nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2015‒02‒22
fifteen papers chosen by
Joseph Marchand
University of Alberta

  1. Coaching, Counseling, Case-Working: Do They Help the Older Unemployed Out of Benefit Receipt and Back into the Labor Market? By Boockmann, Bernhard; Brändle, Tobias
  2. Rise of the Machines: The Effects of Labor-Saving Innovations on Jobs and Wages By Andy Feng; Georg Graetz
  3. The Impact of Temporary Agency Work on Trade Union Wage Setting: A Theoretical Analysis By Beissinger, Thomas; Baudy, Philipp
  4. How risky is college investment? By Hendricks, Lutz; Leukhina, Oksana
  5. Robots Are Us: Some Economics of Human Replacement By Seth G. Benzell; Laurence J. Kotlikoff; Guillermo LaGarda; Jeffrey D. Sachs
  6. Subsidized Start-Ups out of Unemployment: A Comparison to Regular Business Start-Ups By Caliendo, Marco; Hogenacker, Jens; Künn, Steffen; Wießner, Frank
  7. Technology and the Changing Family: A Unified Model of Marriage, Divorce, Educational Attainment and Married Female Labor-Force Participation By Greenwood, Jeremy; Guner, Nezih; Kocharkov, Georgi; Santos, Cezar
  8. The One Constant: A Causal Effect of Collective Bargaining on Employment Growth? - Evidence from German Linked-Employer-Employee Data By Tobias Brändle; Laszlo Goerke
  9. The Recent Decline of Single Quarter Jobs By Hyatt, Henry R.; Spletzer, James R.
  10. The Earnings Returns to Graduating with Honors: Evidence from Law Graduates By Freier, Ronny; Schumann, Mathias; Siedler, Thomas
  11. Who Works for Whom? Worker Sorting in a Model of Entrepreneurship with Heterogeneous Labor Markets By Emin M. Dinlersoz; Henry R. Hyatt; Hubert P. Janicki
  12. Innovation and corporate employment growth revisited By Herstad , Sverre J.; Sandven , Tore
  13. What Explains Immigrant-Native Gaps in European Labor Markets: The Role of Institutions By Guzi, Martin; Kahanec, Martin; Kureková, Lucia Mýtna
  14. Public health insurance and entry into self-employment By Fossen, Frank M.; König, Johannes
  15. Economic Shocs and Internal Migration By Joan Monras

  1. By: Boockmann, Bernhard (Institut für Angewandte Wirtschaftsforschung (IAW)); Brändle, Tobias (Institut für Angewandte Wirtschaftsforschung (IAW))
    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: evaluation, active labor market programs, long-term unemployment, older unemployed
    JEL: J68 J14
    Date: 2015–01
  2. By: Andy Feng; Georg Graetz
    Abstract: How do firms respond to technological advances that facilitate the automation of tasks? Which tasks will they automate, and what types of worker will be replaced as a result? We present a model that distinguishes between a task's engineering complexity and its training requirements. When two tasks are equally complex, firms will automate the task that requires more training and in which labor is hence more expensive. Under quite general conditions this leads to job polarization, a decline in middle wage jobs relative to both high and low wage jobs. Our theory explains recent and historical instances of job polarization as caused by labor-replacing technologies, such as computers, the electric motor, and the steam engine, respectively. The model makes novel predictions regarding occupational training requirements, which we find to be consistent with US data.
    Keywords: Automation, job polarization, technical change, wage inequality, training
    JEL: E25 J23 J31 M53 O33
    Date: 2015–02
  3. By: Beissinger, Thomas (University of Hohenheim); Baudy, Philipp (University of Hohenheim)
    Abstract: Focusing on the cost-reducing motive behind the use of temporary agency employment, this paper aims at providing a better theoretical understanding of the effects of temporary agency work on the wage-setting process, trade unions' rents, firms' profits and employment. It is shown that trade unions may find it optimal to accept lower wages to prevent firms from using temporary agency workers. Hence, the firms' option to use agency workers may affect wage setting also in those firms that only employ regular workers. However, if firms decide to employ agency workers, trade union wage claims will increase for the (remaining) regular workers. An intensive use of temporary agency workers in high-wage firms may therefore be the cause and not the consequence of the high wage level in those firms. Even though we assume monopoly unions that ascribe the highest possible wage-setting power to the unions, the economic rents of trade unions decline because of the firms' option to use temporary agency work, whereas firms' profits may increase.
    Keywords: trade unions, temporary agency work, wage-setting process, labour market segmentation, dual labour markets
    JEL: J51 J31 J23 J42
    Date: 2015–01
  4. By: Hendricks, Lutz; Leukhina, Oksana
    Abstract: This paper is motivated by the fact that nearly half of U.S. college students drop out without earning a bachelor's degree. Its objective is to quantify how much uncertainty college entrants face about their graduation outcomes. To do so, we develop a quantitative model of college choice. The innovation is to model in detail how students progress towards a college degree. The model is calibrated using transcript and financial data. We find that more than half of college entrants can predict whether they will graduate with at least 80% probability. As a result, stylized policies that insure students against the financial risks associated with uncertain graduation have little value for the majority of college entrants.
    Keywords: Education,College dropout risk
    JEL: E24 J24 I21
    Date: 2015
  5. By: Seth G. Benzell; Laurence J. Kotlikoff; Guillermo LaGarda; Jeffrey D. Sachs
    Abstract: Will smart machines replace humans like the internal combustion engine replaced horses? If so, can putting people out of work, or at least out of good work, also put the economy out of business? Our model says yes. Under the right conditions, more supply produces, over time, less demand as the smart machines undermine their customer base. Highly tailored skill- and generation-specific redistribution policies can keep smart machines from immiserating humanity. But blunt policies, such as mandating open-source technology, can make matters worse.
    JEL: E22 E23 E24 J24 J31 O30 O40
    Date: 2015–02
  6. By: Caliendo, Marco (University of Potsdam); Hogenacker, Jens (ConVista Consulting AG); Künn, Steffen (IZA); Wießner, Frank (Catholic University of Eichstätt)
    Abstract: Offering unemployed individuals a subsidy to become self-employed is a widespread active labor market policy strategy. Previous studies have illustrated its high effectiveness to help participants escaping unemployment and improving their labor market prospects compared to other unemployed individuals. However, the examination of start-up subsidies from a business perspective has only received little attention to date. Using a new dataset based on a survey allows us to compare subsidized start-ups out of unemployment with regular business founders, with respect to not only personal characteristics but also business outcomes. The results indicate that previously unemployed entrepreneurs face disadvantages in variables correlated with entrepreneurial ability and access to capital. 19 months after start-up, the subsidized businesses experience higher survival, but lag behind regular business founders in terms of income, business growth and innovation. Moreover, we show that expected deadweight losses related to start-up subsidies occur on a (much) lower scale than usually assumed.
    Keywords: innovation, deadweight effects, entrepreneurship, start-up subsidies, evaluation
    JEL: C14 L26 J68
    Date: 2015–01
  7. By: Greenwood, Jeremy (University of Pennsylvania); Guner, Nezih (MOVE, Barcelona); Kocharkov, Georgi (University of Konstanz); Santos, Cezar (Getulio Vargas Foundation, Brazil)
    Abstract: Marriage has declined since 1960, with the drop being bigger for non-college educated individuals versus college educated ones. Divorce has increased, more so for the non-college educated. Additionally, positive assortative mating has risen. Income inequality among households has also widened. A unified model of marriage, divorce, educational attainment and married female labor-force participation is developed and estimated to fit the postwar U.S. data. Two underlying driving forces are considered: technological progress in the household sector and shifts in the wage structure. The analysis emphasizes the joint role that educational attainment, married female labor-force participation, and assortative mating play in determining income inequality.
    Keywords: assortative mating, education, married female labor supply, household production, marriage and divorce, inequality
    JEL: E13 J12 J22 O11
    Date: 2015–02
  8. By: Tobias Brändle; Laszlo Goerke
    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 J J63
    Date: 2015–01
  9. By: Hyatt, Henry R. (U.S. Census Bureau); Spletzer, James R. (U.S. Census Bureau)
    Abstract: Rates of hiring and job separation fell by as much as a third in the U.S. between the late 1990s and the early 2010s. Half of this decline is associated with the declining incidence of jobs that start and end in the same calendar quarter, employment events that we call "single quarter jobs." We investigate this unique subset of jobs and its decline using matched employer-employee data for the years 1996-2012. We characterize the worker demographics and employer characteristics of single quarter jobs, and demonstrate that changes over time in workforce and employer composition explain little of the decline in these jobs. We find that the decline in these jobs accounts for about a third of the decline in the fraction of the population that holds a job in the private sector that occurred from the mid -2000s to the early 2010s. We also find little evidence that single quarter jobs are stepping stones into longer-term employment. Finally, we show that the inclusion or exclusion of these single quarter jobs creates divergent trends in average earnings and the dispersion of earnings for the years 1996-2012. To the extent that administrative records measure the volatile tail of the employment distribution better than conventional household surveys, these findings show that measurement of short duration jobs matters for economic analysis.
    Keywords: hires, separations, single quarter jobs, stepping stone jobs
    JEL: J21
    Date: 2015–01
  10. By: Freier, Ronny (DIW Berlin); Schumann, Mathias (University of Hamburg); Siedler, Thomas (University of Hamburg)
    Abstract: This paper studies the causal effects of graduating from university with an honors degree on subsequent earnings. While a rich body of literature has focused on estimating returns to human capital, few studies have analyzed returns at the very top of the education distribution. We highlight the importance of honors degrees for future labor market success in the context of German law graduates. Using a difference-in-differences research design combined with entropy balancing, we find that students of law who passed the state bar exam with an honors degree receive a significant earnings premium of about 14 percent. The results are robust to various sensitivity analyzes.
    Keywords: returns to education, difference-in-differences, entropy balancing, law graduates, earnings
    JEL: J01 J31 J44
    Date: 2015–01
  11. By: Emin M. Dinlersoz; Henry R. Hyatt; Hubert P. Janicki
    Abstract: Compared with mature firms, young firms, most of which represent entrepreneurial activity, disproportionately hire younger, nonemployed individuals, and provide them with lower earnings. Furthermore, in recent years the number of young firms has been declining, along with their employment share, employee size, and worker earnings. To account for these facts, this paper introduces heterogeneous labor markets with search frictions to a dynamic model of entrepreneurship. Individuals differ in productivity and wealth. They can choose not to work, become entrepreneurs, or work in one of two sectors: a corporate versus an entrepreneurial sector. The sectoral differences in production technology and labor market frictions lead to sector-specific wages and worker sorting. Individuals with lower assets tend to take lower-paying jobs in the entrepreneurial sector. Empirical analysis indicates that this type of sorting is consistent with the average net worth of workers in young versus mature firms in the data. The model is used to explore potential mechanisms behind the recent decline in entrepreneurship in the U.S.
    Date: 2015–02
  12. By: Herstad , Sverre J. (NIFU Nordic Institute for Studies in Innovation, Research and Education, Oslo); Sandven , Tore (NIFU Nordic Institute for Studies in Innovation, Research and Education, Oslo)
    Abstract: Using Norwegian Community Innovation Survey (CIS) data linked to public employment registers covering the years 2004 - 2010, this paper investigates the relationship between employment growth prior to the event of innovation, innovation output, and growth performance after the event. Positive growth ex ante generally strengthens growth ex post. Moreover, it increases the likelihood that innovations are introduced during the intermediate period that strengthen employment performances further. This effect is present for all levels of growth only when new products, production processes and support functions are introduced in tandem. Standalone improvements of products, by contrast, influence only the probability of survival, whereas standalone improvements of production processes and support functions support ex post growth specifically in the upper tail of the distribution. Our findings challenge the common view that product innovations are more important to growth than process innovations, and reveal interdependencies between multi-faceted organizational capabilities, innovation output and employment performance.
    Keywords: Capabilities; innovation; employment growth; Norway
    JEL: J23 J24 O15 O33
    Date: 2015–02–08
  13. By: Guzi, Martin (Masaryk University); Kahanec, Martin (Central European University); Kureková, Lucia Mýtna (Slovak Governance Institute)
    Abstract: The role of institutions in immigrant integration remains underexplored in spite of its essential significance for integration policies. This paper adopts the Varieties of Capitalism framework to study the institutional determinants of Immigrant-Native gaps in host labor markets. Using the EU LFS we first measure immigrant-native gaps in labor force participation, unemployment, low-skilled employment and temporary employment. We distinguish the gaps that can be explained by immigrant-native differences in characteristics from those that cannot be explained by such differences, as these require different integration policy approaches. In the second stage we measure the effects of institutional and contextual variables on explained and unexplained immigrant-native gaps. Our findings confirm that institutional contexts play a significant role in immigrant integration, and highlight the importance of tailoring policy approaches with regard to the causes of immigrant-native gaps.
    Keywords: labor market, discrimination, integration policy, immigrant integration, Varieties of Capitalism
    JEL: J15 J18 J61
    Date: 2015–02
  14. By: Fossen, Frank M.; König, Johannes
    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 selfemployed, 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 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 selfemployment 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
  15. By: Joan Monras (Département d'économie)
    Abstract: Previous literature shows that internal migration rates are strongly procyclical. This would seem to imply that geographic relocation does not help mitigate negative local economic shocks during recessions. This paper shows that this is not the case. I document that net in-migrationrates decreased in areas more affected by the Great Recession. Using various IV strategies that rely on the importance of the construction sector and the indebtedness of households before the crisis, I conclude that internal migration might help to alleviate up to one third of the effects of the crisis on wages in the most affected locations. This is due to a disproportionate decrease in in-migration into those locations rather than an increase in out-migration. More generally, I show that differences in population growth rates across locations are mainly explained by differences in in-migration rates rather than in out-migration rates. I introduce a model to guide the empirical analysis and to quantify the spill-over effects caused by internal migration.
    Keywords: Internal migration and local labor demand shocks.
    JEL: J61 J20 J30 F22 J43 R23
    Date: 2015–02

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