nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2014‒12‒24
nineteen papers chosen by
Joseph Marchand
University of Alberta

  1. Employment Cyclicality and Firm Quality By Kahn, Lisa B.; McEntarfer, Erika
  2. Landing The First Job: The Value of Intermediaries in Online Hiring By Christopher Stanton; Catherine Thomas
  3. Trade and Tasks: An Exploration over Three Decades in Germany By Sascha O. Becker; Marc-Andreas Muendler
  4. Your very private job agency: Job referrals based on residential location networks By Franziska Hawranek; Norbert Schanne
  5. Reservation Wages and the Wage Flexibility Puzzle By Felix Koenig; Alan Manning; Barbara Petrongolo
  6. Four pillars of job applicant screening in China By HLASNY, Vladimir
  7. The Effects of Elite Sports on Later Job Success By Ralf Dewenter; Leonie Giessing
  8. Labor Demand and Unequal Payment: Does Wage Inequality matter? Analyzing the Influence of Intra-firm Wage Dispersion on Labor Demand with German Employer-Employee Data By Arnd Kölling
  9. Labor Market Careers before and after Incarceration By János Kollo; Bence Czafit
  10. Labor Mobility and Racial Discrimination By Deschamps, Pierre; De Sousa, Jose
  11. When Does Education Matter? The Protective Effect of Education for Cohorts Graduating in Bad Times By Cutler, David M.; Huang, Wei; Lleras-Muney, Adriana
  12. The Impact of Disability Benefits on Labor Supply: Evidence for the VA’s Disability Compensation Program By David Autor; Mark Duggan; Kyle Greenberg; David Lyle
  13. Fostering and Measuring Skills: Improving Cognitive and Non-Cognitive Skills to Promote Lifetime Success By Tim Kautz; James J. Heckman; Ron Diris; Bas ter Weel; Lex Borghans
  14. Long-run effects on poverty of public expenditure in education By Marisa Hidalgo Hidalgo; Iñigo Iturbe-Ormaetxe Kortajarene
  15. Welfare Reform and Children's Health By Baltagi, Badi H.; Yen, Yin-Fang
  16. Enterprise-level bargaining and labour productivity of Italian family firms: a quantile regression analysis By Damiani, Mirella; Pompei, Fabrizio; Ricci, Andrea
  17. Older public sector workers’ retirement planning, participation, and preparedness By Robert Clark; Robert Hammond; Emma Hanson; Melinda Morrill
  18. The Long-term Earnings Consequences of General vs. Specific Training of the Unemployed By Stenberg, Anders; Westerlund, Olle
  19. The Effects of a Job Creation Scheme. Evidence from Regional Variation in Programme Capacities By Rainer Eppel

  1. By: Kahn, Lisa B. (Yale University); McEntarfer, Erika (U.S. Census Bureau)
    Abstract: Who fares worse in an economic downturn, low- or high-paying firms? Different answers to this question imply very different consequences for the costs of recessions. Using U.S. employer-employee data, we find that employment growth at low-paying firms is less cyclically sensitive. High-paying firms grow more quickly in booms and shrink more quickly in busts. We show that while during recessions separations fall in both high-paying and low-paying firms, the decline is stronger among low-paying firms. This is particularly true for separations that are likely voluntary. Our findings thus suggest that downturns hinder upward progression of workers toward higher paying firms – the job ladder partially collapses. Workers at the lowest paying firms are 20% less likely to advance in firm quality (as measured by average pay in a firm) in a bust compared to a boom. Furthermore, workers that join firms in busts compared to booms will on average advance only half as far up the job ladder within the first year, due to both an increased likelihood of matching to a lower paying firm and a reduced probability of moving up once matched. Thus our findings can account for some of the lasting negative impacts on workers forced to search for a job in a downturn, such as displaced workers and recent college graduates.
    Keywords: firm quality, wages, recessions
    JEL: E24 E32 J23 J3 J63
    Date: 2014–11
  2. By: Christopher Stanton; Catherine Thomas
    Abstract: Online markets for remote labor services allow workers and firms to contract with each other directly. Despite this, intermediaries - called outsourcing agencies - have emerged in these markets. This paper shows that agencies signal to employers that inexperienced workers are high quality. Workers affiliated with an agency have substantially higher job-finding probabilities and wages at the beginning of their careers compared to similar workers without an agency affiliation. This advantage declines after high-quality non-affiliated workers receive good public feedback scores. The results indicate that intermediaries have arisen endogenously to permit a more efficient allocation of workers to jobs.
    Keywords: Labor market intermediation, Offshoring, Incomplete information
    JEL: F16 J30 D02 O30
    Date: 2014–11
  3. By: Sascha O. Becker; Marc-Andreas Muendler
    Abstract: This paper combines representative worker-level data that cover time-varying job-level task characteristics of an economy over a long time span with sector-level bilateral trade data for merchandize and services. We carefully create longitudinally consistent workplace characteristics from the German Qualification and Career Survey 1979-2006 and prepare trade flow statistics from varying sources. Four main facts emerge: (i) intermediate inputs constitute a major share of imports, and their relevance grows especially in the early decade; (ii) the German workforce increasingly specializes in workplace activities and job requirements that are typically considered non-offshorable, mainly within and not between sectors and occupations; (iii) the imputed activity and job requirement content of German imports grows relatively more intensive in work characteristics typically considered offshorable; and (iv) labour-market institutions at German trade partners are largely unrelated to the changing task content of German imports but German sector-level outcomes exhibit some covariation consistent with faster task offshoring in sectors exposed to lower labour-market tightness. We discuss policy implications of these findings.
    JEL: F14 F16 J23 J24
    Date: 2014–12
  4. By: Franziska Hawranek; Norbert Schanne
    Abstract: Your very private job agency: Job referrals based on residential location networks This paper analyzes job referral effects that are based on residential location. We use georeferenced record data for the entire working population (liable to social security) and the corresponding establishments in the Rhine-Ruhr metropolitan area, which is Germany's largest (and EU's second largest) metropolitan area. We estimate the propensity of two persons to work at the same place when residing in the same neighborhood (reported with an accuracy of 500m×500m grid cells), and compare the effect to people living in adjacent neighborhoods. We find a significant increase in the probability of working together when living in the same neighborhood, which is stable across various specifications. Additionally, we look at how referral effects differ for various groups like age, skill, ethnic groups and industry sectors. We find that especially low skilled workers make use of residential networks for job search, as well as some groups of immigrants. Especially migrants from the new EU countries as well as Italians and people from former Yugoslavia have a highly increased probability of working together when they share the same neighborhood. This is clear sign for network effects especially for some immigrant groups in the German labor market.JobFurther, we are able to investigate a number of issues in order to deepen the insight on actual job referrals: distinguishing between the effects on working in the same neighborhood and working in the same establishment ? probably the more accurate measure for job referrals ? shows that the latter yield overall smaller effects. Further, we find that clusters in employment although having a significant positive effect play only a minor role for the magnitude of the referral effect, which makes us confident that what we find is actually related to a true referral effect and not some spurious correlation. When we exclude short distance commuters, we find the same probabilities of working together, which reinforces our interpretation of this probability as a network effect. The paper investigates the effect of living together on the probability of working together. We find strong evidence for a positive and highly significant relationship, which is robust across several specifications and robustness tests, addressing common issues on the identification of neighborhood effects. JEL Classification: J20, J46, R23
    JEL: J20 R23
    Date: 2014–11
  5. By: Felix Koenig; Alan Manning; Barbara Petrongolo
    Abstract: Wages are only mildly cyclical, implying that shocks to labour demand have a larger short-run impact on unemployment rather than wages, at odds with the quantitative predictions of the canonical search and matching model. This paper provides an alternative perspective on the wage flexibility puzzle, explaining why the canonical model can only match the observed cyclicality of wages if the replacement ratio is implausibly high. We show that this failure remains even if wages are only occasionally renegotiated, unless the persistence in unemployment is implausibly low. We then provide some evidence that part of the problem comes from the implicit model for the determination of reservation wages. Estimates for the UK and West Germany provide evidence that reservation wages are much less cyclical than predicted even conditional on the observed level of wage cyclicality. We present evidence that elements of perceived "fairness" or "reference points" in reservation wages may address this model failure.
    Keywords: Reservation wages, wage cyclicality, reference points
    JEL: J31 J64 E24
    Date: 2014–12
  6. By: HLASNY, Vladimir
    Abstract: Chinese employers practice extensive personal screening of job applicants. This study identifies four manifestations of this practice by motive – statistical, customer taste-based, employer taste-based, and regulatory – and evaluates their prevalence, economic determinants and implications for firms’ performance using simultaneous-equations linear and Poisson models. Categorization of a regulatory motive for applicant sorting in China is one contribution of this study. Statistical screening is found to be related positively to employers’ capital intensity, labor-market power and private ownership, and negatively to the supply of skills in provincial labor markets, as may be expected. Customer-taste screening is more prevalent in service and sales industries, as expected, and interestingly in wealthy first-tier cities. Employer-taste screening appears more prevalent at privately-owned firms, and surprisingly in skill-intensive industries and in first-tier cities, potentially reflecting difficulty at distinguishing it from customer-taste screening. Regulatory screening is related positively to firms’ market power, capital intensity and state ownership, as expected. Statistical and customer-taste screening is associated with higher firm profitability, particularly in skill-intensive industries and in service and sales industries, respectively, while employer-taste and regulatory screening is associated with lower profitability, as expected. These results jointly validate our identification of the four pillars of applicant screening.
    Keywords: Recruitment, Job applicant screening, Profiling, Statistical & taste-based discrimination, Hukou, China, Poisson regression, Simultaneous equations model
    JEL: J7 J24 D83
    Date: 2014–12
  7. By: Ralf Dewenter; Leonie Giessing
    Abstract: This paper analyses the income effect of the participation in elite sports. To quantify the average difference in the monthly net income of former elite athletes and non-athletes we estimate sample average treatment effect scores (SATT) by using covariate nearest-neighbour matching (CVM). While our treatment group consists of formerly funded top-level athletes, the control group of non-athletes is drawn from the SOEP database. Matching takes place by socio-demographic variables as well as measures of personal qualities and attitudes. On average, former athletes receive higher incomes than similar non-athletes. The income premium for former team sports and male athletes is even higher. Comparing the income of former female athletes with male non-athletes, we find that the participation in elite sports closes the gender-wage gap. Our results are robust to variations in the specification and statistically as well economically significant.
    Keywords: Funding of elite sports, nearest-neighbor matching, job success, gender-wage gap
    JEL: C49 J30 L83
    Date: 2014
  8. By: Arnd Kölling (Berlin School of Business and Law)
    Abstract: This paper examines the relationship between intra-firm wage dispersion and establishments’ employment in a theoretical analysis and empirical regressions using German “Linked Employer-Employee Data from the IAB” (LIAB) for the years of 1996 through 2008. Therefore, fractional probit models for the panel data, recommended in Papke and Wooldridge (2008), and fixed effects regression with a log-odds transformation of the dependent variable are conducted to estimate share equations of a labor demand model. The results illustrate a negative influence of the residual wage inequality that takes into account the composition of the workforce in the establishment with employment. In addition, an increasing wage dispersion at the lower end of the wage distribution decreases labor demand of the establishment but the estimates of the overall wage dispersion becomes insignificant then.
    Keywords: Labor Demand, Wage Dispersion, Share Equation
    JEL: J23 J21 E24
    Date: 2014–11
  9. By: János Kollo (Institute of Economics, Center for Economic and Regional Studies, Hungarian Academy of Sciences); Bence Czafit (Budapest Institute for Policy Analysis)
    Abstract: We study the entry to formal employment and earnings of a large sample of convicts released from Hungarian prisons in 2002-2008. We identify the effect of the prison service on post-release careers by exploiting differences in the timing of incarceration, on the one hand, and estimating fixed effects models, on the other. For convicts with a single prison spell,we find initially negative effect on employment that turns positive after about one year while the impact on wages is permanently negative. A comparison with recidivists, for whom the employment effect is negative and the wage effect is weaker, suggests that these results are driven by a drop in the reservation wages of ‘converted’ criminals rather than the lack of discrimination. This reading is supported by further data showing that the ex-inmates, on average, make increased effort to find legitimate sources of living and support to finding jobs.
    Keywords: incarceration, unemployment, wage loss, discrimination
    JEL: K42 J64 J39
    Date: 2014–11
  10. By: Deschamps, Pierre; De Sousa, Jose
    Abstract: This paper assesses the impact of labor mobility on racial discrimination. We present an equilibrium search model that reveals an inverted U-shaped relationship between labor mobility and race-based wage differentials. We explore this relationship empirically with an exogenous mobility shock on the European soccer labor market. The Bosman ruling by the European Court of Justice in 1995 lifted restrictions on soccer player mobility. Using a panel of all clubs in the English first division from 1981 to 2008, we compare the pre- and post-Bosman ruling market to identify the causal effect of intensified mobility on race-based wage differentials. Consistent with a taste-based explanation, we find evidence that increasing labor market mobility decreases racial discrimination.
    Keywords: Discrimination, Mobility, Wage Differentials
    JEL: J15 J31 J6 J71
    Date: 2014
  11. By: Cutler, David M.; Huang, Wei; Lleras-Muney, Adriana
    Abstract: Using Eurobarometer data, we document large variation across European countries in education gradients in income, self-reported health, life satisfaction, obesity, smoking and drinking. While this variation has been documented previously, the reasons why the effect of education on income, health and health behaviors varies is not well understood. We build on previous literature documenting that cohorts graduating in bad times have lower wages and poorer health for many years after graduation, compared to those graduating in good times. We investigate whether more educated individuals suffer smaller income and health losses as a result of poor labor market conditions upon labor market entry. We confirm that a higher unemployment rate at graduation is associated with lower income, lower life satisfaction, greater obesity, more smoking and drinking later in life. Further, education plays a protective role for these outcomes, especially when unemployment rates are high: the losses associated with poor labor market outcomes are substantially lower for more educated individuals. Variation in unemployment rates upon graduation can potentially explain a large fraction of the variance in gradients across different countries.
    Date: 2014–12–08
  12. By: David Autor (Massachusetts Institute of Technology and The National Bureau of Economic Research); Mark Duggan (Stanford University and The National Bureau of Economic Research); Kyle Greenberg (Massachusetts Institute of Technology and United States Military Academy); David Lyle (United States Military Academy)
    Abstract: We analyze the labor market effects of the U.S. Department of Veterans Affairs’ Disability Compensation (DC) program. The largely unstudied DC program currently provides income and health insurance to approximately four million veterans of military service who have service-connected disabilities. We study a unique policy change, the 2001 Agent Orange decision, which expanded eligibility for DC benefits to a broader set of covered conditions — in particular, type II diabetes — to Vietnam veterans who had served in-theater (with ‘Boots on the Ground’ or BOG). Notably, the Agent Orange policy excluded Vietnam era veterans who did not serve in-theatre (‘Not on Ground’ or NOG), thus allowing us to assess the causal effects of DC eligibility by contrasting the outcomes of BOG and NOG veterans. Our results indicate that the policy-induced increase in DC enrollment reduced labor force participation by 18 percentage points among BOG veterans who enrolled in the DC program as a result of the policy change. We also find evidence of program spillovers, with DC recipients significantly more likely to qualify for Social Security Disability Insurance benefits.
    Date: 2014–11
  13. By: Tim Kautz; James J. Heckman; Ron Diris; Bas ter Weel; Lex Borghans
    Abstract: This paper reviews the recent literature on measuring and boosting cognitive and noncognitive skills. The literature establishes that achievement tests do not adequately capture character skills|personality traits, goals, motivations, and preferences that are valued in the labor market, in school, and in many other domains. Their predictive power rivals that of cognitive skills. Reliable measures of character have been developed. All measures of character and cognition are measures of performance on some task. In order to reliably estimate skills from tasks, it is necessary to standardize for incentives, effort, and other skills when measuring any particular skill. Character is a skill, not a trait. At any age, character skills are stable across different tasks, but skills can change over the life cycle. Character is shaped by families, schools, and social environments. Skill development is a dynamic process, in which the early years lay the foundation for successful investment in later years. High-quality early childhood and elementary school programs improve character skills in a lasting and cost-effective way. Many of them beneficially affect later-life outcomes without improving cognition. There are fewer long-term evaluations of adolescent interventions, but workplace-based programs that teach character skills are promising. The common feature of successful interventions across all stages of the life cycle through adulthood is that they promote attachment and provide a secure base for exploration and learning for the child. Successful interventions emulate the mentoring environments offered by successful families.
    JEL: D01 I20 J24
    Date: 2014–12
  14. By: Marisa Hidalgo Hidalgo (Universidad de Alicante); Iñigo Iturbe-Ormaetxe Kortajarene (Universidad de Alicante)
    Abstract: Household characteristics may have long-run effects on individual outcomes in adulthood. For instance, individuals who lived when young in households experiencing financial problems are more likely to be poor when adults. Public intervention in education is one of the most important means by which governments try to reduce these effects and to promote equality of opportunity. The objective of this paper is to check whether public expenditure in education has an effect in reducing the probability of being poor when adult, and to what extent. Our main finding is that public expenditure in primary education has a strong long-run effect on reducing incidence of poverty in adulthood. We also find that this effect is concentrated mainly among individuals who have parents with a low level of education.
    Keywords: public expenditure in education, poverty rate, intergenerational transmission of poverty.
    JEL: H52 I21 I23 J24 J31
    Date: 2014–11
  15. By: Baltagi, Badi H. (Syracuse University); Yen, Yin-Fang (Southwestern University of Finance and Economics)
    Abstract: This study investigates the effect of the Temporary Aid to Needy Families (TANF) program on children's health outcomes using data from the Survey of Income and Program Participation (SIPP) over the period 1994 to 2005. The TANF policies have been credited with increased employment for single mothers and a dramatic drop in welfare caseload. Our results show that these policies also had a significant effect on various measures of children's medical utilization among low-income families. These health measures include a rating of the child's health status reported by the parents; the number of times that parents consulted a doctor; and the number of nights that the child stayed in a hospital. We compare the overall changes of health status and medical utilization for children with working and nonworking mothers. We find that the child's health status as reported by the parents is affected by the maternal employment status.
    Keywords: maternal employment, children's health, welfare reform, fixed effects
    JEL: I1 I3
    Date: 2014–11
  16. By: Damiani, Mirella; Pompei, Fabrizio; Ricci, Andrea
    Abstract: We investigate the role of Italian firms to evaluate their role on labour productivity performance. We find that family owned firms are less efficient than their no-family counterparts and also that family management negatively affects labour productivity. Furthermore, we estimate the role of firm level bargaining to verify whether family controlled firms, adopting these types of agreements, may partially close their efficiency gap with respect to their competitors. We find that enterprises under family governance obtain significant efficiency gains when they adopt firm level bargaining, greater than those obtained by their no-family counterparts.
    Keywords: Family firms, corporate governance, labour productivity
    JEL: G3 G32 J3 J33
    Date: 2014–12–05
  17. By: Robert Clark (North Carolina State University and The National Bureau of Economic Research); Robert Hammond (North Carolina State University); Emma Hanson (North Carolina State University); Melinda Morrill (North Carolina State University)
    Abstract: Once retired from a career job, individuals must live off savings, Social Security, and pensions or earnings from post-retirement work. Those who have made adequate plans for retirement are more likely to be able to meet their desired levels of consumption once retired and are less likely to end up relying on public assistance or having to reenter the labor market. While much attention has been paid to participation in voluntary retirement saving plans, less is known about workers’ planning for retirement. Using administrative records linked to a large-scale survey, we explore what factors are associated with both objective and subjective measures of planning for retirement among public sector workers in North Carolina. We find that only about half our sample of workers ages 50-69 have made a retirement plan. We show that individuals who exhibit higher levels of time discounting, or impatience, are also less likely to plan for retirement and that financial literacy is associated with higher rates of planning. We also show that planning is related to wealth accumulation and retirement preparedness.
    Date: 2014–11
  18. By: Stenberg, Anders (SOFI, Stockholm University); Westerlund, Olle (Umeå University)
    Abstract: Training programs for the unemployed typically involve teaching specific skills in demand amongst employers. In 1997, Swedish unemployed could also choose general training at the upper secondary school level. Despite the dominance of programs offering specific training, long-term relative earnings effects of general vs. specific training are theoretically ambiguous. Analyzing detailed administrative data 1990-2010, we find specific training associated with higher earnings in the short run, but that earnings converge over time. Results also indicate that individuals act on their comparative advantages. Long-run earnings advantages of general training are found for females with limited prior education and among metropolitan residents.
    Keywords: active labor market programs, adult education, vocational training
    JEL: I21 J62 J68
    Date: 2014–11
  19. By: Rainer Eppel (WIFO)
    Abstract: In direct job creation schemes, unemployed individuals at risk of permanent labour market exclusion are offered temporary subsidised employment in public or non-profit sector firms in combination with skills training and socio-pedagogical support. The main aim is to stabilise and qualify them for later re-integration into the regular labour market. Exploiting exogenous regional variation in population-group-specific programme capacities, I find evidence that such a job creation scheme is, on average, effective in providing a bridge to a regular job. The achieved integration is, however, often not stable. Successful participants face a high risk of once again becoming unemployed.
    Date: 2014–12–16

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