nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2015‒03‒13
ten papers chosen by
Joseph Marchand
University of Alberta

  1. Trade reform and regional dynamics : evidence from 25 years of Brazilian matched employer-employee data By Dix Carneiro,Rafael; Kovak,Brian K.
  2. Why are Higher Skilled Workers More Mobile Geographically? The Role of the Job Surplus By Michael Amior
  3. Do Earnings Really Decline for Older Workers? By Stephen Bazen; Kadija Charni
  4. Robots at Work By Georg Graetz; Guy Michaels
  5. Maternity and Labor Markets: Impact of Legislation in Colombia By Natalia Ramírez Bustamante; Ana Maria Tribin Uribe; Carmiña O. Vargas
  6. Offshoring of medium-skill jobs, polarization, and productivity effect: Implications for wages and low-skill unemployment By Vallizadeh E.; Muysken J.; Ziesemer T.H.W.
  7. Student Loans and Repayment: Theory, Evidence and Policy By Lance Lochner; Alexander Monge-Naranjo
  8. Are Cancer Survivors who are Eligible for Social Security More Likely to Retire than Healthy Workers? Evidence from Difference-in-Differences By David Candon
  9. Breaking the Glass Ceiling By Bertrand, Marianne; Black, Sandra; Jensen, Sissel; Lleras-Muney, Adriana
  10. Labor Market Flexibility and FDI Flows: Evidence from Oil-Rich GCC and Middle Income Countries By Mina, Wasseem; Jaeck, Louis

  1. By: Dix Carneiro,Rafael; Kovak,Brian K.
    Abstract: This paper empirically studies the dynamics of labor market adjustment following the Brazilian trade reform of the 1990s. The paper uses variation in industry-speci?c tari? cuts interacted with initial regional industry mix to measure trade-induced local labor demand shocks and examines regional and individual labor market responses to those one-time shocks over two decades. Contrary to conventional wisdom, the analysis does not ?nd that the impact of local shocks is dissipated over time through wage-equalizing migration. Instead, it ?nds steadily growing e?ects of local shocks on regional formal sector wages and employment for 20 years. This ?nding can be rationalized in a simple equilibrium model with two complementary factors of production, labor and industry-speci?c factors such as capital, that adjust slowly and imperfectly to shocks. Next, the paper documents rich margins of adjustment induced by the trade reform at the regional and individual levels. Workers initially employed in harder hit regions face continuously deteriorating formal labor market outcomes relative to workers employed in less a?ected regions, and this gap persists even 20 years after the beginning of trade liberalization. Negative local trade shocks induce workers to shift out of the formal tradable sector and into the formal nontradable sector. Non-employment strongly increases in harder hit regions in the medium run, but in the longer run, non-employed workers eventually ?nd re-employment in the informal sector. Working age population does not react to these local shocks, but formal sector net migration does, consistent with the relative decline of the formal sector and growth of the informal sector in adversely a?ected regions.
    Keywords: Economic Theory&Research,Regional Economic Development,Labor Markets,Labor Policies,Emerging Markets
    Date: 2015–03–02
  2. By: Michael Amior
    Abstract: The skill gap in geographical mobility is entirely driven by workers who report moving for a new job. A natural explanation lies in the large expected surplus accruing to skilled job matches. Just as large surpluses ease the frictions which impede job search in general, they also help overcome those frictions (specifically moving costs) which plague cross-city matching in particular. I reject the alternative hypothesis that mobility differences are driven by variation in the moving costs themselves, based on PSID evidence on self-reported willingness to move. Evidence on wage processes also supports my claims.
    Keywords: Internal migration, job search, education, skills
    JEL: J24 J61 J64
    Date: 2015–03
  3. By: Stephen Bazen (Aix-Marseille University (Aix-Marseille School of Economics), CNRS and EHESS); Kadija Charni (Aix-Marseille University (Aix-Marseille School of Economics), CNRS and EHESS)
    Abstract: Cross section data suggest that the relationship between age and hourly earnings is an inverted-U shape. Evidence from panel data does not necessarily confirm this finding suggesting that older workers may not experience a reduction in earnings at the end of their working life. In this paper we use panel data on males for Great Britain in order to examine why the two types of data provide conflicting conclusions. Concentrating on the over 50s, several hypotheses are examined: overlapping cohorts, job tenure, job-changing, labour supply behaviour and selectivity bias. Cohort and individual fixed effects partly explain the divergent conclusions. However, for fully, year-on-year employed individuals, there is no evidence of earnings decline at the end of working life. We find no role for selectivity due to retirement, although shorter working hours or partial retirement along with job-changing late in life do provide an explanation for why hourly earnings decline for certain older workers. We find no evidence that the process of ageing itself leads to lower earnings as suggested by the cross section profile.
    Keywords: age-earnings profile, older workers, Labour supply, cohort effects
    JEL: J3 J14 J24
    Date: 2015–02
  4. By: Georg Graetz; Guy Michaels
    Abstract: Despite ubiquitous discussions of robots' potential impact, there is almost no systematic empirical evidence on their economic effects. In this paper we analyze for the first time the economic impact of industrial robots, using new data on a panel of industries in 17 countries from 1993-2007. We find that industrial robots increased both labor productivity and value added. Our panel identification is robust to numerous controls, and we find similar results instrumenting increased robot use with a measure of workers' replaceability by robots, which is based on the tasks prevalent in industries before robots were widely employed. We calculate that the increased use of robots raised countries' average growth rates by about 0.37 percentage points. We also find that robots increased both wages and total factor productivity. While robots had no significant effect on total hours worked, there is some evidence that they reduced the hours of both low-skilled and middle-skilled workers.
    Keywords: Robots, productivity, technological change
    JEL: E23 J23 O30
    Date: 2015–03
  5. By: Natalia Ramírez Bustamante; Ana Maria Tribin Uribe; Carmiña O. Vargas
    Abstract: Our research seeks to determine the impact on female labor outcomes of the amendment on the Colombian labor law in which maternity leave was extended from 12 to 14 weeks (through Law 1468 of July 2011). To identify this impact we compare labor market outcomes of two groups of women with differences in their fertility rates. We find evidence that as a result of the extension of the maternity leave period, women in the high-fertility age group have experienced an increase in inactivity rates, informality, and self-employment. We argue that a redesign of maternity protection policy is due, one through which the economic and social costs of bearing children are shared by both parents and which may generate social change regarding the importance of paternal care.
    Keywords: Maternity leave, women’s labor market, labor regulation.
    JEL: J08 J2 J3 J7 K31
    Date: 2015–03–04
  6. By: Vallizadeh E.; Muysken J.; Ziesemer T.H.W. (UNU-MERIT)
    Abstract: We examine the effects of endogenous offshoring on cost-efficiency, wages and unemployment in a task assignment model with skill heterogeneity. Exact conditions for the following insights are derived. The distributional effect of offshoring high- low-skill-intensive tasks is similar to unskilled- skill-biased technology changes, while offshoring medium-skill-intensive tasks induces wage polarization. Offshoring improves cost-efficiency through international task reallocation and puts a downward pressure on all wages through domestic skill-task reallocation. If elasticities of task substitution are low high, the downward pressure on wages in neighbouring skill segments is low high with a net effect of higher lower wages and employment.
    Keywords: Trade and Labor Market Interactions; Globalization: Labor; Labor Force and Employment, Size, and Structure; Human Capital; Skills; Occupational Choice; Labor Productivity; Unemployment: Models, Duration, Incidence, and Job Search;
    JEL: F16 J21 J24 J64
    Date: 2015
  7. By: Lance Lochner (Department of Economics, University of Western Ontario, Canada; NBER, U.S.A; CESifo, Germany; The Rimini Centre for Economic Analysis, Italy); Alexander Monge-Naranjo (Federal Reserve Bank of St. Louis, U.S.A.; Washington University in St. Louis, U.S.A.)
    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.
    Date: 2015–03
  8. By: David Candon (University College Dublin)
    Abstract: Despite the fact that there are over a million new cancer cases detected in the U.S. every year, none of retirement-health literature focuses specifically on the effect that cancer has on retirement. Social Security may offer a pathway to retirement for eligible workers but the separate effects of both cancer, and Social Security, on retirement, need to be accounted for. I use the fact that some workers will be eligible for Social Security when they are diagnosed with cancer, while some will not, as a source of exogenous variation to identify the joint effect of cancer diagnosis and Social Security eligibility on retirement. With data from the Health and Retirement Study (HRS), I use a difference-in-differences model to show that being eligible for Social Security, and surviving cancer, increases the probability of retirement by 11.2% for male workers. Given the increase in both cancer survival rates, and the number of older workers in the labour force, it is important to know if cancer is causing permanent exits, in a population who otherwise would continue working.
    Keywords: Cancer; Employment; Retirement; Labour market
    JEL: I10 I18 J21 J26
    Date: 2015–02–27
  9. By: Bertrand, Marianne; Black, Sandra; Jensen, Sissel; Lleras-Muney, Adriana
    Abstract: In late 2003, Norway passed a law mandating 40 percent of each gender on the board of publicly limited liability companies. The primary objective of this reform was to increase representation of women in top positions in the corporate sector and decrease gender disparity in earning within that sector. We document that the newly (post-reform) appointed female board members were observably more qualified than their female predecessors, and that the gender gap in earnings within boards fell substantially. While the reform may have improved representation of female employees at the very top of the earnings distribution(top 5 highest earners)within firms that were mandated to increase female participation on their board, there is no evidence that these gains at the very top trickled-down. Moreover the reform had no obvious impact on highly qualified women whose qualifications mirror those of the board members but who were not appointed to boards. We observe no statistically significant change in the gender wage gaps or in the female representation in top positions, although standard errors are large enough that we cannot rule economically meaningful gains. Finally, there is little evidence that the reform affected the decisions of women more generally;it was not accompanied by any change in female enrollment in business education programs, or a convergence in earnings trajectories between recent male and female graduates of such programs. While young women preparing for a career in business report being aware of the reform and expect their earnings and promotion chances to benefit from it, the reform did not affect their fertility and marital plans. Overall, in the short run the reform had very little discernable impact on women in business beyond its direct effect on the newly appointed female board members.
    Keywords: affirmative action; boards; gender gap
    JEL: G38 J31 J7
    Date: 2015–03
  10. By: Mina, Wasseem; Jaeck, Louis
    Abstract: In this paper we empirically examine the impact of labor market flexibility on FDI flows to oil-rich GCC and compare it to middle income countries in 2006-2011. We account for potential endogeneity and nonstationarity and adopt system GMM and IV estimation methodologies. Our findings show that in middle income countries overall flexibility increases FDI flows under both system GMM and IV methodologies. In GCC countries overall LMF decreases FDI flows under system GMM methodology. Results also show a positive “GCC region” influence outweighing the negative flexibility influence. Growth potential and infrastructure development matter for both GCC and middle income countries.
    Keywords: Labor markets; FDI; GCC; Middle income countries; UAE
    JEL: F2 F21 J3 J32 J38 J5 J53 J58 J6 J65 J68
    Date: 2015–03–04

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