nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2014‒11‒22
nine papers chosen by
Joseph Marchand
University of Alberta

  1. “Are we wasting our talent? Overqualification and overskilling among PhD graduates” By Antonio Di Paolo; Ferran Mañé
  2. The effectiveness of fiscal stimuli for working parents By Henk-Wim de Boer; Egbert Jongen; Jan Kabatek
  3. The relation between economic and non-economic incentives to work and employment chances among the unemployed By Nordlund, Madelende; Strandh, Mattias
  4. Job mission as a substitute for monetary incentives: experimental evidence By Lea Cassar
  5. Demanding occupations and the retirement age in the Netherlands By Niels Vermeer; Mauro Mastrogiacomo (DNB; VU; Netspar); Arthur van Soest (Tilburg University; Netspar)
  6. Transmission of preferences and beliefs about female labor market participation : direct evidence on the role of mothers By Jesús M. Carro; Matilde P. Machado; Ricardo Mora
  7. Evaluating the effect of beauty on labor market outcomes: A review of the literature By LIU Xing; SIERMINSKA Eva
  8. The Local Economic Impacts of Hydraulic Fracturing and Determinants of Dutch Disease By Peter Maniloff; Ralph Mastromonaco
  9. Estimating the short run effects of South Africa's Employment Tax Incentive on youth employment probabilities using a difference-in-differences approach By Vimal Ranchhod; Arden Finn

  1. By: Antonio Di Paolo (Faculty of Economics, University of Barcelona); Ferran Mañé (Faculty of Economics, Rovira i Virgili University)
    Abstract: Drawing on a very rich data set from a recent cohort of PhD graduates, we examine the correlates and consequences of qualification and skills mismatch. We show that job characteristics such as the economic sector and the main activity at work play a fundamental direct role in explaining the probability of being well matched. However, the effect of academic attributes seems to be mainly indirect, since it disappears once we control for the full set of work characteristics. We detected a significant earnings penalty for those who are both overqualified and overskilled and also showed that being mismatched reduces job satisfaction, especially for those whose skills are underutilized. Overall, the problem of mismatch among PhD graduates is closely related to demand-side constraints of the labor market. Increasing the supply of adequate jobs and broadening the skills PhD students acquire during training should be explored as possible responses.
    Keywords: overskilling, overqualification, doctors, earnings, job satisfaction JEL classification: I20, J24, J28, J31
    Date: 2014–10
  2. By: Henk-Wim de Boer; Egbert Jongen; Jan Kabatek
    Abstract: We study the relative effectiveness of fiscal stimuli for working parents in an empirical model of household labour supply and childcare use. We use a large and rich administrative dataset for the Netherlands. To promote the labour participation of parents with young children, governments employ a number of fiscal instruments. Prominent examples are childcare subsidies and in-work benefits. However, which policy works best for employment is largely unknown. We study the relative effectiveness of fiscal stimuli for working parents in an empirical model of household labour supply and childcare use. We use a large and rich administrative dataset for the Netherlands. Large-scale reforms in childcare subsidies and in-work benefits in the data period benefit the identification of the parameters. We find that an in-work benefit for secondary earners that increases with income is the most cost-effective way of stimulating total hours worked of parents with young children. Childcare subsidies and a `flat' in-work benefit for secondary earners are somewhat less cost-effective. In-work benefits for both primary and secondary earners are much less cost-effective, since the former are rather unresponsive to financial incentives.
    JEL: C25 C52 H31 J22
    Date: 2014–10
  3. By: Nordlund, Madelende (The Department of Sociology, Umeå University); Strandh, Mattias (The Department of Sociology, Umeå University)
    Abstract: In this study we address the relationship of self-reported reservation wages (RW) (the lowest offered income at which an unemployed persona will accept a job offer), the income replacement rate of unemployment benefit (IRUB) and psychosocial need for employment with job search intensity and reemployment probabilities among unemployed in Sweden in 1996-1997. The results indicate that the RWs reported by the group that we observe over time were relatively stable, but strongly related to IRUB and both the gender and age of the unemployed individuals. Interestingly, IRUB was related to search intensity, but not reemployment probabilities, while the RW was related to reemployment probabilities but not search intensity. These findings suggest that IRUB might be a poor proxy for RWs, in some situations at least. In sharp contrast, psychosocial incentives appeared to be related to both search intensity and reemployment probabilities, indicating a need for a richer understanding of search behaviour and unemployment durations. The data also indicate that the roles of search behaviour and incentives for reemployment probabilities may be exaggerated which, at least under the relatively depressed labour market conditions our data represented, appeared to be much more strongly related to human capital and demand for labour for our study population.
    Keywords: Reservation wage; income replacement rate; psychosocial need of work; job search intensity; human capital; job-chances
    JEL: J64
    Date: 2014–10–14
  4. By: Lea Cassar
    Abstract: Are monetary and non-monetary incentives used as substitutes in motivating effort? I address this question in a laboratory experiment in which the choice of the job charac- teristics (i.e., the mission) is part of the compensation package that principals can use to influence agents' effort. Principals offer contracts that specify a piece rate and a charity - which can be either the preferred charity of the agent, or the one of the principal. The agents then exert a level of effort that generates a profit to the principal and a dona- tion to the specified charity. My results show that the agents exert more effort than the level that maximizes their own pecuniary payoff in order to benefit the charity, especially their preferred one. The principals take advantage of this intrinsic motivation by offering lower piece rates and by using the choice of the charity as a substitute to motivate effort. However, I also find that because of fairness considerations, the majority of principals are reluctant to lower the piece rate below a fair threshold, making the substitution between monetary and non-monetary incentives imperfect. These findings have implications for the design of incentives in mission-oriented organizations and contribute to our understanding of job satisfaction and wage differentials across organizations and sectors.
    Keywords: Mission, intrinsic motivation, incentives, experiment
    JEL: C92 J33 M52 M55
    Date: 2014–10
  5. By: Niels Vermeer; Mauro Mastrogiacomo (DNB; VU; Netspar); Arthur van Soest (Tilburg University; Netspar)
    Abstract: In the policy debate on increasing the statutory retirement age, the issue has been raised to make an exception for workers with demanding occupations, since health considerations may make it unreasonable to expect them to work longer. We use unique Dutch survey data to analyze the general public’s opinions on what are demanding occupations, to what extent it is justified that someone with a demanding occupation can retire earlier, and on the willingness to contribute to an earlier retirement scheme for such occupations through higher taxes. A representative sample of Dutch adults answered several questions about hypothetical persons with five different jobs. Panel data models are used to analyze the answers, accounting for confounding factors affecting the evaluations of the demanding nature of the jobs as well as their reasonable retirement age or willingness to contribute to an early retirement scheme. The Dutch public thinks that workers in demanding occupations should be able to retire earlier. A one standard deviation increase in the perceived demanding nature of an occupation translates into a one year decrease in the reasonable retirement age and a 30 to 40 percentage points increase in the willingness to contribute to an early retirement scheme for that occupation. There is some evidence that respondents whose own job is similar to the occupation they evaluate find this occupation more demanding than other respondents but respondents are also willing to contribute to early retirement of occupations that are not similar to their own.
    JEL: J26 J81 H55
    Date: 2014–10
  6. By: Jesús M. Carro; Matilde P. Machado; Ricardo Mora
    Abstract: Recently, economists have established that culture—defined as a common set of preferences and beliefs —affects economic outcomes, including the levels of female labor force participation. Although this literature has argued that culture is transmitted from parents to children, it has also recognized the difficulty in empirically disentangling the parental transmission of preferences and/or beliefs from other confounding factors, such as technological change or investment in education. Using church registry data from the 18th and 19th centuries, our primary contribution is to interpret the effect of a mother’s labor participation status on that of her daughter as the mother-to-daughter transmission of preferences and/or beliefs that are isolated from confounding effects. Because our data are characterized by abundant non-ignorable missing information, we estimate the participation model and the missing process jointly by maximum likelihood. Our results reveal that the mother’s working status has a large and statistically significant positive effect on the daughter’s probability of working. These findings suggest that intergenerational family transmission of preferences and/or beliefs played a decisive role in the substantial increases in female labor force participation that occurred later.
    Keywords: Female labor market participation, Intergenerational transmission of preferences and/or beliefs, Historical family data, Church registry data, Non-ignorable missingness, Econometric methods for missing data
    JEL: J22 J24 J16 J12
    Date: 2014–10
  7. By: LIU Xing; SIERMINSKA Eva
    Abstract: Examining the effect of beauty on labor market outcomes has become a growing field of labor economics. In fact, the way the labor market rewards physical attractiveness has become an important underlying determinant of wage discrimination, as well as the gender wage gap. In this article, we survey the extensive literature on this topic paying particular attention to the channels through which beauty may affect wage differentials. Overall our survey confirms the existence of a positive association between beauty and labor market outcomes such as earnings and employment opportunities (call-back rates). Further research is needed on the effect of attractiveness within occupations in order to provide more evidence on its productivity-enhancing channel of transmission and the effect this has on the gender wage gap, as well as on the endogeneity of beauty.
    Keywords: Beauty premium; Discrimination; Gender differentials; Occupational sorting; Human capital model; Physical attractiveness; Wages; Productivity; Stereotypes; Cross-country
    Date: 2014–10
  8. By: Peter Maniloff (Division of Economics and Business, Colorado School of Mines); Ralph Mastromonaco (Department of Economics, University of Oregon)
    Abstract: In this paper we quantify the local economic impacts of the development of unconventional shale oil and gas reserves through the controversial extraction procedure known as hydraulic fracturing or ``fracking'' and assess the possibility of the boom creating a ``resource curse'' for resource-rich counties. First, using government local economic data matched to highly detailed national oil and natural gas panel data, we estimate the effect that new ``fracking'' installations have on local job growth and average earnings, controlling for time-varying unobserved determinants of job growth, overall, by industry, and by region. We find that overall employment effects are substantial although smaller than some previous studies. Second, we show that shale development increases wages in manufacturing in counties with relatively tight labor markets and little prior oil and gas industry presence. Increased wages in the manufacturing sector suggests the possibility of a loss of competitiveness in some counties with shale oil and gas resources, raising the specter of a future resource curse.
    Keywords: local employment, job growth, dutch disease, resource curse, hydraulic fracturing, shale gas
    Date: 2014–10
  9. By: Vimal Ranchhod (SALDRU, School of Economics, University of Cape Town); Arden Finn (SALDRU, School of Economics, University of Cape Town)
    Abstract: What effect did the introduction of the Employment Tax Incentive (ETI) have on youth employment probabilities in South Africa in the short run? The ETI came into effect on the 1st of January 2014. Its purpose is to stimulate youth employment levels and ease the challenges that many youth experience in finding their first jobs. Under the ETI, firms that employ youth are eligible to claim a deduction from their taxes due, for the portion of their wage bill that is paid to certain groups of youth employees. We utilize nationally representative Quarterly Labour Force Survey (QLFS) data for the period from January 2011 to June 2014, and implement a difference-in-differences methodology at the individual level to identify the effects of the ETI on youth employment probabilities. Our primary finding is that the ETI did not have any statistically significant and positive effects on youth employment probabilities. The point estimate from our preferred regression is -0.005 and the 95% confidence interval is from -0.017 to 0.006. We thus obtain a fairly precisely estimated 'zero effect'. We also find no evidence that the ETI has resulted in an increase in the level of churning in the labour market for youth. What our results imply is that any decrease in tax revenues that arise from the ETI are effectively accruing to firms which, collectively, would have employed most of these youth even in the absence of the ETI. We conclude with a discussion of some of the policy implications of our findings.
    Keywords: Youth, Unemployment, South Africa, Employment Tax Incentive
    JEL: H25 H32 J38
    Date: 2014

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