nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2014‒08‒16
seven papers chosen by
Joseph Marchand
University of Alberta

  1. The Labor Supply Of Self-Employed Workers: The Choice Of Working Hours In Worker Co-Ops By John Pencavel
  2. The Performance Pay Premium: How Big Is It and Does It Affect Wage Dispersion? By Bryson, Alex; Forth, John; Stokes, Lucy
  3. The Effects of Reducing the Entitlement Period to Unemployment Insurance Benefits By De Groot, Nynke; van der Klaauw, Bas
  4. Formal Education Versus Learning-by-Doing By Gavrel, Frédéric; Lebon, Isabelle; Rebiere, Therese
  5. Transitions in a West African Labour Market: The Role of Family Networks By Nordman, Christophe Jalil; Pasquier-Doumer, Laure
  6. The Prison Boom and the Lack of Black Progress after Smith and Welch By Derek Neal; Armin Rick
  7. Taxing top earners: a human capital perspective By Badel, Alejandro; Huggett, Mark

  1. By: John Pencavel (Stanford University)
    Abstract: If workers in cooperatives are like workers in conventional workplaces, they care about the length of their working hours. In this paper, their choice of hours is characterized as a conventional labor supply decision and a familiar hours-wage relationship is derived. This is estimated using mill-year observations on the plywood co-ops in the Pacific Northwest. The results are compared with those from the labor supply behavior of self-employed workers and with those in capitalist plywood mills.
    Keywords: labor supply, hours, worker co-ops
    JEL: J22 J54
    Date: 2014–08
  2. By: Bryson, Alex (National Institute of Economic and Social Research (NIESR)); Forth, John (National Institute of Economic and Social Research (NIESR)); Stokes, Lucy (National Institute of Economic and Social Research (NIESR))
    Abstract: Using nationally representative linked employer-employee data we find one-quarter of employees in Britain are paid for performance. The log hourly wage gap between performance pay and fixed pay employees is .36 points. This falls to .15 log points after controlling for observable demographic, job and workplace characteristics. It falls still further to .10 log points when comparing "like" employees in the same workplace, indicating that performance pay contracts are used in higher paying workplaces. The premium rises markedly as one moves up the wage distribution: it is seven times higher at the 90th percentile than it is at the 10th percentile in the wage distribution (.42 log points compared to .06 log points).
    Keywords: wages, wage inequality, performance pay, bonuses
    JEL: J33
    Date: 2014–07
  3. By: De Groot, Nynke (Free University Amsterdam); van der Klaauw, Bas (VU University Amsterdam)
    Abstract: This paper exploits a substantial reform of the Dutch UI law to study the effect of the entitlement period on job finding and subsequent labor market outcomes. Using detailed administrative data covering the full population we find that reducing the entitlement period increases the job finding rate, but decreases the job quality. Unemployed workers accept more often temporary jobs with lower wages and fewer working hours. Therefore, they also change jobs more frequently. The reform did not affect total post-unemployment earnings indicating that the positive effects on job finding and job turnover cancel out the negative effects on job quality. We also observe a spike in job finding around benefits exhaustion even, although more modest, for individuals who do not experience a drop in benefits level when moving to welfare.
    Keywords: unemployment benefits entitlement, job finding, job quality, difference-in-differences, duration model
    JEL: J64 J65 C21 C41
    Date: 2014–07
  4. By: Gavrel, Frédéric (University of Caen); Lebon, Isabelle (University of Caen); Rebiere, Therese (CNAM, Paris)
    Abstract: The efficiency of educational choices is studied in a search-matching model where individuals face a tradeoff: acquiring formal education or learning while on the job. When their education effort is successful, newcomers directly obtain a high-skill job; otherwise, they begin with a low-skill job, learn-by-doing and then search while on-the-job for a high-skill job. Low-skill firms suffer from hold-up behavior by high-skill firms. The low-skill sector is insufficiently attractive and individuals devote too much effort to formal education. A self-financing tax and subsidy policy restores market efficiency.
    Keywords: formal education, learning-by-doing, market efficiency, on-the-job search, search unemployment
    JEL: H21 I20 J21 J64 J68
    Date: 2014–07
  5. By: Nordman, Christophe Jalil (IRD, DIAL, Paris); Pasquier-Doumer, Laure (IRD, DIAL, Paris)
    Abstract: This paper sheds light on the role of family networks in the dynamics of a West African labour market, i.e. in the transitions from unemployment to employment, from wage employment to self-employment, and from self-employment to wage employment. It investigates the effects of three dimensions of the family network on these transitions: its structure, the strength of ties and the resources embedded in the network. For this purpose, we use a first-hand survey conducted in Ouagadougou on a representative sample of 2000 households. Using event history data and very detailed information on family network, we estimate proportional hazard models for discrete-time data. We find that family networks have a significant effect on the dynamics of workers in the labour market and that this effect differs depending on the type of transition and the considered dimension of the family network. The network size appears to not matter much in the labour market dynamics. Strong ties however play a stabilizing role by limiting large transitions. Their negative effect on transitions is reinforced with high level of resources embedded in the network.
    Keywords: family network, labour market dynamics, event history data, survival analysis, Burkina Faso
    JEL: D13 J24 L14
    Date: 2014–07
  6. By: Derek Neal; Armin Rick
    Abstract: More than two decades ago, Smith and Welch (1989) used the 1940 through 1980 census files to document important relative black progress. However, recent data indicate that this progress did not continue, at least among men. The growth of incarceration rates among black men in recent decades combined with the sharp drop in black employment rates during the Great Recession have left most black men in a position relative to white men that is really no better than the position they occupied only a few years after the Civil Rights Act of 1965. A move toward more punitive treatment of arrested offenders drove prison growth in recent decades, and this trend is evident among arrested offenders in every major crime category. Changes in the severity of corrections policies have had a much larger impact on black communities than white communities because arrest rates have historically been much greater for blacks than whites.
    JEL: J01 J31 K14
    Date: 2014–07
  7. By: Badel, Alejandro (Federal Reserve Bank of St. Louis); Huggett, Mark (Georgetown University)
    Abstract: We assess the consequences of substantially increasing the marginal tax rate on U.S. top earners using a human capital model. The top of the model Laffer curve occurs at a 53 percent top tax rate. Tax revenues and the tax rate at the top of the Laffer curve are smaller compared to an otherwise similar model that ignores the possibility of skill change in response to a tax reform. We also show that if one applies the methods used by Diamond and Saez (2011) to provide quantitative guidance for setting the tax rate on top earners to model data then the resulting tax rate exceeds the tax rate at the top of the model Laffer curve.
    Keywords: Human Capital; Marginal Tax Rates; Inequality; Laffer Curve
    JEL: D91 E21 H2 J24
    Date: 2014–07–23

This nep-lma issue is ©2014 by Joseph Marchand. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.