nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2014‒08‒09
nine papers chosen by
Joseph Marchand
University of Alberta

  1. Structural Labor Supply Models and Wage Exogeneity By Max Löffler; Andreas Peichl; Sebastian Siegloch
  2. Towards a Micro-Founded Theory of Aggregate Labor Supply By Andres Erosa; Luisa Fuster; Gueorgui Kambourov
  4. Do Wages Continue Increasing at Older Ages? Evidence on the Wage Cushion in the Netherlands By Rob Euwals; Anja Deelen
  5. Transferability of Human Capital and Immigrant Assimilation: An Analysis for Germany By Leilanie Basilio. Thomas K. Bauer; Anica Kramer
  6. Financial frictions, occupational choice and economic inequality By Lian Allub; Andres Erosa Etchebehere
  7. Effort Elicitation, Wage Differentials and Income Distribution in a Wage-led Growth Regime By Jaylson Jair da Silveira; Gilberto Tadeu Lima
  8. Financial incentives and loan officer behavior: Multitasking and allocation of effort under an incomplete contract By Behr, Patrick; Drexler, Alejandro; Gropp, Reint; Guettler, Andre
  9. Regional Economic Impacts of the Shale Gas and Tight Oil Boom: A Synthetic Control Analysis By Munasib, Abdul; Rickman, Dan S.

  1. By: Max Löffler; Andreas Peichl; Sebastian Siegloch
    Abstract: There is still considerable dispute about the magnitude of labor supply elasticities. While differences in micro and macro estimates are recently attributed to frictions and adjustment costs, we show that relatively low labor supply elasticities derived from microeconometric models can also be explained by modeling assumptions with respect to wages. Specifically, we estimate 3,456 structural labor supply models each representing a plausible combination of frequently made choices. While most model assumptions do not systematically affect labor supply elasticities, our analysis shows that the results are very sensitive to the treatment of wages. In particular, the often-made but highly restrictive independence assumption between preferences and wages is key. To overcome this restriction, we propose a flexible estimation strategy that nests commonly used models. We show that loosening the exogeneity assumption leads to labor supply elasticities that are much higher.
    Keywords: labor supply, elasticity, random utility models, wages
    JEL: C25 C52 H31 J22
    Date: 2014
  2. By: Andres Erosa; Luisa Fuster; Gueorgui Kambourov
    Abstract: We build a heterogeneous life-cycle model which captures a large number of salient features of individual labor supply over the life cycle, by education, both along the intensive and extensive margins. The model provides an aggregation theory of individual labor supply, firmly grounded on individual-level micro evidence, and is used to study the aggregate labor supply responses to changes in the economic environment. We find that the aggregate labor supply elasticity to a transitory wage shock is 1.75, with the extensive margin accounting for 62% of the response. Furthermore, we find that the aggregate labor supply elasticity to a permanent-compensated wage change is 0.44.
    Keywords: Aggregate labor supply, intensive margin, extensive margin, life cycle, fixed cost of work, non-linear earnings, precautionary savings, preference heterogeneity
    JEL: D9 E2 E13 E62 J22
    Date: 2014–07–14
  3. By: Patrizia Ordine; Giuseppe Rose (Dipartimento di Economia, Statistica e Finanza, Università della Calabria)
    Abstract: This paper analyzes the process driving graduate workers in undergraduate jobs. Micro and macro perspectives are considered so that the interrelationships between individual mismatch and over-education at the aggregate level are analyzed. The theoretical model highlights that individual mismatch does not necessarily imply that the share of graduates exceeds what is optimally required at the aggregate level. The empirical investigation tests to what extent the individual probability of mismatch is related to the availability of graduates in the labor market. A structural estimation is implemented using a quasi-natural experiment ideally provided by an exogenous expansion of higher education that took place in some Italian regions in the mid ?'90s. Difference-in-Differences models show that in this country an increase in the supply of graduates has actually reduced the individual probability of mismatch which is an effect rationalized by the theory.
    Keywords: Overeducation, mismatch, matching models, difference-in-differences
    JEL: J24 J64 I23
    Date: 2014–07
  4. By: Rob Euwals; Anja Deelen
    Abstract: In this study, we investigate the anatomy of older workers’ wages. The central question is whether the wage cushion—i.e., the difference between actual wages and collectively agreed-upon (maximum) contractual wages—contributes to the fact that wages continue increasing at older ages. We follow the wages of individual workers in twenty-two sectors of industry in the Netherlands using administrative data for the period 2006 – 2010. In the public sector, we find no evidence of a wage cushion. Wage scale ceilings set in collective agreements are guiding for older workers’ wages, and workers earning a contractual wage equal to a wage scale ceiling are not compensated with higher additional wages. In the private sector, we do find evidence of a wage cushion. Wage scale ceilings are less restrictive and workers earning a contractual wage exceeding the highest wage scale ceiling experience higher contractual wage growth. The private sector wage cushion enhances wage differentiation and allows for wages that continue increasing at older ages.
    JEL: C23 J14 J31
    Date: 2014–07
  5. By: Leilanie Basilio. Thomas K. Bauer; Anica Kramer
    Abstract: This paper investigates the transferability of human capital across countries and the contribution of imperfect human capital portability to the explanation of the immigrant-native wage gap. Using data for West Germany, our results reveal that, overall, education and in particular labor market experience accumulated in the home countries of the immigrants receive signifiantly lower returns than human capital obtained in Germany. We further find evidence for heterogeneity in the returns to human capital of immigrants across countries. Finally, imperfect human capital transferability appears to be a major factor in explaining the wage differential between natives and immigrants.
    Keywords: Human Capital, Rate of Return, Immigration, Assimilation
    JEL: J61 J31 J24
    Date: 2014
  6. By: Lian Allub; Andres Erosa Etchebehere
    Abstract: We develop a quantitative theory of entrepreneurship, income inequality, and financial frictions disciplined with household data from Brazil. The theory extends Lucas (1978) by modeling heterogeneity in two skills: -working and managerial skills. Consistently with the evidence, the theory implies three occupational categories: workers, employers, and self-employed entrepreneurs. We find that the removal of financial frictions decreases self-employment rates from 24% to 11% (with small effects on the number of employers), increases aggregate output by 48%, and has non- trivial effects on the distribution of income. We also find that while most households benefit from a reform that eliminates enforcement problems, the majority of employers (about two thirds) lose from the reform. By depressing the demand for labor, limited enforcement depresses the equilibrium wage rate, increasing the profits of employers. Our theory thus suggests that employers in Brazil may have a vested interested in maintaining a status quo with low enforcement.
    Date: 2014–07
  7. By: Jaylson Jair da Silveira; Gilberto Tadeu Lima
    Abstract: Motivated by a considerable (experimental and empirical) evidence on endogenous labor effort and inter- and intra-industry wage differentials, this paper explores implications for income distribution, capacity utilization and economic growth of firms using different strategies to elicit effort (and hence productivity) from workers. The frequency distribution of effort-elicitation strategies in the population of firms is governed by a replicator dynamics that generates wage differential as a long-run, evolutionary equilibrium outcome. Although firms willing to elicit more labor effort have to compensate workers with a higher wage rate, a larger proportion of firms adopting such strategy will not necessarily produce a higher wage share in income and thereby higher rates of capacity utilization and economic growth. The intuition is that, depending on the accompanying rise in average labor productivity, the wage share in income (and hence the aggregate effective demand) may not vary positively with the proportion of firms paying higher wages. Therefore, endogenous labor productivity and wage differentials carry relevant theoretical and policy implications for a wage-led growth regime.
    Keywords: Labor effort; wage differentials; income distribution; capacity utilization; economic growth.
    JEL: O11 O41 J31
    Date: 2014–07–21
  8. By: Behr, Patrick; Drexler, Alejandro; Gropp, Reint; Guettler, Andre
    Abstract: In this paper we investigate the implications of providing loan officers with a compensation structure that rewards loan volume and penalizes poor performance versus a fixed wage unrelated to performance. We study detailed transaction information for more than 45,000 loans issued by 240 loan officers of a large commercial bank in Europe. We examine the three main activities that loan officers perform: monitoring, originating, and screening. We find that when the performance of their portfolio deteriorates, loan officers increase their effort to monitor existing borrowers, reduce loan origination, and approve a higher fraction of loan applications. These loans, however, are of above-average quality. Consistent with the theoretical literature on multitasking in incomplete contracts, we show that loan officers neglect activities that are not directly rewarded under the contract, but are in the interest of the bank. In addition, while the response by loan officers constitutes a rational response to a time allocation problem, their reaction to incentives appears myopic in other dimensions. --
    Keywords: loan officer,incentives,monitoring,screening,loan origination
    JEL: G21 J33
    Date: 2014
  9. By: Munasib, Abdul; Rickman, Dan S.
    Abstract: The dramatic increase in oil and gas production from shale formations has led to intense interest in its impact on local area economies. Exploration, drilling and extraction are associated with direct increases in employment and income in the energy industry, but little is known about the impacts on other parts of local economies. Increased energy sector employment and income can have positive spillover effects through increased purchases of intermediate goods and induced local spending. Negative spillover effects can occur through rising local factor and goods prices and adverse effects on the local area quality of life. Therefore, this paper examines the net economic impacts of oil and gas production from shale formations for key shale oil and gas producing areas in Arkansas, North Dakota and Pennsylvania. The synthetic control method (Abadie and Gardeazabal 2003; Abadie et al., 2010) is used to establish a baseline projection for the local economies in the absence of increased energy development, allowing for estimation of the net regional economic effects of increased shale oil and gas production.
    Keywords: Shale gas; Shale oil; Synthetic control method
    JEL: Q33 R11
    Date: 2014–07–27

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