nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2015‒10‒25
twelve papers chosen by
Joseph Marchand
University of Alberta

  1. Gradual Retirement, Financial Incentives, and Labour Supply of Older Workers: Evidence from a Stated Preference Analysis By Elsayed, Ahmed; de Grip, Andries; Fouarge, Didier; Montizaan, Raymond
  2. Bilingual Schooling and Earnings: Evidence from a Language-in-Education Reform By Cappellari, Lorenzo; Di Paolo, Antonio
  3. Be smart, live long: the relationship between cognitive and non-cognitive abilities and mortality By Öhman, Mattias
  4. More effort with less pay: On information avoidance, belief design and performance By Huck, Steffen; Szech, Nora; Wenner, Lukas M.
  5. Beyond Qualifications: Returns to Cognitive and Socio-Emotional Skills in Colombia By Acosta, Pablo A.; Muller, Noel; Sarzosa, Miguel
  6. Brain Types and Wages By Drydakis, Nick
  7. Temporary Employment, Demand Volatility and Unions: Firm-Level Evidence By Devicienti, Francesco; Naticchioni, Paolo; Ricci, Andrea
  8. Financial incentives and labor market duality. By C. Berson; N. Ferrari
  9. The Carrot and the Stick: The Business Cycle Implications of Incentive Pay in the Labor Search Model By Julien Champagne
  10. Offshoring and skill-upgrading in French manufacturing: A Heckscher-Ohlin-Melitz view By Juan Carluccio; Alejandro Cuñat; Harald Fadinger; Christian Fons-Rosen
  11. The Impact of Part-Time Work on Firm Total Factor Productivity: Evidence from Italy By Francesco Devicienti; Elena Grinza; Davide Vannoni
  12. The Subversive Nature of Inequality: Subjective Inequality Perceptions and Attitudes to Social Inequality By Kuhn, Andreas

  1. By: Elsayed, Ahmed (IZA); de Grip, Andries (ROA, Maastricht University); Fouarge, Didier (ROA, Maastricht University); Montizaan, Raymond (ROA, Maastricht University)
    Abstract: Using data from a stated preferences experiment in the Netherlands, we find that replacing full-time pension schemes with schemes that offer gradual retirement opportunities induce workers to retire one year later on average. Total life-time labour supply, however, decreases with 3.4 months because the positive effect of delayed retirement on labour supply is cancelled out by the reduction in working hours before full retirement. The impact of gradual retirement schemes is, however, heterogeneous across groups of workers. Workers with non-routine job tasks retire at a later age when they can gradually retire. Financial incentives, either in terms of changing pension income or the price of leisure, also affect the expected retirement age, but the impact of these financial incentives does not differ with the possibility of gradual retirement. Finally, we find that gradual retirement is not a preferred option among workers as the large majority still prefers full retirement. This especially holds for workers with a lower wage and those with higher life expectancy.
    Keywords: gradual retirement, labour supply, financial incentives
    JEL: J14 J26
    Date: 2015–10
  2. By: Cappellari, Lorenzo (Università Cattolica del Sacro Cuore); Di Paolo, Antonio (University of Barcelona)
    Abstract: We exploit the 1983 language-in-education reform that introduced Catalan alongside Spanish as medium of instruction in Catalan schools to estimate the labour market value of bilingual education. Identification is achieved in a difference-in-differences framework exploiting variation in exposure to the reform across years of schooling and years of birth. We find positive wage returns to bilingual education and no effects on employment, hours of work or occupation. Results are robust to education-cohort specific trends or selection into schooling and are mainly stemming from exposure at compulsory education. We show that the effect worked through increased Catalan proficiency for Spanish speakers and that there were also positive effects for Catalan speakers from families with low education. These findings are consistent with human capital effects rather than with more efficient job search or reduced discrimination. Exploiting the heterogeneous effects of the reform as an instrument for proficiency we find sizeable earnings effects of skills in Catalan.
    Keywords: bilingual education, returns to schooling, language-in-education reform, Catalonia
    JEL: J24 J31 I28
    Date: 2015–10
  3. By: Öhman, Mattias (Department of Economics, Uppsala University)
    Abstract: I study the association between cognitive and non-cognitive abilities and mortality, and investigate how well income and education act as proxy measures for ability. The risk of premature mortality is estimated using Cox proportional hazard models with a dataset of 692,303 Swedish men aged 18-20 years, enlisted between the years 1969-1983, and deaths between the years 1969 and 2009. Results suggest that both cognitive and non-cognitive abilities are strongly associated with mortality, independently and through income and education. Non-cognitive ability is a stronger predictor of the risk of mortality than cognitive ability. For middle and high income earners, and individuals with a college education, there are no associations between the abilities and mortality. However, for low income earners and individuals without a college education, cognitive and non-cognitive ability have strong associations with mortality. Results are mainly driven by the bottom of the measured ability distributions.
    Keywords: Cognitive ability; non-cognitive ability; mortality; education; income
    JEL: I12 J24
    Date: 2015–09–30
  4. By: Huck, Steffen; Szech, Nora; Wenner, Lukas M.
    Abstract: In a tedious real effort task, subjects know that their piece rate is either low or ten times higher. When subjects are informed about their piece rate realization, they adapt their performance. One third of subjects nevertheless forego this instrumental information when given the choice - and perform stunningly well. Agents who are uninformed regarding their piece rate tend to outperform all others, even those who know that their piece rate is high. This also holds for enforced instead of self-selected information avoidance. All our findings can be captured by a model of optimally distorted expectations following Brunnermeier and Parker (2005).
    Keywords: Optimal Expectations,Belief Design,Performance,Real Effort Task,Coarse Incentive Structures,Workplace Incentives
    JEL: D83 D84 J31 M52
    Date: 2015
  5. By: Acosta, Pablo A. (World Bank); Muller, Noel (World Bank); Sarzosa, Miguel (University of Maryland)
    Abstract: This paper examines the relationship between individuals' skills and labor market outcomes for the working-age population of Colombia's urban areas. Using a 2012 unique household survey, the paper finds that cognitive skills (aptitudes to perform mental tasks such as comprehension or reasoning) and socio-emotional skills (personality traits and behaviors) matter for favorable labor market outcomes in the Colombian context, although they have distinct roles. Cognitive skills are greatly associated with higher earnings and holding a formal job or a high-qualified occupation. By contrast, socio-emotional skills appear to have little direct influence on these outcomes, but play a stronger role in labor market participation. Both types of skills, especially cognitive skills, are largely associated with pursuing tertiary education. The analysis applies standard econometric techniques as a benchmark and structural estimations to correct for the measurement error of skill constructs.
    Keywords: returns to skills, cognitive skills, socio-emotional skills, personality traits, latent skills, unobserved heterogeneity, labor market outcomes, Colombia
    JEL: J24 J31 I24
    Date: 2015–10
  6. By: Drydakis, Nick (Anglia Ruskin University)
    Abstract: We examine the association between brain types and wages using the UK Behavioural Study dataset for the period 2011 to 2013 (four waves). By applying Empathising-Systemising Theory (E-S), the estimations suggest that, for men and women, systemising traits are associated with higher wage returns than empathising traits and that a Type-S brain (also known as a Male-brain, entailing greater skills in directing systems) is associated with higher wage rewards than a Type-E brain (also known as a Female-brain, entailing more social skills). In addition, wage decompositions suggest that systemising traits can explain greater differences in the assigned gender wage gap compared to empathising traits. Interestingly, the estimations suggest that the wage returns of empathising and systemising traits vary by occupation and that each trait might provide an absolute wage-return advantage in certain occupations. Whilst men and women in certain occupations might face positive wage rewards when they have empathising and systemising traits and work atypical of those common to their gender, it would appear that evaluating individuals' empathising, systemising and brain type is perceived to be important for employees' wage returns.
    Keywords: brain-type, empathising-systemising theory, segregation, wages, wage-gap
    JEL: J24 J31
    Date: 2015–10
  7. By: Devicienti, Francesco (University of Turin); Naticchioni, Paolo (University of Rome 3); Ricci, Andrea (ISFOL)
    Abstract: This paper investigates the effect of workplace unionization and product market volatility on firms' propensity to use temporary employment. Using Italian firm level data, we show that unionization and volatility have a positive impact on the share of temporary contracts. However, as volatility increases the union effect becomes negative, suggesting that in a highly volatile economic environment unions may be concerned about the weakening of their bargaining power associated with an extensive use of temporary workers. Furthermore, these effects are at work only for the use of non-training temporary contracts, while training temporary contracts are not affected by unions, volatility and their interplay. We argue that this occurs because non-training temporary contracts can be used by firms as a buffer stock to cope with uncertainty and by unions to protect insiders, while training temporary contracts are more likely to be used as a screening device for future permanent positions.
    Keywords: product demand volatility, training, temporary workers, unions, firms
    JEL: J51 J23 J24
    Date: 2015–10
  8. By: C. Berson; N. Ferrari
    Abstract: In coordination with the ECB and 24 other national central banks of the European Union, the Banque de France interrogated 1150 French firms to understand how the crisis affected their economic environment and their human resources practices during the 2010-2013 period. A majority of workers were employed by firms which indicate that their activity was mostly affected by a decrease in demand considered as long-lasting by more than 40% of them, especially in the construction sector and among small firms. In contrast, less than 20% of firms (weighted by their employment) report that the unavailability of credit had an effect on their activity. Over the period, despite the economic downturn, the amount of total costs increased for 70% of firms (weighted by their employment) mainly through an increase in labour costs and secondly in the cost of supplies. In particular, base wages continued to increase for a large share of firms, suggesting strong downward wage rigidities. Many firms indicate substantial difficulties in adjusting the labour force: throughout the crisis it became more difficult to hire qualified employees, to adjust working hours or to move workers to different job positions. The joint presence of difficulties in finding employees and unemployment growth suggest that structural unemployment increased in France in recent years. Other factors considered as significantly constraining for employment growth by a large majority of firms are uncertainty about economic conditions, risks that labour laws are changed, high payroll taxes and firing costs.
    Keywords: Duality, public policies.
    JEL: J41 J42 J48
    Date: 2015
  9. By: Julien Champagne
    Abstract: This paper considers a real business cycle model with labor search frictions where two types of incentive pay are explicitly introduced following the insights from the micro literature on performance pay (e.g. Lazear, 1986). While in both schemes workers and firms negotiate ahead of time-t information, the object of the negotiation is different. The first scheme is called an “efficiency wage,” since it follows closely the intuition of the shirking model by Shapiro and Stiglitz (1984), while the second is called a “performancepay” wage, since the negotiation occurs over a wage schedule that links the worker’s wage to the worker’s output. The key feature here is that the worker can then adjust the level of effort (i.e. performance) provided in any period. I simulate a shift toward performance-pay contracts as experienced by the U.S. labor market to assess whether it can account simultaneously for two documented business cycle phenomena: the increase in relative wage volatility and the Great Moderation. While the model yields higher wage volatility when performance pay is more pervasive in the economy, it produces higher volatility of output and higher procyclicality of wages, two results counterfactual to what the U.S. economy has experienced during the Great Moderation. These results pose a challenge to the idea that higher wage flexibility through an increase in performance-pay schemes can account for business cycle statistics observed over the past 30 years.
    Keywords: Business fluctuations and cycles; Labour markets
    JEL: E24 J33 J41
    Date: 2015
  10. By: Juan Carluccio; Alejandro Cuñat; Harald Fadinger; Christian Fons-Rosen
    Abstract: We present a factor-proportions trade model in which heterogeneous firms can offshore intermediate inputs subject to fixed offshoring costs. In the skill-abundant country, high- productivity firms offshore a larger range of labor-intensive inputs to the labor-abundant countries than low-productivity firms. Differently from the traditional versions of factor- proportions trade theory, Heckscher-Ohlin forces operate at the within-industry level, leading to endogenous variation in skill intensity across firms that is positively correlated with firm productivity. Using French firm-level data for the years 1996 to 2007, we provide empirical support for the factor proportions channel through which offshoring to labor-abundant countries affects the firm-level skill intensities of French manufacturers.
    Keywords: offshoring, heterogeneous firms, firm-level factor intensities, Heckscher-Ohlin
    JEL: F11 F12 F14
    Date: 2015–09
  11. By: Francesco Devicienti (Department of Economics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino, Italy); Elena Grinza (Department of Economics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino, Italy); Davide Vannoni (Department of Economics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino, Italy)
    Abstract: In this paper, we explore the impact of part-time work on firm productivity. Using a large panel data set of Italian corporations’ balance sheets for the period 2000-2010, we first estimate the total factor productivity (TFP) of each firm for each year. We use different approaches aimed at solving input simultaneity, including a version of Ackerberg et al.’s (2006) control function approach, which accounts for firm fixed effects. We then match the TFP estimates with rich information on the firms’ use of part-time work obtained from survey data and estimate the impact of part-time work on TFP at the firm level. We find that an increase of 1 standard deviation in the part-time share reduces TFP by 2.03%. The results suggest that this harmful effect stems from horizontal rather than vertical part-time arrangements. We also find that firms declaring that they use part-time work to accommodate workers’ requests suffer the most. Moreover, we show that the so-called ‘flexible’ and ‘elastic’ clauses are successful in reducing the negative impact associated with part-time work.
    Keywords: Part-time work, Horizontal and vertical part-time contracts, Flexible and elastic clauses, Firm total factor productivity (TFP), Semiparametric estimation methods.
    JEL: L23 L25 J23
    Date: 2015–10
  12. By: Kuhn, Andreas (Swiss Federal Institute for Vocational Education and Training)
    Abstract: This paper shows that higher levels of perceived wage inequality are associated with a weaker (stronger) belief into meritocratic (non-meritocratic) principles as being important in determining individual wages. This finding is robust to the use of an instrumental-variable estimation strategy which takes the potential issue of reverse causality into account, and it is further corroborated using various complementary measures of individuals' perception of the chances and risks associated with an unequal distribution of economic resources, such as their perception of the chances of upward mobility. I finally show that those individuals perceiving a high level of wage inequality also tend to be more supportive of redistributive policies and progressive taxation, and that they tend to favor the political left, suggesting a feedback effect of inequality perceptions into the political-economic sphere. Taken together, these findings suggest that high levels of perceived wage inequality have the potential to undermine the legitimacy of market outcomes.
    Keywords: inequality perceptions, attitudes to social inequality, support of redistribution, legitimacy of market outcomes, beliefs about the causes of economic success, political preferences
    JEL: D31 D63 J31
    Date: 2015–10

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