our results are consistent with models where the labor market allocates higher-caliber CEOs to more productive positions.
    Keywords: CEO; Cognitive ability; Non-cognitive ability; Height; Compensation; Firm size
    JEL: G30 J24 J31
    Date: 2014–06–03
  10. By: Dur, Robert (Erasmus University Rotterdam); Zoutenbier, Robin (Erasmus University Rotterdam)
    Abstract: We examine differences in altruism and laziness between public sector employees and private sector employees. Our theoretical model predicts that the likelihood of public sector employment increases with a worker's altruism, and increases or decreases with a worker's laziness depending on his altruism. Using questionnaire data from the German Socio-Economic Panel Study, we find that public sector employees are significantly more altruistic and lazy than observationally equivalent private sector employees. A series of robustness checks show that these patterns are stronger among higher educated workers; that the sorting of altruistic people to the public sector takes place only within the caring industries; and that the difference in altruism is already present at the start of people's career, while the difference in laziness is only present for employees with sufficiently long work experience.
    Keywords: public service motivation, altruism, laziness, sorting, public sector employment, personality characteristics
    JEL: H1 J45 M5
    Date: 2014–06
  11. By: Abdulloev, Ilhom (Open Society Institute Assistance Foundation, Tajikistan); Gang, Ira N. (Rutgers University); Yun, Myeong-Su (Tulane University)
    Abstract: Women who want to work often face many more hurdles than men. This is true in Tajikistan where there is a large gender gap in labour force participation. We highlight the role of two factors – international migration and education – on the labour force participation decision and its gender gap. Using probit and decomposition analysis, our investigation shows that education and migration have a significant association with the gender gap in labour force participation in Tajikistan. International emigration from Tajikistan, in which approximately 93.5% of the participants are men, reduces labour force participation by men domestically; increased female education, especially at the university and vocational level, increases female participation. Both women acquiring greater access to education and men increasing their migration abroad contribute to reducing the gender gap.
    Keywords: migration, education, gender gap, labour force participation, Tajikistan
    JEL: J01 J16 O15
    Date: 2014–05
  12. By: Merlino, Luca Paolo; Parrotta, Pierpaolo; Pozzoli, Dario (Department of Economics, Copenhagen Business School)
    Abstract: In this paper, we investigate the sorting of workers in firms to understand gender gaps in labor market outcomes. Using Danish employer-employee matched data, we find strong evidence of glass ceilings in certain firms, especially after motherhood, preventing women from climbing the career ladder and causing the most productive female workers to seek better jobs in more female-friendly firms in which they can pursue small career advancements. Nonetheless, gender differences in promotion persist and are found to be similar in all firms when we focus on large career advancements. These results provide evidence of the sticky floor hypothesis, which, together with the costs associated with changing employer, generates persistent gender gaps.
    Keywords: Sorting; Assortative Matching; Gender Gap; Glass Ceiling; Sticky Floor.
    JEL: J16 J24 J62
    Date: 2014–05–19
  13. By: Lundborg, Per (Swedish Institute for Social Research); Skedinger, Per (Research Institute of Industrial Economics (IFN))
    Abstract: We present a large survey with responses from Swedish firms on their attitudes towards refugees, regarding hiring, job performance, wage setting and discrimination. Generally, firms report positive experiences of having refugees as employees, but we also document a great deal of heterogeneity in attitudes. Firms that ceased to have refugees on the payroll are less satisfied with their job performance, which seems related to poor language skills and less screening of refugees but not to discrimination of them by staff or customers. While most firms agree with statements that wage cuts negatively affect worker cohesion, effort or the quality of applicants, employers who consider such cuts as employment-enhancing tend to not agree.
    Keywords: Refugee immigrants; Labour demand; Discrimination
    JEL: J15 J23 J71
    Date: 2014–05–16

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