nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2015‒05‒16
thirteen papers chosen by
Joseph Marchand
University of Alberta

  1. Does Education Raise Productivity and Wages Equally? The Moderating Roles of Age, Gender and Industry By François Rycx; Yves Saks; Ilan Tojerow
  2. The Impact of Disability Benefits on Labor Supply: Evidence from the VA's Disability Compensation Program By David H. Autor; Mark Duggan; Kyle Greenberg; David S. Lyle
  3. The making of a manager: evidence from military officer training By Grönqvist, Erik; Lindqvist, Erik
  4. The Career Effects of Scandal: Evidence from Scientific Retractions By Pierre Azoulay; Alessandro Bonatti; Joshua L. Krieger
  5. Are China's Ethnic Minorities Less Likely to Move? By Gustafsson, Björn Anders; Yang, Xiuna
  6. Giving College Credit Where it is Due: Advanced Placement Exam Scores and College Outcomes By Jonathan Smith; Michael Hurwitz; Christopher Avery
  7. Labour Market Mismatch and Labour Productivity: Evidence from PIAAC Data By Muge Adalet McGowan; Dan Andrews
  8. The Effects of Exposure to Better Neighborhoods on Children: New Evidence from the Moving to Opportunity Experiment By Raj Chetty; Nathaniel Hendren; Lawrence F. Katz
  9. What Factors Affect Doctors’ Hours Decisions: Comparing Structural Discrete Choice and Reduced-Form Approaches By Guyonne Kalb; Daniel Kuehnle; Anthony Scott; Terence Chai Cheng; Sung-Hee Jeon
  10. CEO fitness and firm value By Limbach, Peter; Sonnenburg, Florian
  11. Employment effects of foreign direct investment. New Evidence from Central and Eastern European Countries. By C. Jude; M. I. Pop Solaghi
  12. Changing Income Inequality and Panel Income Changes By Duval Hernández, Robert; Fields, Gary S.; Jakubson, George H.
  13. To Work or Not to Work? Updated Estimates of Labour Supply Elasticities By Zuzana Siebertova; Matus Senaj; Norbert Svarda; Jana Valachyova

  1. By: François Rycx (Université libre de Bruxelles, SBS-EM (CEB and DULBEA), and IZA); Yves Saks (National Bank of Belgium, Research Department); Ilan Tojerow (Université libre de Bruxelles, SBS-EM (CEB and DULBEA), and IZA)
    Abstract: The labour market situation of low-educated people is particularly critical in most advanced economies, especially among youngsters and women. Policies aiming to increase their employability either try to foster their productivity and/or to decrease their wage cost. Yet, the evidence on the misalignment between education-induced productivity gains and corresponding wage cost differentials is surprisingly thin, inconclusive and subject to various econometric biases. We investigate this issue using rich Belgian linked employer-employee panel data for the period 1999-2010. Moreover, we provide first evidence on the moderating roles of age, gender and industry in the relationship between education, productivity and wage costs. Controlling for simultaneity issues, time-invariant workplace characteristics and dynamics in the adjustment process of dependent variables, findings support the existence of a ‘wage-compression effect’, i.e. a situation in which the distribution of wage costs is more compressed than the education-productivity profile. This effect, robust across industries, is found to disappear among older cohorts of workers and to be more pronounced among women than men. Overall, findings suggest that particular attention should be devoted to the productivity to wage cost ratio of low-educated workers, especially when they are young and female, but also to policies favouring gender equality in terms of remuneration and career advancement.
    Keywords: Education, labour costs, productivity, linked panel data
    JEL: C33 I21 J24 J31
    Date: 2015–04
  2. By: David H. Autor; Mark Duggan; Kyle Greenberg; David S. Lyle
    Abstract: Combining administrative data from the U.S. Army, Department of Veterans Affairs (VA) and the U.S. Social Security Administration, we analyze the effect of the VA’s Disability Compensation (DC) program on veterans’ labor force participation and earnings. The largely unstudied Disability Compensation program currently provides income and health insurance to almost four million veterans of military service who suffer service-connected disabilities. We study a unique policy change, the 2001 Agent Orange decision, which expanded DC eligibility for Vietnam veterans who had served in-theatre to a broader set of conditions such as type 2 diabetes. Exploiting the fact that the Agent Orange policy excluded Vietnam era veterans who did not serve in-theatre, we assess the causal effects of DC eligibility by contrasting the outcomes of these two Vietnam-era veteran groups. The Agent Orange policy catalyzed a sharp increase in DC enrollment among veterans who served in-theatre, raising the share receiving benefits by five percentage points over five years. Disability ratings and payments rose rapidly among those newly enrolled, with average annual non-taxed federal transfer payments increasing to $17K within five years. We estimate that benefits receipt reduced labor force participation by 18 percentage points among veterans enrolled due to the policy, though measured income net of transfer benefits rose on average. Consistent with the relatively advanced age and diminished health of Vietnam era veterans in this period, we estimate labor force participation elasticities that are somewhat higher than among the general population.
    JEL: J22
    Date: 2015–05
  3. By: Grönqvist, Erik (IFAU - Institute for Evaluation of Labour Market and Education Policy); Lindqvist, Erik (Department of Economics, Stockholm School of Economics)
    Abstract: We show that officer training during the Swedish military service has a strong positive effect on the probability to attain a managerial position later in life. The most intense type of officer training increases the probability of becoming a civilian manager by about 5 percentage points, or 75 percent. Officer training also increases educational attainment post-military service. We argue that the effect on civilian leadership could be due to acquisition of leadership specific skills during the military service, and present suggestive evidence related to alternative mechanisms, such as signalling, networks, and training unrelated to leadership.
    Keywords: Leadership; management; CEOs; non-cognitive skills; regression-discontinuity; program evaluation; conscription; military service; military officers; military leadership
    JEL: I20 J24 J31 M51
    Date: 2015–04–22
  4. By: Pierre Azoulay; Alessandro Bonatti; Joshua L. Krieger
    Abstract: Scandals permeate social and economic life, but their consequences have received scant attention in the economics literature. To shed empirical light on this phenomenon, we investigate how the scientific community's perception of a scientist's prior work changes when one of his articles is retracted. Relative to non-retracted control authors, faculty members who experience a retraction see the citation rate to their articles drop by 10% on average, consistent with the Bayesian intuition that the market inferred their work was mediocre all along. We then investigate whether the eminence of the retracted author, and the publicity surrounding the retraction, shape the magnitude of the penalty. We find that eminent scientists are more harshly penalized than their less-distinguished peers in the wake of a retraction, but only in cases involving fraud or misconduct. When the retraction event had it source in "honest mistakes," we find no evidence of differential stigma between high- and low-status faculty members.
    JEL: O31 O33
    Date: 2015–05
  5. By: Gustafsson, Björn Anders (University of Gothenburg); Yang, Xiuna (Beijing Normal University)
    Abstract: This study uses China's Inter-Census Survey 2005 to analyse the extent migration behaviour among 14 large ethnic minority groups and the Han majority. Results show that the probability to migrate to all types of destinations varies by province of origin, decreases by age, and in most cases, by expected income at the origin. Furthermore the probability to migrate is found to typically increase by length of education and decrease for females by the number of children. In most cases investigated, a minority ethnicity reduces migration probabilities for people registered in rural China. This is particularly the case for persons belonging to the Uyghur and Tibetan ethnic groups, but also for the Mongolian, Bai, Yao and Tujia groups. In contrast, Korean and Hui have a higher probability of migration than the majority. For people with an urban hukou there are fewer examples that minority ethnicity affects probability to migrate.
    Keywords: China, ethnic minorities, Uighur, Tibetan, Korean, Hui
    JEL: J15 J61 J7 P23
    Date: 2015–04
  6. By: Jonathan Smith; Michael Hurwitz; Christopher Avery
    Abstract: We implement a regression discontinuity design using the continuous raw Advanced Placement (AP) exam scores, which are mapped into the observed 1-5 integer scores, for over 4.5 million students. Earning higher AP integer scores positively impacts college completion and subsequent exam taking. Specifically, attaining credit-granting integer scores increases the probability that a student will receive a bachelor’s degree within four years by 1 to 2 percentage points per exam. We also find that receiving a score of 3 over a 2 on junior year AP exams causes students to take between 0.06 and 0.14 more AP exams senior year.
    JEL: I2 I23 J24
    Date: 2015–05
  7. By: Muge Adalet McGowan; Dan Andrews
    Abstract: This paper explores the link between skill and qualification mismatch and labour productivity using cross-country industry data for 19 OECD countries. Utilising mismatch indicators aggregated from micro-data sourced from the recent OECD Survey of Adult Skills (PIAAC), the main results suggest that higher skill and qualification mismatch is associated with lower labour productivity, with over-skilling and under-qualification accounting for most of these impacts. A novel result is that higher skill mismatch is associated with lower labour productivity through a less efficient allocation of resources, presumably because when the share of over-skilled workers is higher, more productive firms find it more difficult to attract skilled labour and gain market shares at the expense of less productive firms. At the same time, a higher share of under-qualified workers is associated with both lower allocative efficiency and within-firm productivity – i.e. a lower ratio of high productivity to low productivity firms. While differences in managerial quality can potentially account for the relationship between mismatch and within-firm productivity, the paper offers some preliminary insights into the policy factors that might explain the link between skill mismatch and resource allocation.<P>Inadéquation entre l'offre et la demande sur le marché du travail : observations à partir de l'étude PIAAC<BR>Ce Document de travail analyse la relation entre inadéquation des compétences et des qualifications et productivité du travail, à l’aide de données sectorielles internationales pour 19 pays de l’OCDE. Calculés à l’aide d’indicateurs agrégés à partir de micro-données empruntées à l’enquête PIAAC (Programme de l’OCDE pour l'évaluation internationale des compétences des adultes), les principaux résultats donnent à penser qu’un plus haut niveau d’inadéquation des compétences et des qualifications va de pair avec une productivité plus faible du travail, la surqualification et la sous-qualification constituant l’essentiel des effets observés. La nouveauté dans ces résultats tient au fait qu’une plus forte inadéquation des compétences va de pair avec une plus faible productivité du travail par une moindre efficience allocative, peut-être parce que lorsque la proportion de travailleurs surqualifiés est plus élevée, les entreprises les plus productives éprouvent plus de difficultés à attirer des personnes qualifiées et gagner des parts de marché sur les entreprises moins productives. Parallèlement, une plus forte proportion de main-d’oeuvre sous-qualifiée va de pair avec une moindre efficience allocative, mais aussi une moindre productivité intra-entreprise (c’est-à-dire que le ratio entreprises très productives/entreprises peu productives diminue). Si des différences de qualité de gestion d’entreprise peuvent peut-être expliquer la relation entre inadéquation et productivité intra-entreprise, ce Document de travail présente une analyse préliminaire des facteurs de politique publique qui pourraient expliquer le lien entre inadéquation des compétences et allocation des ressources.
    Keywords: education, human capital, productivity, reallocation, qualification mismatch, allocation of talent, managerial quality, redéploiement, distribution des compétences, inadéquation des compétences, inadéquation des qualifications, productivité, éducation, capital humain
    JEL: I20 J20 J24 O40
    Date: 2015–04–28
  8. By: Raj Chetty; Nathaniel Hendren; Lawrence F. Katz
    Abstract: The Moving to Opportunity (MTO) experiment offered randomly selected families living in high-poverty housing projects housing vouchers to move to lower-poverty neighborhoods. We present new evidence on the impacts of MTO on children's long-term outcomes using administrative data from tax returns. We find that moving to a lower-poverty neighborhood significantly improves college attendance rates and earnings for children who were young (below age 13) when their families moved. These children also live in better neighborhoods themselves as adults and are less likely to become single parents. The treatment effects are substantial: children whose families take up an experimental voucher to move to a lower-poverty area when they are less than 13 years old have an annual income that is $3,477 (31%) higher on average relative to a mean of $11,270 in the control group in their mid-twenties. In contrast, the same moves have, if anything, negative long-term impacts on children who are more than 13 years old when their families move, perhaps because of disruption effects. The gains from moving fall with the age when children move, consistent with recent evidence that the duration of exposure to a better environment during childhood is a key determinant of an individual's long-term outcomes. The findings imply that offering families with young children living in high-poverty housing projects vouchers to move to lower-poverty neighborhoods may reduce the intergenerational persistence of poverty and ultimately generate positive returns for taxpayers.
    JEL: H53 I32 I38 R38
    Date: 2015–05
  9. By: Guyonne Kalb (Melbourne Institute of Applied Economic and Social Research, University of Melbourne); Daniel Kuehnle (University of Erlangen-Nuremberg); Anthony Scott (Melbourne Institute of Applied Economic and Social Research, University of Melbourne); Terence Chai Cheng (School of Economics, The University of Adelaide); Sung-Hee Jeon (Statistics Canada)
    Abstract: Few papers examine the pecuniary and non-pecuniary determinants of doctors’ labour supply despite substantial predicted shortages in many OECD countries. We contribute to the literature by applying both a structural discrete choice and a reduced-form approach. Using detailed survey data for Australian physicians, we examine how these different modelling approaches affect estimated wage elasticities at the intensive margin. We show that all modelling approaches predict small negative wage elasticities for male and female General Practitioners (GPs) and specialists. Our detailed subgroup analysis does not reveal particularly strong responses to wage increases by any specific group. We show that the translog and Box-Cox utility functions outperform the quadratic utility function. Exploiting the advantages of the structural discrete choice model, we examine short-term effects at the intensive margin by calculating labour supply changes in response to 5 and 10% wage increases. The results show that such wage increases substantially reduce the full-time equivalent supply of male GPs, and to a lesser extent of male specialists and female GPs, but not of female specialists.
    Keywords: Labour supply, discrete choice model, wage elasticity, health workforce, MABEL
    JEL: I11 J22 J44 J21
    Date: 2015–04
  10. By: Limbach, Peter; Sonnenburg, Florian
    Abstract: We provide evidence for a positive impact of CEO fitness on firm value (Tobin's Q). For each of the years 2001 to 2011, we define S&P 1500 CEOs as fit if they finish a marathon. Fit CEOs are associated with higher firm profitability and M&A announcement returns. Effects on firm value are strongest for CEOs with above-median age, above-median tenure and high workload, consistent with the positive impact of fitness on cognitive functions, performance and stress coping found in the literature. Results are robust to tests for endogeneity, including CEOfirm fixed effects, time-varying firm and industry effects, permutation tests, reverse causality and sudden deaths. They provide an explanation for the growing importance of fitness in the managerial labor market.
    Keywords: CEO fitness,CEO heterogeneity,firm value,mergers and acquisitions,work stress
    JEL: G32 G34 J24
    Date: 2015
  11. By: C. Jude; M. I. Pop Solaghi
    Abstract: This paper examines the role of foreign direct investment (FDI) as a determinant of employment by using a dynamic labor demand model applied for a panel of 20 Central and Eastern European Countries during the period 1995-2012. Our results indicate that FDI leads to a phenomenon of creative destruction. The introduction of labor saving techniques leads to an initial negative effect on employment, while the progressive vertical integration of foreign affiliates into the local economy eventually converges towards a positive long run effect. However, this phenomenon is only observed in EU countries. Our analysis thus gives partial support to the worries that FDI may displace jobs. Still, the relative importance of FDI as a determinant of employment is modest compared to economic restructuring and output growth. Finally, our results show evidence of a skill bias of production in foreign affiliates, as human capital favors a positive contribution of FDI to employment.
    Keywords: FDI, employment, labor demand, transition countries, dynamic panel.
    JEL: F23 J23
    Date: 2015
  12. By: Duval Hernández, Robert (University of Cyprus); Fields, Gary S. (Cornell University); Jakubson, George H. (Cornell University)
    Abstract: When economic growth (or economic decline) takes place, who benefits and who is hurt how much? The more traditional way of answering this question is to compare two or more comparable cross sections and gauge changing income inequality among countries or individuals. A newer way is to utilize data on a panel of countries or a panel of people and assess the pattern of panel income changes. How do these two approaches relate to one another? This paper shows, first, that it is possible to have all four combinations – rising or falling inequality and divergent or convergent panel income changes, and second, under what conditions, for various measures of rising/falling inequality and various measures of divergent/convergent income changes, each of the four possible combinations can arise.
    Keywords: income inequality, economic mobility
    JEL: J31 D63
    Date: 2015–04
  13. By: Zuzana Siebertova (Council for Budget Responsibility); Matus Senaj (Council for Budget Responsibility); Norbert Svarda (Council for Budget Responsibility); Jana Valachyova (Council for Budget Responsibility)
    Abstract: This paper provides a revised microeconometric analysis of extensive margin labour supply elasticities in Slovakia. Compared to earlier analysis, we estimate the elasticities for males and females separately. We find that a one percent increase in net wage increases the probability of economic activity by 0.21 and 0.4 percentage points for males and females, respectively. Taking into account tax and transfer system details valid in Slovakia in 2009-2012, a one percent increase in transfers decreases the semi-elasticity of labour force participation by 0.03 percentage points for males and 0.05 percentage points for females. These results are broadly in line with the elasticities usually reported in the literature. Our results show that low-skilled, females and the elderly are the groups that are particularly responsive to changes in taxes and transfers. Labour market policies aimed to boost employment should concentrate on increasing marginal gains to work, especially for low-educated individuals and women.
    Keywords: labour supply elasticity, extensive margin, Heckman model, probit
    JEL: H31 H53 I38 J21
    Date: 2015–05

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