nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2014‒08‒02
eleven papers chosen by
Joseph Marchand
University of Alberta

  1. Aggregate Demand, Idle Time, and Unemployment By Pascal Michaillat; Emmanuel Saez
  2. Green Jobs and Growth in the United States: Green Shoots or False Dawn? By Robert J R Elliott; Joanne K Lindley
  3. Behind and beyond the (headcount) employment rate By Andrea Brandolini; Eliana Viviano
  4. Regional Variations in Labor Demand Elasticities: Evidence from U.S. Counties By Maiti, Abhradeep; Indra, Debarshi
  5. Industry-level labour demand elasticities across the Eurozone: will there be any gain after the pain of internal devaluation? By Antonis Adam; Thomas Moutos
  6. Why firms avoid cutting wages : survey evidence from European firms By Du Caju, Philip; Kosma, Theodora; Lawless, Martina; Messina, Julian; Room, Tairi
  7. Women’s wages and fertility revisited. Evidence from Norway By Tom Kornstad; Marit Rønsen
  8. Employment and Wage Insurance within Firms: Worldwide Evidence By Andrew Ellul; Marco Pagano; Fabiano Schivardi
  9. Trade, Wages, and Collective Bargaining: Evidence from France. By J. Carluccio; D. Fougère; E. Gautier
  10. Should Student Employment Be Subsidized? Conditional Counterfactuals and the Outcomes of Work-Study Participation By Judith Scott-Clayton; Veronica Minaya
  11. The Search and Matching Equilibrium in an Economy with an Informal Sector: A Positive Analysis of Labor Market Policies By Luz Adriana Flórez

  1. By: Pascal Michaillat (London School of Economics (LSE), Economics Department; Centre for Macroeconomics (CFM)); Emmanuel Saez (University of California-Berkeley, Department of Economics)
    Abstract: This paper develops a model of unemployment fluctuations. The model keeps the architecture of the Barro and Grossman [1971] general disequilibrium model but replaces the disequilibrium framework on the labor and product markets by a matching framework. On the product and labor markets, both price and tightness adjust to equalize supply and demand. There is one more variable than equilibrium condition on each market, so we consider various price mechanisms to close the model, from completely flexible to completely rigid. With some price rigidity, aggregate demand influences unemployment through a simple mechanism: higher aggregate demand raises the probability that firms find customers, which reduces idle time for firms’ employees and thus increases labor demand, which in turn reduces unemployment. We use the comparative-statics predictions of the model together with empirical measures of quantities and tightnesses to re-examine the origins of labor market fluctuations. We conclude that (1) price and real wage are not fully flexible because product and labor market tightness fluctuate significantly; (2) fluctuations are mostly caused by labor demand and not labor supply shocks because employment is positively correlated with labor market tightness; and (3) labor demand shocks mostly reflect aggregate demand and not technology shocks because output is positively correlated with product market tightness.
    Date: 2014–07
  2. By: Robert J R Elliott; Joanne K Lindley
    Abstract: Green growth is increasingly being seen as a means of simultaneously meeting current and future climate change obligations and reducing unemployment. This paper uses detailed industry-level data from the Bureau of Labor Statistic's Green Goods and Services survey to examine how the provision of green goods and services has affected various aspects of the US economy. Our descriptive results reveal that those states and industries that were relatively green in 2010 became even greener in 2011. To investigate further we include green goods and services in a production function. The results show that between 2010 and 2011 industries that have increased their share of green employment have reduced their productivity although this negative correlation with productivity was only for the production of green goods and not for the supply of green services. In further analysis we investigate skill-technology complementarities in the production of green goods and services and show that industries that increased their provision of green goods and services grew more slowly, reduced their expenditure on technology inputs and increased their demand for medium educated workers, whilst simultaneously reducing their demand for low skilled workers.
    Keywords: Green Goods and Services; Productivity; Employment
    JEL: Q4 Q3
    Date: 2014–07
  3. By: Andrea Brandolini (Bank of Italy); Eliana Viviano (Bank of Italy)
    Abstract: This paper argues that we need more general statistical indices to analyse European labour markets. First, the paper discusses some normative aspects implicit in the current definition of the employment rate, which is a fundamental policy target in the new Europe 2020 strategy. Second, it proposes a class of generalised indices based on work intensity, as approximated by the total annual hours of work relative to a benchmark value. Third, it derives household-level employment indices within a consistent framework. These indices provide a more nuanced picture of the European labour markets, which better reflects the diversity in the use of part-time and fixed-term jobs as well as other factors affecting the distribution of work across and within households.
    Keywords: employment rate, jobless household rate, work intensity
    JEL: J21 E24
    Date: 2014–07
  4. By: Maiti, Abhradeep; Indra, Debarshi
    Abstract: We use a large panel dataset covering the years 1988 to 2010 to estimate county specific total wage elasticities of labor demand for four highly aggregated industries in the United States. Our industries are construction, finance/real estate/service, manufacturing, and retail trade, which together employ on average over eighty percent of the U.S. national labor force per year. We use both the conventional constant coefficient panel data model and a random coefficients panel data model to estimate labor demand elasticities in various industries. We find the labor demand curves in all the industries studied to be downward sloping. We also find significant evidence that the total wage elasticity of labor demand exhibits regional variation. The labor demand estimates obtained in this study are useful to investigate the differential impact of various shocks and policy changes on the labor market. As an example, we use the estimated county specific labor demand elasticities to identify the impact of union membership and right to work laws on labor demand. We show that labor demand tends to become less elastic with higher union membership rates. We also find that labor demand becomes more elastic if a right to work law is in place.
    Keywords: Labor Demand Elasticity, Random Parameter Model, Union Membership, Right to Work Law
    JEL: C35 J20 J23 J50 R14 R15 R21 R41
    Date: 2014–07–24
  5. By: Antonis Adam (University of Ioannina); Thomas Moutos (Athens University fo Economics and Business)
    Abstract: In this paper we estimate disaggregated labour demand equations using panel data involving observations across time (1970-2007) for twenty-three industries across eleven euro area countries. By using the EU KLEMS database, which provides data across countries, we provide industry-by-industry estimates of the labour demand function. The values of our estimated (own-price) elasticities of labour demand are substantial, and in accordance with the findings of the empirical literature. Independently of whether we use level or time-differenced data, the (absolute value of the) estimated conditional elasticities are bracketed in the interval [0.05, 0.80], with the (un-weighted) mean elasticity across the various methods ranging from 0.26 to 0.43. The values of the estimated unconditional elasticities are similar in size and range, and the same holds true for country-specific wage-elasticities of labour demand. Our results indicate that the wage declines experienced in the periphery countries of the euro area can, when the contractionary credit and budgetary policies come to an end, have a non-negligible, albeit modest, effect on future employment growth.
    Keywords: labour demand; wages; international trade; euro area
    JEL: J23
    Date: 2014–07
  6. By: Du Caju, Philip; Kosma, Theodora; Lawless, Martina; Messina, Julian; Room, Tairi
    Abstract: Firms very rarely cut nominal wages, even in the face of considerable negative economic shocks. This paper uses a unique survey of fourteen European countries to ask firms directly about the incidence of wage cuts and to assess the relevance of a range of potential reasons for why the firms avoid cutting wages. The paper examines how firm characteristics and collective bargaining institutions affect the relevance of each of the common explanations put forward for the infrequency of wage cuts. Concerns about the retention of productive staff and a lowering of morale and effort were reported as key reasons for downward wage rigidity across all countries and firm types. Restrictions created by collective bargaining were found to be an important consideration for firms in Western European (EU-15) countries but were one of the lowest ranked obstacles in the new EU member states in Central and Eastern Europe.
    Keywords: Labor Markets,Labor Policies,Microfinance,Labor Management and Relations,Income
    Date: 2014–07–01
  7. By: Tom Kornstad; Marit Rønsen (Statistics Norway)
    Abstract: Since the 1960s, Beckers’ New Home Economics has provided a central theoretical framework for studies of fertility behaviour. New Home Economics predict a negative effect of female wages on fertility. This prediction has been tested in a number of studies over the past decades, but the results are far from unanimous. In this paper we review past evidence of the impact of female wages on their childbearing behaviour and supply new evidence from Norway. We estimate a simultaneous hazard rate model of transitions to first, second and third birth, including predicted wage as a time-dependent variable. Using a very large dataset covering all women born in Norway during the period 1955-74, we find that timing of births is associated with wage changes. The wage effect on the log hazard is U-shaped for all the four 5-year cohorts we are studying, but the effect varies across cohorts and parity. We also find that the relationship between timing of births and wages are not very sensitive to the omission of the women’s non-labour income.
    Keywords: female fertility; wages; non-labor income; hazard model
    JEL: J13 J30
    Date: 2014–06
  8. By: Andrew Ellul (Indiana University); Marco Pagano (Università di Napoli Federico II CSEF, EEIF, CEPR and ECGI); Fabiano Schivardi (LUISS, EIEF and CEPR)
    Abstract: We investigate the determinants of firms’ implicit employment and wage insurance to employees against industry-level and idiosyncratic shocks. We rely on differences between family and non-family firms to identify the supply of insurance, and between national public insurance programs to gauge workers’ demand for insurance. Using firm-level data from 41 countries, we find that family firms provide greater employment protection but less wage stability. Employment protection comes at a price: family firms pay 5 percent lower wages, controlling for country, industry and time effects. The additional protection afforded by family firms is greater, and the wage discount larger, the less generous the public unemployment insurance program, indicating that firm and government employment insurance are substitutes. The cross-country evidence is broadly confirmed by Italian employee-employer matched data, which also show that in family firms the adjustment to shocks occurs mostly through the hiring margin, while separations are not responsive to shocks. JEL Classification: G31, G32, G38, H25, H26, M40.
    Keywords: risk-sharing, insurance, social security, unemployment, wages, family firms.
    Date: 2014–07–22
  9. By: J. Carluccio; D. Fougère; E. Gautier
    Abstract: Using a unique French firm-level dataset, we study how international trade affects the wage bargaining process at the firm level. Using instrumental variables techniques, we find that exports shocks have a positive effect on the probability that a firm-level wage agreement is signed, while shocks increasing imports of finished goods have the opposite effect. Exports increase wages for all occupational categories, whereas offshoring has heterogeneous effects. In firms where wage agreements are frequently signed, the export wage premium is larger, and blue-collar workers are protected against the negative impact of offshoring on wages.
    Keywords: trade, wages, collective bargaining.
    JEL: F16 J51 E24
    Date: 2014
  10. By: Judith Scott-Clayton; Veronica Minaya
    Abstract: Student employment subsidies are one of the largest types of federal employment subsidies, and one of the oldest forms of student aid. Yet it is unclear whether they help or harm students’ long term outcomes. We present a framework that decomposes overall effects into a weighted average of effects for marginal and inframarginal workers. We then develop an application of propensity scores, which we call conditional-counterfactual matching, in which we estimate the overall impact, and the impact under two distinct counterfactuals: working at an unsubsidized job, or not working at all. Finally, we estimate the effects of the largest student employment subsidy program—Federal Work-Study (FWS)—for a broad range of participants and outcomes. Our results suggest that about half of FWS participants are inframarginal workers, for whom FWS reduces hours worked and improves academic outcomes, but has little impact on future employment. For students who would not have worked otherwise, the pattern of effects reverses. With the exception of first-year GPA, we find scant evidence of negative effects of FWS for any outcome or subgroup. However, positive effects are largest for lower-income and lower-SAT subgroups, suggesting there may be gains to improved targeting of funds.
    JEL: I22 I28 J24
    Date: 2014–07
  11. By: Luz Adriana Flórez
    Abstract: This paper contributes to the theoretical analysis of the informal sector in the search and matching framework. Building upon the work of Albrecht et al. (2009), where the informal sector consists of unregulated self-employment, I describe the search and matching equilibrium in an economy with an informal sector where workers are risk neutral and the government can observe when a worker is formal and informal. In this case I solve the matching equilibrium by introducing three policies: unemployment benefits, a formal lump sum tax, and a job creation subsidy. I analyze the effects of these policies on unemployment rates, formal employment and informal employment. I show that these policies affect the incentives of workers to be formal or informal changing the composition of these two types of workers in the labor market. Classification JEL: J46; J65; J68
    Date: 2014–07

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