nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2015‒07‒11
24 papers chosen by
Joseph Marchand
University of Alberta

  1. Low-Skilled Jobs and Student Jobs: Employers' Preferences in Slovakia and the Czech Republic By Kureková, Lucia Mýtna; Žilinčíková, Zuzana
  2. The Early Labour Market Effects of Generally and Vocationally Oriented Higher Education: Is There a Trade-off? By Verhaest, Dieter; Baert, Stijn
  3. Crowding-Out Effect of Publicly Provided Childcare: Why Maternal Employment Did Not Increase By Yukiko Asai; Ryo Kambayashi; Shintaro Yamaguchi
  4. Early smoking, education, and labor market performance By Palali, Ali
  5. The Employment Effects of State Hiring Credits By Neumark, David; Grijalva, Diego
  6. Employer Downsizing and Older Workers' Health By Gutierrez, Italo A.; Michaud, Pierre-Carl
  7. Dismissal Disputes and Endogenous Sorting By Garibaldi, Pietro; Pfann, Gerard A.
  8. The Labor Market Effects of Opening the Border: New Evidence from Switzerland By Andreas Beerli; Giovanni Peri
  9. Experimental Evidence on the Long-Term Impacts of a Youth Training Program By Ibarrarán, Pablo; Kluve, Jochen; Ripani, Laura; Rosas Shady, David
  10. Fairness and Frictions: The Impact of Unequal Raises on Quit Behavior By Dube, Arindrajit; Giuliano, Laura; Leonard, Jonathan
  11. How to Fight Long-Term Unemployment: Lessons from Germany By Spermann, Alexander
  12. Labor Supply and Productivity Responses to Non-Salary Benefits: Do They Work? If So, at What Level Do They Work Best? By Spencer, Marilyn; Gevrek, Deniz; Chambers, Valrie; Bowden, Randall
  13. The Elasticity of Substitution Between Time and Market Goods: Evidence from the Great Recession By Aviv Nevo; Arlene Wong
  14. How Does Education Improve Cognitive Skills? Instructional Time versus Timing of Instruction By Sarah Dahmann
  15. Home Production and Retirement in Couples: A Panel Data Analysis By Bonsang, Eric; van Soest, Arthur
  16. Optimal Wage Redistribution in the Presence of Adverse Selection in the Labor Market By Bastani, Spencer; Blumkin, Tomer; Micheletto, Luca
  17. Equilibrium Labor Market Search and Health Insurance Reform By Aizawa, Naoki; Fang, Hanming
  18. Early Maternal Time Investment and Early Child Outcomes By del Bono, Emilia; Francesconi, Marco; Kelly, Yvonne; Sacker, Amanda
  19. Aggregating Elasticities: Intensive and Extensive Margins of Female Labour Supply By Orazio Attanasio; Peter Levell; Hamish Low; Virginia Sánchez-Marcos
  20. Self-Managed Working Time and Employee Effort: Theory and Evidence By Michael Beckmann; Thomas Cornelissen; Matthias Kräkel
  21. The Effect of Income on Mortality – New Evidence for the Absence of a Causal Link By Alexander Ahammer, G. Thomas Horvath, Rudolf Winter-Ebmer
  22. Labor Demand and ICT Adoption in Spain By Manuel Hidalgo-Pérez; Jesús Rodríguez López; José M. Okean
  23. International Migration of Couples By Junge, Martin; Munk, Martin D.; Poutvaara, Panu
  24. Human Capital and the Dynamic Effects of Trade By Auer, Raphael

  1. By: Kureková, Lucia Mýtna (Slovak Governance Institute); Žilinčíková, Zuzana (Masaryk University)
    Abstract: Massification of tertiary education, growing share of student workers on labour market and consequently increased competition for low-skilled jobs gave rise to the theory of crowding out of the less educated workers. This paper contributes to better understanding of temporary skills-qualifications mismatch typical for student workers by analysing the preferences of employers in low-skilled jobs and student jobs. We take labour market demand perspective and carry out exploratory analysis of job offers posted online in Slovakia and the Czech Republic. The results show that the student labour market is quite diverse as student job offers can be found in low-skilled, but also medium-skilled positions. We also find that although student vacancies require, on average, fewer skills than non-student positions, there is strong correlation between formal sophistication of a job vacancy and the required minimum educational level, as well as required skills for both student and non-student positions. It appears that low-educated workers and student workers do not compete for the limited number of positions, but rather fill employers' demands for different types of hard (e.g. language skills) and soft (e.g. flexibility, adaptability) skills. These results support the complementarity view of the coexistence of student employment and low-skilled employment rather than the crowding out theory.
    Keywords: youth, students, employment, skills, vacancy, online, labor demand, Czech Republic, Slovakia
    JEL: J23 J21 J24 J63
    Date: 2015–06
  2. By: Verhaest, Dieter (KU Leuven); Baert, Stijn (Ghent University)
    Abstract: This study investigates whether the choice for a vocationally versus a generally oriented higher education program entails a trade-off between higher employment chances and better matches at the start of the career (when opting for a vocational orientation) and a lower risk of bad match persistence later on (when opting for a general orientation). We rely on detailed early career spell data of Flemish graduates and assess the vocational orientation of their program by means of the presence of curriculum-based work placement. We model the program choice (vocationally versus generally oriented), the transition to a good match and the preceding transition to a bad match simultaneously. To account for non-random selection into vocational programs and into bad matches, the Timing of Events method is combined with an exclusion restriction. After accounting for unobserved heterogeneity, we do not find any evidence for a trade-off early in the career. This result contributes to the debate about the efficiency of vocationalising tertiary education programs through the implementation of work placement.
    Keywords: vocational education, academisation, work placement, mismatch, underemployment, overeducation
    JEL: I21 J24 J64 C21 C41
    Date: 2015–06
  3. By: Yukiko Asai; Ryo Kambayashi; Shintaro Yamaguchi
    Abstract: We estimate the causal effects of childcare availability on the maternal employment rate using prefecture panel data constructed from the Japanese quinquennial census 1990-2010. We find that childcare availability did not increase maternal employment due to the crowding-out effects. Namely, families substituted accredited childcare for informal care by grandparents. We also find evidence that more and more families do not live with grandparents who used to take care of grandchildren, as the availability of accredited childcare increases.
    Keywords: childcare, female labor supply, maternal employment, nuclear family, three-generation family
    JEL: J13 J21 J22
    Date: 2015–07
  4. By: Palali, Ali (Tilburg University, Center For Economic Research)
    Abstract: This study investigates the effects of early smoking on educational attainment and<br/>labor market performance. The results show that early smoking adversely affects educational attainment and initial labor market performance, but only for males. The effect of early smoking on initial labor market performance is indirect through educational attainment. Moreover, for males only, early smoking has a negative effect on current labor market performance even after conditioning on education. For females neither education nor labor market performance is affected by early smoking.
    Keywords: early smoking; education; labor market performance; Mixed Proportional Hazards model; discrete factor approach
    JEL: C41 I19 J24 J31
    Date: 2015
  5. By: Neumark, David (University of California, Irvine); Grijalva, Diego (Universidad San Francisco de Quito)
    Abstract: State and federal policymakers grappling with the aftermath of the Great Recession sought ways to spur job creation, in many cases adopting hiring credits to encourage employers to create new jobs. However, there is virtually no evidence on the effects of these kinds of counter-recessionary hiring credits – the only evidence coming from much earlier studies of the federal New Jobs Tax Credit in the 1970s. This paper provides evidence on the effects of state hiring credits on job growth. For many of the types of hiring credits we examine we do not find positive effects on job growth. However, some specific types of hiring credits – most notably including those targeting the unemployed, those that allow states to recapture credits when job creation goals are not met, and refundable hiring credits – appear to have succeeded in boosting job growth, more so during the Great Recession period or perhaps recessions generally. At the same time, some credits appear to generate hiring without increasing employment or to generate much more hiring than net employment growth, consistent with these credits leading to churning of employees that raises the costs of producing jobs via hiring credits.
    Keywords: labor demand, hiring credits, employment growth
    JEL: J23
    Date: 2015–06
  6. By: Gutierrez, Italo A. (RAND); Michaud, Pierre-Carl (University of Québec at Montréal)
    Abstract: We estimate the effects of employer downsizing on older workers' health outcomes using different approaches to control for endogeneity and sample selection. With the exception of the instrumental variables approach, which provides large imprecise estimates, our results suggest that employer downsizing increases the probability that older workers rate their health as fair or poor; increases the risk of showing symptoms of clinical depression; and increases the risk of being diagnosed with stroke, arthritis, and psychiatric or emotional problems. We find weaker evidence that downsizing increases the risk of showing high levels of C-reactive protein (CRP), a measure of general inflammation. We find that downsizing affects health by increasing job insecurity and stress, but that its effects remain statistically significant after controlling for these pathways, suggesting that other mechanisms such as diminished morale and general demotivation also affect worker health. Our findings suggest that employers ought to consider actions to offset the detrimental health effects of reducing personnel on their remaining (older) workers.
    Keywords: older workers, employer downsizing, health outcomes
    JEL: I12 M51
    Date: 2015–06
  7. By: Garibaldi, Pietro (University of Turin); Pfann, Gerard A. (Maastricht University)
    Abstract: Dismissal disputes occur mostly in recessions and often lead to long and costly contract termination procedures. This paper investigates how dispute procedures may affect the job-matching process. First we present a simple accounting frame- work that corresponds with general dismissal legislation, but is sufficiently flexible to accommodate country-specific legislation. Detailed information from a sample of 2,191 disputes that occurred in the Netherlands between 2006 and 2009 is used to adjust the framework to Dutch institutional specificity. The resulting equilibrium matching model is solved to explain endogenous sorting between lengthy and costly firing procedures. The model also rationalizes the longevity of the dual Dutch model and its political resilience.
    Keywords: disputes, firing, legislation, sorting
    JEL: E24 J08 J38 K31
    Date: 2015–06
  8. By: Andreas Beerli; Giovanni Peri
    Abstract: Between 1999 and 2007 Switzerland opened its labor markets to immigrants from the European Union (EU), fully liberalizing access by 2007. The timing of this labor market liberalization differed by geography, however. In particular, cross-border workers, who constituted more than half of EU immigrants, were allowed free-entry into the border region (BR), but not the non-border region (NBR), already in 2004. In this paper, we exploit the different timing of these policies in a difference-in-difference approach and estimate the effects of the policy changes on the inflow of new immigrants and on native labor market outcomes such as wages and employment by comparing the BR and NBR. We find that opening the border to EU immigrants increased their presence by 4 percent of employment, and this had no significant impact on average native wages and employment. Decomposing the effect between skill groups we find that immigrants complemented highly educated native workers, while they displaced middle educated workers and had no effect on less educated.
    JEL: J2 J24 J61
    Date: 2015–07
  9. By: Ibarrarán, Pablo (Inter-American Development Bank); Kluve, Jochen (Humboldt University Berlin, RWI); Ripani, Laura (Inter-American Development Bank); Rosas Shady, David (Inter-American Development Bank)
    Abstract: This paper presents the results of a randomized controlled trial on the long-term impacts of a youth training program. The empirical analysis estimates labor market impacts six years after the training – including long-term labor market trajectories of young people – and, to the best of our knowledge, is the first experimental long-term evaluation of a youth training program outside the US. We are able to track a representative sample of more than 3,200 youths at the six-year follow-up. Our empirical findings document significant impacts on the formality of employment, particularly for men, and impacts for both men and women in Santo Domingo, the capital of the Dominican Republic. The long-term analysis shows that these impacts are sustained and growing over time. There are no impacts on average employment, which is consistent with the low unemployment in countries with high informality and no unemployment insurance. Looking at the local labor market context, the analysis suggests that skills training programs work particularly well in more dynamic local contexts, where there is actual demand for the skills provided.
    Keywords: long-term, impact evaluation, randomized controlled trial, Dominican Republic, youth training, labor market outcomes
    JEL: J24 J64 O15 O17
    Date: 2015–06
  10. By: Dube, Arindrajit (University of Massachusetts Amherst); Giuliano, Laura (University of Miami); Leonard, Jonathan (University of California, Berkeley)
    Abstract: We analyze how quits responded to arbitrary differences in own and peer wages using an unusual feature of a pay raise at a large U.S. retailer. The firm's use of discrete pay steps created discontinuities in raises, where workers earning within 1 cent of each other received new wages that differed by 10 cents. First, we estimate a regression discontinuity (RD) model based on own wages; we find large causal effects of wages on quits, with quit elasticities less than -10. Next, we address whether the overall quit response reflects the impact of comparisons to market wages or to the wages of in-store peers. Here we use a multi-dimensional RD design that includes both a sharp RD in the own wage and a fuzzy RD in the average peer wage. We find that the large quit response mostly reflects relative-pay concerns and not market comparisons. After accounting for peer effects, quits do not appear to be very sensitive to wages – consistent with the presence of significant search frictions. Finally, we find that the relative-pay effect is nonlinear and driven mainly by workers who are paid less than their peers – suggesting concerns about fairness or disadvantageous inequity.
    Keywords: turnover, search frictions, fairness, quits, peer effects, regression discontinuity
    JEL: J00 J31 J42 J63
    Date: 2015–06
  11. By: Spermann, Alexander (IZA)
    Abstract: The number of long-term unemployed in Germany has stagnated at around one million for several years. Despite excellent labour market conditions, the long-term unemployment rate is well above the OECD average. Therefore, the "carrot and stick" principle of Hartz reforms is in clear need of further development. The author proposes an overall concept for preventing and reducing long-term unemployment and long-term basic income receipt. An important element is an activation strategy for long-term unemployed and long-term basic income recipients that implies interim target setting and requires more and better trained case managers in the job centres.
    Keywords: long-term unemployment, long-term basic income receipt, Germany, training programs, active labor market policy, activation
    JEL: J31 J38
    Date: 2015–06
  12. By: Spencer, Marilyn (Texas A&M University Corpus Christi); Gevrek, Deniz (Texas A&M University Corpus Christi); Chambers, Valrie (Stetson University); Bowden, Randall (Texas A&M University Corpus Christi)
    Abstract: This study explores the impact of a particular low marginal-cost employee benefit on employees' intended retention and performance. By utilizing a unique data set constructed by surveying full-time faculty and staff members at a public university in the United States, we study the impact of this employee benefit on faculty and staff performance and retention. We focus on the impact of reduction in dependent college tuition at various levels on employees' intentions to work harder and stay at their current job by using both OLS and Ordered Probit models. We also simulate the direct opportunity cost (reduction in revenue) in dollars and as a percent of total budgeted revenue to facilitate administrative decision making. The results provide evidence that for institutions where employee retention and productivity are a priority, maximizing or offering dependent college tuition waiver may be a relatively low-cost benefit to increase intended retention and productivity. In addition, the amount of the tuition waiver, number of dependents and annual salary are statistically significant predictors of intended increased productivity and intent to stay employed at the current institution. Employee retention and productivity is a challenge for all organizations. Although pay, benefits, and organizational culture tend to be key indicators of job satisfaction, little attention is given to specific types of benefits. This study is the first comprehensive attempt to explore the relationship between the impact of this low-cost employee benefit and employee performance and retention in a higher education institution in the United States.
    Keywords: higher education, retention, employee satisfaction, productivity, job satisfaction, fringe benefits
    JEL: J22 J32 J45 M52
    Date: 2015–06
  13. By: Aviv Nevo; Arlene Wong
    Abstract: We document a change in household shopping behavior during the Great Recession. Households purchased more on sale, larger sizes and generic products, increased coupon usage, and shopping at discount stores. We estimate that the returns to these shopping activities declined during the recession and therefore this behavior implies a significant decrease in households’ opportunity cost of time. Using the estimated cost of time and time use data, we estimate a high elasticity of substitution between market expenditure and time spent on non-market work. We find that households smooth a sizable fraction of consumption by varying their time allocation during recessions.
    JEL: D12 E31 J22
    Date: 2015–07
  14. By: Sarah Dahmann
    Abstract: This paper investigates two mechanisms through which education may affect cognitive skills in adolescence: the role of instructional quantity and the timing ofinstruction with respect to age. To identify causal effects, I exploit a school reform carried out at the state level in Germany as a quasi-natural experiment: between 2001 and 2007, the academic-track high school (Gymnasium) was reduced by one year in most of Germany's federal states, leaving the overall curriculum unchanged. To investigate the impact of this educational change on students' cognitive abilities, I conduct two separate analyses: first, I exploit the variation in the curriculum taught to same-aged students at academic-track high school over time and across states to identify the effect of the increase in class hours on students' crystallized and fluid intelligence scores. Using rich data on seventeen year-old adolescents from the German Socio-Economic Panel (SOEP) study, the estimates show that fluid intelligence remained unaffected, while crystallized intelligence improved for male students. Second, I compare students' competences in their final year of high school using data from the German National Educational Panel Study (NEPS). The results suggest that students affected by the reform catch up with their non-affected counterparts in terms of their competences by the time of graduation. However, they do not provide any evidence for the timing of instruction to matter in cognitive skill formation. Overall, secondary education therefore seems to impact students'cognitive skills in adolescence especially through instructional time and not so much through age-distinct timing of instruction.
    Keywords: Cognitive Skills, Crystallized Intelligence, Fluid Intelligence, Skill Formation, Education, High School Reform
    JEL: I21 I28 J24
    Date: 2015
  15. By: Bonsang, Eric (LISER (CEPS/INSTEAD)); van Soest, Arthur (Tilburg University)
    Abstract: We analyse the effects of retirement of one partner on home production by both partners in a couple. Using longitudinal data from Germany on couples, we control for fixed household specific effects to address the concern that retirement decisions are correlated with unobserved characteristics that also affect home production. For males and females, we find that own retirement significantly increases the amounts of home production. There are negative cross-effects of retirement on home production done by the partner. The fall in household income at retirement of one of the partners is largely compensated by an increase in total household production.
    Keywords: time allocation, home production, retirement, couples
    JEL: J22 J29 J14
    Date: 2015–06
  16. By: Bastani, Spencer (Uppsala University); Blumkin, Tomer (Ben Gurion University); Micheletto, Luca (University of Milan)
    Abstract: In this paper we allude to a novel role played by the non-linear income tax system in the presence of adverse selection in the labor market due to asymmetric information between workers and firms. We show that an appropriate choice of the tax schedule enables the government to affect the wage distribution by controlling the transmission of information in the labor market. This represents an additional channel through which the government can foster the pursuit of its redistributive goals.
    Keywords: adverse selection, labor market, optimal taxation, pooling, redistribution
    JEL: D82 H21 J31
    Date: 2015–06
  17. By: Aizawa, Naoki (Federal Reserve Bank of Minneapolis); Fang, Hanming (University of Pennsylvania)
    Abstract: We present and empirically implement an equilibrium labor market search model where risk averse workers facing medical expenditure shocks are matched with firms making health insurance coverage decisions. Our model delivers a rich set of predictions that can account for a wide variety of phenomenon observed in the data including the correlations among firm sizes, wages, health insurance offering rates, turnover rates and workers’ health compositions. We estimate our model by Generalized Method of Moments using a combination of micro datasets including Survey of Income and Program Participation, Medical Expenditure Panel Survey and Robert Wood Johnson Foundation Employer Health Insurance Survey. We use our estimated model to evaluate the equilibrium impact of the 2010 Affordable Care Act (ACA) and find that it would reduce the uninsured rate among the workers in our estimation sample from about 22% in the pre-ACA benchmark economy to less than 4%. We also find that income-based premium subsidies for health insurance purchases from the exchange play an important role for the sustainability of the ACA; without the premium subsidies, the uninsured rate would be around 18%. In contrast, as long as premium subsidies and health insurance exchanges with community ratings stay intact, ACA without the individual mandate, or without the employer mandate, or without both mandates, could still succeed in reducing the uninsured rates to 7.34%, 4.63% and 9.22% respectively.
    Keywords: Health; Health insurance; Health care reform; Labor market equilibrium
    JEL: G22 I11 I13 J32
    Date: 2015–07–02
  18. By: del Bono, Emilia; Francesconi, Marco; Kelly, Yvonne; Sacker, Amanda
    Abstract: Using large longitudinal survey data from the UK Millennium Cohort Study, this paper estimates the relationship between maternal time inputs and early child development. We find that maternal time is a quantitatively important determinant of skill formation and that its effect declines with child age. There is evidence of long-term effects of early maternal time inputs on later outcomes, especially in the case of cognitive skill development. In the case of non-cognitive development, the evidence of this long-term impact disappears when we account for skill persistence.
    Keywords: Cognitive and non-cognitive skill formation; Early interventions; Education production functions
    JEL: I20 J15 J24
    Date: 2015–07
  19. By: Orazio Attanasio; Peter Levell; Hamish Low; Virginia Sánchez-Marcos
    Abstract: There is a renewed interest in the size of labour supply elasticities and the discrepancy between micro and macro estimates. Recent contributions have stressed the distinction between changes in labour supply at the extensive and the intensive margin. In this paper, we stress the importance of individual heterogeneity and aggregation problems. At the intensive margins, simple specifications that seem to fit the data give rise to non linear expressions that do not aggregate in a simple fashion. At the extensive margin, aggregate changes in participation are likely to depend on the cross sectional distribution of state variables when a shock hits and, therefore, are likely to be history dependent. We tackle these aggregation issues directly by specifying a life cycle model to explain female labour supply in the US and estimate its various components. We estimate the parameters of different component of the model. Our results indicate that (i) at the intensive margin, Marshallian and Hicksian elasticities are very heterogeneous and, on average, relatively large; (ii) Frisch elasticities are, as implied by the theory, even larger; (iii) aggregate labour supply elasticities seem to vary over the business cycle, being larger during recessions.
    JEL: D12 J22
    Date: 2015–07
  20. By: Michael Beckmann; Thomas Cornelissen; Matthias Kräkel
    Abstract: This paper theoretically and empirically examines the impact of self-managed working time (SMWT) on employee effort. As a means of increased worker autonomy, SMWT can theoretically increase effort via intrinsic motivation and reciprocal behaviour, but can lead to a decrease of effort due to a loss of control. Based on German individual-level panel data, we find that SMWT employees exert higher effort levels than employees with fixed working hours. Even after accounting for observed and unobserved characteristics there remains a modest positive effect. This effect is mainly driven by employees who are intrinsically motivated, suggesting that intrinsic motivation is complementary to SMWT. However, reciprocal work intensification does not seem to be an important channel of providing extra effort.
    Keywords: Self-managed working time, worker autonomy, employee effort, reciprocity, intrinsic motivation, complementarity
    JEL: J24 J81 M50
    Date: 2015
  21. By: Alexander Ahammer, G. Thomas Horvath, Rudolf Winter-Ebmer
    Abstract: We analyze the effect of income on mortality in Austria using administrative social security data. To tackle potential endogeneity concerns arising in this context, we estimate time-invariant firm-specific wage components and use them as instruments for actual wages. While we do find quantitatively small yet statistically significant effects in our naïve least squares estimations, IV regressions reveal a robust zero-effect of income on ten-year death rates for prime-age workers, both in terms of coefficient magnitude and statistical significance. These results are robust to a number of different sample specifications and both linear and non-linear estimation methods.
    Keywords: Income, mortality, wage decomposition.
    JEL: J14 J31 I10
    Date: 2015–07
  22. By: Manuel Hidalgo-Pérez (Universidad Pablo de Olavide); Jesús Rodríguez López (U. Pablo de Olavide); José M. Okean (U. Pablo de Olavide)
    Abstract: Spain is delayed in adopting information and communication technologies (ICT) and its productivity per hour worked presents a downward trend since the mid 90s. In this paper we argue that these two facts are related. Using the EU KLEMS dataset we test the capital-skill complementarity hypothesis in a cross-section of sectors in Spain. We find that the substitutability between workers and ICT assets falls as worker skill level rises, and that this feature holds across all sectors. Further- more, the ICT assets are complementary with skilled workers. The fraction of workers employed with medium and high skills across sectors rose by 21% and 12%, respectively, to the disadvantage of low skilled workers, due to an adjustment within sectors more than to a composition effect between sectors. Finally, using a regression analysis, we conclude that some labor market institutions are likely behind the evolution of sectorial productivity and ICT investment in Spain.
    Keywords: Productivity, TFP, ICT, education
    JEL: I24 J24 O40
    Date: 2015–07
  23. By: Junge, Martin; Munk, Martin D.; Poutvaara, Panu
    Abstract: We develop a theoretical model regarding the migration of dual-earner couples and test it in the context of international migration. Our model predicts that the probability that a couple emigrates increases with the income of the primary earner, whereas the income of the sec-ondary earner may affect the decision in either direction. We conduct an empirical analysis that uses population-wide administrative data from Denmark, and the results are consistent with our model. We find that primary earners in couples are more strongly self-selected with respect to income than single persons. This novel result counters the intuition that family ties weaken self-selection.
    Keywords: International migration; Family migration; Education; Gender differences; Dual-earner couples
    JEL: F22 J12 J16 J24
    Date: 2015–06–23
  24. By: Auer, Raphael
    Abstract: This paper examines the cross-country income and welfare consequences of trade-induced human capital (dis-)accumulation. The model is based on heterogeneous workers who make educational decisions in the presence of complete markets. When such heterogeneous workers invest in schooling, high type agents earn a surplus from their investment. In the presence of cross-country differences in skill-augmenting technology, trade shifts this surplus to rich countries that can use skills more efficiently. Thus, while the static gains from trade may lead to convergence, the dynamic gains from trade occur to initially rich countries, thus leading to cross-country divergence of income and welfare. The second part of the paper endogenizes world prices, documenting that as trade liberalization concentrates skills in countries with a high level of skill augmenting technology, it thereby increases the effective global supply of skilled labor. Despite the resulting decline in the price of skill-intensive goods, trade is shown to be skill-biased.
    Keywords: economic growth; employment; factor content of trade; human capital; import competition
    JEL: E24 F11 F14 F16 J24 O11 O4
    Date: 2015–07

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