nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2015‒01‒19
nineteen papers chosen by
Joseph Marchand
University of Alberta

  1. Fostering and Measuring Skills: Improving Cognitive and Non-Cognitive Skills to Promote Lifetime Success By Kautz, Tim; Heckman, James J.; Diris, Ron; ter Weel, Bas; Borghans, Lex
  2. Why rapidly expanding the number of college-trained workers may not lower income inequality: The curious case of Taiwan, 1978-2011 By Keng, Shao-Hsun; Lin, Chun-Hung; Orazem, Peter
  3. Retirement Timing of Women and the Role of Care Responsibilities for Grandchildren By Robin L. Lumsdaine; Stephanie J.C. Vermeer
  4. Assessing the Change in Labor Market Conditions By Chung, Hess; Fallick, Bruce C.; Nekarda, Christopher J.; Ratner, David
  5. Student Loans and Repayment: Theory, Evidence and Policy By Lance Lochner; Alexander Monge-Naranjo
  6. A Kink that Makes You Sick: the Effect of Sick Pay on Absence in a Social Insurance System By Böckerman, Petri; Kanninen, Ohto; Suoniemi, Ilpo
  7. Share Capitalism and Worker Wellbeing By Bryson, Alex; Clark, Andrew E.; Freeman, Richard B.; Green, Colin P.
  8. Nominal Wage Rigidity in Village Labor Markets By Supreet Kaur
  9. The role of product diversification in skill-biased technological change By Nam, Choong Hyun
  10. College Expansion and the Marginal Returns to Education: Evidence from Russia By Belskaya, Olga; Peter, Klara Sabirianova; Posso, Christian
  11. Women Helping Women? Evidence from Private Sector Data on Workplace Hierarchies By Astrid Kunze; Amalia R. Miller
  12. The Causal Effect of Unemployment Duration on Wages: Evidence from Unemployment Insurance Extensions By Schmieder, Johannes F.; Wachter, Till von; Bender, Stefan
  13. Do NEETs Need Grit? By Mendolia, Silvia; Walker, Ian
  14. Migration and the Demographic Shift By Zaiceva, Anzelika; Zimmermann, Klaus F.
  15. Wages and Wedges in an Estimated Labor Search Model By Ryan Chahrour; Sanjay K. Chugh; Tristan Potter
  16. Gender By Muriel Niederle
  17. Land Collateral and Labor Market Dynamics in France. By L. Kaas; P. A. Pintus; S. Ray
  18. Informing Migration Policies: A Data Primer By Carletto, Calogero; Larrison, Jennica; Ozden, Caglar
  19. A disadvantaged childhood matters more if local unemployment is high By Zwysen, Wouter

  1. By: Kautz, Tim (University of Chicago); Heckman, James J. (University of Chicago); Diris, Ron (K.U.Leuven); ter Weel, Bas (CPB Netherlands Bureau for Economic Policy Analysis); Borghans, Lex (Maastricht University)
    Abstract: This paper reviews the recent literature on measuring and boosting cognitive and non-cognitive 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.
    Keywords: non-cognitive skills, human development, interventions
    JEL: D01 I20 J24
    Date: 2014–12
  2. By: Keng, Shao-Hsun; Lin, Chun-Hung; Orazem, Peter
    Abstract: Since 1990, Taiwan increased the college share of its labor force from 7% to 28% by converting junior colleges to 4-year colleges.  Such a rapid surge in skill supply should suppress college wages and lower income inequality.  Instead, inequality rose steadily.  The surge of weaker college graduates made them weak substitutes for better trained college graduates, increasing wage inequality within skill groups. The college premium would have been 15% higher had college quality remained unchanged at its 1992 level.  The Taiwan case shows that increasing college access alone will not lower income inequality unless college quality is maintained.
    Keywords: education; Returns to skills; Wage inequality; college supply; college quality; Taiwan
    JEL: J24 J31
    Date: 2014–12–21
  3. By: Robin L. Lumsdaine; Stephanie J.C. Vermeer
    Abstract: This paper considers the potential relationship between providing care for grandchildren and retirement, among women nearing retirement age. Using 47,400 person-wave observations from the Health and Retirement Study (HRS), we find the arrival of a new grandchild is associated with a more than eight percent increase in the retirement hazard despite little overall evidence of a care/retirement interaction. We document that while family characteristics seem to be the most important factors driving the care decision, they are also important determinants of retirement. In contrast, while financial incentives such as pensions and retiree health insurance have the largest influence on retirement, the opportunity cost associated with outside income seems to have little effect on whether or not a grandmother provides care. There is little evidence of substitution between caring for grandchildren versus providing care for elderly parents or engaging in volunteer activities; grandchild care is instead taken on as an additional responsibility. Our findings suggest that policies aimed at prolonging worklife may need to consider grandchild care responsibilities as a countervailing factor while those policies focused on grandchild care may also affect elderly labor force composition.
    JEL: J12 J13 J14 J22 J26
    Date: 2014–12
  4. By: Chung, Hess (Federal Reserve Board of Governors); Fallick, Bruce C. (Federal Reserve Bank of Cleveland); Nekarda, Christopher J. (Federal Reserve Board of Governors); Ratner, David (Federal Reserve Board of Governors)
    Abstract: This paper describes a dynamic factor model of 19 U.S. labor market indicators, covering the broad categories of unemployment and underemployment, employment, workweeks, wages, vacancies, hiring, layoffs, quits, and surveys of consumers’ and businesses’ perceptions. The resulting labor market conditions index (LMCI) is a useful tool for gauging the change in labor market conditions. In addition, the model provides a way to organize discussions of the signal value of different labor market indicators in situations when they might be sending diverse signals. The model takes the greatest signal from private payroll employment and the unemployment rate. Other infl uential indicators include the insured unemployment rate, consumers’ perceptions of job availability, and help-wanted advertising. Through the lens of the LMCI, labor market conditions have improved at a moderate pace over the past several years, albeit with some notable variation along the way. In addition, from the perspective of the model, the unemployment rate declined a bit faster over the past two years than was consistent with the other indicators.
    Keywords: LMCI; U.S.labor market; dynamic factor model; unemployment rate; employment
    JEL: E24 E66 J20 J6
    Date: 2015–01–06
  5. By: Lance Lochner (University of Western Ontario); Alexander Monge-Naranjo (Federal Reserve Bank of St. Louis and Washington University at St. Louis)
    Abstract: Rising costs of and returns to college have led to sizeable increases in the demand for student loans in many countries. In the U.S., student loan default rates have also risen for recent cohorts as labor market uncertainty and debt levels have increased. We discuss these trends as well as recent evidence on the extent to which students are able to obtain enough credit for college and the extent to which they are able to repay their student debts after. We then discuss optimal student credit arrangements that balance three important objectives: (i) providing credit for students to access college and finance consumption while in school, (ii) providing insurance against uncertain adverse schooling or post-school labor market outcomes in the form of income-contingent repayments, and (iii) providing incentives for student borrowers to honor their loan obligations (in expectation) when information and commitment frictions are present. Specifically, we develop a two-period educational investment model with uncertainty and show how student loan contracts can be designed to optimally address incentive problems related to moral hazard, costly income verification, and limited commitment by the borrower. We also survey other research related to the optimal design of student loan contracts in imperfect markets. Finally, we provide practical policy guidance for re-designing student loan programs to more efficiently provide insurance while addressing information and commitment frictions in the market.
    Keywords: Human Capital; Borrowing; Student Loans; Default; Repayment; Income-Contingent; Credit Constraint
    JEL: D14 D82 H21 H52 I22 I24 J24
    Date: 2014
  6. By: Böckerman, Petri; Kanninen, Ohto; Suoniemi, Ilpo
    Abstract: We examine the effect of the replacement rule of a social insurance system on sickness absence. The elasticity of absence with respect to the benefit level is a critical parameter in defining the optimal sickness insurance scheme. A pre-determined, piecewise linear policy rule in which the replacement rate is determined by past earnings allows identification of the causal effect using a regression kink design. Using a large administrative dataset, we find a substantial and robust behavioral response. The statistically significant point estimate of the elasticity of the duration of sickness absence with respect to the replacement rate in a social insurance system is on the order of 1.
    Keywords: Sick pay, labor supply, sickness absence, regression kink design, social insurance
    JEL: I18 I3 J22
    Date: 2014–12–30
  7. By: Bryson, Alex (National Institute of Economic and Social Research (NIESR)); Clark, Andrew E. (Paris School of Economics); Freeman, Richard B. (Harvard University); Green, Colin P. (Lancaster University)
    Abstract: We show that worker wellbeing is not only related to the amount of compensation workers receive but also how they receive it. While previous theoretical and empirical work has often been pre-occupied with individual performance-related pay, we here demonstrate a robust positive link between the receipt of a range of group performance schemes (profit shares, group bonuses and share ownership) and job satisfaction. Critically, this relationship remains after conditioning on wage levels, which suggests these pay methods provide utility to workers in addition to that through higher wages. These findings survive a variety of methods aimed at accounting for unobserved individual and job-specific characteristics. We investigate two potential channels for this effect. We first demonstrate that half of the positive effect can be accounted for by employees' tendency to reciprocate in return for the "gift" of share capitalism. Second, we show that these 'share capitalist' modes of pay dampen the negative wellbeing effects of what we typically think of as "bad" aspects of job quality. Finally, share-capitalist pay methods also have positive wellbeing spill-over effects on co-workers.
    Keywords: compensation methods, wages, job satisfaction, working conditions
    JEL: J28 J33 J54 J63 J81 M52
    Date: 2014–12
  8. By: Supreet Kaur
    Abstract: This paper tests for downward nominal wage rigidity in markets for casual daily agricultural labor in a developing country context. I examine transitory shifts in labor demand, generated by rainfall shocks, in 600 Indian districts from 1956-2009. First, there is asymmetric adjustment: nominal wages rise in response to positive shocks but do not fall during droughts. Second, transitory positive shocks generate ratcheting: after they have dissipated, nominal wages do not adjust back down. Third, inflation moderates these effects, enabling downward real wage adjustments both during droughts and after positive shocks. Fourth, wage distortions generate employment distortions, creating boom and bust cycles: employment is 9% lower in the year after a transitory positive shock than if the positive shock had not occurred. Fifth, consistent with the misallocation of labor across farms, households with small landholdings increase labor supply to their own farms when they are rationed out of the external labor market. The results are not consistent with other transmission mechanisms, such as migration or capital accumulation. These findings indicate the presence of rigidities in a setting with few institutional constraints. Survey evidence suggests that workers and employers believe that nominal wage cuts are unfair and lead to effort reductions.
    JEL: E24 J31 O10 O12
    Date: 2014–12
  9. By: Nam, Choong Hyun
    Abstract: Since the 1980s, the labour demand has shifted toward more educated workers in the US. The most common explanation is that the productivity of skilled workers has risen relative to the unskilled, but it is not easy to explain why the aggregate labour productivity was stagnant during the 1980s. Alternatively, I have constructed a theoretical model which assumes that the demand for white-collar workers increases not because their productivity grows faster, but because increasing product variety requires white-collar workers as fixed input. Hence, the transition from Ford-style mass production towards more diversified one has shifted labour demand toward white-collar workers.
    Keywords: Skill Demand; product innovation; inequality; productivity
    JEL: E23 E24 E32 J31 L1 O3 O4
    Date: 2014–12–31
  10. By: Belskaya, Olga (University of North Carolina, Chapel Hill); Peter, Klara Sabirianova (University of North Carolina, Chapel Hill); Posso, Christian (University of North Carolina, Chapel Hill)
    Abstract: This paper evaluates whether the expansion of higher education is economically worthwhile based on a recent surge in the number of campuses and college graduates in Russia. Our empirical strategy relies on the marginal treatment effect method in both normal and semi‐parametric versions, and estimating policy‐influenced treatment parameters for the marginal students who are directly affected by college expansion. We use high‐quality panel data with multiple wage observations, many birth cohorts, disaggregated location information, and past economic conditions. We find that college expansion attracts individuals with lower returns to college, but the returns for marginal students vary considerably depending on the scale of expansion and the type of location where new campuses are opened. Marginal individuals in smaller cities and locations without college campuses receive the largest benefits from new campuses. The results provide important implications for the design of policies targeting the expansion of higher education.
    Keywords: education, returns to college, marginal treatment effect, policy‐relevant treatment effect, local instrumental variable, selection bias, college expansion, Russia
    JEL: J31 I21 P36
    Date: 2014–12
  11. By: Astrid Kunze; Amalia R. Miller
    Abstract: This paper studies gender spillovers in career advancement using 11 years of employer-employee matched data on the population of white-collar workers at over 4,000 private-sector establishments in Norway. Our data include unusually detailed job information for each worker, which enables us to define seven hierarchical ranks that are consistent across establishments and over time in order to measure promotions (defined as year-to-year rank increases) even for individuals who change employers. We first find that women have significantly lower promotion rates than men across all ranks of the corporate hierarchy, even after controlling for a range of individual characteristics (age, education, tenure, experience) and including fixed effects for current rank, year, industry, and even work establishment. In measuring the effects of female coworkers, we find positive gender spillovers across ranks (flowing from higher-ranking to lower-ranking women) but negative spillovers within ranks. The finding that greater female representation at higher ranks narrows the gender gap in promotion rates at lower ranks suggests that policies that increase female representation in corporate leadership can have spillover benefits to women in lowers ranks.
    JEL: J13 J31 J62 J7 K31 M14 M51
    Date: 2014–12
  12. By: Schmieder, Johannes F. (Boston University); Wachter, Till von (University of California, Los Angeles); Bender, Stefan (Institute for Employment Research (IAB), Nuremberg)
    Abstract: This paper estimates the causal effect of long-term unemployment on wages. Job search theory implies that if Unemployment Insurance (UI) extensions do not affect wages conditional on the month of unemployment exit, then reservation wages do not bind on average. Then, UI extensions affect mean wages only through unemployment durations and are valid instrumental variables (IV). Using a regression discontinuity design, we find that UI extensions in Germany reduced job searchers' reemployment wages on average, but did not affect wages conditional on unemployment duration. Resulting IV estimates imply substantial negative effects of unemployment duration on wages of 0.8% per month.
    Keywords: long-term unemployment, wage losses, unemployment insurance
    JEL: J64 J65
    Date: 2014–12
  13. By: Mendolia, Silvia (University of Wollongong); Walker, Ian (Lancaster University)
    Abstract: This paper investigates the relationship between personality traits in adolescence and education and labour market choices. In particular, we investigate the impact of grit (a tendency and ability to sustain interest in long term goals - perseverance) on the risk of youths being NEET – "Not in Education, Employment or Training". Thus, our focus is on early drop-out from the labour market and education at age 18-20. Individuals with high levels of grit are less likely to be out of education or employment, while low self-esteem and external locus of control increase the chances of experiencing these conditions. We use propensity score matching to control for a rich set of adolescent and family characteristics and our results show that personality traits do affect education and employment choices. We test the robustness of our results using the methodology proposed by Altonji et al. (2005) that consists of making hypotheses about the correlation between the unobservables and observables that determine the outcomes and the unobservables that influence personality.
    Keywords: personality, NEET, grit, locus of control, self-esteem
    JEL: I10 I21
    Date: 2014–12
  14. By: Zaiceva, Anzelika (University of Modena and Reggio Emilia); Zimmermann, Klaus F. (IZA and University of Bonn)
    Abstract: This chapter connects population aging with international migration. After documenting the trends for both, we review the supply-push and demand-pull determinants of migration, focusing particularly on the role of age and aging. We subsequently discuss the literature concerning the implications of migration in the context of aging for labor markets, health and public budgets including the political economy context. Although immigration is sometimes suggested as a solution for the aging problem, the existing academic literature from different fields is more cautious about its role and potential. While large-scale selective immigration might contribute to alleviating demographic pressures, it is unlikely that immigration will increase to the unrealistically large numbers needed.
    Keywords: aging, migration, demographic pressures, elderly migration, attitudes towards migration, political economy of immigration
    JEL: F22 J11 J14 J61 O15
    Date: 2014–12
  15. By: Ryan Chahrour (Boston College); Sanjay K. Chugh (Boston College); Tristan Potter (Boston College)
    Abstract: We estimate a search-based real business cycle economy using quantity data and a broad set of wage indicators, allowing the latent wage to follow a non-structural ARMA process. Under the estimated process, wages adjust immediately to most shocks and induce substantial variation in labor's share of surplus. These results are not consistent with either a rigid real wage or Nash bargaining. The model fit is excellent, and smoothed realizations of the wage are consistent with empirical measures. According to the model, shocks to intertemporal preferences are the primary cause of inefficient fluctuations in the labor market and the driver of variation in labor's share of surplus.
    Keywords: Search and Matching, Wage Determination, DSGE, Bayesian Estimation
    JEL: E32 E24
    Date: 2014–12–17
  16. By: Muriel Niederle
    Abstract: This paper summarizes research on gender differences in economic settings. I discuss gender differences in attitudes toward competition, altruism and the closely related issue of cooperation, and risk preferences. While gender differences in competition are large and robust, the results are much more mixed and more nuanced concerning altruism or cooperative tendencies. Surprisingly, the results are also quite mixed when concerning gender differences in risk attitudes. I discuss the external validity of laboratory results in the field. More importantly, however, I emphasize research investigating the external relevance of laboratory findings. That is, to what extent can gender differences in the aforementioned psychological attributes account for observed gender differences in economic outcomes including education and labor market outcomes as well as voting behavior.
    JEL: C9 J0
    Date: 2014–12
  17. By: L. Kaas; P. A. Pintus; S. Ray
    Abstract: The value of land in the balance sheet of French firms correlates positively with their hiring and investment flows. To explore the relationship between these variables, we develop a macroeconomic model with firms that are subject to both credit and labor market frictions. The value of collateral is driven by the forward-looking dynamics of the land price which reacts endogenously to fundamental and non-fundamental (sunspot) shocks. We calibrate the model to French data and find that land price shocks give rise to significant amplification and hump-shaped responses of investment, vacancies and unemployment that are in line with the data. We show that both the endogenous movements in the firms’ discount factor and the sluggish response of the land price are key elements that drive the results.
    Keywords: Financial shocks; Labor market frictions.
    JEL: E24 E32 E44
    Date: 2014
  18. By: Carletto, Calogero (World Bank); Larrison, Jennica (University of Baltimore); Ozden, Caglar (World Bank)
    Abstract: Researchers in many fields, such as demography, economics, and sociology, have established various data collection methodologies and principles to answer a range of academic and policy questions on migration. Although the progress has been impressive, some basic challenges remain. This paper addresses some basic, yet fundamental, questions on identification of international migrants and how their various demographic, personal, and human capital characteristics are captured via different data sources. The critical issues are the construction of proper sampling frames in censuses, registers, and surveys and the design of questionnaires in household, labor market, and other relevant surveys. The paper discusses how these data sources can be used to answer policy questions in areas such as labor markets, education, or poverty. The focus is on how some of the existing shortcomings in availability, quality, and relevance of migration data can be overcome via improvements in data collection methods.
    Keywords: migration, development, survey design, data collection, data dissemination
    JEL: F22 J61 O15
    Date: 2014–12
  19. By: Zwysen, Wouter
    Abstract: Using multilevel models on the German Socio-Economic Panel Study this paper shows that disadvantaged young adults (16-35 years old) are more affected by the business cycle than their similarly educated counterparts from more advantaged backgrounds. We propose that a disadvantaged background lowers desirability on the labour market, which matters more to employers as the labour market tightens. When the local unemployment rate is high, young adults from a disadvantaged background are less likely to be hired for good jobs or hired at all than their more advantaged counterparts. These results are robust to different operationalisations and sibling fixed effects.
    Date: 2014–12–18

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