nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2015‒08‒30
twenty-two papers chosen by
Joseph Marchand
University of Alberta

  1. The Labour Market Effects of Academic and Vocational Education over the Life Cycle: Evidence from Two British Cohorts By Brunello, Giorgio; Rocco, Lorenzo
  2. The Effect of Income on Mortality – New Evidence for the Absence of a Causal Link By Alexander Ahammer; G. Thomas Horvath; Rudolf Winter-Ebmer
  3. Minimum wage through the looking glass By Kenn Ariga
  4. The Growing Importance of Social Skills in the Labor Market By David J. Deming
  5. How Does Occupational Access for Older Workers Differ by Education? By Matthew S. Rutledge; Steven A. Sass; Jorge D. Ramos-Mercado
  6. People and Machines: A Look at the Evolving Relationship Between Capital and Skill In Manufacturing 1860-1930 Using Immigration Shocks By Jeanne Lafortune; José Tessada; Ethan Lewis
  7. Time Use and Productivity: The Wage Returns to Sleep By Matthew Gibson; Jeffrey Shrader
  8. Wage Compression within the Firm By Leonardi, Marco; Pellizzari, Michele; Tabasso, Domenico
  9. Finance and Growth at the Firm Level: Evidence from SBA Loans By Brown, J. David; Earle, John S.
  10. Entrepreneurship, human capital, and labor demand: A story of signaling and matching By Bublitz, Elisabeth; Nielsen, Kristian; Noseleit, Florian; Timmermans, Bram
  11. Making Summer Matter: The Impact of Youth Employment on Academic Performance By Amy Ellen Schwartz; Jacob Leos-Urbel; Matthew Wiswall
  12. The Pleasures and Pains of Self-Employment: A Panel Data Analysis of Satisfaction with Life, Work, and Leisure By Peter van der Zwan; Jolanda Hessels; Cornelius A. Rietveld
  13. Cognitive Skills, Non-Cognitive Skills, and Family Background: Evidence from Sibling Correlations By Anger, Silke; Schnitzlein, Daniel D.
  14. Can Policy Facilitate Partial Retirement? Evidence from Germany By Berg, Peter B.; Hamman, Mary K.; Piszczek, Matthew; Ruhm, Christopher J.
  15. Inequality when effort matters By Martin Ravallion
  16. Why Work More? The Impact of Taxes, and Culture of Leisure on Labor Supply in Europe By Mocan, Naci; Pogorelova, Luiza
  17. A Detailed Decomposition Analysis of the Public-Private Sector Wage Gap in South Africa By Kwenda, Prudence; Benhura, Miracle
  18. The Taxation of Superstars By Scheuer, Florian; Werning, Iván
  19. Measuring the Impacts of Teachers: Response to Rothstein (2014) By Chetty, Raj; Friedman, John; Rockoff, Jonah
  20. Effects of the 2001 Extension of Paid Parental Leave Provisions on Birth Seasonality in Canada By Compton, Janice; Tedds, Lindsay
  21. The Effect of Health Insurance on Workers' Compensation Filing: Evidence from the Affordable Care Act's Age-Based Threshold for Dependent Coverage By Marcus Dillender
  22. How Bad is Involuntary Part-time Work? By Daniel Borowczyk-Martins; Etienne Lalé

  1. By: Brunello, Giorgio (University of Padova); Rocco, Lorenzo (University of Padova)
    Abstract: Several commentators have argued that vocational education provides a smoother school to work transition than academic education. In the long - run, however, the skills it provides depreciate faster and individuals with this type of education are less capable of adapting to technical change. Because of this, its short – term advantages trade off with expected long-term disadvantages in terms of employment, wages or both. Using two UK cohort studies, that allow us to follow individuals for at least 16 years in the labour market, we investigate whether this view has empirical support. For employment, our results indicate that the initial advantage associated to vocational education declines over time, without turning however into a disadvantage at later ages. For real net wages, the picture is more nuanced, with results that vary by cohort and educational level. Overall, our evidence suggests that vocational education is associated to lower expected long-term utility only for the younger cohort with higher (post-secondary) education. We further distinguish between dominant and non-dominant vocational education to account for the different bundles of skills held by individuals, and find that those with a more balanced bundle tend to have higher expected long-term earnings.
    Keywords: vocational, academic education, UK
    JEL: J31
    Date: 2015–08
  2. 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
  3. By: Kenn Ariga (Institute of Economic Research, Kyoto University)
    Abstract: We investigate impacts of two major increases in minimum wage of Thailand in 2012, and 2013. In spite of the large increase in average wage induced by the hike, the e¤ect on employment is positive. Given that roughly 40% of daily wage samples are less than the minimum, we build and estimate a model that incorpo- rate (minimum wage) compliance decision. We use the switching regressions to estimate the gap in wages between above and below minimum wage. This gap is sizable and statistically signi…cant for daily wage, but small and statistically insigni…cant for monthly wage. When the employer's probability for compliance is included in the employment probability of individuals, we …nd that the higher compliance rate positively in- fluence the employment probability. These …ndings strongly suggest that the minimum wage hike in 2012~13 induced north-eastward shift of the equilibrium along the labor supply schedule. In the last part of the analysis, we o¤er a va- riety of circumstantial evidence in support of tacit collusion among large scale employers in setting daily wages.
    Keywords: minimum wage, minimum wage compliance, Thailand
    JEL: J31 J38 J42
    Date: 2015–08
  4. By: David J. Deming
    Abstract: The slow growth of high-paying jobs in the U.S. since 2000 and rapid advances in computer technology have sparked fears that human labor will eventually be rendered obsolete. Yet while computers perform cognitive tasks of rapidly increasing complexity, simple human interaction has proven difficult to automate. In this paper, I show that the labor market increasingly rewards social skills. Since 1980, jobs with high social skill requirements have experienced greater relative growth throughout the wage distribution. Moreover, employment and wage growth has been strongest in jobs that require high levels of both cognitive skill and social skill. To understand these patterns, I develop a model of team production where workers “trade tasks” to exploit their comparative advantage. In the model, social skills reduce coordination costs, allowing workers to specialize and trade more efficiently. The model generates predictions about sorting and the relative returns to skill across occupations, which I test and confirm using data from the NLSY79. The female advantage in social skills may have played some role in the narrowing of gender gaps in labor market outcomes since 1980.
    JEL: J24 J31
    Date: 2015–08
  5. By: Matthew S. Rutledge; Steven A. Sass; Jorge D. Ramos-Mercado
    Abstract: Changing jobs after age 50 has become increasingly common. To assess the employment opportunities available to these job-changers, this study examines how the range of occupations in which they find jobs narrows as they age and whether this pattern differs by socioeconomic status, using education as a proxy. The results indicate that workers in their early 50s who change jobs find employment in a reasonably similar set of occupations as do prime-age workers but that the opportunities increasingly narrow as they enter their late 50s and early 60s. These results vary by educational attainment. Interestingly, while job opportunities narrow as workers age, the number of opportunities available to older workers at any given age has improved significantly between the late 1990s and early 2010s – though the gains have gone primarily to better-educated older workers. Consistent with previous research, the study also finds: 1) employer policies that emphasize employee training, respect for seniority, and “hiring from within” create barriers to the hiring of older job-seekers; 2) older workers are less likely to be hired in jobs requiring strong cognitive skills; but 3) physical demands and adverse working conditions are not serious impediments.
    Date: 2015–08
  6. By: Jeanne Lafortune; José Tessada; Ethan Lewis
    Abstract: This paper estimates the elasticity of substitution between capital and skill using variation across U.S. counties in immigration-induced skill mix changes between 1860 and 1930. We find that capital began as a q-complement for skilled and unskilled workers, and then dramatically increased its relative complementary with skilled workers around 1890. Simulations of a parametric production function calibrated to our estimates imply the level of capital-skill complementarity after 1890 likely allowed the U.S. economy to absorb the large wave of less-skilled immigration with a modest decline in less-skilled relative wages. This would not have been possible under the older production technology.
    JEL: J24 N61 O33
    Date: 2015–07
  7. By: Matthew Gibson (Williams College); Jeffrey Shrader (University of California-San Diego)
    Abstract: We investigate the productivity effects of the single largest use of time - sleep. Using time use diaries from the United States, we demonstrate that later sunset time reduces worker sleep and wages. Sunset time one hour later decreases short-run wages by 0.5% and long-run wages by 4.5%. After investigating this relationship and ruling out alternative hypotheses, we implement an instrumental variables specification that provides the first causal estimates of the impact of sleep on wages. A one-hour increase in average weekly sleep increases wages by 1.5% in the short run and by 4.9% in the long run.
    JEL: J22 J24 J31
    Date: 2015–08
  8. By: Leonardi, Marco (University of California, Berkeley); Pellizzari, Michele (University of Geneva); Tabasso, Domenico (University of Geneva)
    Abstract: We study the distributional effect of a wage indexation mechanism - the Scala Mobile (SM) - that heavily compressed the distribution of Italian wages during the 1970s and 1980s. The SM imposed large real wage increases at the bottom of the distribution and was essentially irrelevant for high-wage workers. We document that this mechanism triggered a strong redistribution within the firm. Skilled workers received lower wage adjustments when employed at firms with many unskilled workers and they tended to move towards more skill-intensive firms. We rationalize these findings with a simplified model of intra-firm bargaining with on-the- job search.
    Keywords: labor market institutions, wage indexation, inequality, intra-firm bargaining
    JEL: J01 J31 J50
    Date: 2015–08
  9. By: Brown, J. David (U.S. Census Bureau); Earle, John S. (George Mason University)
    Abstract: We analyze linked databases on all Small Business Administration (SBA) loans, on all SBA lenders, and on all U.S. employers to estimate the effects of financial access on employment growth. Our methods combine regressions with matching on firm age, size, industry, year, and employment history, and with instrumental variables capturing ease of access to SBA lenders. The estimation results imply an increase of 3-4 jobs for each million dollars of loans, suggesting that credit constraints impede small business growth prior to loan receipt. We also investigate the variation in estimated employment effects for the SBA 504 versus 7(a) programs, and with respect to the business cycle, local credit conditions, and within-county versus non-SBA county-industry control firms. Finally, for loans issued over the 1992-2007 period, we estimate total job creation of 1.0-2.1 million and the government's cost per job of $8,200-$18,000 measured five years after the loan year.
    Keywords: finance, financial access, loans, employment, growth, small business administration, small business finance
    JEL: D04 G21 G28 H32 H81 J23 L53
    Date: 2015–08
  10. By: Bublitz, Elisabeth; Nielsen, Kristian; Noseleit, Florian; Timmermans, Bram
    Abstract: Contrary to employees, there is no clear evidence that entrepreneurs' education positively effects income. In this study we propose that entrepreneurs can benefit from their education as a signal during the recruitment process of employees. This process is then assumed to follow a matching of equals among equals. Using rich data from Germany and Denmark we fully confirm a matching on qualification levels for high-skilled employees, partially for medium-skilled employees but not for low-skilled employees, suggesting that as skill levels of employees decrease it becomes equally probable that they work for different founders. Founder qualification is the most reliable predictor of recruitment choices over time. Our findings are robust to numerous control variables as well as across industries and firm age.
    Keywords: returns to education,labor demand of small firms,human capital,matching,signaling
    JEL: J23 J24 J21
    Date: 2015
  11. By: Amy Ellen Schwartz; Jacob Leos-Urbel; Matthew Wiswall
    Abstract: Holding a summer job is a rite of passage in American adolescence, a first rung towards adulthood and self-sufficiency. Summer youth employment has the potential to benefit high school students’ educational outcomes and employment trajectories, especially for low-income youth. This paper examines New York City’s Summer Youth Employment Program (SYEP). SYEP provides jobs to youth ages 14-24, and due to high demand for summer jobs, allocates slots through a random lottery system. We match student-level data from the SYEP program with educational records from the NYC Department of Education, and use the random lottery to estimate the effects of SYEP participation on a number of academic outcomes, including test taking and performance. We find that SYEP participation has positive impacts on student academic outcomes, and these effects are particularly large for students who participate in SYEP multiple times. These findings suggest substantial heterogeneity in program effects, and an important avenue for policy makers to target the program to those who might benefit from it the most.
    JEL: I2 J24 J38
    Date: 2015–08
  12. By: Peter van der Zwan (Erasmus University Rotterdam, the Netherlands); Jolanda Hessels (Erasmus University Rotterdam, the Netherlands); Cornelius A. Rietveld (Erasmus University Rotterdam, the Netherlands)
    Abstract: We investigate how a transition from paid employment to self-employment in the labor market influences life satisfaction. Furthermore, we consider the dynamics of work and leisure satisfaction because the balance between work and leisure is an important element of life satisfaction. Fixed-effects regressions using German Socio-Economic Panel data (1984-2012) reveal that switching to self-employment benefits life and work satisfaction. The effects on life satisfaction are weak and temporary, but they are pronounced and relatively persistent for work satisfaction. However, the gain in work satisfaction is outweighed by a decrease in leisure satisfaction, thus placing work-life balance under severe pressure.
    Keywords: Self-employment; Entrepreneurship; Life satisfaction; Work satisfaction; Work-life balance
    JEL: I31 J24 J28 J31 L26
    Date: 2015–08–18
  13. By: Anger, Silke; Schnitzlein, Daniel D.
    Abstract: This paper estimates sibling correlations in cognitive and non-cognitive skills to evaluate the importance of family background for skill formation. Based on a large representative German dataset including IQ test scores and measures of non-cognitive skills, a restricted maximum likelihood model indicates substantial influences of family background on skill formation. Sibling correlations in non-cognitive skills range from 0.223 to 0.464; therefore, at least one-fifth of the variance in these skills results from sibling-related factors. Sibling correlations in cognitive skills are higher than 0.50; therefore, more than half of the inequality in cognition can be explained by family background. Comparing these findings with those in the intergenerational skill transmission literature suggests that intergenerational correlations capture only part of the influence of family on children's cognitive and non-cognitive skills, as confirmed by decomposition analyses and in line with previous findings on educational and income mobility.
    Keywords: Sibling correlations, family background, non-cognitive skills, cognitive skills, intergenerational mobility
    JEL: J24 J62
    Date: 2015–07
  14. By: Berg, Peter B. (Michigan State University); Hamman, Mary K. (University of Wisconsin, La Crosse); Piszczek, Matthew (University of Wisconsin, Oshkosh); Ruhm, Christopher J. (University of Virginia)
    Abstract: In 1996, Germany introduced the Altersteilzeit (ATZ) law, which encouraged longer working lives through partial retirement incentives. Using matched pension system and establishment survey data, we estimate changes in part-time employment and retirement after ATZ. We find the policy induced growth in part-time work for men and extended men's expected duration of employment by 1.8 years. As the policy evolved to include an abrupt retirement option, the worklife gain for men fell to 1.2 years. Among women, part-time employment grew less and employment duration changed little initially but later declined by 0.2 years when abrupt retirement became available.
    Keywords: partial retirement, Germany
    JEL: J26
    Date: 2015–08
  15. By: Martin Ravallion (Georgetown University and NBER, U.S.A.)
    Abstract: It is sometimes argued that poorer people choose to work less, implying less welfare inequality than suggested by observed incomes. Social policies have also acknowledged that efforts differ, and that people respond to incentives. Prevailing measures of inequality (in outcomes or opportunities) do not, however, measure incomes consistently with personal choices of effort. The direction of bias is unclear given the heterogeneity in efforts and preferences. Data on the labor supplies of single American adults suggest that adjusting for effort imposing common preferences attenuates inequality, although the effect is small. Allowing for preference heterogeneity consistently with behavior suggests higher inequality.
    Keywords: income, welfare, inequality, poverty, effort, labor supply.
    JEL: D31 D63
    Date: 2015–07
  16. By: Mocan, Naci (Louisiana State University); Pogorelova, Luiza (Louisiana State University)
    Abstract: We use micro data from the European Social Survey to investigate the impact of “culture of leisure” and taxes on labor force participation and hours worked of second-generation immigrants who reside in 26 European countries. These individuals are born in Europe, and they have been exposed to institutional, legal and labor market structures of their countries, including the tax rates. Fathers of these individuals are first-generation immigrants who migrated from 81 different countries. We construct measures of "taste for leisure" in the country of origin of each immigrant father. We employ average and marginal taxes for each country of residence, and control for a large set of individual characteristics, in addition to attributes of the country of residence and country of ancestry. The results show that for women, both taxes and culture of leisure impact participation and hours worked. For men, taxes influence labor supply both at the intensive and the extensive margins, but culture of leisure has no impact.
    Keywords: tax, labor supply, leisure, immigrant, culture, origin
    JEL: J22 Z1
    Date: 2015–08
  17. By: Kwenda, Prudence (University of the Witwatersrand, Johannesburg); Benhura, Miracle (University of the Witwatersrand, Johannesburg)
    Abstract: The present study examines the public-private sector wage gap in South Africa using individual cross section data for 2000-7. Results from unconditional quantile regressions and generalised Oaxaca-Blinder type decompositions show that the wage gap is inverted-U shaped across the wage distribution. The 'composition' effect is more important than the 'price' effect at the bottom of the distribution while the opposite applies at the top. Key factors underpinning the 'composition' effect are unionisation, industry of employment and education, while those associated with the 'price' effect are education, race and occupation.
    Keywords: public sector, wage gap, recentered influence function, decomposition
    JEL: C21 J31 J45
    Date: 2015–08
  18. By: Scheuer, Florian; Werning, Iván
    Abstract: How are optimal taxes affected by the presence of superstar phenomena at the top of the earnings distribution? To answer this question, we extend the Mirrlees model to incorporate an assignment problem in the labor market that generates superstar effects. Perhaps surprisingly, rather than providing a rationale for higher taxes, we show that superstar effects provide a force for lower marginal taxes, conditional on the observed distribution of earnings. Superstar effects make the earnings schedule convex, which increases the responsiveness of individual earnings to tax changes. We show that various common elasticity measures are not sufficient statistics and must be adjusted upwards in optimal tax formulas. Finally, we study a comparative static that does not keep the observed earnings distribution fixed: when superstar technologies are introduced, inequality increases but we obtain a neutrality result, finding tax rates at the top unaltered.
    Keywords: Earnings Elasticities; Inequality; Optimal Taxation; Sufficient Statistics; Superstar Effects
    JEL: D3 D5 D6 D8 E6 H2 J2 J3
    Date: 2015–08
  19. By: Chetty, Raj; Friedman, John; Rockoff, Jonah
    Abstract: Using data from North Carolina, Jesse Rothstein (2014) presents a comprehensive replication of Chetty, Friedman, and Rockoff's [CFR] (2014a,b) results on teachers' impacts. In addition, Rothstein presents new evidence that he argues raises concerns about three aspects of CFR's methods and identification assumptions: their treatment of missing data, the validity of their quasi-experimental design, and their method of controlling for observables when estimating teachers' long-term effects. In this paper, we show that Rothstein's methodological critiques are not valid by replicating his new empirical findings using simulated data in which none of CFR's identification assumptions are violated. We also present supplementary empirical evidence from our data supporting the assumptions required for CFR's original analyses. Together, these results show that: (1) Rothstein's technique for imputing teacher VA for teachers with missing data generates bias, while subsamples with no missing data yield estimates of forecast bias similar to CFR's baseline results; (2) his proposed prior score \placebo test" rejects valid quasiexperimental research designs, and the correlation between changes in prior test scores and current teacher value-added he documents is an artifact of estimating teacher value-added using prior test score data; and (3) his method of controlling for covariates yields inconsistent estimates of teachers' long-term effects, while quasi-experimental designs that do not rely on controls for observables yield estimates of teachers' long-term impacts similar to CFR's baseline results. We conclude that Rothstein's important replication study is entirely consistent with – and in fact reinforces – CFR's methods and results. Our conclusions match those of Bacher-Hicks, Kane, and Staiger (2014), who replicate both CFR's results and Rothstein's findings using data from Los Angeles and also conclude that Rothstein's results raise no concerns about CFR's analysis.
    Keywords: education policy; teacher effects; value-added models
    JEL: H52 I28 J01
    Date: 2015–08
  20. By: Compton, Janice; Tedds, Lindsay
    Abstract: It is well known that there exists a strong seasonal pattern in births and that the pattern differs across geographic regions. While historically this seasonal pattern has been linked to exogenous factors, modern birth seasonality patterns can also be explained by purposive choice. If birth month of a child is at least partially chosen by the parents then, by extension, it can also be expected that this can be influenced by anything that changes the costs and benefits associated with that choice, including public policy. This paper explores the effect that the 2001 extension of paid parental leave benefits had on birth seasonality in Canada. Overall we find strong results that the pattern of birth seasonality in Canada changed after 2001, with a notable fall in spring births and an increase in late summer and early fall births. We discuss the potential effects of this unintended consequence, including those related to health and development, educational preparedness and outcomes, and econometric modelling.
    Keywords: birth seasonality, policy determinants, parental leave, Canada
    JEL: H30 J13 J38
    Date: 2015–08–25
  21. By: Marcus Dillender (W.E. Upjohn Institute for Employment Research)
    Abstract: This paper identifies the effect of health insurance on workers' compensation (WC) filing for young adults by implementing a regression discontinuity design using WC medical claims data from Texas. The results suggest health insurance factors into the decision to have WC pay for discretionary care. The implied instrumental variables estimates suggest a 10 percentage point decrease in health insurance coverage increases WC bills by 15.3 percent. Despite the large impact of health insurance on the number of WC bills, the additional cost to WC at age 26 appears to be small as most of the increase comes from small bills.
    Keywords: Workers’ compensation, Moral hazard, Health insurance, Affordable Care Act
    JEL: I13 J32 J38
    Date: 2015–07
  22. By: Daniel Borowczyk-Martins; Etienne Lalé
    Abstract: Using data from the Current Population Survey, we document that separations from full-time employment account for the bulk of the variation in involuntary part-time work, and that since the Great Recession full-time workers are at a greater risk of working part-time involuntarily than being unemployed. We quantify the effects of a higher incidence of involuntary part-time work by means of an incomplete-market search model, wherein short spells of involuntary part-time employment can have long-lasting negative effects on consumption. Our model predicts significant welfare losses under the assumption that public insurance is provided in unemployment but not in involuntary part-time work.
    Keywords: Employment, Involuntary part-time work, Welfare, Great Recession.
    JEL: E21 E32 J21
    Date: 2015–08–19

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