nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2015‒12‒28
24 papers chosen by
Joseph Marchand
University of Alberta

  1. The Relationship between Establishment Training and the Retention of Older Workers: Evidence from Germany By Peter B. Berg; Mary K. Hamman; Matthew M. Piszczek; Christopher J. Ruhm
  2. Mismatch of Talent Evidence on Match Quality, Entry Wages, and Job Mobility By Fredriksson, Peter; Hensvik, Lena; Nordström Skans, Oskar
  3. In Search of Ideas: Technological Innovation and Executive Pay Inequality By Carola Frydman; Dimitris Papanikolaou
  4. Changes in the Return to Skills and the Variance of Unobserved Ability By Guido Matías Cortés; Manuel Hidalgo-Pérez
  5. Where Has All The Skewness Gone? The Decline In High-Growth (Young) Firms In The U.S. By Ryan A. Decker; John Haltiwanger; Ron S. Jarmin; Javier Miranda
  6. Wage Dispersion and Search Behavior By Robert E. Hall; Andreas I. Mueller
  7. The Labor Market Effects of a Refugee Wave: Applying the Synthetic Control Method to the Mariel Boatlift By Giovanni Peri; Vasil Yasenov
  8. Discretion in Hiring By Mitchell Hoffman; Lisa B. Kahn; Danielle Li
  9. Happy Birthday, You’re Fired! The Effects of an Age-Dependent Minimum Wage on Youth Employment Flows in the Netherlands By Jan Kabátek
  10. Work Incentives in the Social Security Disability Benefit Formula By Gopi Shah Goda; John B. Shoven; Sita Slavov
  11. Optimal Income Taxation with Unemployment and Wage Responses: A Sufficient Statistics Approach By Kory Kroft; Kavan J. Kucko; Etienne Lehmann; Johannes F. Schmieder
  12. It’s About Time: Effects of the Affordable Care Act Dependent Coverage Mandate On Time Use By Gregory Colman; Dhaval Dave
  13. The Effect of Wealth on Individual and Household Labor Supply: Evidence from Swedish Lotteries By David Cesarini; Erik Lindqvist; Matthew J. Notowidigdo; Robert Östling
  14. The Impact of 'A - Day' on Executive Pensions and Pay for Performance By Damon Morris; Ian Gregory-Smith; Brian Main; Alberto Montagnoli; Peter Wright
  15. Productivity and Organization in Portuguese Firms By Lorenzo Caliendo; Giordano Mion; Luca David Opromolla; Esteban Rossi-Hansberg
  16. Leveraging Lotteries for School Value-Added: Testing and Estimation By Joshua Angrist; Peter Hull; Parag A. Pathak; Christopher Walters
  17. Customer-Labor Substitution: Evidence from Gasoline Stations By Emek Basker; Lucia Foster; Shawn Klimek
  18. The impact of educational mismatches on wages: The influence of measurement error and unobserved heterogeneity By SELLAMI, Sana; VERHAEST, Dieter; NONNEMAN, Walter; VAN THIER, Walter
  19. The Option Value of Human Capital: Higher Education and Wage Inequality By Sang Yoon Lee; Yongseok Shin; Donghoon Lee
  20. Economic Gains for U.S. States from Educational Reform By Eric A. Hanushek; Jens Ruhose; Ludger Woessmann
  21. Paid Family Leave, Fathers’ Leave-Taking, and Leave-Sharing in Dual-Earner Households By Ann Bartel; Maya Rossin-Slater; Christopher Ruhm; Jenna Stearns; Jane Waldfogel
  22. Trade Shocks, Firm Hierarchies and Wage Inequality By Benjamin Friedrich
  23. Learning Entrepreneurship From Other Entrepreneurs? By Luigi Guiso; Luigi Pistaferri; Fabiano Schivardi
  24. Job Creation, Small vs. Large vs. Young, and the SBA By J. David Brown; John S. Earle; Yana Morgulis

  1. By: Peter B. Berg; Mary K. Hamman; Matthew M. Piszczek; Christopher J. Ruhm
    Abstract: In the coming years, a substantial portion of Germany’s workforce will retire, making it difficult for businesses to meet human capital needs. Training older workers may be a successful strategy for managing this demographic transition. This study examines relationships between establishment training programs, wages, and retirement among older men and women. Using unique matched establishment-employee data from Germany, the authors find that when establishments offer special training programs targeted at older workers, women—and especially lower wage women—are less likely to retire. Results suggest this relationship may be due to greater wage growth. For men, findings suggest establishment offer of inclusion in standard training programs may improve retention of low wage men, but analysis of pre-existing differences in establishment retirement patterns suggests this relationship may not be causal. Our research suggests targeted training programs likely play an important role in retaining and advancing careers of low wage older women.
    JEL: J15 J18 J2 J21 J24 J26
    Date: 2015–11
  2. By: Fredriksson, Peter (Stockholm University, UCLS, IZA, and IFAU); Hensvik, Lena (Institute for Evaluation of Labour Market and Education Policy (IFAU), Uppsala Center for Labor Studies (UCLS), and CESifo); Nordström Skans, Oskar (Uppsala University, UCLS, IFAU and IZA)
    Abstract: We examine the direct impact of idiosyncratic match quality on entry wages and job mobility using unique data on worker talents matched to job-indicators and individual wages. Tenured workers are clustered in jobs with high job-specific returns to their types of talents. We therefore measure mismatch by how well the types of talents of recent hires correspond to the talents of tenured workers performing the same jobs. A stylized model shows that match quality has a smaller impact on entry wages but a larger impact on separations and future wage growth if matches are formed under limited information. Empirically, we find such patterns for inexperienced workers and workers who were hired from non-employment, which are also groups where mismatch is more pronounced on average. Most learning about job-specific mismatch happens within a year. Experienced job-to-job movers appear to match under much less uncertainty. They are better matched on entry and mismatch have a smaller eect on their initial separation rates and later wage growth. Instead, match quality is priced into their starting wages.
    Keywords: Matching; Job search; Comparative advantage; Employer learning
    JEL: J24 J31 J62 J64
    Date: 2015–12–16
  3. By: Carola Frydman; Dimitris Papanikolaou
    Abstract: We develop a general equilibrium model that delivers realistic fluctuations in both the level as well as the dispersion in executive pay as a result of changes in the technology frontier. Our model recognizes that executives add value to the firm not only by participating in production decisions, but also by identifying new investment opportunities. The economic value of these two distinct components of the executive's job varies with the state of the economy. Improvements in technology that are specific to new vintages of capital raise the skill price of discovering new growth prospects -- and thus raise the compensation of executives relative to workers. If most of the dispersion in managerial skill lies in the ability to find new projects, dispersion in executive pay will also rise. Our model delivers testable predictions about the relation between executive pay and growth opportunities that are quantitatively consistent with the data.
    JEL: E22 G10 G30 J24 J3 M52
    Date: 2015–12
  4. By: Guido Matías Cortés (University of Manchester); Manuel Hidalgo-Pérez (U. Pablo de Olavide)
    Abstract: Changes in within-group wage inequality are often interpreted as reflecting changes in returns to unobservable skills. This interpretation relies on the highly restrictive assumption that the variance of skills within groups remains constant over time. We propose and implement a new identification strategy which relaxes this assumption using longi- tudinal data. Results based on matched CPS data for 1982-2012 show strong evidence of increases in the dispersion of unobserved skills, par- ticularly among college graduates. Contrary to the conclusion drawn when constant within-group skill variance is assumed, our results sug- gest that the return to skills decreased during the 1980s and early 1990s.
    Keywords: Return to skills; Within-group wage inequality
    JEL: J31 J24 E24
    Date: 2015–12
  5. By: Ryan A. Decker; John Haltiwanger; Ron S. Jarmin; Javier Miranda
    Abstract: The pace of business dynamism and entrepreneurship in the U.S. has declined over recent decades. We show that the character of that decline changed around 2000. Since 2000 the decline in dynamism and entrepreneurship has been accompanied by a decline in high-growth young firms. Prior research has shown that the sustained contribution of business startups to job creation stems from a relatively small fraction of high-growth young firms. The presence of these high-growth young firms contributes to a highly (positively) skewed firm growth rate distribution. In 1999, a firm at the 90th percentile of the employment growth rate distribution grew about 31 percent faster than the median firm. Moreover, the 90-50 differential was 16 percent larger than the 50-10 differential reflecting the positive skewness of the employment growth rate distribution. We show that the shape of the firm employment growth distribution changes substantially in the post-2000 period. By 2007, the 90-50 differential was only 4 percent larger than the 50-10, and it continued to exhibit a trend decline through 2011. The reflects a sharp drop in the 90th percentile of the growth rate distribution accounted for by the declining share of young firms and the declining propensity for young firms to be high-growth firms.
    JEL: E24 J63 L26
    Date: 2015–12
  6. By: Robert E. Hall; Andreas I. Mueller
    Abstract: We use a rich new body of data on the experiences of unemployed job-seekers to determine the sources of wage dispersion and to create a search model consistent with the acceptance decisions the job-seekers made. From the data and the model, we identify the distributions of four key variables: offered wages, offered non-wage job values, the value of the job-seeker's non-work alternative, and the job-seeker's personal productivity. We find that, conditional on personal productivity, the dispersion of offered wages is moderate, accounting for 21 percent of the total variation in observed offered wages, whereas the dispersion of the non-wage component of offered job values is substantially larger. We relate our findings to an influential recent paper by Hornstein, Krusell, and Violante who called attention to the tension between the fairly high dispersion of the values job-seekers assign to their job offers–which suggest a high value to sampling from multiple offers–and the fact that the job-seekers often accept the first offer they receive.
    JEL: J31 J32 J64
    Date: 2015–11
  7. By: Giovanni Peri; Vasil Yasenov
    Abstract: We apply the synthetic control method to re-examine the wage and employment effect of the Mariel Boatlift in Miami. We focus exclusively on workers with no high school degree. They are the group competing more closely in the labor market with the newly arrived. We compare Miami's labor market outcomes with those in a control group of cities chosen using the synthetic control method so as to match Miami's wages and other labor market features in the period 1972 to 1979. Using most samples and different outcomes we find no departure between Miami and its control between 1979 and 1983. Significant noise exists in many samples but we never find significant negative effects especially right after the Boatlift, when they should have been the strongest. We point out that the very different conclusions in a recent reappraisal by George Borjas (2015) stem from the use of a small sub-sample of high school dropouts in the already very small March-CPS sample. That sample is subject to substantial measurement error and no other sample provides the same findings. Being imprecise about the timing of the data and the choice and validation of the control sample further contribute to the impression of an effect from the boatlift in Borjas (2015). We also revisit the non-Boatlift of 1994, considered by Angrist and Krueger (1999) and we do not find consistent deviations of Miami outcomes from the appropriate control that could be mistaken for labor market effects of a Cuban inflow.
    JEL: J3 J61
    Date: 2015–12
  8. By: Mitchell Hoffman; Lisa B. Kahn; Danielle Li
    Abstract: Who should make hiring decisions? We propose an empirical test for assessing whether firms should rely on hard metrics such as job test scores or grant managers discretion in making hiring decisions. We implement our test in the context of the introduction of a valuable job test across 15 firms employing low-skill service sector workers. Our results suggest that firms can improve worker quality by limiting managerial discretion. This is because, when faced with similar applicant pools, managers who exercise more discretion (as measured by their likelihood of overruling job test recommendations) systematically end up with worse hires.
    JEL: J24 M51
    Date: 2015–11
  9. By: Jan Kabátek (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne; Institute for the Student of Labor (IZA); Netspar)
    Abstract: This paper investigates the effects of the age-dependent minimum wage on youth employment flows in the Netherlands. The Dutch minimum wage for workers aged 15-23 is defined as a step-wise increasing function of a worker’s calendar age. At the age of 23, workers become eligible for the “adult” minimum wage which does not increase further. This creates an incentive for firms to discriminate against employees on the basis of their age, substituting more expensive older workers with younger ones. In order to grasp the size of these effects, I analyze monthly flows in and out of employment using administrative records for the entire youth population of the Netherlands. I account for the time remaining until workers’ next birthdays, exploiting the fact that firms are facing a sharp discontinuity in labor costs in the month when a worker turns one year older. The results show a significant increase in job separation around the time of this discontinuity: the probability of job separation increases by 1.1% in the three calendar months which are closest to a worker’s next birthday. This effect exhibits substantial heterogeneity with respect to a worker’s age, showing that young and inexperienced workers are more likely to be affected by the discontinuities. The size of the effect also varies by the sector of employment, being particularly large for supermarket employees. Job accession peaks just after workers’ birthdays, representing both entry of the workers with higher reservation wages and reemployment of the workers whose jobs are dissolved around the time of the discontinuity. Classification-J23, J31, J38, M51
    Keywords: Minimum wage, age-dependency, labor market flows
    Date: 2015–12
  10. By: Gopi Shah Goda; John B. Shoven; Sita Slavov
    Abstract: We examine the connection between taxes paid and benefits accrued under the Social Security Disability Insurance (SSDI) program on both the intensive and extensive margins. We perform these calculations for stylized workers given the existing benefit structure and disability hazard rates. On the intensive margin, we examine the effect of an additional dollar of earnings on the marginal payroll taxes contributed and future benefits earned. We find that the present discounted value of disability benefits received from an additional dollar of earnings, net of the SSDI payroll tax, generally declines with age, becoming negative around age 40 and reaching almost zero at age 63. On the extensive margin, we determine the effect of working an additional year on the additional payroll taxes and future benefits as a percentage of income. The return to working an additional year at an income level just large enough to earn Social Security credits for the year is large and positive through age 60. However, the return to working an additional full year is substantially smaller and becomes negative at approximately age 57. Thus, older workers face strong incentives to earn enough to obtain creditable coverage through age 60, but they face disincentives for additional earnings. In addition, workers ages 61 and older face work disincentives at any level of earnings. We repeat this analysis for stylized workers at different levels of earnings and find that, while the program transfers resources from high earners to low earners, the workers experience similar patterns in the returns to working.
    JEL: H31 H53 J22 J26
    Date: 2015–11
  11. By: Kory Kroft; Kavan J. Kucko; Etienne Lehmann; Johannes F. Schmieder
    Abstract: This paper reassesses whether the optimal income tax program features an Earned Income Tax Credit (EITC) or a Negative Income Tax (NIT) at the bottom of the income distribution, in the presence of unemployment and wage responses to taxation. The paper makes two key contributions. First, it derives a sufficient statistics optimal tax formula in a general model that incorporates unemployment and endogenous wages. This formula nests a broad variety of structures of the labor market, such as competitive models with fixed or flexible wages and models with matching frictions. Our results show that the sufficient statistics to be estimated are: the macro employment response with respect to taxation and the micro and macro participation responses with respect to taxation. We show that an EITC-like policy is optimal provided that the welfare weight on the working poor is larger than the ratio of the micro participation elasticity to the macro participation elasticity. The second contribution is to estimate the sufficient statistics that are inputs to the optimal tax formula using a standard quasi-experimental research design. We estimate these reduced-form parameters using policy variation in tax liabilities stemming from the U.S. tax and transfer system for over 20 years. Using our empirical estimates, we implement our sufficient statistics formula and show that the optimal tax at the bottom more closely resembles an NIT relative to the case where unemployment and wage responses are not taken into account.
    JEL: H21 H22 H23 J2 J21 J23
    Date: 2015–11
  12. By: Gregory Colman; Dhaval Dave
    Abstract: One of the main purposes of the Patient Protection and Affordable Care Act (ACA) is to enable Americans to make more productive use of their time. This is apparent in the rationale given for the ACA’s extension of dependent care coverage, which requires employer-sponsored insurance plans that cover the children of insured workers to continue to cover these dependents until they turn 26. A number of studies have examined the effect of the dependent care coverage provision on insurance coverage, health, healthcare utilization, and labor supply among young adults. None that we are aware of has directly examined effects on time use. If, as suggested by prior work, the provision reduced the amount of time young adults work, the question arises, what have these adults done with the extra time? A related question is whether the change made them better off. We use the American Time Use Survey from 2003-2013 to answer these two main questions, providing several contributions to the literature on the ACA. Models are based on a difference-in-differences framework, and the results suggest that the ACA’s dependent coverage provision has reduced job-lock, as well as the duration of the average doctor’s visit, including time spent waiting for and receiving medical care, among persons ages 19-25. The latter effect is consistent with a substitution from hospital ER utilization to greater routine physician care. The extra time has gone into socializing, and to a lesser extent, into education and job search. Availability of insurance and change in work time appear to have increased young adults’ subjective well-being, enabling them to spend time on activities they view as more meaningful than those they did before insurance became available.
    JEL: H0 I1 J2
    Date: 2015–11
  13. By: David Cesarini; Erik Lindqvist; Matthew J. Notowidigdo; Robert Östling
    Abstract: We study the effect of wealth on labor supply using the randomized assignment of monetary prizes in a large sample of Swedish lottery players. We find winning a lottery prize modestly reduces labor earnings, with the reduction being immediate, persistent, and similar by age, education, and sex. A calibrated dynamic model of individual labor supply implies an average lifetime marginal propensity to earn out of unearned income of -0.11, and labor-supply elasticities in the lower range of previously reported estimates. The earnings response is stronger for winners than their spouses, which is inconsistent with unitary household labor supply models.
    JEL: J22 J26
    Date: 2015–11
  14. By: Damon Morris (Department of Economics, University of Sheffield); Ian Gregory-Smith (Department of Economics, University of Sheffield); Brian Main (Business School, University of Edinburgh); Alberto Montagnoli (Department of Economics, University of Sheffield); Peter Wright (Department of Economics, University of Sheffield)
    Abstract: This paper evaluates the impact of the ‘A-day’ pensions simplification legislation introduced in the UK in 2006. This reform exogenously affected the cost of pension provision for firms whose executives had accumulated pensions benefits in excess of the prescribed limit. We find a strong reaction in the form of pension provision in a sample of UK executive directors. After A-day, many executives saw their defined benefit scheme replaced with supplementary cash payments. This had the unintended consequence of significantly decreasing the relationship between executive pay and firm performance for those executives affected by the reform.
    Keywords: Executive compensation; Executive pensions; Pay for Performance; A-day
    JEL: J32 J33 M12 M52
    Date: 2015–12
  15. By: Lorenzo Caliendo; Giordano Mion; Luca David Opromolla; Esteban Rossi-Hansberg
    Abstract: The productivity of firms is, at least partly, determined by a firm's actions and decisions. One of these decisions involves the organization of production in terms of the number of layers of management the firm decides to employ. Using detailed employer-employee matched data and firm production quantity and input data for Portuguese firms, we study the endogenous response of revenue-based and quantity-based productivity to a change in layers: a firm reorganization. We show that as a result of an exogenous demand or productivity shock that makes the firm reorganize and add a management layer, quantity based productivity increases by about 4%, while revenue-based productivity drops by more than 4%. Such a reorganization makes the firm more productive, but also increases the quantity produced to an extent that lowers the price charged by the firm and, as a result, its revenue-based productivity.
    Keywords: productivity, organization, wages, managers, layers, TFP, firm size
    JEL: D22 D24 L23 F16 J24 J31
    Date: 2015–12
  16. By: Joshua Angrist; Peter Hull; Parag A. Pathak; Christopher Walters
    Abstract: Conventional value-added models (VAMs) compare average test scores across schools after regression-adjusting for students’ demographic characteristics and previous scores. The resulting VAM estimates are biased if the available control variables fail to capture all cross-school differences in student ability. This paper introduces a new test for VAM bias that asks whether VAM estimates accurately predict the achievement consequences of random assignment to specific schools. Test results from admissions lotteries in Boston suggest conventional VAM estimates may be misleading. This finding motivates the development of a hierarchical model describing the joint distribution of school value-added, VAM bias, and lottery compliance. We use this model to assess the substantive importance of bias in conventional VAM estimates and to construct hybrid value-added estimates that optimally combine ordinary least squares and instrumental variables estimates of VAM parameters. Simulations calibrated to the Boston data show that, bias notwithstanding, policy decisions based on conventional VAMs are likely to generate substantial achievement gains. Estimates incorporating lotteries are less biased, however, and yield further gains.
    JEL: I20 J24
    Date: 2015–11
  17. By: Emek Basker; Lucia Foster; Shawn Klimek
    Abstract: Employment by gasoline stations increased between 1977 and 1992, a period during which many stations converted from full-service to self-service pumps, outsourcing to customers tasks previously performed by employees. Applying several identification strategies to establishment-level data from the Census of Retail Trade over this period, we show that self-service stations employ approximately 0.4 fewer workers per pump. At the same time, stations that adopted self service expanded their size and diversified operations by adding convenience stores, mitigating the job-loss impact of self service.
    Keywords: Customer-labor substitution, retail, gasoline station, self service, full service, outsourcing
    JEL: D22 D24 J23 L81
    Date: 2015–12
  18. By: SELLAMI, Sana; VERHAEST, Dieter; NONNEMAN, Walter; VAN THIER, Walter
    Abstract: We investigate the differential impact of alternative combinations of horizontal and vertical educational mismatches on wages. By using panel data for Belgian graduates, we consider the role of unobserved worker heterogeneity. Random measurement error in both types of mismatches is accounted for by adopting instrumental variable techniques. We consistently find that overeducated individuals without field of study mismatch earn less than adequately educated workers with a similar educational background. However, for individuals who are working outside their field of study, such a wage penalty is not always observed once accounting for unobserved heterogeneity and random measurement error. In some cases, field of study mismatch even seems to be financially beneficial to the worker.
    Keywords: Returns to education, Field of study mismatch, Overeducation, Underemployment, Earnings inequality, Ability bias
    JEL: I24 J24 J31
    Date: 2015–11
  19. By: Sang Yoon Lee; Yongseok Shin; Donghoon Lee
    Abstract: Going to college is a risky investment in human capital. However, we highlight two options inherently embedded in college education that mitigate this risk: (i) college students can quit without completing four-year degrees after learning about their post-graduation wages and (ii) college graduates can take jobs that do not require four-year degrees (i.e., underemployment). These options reduce the chances of falling in the lower end of the wage distribution as a college graduate, rendering standard mean-variance calculations misleading. We show that the interaction between these options and the rising wage dispersion, especially among college graduates, is key to understanding the muted response of college enrollment and graduation rates to the substantial increase in the college wage premium in the United States since 1980. Furthermore, we find that subsidies inducing marginal students to attend colleges will have a negligible net benefit: Such students are far more likely to drop out of college or become underemployed even with a four-year degree, implying only small wage gains from college education.
    JEL: E24 I24 J24
    Date: 2015–11
  20. By: Eric A. Hanushek; Jens Ruhose; Ludger Woessmann
    Abstract: There is limited existing evidence justifying the economic case for state education policy. Using newly-developed measures of the human capital of each state that allow for internal migration and foreign immigration, we estimate growth regressions that incorporate worker skills. We find that educational achievement strongly predicts economic growth across U.S. states over the past four decades. Based on projections from our growth models, we show the enormous scope for state economic development through improving the quality of schools. While we consider the impact for each state of a range of educational reforms, an improvement that moves each state to the best-performing state would in the aggregate yield a present value of long-run economic gains of over four times current GDP.
    JEL: I21 J24 O47
    Date: 2015–12
  21. By: Ann Bartel; Maya Rossin-Slater; Christopher Ruhm; Jenna Stearns; Jane Waldfogel
    Abstract: This paper provides quasi-experimental evidence on the impact of paid leave legislation on fathers’ leave-taking, as well as on the division of leave between mothers and fathers in dual-earner households. Using difference-in-difference and difference-in-difference-in-difference designs, we study California’s Paid Family Leave (CA-PFL) program, which is the first source of government-provided paid parental leave available to fathers in the United States. Our results show that fathers in California are 0.9 percentage points—or 46 percent relative to the pre-treatment mean—more likely to take leave in the first year of their children’s lives when CA-PFL is available. We also examine how parents allocate leave in households where both parents work. We find that CA-PFL increases father-only leave-taking (i.e., father on leave while mother is at work) by 50 percent and joint leave-taking (i.e., both parents on leave at the same time) by 28 percent. These effects are much larger for fathers of sons than for fathers of daughters, and almost entirely driven by fathers of first-born children and fathers in occupations with a high share of female workers.
    JEL: J08 J13 J18 J2
    Date: 2015–11
  22. By: Benjamin Friedrich (Yale University, CT, USA and Department of Economics and Business Economics, Aarhus University, Denmark)
    Abstract: This study uses administrative employer-employee data and firm-level trade data from Denmark to provide evidence for a novel mechanism through which trade affects wage inequality: changes in firm hierarchies. This mechanism is motivated by the empirical fact that within-firm wage variation across the hierarchical levels of top manager, middle manager, supervisor and worker accounts for an important component of wage inequality. It is comparable in magnitude to wage differences across firms. To identify the causal effect of trade shocks on firm hierarchies and wage inequality, I use two distinct research designs for firm-level trade shocks—one based on foreign demand and transportation costs, and the other using the Muslim boycott of Danish exports after the Cartoon crisis. Both identification strategies suggest robust effects of trade shocks on within-firm inequality through changes in hierarchies. Consistent with models of knowledge-based or incentive-based hierarchies, firm-level trade shocks influence organizational choices through production scale. Adding a hierarchy layer significantly increases inequality within firms, ranging from 2% for the 50-10 wage gap to 4.7% for the 90-50 wage gap.
    Keywords: Empirical Studies of Trade, Trade and Labor Market Interactions , Wage Level and Structure, Wage Differentials, Firm Organization and Market Structure, Organization of Production
    JEL: F14 F16 J31 L22 L23
    Date: 2015–12–18
  23. By: Luigi Guiso; Luigi Pistaferri; Fabiano Schivardi
    Abstract: We document that individuals who grew up in areas with high density of firms are more likely, as adults, to become entrepreneurs, controlling for the density of firms in their current location. Conditional on becoming entrepreneurs, the same individuals are also more likely to be successful entrepreneurs, as measured by business income or firm productivity. Strikingly, firm density at entrepreneur’s young age is more important than current firm density for business performance. These results are not driven by better access to external finance or intergenerational occupation choices. They are instead consistent with entrepreneurial capabilities being at least partly learnable through social contacts. In keeping with this interpretation, we find that entrepreneurs who at the age of 18 lived in areas with a higher firm density tend to adopt better managerial practices (enhancing productivity) later in life.
    JEL: J24 M13 R11
    Date: 2015–12
  24. By: J. David Brown; John S. Earle; Yana Morgulis
    Abstract: Analyzing a list of all Small Business Administration (SBA) loans in 1991 to 2009 linked with annual information on all U.S. employers from 1976 to 2012, we apply detailed matching and regression methods to estimate the variation in SBA loan effects on job creation and firm survival across firm age and size groups. The number of jobs created per million dollars of loans generally increases with size and decreases in age. The results imply that fast-growing firms (“gazelles”) experience the greatest financial constraints to growth, while the growth of small, mature firms is least financially constrained. The estimated association between survival and loan amount is larger for younger and smaller firms facing the “valley of death”.
    JEL: H81
    Date: 2015–11

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