nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2014‒12‒29
seventeen papers chosen by
Joseph Marchand
University of Alberta

  1. Measuring Heterogeneity in Job Finding Rates Among the Nonemployed Using Labor Force Status Histories By Kudlyak, Marianna; Lange, Fabian
  2. Relative Effects of Labor Taxes and Unemployment Benefits on Hours Worked per Worker and Employment By Been-Lon Chen; Mei Hsu; Chih-Fang Lai
  4. Firm-Level Shocks and Labor Adjustments By Carlsson, Mikael; Messina, Julián; Nordström Skans, Oskar
  5. The Minimum Wage and the Great Recession: Evidence of Effects on the Employment and Income Trajectories of Low-Skilled Workers By Jeffrey Clemens; Michael Wither
  6. One Size does not Fit All: Multiple Dimensions of Ability, College Attendance and Wages By María F. Prada; Sergio S. Urzúa
  7. The Swiss “Job Miracle” By Michael Siegenthaler; Michael Graff; Massimo Mannino
  8. Labor Market Effects of Intrauterine Exposure to Nutritional Deficiency: Evidence from Administrative Data on Muslim Immigrants in Denmark By Schultz-Nielsen, Marie Louise; Tekin, Erdal; Greve, Jane
  9. Can Immigrants Help Women "Have it All"? Immigrant Labor and Women's Joint Fertility and Labor Supply Decisions By Furtado, Delia
  10. Why are there so few female entrepreneurs? An examination of gender differences in entrepreneurship using Norwegian registry data By Arvid Raknerud; Marit Rønsen
  11. Unemployment in the Great Recession: A Comparison of Germany, Canada and the United States By Florian Hoffmann; Thomas Lemieux
  12. Maternity leave and mothers' long-term sickness absence: Evidence from Germany By Guertzgen, Nicole; Hank, Karsten
  13. Fixed-Term Employment and Fertility: Evidence from German Micro Data By Auer, Wolfgang; Danzer, Natalia
  14. Heterogeneous Returns to U.S. College Selectivity and the Value of Graduate Degree Attainment By Seki, Mai
  15. The Value of Smarter Teachers: International Evidence on Teacher Cognitive Skills and Student Performance By Eric A. Hanushek; Marc Piopiunik; Simon Wiederhold
  16. Dual Labour Markets and (Lack of) On-The-Job Training: PIAAC Evidence from Spain and Other EU Countries By Cabrales, Antonio; Dolado, Juan J.; Mora, Ricardo
  17. Early Maternal Time Investment and Early Child Outcomes By del Bono, Emilia; Francesconi, Marco

  1. By: Kudlyak, Marianna (Federal Reserve Bank of Richmond); Lange, Fabian (McGill University)
    Abstract: We use a novel approach to studying the heterogeneity in the job finding rates of the nonemployed by classifying the nonemployed by labor force status (LFS) histories, instead of using only one-month LFS. Job finding rates differ substantially across LFS histories: they are 25-30% among those currently out of the labor force (OLF) with recent employment, 10% among those currently OLF who have been unemployed but not employed in the previous two months, and 2% among those who have been OLF in all three previous months. This heterogeneity cannot be deduced from the one-month LFS or from one-month responses to the CPS survey questions about desire to work or recent search activity. We conclude that LFS histories is an important predictor of the nonemployed's job finding probability, particularly for those OLF.
    Keywords: job finding rate, search process, out of the labor force (OLF), heterogeneity, unemployment
    JEL: E24 E32 J21 J22 J30 J41 J60 J63 J64
    Date: 2014–11
  2. By: Been-Lon Chen (Institute of Economics, Academia Sinica, Taipei, Taiwan); Mei Hsu (College of Management, National Taiwan Normal University); Chih-Fang Lai (Institute of Economics, Academia Sinica, Taipei, Taiwan)
    Abstract: Labor supply in Europe was declined by about 30% relative to the US over the past 3 decades. The decline comes from hours per worker and employment. This paper studies a matching model and the effects of labor taxes and unemployment benefits. Labor taxes decrease hours and employment, with overstated adverse effects on hours if extensive margins are not considered. Unemployment benefits decrease employment and increase hours, with understated adverse effects on employment if intensive margins are not considered. In baseline, labor taxes and unemployment benefits together explain about 75% of declining labor supply in Europe relative to the US.
    Keywords: search, labor taxes, adverse labor markets, hours worked per worker and employment
    JEL: E24 E60
    Date: 2014–11
  3. By: Bart Cockx; Corinna Ghirelli (-)
    Abstract: We study the impact of graduating in a recession in Flanders (Belgium), i.e. in a rigid labor market. In the presence of a high minimum wage, a typical recession hardly influences the hourly wage of low educated men, but reduces working time and earnings by about 4.5% up to twelve years after graduation. For the high educated, the working time is not persistently affected, but the penalty on the hourly wage (and earnings) increases with experience, and attains roughly -6% ten years after labor market entry. We also contribute to the literature on inference with few clusters.
    Keywords: scars, graduating, labor market rigidity, recession, few clusters, cluster robust
    JEL: C12 C41 E32 I21 J22 J23 J31 J6
    Date: 2014–11
  4. By: Carlsson, Mikael (Uppsala Center for Labor Studies); Messina, Julián (World Bank, and IZA); Nordström Skans, Oskar (Uppsala Center for Labor Studies)
    Abstract: We analyze how firms adjust their labor in response to idiosyncratic shifts in their production function and demand curves using a unique data-set of Swedish manufacturing firms. We show that permanent shocks to firm-level demand is a main driving force behind both job and worker reallocation. In contrast, shocks to physical productivity and temporary demand shocks have a very limited impact on firm-level employment despite being important determinants of other firm-level fundamentals. We also present evidence suggesting that the adjustment to permanent demand shocks is fairly unconstrained. Most notably, firms primarily downsize through increased separations of both short- and long-tenured workers even when they could have adjusted their employment through reduced hires.
    Keywords: Technology; Demand; Job Creation; Rigidities; Worker Flows
    JEL: C33 J23 J63 O33
    Date: 2014–12–02
  5. By: Jeffrey Clemens; Michael Wither
    Abstract: We estimate the minimum wage's effects on low-skilled workers' employment and income trajectories. Our approach exploits two dimensions of the data we analyze. First, we compare workers in states that were bound by recent increases in the federal minimum wage to workers in states that were not. Second, we use 12 months of baseline data to divide low-skilled workers into a "target" group, whose baseline wage rates were directly affected, and a "within-state control" group with slightly higher baseline wage rates. Over three subsequent years, we find that binding minimum wage increases had significant, negative effects on the employment and income growth of targeted workers. Lost income reflects contributions from employment declines, increased probabilities of working without pay (i.e., an "internship" effect), and lost wage growth associated with reductions in experience accumulation. Methodologically, we show that our approach identifies targeted workers more precisely than the demographic and industrial proxies used regularly in the literature. Additionally, because we identify targeted workers on a population-wide basis, our approach is relatively well suited for extrapolating to estimates of the minimum wage's effects on aggregate employment. Over the late 2000s, the average effective minimum wage rose by 30 percent across the United States. We estimate that these minimum wage increases reduced the national employment-to-population ratio by 0.7 percentage point.
    JEL: I38 J08 J21 J38
    Date: 2014–12
  6. By: María F. Prada; Sergio S. Urzúa
    Abstract: We investigate the role of mechanical ability as another dimension that, jointly with cognitive and socio-emotional, affects schooling decisions and labor market outcomes. Using a Roy model with a factor structure and data from the NLSY79, we show that the labor market positively rewards mechanical ability. However, in contrast to the other dimensions, mechanical ability reduces the likelihood of attending four-year college. We find that, on average, for individuals with high levels of mechanical and low levels of cognitive and socio-emotional ability, not attending four-year college is the alternative associated with the highest hourly wage (ages 25-30).
    JEL: C38 J24
    Date: 2014–12
  7. By: Michael Siegenthaler (KOF Swiss Economic Institute, ETH Zurich, Switzerland); Michael Graff (KOF Swiss Economic Institute, ETH Zurich, Switzerland); Massimo Mannino (University of St. Gallen)
    Abstract: While Switzerland’s recent growth of employment was high in historical and international perspective, the reasons for this “job miracle” were not well understood. As the “miracle” was not anticipated by economic forecasters, it consequently resulted in systematic and persistent forecast errors. This paper shows that the “miracle” is related to a substantial increase in the labor intensity of economic activity. To this end, we present a number of stylized facts reflecting shifts and structural changes that affected the Swiss economy around 2000. Then, we discuss potential drivers of the “miracle” which are consistent with these facts. Finally, we demonstrate how they contribute to understand why, during the last ten years, forecasters systematically underestimated the growth of domestic employment. Finally, we highlight that immigration was not only a consequence of the “miracle”, but also an important cause, as it created additional jobs in Switzerland by raising local demand for goods and, most importantly, services.
    Keywords: Migration, Labor Market, employment forecasts, local multipliers, free movement of persons, Swiss job miracle
    JEL: C52 E24 J21 J61
    Date: 2014–12
  8. By: Schultz-Nielsen, Marie Louise (Rockwool Foundation Research Unit); Tekin, Erdal (American University); Greve, Jane (Rockwool Foundation Research Unit)
    Abstract: This paper examines whether nutritional disruptions experienced during the stage of fetal development impair an individual's labor market productivity later in life. We consider intrauterine exposure to the month of Ramadan as a natural experiment that might cause shocks to the inflow of nutrients essential for fetal development. Specifically, we use administrative data from Denmark to investigate the impact of exposure to Ramadan in utero on labor market outcomes of adult Muslim males, including employment status, annual salary, hourly wage rate, and hours of work. Our findings indicate that potential exposure to nutritional disruptions during a critical stage of fetal development has scarring effects on the fetus expressed as poor labor market outcomes later in life. Specifically, exposure to Ramadan in the 7th month of gestation results in a lower likelihood of employment, a lower salary, and reduced labor supply, but not necessarily a lower wage rate. We also document suggestive evidence that these results may partially be driven by increased disability and to a lesser extent by poor educational attainment among those who were exposed to Ramadan during this particular period in utero.
    Keywords: Ramadan, fetal origins, Intrauterine, Denmark, nutrition, wage, labor, Muslim
    JEL: I1 I12 J1 J13 J22 J24 J3
    Date: 2014–11
  9. By: Furtado, Delia (University of Connecticut)
    Abstract: This paper explores how inflows of low-skilled immigrants impact the tradeoffs women face when making joint fertility and labor supply decisions. I find increases in fertility and decreases in labor force participation rates among high skilled US-born women in cities that have experienced larger immigrant inflows. Most interestingly, these changes have been accompanied by decreases in the strength of the negative correlation between childbearing and labor force participation, an often-used measure of the difficulty with which women combine motherhood and labor market work. Using a structured statistical model, I show that the immigrant-induced attenuation of this negative correlation can explain about 24 percent of the immigrant-induced increases in the joint likelihood of childbearing and labor force participation in the U.S. between the years 1980 and 2000.
    Keywords: child care, fertility, labor force participation, immigration, tetrachoric correlation
    JEL: D10 F22 J13 J22 R23
    Date: 2014–11
  10. By: Arvid Raknerud; Marit Rønsen (Statistics Norway)
    Abstract: Women make up almost 50 percent of the employed population in Norway, but only about 25 percent of the entrepreneurs. Using registry data on the whole population we address gender differences in the propensity to become an entrepreneur. We do so by analysing transition from ordinary wage employment into entrepreneurship, defined as either sole proprietorship or owner- managed incorporated entrepreneurship. We focus on the impact of the family and household situation and show that children are no barrier to female entrepreneurship. This result holds also when we look at the establishment of an incorporated business, which represents a bigger investment decision than mere self-employment. Moreover, we find that gender differences with regard to the impact of family and household characteristics are generally smaller for incorporated entrepreneurship than for self-employment. For example, while there is a clear positive effect on women’s – but not men’s – propensity to become self-employed if the partner is highly educated, the impact of the partner’s education is ambiguous both for men and women in the case of incorporated entrepreneurship. The strongest predictor of entrepreneurship among the partner characteristics, both for men and women, is whether or not the partner is an entrepreneur. Although our results do not bring a clear answer to why there are so few female entrepreneurs in Norway, an important insight from our analyses is that the family and household situation can be ruled out as a major explanation.
    Keywords: : Entrepreneurship; gender; work and family; partner’s characteristics; probit regression; linked registry data
    JEL: L26 J13 J16 J22 C23
    Date: 2014–11
  11. By: Florian Hoffmann; Thomas Lemieux
    Abstract: This paper investigates the potential reasons for the surprisingly different labor market performance of the United States, Canada, Germany, and several other OECD countries during and after the Great Recession of 2008-09. Unemployment rates did not change substantially in Germany, increased and remained at relatively high levels in the United States, and increased moderately in Canada. More recent data also show that, unlike Germany and Canada, the U.S. unemployment rate remains largely above its pre-recession level. We find two main explanations for these differences. First, the large employment swings in the construction sector linked to the boom and bust in U.S. housing markets can account for a large fraction of the cross-country differences in aggregate labor market outcomes for the three countries. Second, cross-country differences are consistent with a conventional Okun relationship linking GDP growth to employment performance. In particular, relative to pre-recession trends there has been a much larger drop in GDP in the United States than Germany between 2008 and 2012. In light of these facts, the strong performance of the German labor market is consistent with other aggregate outcomes of the economy.
    JEL: J21 J64
    Date: 2014–11
  12. By: Guertzgen, Nicole; Hank, Karsten
    Abstract: Exploiting unique German administrative data, we estimate the association between an expansion in maternity leave duration from two to six months in 1979 and mothers' post-birth long-term sickness absence over a period of three decades after childbirth. Using a regression discontinuity design, we first show that the leave extension caused mothers to significantly delay their return to work within the first year after childbirth. We then compare the number and length of spells of long-term sickness absence of returned mothers who gave birth before and after the change in leave legislation. Our findings suggest that among those returned, mothers subject to the leave extension exhibit a higher incidence of long-term sickness absence as compared to control mothers. This also holds true after controlling for observable differences in pre-birth illness histories. At the same time, there are no pronounced effects on mothers' medium-run labor market attachment following the short-run delay in return to work, which might rationalize a negative causal health effect. Breaking down the results by mothers' pre-birth health status suggests that the higher incidence of long-term sickness absence among the treated may be explained by the fact that the reform has facilitated re-entry of a negative health selection into the labor market.
    Keywords: maternity leave policies,health,administrative data,regression discontinuity design
    JEL: J10 J16 J18
    Date: 2014
  13. By: Auer, Wolfgang (Ifo Institute for Economic Research); Danzer, Natalia (Ifo Institute for Economic Research)
    Abstract: We study the short- to medium-run effects of starting a career on a fixed-term contract on subsequent fertility outcomes. We focus on the career start since we expect that temporary contracts and their inherent economic uncertainty imply a path dependency which might have spill-over effects on other domains of life. Our empirical analysis is based on rich data from the German Socio-Economic Panel which provides comprehensive information about individuals' labour market history as well as fertility behaviour. Our main results are: Women (i) tend to postpone their first birth due to fixed-term employment at labour market entry and (ii) reduce the number of children in the first 10 years after graduation. These associations are strongest in the subsample of native women with at least vocational training. (iii) In contrast, we find no significant correlations for men. We argue that these findings are robust to potential endogeneity threats.
    Keywords: career start, fixed-term employment, postponement of maternity, fertility, economic uncertainty, graduation
    JEL: J13 J18 J41
    Date: 2014–11
  14. By: Seki, Mai
    Abstract: Existing studies on the returns to college selectivity have mixed results, mainly due to the difficulty of controlling for selection into more-selective colleges based on unobserved ability. Moreover, researchers have not considered graduate degree attainment in the analysis of labour market returns to college selectivity. In this paper, I estimate the effect of a U.S. four-year undergraduate program’s selectivity on wages, including graduate degree attainment. I control for both observed and unobserved selection by extending the model of Carneiro, Hansen and Heckman (2003). There are two channels through which college selectivity affects future labour market outcomes. The first is the wage returns to college selectivity conditional on graduate degree attainment. The second is the effect of college selectivity on the probability of graduate degree attainment and the wage returns to graduate degree attainment. The results show that the former effects dominate the latter, but both are small in magnitude.
    Keywords: returns to education, heterogeneous treatment effect, selection, data combination
    JEL: I21 C30
    Date: 2014–11–25
  15. By: Eric A. Hanushek; Marc Piopiunik; Simon Wiederhold
    Abstract: Differences in teacher quality are commonly cited as a key determinant of the huge international student performance gaps. However, convincing evidence on this relationship is still lacking, in part because it is unclear how to measure teacher quality consistently across countries. We use unique international assessment data to investigate the role of teacher cognitive skills as one main dimension of teacher quality in explaining student outcomes. Our main identification strategy exploits exogenous variation in teacher cognitive skills attributable to international differences in relative wages of nonteacher public sector employees. Using student-level test score data, we find that teacher cognitive skills are an important determinant of international differences in student performance. Results are supported by fixed-effects estimation that uses within-country between-subject variation in teacher skills.
    JEL: H4 I2 J2
    Date: 2014–12
  16. By: Cabrales, Antonio; Dolado, Juan J.; Mora, Ricardo
    Abstract: Using the Spanish micro data from the Programme for the International Assessment of Adult Competencies (PIAAC), we first document how the excessive gap in employment protection between indefinite and temporary workers leads to large differentials in on-the-job training (OTJ) against the latter. Next, we find that that the lower specific training received by temporary workers is correlated with lower literacy and numeracy scores achieved in the PIAAC study. Finally, we provide further PIAAC cross-country evidence showing that OJT gaps are quite lower in those European labour markets where dualism is less entrenched than in those where it is more extended.
    Keywords: cognitive skills; dual labour market; on-the-job training; severance pay
    JEL: C14 C52 D24 J24
    Date: 2014–11
  17. By: del Bono, Emilia; Francesconi, Marco
    Abstract: Using large longitudinal survey data from the UK Millennium Cohort Study, this paper estimates the eect of maternal time inputs on early child development. We nd that maternal time is a quantitatively important determinant of skill formation and that its eect declines with child age. There is evidence of a long shadow of the eect of early maternal time inputs on later outcomes, especially in the case of cognitive skill development. In the case of non-cognitive development, this eect disappears when we account for skill persistence.
    Keywords: cognitive and non- cognitive skill formation; early interventions; education production functions
    JEL: I20 J15 J24
    Date: 2014–11

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