nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2014‒07‒21
eleven papers chosen by
Joseph Marchand
University of Alberta

  1. Offshoring and Directed Technical Change By Daron Acemoglu; Gino Gancia; Fabrizio Zilibotti
  2. Crime Scars: Recessions and the Making of Career Criminals By Brian Bell; Anna Bindler; Stephen Machin
  3. Time Use and Productivity: The Wage Returns to Sleep By Gibson, Matthew; Shrader, Jeffrey
  4. Two Steps Forward - One Step Back?: Evaluating Contradicting Child Care Policies in Germany By Kai-Uwe Müller; Katharina Wrohlich
  5. Not in my Community: Social Pressure and the Geography of Dismissals By Brunello, Giorgio; Bassanini, Andrea; Caroli, Eve
  6. Who Benefits from State Corporate Tax Cuts? A Local Labor Markets Approach with Heterogeneous Firms By Juan Carlos Suárez Serrato; Owen Zidar
  7. Competition and Screening with Skilled and Motivated Workers By F. Barigozzi; N. Burani
  8. Examining Determinants of Foreign Wage Premiums in China By Theresa M. Greaney; Yao Li
  9. Some estimates for income elasticities of leisure activities in the United States By González Chapela, Jorge
  10. What Happens When Employers are Free to Discriminate? Evidence from the English Barclays Premier Fantasy Football League By Alex Bryson; Arnaud Chevalier
  11. Unhappy Cities By Edward L. Glaeser; Joshua D. Gottlieb; Oren Ziv

  1. By: Daron Acemoglu; Gino Gancia; Fabrizio Zilibotti
    Abstract: We study the short- and long-run implications of offshoring on innovation, technology adoption, wage and income inequality in a Ricardian model with directed technical change. In our model, profit maximization determines both the extent of offshoring and the direction of technological progress. A fall in the cost of offshoring induces technical change with an ambiguous factor bias. When the initial offshoring cost is high, an increase in offshoring opportunities triggers a transition with falling real wages for unskilled workers in the West, skill-biased technical change and rising skill premia worldwide. When the offshoring cost is sufficiently low, instead, further increases in offshoring opportunities induce technical change biased in favor of the unskilled workers and may lower the skill premium. Although offshoring improves the welfare of workers in the East, it may benefit or harm unskilled workers in the West depending on parameters, the level of offshoring and the equilibrium growth rate.
    Keywords: China, directed technical change, offshoring, productivity growth, skill premium
    JEL: F43 O31 O33
    Date: 2014–06
  2. By: Brian Bell; Anna Bindler; Stephen Machin
    Abstract: Recessions lead to short-term job loss, lower levels of happiness and decreasing income levels. There is growing evidence that workers who first join the labour market during economic downturns suffer from poor job matches that have a sustained detrimental effect on their wages and career progression. This paper uses a range of US and UK data to document a more disturbing long-run effect of recessions: young people who leave school in the midst of recessions are significantly more likely to lead a life of crime than those graduating into a buoyant labour market. These effects are long lasting and substantial.
    Keywords: Crime, recessions, unemployment
    JEL: J64 K42
    Date: 2014–07
  3. By: Gibson, Matthew; Shrader, Jeffrey
    Abstract: While economists have long been interested in effects of health and human capital on productivity, less attention has been paid to the influence of time use. We investigate the productivity effects of the single largest use of time--sleep. Because sleep influences performance on memory and focus intensive tasks, it plausibly affects economic outcomes. We identify the effect of sleep on wages by exploiting the relationship between sunset time and sleep duration. Using a large, nationally representative set of time use diaries from the United States, we provide the first causal estimates of the impact of sleep on wages: a one-hour increase in long-run average sleep increases wages by 16%, equivalent to more than one year of schooling. We also document the nonlinearity of the sleep-wage relationship. Our results highlight the economic importance of sleep and pose potentially fruitful questions about the effects of time use on labor market outcomes. (JEL No. J22, J24, J31)
    Keywords: Social and Behavioral Sciences
    Date: 2014–07–14
  4. By: Kai-Uwe Müller; Katharina Wrohlich
    Abstract: We apply a structural model of mothers' labor supply and child care choices to evaluate the effects of two childcare reforms in Germany that were introduced simultaneously in August 2013. First, a legal claim to subsidized child care became effective for all children aged one year or older. Second, a new benefit called 'Betreuungsgeld' came into effect that is granted to families who do not use public or publicly subsidized child care. Both reforms target children of the same age group and are unconditional on the parents' income or employment status, yet affect mothers' incentives for labor supply and child care choices in opposite directions. Our model facilitates estimating the joint reform impact as well as disentangling the individual effects of both policies. A comprehensive data set with information on labor supply, the use of and potential access restrictions to various child care arrangements provides the basis for the empirical analysis. We find the overall effect of both reforms to be small but positive as far as mother's labor supply and the use of formal care is concerned. The legal claim's positive impact on mothers' labor supply and the use of formal child care is largely offset by the negative effect on both outcomes resulting from the introduction of the 'Betreuungsgeld'.
    Keywords: Family policy, labor supply, child care, policy evaluation, structural model
    JEL: J22 J18 H31
    Date: 2014
  5. By: Brunello, Giorgio; Bassanini, Andrea; Caroli, Eve
    Abstract: There is growing evidence that social pressure shapes firms' behavior. Given how sensitive communities are to downsizing, this suggests that firms are likely to be under strong social pressure when considering reducing employment. Using French linked employer-employee data, we show that social pressure induces firms to refrain from dismissing at short distance from their headquarters. More specifically, we find that, within firms, secondary establishments located further away from headquarters have higher dismissal rates than those located closer, taking into account the possible endogeneity of plant location. We also find that the positive effect of distance on dismissals increases with the visibility of the firm in the local community of its headquarters. This effect is also stronger the greater the degree of selfishness of the community in which the headquarters are located. This suggests that local social pressure at headquarters is a key determinant of the positive relationship between distance to headquarters and dismissals. We show that our results cannot be entirely accounted for by alternative explanations of the distance-dismissal relationship that are put forward in the literature.
    Keywords: Personnel Management; Labor Demand; employment policies; social pressure;
    JEL: M12 M51 J23 J63 R12
    Date: 2014–06
  6. By: Juan Carlos Suárez Serrato; Owen Zidar
    Abstract: This paper estimates the incidence of state corporate taxes on workers, landowners, and firm owners in a spatial equilibrium model in which corporate taxes affect the location choices of both firms and workers. Heterogeneous, location-specific productivities and preferences determine the mobility of firms and workers, respectively. Owners of monopolistically competitive firms receive economic profits and may bear the incidence of corporate taxes as heterogeneous productivity can make them inframarginal in their location choices. We derive a simple expression for equilibrium incidence as a function of a few estimable parameters. Using variation in state corporate tax rates and apportionment rules, we estimate the reduced-form effects of tax changes on firm and worker location decisions, wages, and rental costs. We then use minimum distance methods to recover the parameters that determine equilibrium incidence as a function of these reduced-form effects. In contrast to previous assumptions of infinitely mobile firms and perfectly immobile workers, we find that firms are only approximately twice as mobile as workers over a ten-year period. This fact, along with equilibrium impacts on the housing market, implies that firm owners bear roughly 40% of the incidence, while workers and land owners bear 35% and 25%, respectively. Finally, we derive revenue-maximizing state corporate tax rates and discuss interactions with other local taxes and apportionment formulae.
    JEL: F22 F23 H2 H22 H25 H32 H71 J23 J3 R23 R30 R58
    Date: 2014–07
  7. By: F. Barigozzi; N. Burani
    Abstract: We study optimal contracts offered by two firms competing for the exclusive services of one worker, who is privately informed about her ability and her motivation. Firms differ both in their production technology and in the mission they pursue and a motivated worker is keen to be hired by the mission-oriented firm. We find that the matching of worker types to firms is always Pareto-efficient. When the difference in firms’ technology is high, only the most efficient firm is active. When the difference is not very high, then agent types sort themselves by motivation: the mission-oriented firm hires motivated types and the profit-oriented firm employs non-motivated ones, independently of ability. Effort provision is higher when the worker is hired by the mission-oriented firm, but a compensating wage differential might exist: the motivated worker is paid less by the mission-oriented firm. Such an earnings penalty is driven entirely by motivation and is increasing in ability.
    JEL: D82 D86 J31 M55
    Date: 2014–06
  8. By: Theresa M. Greaney (Department of Economics, University of Hawaii at Manoa); Yao Li (School of Management and Economics, University of Electronic Science and Technology of China)
    Abstract: We estimate foreign ownership wage premiums for every 3-digit manufacturing industry in China and discover a wide range of premiums both for so-called “foreign†ownership and for overseas Chinese ownership of firms. Foreign ownership generates larger and more prevalent wage premiums than overseas Chinese ownership of firms, but both types of foreign ownership produce wage premiums that respond similarly in hypothesis testing of determinants. Using the number of computers per worker as an indicator of a firm’s technology level, we find support in 76-78% of industries for the hypothesis that foreign firms pay higher wages to reduce the risk of worker turnover and the accompanying technology leakage to domestic rivals. However, this determinant explains only 5-6% of the foreign wage premium, on average. We find the most intensive support for the “fair wage†hypothesis that foreign firms pay higher wages because they are more profitable than domestic firms and workers in more profitable firms expect to be paid more, otherwise they will shirk. This hypothesis explains an average of 8-9% of the foreign wage premiums, with support for the hypothesis found in 72-75% of the industries using firm’s total profits per worker as the added wage determinant. Intangible assets and training costs were found to be much weaker individual determinants of foreign wage premiums. When we consider the best combination of explanatory variables to include in each industry’s wage regression, we find support for our combined hypotheses in the vast majority of industries, but we still find large residual wage premiums attached to foreign ownership in China.
    Keywords: FDI, foreign ownership, wages, China
    JEL: F16 F23 J31
    Date: 2014–06
  9. By: González Chapela, Jorge
    Abstract: The empirical classification of leisure activities into luxuries, necessities, or inferior activities is useful for predicting the impact of economic development or life-cycle variations in wages on the organization of people’s leisure. We take a step in that direction. We present theoretical underpinnings to the investigation of leisure-income responses and conduct an empirical examination of four broad activities using a recently collected cross-section of observations on time use in the US. Findings suggest that consumers endowed with more income opt to improve the quality of their leisure activities but not to increase (or increase only slightly) the time spent on them. A positive, direct effect of education on active leisure stemming mainly from men’s behavior is also found.
    Keywords: Engel aggregation; empirical time-demand functions; income elasticities of time use; American Time Use Survey.
    JEL: C26 D12 J22
    Date: 2014–07–14
  10. By: Alex Bryson; Arnaud Chevalier
    Abstract: Research on employers' hiring discrimination is limited by the unlawfulness of such activity. Consequently, researchers have focused on the intention to hire. Instead, we rely on a virtual labour market, the Fantasy Football Premier League, where employers can freely exercise their taste for racial discrimination in terms of hiring and firing. The setting allows us to eliminate co-worker, consumer-based and statistical discrimination as potential sources of discrimination, thus isolating the effects of taste-based discrimination. We find no evidence of racial discrimination, either in initial hiring or through the season, in a context where employers are fully aware of current and prospective workers' productivity.
    Keywords: Race, labour market discrimination, football
    JEL: J15 J23 J24 J71 M51
    Date: 2014–07
  11. By: Edward L. Glaeser; Joshua D. Gottlieb; Oren Ziv
    Abstract: There are persistent differences in self-reported subjective well-being across U.S. metropolitan areas, and residents of declining cities appear less happy than other Americans. Newer residents of these cities appear to be as unhappy as longer term residents, and yet some people continue to move to these areas. While the historical data on happiness are limited, the available facts suggest that cities that are now declining were also unhappy in their more prosperous past. One interpretation of these facts is that individuals do not aim to maximize self-reported well-being, or happiness, as measured in surveys, and they willingly endure less happiness in exchange for higher incomes or lower housing costs. In this view, subjective well-being is better viewed as one of many arguments of the utility function, rather than the utility function itself, and individuals make trade-offs among competing objectives, including but not limited to happiness.
    JEL: D00 I00 J00 R00
    Date: 2014–07

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