nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2015‒04‒11
sixteen papers chosen by
Joseph Marchand
University of Alberta

  1. Scars of Recessions in a Rigid Labor Market By Bart Cockx; Corinna Ghirelli
  2. Spatial Variation in Higher Education Financing and the Supply of College Graduates By John Kennan
  3. Sexual Identity, Earnings, and Labour Market Dynamics: New Evidence from Longitudinal Data in Australia By Sabia, Joseph J.; Wooden, Mark
  4. Who Benefits from a Minimum Wage Increase? By John W. Lopresti; Kevin J. Mumford
  5. Permanent Wage Cost Subsidies for Older Workers. An Effective Tool for Increasing Working Time and Postponing Early Retirement? By Andrea ALBANESE; Bart COCKX
  6. Tax and Transfer Policies and the Female Labor Supply in the EU By Kaliskova, Klara
  7. Does Outward Foreign Direct Investment affect domestic real wages? An investigation using French micro-data By Alexandre Gazaniol; Catherine Laffineur
  8. Gender roles and medical progress By Albanesi, Stefania; Olivetti, Claudia
  9. Robots at Work By Graetz, Georg; Michaels, Guy
  10. Nonlinear Estimation of Lifetime Intergenerational Economic Mobility and the Role of Education? By Paul Gregg; Lindsey Macmillan; Claudia Vittori
  11. Pooling Multiple Case Studies Using Synthetic Controls: An Application to Minimum Wage Policies By Dube, Arindrajit; Zipperer, Ben
  12. Wage Setting in the Colombian Manufacturing Industry By Agudelo, Sonia A.; Sala, Hector
  13. Apprenticeship, Vocational Training and Early Labor Market Outcomes - in East and West Germany By Regina T. Riphahn; Michael Zibrowius
  14. Paying with Self-Chosen Goals : Incentives and Gender Differences By Dalton, P.S.; Gonzalez Jimenez, V.H.; Noussair, C.N.
  15. Authoritarianism and labor market : preference of labor policies in the Arab Gulf countries By Matsuo, Masaki
  16. Man-cessions, Fiscal Policy, and the Gender Composition of Employment By Bredemeier, Christian; Juessen, Falko; Winkler, Roland

  1. By: Bart Cockx (Ghent University, SHERPPA, UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) and CESifo, IZA); Corinna Ghirelli (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))
    Abstract: We study the impact of graduating in a recession in Flanders (Belgium), i.e. in a rigid labor market. In the presence of a high minimum wage, a typical recession hardly influences the hourly wage of low educated men, but reduces working time and earnings by about 4.5% up to twelve years after graduation. For the high educated, the working time is not persistently affected, but the penalty on the hourly wage (and earnings) increases with experience, and attains roughly -6% ten years after labor market entry. We also contribute to the literature on inference with few clusters.
    Keywords: scars, graduating, labor market rigidity, recession, few clusters, cluster robust
    JEL: C12 C41 E32 I21 J22 J23 J31 J6
  2. By: John Kennan
    Abstract: In the U.S. there are large differences across States in the extent to which college education is subsidized, and there are also large differences across States in the proportion of college graduates in the labor force. State subsidies are apparently motivated in part by the perceived benefits of having a more educated workforce. The paper extends the migration model of Kennan and Walker (2011) to analyze how geographical variation in college education subsidies affects the migration decisions of college graduates. The model is estimated using NLSY data, and used to quantify the sensitivity of migration and college enrollment decisions to differences in expected net lifetime income, focusing on how cross-State differences in public college financing affect the educational composition of the labor force. The main finding is that these differences have substantial effects on college enrollment, with no evidence that these effects are dissipated through migration
    JEL: I22 I23 J24 J61
    Date: 2015–04
  3. By: Sabia, Joseph J. (San Diego State University); Wooden, Mark (Melbourne Institute of Applied Economic and Social Research)
    Abstract: Using newly collected data from the Household, Income and Labour Dynamics in Australia (HILDA) Survey, this study presents new estimates of the earnings effects of sexual orientation in Australia and offers the first empirical investigation of the labour market trajectories of lesbian/gay/bisexual individuals. Our results show that gay males are: (i) less likely to be continuously employed than their heterosexual counterparts, and (ii) face an earnings penalty of approximately 20 percent, driven, in part, by a longer-run earnings growth penalty relative to heterosexuals. Individual fixed effects estimates show that males entering into same-sex partnerships experience earnings declines relative to those entering into opposite-sex partnerships. For lesbians, we find evidence of an earnings premium, explained largely by increased labour supply on the intensive margin and, to a lesser extent, greater earnings growth over time.
    Keywords: sexual orientation, labour market dynamics, earnings trajectories, HILDA Survey
    JEL: J31 J71
    Date: 2015–03
  4. By: John W. Lopresti (College of William and Mary); Kevin J. Mumford (Purdue University)
    Abstract: This paper addresses the question of how a minimum wage increase affects the wages of low-wage workers. Most studies assume that there is a simple mechanical increase in the wage for workers earning a wage between the old and the new minimum wage, with some studies allowing for spillovers to workers with wages just above this range. Rather than assume that the wages of these workers would have remained constant, this paper estimates how a minimum wage increase impacts a low-wage worker's wage relative to the wage the worker would have if there had been no minimum wage increase. The method allows for the effect to depend not only on the initial wage of the worker, but also nonlinearly on the size of the minimum wage increase. Using Current Population Survey data from 2005 to 2008, a period with a large number of U.S. state-level minimum wage increases, this paper finds that low-wage workers who experience a small increase in the minimum wage tend to have lower wage growth than if there had been no minimum wage increase. A large increase to the minimum wage increases the wages of not only those workers who previously earned less than the new minimum wage, but also spill over to workers with moderately higher wages. Finally, this paper finds little evidence of heterogeneity in the effect by age, gender, income, and race.
    Keywords: Wage effects, minimum wage
    JEL: J31 J38
    Date: 2015–03
  5. By: Andrea ALBANESE (Ghent University, SHERPPA and DEFAP Graduate School (University of Milan-Bicocca and Catholic University of the Sacred Heart)); Bart COCKX (Ghent University, SHERPPA, UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) and CESifo, IZA)
    Abstract: In several OECD countries age-targeted wage subsidies have been introduced to increase the employment of older workers, but evidence on their effectiveness is scarce. This paper examines the effects of a permanent wage cost subsidy in Belgium on the employment rate, working time and hourly wage. We estimate these effects by integrating Inverse Probability Weighting in a, possibly trend-adjusted, Difference-in-Differences of endogenously sampled repeated cross sections. We find small positive short-run impacts on working time and larger ones on the employment rate, but only for employees at high risk of leaving to early retirement. The wage is not affected.
    Keywords: Employers’ wage subsidies, older workers, Weighted Difference-in-Differences, endogenous sampling
    JEL: J14 C21 J18 J3
  6. By: Kaliskova, Klara (CERGE-EI)
    Abstract: This study contributes to the female labor supply responsiveness literature by measuring the effect of tax-benefit policies on female labor supply based on a broad sample of 26 European countries in 2005-2010. The tax-benefit microsimulation model EUROMOD is used to calculate a measure of work incentives at the extensive margin – the participation tax rate, which is then used as the main explanatory variable in a female employment equation. This allows me to deal with the endogeneity of income in a new way by using a simulated instrumental variable based on a fixed EU-wide sample of women. Results suggest that a 10 percentage point increase in the participation tax rate decreases the female employment probability by 2 percentage points. The effect is higher for single mothers, for women in the middle of the skills distribution, and in countries that have lower rates of female employment.
    Keywords: female labor supply, tax and benefit system, Europe, instrumental variable
    JEL: C25 H24 H31 J22
    Date: 2015–03
  7. By: Alexandre Gazaniol; Catherine Laffineur
    Abstract: This paper investigates to which extent outward foreign direct investment (FDI) affects domestic wages. We are first interested in the raw wage differential between multinational and domestic firms. Results reveal that multinational companies pay a wage premium to their employees, even within precise skill-groups (blue-collar workers, intermediate occupations and managers). The wage premium is increasing within the wage distribution. In a second step, we use spell of workers within a firm in a fixed effect model to analyze the effect of outward FDI within job-spells. Results suggest that outward FDI raises wages for managers and reduces wages for workers performing offshorable tasks. The positive effect of FDI on managers’ wages is mainly driven by the intensive margin of outward FDI, that is by large firms already established abroad. This result is observed even after controlling for endogenous workers’ mobility.
    Keywords: Offshoring, Tasks, Wages, Inequality
    JEL: J24 J31 D21 D23
    Date: 2015–03
  8. By: Albanesi, Stefania (Federal Reserve Bank of New York); Olivetti, Claudia
    Abstract: Maternal mortality was the second-leading cause of death for women in childbearing years up until the mid-1930s in the United States. For each death, twenty times as many mothers were estimated to suffer pregnancy-related conditions, often leading to severe and prolonged disablement. Poor maternal health made it particularly hard for mothers to engage in market work. Between 1930 and 1960, there was a remarkable reduction in maternal mortality and morbidity, thanks to medical advances. We argue that these medical advances, by enabling women to reconcile work and motherhood, were essential for the joint rise in married women’s labor force participation and fertility over this period. We also show that the diffusion of infant formula played an important auxiliary role.
    Keywords: maternal health; labor force participation
    JEL: I00 J00 J19 J21
    Date: 2015–03–01
  9. By: Graetz, Georg (Uppsala University); Michaels, Guy (London School of Economics)
    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
  10. By: Paul Gregg (Department of Social and Policy Sciences and Centre for the Analysis of Social Policy, University of Bath); Lindsey Macmillan (Department of Quantitative Social Science, Institute of Education, University College London); Claudia Vittori (Department of Social and Policy Sciences and Centre for the Analysis of Social Policy, University of Bath)
    Abstract: Previous studies of intergenerational income mobility have typically focused at on estimating persistence across generations at the mean of the distribution of sons’ earnings. Here, we use the relatively new unconditional quantile regression (UQR) technique to consider how the association between parental income in childhood and sons’ adult earnings vary across the distribution of sons’ earnings. We find a J-shaped relationship between parental income and sons’ earnings, with parental income a particularly strong predictor of labour market success for those at the bottom, and to a greater extent, the top of the earnings distribution. We explore the potential role of early skills, education and early labour market attachment in this process. Worryingly, we find that education is not as meritocratic as we might hope, with the role of parental income dominating that of education at the top of the distribution of earnings. Early unemployment experience has long-lasting impacts on sorting those at the bottom, alongside parental income.
    Keywords: Intergenerational mobility, education, nonlinear
    JEL: I20 J62 J24
    Date: 2015–04–01
  11. By: Dube, Arindrajit (University of Massachusetts Amherst); Zipperer, Ben (University of Massachusetts Amherst)
    Abstract: We propose a simple, distribution-free method for pooling synthetic control case studies using the mean percentile rank. We also test for heterogeneous treatment effects using the distribution of estimated ranks, which has a known form. We propose a cross-validation based procedure for model selection. Using 29 cases of state minimum wage increases between 1979 and 2013, we find a sizable, positive and statistically significant effect on the average teen wage. We do detect heterogeneity in the wage elasticities, consistent with differential bites in the policy. In contrast, the employment estimates suggest a small constant effect not distinguishable from zero.
    Keywords: synthetic controls, program evaluation, heterogeneous treatment effects, minimum wage
    JEL: J38 J23 J88
    Date: 2015–03
  12. By: Agudelo, Sonia A. (Universitat Autònoma de Barcelona); Sala, Hector (Universitat Autònoma de Barcelona)
    Abstract: We show that wage setting in the Colombian manufacturing industry is not fundamentally driven by labor productivity in contrast to the standard theoretical prediction. On the contrary, internal institutional arrangements – payroll taxation, the minimum wage or the price wedge between manufacturing and consumption prices – together with a higher exposure to international trade – connected to the increasing globalization of the Colombian economy – appear as the crucial drivers. These findings lead us to question the political strategy followed to attain cost competitiveness in a context of growing exposure to international trade. Implementation of a true wage bargaining system is suggested as a critical policy target to prevent the disruptive economic consequences of the current wage setting mechanism and help rebalance the trade deficit.
    Keywords: minimum wages, payroll taxes, trade openness, labor productivity, wage setting, price wedge
    JEL: J30 F16 J31
    Date: 2015–03
  13. By: Regina T. Riphahn; Michael Zibrowius
    Abstract: We study the returns to apprenticeship and vocational training for three early labor market outcomes all measured at age 25 for East and West German youths: non-employment (i.e., unemployment or out of the labor force), permanent fulltime employment, and wages. We find strong positive effects of apprenticeship and vocational training. There are no significant differences for different types of vocational training, minor differences between East and West Germany and males and females, and no significant changes in the returns over time. Instrumental variable estimations confirm the regression results. The positive returns hold up even in poor labor market situations.
    Keywords: Youth unemployment, school-to-work transition, returns to education, vocational training, transition economics
    JEL: J40 J24 I29
    Date: 2015
  14. By: Dalton, P.S. (Tilburg University, Center For Economic Research); Gonzalez Jimenez, V.H. (Tilburg University, Center For Economic Research); Noussair, C.N. (Tilburg University, Center For Economic Research)
    Abstract: Abstract: To boost employees’ performance, firms often offer monetary bonuses when production goals are reached. However, the evidence suggests that the particular level of a goal is critical to the effectiveness of this practice. Goals must be challenging yet achievable. Computing optimal goals when employees have private information about their own abilities is often not feasible for the firm. To solve this problem, we propose a compensation scheme in which workers set their own production goals. We provide a simple model of self-chosen goals and test its predictions in the laboratory. The evidence we<br/>find in the laboratory confirms our model’s predictions for men, but not for women. Men exert greater effort under the self-chosen goal contract system than under a piece rate contract. In contrast, women perform worse under the self-chosen goal contract. Further analysis suggests that this is because women fail to set goals that are challenging enough, because they are less likely to update their goals to take into account their improving performance as they repeat the task.
    Keywords: contracts; bonus; endogenous goals; productivity; intrinsic motivation; challenge seeking; gender differences
    JEL: C91 C92 J16 J24
    Date: 2015
  15. By: Matsuo, Masaki
    Abstract: Migrant and labor issues are a primary concern in the Arab Gulf countries. With focus on the economic and political conditions that influence actors' decisions when framing labor policies, this study analyzes how preferences of such policies are formed and explains why the governments of the Arab Gulf countries attempt to implement less economical policies. The findings suggest that governments avoid concessions for enterprises required to implement more economical policies and chose uneconomical ones to maintain authoritarian regimes.
    Keywords: Gulf Countries, Labor market, Migrant labor, Migration, Authoritarianism, Labor policy, Arab Gulf countries
    JEL: F22 J31 J61 N35
    Date: 2015–03
  16. By: Bredemeier, Christian (University of Cologne); Juessen, Falko (University of Wuppertal); Winkler, Roland (TU Dortmund)
    Abstract: In recessions, predominantly men lose their jobs, which has given rise to the term "man-cessions". We analyze whether fiscal expansions bring men back into jobs. To do so, we estimate vector-autoregressive models and identify the effects of fiscal shocks and non-fiscal shocks on the gender composition of employment. We show that contractionary non-fiscal shocks lead to man-cessions, i.e. employment falls and more strongly so for men. By contrast, an expansionary fiscal shock predominantly raises the employment of women. Taken together, these results imply a trade-off dilemma for policy that seeks to stabilize the level of employment along with its composition.
    Keywords: employment, gender, fiscal policy, business cycles
    JEL: E24 E32 J10 J21
    Date: 2015–03

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.