nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2015‒07‒18
nineteen papers chosen by
Joseph Marchand
University of Alberta

  1. Why the Referential Treatment: Evidence from Field Experiments on Referrals By Amanda Pallais; Emily Glassberg Sands
  2. Crowding-Out Effect of Publicly Provided Childcare: Why Maternal Employment Did Not Increase By Yukiko Asai, Ryo Kambayashi, Shintaro Yamaguchi
  3. Investment over the Business Cycle: Insights from College Major Choice By Blom, Erica; Cadena, Brian C.; Keys, Benjamin J.
  4. The Anatomy of Job Polarisation in the UK By Salvatori, Andrea
  5. Not Working at Work: Loafing, Unemployment and Labor Productivity By Michael C. Burda; Katie Genadek; Daniel S. Hamermesh;
  6. (Un)Informed College and Major Choice: Evidence from Linked Survey and Administrative Data By Justine S. Hastings; Christopher A. Neilson; Anely Ramirez; Seth D. Zimmerman
  7. Top Incomes in Canada: Evidence from the Census By Thomas Lemieux; W. Craig Riddell
  8. Whose Preferences Are Revealed in Hours of Work? By Pencavel, John
  9. The Effect of Income on Mortality: New Evidence for the Absence of a Causal Link By Ahammer, Alexander; Horvath, Thomas; Winter-Ebmer, Rudolf
  10. PeersÕ Composition Effects in the Short and in the Long Run: College Major, College Performance and Income By Massimo Anelli; Giovanni Peri
  11. Who Needs a Fracking Education? The Educational Response to Low-Skill Biased Technological Change By Elizabeth U. Cascio; Ayushi Narayan
  12. All Good Things Come to an End: CEO Tenure and Firm Value By Limbach, Peter; Schmid, Markus; Scholz, Meik
  13. A Signal of Diligence? Student Work Experience and Later Employment Chances By Baert, Stijn; Rotsaert, Olivier; Verhaest, Dieter; Omey, Eddy
  14. The Rise of Domestic Outsourcing and the Evolution of the German Wage Structure By Goldschmidt, Deborah; Schmieder, Johannes F.
  15. The French Productivity Puzzle By Askenazy, Philippe; Erhel, Christine
  16. Household Responses to Severe Health Shocks and the Design of Social Insurance By Itzik Fadlon; Torben Heien Nielsen
  17. When Experienced and Decision Utility Concur: The Case of Income Comparisons By Clark, Andrew E.; Senik, Claudia; Yamada, Katsunori
  18. Does the Gender Composition of Scientific Committees Matter? By Bagues, Manuel F.; Sylos-Labini, Mauro; Zinovyeva, Natalia
  19. A Bitter Medicine? Short-term Employment Impact of Deregulation in Network Industries By Bassanini, Andrea

  1. By: Amanda Pallais; Emily Glassberg Sands
    Abstract: Referred workers are more likely than non-referred workers to be hired, all else equal. In three field experiments in an online labor market, we examine why. We find that referrals contain positive information about worker performance and persistence that is not contained in workers' observable characteristics. We also find that referrals performed particularly well when working directly with their referrers. However, we do not find evidence that referrals exert more effort because they believe their performance will affect their relationship with their referrer or their referrer's position at the firm.
    JEL: C93 J24 J63 M51
    Date: 2015–07
  2. By: Yukiko Asai, Ryo Kambayashi, Shintaro Yamaguchi (Institute of Social Science, The University of Tokyo)
    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: 2015–07–15
  3. By: Blom, Erica (affiliation not available); Cadena, Brian C. (University of Colorado, Boulder); Keys, Benjamin J. (Harris School, University of Chicago)
    Abstract: This paper examines the relationship between individuals' personal exposure to economic conditions and their investment choices in the context of human capital. Focusing on bachelor's degree recipients, we find that birth cohorts exposed to higher unemployment rates during typical schooling years select majors that earn higher wages, that have better employment prospects, and that more often lead to work in a related field. Much of this switching behavior can be considered a rational response to differences in particular majors' labor market prospects during a recession. However, higher unemployment leads to other meaningful changes in the distribution of majors. Conditional on changes in lifetime expected earnings, recessions encourage women to enter male-dominated fields, and students of both genders pursue more difficult majors, such as STEM fields. These findings imply that the economic environment changes how students select majors, possibly by encouraging them to consider a broader range of possible degree fields. Finally, in the absence of this compensating behavior, we estimate that the average estimated costs of graduating in a recession would be roughly ten percent larger.
    Keywords: college major, business cycle, human capital investment, STEM majors, gender differences
    JEL: E32 I23 J22 J24
    Date: 2015–07
  4. By: Salvatori, Andrea (ISER, University of Essex)
    Abstract: This paper presents new evidence on the evolution of job polarisation over time and across skill groups in the UK between 1979 and 2012. The UK has experienced job polarisation in each of the last three decades, with growth in top jobs always exceeding that in bottom ones. Overall, top occupations have gained over 80% of the employment shares lost by middling occupations. The decline of middling occupations is entirely accounted for by non-graduates who have seen their relative numbers decrease and the distribution of their employment shift towards the bottom of the occupational skill distribution. The increase at the top is entirely accounted for by compositional changes, as a result of the increase in the number of graduates since the 1990s. Employment has not polarised for graduates, but has become less concentrated in top occupations, especially in the 2000s. The paper also documents that job polarisation has not been matched by wage polarisation across the occupational distribution in any decade and discusses how these new findings relate to the existing evidence for the US and to the prevailing technology-based explanation for job polarisation. Overall, the importance of occupational changes between skill groups and the performance of occupational wages over time cast doubts on the role of technology as the main driver of polarisation in the UK. In particular, the evidence suggests that supply-side changes are likely to be important factors in explaining why high-skill occupations continued to grow in the 2000s even as they stalled in the US.
    Keywords: job polarisation, wage inequality, occupational mobility, routine employment, skill biased technological change
    JEL: J21 J23 J24 O33
    Date: 2015–07
  5. By: Michael C. Burda; Katie Genadek; Daniel S. Hamermesh;
    Abstract: Using the American Time Use Survey (ATUS) 2003-12, we estimate time spent by workers in non-work while on the job. Non-work time is substantial and varies positively with the local unemployment rate. While the average time spent by workers in non-work conditional on any positive non-work rises with the unemployment rate, the fraction of workers who report time in non-work varies pro-cyclically, declining in recessions. These results are consistent with a model in which heterogeneous workers are paid efficiency wages to refrain from loafing on the job. That model correctly predicts relationships of the incidence and conditional amounts of non-work with wage rates and measures of unemployment benefits in state data linked to the ATUS, and it is consistent with observed occupational differences in non-work.
    Keywords: time use, non-work, loafing, shirking, efficiency wage, labor productivity
    JEL: J22 E24
    Date: 2015–07
  6. By: Justine S. Hastings; Christopher A. Neilson; Anely Ramirez; Seth D. Zimmerman
    Abstract: We use large-scale surveys of Chilean college applicants and college students to explore the way students form beliefs about earnings and cost outcomes at different institutions and majors and how these beliefs relate to degree choice and persistence. Linking our survey records to administrative education and earnings data, we compare earnings and cost expectations to observed values for past students and follow survey participants forward to see how beliefs relate to matriculation and dropout outcomes. We find that students have correctly centered but noisy cost expectations, and appear to systematically overestimate earnings outcomes for past graduates. Students who overestimate costs are less likely to matriculate in any degree program and in their stated first-choice program, and are more likely to drop out. Students who overestimate earnings matriculate at similar rates to other students, but choose degree programs where past students have been less likely to graduate, have earned less early in their careers, and have been more likely to default on student loans. Consistent with an informal model of enrollment choice, students with a stated preference for labor market-related degree characteristics are less likely to overestimate earnings outcomes and choose degrees where past students have gone on to earn more, while the opposite is true for students with a stated preference for enjoyment of the curriculum.
    JEL: H52 I2 I24 I28 J24
    Date: 2015–07
  7. By: Thomas Lemieux; W. Craig Riddell
    Abstract: This paper looks at the evolution of incomes at the top of the distribution in Canada. Master files of the Canadian Census are used to study the composition of top income earners between 1981 and 2011. Our main finding is that, as in the United States, executives and individuals working in the financial and business services sectors are the two most important groups driving the growth in top incomes in Canada. A finding more specific to Canada is that the oil and gas sector has also played an important role in income growth at the top, especially in more recent years. Another arguably Canadian-specific finding is that holders of medical degrees have lost ground compared to other top income earners. Finally, despite the IT revolution, scientists, engineers and even computer scientists do not account for much of the growth in top incomes in Canada.
    JEL: J24 J31
    Date: 2015–07
  8. By: Pencavel, John (Stanford University)
    Abstract: It has become orthodox in economics research to interpret the association between hourly earnings and working hours as the expression of the preferences of workers. This convention originated in H. Gregg Lewis' explanation for the decline in hours of work since the nineteenth century. His explanation rested on an explicit resolution of the identification problem inherent in any quantity (hours) - price (wage) relation. For over forty years, researchers have neglected this identification problem with the result that the findings in the purported "labor supply" literature are of questionable value.
    Keywords: working hours, wages, labor supply, labor demand, identification
    JEL: J22 J23 C13
    Date: 2015–07
  9. By: Ahammer, Alexander (University of Linz); Horvath, Thomas (WIFO - Austrian Institute of Economic Research); Winter-Ebmer, Rudolf (University of Linz)
    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
  10. By: Massimo Anelli; Giovanni Peri
    Abstract: In this paper we use a newly constructed dataset following 30,000 Italian individuals from high school to labor market and we analyze whether the gender composition of peers in high school affected their choice of college major, their academic performance and their labor market income. We leverage the fact that the composition of high school classmates (peers), within school-cohort and teacher-group, was not chosen by the students and it was as good as random. We find that male students graduating from classes with at least 80% of male peers were more likely to choose Òprevalently maleÓ (PM) college majors (Economics, Business and Engineering). However, this higher propensity to enroll in PM majors faded away during college (through transfers and attrition) so that men from classes with at least 80% of male peers in high school did not have higher probability of graduating in PM majors. They had instead worse college performance and did not exhibit any difference in income or labor market outcomes after college. We do not find significant effects on women.
    Keywords: Peer effects, high school, gender, choice of college major, academic performance, wages
    Date: 2015–07
  11. By: Elizabeth U. Cascio; Ayushi Narayan
    Abstract: Over the past decade, a technological breakthrough – hydraulic fracturing or “fracking” – has fueled a boom in oil and natural gas extraction by reaching shale reserves inaccessible through conventional technologies. We explore the educational response to fracking, taking advantage of the timing of its widespread introduction and the spatial variation in shale oil and gas reserves. We show that local labor demand shocks from fracking have been biased toward low-skilled labor and males, reducing the return to high school completion among men. We also show that fracking has increased high school dropout rates of male teens, both overall and relative to females. Our estimates imply that, absent fracking, the male-female gap in high school dropout rates among 17- to 18-year-olds would have narrowed by about 11% between 2000 and 2013 instead of remaining unchanged. Our estimates also imply an elasticity of high school completion with respect to the return to high school of 0.47, a figure below historical estimates. Explanations for our findings aside from fracking’s low-skill bias – changes in school inputs, population demographics, and resource prices – receive less empirical support.
    JEL: I20 J2 J3 O33 Q33 R23
    Date: 2015–07
  12. By: Limbach, Peter; Schmid, Markus; Scholz, Meik
    Abstract: This paper studies the trade-off between the benefits (e.g., experience, learning) and costs (e.g., CEO-firm mismatch, entrenchment) that arise over a CEO’s time in office. We find that CEO tenure exhibits an inverted U-shaped relation with firm value, profitability, and M&A announcement returns. Results stand various robustness tests including alternative explanations and CEO-firm fixed effects. For the average S&P 1500 firm the costs of tenure start to outweigh the benefits after about 12 years. Optimal CEO tenure, however, varies significantly depending on a firm’s economic environment that determines the cost-benefit relation of tenure. Results from sudden deaths, used to address endogeneity, confirm that high-tenure CEOs reduce shareholder value. While this study suggests that frequent CEO turnover can be valuable, it does not support a one-size-fits-all policy of CEO term limits.
    Keywords: CEO term limits, economic environment, firm value, mergers and acquisitions
    JEL: G30 G34 J24
    Date: 2015–07
  13. By: Baert, Stijn (Ghent University); Rotsaert, Olivier (Ghent University); Verhaest, Dieter (KU Leuven); Omey, Eddy (Ghent University)
    Abstract: We investigate the impact of student work experience on later hiring chances. To completely rule out potential endogeneity, we present a field experiment in which various forms of student work experience are randomly disclosed by more than 1000 fictitious graduates applying for jobs in Belgium. Theoretical mechanisms are investigated by estimating heterogeneous treatment effects by the relevance and timing of revealed student work experience. We find that neither form of student work experience enhances initial recruitment decisions. For a number of candidate subgroups (by education level and occupation type), even an adverse effect is found.
    Keywords: student employment, transitions in youth, human capital, signaling, randomised field experiments
    JEL: J24 I21 D83 C93
    Date: 2015–07
  14. By: Goldschmidt, Deborah (Boston University); Schmieder, Johannes F. (Boston University)
    Abstract: The nature of the relationship between employers and employees has been changing over the last decades, with firms increasingly relying on contractors, temp agencies and franchises rather than hiring employees directly. We investigate the impact of this transformation on the wage structure by following jobs that are moved outside of the boundary of lead employers to contracting firms. For this end we develop a new method for identifying outsourcing of food, cleaning, security and logistics services in administrative data using the universe of social security records in Germany. We document a dramatic growth of domestic outsourcing in Germany since the early 1990s. Event-study analyses show that wages in outsourced jobs fall by approximately 10-15% relative to similar jobs that are not outsourced. We find evidence that the wage losses associated with outsourcing stem from a loss of firm-specific rents, suggesting that labor cost savings are an important reason why firms choose to contract out these services. Finally, we tie the increase in outsourcing activity to broader changes in the German wage structure, in particular showing that outsourcing of cleaning, security and logistics services alone accounts for around 10 percent of the increase in German wage inequality since the 1980s.
    Keywords: inequality, wage structure, contracting-out, outsourcing, wage premia
    JEL: J31 D22
    Date: 2015–07
  15. By: Askenazy, Philippe (Paris School of Economics); Erhel, Christine (University of Paris 1 Panthéon-Sorbonne)
    Abstract: Since 2008, France experiences a sharp productivity slowdown. Both output per hour and total factor productivity are particularly deceptive in the market economy. This recent trend contrasts with the acceleration of productivity during the previous crisis in the 1990's and the continuous increase during the following decade. This text provides the first comprehensive exploration of this puzzling break. The direct impacts of the Great Recession on industry composition or reallocation of capital are not significant suspects for a slowdown occurring across business activities. Labour market mechanisms are better candidates. On the one hand, the French labour market policy has massively boosted the creation of low-productive jobs including very-short term employees and self-employed workers. On the other hand, firms, which benefit from massive tax cuts, have hoarded their high-skilled workforce. In addition, the spread of innovative HRM incentives, e.g. employee shareholding, seems to have turned productivity more sensitive to the business cycle (and especially to the fall of stock markets).
    Keywords: productivity slowdown, France, labour market policies, recession
    JEL: O40 J20 D20 E24
    Date: 2015–07
  16. By: Itzik Fadlon; Torben Heien Nielsen
    Abstract: This paper studies how households respond to severe health shocks and the insurance role of spousal labor supply. In the empirical part of the paper, we provide new evidence on individuals' labor supply responses to spousal health and mortality shocks. Analyzing administrative data on over 500,000 Danish households in which a spouse dies, we find that survivors immediately increase their labor supply and that this effect is entirely driven by those who experience significant income losses due to the shock. Notably, widows – who experience large income losses when their husbands die – increase their labor force participation by more than 11%, while widowers – who are significantly more financially stable – decrease their labor supply. In contrast, studying over 70,000 households in which a spouse experiences a severe health shock but survives – for whom income losses are well-insured in our setting – we find no economically significant spousal labor supply responses, suggesting adequate insurance coverage for morbidity (vs. mortality) shocks. In the theoretical part of the paper, we develop a method for welfare analysis of social insurance using only spousal labor supply responses. In particular, we show that the labor supply responses of spouses fully identify the welfare gains from insuring households against health and mortality shocks. Our findings imply large welfare gains from transfers to survivors and identify efficient ways for targeting government transfers.
    JEL: H0 I1 J1 J2
    Date: 2015–07
  17. By: Clark, Andrew E. (Paris School of Economics); Senik, Claudia (Paris School of Economics); Yamada, Katsunori (Kindai University)
    Abstract: While there is now something of a consensus in the literature on the economics of happiness that income comparisons to others help determine subjective wellbeing, debate continues over the relative importance of own and reference-group income, in particular in research on the Easterlin paradox. The variety of results in this domain have produced some scepticism regarding happiness analysis, and in particular with respect to the measurement of reference-group income. We here use data from an original Internet survey in Japan to compare the results from happiness regressions to those from hypothetical-choice experiments. The trade-off between own and others' income (showing the importance of absolute and relative income) is similar in these two sets of results. This kind of validation of experienced utility via direct comparison with decision utility remains rare in this literature.
    Keywords: satisfaction, income comparisons, reference-group income, discrete-choice experiments
    JEL: D31 D63 I3 J31
    Date: 2015–07
  18. By: Bagues, Manuel F. (Aalto University); Sylos-Labini, Mauro (University of Pisa); Zinovyeva, Natalia (Aalto University)
    Abstract: An increasing number of countries are introducing gender quotas in scientific committees. We analyze how a larger presence of female evaluators affects committee decision-making using information on 100,000 applications to associate and full professorships in all academic disciplines in two countries, Italy and Spain. These applications were assessed by 8,000 evaluators who were selected through a random draw. A larger number of women in evaluation committees does not increase either the quantity or the quality of female candidates who qualify. If anything, when evaluators' are not familiar with candidates' research area, gender-mixed committees tend to be less favorable towards female candidates than all-male committees, with the exception of evaluations to full professorships in Spain. Data from 300,000 individual voting reports suggests that men become less favorable towards female candidates as soon as a woman joins the committee.
    Keywords: scientific committees, gender discrimination, randomized natural experiment
    JEL: J71 J16
    Date: 2015–07
  19. By: Bassanini, Andrea (OECD)
    Abstract: There is evidence that pro-competitive reforms in an industry with large incumbents induce the latter to re-organise and reduce prices in an attempt to deter entry of new competitors. Using data for three broadly-defined network industries in 23 OECD countries and covering over 30 years, I show that such re-organization has sizable negative short-term effects on industry employment. The employment losses, which last at least 3 years, are larger when reforms are implemented during downturns and insignificant when they take place in upturns. These findings contrast with previous evidence that deregulation in retail distribution has no (or even positive) short-term employment effects. This discrepancy is likely driven by the much larger employment share of small incumbents, with no margins of efficiency improvement, in retail than in network industries (as well as many other industries). Evidence on the immediate effect of removing entry barriers on industry prices and productivity is consistent with the hypothesis that the initial contraction of industry employment is the result of incumbents re-organising and downsizing before the entry of new competitors.
    Keywords: barriers to entry, structural reforms, job destruction, short-term costs, optimal timing of reforms
    JEL: J23 L11
    Date: 2015–07

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