nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2015‒02‒16
thirteen papers chosen by
Joseph Marchand
University of Alberta

  1. A Question of Degree: The Effects of Degree Class on Labor Market Outcomes By Feng, Andy; Graetz, Georg
  2. Pension Reform and Labor Supply: Flexibility vs. Prescription By Hernaes, Erik; Markussen, Simen; Piggott, John; Røed, Knut
  3. Dual Labour Markets at Work: The Impact of Employers' Use of Temporary Agency Work on Regular Workers' Job Stability By Hirsch, Boris
  4. Do We Know Why Earnings Fall with Job Displacement? Working Paper: 2015-01 By William J. Carrington
  5. Bargaining and Wage Rigidity in a Matching Model for the US By Malcomson, James; Mavroeidis, Sophocles
  6. Does Competition Eliminate Discrimination? Evidence from the Commercial Sex Market in Singapore By Huailu Li; Kevin Lang; Kaiwen Leong
  7. Coaching, Counseling, Case-Working: Do They Help the Older Unemployed out of Benefit Receipt and back into the Labor Market? By Bernhard Boockmann; Tobias Brändle
  8. Youth Training Programs Beyond Employment. Experimental Evidence from Argentina By María Laura Alzúa; Guillermo Cruces; Carolina Lopez
  9. The One Constant: A Causal Effect of Collective Bargaining on Employment Growth? Evidence from German Linked-Employer-Employee Data By Tobias Brändle; Laszlo Goerke
  10. Do Changes in Regulation Affect Temporary Agency Workers' Job Satisfaction? By Busk, Henna; Jahn, Elke J.; Singer, Christine
  11. Labour Force Participation and Tax-Benefit Systems: A Cross-Country Comparative Perspective By K. Galušcák; G. Kátay
  12. Public Health Insurance and Entry into Self-Employment By Fossen, Frank M.; König, Johannes
  13. “Regional wage gaps, education, and informality in an emerging country. The case of Colombia.” By Paula Herrera-Idárraga; Enrique López-Bazo; Elisabet Motellón

  1. By: Feng, Andy (Singapore Ministry of Trade and Industry); Graetz, Georg (Uppsala University)
    Abstract: How does measured performance at university affect labor market outcomes? We show that degree class – a coarse measure of student performance used in the UK – causally affects graduates' industry and hence expected wages. To control for unobserved ability, we employ a regression discontinuity design that utilizes rules governing the award of degrees. A First Class (Upper Second) increases the probability of working in a high-wage industry by thirteen (eight) percentage points, and leads to three (seven) percent higher expected wages. The results point to the importance of statistical discrimination, heuristic decision making, and luck in the labor market.
    Keywords: high skill wage inequality, regression discontinuity design, statistical discrimination
    JEL: C26 I24 J24 J31
    Date: 2015–01
  2. By: Hernaes, Erik (Ragnar Frisch Centre for Economic Research); Markussen, Simen (Ragnar Frisch Centre for Economic Research); Piggott, John (University of New South Wales); Røed, Knut (Ragnar Frisch Centre for Economic Research)
    Abstract: We exploit a comprehensive restructuring of the early retirement system in Norway in 2011 to examine labor supply responses to alternative pension reform strategies relying on improved work incentives (flexibility) or increased access ages (prescription), respectively. We find that increasing the returns to work is a powerful policy tool: The removal of the earnings test at age 63 led to an immediate increase in average annual labor earnings among the affected mature workers by around $14,700 (NOK 90,000). The implied uncompensated labor earnings elasticity (the percentage change in average gross earnings relative to the percentage change in average work-incentives) is around 0.25.
    Keywords: early retirement, labor supply, pension reform, program evaluation
    JEL: H55 J22 J26
    Date: 2015–01
  3. By: Hirsch, Boris (University of Erlangen-Nuremberg)
    Abstract: Fitting duration models on an inflow sample of jobs in Germany starting in 2002-2010, this paper investigates the impact of employers' use of temporary agency work on regular workers' job stability. In line with dual labour market theory, I find that non-temp jobs are significantly more stable if employers utilise temps. The rise in job stability stems mainly from reduced transitions into non-employment suggesting that non-temp workers are safeguarded against involuntary job losses. My findings are robust to controlling for unobserved permanent employer characteristics and changes in the observational window that includes the labour market disruption of the Great Recession.
    Keywords: temporary agency work, job stability, dual labour markets
    JEL: J63 J41 J21
    Date: 2015–01
  4. By: William J. Carrington
    Abstract: After being displaced from their jobs, workers experience reduced earnings for many years and are at greater risks of other problems as well. The ills suffered by displaced workers motivated several recent expansions of government programs, including the unemployment insurance system, and have spurred calls for wage insurance that would provide longer-run earnings replacement. However, while the average size and the individual characteristics associated with the losses are relatively clear, the theory of displacement-induced earnings loss is scattered. Much of the policy discussion appears to
    JEL: J3 J6
    Date: 2015–01–23
  5. By: Malcomson, James (University of Oxford); Mavroeidis, Sophocles (University of Oxford)
    Abstract: The Mortensen and Pissarides (1994) matching model with all wages negotiated each period is shown inconsistent with macroeconomic wage dynamics in the US. This applies even when heterogeneous match productivities, time to build vacancies and credible bargaining are incorporated. Wage rigidity consistent with micro evidence that wages of job changers are more flexible than those of job stayers allows the model to capture these dynamics and is not inconsistent with parameter calibrations in the literature. Such wage rigidity affects only the timing of wage payments over the duration of matches, so conclusions about characteristics based on calibrations continue to apply.
    Keywords: matching frictions, wage bargaining, wage rigidity
    JEL: E2 J3 J6
    Date: 2015–01
  6. By: Huailu Li; Kevin Lang; Kaiwen Leong
    Abstract: The street sex worker market in Geylang, Singapore is highly competitive. Clients can search legally at negligible cost. Sex workers discriminate based on client ethnicity despite an excess supply of sex workers. Workers are more (less) likely to approach and ask a higher (lower) price of Caucasians (Bangladeshis), based on their perceived willingness to pay. They avoid Indians, set a significantly higher price and are less likely to reach an agreement with them, suggesting that Indians face taste discrimination. These findings remain even after controlling for prostitute fixed effects and are consistent with the workers' self-reported attitudes and beliefs.
    JEL: J7 O17
    Date: 2015–01
  7. By: Bernhard Boockmann; Tobias Brändle
    Abstract: Job search assistance and intensified counseling have been found to be effective for labor market integration by a large number of studies, but the evidence for older and hard-to-place unemployed individuals more specifically is mixed. In this paper we present key results from the evaluation of “Perspektive 50plus”, a large-scale active labor market program directed at the older unemployed in Germany. To identify the treatment effects, we exploit regional variation in program participation. Based on survey evidence, we argue that participation of regions is not endogenous in the vast majority of cases. We use a combination of different evaluation estimators to check the sensitivity of the results to selection, substitution and local labor market effects. We find large positive effects of the program in the range of five to ten percentage points on integration into unsubsidized employment. However, there are also substantial lock-in effects, such that program participants have a higher probability of remaining on public welfare benefit receipt for up to one year after commencing the program.
    Keywords: active labor market programs, evaluation, long-term unemployment, older unemployed
    JEL: J68 J14
    Date: 2015–01
  8. By: María Laura Alzúa (CONICET-CEDLAS-UNLP); Guillermo Cruces (CONICET-CEDLAS-UNLP-IZA); Carolina Lopez (CONICET-CEDLAS-UNLP)
    Abstract: Youth training programs and their evaluations are ubiquitous, yet there is relatively little evidence on the mechanisms through which they operate and their effect on outcomes beyond the labor market. This is the motivation of our study of entra21 , a job training program for low income youth in Cordoba, Argentina. The program included life-skills and vocational training, as well as internships with private sector employers. Participants were allocated by means of a public lottery. We rely on detailed monthly administrative records for program participants, from which we construct a panel dataset including formal employment status, employment spells, earnings and welfare participation. These administrative records allow us to establish the effects of the program in the short term (18 months), but also – exceptionally for programs of this type in Latin America – in the medium term (36 months). The results indicate sizable gains of about 8 percentage points in formal employment in the short term (about 32% higher than the control group), although these effects tend to dissipate in the medium term. Contrary to what has been found for similar programs in the region, the effects of entra21 are substantially stronger for men, for whom the effects persist in the medium run. A dynamic analysis of employment transitions indicates that the program operates through an increase in the persistence of formal employment rather than from more frequent entries into employment. Program participants also exhibit earnings up to 50% higher than those in the control group, and an analysis of bounds indicates that these gains result from both higher employment levels and higher wages. The higher persistence and higher earnings suggest that the program was successful in increasing the human capital of participants rather than (or in addition to) providing contacts or formal intermediation. With respect to results beyond employment, women selected for the program exhibit lower levels of welfare dependency – younger participants (aged 18 to 24) are less likely to receive child-related public cash transfers over the whole period of analysis. Finally, we present original evidence on the relationship between formal employment and consumer credit use. Program participants exhibit a higher probability of having requested consumer credit, and a higher probability of holding bank debts in good standing. These results indicate that training and internship programs directed at disadvantaged youth can provide other indirect benefits that are not usually accounted for in existing evaluations.
    JEL: J08 J24 J68 O15
    Date: 2015–01
  9. By: Tobias Brändle (Institut für Angewandte Wirtschaftsforschung (IAW), University of Tübingen); Laszlo Goerke (Institute for Labour Law and Industrial Relations in the EU, University of Trier)
    Abstract: A large number of articles have analysed ‘the one constant´ in the economic effects of trade unions, namely that union bargaining reduces employment growth by two to four percentage points per year. Evidence is, however, mostly related to Anglo Saxon countries. We investigate whether a different institutional setting might lead to a different outcome, making the constant a variable entity. We use linked-employer-employee data for Germany and analyse the effect of collective bargaining coverage on employment growth in German plants. We find a robust and negative correlation between being covered by a sector-wide bargaining agreement or firmlevel contract and employment growth per annum of about 0.8 percentage points. Using various approaches, however, we cannot establish a causal interpretation of the effects, suggesting that the cross-section results are driven by selection.
    Keywords: collective bargaining, employment growth, job flows, trade unions
    JEL: J23 J52 J53 J63
    Date: 2015–01
  10. By: Busk, Henna (University of Jyväskylä); Jahn, Elke J. (Institute for Employment Research (IAB), Nuremberg); Singer, Christine (Institute for Employment Research (IAB), Nuremberg)
    Abstract: This paper evaluates the impact on temporary agency workers’ job satisfaction of a reform that considerably changed regulations covering the temporary help service sector in Germany. We isolate the causal effect of this reform by combining a difference-in-difference and matching approach and using rich survey data. We find that the change of the law substantially decreased agency workers’ job satisfaction while regular workers’ job satisfaction remained unchanged. Further analysis reveals that the negative effect on agency workers’ job satisfaction can be attributed to a decrease in wages and an increase in perceived job insecurity. These results are also robust to the use of different specifications and placebo tests.
    Keywords: temporary agency employment, deregulation, job satisfaction
    JEL: J28 J41 J88
    Date: 2015–01
  11. By: K. Galušcák; G. Kátay
    Abstract: This paper investigates the extent to which cross-country differences in aggregate participation rates can be explained by divergence in tax-benefit systems. We take the example of two countries, the Czech Republic and Hungary, which – despite a lot of similarities – differ markedly in labour force participation rates. We first replicate for Czech household-level data the labour supply estimation for Hungary presented in Benczúr et al. (2014) and use the two perfectly comparable estimates to simulate how the aggregate participation rate would change in one country if the other country’s tax and social welfare system were adopted. Our estimation results yield similar labour supply elasticities for both countries, suggesting that individual preferences are essentially identical. The simulation results show that about one-half of the total difference in the participation rates of the 15–74 years old population can be explained by differences in the tax-benefit systems. The highest response is obtained for married women or women of childbearing age. This is related to the more generous maternity benefit system in place in Hungary as compared to the Czech Republic.
    Keywords: Cross-country comparison, labour supply, microsimulation, participation rate, tax-benefit systems.
    JEL: C63 H24 I38 J22 P50
    Date: 2015
  12. By: Fossen, Frank M. (Free University of Berlin); König, Johannes (Freie Universität Berlin)
    Abstract: We estimate the impact of a differential treatment of paid employees versus self-employed workers in a public health insurance system on the entry rate into entrepreneurship. In Germany, the public health insurance system is mandatory for most paid employees, but not for the self-employed, who usually buy private health insurance. Private health insurance contributions are relatively low for the young and healthy, and until 2013 also for males, but less attractive at the other ends of these dimensions and if membership in the public health insurance allows other family members to be covered by contribution-free family insurance. Therefore, the health insurance system can create incentives or disincentives to starting up a business depending on the family's situation and health. We estimate a discrete time hazard rate model of entrepreneurial entry based on representative household panel data for Germany, which include personal health information, and we account for non-random sample selection. We estimate that an increase in the health insurance cost differential between self-employed workers and paid employees by 100 euro per month decreases the annual probability of entry into self-employment by 0.38 percentage points, i.e. about a third of the average annual entry rate. The results show that the phenomenon of entrepreneurship lock, which an emerging literature describes for the system of employer provided health insurance in the USA, can also occur in a public health insurance system. Therefore, entrepreneurial activity should be taken into account when discussing potential health care reforms, not only in the USA and in Germany.
    Keywords: health insurance, entrepreneurship lock, self-employment
    JEL: L26 I13 J2
    Date: 2015–01
  13. By: Paula Herrera-Idárraga (Department of Econometrics. University of Barcelona); Enrique López-Bazo (Department of Econometrics. University of Barcelona); Elisabet Motellón (Department of Econometrics. University of Barcelona)
    Abstract: This paper uses Colombian micro-data to analyze the role of education and informality on regional wage differentials. Our hypothesis is that apart from differences in the endowment of human capital across regions, regional heterogeneity in the incidence of informality is another important source of regional wage inequality in developing and emerging countries. This is confirmed by the evidence from Colombia, which in addition reveals remarkable heterogeneity across territories in the wage return to individuals’ characteristics. Regional heterogeneity in returns to education is especially intense in the upper part of the wage distribution. In turn, heterogeneity in the informal pay penalty is more relevant in the lower part.
    Keywords: Regions, Wage differentials, Quantile-based decompositions, Formal/Informal Jobs, Economic Development JEL classification: C21, J31, J38
    Date: 2015–01

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