nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2015‒01‒31
twenty-two papers chosen by
Joseph Marchand
University of Alberta

  1. Assessing the Change in Labor Market Conditions By Chung, Hess ; Fallick, Bruce C. ; Nekarda, Christopher J. ; Ratner, David
  2. Does Delay Cause Decay? The Effect of Administrative Decision Time on the Labor Force Participation and Earnings of Disability Applicants By David H. Autor ; Nicole Maestas ; Kathleen J. Mullen ; Alexander Strand
  3. The Effect of Unemployment Benefits on the Duration of Unemployment Insurance Receipt: New Evidence from a Regression Kink Design in Missouri, 2003-2013 By David Card ; Andrew Johnston ; Pauline Leung ; Alexandre Mas ; Zhuan Pei
  4. Bounding the Labor Supply Responses to a Randomized Welfare Experiment: A Revealed Preference Approach By Patrick Kline ; Melissa Tartari
  5. The effect of hiring subsidies on regular wages By Moczall, Andreas
  6. Accounting for Changes in Between-Group Inequality By Ariel Burstein ; Eduardo Morales ; Jonathan Vogel
  7. Search Costs and Efficiency: Do Unemployed Workers Search Enough? By Pieter Gautier ; Jose L Moraga-Gonzalez ; Ronald Wolthoff
  8. Exploration for Human Capital: Evidence from the MBA Labor Market By Camelia M. Kuhnen ; Paul Oyer
  9. Offshoring, low-skilled immigration, and labor market polarization By Mandelman, Federico S. ; Zlate, Andrei
  10. Indentifying the sector bias of technical change By Thomas von Brasch
  11. Long Run Effects of Free School Choice: College Attainment, Employment, Earnings, and Social Outcomes at Adulthood By Victor Lavy
  12. Recruiting and Retaining High-Quality State and Local Workers: Do Pensions Matter? By Alicia H. Munnell ; Jean-Pierre Aubry ; Geoffrey T. Sanzenbacher
  13. Workers Compensation Insurance: Incentive Effects of Experience Rating on Work-related Health and Safety By Pascale Lengagne
  14. The employment effect of minimum wage using 77 international studies since 1992: A meta-analysis By Chletsos, Michael ; Giotis, Georgios P.
  15. Knowledge, Human Capital and Economic Development: Evidence from the British Industrial Revolution, 1750-1930 By B. Zorina Khan
  16. The sorting of female careers after first birth: A competing risks analysis of maternity leave duration By Arntz, Melanie ; Dlugosz, Stephan ; Wilke, Ralf A.
  17. Maternity Leave and Its Consequences for Subsequent Careers in Germany By Nele E. Franz
  18. The German Labor Market for Older Workers in Comparative Perspective By John S. Heywood ; Uwe Jirjahn
  19. Contract staggering and unemployment during the great recession: evidence from Spain By Luis Diéz-Catalán ; Ernesto Villanueva
  20. The Spanish productivity puzzle in the Great Recession. By Laura Hospido ; Eva Moreno-Galbis
  21. Self-Identified Sexual Orientation and the Lesbian Earnings Differential By Mary Eschelbach Hansen ; Michael E. Martell
  22. Vertical Transmission of Overweight: Evidence From English Adoptees By Joan Costa-Font ; Mireia Jofre-Bonet ; Julian Le Grand

  1. By: Chung, Hess (Board of Governors of the Federal Reserve System (U.S.) ); Fallick, Bruce C. (Federal Reserve Bank of Cleveland ); Nekarda, Christopher J. (Board of Governors of the Federal Reserve System (U.S.) ); Ratner, David (Board of Governors of the Federal Reserve System (U.S.) )
    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 influential 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 t he 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; employment; unemployment rate
    JEL: E24 E66 J20 J60
    Date: 2014–12–17
  2. By: David H. Autor ; Nicole Maestas ; Kathleen J. Mullen ; Alexander Strand
    Abstract: This paper measures the causal effect of time out of the labor force on subsequent employment of Social Security Disability Insurance (SSDI) applicants and distinguishes it from the discouragement effect of receiving disability benefits. Using a unique Social Security Administration workload database to identify exogenous variation in decision times induced by differences in processing speed among disability examiners to whom applicants are randomly assigned, we find that longer processing times reduce the employment and earnings of SSDI applicants for multiple years following application, with the effects concentrated among applicants awarded benefits during their initial application. A one standard deviation (2.1 month) increase in initial processing time reduces long-run “substantial gainful activity” rates by 0.36 percentage points (3.5%) and long-run annual earnings by $178 (5.1%). Because applicants initially denied benefits spend on average more than 15 additional months appealing their denials, previous estimates of the benefit receipt effect are confounded with the effect of delays on subsequent employment. Accounting separately for these channels, we find that the receipt effect is at least 50% larger than previously estimated. Combining the delay and benefits receipt channels reveals that the SSDI application process reduces subsequent employment of applicants on the margin of award by twice as much as prior literature suggests.
    JEL: H53 I13 J22 J38
    Date: 2015–01
  3. By: David Card ; Andrew Johnston ; Pauline Leung ; Alexandre Mas ; Zhuan Pei
    Abstract: We provide new evidence on the effect of the unemployment insurance (UI) weekly benefit amount on unemployment insurance spells based on administrative data from the state of Missouri covering the period 2003-2013. Identification comes from a regression kink design that exploits the quasi-experimental variation around the kink in the UI benefit schedule. We find that UI durations are more responsive to benefit levels during the recession and its aftermath, with an elasticity between 0.65 and 0.9 as compared to about 0.35 pre-recession.
    JEL: J64 J65
    Date: 2015–01
  4. By: Patrick Kline ; Melissa Tartari
    Abstract: We study the short-term impact of Connecticut's Jobs First welfare reform experiment on women’s labor supply and program participation decisions. A non-parametric optimizing model is shown to restrict the set of counterfactual choices compatible with each woman's actual choice. These revealed preference restrictions yield informative bounds on the frequency of several intensive and extensive margin responses to the experiment. We find that welfare reform induced many women to work but led some others to reduce their earnings in order to receive assistance. The bounds on this latter “opt-in” effect imply that intensive margin labor supply responses are non-trivial.
    JEL: C14 H20 J22
    Date: 2015–01
  5. By: Moczall, Andreas (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany] )
    Abstract: "What happens to the wages of regular workers in establishments subsidized with hiring subsidies? Does hiring programme participants result in windfalls that are distributed among regular workers? Do these reduce their wage demands to avoid being substituted by subsidized workers? Using linked employer-employee data from Germany, I estimate the effects of subsidizing an establishment on regular workers' wages using spell fixed effects regression. I find that hiring subsidy schemes do increase the daily wages of regular workers by up to almost one per cent in the manufacturing sector. These effects are limited to large establishments and abovemedian local unemployment rates. They occur within the establishment itself and are not merely the result of varying regional exposure to ALMP programmes. I conclude that hiring subsidies have a notable impact on regular workers beyond mere substitution." (Author's abstract, IAB-Doku) ((en))
    Keywords: IAB-Linked-Employer-Employee-Datensatz, Eingliederungszuschuss, Beschäftigerverhalten, Lohnstruktur, Betrieb, arbeitsmarktpolitische Maßnahme - Auswirkungen
    JEL: J38 J68 H25 C23
    Date: 2015–01–07
  6. By: Ariel Burstein ; Eduardo Morales ; Jonathan Vogel
    Abstract: We provide an assignment model to decompose changes in between-group wage inequality into changes in the composition of the workforce, the productivity/demand for tasks, computerization, and labor productivity. The model incorporates comparative advantage between many groups of workers, many types of equipment, and many tasks and yet may be parameterized and estimated in a transparent manner. Our identification of parameters, measurement of shocks, and the equilibrium equation determining wages are all very similar to what have been used in previous reduced-form analyses. We use U.S. data on the allocation of workers to occupations and computer usage as well as changes in average wages across worker groups between 1984 and 2003 to parameterize our model. We find that computerization and changes in task productivity/demand, which are both measured without directly using data on changes in wages, jointly explain the majority of the rise in the skill premium and more disaggregated measures of between-eduation group inequality as well as roughly half of the rise in the relative wage of women over this time period. We show how to link the strength of these two forces to changes in the extent of international trade.
    JEL: E24 F16 J2
    Date: 2015–01
  7. By: Pieter Gautier ; Jose L Moraga-Gonzalez ; Ronald Wolthoff
    Abstract: Many labor market policies affect the marginal benefits and costs of job search. The impact and desirability of such policies depend on the distribution of search costs. In this paper, we provide an equilibrium framework for identifying the distribution of search costs and we apply it to the Dutch labor market. In our model, the wage distribution, job search intensities, and firm entry are simultaneously determined in market equilibrium. Given the distribution of search intensities (which we directly observe), we calibrate the search cost distribution and the flow value of non-market time; these values are then used to derive the socially optimal firm entry rates and distribution of job search intensities. From a social point of view, some unemployed workers search too little due to a hold-up problem, while other unemployed workers search too much due to coordination frictions and rentseeking behavior. Our results indicate that jointly increasing unemployment benefits and the sanctions for unemployed workers who do not search at all can be welfare-improving.
    Keywords: job search; search cost heterogeneity; labor market frictions; wage dispersion; welfare
    JEL: J64 J31 J21 E24 C14
    Date: 2015–01–08
  8. By: Camelia M. Kuhnen ; Paul Oyer
    Abstract: We empirically investigate the effect of uncertainty on corporate hiring. Using novel data from the labor market for MBA graduates, we show that uncertainty regarding how well job candidates fit with a firm’s industry hinders hiring, and that firms value probationary work arrangements that provide the option to learn more about potential full-time employees. The detrimental effect of uncertainty on hiring is more pronounced when firms face greater firing and replacement costs, and when they face less direct competition from other similar firms. These results suggest that firms faced with uncertainty use similar considerations when making hiring decisions as when making decisions regarding investment in physical capital.
    JEL: G31 J44 M51
    Date: 2015–01
  9. By: Mandelman, Federico S. (Federal Reserve Bank of Atlanta ); Zlate, Andrei (Federal Reserve Bank of Boston )
    Abstract: During the last three decades, jobs in the middle of the skill distribution disappeared, and employment expanded for high- and low-skill occupations. Real wages did not follow the same pattern. Although earnings for the high-skill occupations increased robustly, wages for both low- and middle-skill workers remained subdued. We attribute this outcome to the rise in offshoring and low-skilled immigration, and we develop a three-country stochastic growth model to rationalize this outcome. In the model, the increase in offshoring negatively affects the middle-skill occupations but benefits the high-skill ones, which in turn boosts aggregate productivity. As the income of high-skill occupations rises, so does the demand for services provided by low-skill workers. However, low-skill wages remain depressed as a result of the surge in unskilled immigration. Native workers react to immigration by upgrading the skill content of their labor tasks as they invest in training.
    Keywords: labor market polarization; task upgrading; offshoring; labor migration; heterogeneous agents; international business cycles
    JEL: F16 F41
    Date: 2014–12–01
  10. By: Thomas von Brasch (Statistics Norway )
    Abstract: The empirical literature studying the sector bias of technical change has only focused on skill-biased technical change. In this paper, I analyse the sector bias of both factor-neutral and factor-biased technical change. In Norwegian data from 1972 to 2007 the empirical evidence is not clear on the impact of a sector bias of skill-biased technical change, but it points to a sector bias of factor-neutral technical change from the 1970s to the 1990s. That said, the impact of the sector bias seems to have reduced towards the latter part of the sample period. I also evaluate the cross-section model used in the literature and show the strong restrictions that must be placed on a vector equilibrium correction model to end up with the standard model. If these restrictions do not hold, the results reported in the literature may be biased. I show that the restrictions are strongly rejected, and that erroneously imposing them significantly changes the estimates of skill-biased technical change in many sectors. These results can, to some extent, be traced back to how the cross-section model ignores initial disequilibrium and imposes factors of production to be either complements or substitutes
    Keywords: Econometric modeling; Technical change; Sector bias.
    JEL: C5 J3 O3
    Date: 2015–01
  11. By: Victor Lavy
    Abstract: Research in economics of education about the effectiveness of educational programs and interventions have centered primarily on standardized test scores as a measure of success. However, since the ultimate goal of education is to improve lifetime well-being, attention shifted recently to long term consequences at adulthood, for example post-secondary schooling. However, the type of educational interventions studied is still limited and much remained to be unraveled. In this paper I study the long term consequences of free school choice by taking advantage of an experiment conducted two decades ago in the city of Tel Aviv, Israel. This school choice program was very effective in improving high school attainment and cognitive achievements six years later (Lavy 2010) and now I examine whether these effects persist beyond high school. The results indicate that treated students experience significant gains in post-secondary enrollment and in completed years of education and also have higher earnings at age 30. These significant positive treatment effects reflect mainly an increase in academic education, through increased enrollment in three-years academic colleges but not in research universities, and some shift away from vocational education at adulthood. Additional gains are reductions in eligibility and recipiency of disability welfare allowances.
    JEL: J24
    Date: 2015–01
  12. By: Alicia H. Munnell ; Jean-Pierre Aubry ; Geoffrey T. Sanzenbacher
    Abstract: Many state and local governments have responded to challenges facing their pension plans by cutting benefits. Will these cuts make it harder for state and local governments to recruit and retain high-quality workers? To date, the answer has been difficult to obtain; most micro-level datasets contain information on the existence of pensions but not on pension generosity. To get around this constraint, this study uses a unique source, the Public Plans Database, to obtain data on the pension generosity of state and local workers’ pensions. These data are merged with the Current Population Survey to investigate how pension generosity affects the gap between the private sector wage of workers that states and localities recruit from the private sector relative to the workers that they lose to it. The findings suggest relatively generous pensions help reduce this “quality gap,” making it easier for state and local employers to recruit high-earning workers from the private sector and retain those workers. The effect is similar regardless of whether employer or employee contributions finance the benefits. The study suggests states should be cautious as they cut their pension benefits and that a strategy to maintain benefits by shifting some costs onto employees may help maintain states’ ability to recruit and retain high-quality workers.
    Date: 2015–01
  13. By: Pascale Lengagne (IRDES Institut de recherche et documentation en économie de la santé )
    Abstract: This article examines Workers Compensation Insurance experience rating premiums setting, a common financial incentive tool existing in several countries. Premiums paid by firms are experience rated, which may encourage them to reduce work-related injuries and disabilities. This article provides a literature review on effects of experience rating on work-related health and safety, and empirical results on the French jurisdiction, using sectorial data from industry and construction sectors in 2005. Results are consistent with the hypothesis that this policy tool is a lever that contributes to improve working conditions and reduce work-related injuries rates.
    Keywords: Workers’ Compensation, experience rating, working conditions, work-related injuries.
    JEL: J28 I13 I18
    Date: 2015–01
  14. By: Chletsos, Michael ; Giotis, Georgios P.
    Abstract: Until the early 90’s a strong consensus existed among economists that minimum wage has negative employment effects. However, in 1992, the studies by Card (1992a) and Katz and Krueger (1992), who found insignificant and slightly positive effects, respectively, came to create a schism. Since then a divergence of views expressed by conflicting empirical studies exists in the literature. In our paper, we use a meta-sample of 77 international studies from 18 countries to investigate this relationship. Our analysis suggests that there is evidence of publication selection, but no effect of minimum wages on employment measures. Additionally, using 27 moderators as potential explanatory variables in order to explain the variation among studies, we find that study characteristics related to the data, the model specifications and the group concerned, diversify the degree of the effect.
    Keywords: Minimum wage, Employment, Meta-analysis.
    JEL: C12 J21 J38
    Date: 2015–01–14
  15. By: B. Zorina Khan
    Abstract: Endogenous growth models raise fundamental questions about the nature of human creativity, and the sorts of resources, skills, and knowledge inputs that shift the frontier of technology and production possibilities. Many argue that the nature of early British industrialization supports the thesis that economic advances depend on specialized scientific training or the acquisition of costly human capital. This paper examines the contributions of different types of knowledge to British industrialization, by assessing the backgrounds, education and inventive activity of the major contributors to technological advances in Britain during the crucial period between 1750 and 1930. The results indicate that scientists, engineers or technicians were not well-represented among the British great inventors until very late in the nineteenth century. Instead, important discoveries and British industrial advances were achieved by individuals who exercised commonplace skills and entrepreneurial abilities to resolve perceived industrial problems. For developing countries today, the implications are that costly investments in specialized human capital resources might be less important than incentives for creativity, flexibility, and the ability to make incremental adjustments that can transform existing technologies into inventions that are appropriate for prevailing domestic conditions.
    JEL: J24 N13 O14 O3 O31 O34
    Date: 2015–01
  16. By: Arntz, Melanie ; Dlugosz, Stephan ; Wilke, Ralf A.
    Abstract: A number of contributions have found evidence for motherhood being a critical life event for women's employment careers. This study presents a detailed model for the du- ration of maternity leave in which young mothers can make a transition into a number of states related to employment and unemployment among others. The model incorporates a large number of factors including the legal framework, individual and firm character- istics. We provide a comprehensive picture of the sorting mechanisms that lead to the differentiation of women's employment careers after birth. Our empirical evidence is de- rived from large linked administrative individual labour market data from Germany for a period of three decades. We obtain unprecedented insights how women's skills, the quality of the previous job match, firm level characteristics, labour market conditions and leave legislation are related to the length of maternity duration.
    Keywords: work interruptions,cumulative incidence,leave legislation
    JEL: J13 J18 C41
    Date: 2014
  17. By: Nele E. Franz
    Abstract: This paper analyzes the wage development of mothers interrupting their careers, in comparison to the wages of men who do not face a parental interruption. We estimate OLS regression models for different subcategories defined by age and point in time. We use data from the German Socioeconomic Panel from 1984 to 2011, to show that wages and the financial penalty for maternity differ according to the duration of interruption. We find a lower wage penalty in the short run for women interrupting their careers who are legally protected, but merely delayed penalties for the same group in the long run.
    Keywords: Human capital, parental leave, wages, OLS
    JEL: C21 J13 J24 J31
    Date: 2014
  18. By: John S. Heywood ; Uwe Jirjahn
    Abstract: This paper focuses on the German labor market for older workers. It does so in comparison with other countries and with a unique focus on the role of employer incentives for retaining and hiring older workers. It argues that while employment of older German workers has improved due to changes in government policy, the labor market for older workers remains characterized by far less mobility and opportunity. While we recognize the potential explanations of reduced productivity and age discrimination, we review evidence pointing to the importance of life-cycle contracts (Hutchens 1986, Lazear 1979). These contracts can be efficient but typically imply that older workers will have difficulty being re-hired into career jobs after separation. We suggest that attempts to reduce or eliminate such life-cycle contracts are likely to be counter-productive but suggest how other countries, particularly Japan, have dealt with this issue.
    Keywords: Older workers, deferred compensation, productivity, discrimination, labor market institutions
    JEL: J14 J33
    Date: 2015
  19. By: Luis Diéz-Catalán (University of Minnesota ); Ernesto Villanueva (Banco de España )
    Abstract: We study the impact of (widespread) downward wage rigidity on the fl ows from employment to non-employment at the onset of the Great Recession. Downward wage (growth) rigidity is due to the fact that sector-level collective agreements in Spain are automatically extended to all fi rms, setting wage minima for workers in the same province-industry-skill cell. We identify the impact of wage rigidity on employment because, unlike settled ones, newly bargained contracts can adjust to aggregate shocks. Using the exact dates of bargaining periods of all sector-level contracts in Spain, we fi nd that agreements reached after the fall of Lehman Brothers were for an average wage growth of 1.8%, while agreements signed before 15 September 2008 were for mean wage increases of 3.1%. Matching information on collective agreements with longitudinal Social Security records on workers, we document two fi ndings. Firstly, the probability of job loss between 2009 and 2010 was 1 percent higher among workers covered by agreements signed before the fall of Lehman Brothers than among workers covered by contracts signed afterwards. Secondly, the analysis of a subsample of contracts with information about the exact province-industry-skill level minimum wage suggests that the impact of date of contract signature on wage changes and employment losses is confi ned to workers whose pre-recession earnings were below 1.2 times the contract-specifi c minimum wage. Those fi ndings are consistent with the hypothesis that the staggering of contracts and the inability to renegotiate contracts amplify aggregate shocks. We end with a discussion of whether those results can be extrapolated to other sample periods.
    Keywords: collective bargaining, labor demand, aggregate shock, wage rigidity
    JEL: J23 J50
    Date: 2015–01
  20. By: Laura Hospido (Banco de España ); Eva Moreno-Galbis (GRANEM )
    Abstract: While Spain has traditionally underperformed its European peers in terms of labor productivity, the trend reverses after 2007. The evolution of aggregate productivity in Spain during the Great Recession is shaped largely, albeit not exclusively, by the adverse conditions in the labor market. Using a longitudinal sample of Spanish manufacturing and services companies between 1995 and 2012, we show that the recent increase in Spanish aggregate productivity is also responsive to the behavior of total factor productivity (TFP) and to composition effects. By combining the information at firm level on balance sheet items, collective agreements and imports-exports, we are able to establish that a collective agreement at the firm level and access to external markets are positively related to TFP performance during the whole period. In addition, our estimates indicate that firm TFP was negatively correlated to the proportion of temporary workers during the expansionary period, 1995-2007, whereas the sign of that correlation reversed during the crisis, 2008-2012. Finally, we relate this sign reversal to the changing composition of temporary workers in the labor market.
    Keywords: labor productivity, TFP, temporary workers, collective agreements, exporting firms
    JEL: J24 J21 J52
    Date: 2015–01
  21. By: Mary Eschelbach Hansen ; Michael E. Martell
    Abstract: Two decades of research on differences in labor market outcomes by sexual orientation has concluded that lesbian workers earn more than heterosexual women. This research, however, is largely based upon data that do not ask respondents about their own sexual orientation. We are the first to use nationally representative data that includes self-identified sexual orientation. We find evidence of a sizeable wage penalty for self-identified lesbians in 2008 and 2010. We show that using common behavioral proxies for sexual orientation overstates of the earnings of lesbians in some years, but understates it in other years. Using the different methods of identification leads to different conclusions about the way the recession affected lesbians: It took much longer for the wages of self-identified lesbians to recover.
    Date: 2014
  22. By: Joan Costa-Font ; Mireia Jofre-Bonet ; Julian Le Grand
    Abstract: We examine the vertical transmission of overweight drawing upon a sample of English children, both adopted and non-adopted, and their families. Our results suggest strong evidence of an intergenerational association of overweight among adoptees, indicating transmission through cultural factors. We find that, when both adoptive parents are overweight, the likelihood of an adopted child being overweight is between 10% and 20% higher than when they are not. We also find that the cultural transmission of overweight is not aggravated by having a full-time working mother, so do not confirm the existence of a female labour market participation penalty on child overweight among adoptees. Overall, our findings, despite subject to data limitations, are robust to a battery of robustness checks, specification and sample selection corrections.
    Keywords: Vertical transmission, cultural transmission, overweight, children, natural parents, Body Mass Index, sample selection
    JEL: I18 D13 Z1
    Date: 2015–01

This nep-lma issue is ©2015 by Joseph Marchand. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.