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

  1. Long-term Direct and Spillover Effects of Job Training: Experimental Evidence from Colombia By Adriana Kugler; Maurice Kugler; Juan Saavedra; Luis Omar Herrera Prada
  2. Is It Harder for Older Workers to Find Jobs? New and Improved Evidence from a Field Experiment By David Neumark; Ian Burn; Patrick Button
  3. The Pros and Cons of Sick Pay Schemes: Testing for Contagious Presenteeism and Shirking Behavior By Stefan Pichler; Nicolas Ziebarth
  4. The Analysis of Field Choice in College and Graduate School: Determinants and Wage Effects By Joseph G. Altonji; Peter Arcidiacono; Arnaud Maurel
  5. Selection and Specialization in the Evolution of Marriage Earnings Gaps By Chinhui Juhn; Kristin McCue
  6. A New Measure of College Quality to Study the Effects of College Sector and Peers on Degree Attainment By Jonathan Smith; Kevin Stange
  7. Lies, Discrimination, and Internalized Racism: Findings from the lab. By David, Wozniak; Tim, MacNeill
  8. “Bilingual Schooling and Earnings: Evidence from a Language-in-Education reform” By Lorenzo Cappellari; Antonio di-Paolo
  9. Collective Labour Supply, Taxes, and Intrahousehold Allocation: An Empirical Approach By Bloemen, Hans
  10. The Promise and Potential of Linked Employer-Employee Data for Entrepreneurship Research By Christopher Goetz; Henry Hyatt; Erika McEntarfer; Kristin Sandusky
  11. A Racial Inequality Trap By Badel, Alejandro
  12. Do Employer Pension Contributions Reflect Employee Preferences? Evidence from a Retirement Savings Reform in Denmark By Itzik Fadlon; Jessica A. Laird; Torben Heien Nielsen
  13. Intended College Attendance: Evidence from an Experiment on College Returns and Cost By Bleemer, Zachary; Zafar, Basit
  14. Optimal Fiscal Policy with Labor Selection By Sanjay K. Chugh; Wolfgang Lechthalerz; Christian Merkl
  15. Local Instruments, Global Extrapolation: External Validity of the Labor Supply-Fertility Local Average Treatment Effect By James Bisbee; Rajeev Dehejia; Cristian Pop-Eleches; Cyrus Samii
  16. Firm-Size Wage Gaps along the Formal-Informal Divide: Theory and Evidence By Balkan, Binnur; Tumen, Semih
  17. Discrimination and Worker Evaluation By Costas Cavounidis; Kevin Lang
  18. Minimum Wages and Spatial Equilibrium: Theory and Evidence By Monras, Joan
  19. The Impact of Part-Time Work on Firm Total Factor Productivity: Evidence from Italy By Devicienti, Francesco; Grinza, Elena; Vannoni, Davide
  20. Resource curse avoidance: Governmental intervention and wage formation in the Norwegian petroleum sector By Jan Morten Dyrstad

  1. By: Adriana Kugler; Maurice Kugler; Juan Saavedra; Luis Omar Herrera Prada
    Abstract: We use administrative data to examine medium and long-term formal education and labor market impacts among participants and family members of a randomized vocational training program for disadvantaged youth in Colombia. In the Colombian program, vocational training and formal education are complementary investments: relative to non-participants, randomly selected participants are more likely to complete secondary school and to attend and persist in tertiary education eight years after random assignment. Complementarity is strongest among applicants with high baseline educational attainment. Training also has educational spillover effects on participants’ family members, who are more likely to enroll in tertiary education. Between three and eight years after randomization, participants are more likely to enter and remain in formal employment, and have formal sector earnings that are at least 11 percent higher than those of non-participants.
    JEL: J24 J38 J6 O17 O54
    Date: 2015–10
  2. By: David Neumark; Ian Burn; Patrick Button
    Abstract: We design and implement a large-scale field experiment – a resume correspondence study – to address a number of potential limitations of existing field experiments testing for age discrimination, which may bias their results. One limitation that may bias these studies towards finding discrimination is the practice of giving older and younger applicants similar experience in the job to which they are applying, to make them “otherwise comparable.” The second limitation arises because greater unobserved differences in human capital investment of older applicants may bias existing field experiments against finding age discrimination. We also study ages closer to retirement than in past studies, and use a richer set of job profiles for older workers to test for differences associated with transitions to less demanding jobs (“bridge jobs”) at older ages. Based on evidence from over 40,000 job applications, we find robust evidence of age discrimination in hiring against older women. But we find that there is considerably less evidence of age discrimination against men after correcting for the potential biases this study addresses.
    JEL: J14 J26 J7 K31
    Date: 2015–10
  3. By: Stefan Pichler; Nicolas Ziebarth
    Abstract: This paper proposes a test for the existence and degree of contagious presenteeism and negative externalities in sickness insurance schemes. First, we theoretically decompose moral hazard into shirking and contagious presenteeism behavior and derive testable conditions. Then, we implement the test exploiting German sick pay reforms and administrative industry-level data on certiï¬ed sick leave by diagnoses. The labor supply adjustment for contagious diseases is signiï¬cantly smaller than for non-contagious diseases. Lastly, using Google Flu data and the staggered implementation of US sick leave reforms, we show that flu rates decrease after employees gain access to paid sick leave.
    Keywords: sickness insurance, paid sick leave, presenteeism, contagious diseases, infections, negative externalities, shirking, US, Germany
    JEL: I12 I13 I18 J22 J28 J32
    Date: 2015–10
  4. By: Joseph G. Altonji; Peter Arcidiacono; Arnaud Maurel
    Abstract: As the workforce has become more educated, educational decisions are no longer just about whether to acquire more, but rather what type of education to pursue. In college, individuals somewhat specialize through their choice of college major. Further specialization occurs in graduate school. This chapter investigates how majors and graduate school affect labor market outcomes as well as how the individuals make these potentially important decisions. To do so, we develop a dynamic model of educational decision-making. In light of the model, we examine the estimation issues associated with obtaining causal effects of educational choices on earnings. We then examine ways that authors have overcome the selection problem as well as the approaches authors have taken to estimate the process by which these educational decisions are made.
    JEL: I23 J24
    Date: 2015–10
  5. By: Chinhui Juhn; Kristin McCue
    Abstract: We examine changes in marriage and earnings patterns across four cohorts born between 1936 and 1975, using data from a series of Survey of Income and Program Participation panels linked to administrative data on earnings. We find that for both men and women, marriage has become increasingly positively associated with education and earnings potential. We compare ordinary least squares (OLS) and fixed effect (FE) estimates of the earnings differential associated with marriage. We find that the marriage earnings gap fell for women in fixed-effect estimates implying that the impact of specialization has diminished over time. We also find that increasingly positive selection into marriage means that OLS estimates overstate the reduction in the marriage earnings gap. While our findings imply that marriage is no longer associated with lower earnings among women without minor children in our most recent cohort, the motherhood gap remains large. Among men, we find that the marriage premium actually increases for more recent birth cohorts in fixed-effects regressions.
    JEL: J12 J16 J22 J31
    Date: 2015–10
  6. By: Jonathan Smith; Kevin Stange
    Abstract: Students starting at a two-year college are much less likely to graduate with a college degree than similar students who start at a four-year college but the sources of this attainment gap are largely unexplained. In this paper we simultaneously investigate the attainment consequences of sector choice and peer quality among over 3 million recent high school graduates. This analysis is enabled by data on all PSAT test-takers between 2004 and 2006 from which we develop a novel measure of peer ability for most two-year and four-year colleges in the United States- the average PSAT of enrolled students. We document substantial variation in average peer quality at two-year colleges across and within states and non-trivial overlap across sectors, neither of which has previously been documented. We find that half the gap in bachelor’s attainment rates between students who start at two-year versus four-year institutions is explained by differences in peers, leaving room for structural barriers to transferring between institutions to also play an important role. Also, having better peers is associated with higher attainment in both sectors, though its effects are quite a bit larger in the four-year sector. Thus, the allocation of students between and within sectors, some of which is driven by state policy decisions, has important consequences for the educational attainment of the nation’s workforce.
    JEL: I21 I23
    Date: 2015–10
  7. By: David, Wozniak; Tim, MacNeill
    Abstract: We simulate a job application/hiring market in the lab to examine racial discrimination. We find little evidence of ability differences based on race but we find taste-based racism between groups and statistical racism within groups. When candidates are given the opportunity to lie about their abilities, all groups discriminate against Blacks, suggesting statistical discrimination. But Whites continue to discriminate against Blacks when actual abilities of the candidate are known, suggesting taste-based discrimination. In contrast to the bulk of studies that attempt to establish racism in general as either a taste-based or statistical, our design allows us to show that the type of discrimination can depend on the personal characteristics of the discriminating individual along with the contextual information available.
    Keywords: Discrimination, Experiment, Racism, Signalling, Screening
    JEL: C9 C90 D0 J71
    Date: 2015–10–25
  8. By: Lorenzo Cappellari (Universitá Cattolica Milano); Antonio di-Paolo (Faculty of Economics, 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 classification: J24, J25, I28.
    Date: 2015–10
  9. By: Bloemen, Hans (VU University Amsterdam)
    Abstract: Most empirical studies of the impact of labour income taxation on the labour supply behaviour of households use a unitary modelling approach. In this paper we empirically analyze income taxation and the choice of working hours by combining the collective approach for household behaviour and the discrete hours choice framework with fixed costs of work. We identify the sharing rule parameters with data on working hours of both the husband and the wife within a couple. Parameter estimates are used to evaluate various model outcomes, like the wage elasticities of labour supply and the impacts of wage changes on the intrahousehold allocation of income. We also simulate the consequences of a policy change in the tax system. We find that the collective model has different empirical outcomes of income sharing than a restricted model that imposes income pooling. In particular, a specification with income pooling fails to capture asymmetries in the income sharing across spouses. These differences in outcomes have consequences for the evaluation of policy changes in the tax system and shed light on the effectiveness of certain policies.
    Keywords: labour supply, household behaviour and family economics, intrahousehold allocation, taxation, model construction and estimation
    JEL: J22 D1 D13 H24 C51
    Date: 2015–10
  10. By: Christopher Goetz; Henry Hyatt; Erika McEntarfer; Kristin Sandusky
    Abstract: In this paper, we highlight the potential for linked employer-employee data to be used in entrepreneurship research, describing new data on business start-ups, their founders and early employees, and providing examples of how they can be used in entrepreneurship research. Linked employer-employee data provides a unique perspective on new business creation by combining information on the business, workforce, and individual. By combining data on both workers and firms, linked data can investigate many questions that owner-level or firm-level data cannot easily answer alone - such as composition of the workforce at start-ups and their role in explaining business dynamics, the flow of workers across new and established firms, and the employment paths of the business owners themselves.
    JEL: J21 L26
    Date: 2015–10
  11. By: Badel, Alejandro (Federal Reserve Bank of St. Louis)
    Abstract: Why has the U.S. black/white earnings gap remained around 40 percent for nearly 40 years? This paper''s answer consists of a model of skill accumulation and neighborhood formation featuring a trap: Initial racial inequality and racial preferences induce racial segregation and asymmetric skill accumulation choices that perpetuate racial inequality. Calibrated to match the U.S. distribution of race, house prices and earnings across neighborhoods, the model produces one-half of the observed racial earnings gap. Moving the economy from the trap to a racially integrated steady state implies a 15.6 percent welfare gain for black households and a 2.7 percent loss for white households.
    Keywords: Racial Inequality; Neighborhood Externalities; Human Capital; Segregation; Incomplete Markets; Earnings Inequality
    JEL: E24 J15 J24 O18
    Date: 2015–09–11
  12. By: Itzik Fadlon; Jessica A. Laird; Torben Heien Nielsen
    Abstract: This paper studies how firms set contributions to employer-provided 401(k)-type pension plans. Using a reform that decreased the subsidy for contributions to capital pension accounts for Danish workers in the top income tax bracket, we provide strong evidence that employers' contributions are based on their employees' savings preferences. We find an immediate decrease in employer contributions to capital accounts, whose magnitude increased in the share of employees directly affected by the reform. This response was large relative to average employee responses within private IRA-type plans and was accompanied by a similar-magnitude shift of employer contributions to annuity accounts.
    JEL: J30 J32 J33
    Date: 2015–10
  13. By: Bleemer, Zachary (University of California, Berkeley); Zafar, Basit (Federal Reserve Bank of New York)
    Abstract: Despite a robust college premium, college attendance rates in the US have remained stagnant and exhibit a substantial socioeconomic gradient. We focus on information gaps – specifically, incomplete information about college benefits and costs – as a potential explanation for these patterns. For this purpose, we conduct an information experiment about college returns and costs embedded within a representative survey of US household heads. We show that, at the baseline, perceptions of college costs and benefits are severely and systematically biased: 75 percent of our respondents underestimate college returns (defined as average earnings of a college graduate relative to a non-college worker in the population), while 61 percent report net public college costs that exceed actual net costs. There is also substantial heterogeneity in beliefs, with evidence of larger biases among lower-income and non-college households. We also elicit respondents' intended likelihood of their pre-college age child attending college, and the likelihood of them recommending college for a friend's child, the two main behavioral outcomes of interest. Respondents are then randomly exposed to one of two information treatments, which respectively provide objective information about "college returns" and "college costs". We find a significant impact on intended college attendance for individuals in the returns experiment: intended college attendance expectations increase by about 0.2 of the standard deviation in the baseline likelihood. Importantly, as a result of the college returns information intervention, gaps in intended college attendance by household income or parents' education persist but decline by 20-30 percent. Notably, the effect of information persists in the medium-term, two months after the intervention. We, however, find no impact of the cost information treatment on college attendance expectations.
    Keywords: college enrollment, college returns and costs, information, subjective expectations
    JEL: D81 D83 D84 I21 I24 I28
    Date: 2015–10
  14. By: Sanjay K. Chugh (Boston College); Wolfgang Lechthalerz (Kiel Institute for the World Economy); Christian Merkl (Friedrich-Alexander-University Erlangen-Nuremberg)
    Abstract: This paper characterizes long-run and short-run optimal fiscal policy in the labor selection framework. Quantitatively, the time-series volatility of the labor income tax rate is orders of magnitude larger than the "tax-smoothing" results based on Walrasian labor markets, but is a few times smaller than the results based on search and matching labor markets. To understand these results in terms of model primitives, we develop a welfare-relevant analytic concept of externalities for the selection model, which we label "tightness." This concept of tightness is the source of the decentralized economy's inefficient cross-sectional wage premia between the average newly-hired worker and the marginal newly-hired worker. Compared to the traditional concept of labor-market tightness in the search and matching literature, this new concept of tightness plays a highly similar role, and, like in the matching model, is crucial for understanding efficiency and optimal policy.
    Keywords: labor market frictions, hiring costs, efficiency, optimal taxation, labor wedge, zero intertemporal distortions
    JEL: E24 E32 E50 E62 E63 J20
    Date: 2015–10–25
  15. By: James Bisbee; Rajeev Dehejia; Cristian Pop-Eleches; Cyrus Samii
    Abstract: We investigate whether local average treatment effects (LATE’s) can be extrapolated to new settings. We extend the analysis and framework of Dehejia, Pop-Eleches, and Samii (2015), which examines the external validity of the Angrist-Evans (1998) reduced-form natural experiment of having two first children of the same sex on the probability of an incremental child and on mother’s labor supply. We estimate Angrist and Evans's (1998) same-sex instrumental variable strategy in 139 country-year censuses using data from the Integrated Public Use Micro Sample International. We compare each country-year's LATE, as a hypothetical target, to the LATE extrapolated from other country-years (using the approach suggested by Angrist and Fernandez-Val 2010). Paralleling our findings in Dehejia, Pop-Eleches, and Samii (2015), we find that with a sufficiently large reference sample, we extrapolate the treatment effect reasonably well, but the degree of accuracy depends on the extent of covariate similarity between the target and reference settings. Our results suggest that – at least for our application – there is hope for external validity.
    JEL: C26 J01 J1 J13 J22
    Date: 2015–10
  16. By: Balkan, Binnur (Central Bank of Turkey); Tumen, Semih (Central Bank of Turkey)
    Abstract: Observationally equivalent workers are paid higher wages in larger firms. This fact is often named as the "firm-size wage gap" and is regarded as a key empirical puzzle. Using micro-level data from Turkey, we document a new stylized fact: the firm-size wage gap is more pronounced for informal (unregistered) jobs than for formal (registered) jobs. To explain this fact, we develop a two-stage wage-posting game with market imperfections and segmented markets, the solution to which produces wages as a function of firm size in a well-defined subgame-perfect equilibrium. The model proposes two explanations. First, taxes on formal employment generate a wedge between formal and informal size wage gaps. Thus, government policy can potentially affect the magnitude of the firm-size wage gaps. The second explanation features a market-based framework with strategic interactions. Relative to small firms, large firms typically post higher wages for both formal and informal jobs they open. A high-wage formal job attracts a larger pool of applicants than a high-wage informal job. The larger pool of applicants for the formal job, in turn, allows the firm to somewhat lower the initial wage offer, while this second-round effect is negligible for informal jobs. As a result, size differentials are lower in formal jobs than informal jobs. We argue that the observed patterns in the use of social connections in job search and heterogeneity in job preferences can be used to justify the validity of this second mechanism.
    Keywords: subgame perfection, wage posting, informal job, wage gap, firm size, taxes, social networks
    JEL: C78 J21 J31 L11
    Date: 2015–10
  17. By: Costas Cavounidis; Kevin Lang
    Abstract: We develop a model of self-sustaining discrimination in wages, coupled with higher unemployment and shorter employment duration among blacks. While white workers are hired and retained indefinitely without monitoring, black workers are monitored and fired if a negative signal is received. The fired workers, who return to the pool of job-seekers, lower the average productivity of black job-seekers, perpetuating the cycle of lower wages and discriminatory monitoring. Under suitable parameter values the model has two steady states, one corresponding to each population group. Discrimination can persist even if the productivity of blacks exceeds that of whites.
    JEL: J71
    Date: 2015–10
  18. By: Monras, Joan (Sciences Po, Paris)
    Abstract: Often, minimum wage laws are decided at the state or regional level, and even when not, federal level increases are only binding in certain states. This has been used in previous literature to evaluate the effects of minimum wages on earnings and employment levels. This paper introduces a spatial equilibrium model to think about the seemingly conflicting findings of this previous literature. The model shows that the introduction of minimum wages can lead to an increase or a decrease in population depending on the local labor demand elasticity and on how unemployment benefits are financed. The paper provides empirical evidence consistent with the model. On average, increases in minimum wages lead to increases in average wages and decreases in employment. The low-skilled local labor demand elasticity is estimated to be above 1, which in the model is a necessary condition for the migration responses found in the data. Low-skilled workers, who are presumably the target of the policy, tend to leave or avoid moving to the regions that increase minimum wages.
    Keywords: minimum wages, spatial equilibrium, internal migration
    JEL: J38
    Date: 2015–10
  19. By: Devicienti, Francesco (University of Turin); Grinza, Elena (University of Turin); Vannoni, Davide (University of Turin)
    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
  20. By: Jan Morten Dyrstad (Department of Economics, Norwegian University of Science and Technology)
    Abstract: A likely channel for Dutch disease turning a presumably blessing resource windfall into a curse, is the wage formation process. By utilizing the shift from decentralized and uncoordinated wage bargaining in the Norwegian petroleum sector to co-ordinated bargaining, this paper analyzes the effectiveness of a governmental intervention aimed at preventing the extraordinary petroleum wage inflation to become detrimental to the economy. The empirical analysis shows that the intervention was successful as insider weights and insider hysteresis effects were effectively reduced, and that the system of coordinated wage bargaining was re-established. The principal conclusion is that institutions and institutional setting play a crucial role in avoiding adverse economic development.
    Keywords: Resource curse, Wage formation, Insider-outsider forces
    JEL: O43 J31 J38
    Date: 2015–10–15

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