nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2015‒11‒15
nine papers chosen by
Joseph Marchand
University of Alberta

  1. Labor Market Policies and Self-Employment Transitions of Older Workers By Dimitris Christelis; Raquel Fonseca Benito
  2. Educational Mismatches and Earnings in the New Zealand Labor Market By Yeo, Jian Z.; Maani, Sholeh A.
  3. The Impact of Part-Time Work on Firm Total Factor Productivity: Evidence from Italy By Francesco Devicienti; Elena Grinza; Davide Vannoni
  4. Do Payroll Taxes in the United States Create Bunching at Kink Points? By David Powell
  5. The impact of changing youth employment patterns on future wages By Umkehrer, Matthias
  6. Gender and the Effect of Working Hours on Firm-Sponsored Training By Picchio, Matteo; van Ours, Jan C.
  7. A Theory of Intra-Firm Group Design By Tumen, Semih
  8. Real Wage Cyclicality in the Eurozone Before and During the Great Recession: Evidence from Micro Data By Verdugo, Gregory
  9. Pension Reform in Public Higher Education By Hyatt, James A.

  1. By: Dimitris Christelis; Raquel Fonseca Benito
    Abstract: We study transitions in and out of self-employment of older individuals using internationally comparable survey data from 13 OECD countries. We compute selfemployment transitions as conditional probabilities arising from a discrete choice panel data model. We examine the influence on self-employment transitions of labor market policies and institutional factors (employment protection legislation, spending on employment and early retirement incentives, unemployment benefits, strength of the rule of law), as well as individual characteristics like physical and mental health. Selfemployment is strongly affected by government policies: larger expenditures on employment incentives impact it positively, while the opposite is true for expenditures on early retirement and unemployment benefits.
    Keywords: self-employment, transitions, ageing, labor policies, panel,
    JEL: J21 J24 C4
    Date: 2015–11–04
  2. By: Yeo, Jian Z. (University of Auckland); Maani, Sholeh A. (University of Auckland)
    Abstract: Mismatch of educational skills in the labor market is an emerging topic in the field of labor economics, partly due to its link to labor productivity. This is the first application of this question to New Zealand data. In this paper we examine the incidence of educational mismatch and its earnings effects. Using micro data drawn from the Household Labour Force Survey and the New Zealand Income Supplement (HLFS/NZIS) for the years 2004 to 2007, we find a noteworthy incidence of both over‐ and under-education. We also find that earnings returns to required years of education exceed the returns with over‐and under‐education, with a greater earnings penalty associated with under‐education. We test hypotheses on three alternative models of educational mismatch and find support for the assignment model of job allocations. We further examine results stratified by age group and for the native‐born and immigrants, and find that our results are robust across these groups.
    Keywords: over‐education, under‐education, educational mismatch, wage effects, productivity
    JEL: J24 J31
    Date: 2015–11
  3. By: Francesco Devicienti; Elena Grinza; Davide Vannoni
    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. [2006]'s 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
  4. By: David Powell (RAND)
    Abstract: Much of the literature on labor supply responsiveness to taxes studies the effects of payroll and income taxes together, usually using income tax changes to identify effects. There is less research on how individuals respond to payroll taxes specifically. Given the salience of the payroll tax relative to other income taxes, it is possible that taxpayers respond differentially than income tax elasticities may suggest. Using data from the Social Security Administration, I exploit two recent short-term changes in payroll taxes to study whether labor earnings responded. The Making Work Pay Tax Credit reduced the payroll tax by 6.2 percentage points up to $6,451 ($12,903 for couples) of earnings in 2009 and 2010. I test for bunching at this kink. In 2011, payroll taxes were reduced by 2 percentage points, changing the incentives to bunch at the taxable earnings maximum. While many papers on bunching must make assumptions on the distribution of earnings in the absence of taxes, an advantage of studying changes in payroll taxes is that it is possible to observe the distribution in different years under different tax regimes. I find evidence of bunching induced by the payroll tax changes. I estimate a tax elasticity of labor earnings of 0.08 at the taxable earnings maximum, suggests that policy proposals to raise or eliminate the payroll tax cap should consider labor supply behavioral responses to this policy. I also estimate larger responsiveness to the Making Work Pay Tax Credit.
    Date: 2015–09
  5. By: Umkehrer, Matthias (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany])
    Abstract: This study examines employment patterns on the labor market for German apprenticeship graduates and returns to early-career employment stability over the past four decades. The data indicate the decreasing stability of youth employment since the late 1980s. Exploiting variation in the timing of macroeconomic shocks, I identify true state dependencies and find that stable employment early in professional life exhibits significant wage returns in future periods. These returns are particularly pronounced at the bottom of the wage distribution and have substantially increased during the 1990s. Accordingly, securing the training-to- work transitions would primarily be beneficial for the wage growth of workers with a generally low earning potential.
    JEL: C20 J21 J31
    Date: 2015–11–04
  6. By: Picchio, Matteo (Università Politecnica delle Marche, Ancona); van Ours, Jan C. (Tilburg University)
    Abstract: Using employees' longitudinal data, we study the effect of working hours on the propensity of firms to sponsor training of their employees. We show that, whereas male part-time workers are less likely to receive training than male full-timers, part-time working women are as likely to receive training as full-time working women. Although we cannot rule out gender-working time specific monopsony power, we speculate that the gender-specific effect of working hours on training has to do with gender-specific stereotyping. In the Netherlands, for women it is common to work part-time. More than half of the prime age female employees work part-time. Therefore, because of social norms, men working part-time could send a different signal to their employer than women working part-time. This might generate a different propensity of firms to sponsor training of male part-timers than female part-timers.
    Keywords: part-time employment, working hours, firm-sponsored training, gender, human capital
    JEL: C33 C35 J24 M51 M53
    Date: 2015–11
  7. By: Tumen, Semih (Central Bank of Turkey)
    Abstract: I develop an intra-firm theory of group design and teamwork in the presence of peer effects. The purpose is to understand the interlinkages between intra-firm group formation and the extent of wage dispersion within the firm. Given a set of heterogeneous workers, the manager faces the challenge of allocating workers into endogenous groups (or teams) to maximize total profits. The optimal allocation features locational proximity between workers with similar productivity levels. I discuss the implications of this allocation on intra-firm wage outcomes. The main idea is that the wage paid to a single worker is determined by the productivity levels of the teammates as well as the worker's own productivity. This means that team composition is critical to understanding the within-firm productivity and wage differentials. I show that intra-firm wage dispersion is more pronounced when workers are more alike within each team and more different across the teams. I provide numerical exercises designed to illustrate how the model's predictions change as the key parameters are varied. One striking result is that a rise in the correlation between education and productivity (this can be interpreted as hiring workers with vocational education) leads to a decline in wage inequality within the firm. I also show that changes in the dispersion of worker efficiency lead to non-monotonic effects on within-firm wage inequality.
    Keywords: group design, peer effects in the workplace, within-firm pay differences, sorting, selectivity
    JEL: J31 L22 L23 M51 M52
    Date: 2015–11
  8. By: Verdugo, Gregory (Université Paris 1 Panthéon-Sorbonne)
    Abstract: We study the response of real wages to the business cycle in eight major Eurozone countries before and during the Great Recession. Average real wages are found to be acyclical, but this reflects, in large part, the effect of changes in the composition of the labour force related to unemployment variations over the cycle. Using longitudinal micro data from the ECHP and SILC panels to control for composition effects, we estimate the elasticities of real wage growth to unemployment increases between −0.6 and −1 over the period 1994-2011. Composition effects have been particularly large since 2008, and they explain most of the stagnation or increase in the average wage observed in some countries from 2008 to 2011. In contrast, at a constant labour force composition in terms of education and experience, the figures indicate a significant decrease in average wages during the downturn, particularly in countries most affected by the crisis. Overall, there is no evidence of downward nominal wage rigidity during the Great recession in most countries in our sample.
    Keywords: wage cyclicality, wage rigidity, Great Recession, Eurozone
    JEL: J30 E32
    Date: 2015–11
  9. By: Hyatt, James A.
    Keywords: Education, Higher Education, pension reform
    Date: 2015–11–10

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