nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2014‒12‒19
eighteen papers chosen by
Joseph Marchand
University of Alberta

  1. The New Full-time Employment Taxes By Casey B. Mulligan
  2. Using Twins to Resolve the Twin Problem of Having a Bad Job and a Low Wage By Böckerman, Petri; Ilmakunnas, Pekka; Vainiomäki, Jari
  3. "As Rare as a Panda": How Facial Attractiveness, Gender, and Occupation Affect Interview Callbacks at Chinese Firms By Maurer-Fazio, Margaret; Lei, Lei
  4. Do Female Executives Make a Difference? The Impact of Female Leadership on Gender Gaps and Firm Performance By Flabbi, Luca; Macis, Mario; Moro, Andrea; Schivardi, Fabiano
  5. Big and Tall: Is there a Height Premium or Obesity Penalty in the Labor Market? By Lee, Wang-Sheng
  6. Long-term effects of job displacement in Japan: A conservative estimate using the Japanese Longitudinal Survey on Employment and Fertility (LOSEF) By Fujii, Mayu; Kambayashi, Ryo
  7. Behavioral Economics of Education: Progress and Possibilities By Adam M. Lavecchia; Heidi Liu; Philip Oreopoulos
  8. Intrinsic Motivation in Public Service: Theory and Evidence from State Supreme Courts By Elliott Ash; W. Bentley MacLeod
  9. The Italian wage curve reloaded: Does occupation matter? By Gucciardi, Gianluca
  10. Can Active Labor Market Policy Be Counter-Productive? By Saint-Paul, Gilles
  11. Estimating the Effects of Minimum Wage in a Developing Country: A Density Discontinuity Design Approach By Jales, Hugo
  12. A Schumpeterian Model of Top Income Inequality By Charles I. Jones; Jihee Kim
  13. The Impact of Short Term Exposure to Ambient Air Pollution on Cognitive Performance and Human Capital Formation By Victor Lavy; Avraham Ebenstein; Sefi Roth
  14. Attractiveness, Anthropometry or Both? Their Relationship and Role in Economic Research By Oreffice, Sonia; Quintana-Domeque, Climent
  15. The Cyclicality of Labor Market Flows: A Multiple-Shock Approach By Hairault, Jean-Olivier; Zhutova, Anastasia
  16. The return to college: Selection and dropout risk By Hendricks, Lutz; Leukhina, Oksana
  17. Wellbeing at work and the Great Recession: The effect of others' unemployment By Cristina Borra Marcos; Francisco Gómez-García
  18. How does tax progressivity and household heterogeneity affect Laffer curves? By Holter, Hans A.; Krueger, Dirk; Stepanchuk, Serhiy

  1. By: Casey B. Mulligan
    Abstract: The Affordable Care Act introduces or expands taxes on incomes and full-time employment, beginning in 2014. The purpose of this paper is to characterize the new full-time employment taxes from the perspective of a household budget constraint, measure their magnitude, and assess their likely consequences for employee work schedules. When the ACA is fully implemented, full-time employment taxes will be prevalent and often as large as what workers can earn in five hours of work per week, 52 weeks per year. The economic significance of the ACA's full-time employment taxes varies by demographic group: they are non-monotonic in age, increasing with family size, and negatively correlated with schooling.
    JEL: H24 I13 J22
    Date: 2014–10
  2. By: Böckerman, Petri (Labour Institute for Economic Research); Ilmakunnas, Pekka (Aalto University); Vainiomäki, Jari (University of Tampere)
    Abstract: We use data on twins matched to register-based information on earnings to examine the long-standing puzzle of non-existent compensating wage differentials. The use of twin data allows us to remove otherwise unobserved productivity differences that were the prominent reason for estimation bias in the earlier studies. Using twin differences we find evidence for positive compensation of adverse working conditions in the labor market.
    Keywords: compensating differentials, earnings, unobserved ability, productivity
    JEL: J28 J31
    Date: 2014–10
  3. By: Maurer-Fazio, Margaret (Bates College); Lei, Lei (Liberty Mutual Insurance)
    Abstract: This study explores how both gender and facial attractiveness affect job candidates' chances of obtaining interviews in China's dynamic Internet job board labor market. It examines how discrimination based on these attributes varies over occupation, location, and firms' ownership type and size. We employ a resume (correspondence) audit methodology. We establish the facial attractiveness of candidate photos via an online survey. 24,192 applications are submitted to 12,096 job postings across four occupations in 6 Chinese cities. We find sizable differences in the interview callback rates of attractive and unattractive job candidates. Job candidates with unattractive faces need to put in 33% more applications than their attractive counterparts to obtain the same number of interview callbacks. Women are preferred to men in three of our four occupations. Women on average need to put in only 91% as many applications as men to obtain the same number of interview callbacks.
    Keywords: beauty, gender, field experiments, discrimination, Chinese firms, hiring, facial attractiveness, internet job boards, resume correspondence audit study
    JEL: C93 J71 J23 O53
    Date: 2014–10
  4. By: Flabbi, Luca (Inter-American Development Bank); Macis, Mario (Johns Hopkins University); Moro, Andrea (Vanderbilt University); Schivardi, Fabiano (Bocconi University)
    Abstract: We analyze a matched employer-employee panel data set and find that female leadership has a positive effect on female wages at the top of the distribution, and a negative one at the bottom. Moreover, performance in firms with female leadership increases with the share of female workers. This evidence is consistent with a model where female executives are better equipped at interpreting signals of productivity from female workers. This suggests substantial costs of under-representation of women at the top: for example, if women became CEOs of firms with at least 20% female employment, sales per worker would increase 6.7%.
    Keywords: executives' gender, gender gap, firm performance, glass ceiling, statistical discrimination
    JEL: M5 M12 J7 J16
    Date: 2014–10
  5. By: Lee, Wang-Sheng (Deakin University)
    Abstract: Previous studies have shown that both height and weight are associated with wages. However, by focusing on interpreting the partial effects of either height or weight on wages while holding all else constant, some gaps in our understanding of the complex relationship between body size and wages remain. Utilizing a semi-parametric spline approach, we first establish that a flexible analysis of height and weight provides a useful and meaningful proxy for beauty. A similar flexible analysis of height, weight and wages reveals that some combinations of anthropometric measurements attract higher wage premiums than others and that the optimal combination varies over the life cycle. A main contribution of the paper is in suggesting a novel and practical way of examining the returns to looks in the labor market based on objective anthropometric measurements.
    Keywords: height, P-spline, semi-parametric, wages, weight
    JEL: J31 J71
    Date: 2014–10
  6. By: Fujii, Mayu; Kambayashi, Ryo
    Abstract: Using data from the Japanese Longitudinal Survey on Employment and Fertility (LOSEF), we investigate the long-term effects of employment (or job) displacement on earnings in the Japanese labor market. Using a fixed-effects model, we find significant negative effects of displacement, amounting to 21.7% of monthly earnings. Further, we conclude that the earnings penalty is persistent, with the estimate of earnings losses remaining at 16.2% four years after displacement. Given that our sample includes those who experienced displacement only once in their career and were reemployed as a standard worker within a year, we consider that our estimates of the earnings reductions associated with job displacement are conservative.
    Date: 2014–10
  7. By: Adam M. Lavecchia; Heidi Liu; Philip Oreopoulos
    Abstract: Behavioral economics attempts to integrate insights from psychology, neuroscience, and sociology in order to better predict individual outcomes and develop more effective policy. While the field has been successfully applied to many areas, education has, so far, received less attention - a surprising oversight, given the field's key interest in long-run decision-making and the propensity of youth to make poor long-run decisions. In this chapter, we review the emerging literature on the behavioral economics of education. We first develop a general framework for thinking about why youth and their parents might not always take full advantage of education opportunities. We then discuss how these behavioral barriers may be preventing some students from improving their long-run welfare. We evaluate the recent but rapidly growing efforts to develop policies that mitigate these barriers, many of which have been examined in experimental settings. Finally, we discuss future prospects for research in this emerging field.
    JEL: D03 D87 I2 J24
    Date: 2014–10
  8. By: Elliott Ash; W. Bentley MacLeod
    Abstract: This paper provides a theoretical and empirical analysis of the intrinsic preferences of state appellate court judges. We construct a panel data set using published decisions from state supreme court cases merged with institutional and biographical information on all (1,700) state supreme court judges for the 50 states of the United States from 1947 to 1994. We exploit variation in the employment conditions of judges over this period of time to measure the effect of these changes on a number of measures of judicial performance. The results are consistent with the hypothesis that judges are intrinsically motivated to provide high-quality decisions, and that at the margin they prefer quality over quantity. When judges face less time pressure, they write more well-researched opinions that are cited more often by later judges. When judges are up for election then performance falls, consistent with the hypothesis that election politics is time-consuming. These effects are strongest when judges have more discretion to select their case portfolio, consistent with psychological theories that posit a negative effect of contingency on motivation (e.g. Deci, 1971). Finally, the intrinsic preference for quality appears to be higher among judges selected by non-partisan elections than among those selected by partisan elections.
    JEL: J3 J33 J44 J45
    Date: 2014–11
  9. By: Gucciardi, Gianluca
    Abstract: This paper provides some evidence on the existence of the wage curve - the negative relationship between individual wages and the local unemployment rate - within a number of occupations. It exploits the Bank of Italy's Household Survey and draws data from 1977 to 2008. An occupation-level wage curve exists for all the employees, while it holds only for a sub-set of the self-employed. In particular, the wage curve has an elasticity of approximately -0.05 for the blue-collars, an elasticity of -0.1 for the employees and of approximately -0.2 for the executives. This suggests that professional labor markets may have different levels of flexibility, also within the same country. In particular, the professional categories with higher (lower) levels of negative elasticity belong to more (less) flexible labor markets.
    Keywords: wage curve,occupation,unemployment,Italian regions
    JEL: J31 J64 E24
    Date: 2014
  10. By: Saint-Paul, Gilles (University of Toulouse I)
    Abstract: We study active labor market policies (ALMP) in a matching model. ALMPs are modelled as a subsidy to job search. Workers differ in their productivity, and search takes place along an extensive margin. An additional job seeker affects the quality of unemployed workers. As a result, the Hosios conditions are no longer valid. To replicate the optimum the worker share in bargaining must exceed the Hosios level, and one must impose a tax on job search activity. The coalition in favor of ALMP is also studied.
    Keywords: active labor market policy, matching models
    JEL: E24 J6
    Date: 2014–10
  11. By: Jales, Hugo
    Abstract: This paper proposes a new framework to empirically assess the effects of the minimum wage in a developing country. This approach allows us to jointly estimate the effects of the minimum wage on unemployment, average wages, sector mobility, wage inequality, the size of the informal sector and on labor tax revenues. I show that under reasonable assumptions, cross-sectional data on the worker's wage and sector status can identify the joint distribution of the latent counterparts of these variables; that is, the sector status and wage that would prevail in the absence of the minimum wage. I also identify parameters that govern how the minimum wage affects the economy. My identification strategy, building on Doyle (2006), specifies a parametric form for the conditional distribution of sector status, given wage. I show how the discontinuity of the wage distribution around the minimum wage identifies the extent of non-compliance with the minimum wage policy, and how the conditional probability of sector status given wage recovers the relationship between latent sector status and wages. I apply the method in the “PNADâ€, a nationwide representative Brazilian cross-sectional dataset from years 2001 to 2009. I show on the application that the assumptions used are not violated in the context of the Brazilian labor market. The results show that the size of the informal sector is increased by around 46% when compared to the scenario in the absence of the minimum wage. This result is driven by both two sources: (i) unemployment effects on the formal sector, (ii) movements of workers from the formal to the informal sector as a unintended consequence of the policy. In addition, the minimum wage legislation strongly affects wage inequality, reducing up to 20% the standard deviation of log-wages, and reduces revenues from labor taxes up to 15%.
    Keywords: Minimum Wage, Informality, Unemployment, Density Discontinuity, Design, Wage Inequality, Labor Tax Revenues, Formal Sector
    JEL: J60 J31 J30
    Date: 2014–10–24
  12. By: Charles I. Jones; Jihee Kim
    Abstract: Top income inequality rose sharply in the United States over the last 35 years but increased only slightly in economies like France and Japan. Why? This paper explores a model in which heterogeneous entrepreneurs, broadly interpreted, exert effort to generate exponential growth in their incomes. On its own, this force leads to rising inequality. Creative destruction by outside innovators restrains this expansion and induces top incomes to obey a Pareto distribution. The development of the world wide web, a reduction in top tax rates, and a decline in misallocation are examples of changes that raise the growth rate of entrepreneurial incomes and therefore increase Pareto inequality. In contrast, policies that stimulate creative destruction reduce top inequality. Examples include research subsidies or a decline in the extent to which incumbent firms can block new innovation. Differences in these considerations across countries and over time, perhaps associated with globalization, may explain the varied patterns of top income inequality that we see in the data.
    JEL: E2 J3 O4
    Date: 2014–10
  13. By: Victor Lavy; Avraham Ebenstein; Sefi Roth
    Abstract: Cognitive performance is critical to productivity in many occupations and potentially linked to pollution exposure. We evaluate this potentially important relationship by estimating the effect of pollution exposure on standardized test scores among Israeli high school high-stakes tests (2000-2002). Since students take multiple exams on multiple days in the same location after each grade, we can adopt a fixed effects strategy estimating models with city, school, and student fixed effects. We focus on fine particulate matter (PM2.5) and carbon monoxide (CO), which are considered to be two of the most dangerous forms of air pollution. We find that while PM2.5 and CO levels are only weakly correlated with each other, both exhibit a robust negative relationship with test scores. We also find that PM2.5, which is thought to be particularly damaging for asthmatics, has a larger negative impact on groups with higher rates of asthma. For CO, which affects neurological functioning, the effect is more homogenous across demographic groups. Furthermore, we find that exposure to either pollutant is associated with a significant decline in the probability of not receiving a Bagrut certificate, which is required for college entrance in Israel. The results suggest that the gain from improving air quality may be underestimated by a narrow focus on health impacts. Insofar as air pollution may lead to reduced cognitive performance, the consequences of pollution may be relevant for a variety of everyday activities that require mental acuity. Moreover, by temporarily lowering the productivity of human capital, high pollution levels lead to allocative inefficiency as students with lower human capital are assigned a higher rank than their more qualified peers. This may lead to inefficient allocation of workers across occupations, and possibly a less productive workforce.
    JEL: I21 J24
    Date: 2014–10
  14. By: Oreffice, Sonia (University of Surrey); Quintana-Domeque, Climent (University of Oxford)
    Abstract: We analyze how attractiveness rated at the start of the interview is related to weight (controlling for height), and BMI, separately by gender and also accounting for interviewer fixed effects, in a nationally representative sample. We are the first to show that height, weight, and BMI all strongly contribute to male and female attractiveness when attractiveness is rated by opposite-sex interviewers, whereas only thinner female respondents are considered attractive by same-sex interviewers; that is, anthropometric characteristics are irrelevant to male interviewers in assessing male attractiveness. In addition, we estimate the interplay of these attractiveness and anthropometric measures in labor and marital outcomes such as hourly wage and spousal education, showing that attractiveness and height matter in the labor market, whereas both male and female BMI are valued in the marriage market instead of attractiveness.
    Keywords: beauty, BMI, height, weight, wage, spousal education
    JEL: D1 J1
    Date: 2014–10
  15. By: Hairault, Jean-Olivier (University of Paris 1 Panthéon-Sorbonne); Zhutova, Anastasia (University of Paris 1 Panthéon-Sorbonne, PSE)
    Abstract: In this paper, we aim to provide a comprehensive view of the unemployment dynamics generated by different structural shocks. We show that the relative contribution of the job finding and separation rates to the unemployment dynamics depends on a type of structural shocks. Identified using a sign restrictions approach, the shocks of our Bayesian Structural VAR model capture the possible shifts in the three conditions determining labor market equilibrium in any matching models, namely: the Beveridge curve, the job creation condition, and the job destruction condition. Using US data we then identify a shock to the profitability of a match (the aggregate shock), a shock specific to the existing jobs (job-specific shock) and a shock to the efficiency of the matching process (search shock). The two former shocks generate a quite balanced contribution of the two transition rates to the volatility of unemployment, whereas the search shock implies a disproportionate importance of the job finding rate. We find the same result for French data, which assesses the robustness of the pattern generated by these structural shocks. The difference between the two countries lies more in the relative importance of the shocks. The search shock appears more significant in France, which in the end reinforces the predominant role of the job finding rate in this country.
    Keywords: unemployment variability, job separation, job finding, Bayesian Var
    JEL: E24 J6
    Date: 2014–10
  16. By: Hendricks, Lutz; Leukhina, Oksana
    Abstract: This paper studies the effect of graduating from college on lifetime earnings. We develop a quantitative model of college choice with uncertain graduation. Departing from much of the literature, we model in detail how students progress through college. This allows us to parameterize the model using transcript data. College transcripts reveal substantial and persistent heterogeneity in students' credit accumulation rates that are strongly related to graduation outcomes. From this data, the model infers a large ability gap between college graduates and high school graduates that accounts for 54% of the college lifetime earnings premium.
    Keywords: Education,College premium,College dropout risk
    JEL: E24 J24 I21
    Date: 2014
  17. By: Cristina Borra Marcos (Dpto. Economía e Historia Económica); Francisco Gómez-García (Dpto. Economía e Historia Económica)
    Abstract: The recent recession has generated a tremendous increase in unemployment rates in Spain. In this paper we use a very rich repeated cross-section dataset on workers’ job conditions, together with regional unemployment rates, to investigate whether peers’ unemployment affects individuals’ job satisfaction. We find that, once perceived job stability is controlled for, peers’ unemployment shows a positive effect on individuals’ wellbeing at work, larger and more precisely estimated for men and private-sector workers. The impact is highly non-linear and the largest effect is found for unemployment rates exceeding 10%. Interestingly, the results are robust to controlling for workforce selection. La recesión reciente ha generado un gran incremento de las tasas de desempleo en España. En este artículo se utiliza una fusión de cortes transversales sobre las condiciones de trabajo, lo que junto a las tasas de desempleo regionales nos permite investigar si el desempleo de los pares afecta a la satisfacción laboral de los individuos. Llegamos a que, una vez controlada la estabilidad en el empleo, el desempleo de los pares muestra un efecto positivo sobre la satisfacción laboral. Este efecto es mayor para los hombres y los trabajadores del sector privado. Además, el impacto es no lineal y el efecto mayor se encuentra para una tasa de desempleo mayor al 10%. Los resultados son robustos y no hay problemas de selección muestral.
    Keywords: Satisfacción laboral, tasa de desempleo, posición relativa, inseguridad laboral, España, Gran Recesión Job satisfaction, unemployment rate, relative position, job insequrity, Spain, Great Recession
    JEL: I31 J28 E24
    Date: 2014–10
  18. By: Holter, Hans A.; Krueger, Dirk; Stepanchuk, Serhiy
    Abstract: How much additional tax revenue can the government generate by increasing labor income taxes? In this paper we provide a quantitative answer to this question, and study the importance of the progressivity of the tax schedule for the ability of the government to generate tax revenues. We develop a rich overlapping generations model featuring an explicit family structure, extensive and intensive margins of labor supply, endogenous accumulation of labor market experience as well as standard intertemporal consumption-savings choices in the presence of uninsurable idiosyncratic labor productivity risk. We calibrate the model to US macro, micro and tax data and characterize the labor income tax Laffer curve under the current choice of the progressivity of the labor income tax code as well as when varying progressivity. We find that more progressive labor income taxes significantly reduce tax revenues. For the US, converting to a flat tax code raises the peak of the Laffer curve by 6%, whereas converting to a tax system with progressivity similar to Denmark would lower the peak by 7%. We also show that, relative to a representative agent economy tax revenues are less sensitive to the progressivity of the tax code in our economy. This finding is due to the fact that labor supply of two earner households is less elastic (along the intensive margin) and the endogenous accumulation of labor market experience makes labor supply of females less elastic (around the extensive margin) to changes in tax progressivity.
    Keywords: Progressive Taxation,Fiscal Policy,Laffer Curve,Government Debt
    JEL: E62 H20 H60
    Date: 2014

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