nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2016‒02‒12
twelve papers chosen by
Joseph Marchand
University of Alberta

  1. The China Shock: Learning from Labor Market Adjustment to Large Changes in Trade By Autor, David; Dorn, David; Hanson, Gordon
  2. Moving towards a Single Labour Contract: Transition vs. Steady-state By Dolado, Juan J.; Lalé, Etienne; Siassi, Nawid
  3. Revisiting the Relationship Between Unemployment and Wages By Joao Alfredo Galindo da Fonseca; Giovanni Gallipoli; Yaniv Yedid-Levi
  4. The Impact of Unemployment Benefit Extensions on Employment: The 2014 Employment Miracle? By Hagedorn, Marcus; Manovskii, Iourii; Mitman, Kurt
  5. Imperfect Mobility of Labor Across Sectors A Reappraisal of the Balassa-Samuelson Effect By Olivier Cardi; Romain Restout
  6. The mobility of displaced workers: How the local industry mix affects job search strategies By Frank Neffke; Anne Otto; César Hidalgo
  7. Job sector and public service motivation: evidence from Colombia By Pablo Sanabria
  8. Employment expectations and uncertainties ahead of the new German minimum wage By Bossler, Mario
  9. Teaching Styles and Achievement: Student and Teacher Perspectives By Ana Hidalgo-Cabrillana; Cristina Lopez-Mayan
  10. "The 2030 Sustainable Development Goals and Measuring Gender Inequality: A Technical Articulation for Asia-Pacific" By Bhavya Aggarwal; Lekha S. Chakraborty
  11. The Dynamics of Inequality By Gabaix, Xavier; Lasry, Jean-Michel; Lions, Pierre-Louis; Moll, Benjamin
  12. Balanced Growth Despite Uzawa By Grossman, Gene; Helpman, Elhanan; Oberfield, Ezra; Sampson, Thomas

  1. By: Autor, David; Dorn, David; Hanson, Gordon
    Abstract: Abstract China’s emergence as a great economic power has induced an epochal shift in patterns of world trade. Simultaneously, it has challenged much of the received empirical wisdom about how labor markets adjust to trade shocks. Alongside the heralded consumer benefits of expanded trade are substantial adjustment costs and distributional consequences. These impacts are most visible in the local labor markets in which the industries exposed to foreign competition are concentrated. Adjustment in local labor markets is remarkably slow, with wages and labor-force participation rates remaining depressed and unemployment rates remaining elevated for at least a full decade after the China trade shock commences. Exposed workers experience greater job churning and reduced lifetime income. At the national level, employment has fallen in U.S. industries more exposed to import competition, as expected, but offsetting employment gains in other industries have yet to materialize. Better understanding when and where trade is costly, and how and why it may be beneficial, are key items on the research agenda for trade and labor economists.
    Keywords: China; International Trade; Labor Markets
    JEL: F16 H55 J23 J31 J63
    Date: 2016–01
  2. By: Dolado, Juan J.; Lalé, Etienne; Siassi, Nawid
    Abstract: This paper analyses the optimal design of a single open-ended contract (SOEC) and studies the political economy of moving towards such a SOEC in a labour market with dual employment protection. We develop a computationally tractable approach to compare two economic environments: one with flexible entry-level jobs and high employment protection at longer tenures, and another one with a SOEC featuring employment protection levels that increase smoothly with tenure. For illustrative purposes, we specialise the discussion of such choices to Spain, a country often considered as an epitome of a dual labour market. We show that a SOEC has the potential of bringing substantial improvements in equilibrium allocations and welfare. We provide estimates for the eligibility rule and tenure profile of the optimal SOEC, defined as the contract maximising the steady-state lifetime utility of new labour-market entrants. Finally, we use the model to identify winners and losers among younger and older workers in the transitional path of such a reform, and evaluate its political support.
    Keywords: dualism; employment protection; labour market reform; single contract
    JEL: H29 J33 J65
    Date: 2015–12
  3. By: Joao Alfredo Galindo da Fonseca (University of British Columbia, Vancouver School of Economics); Giovanni Gallipoli (University of British Columbia); Yaniv Yedid-Levi (University of British Columbia, Vancouver School of Economics)
    Abstract: We revisit the empirical relationship between wages and labor market conditions. Following work histories in the NLSY79 we document that the relationship between wages and unemployment rate differs across occupations. The results hold after controlling for unobserved match quality. This suggests that evidence about history-dependence of wages obtained from pooled samples conceals significant differences and may provide an imprecise description of earning dynamics. Similar discrepancies emerge when we group workers by education. Sensitivity of wages to unemployment appears related to whether total remuneration entails performance pay components.
    Keywords: wages, unemployment, occupation
    JEL: E30 J30 J60
    Date: 2016–02
  4. By: Hagedorn, Marcus; Manovskii, Iourii; Mitman, Kurt
    Abstract: We measure the aggregate effect of unemployment benefit duration on employment and the labor force. We exploit the variation induced by Congress' failure in December 2013 to reauthorize the unprecedented benefit extensions introduced during the Great Recession. Federal benefit extensions that ranged from 0 to 47 weeks across U.S. states were abruptly cut to zero. To achieve identification we use the fact that this policy change was exogenous to cross-sectional differences across U.S. states and we exploit a policy discontinuity at state borders. Our baseline estimates reveal that a 1% drop in benefit duration leads to a statistically significant increase of employment by 0.019 log points. In levels, 2.1 million individuals secured employment in 2014 due to the benefit cut. More than 1.1 million of these workers would not have participated in the labor market had benefit extensions been reauthorized.
    Keywords: aggregate employment; labor force; macroeconomic stabilization; search and matching; unemployment insurance
    JEL: E24 E62 E65 J65
    Date: 2016–01
  5. By: Olivier Cardi (Université François Rabelais - Tours, LEO - Laboratoire d'économie d'Orleans - UO - Université d'Orléans - CNRS - Centre National de la Recherche Scientifique, CRED - Centre de Recherches en Economie et Droit - Université Paris 2 PANTHEON-ASSAS); Romain Restout (BETA - Bureau d'Economie Théorique et Appliquée - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique, UCL - Université Catholique de Louvain)
    Abstract: This paper investigates the relative price and relative wage effects of a higher productivity in the traded sector compared with the non traded sector in a two-sector open economy model with imperfect substitutability in hours worked across sectors. The Balassa- Samuelson [1964] model predicts that a rise in the sectoral productivity ratio by 1% raises the relative price of non tradables by 1% while leaving the non traded wage-traded wage ratio unchanged. Applying cointegration methods to a panel of fourteen OECD countries over the period 1970-2007, our estimates show that the relative price rises by only 0.78% and the relative wage falls by 0.27%. While our first set of empirical findings cast doubt on the quantitative predictions of the Balassa-Samuelson model, our second set of evidence highlights the role of imperfect labor mobility: the relative price responds more to a productivity differential between tradables and non tradables while the reaction of the relative wage is more muted in countries with higher intersectoral reallocation of labor. We show that the ability of the two-sector model to account for our evidence quantitatively relies upon two ingredients: i) imperfect mobility of labor across sectors, and ii) physical capital accumulation. Finally, our numerical results reveal that the model predicts the relative price response fairly well, and to a lesser extent the relative wage response.
    Keywords: Relative price of non tradables, Sectoral wages, Productivity growth, Sec- toral labor reallocation, Investment
    Date: 2015
  6. By: Frank Neffke; Anne Otto; César Hidalgo
    Abstract: Establishment closures leave many workers unemployed. Based on employment histories of 20 million German workers, we nd that workers often cope with their displacement by moving to dierent regions and industries. However, which of these coping strategies is chosen depends on the local industry mix. A large local presence of predisplacement or related industries strongly reduces the rate at which workers leave the region. Moreover, our ndings suggest that a large local presence of the predisplacement industry induces workers to shift search eorts toward this industry, reducing the spatial scope of search for jobs in alternative industries and vice versa.
    Keywords: Displacement, local industry mix, agglomeration externalities, matching, mobility
    JEL: J24 J61 J64 R12
    Date: 2016–01
  7. By: Pablo Sanabria (Faculty of Economics and Management, Pontificia Universidad Javeriana Cali)
    Abstract: In this article I examine the determinants of job sector choice with a particular interest in the relationship with the so-called concept of public service motivation (PSM), in the context of a developing country. I use multinomial logit (MNL) to understand individuals’ decisions to take jobs in one of four sectors: government, nonprofit, for-profit, or academic jobs in Colombia. My analysis is based on data about a sample of participants on the Colombian scholarship program, Colfuturo, drawn from between 2002 and 2007. My results indicate that there are important differences in terms of the determinants of job sector choices across the four different sectors and that PSM appears to have a role on such decisions.
    Keywords: organizational behavior; human talent; motivation
    JEL: D23 D73 H7 J45 M12
    Date: 2016–02
  8. By: Bossler, Mario (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany])
    Abstract: "Followed by an extensive policy discussion late 2013 and early 2014, the new German minimum wage was introduced on 1 January 2015. This article analyzes announcement effects of the new statutory minimum wage on employer expectations in 2014. The IAB Establishment Panel allows for a difference-in-differences comparison between affected and unaffected employers and entails variables that address the employers' employment expectations. In 2014, affected employers show an increased employment uncertainty and a drop in their expected employment development. They also more likely report wage costs to become a problem. In size, the employment expectations translate into a loss of about 12 800 jobs." (Author's abstract, IAB-Doku) ((en))
    JEL: D22 J23 J38
    Date: 2016–01–27
  9. By: Ana Hidalgo-Cabrillana; Cristina Lopez-Mayan
    Abstract: Using data from a Spanish assessment program of fourth-grade pupils, we analyze to what extent using traditional and modern teaching styles in class is related to achievement in maths and reading. As a novelty, we measure in-class work using two different sources of information - teacher and students. Our identification strategy relies on between-class within-school variation of teaching styles. We find that modern practices are related to better achievement, especially in reading, while traditional practices, if anything, are detrimental. There are differences depending on the source of information: the magnitude of coefficients is larger when practices are reported by students. These findings are robust to considering alternative identifications of teaching practices. We obtain heterogeneous effects of teaching styles by gender and type of school but only when using students' answers. Our findings highlight the importance of the source of information, teacher or students, to draw adequate conclusions about the effect of teaching style on achievement.
    Keywords: students and teacher reports, test scores, teacher quality, modern and traditional teaching
    JEL: I20 I21 J24
    Date: 2015–12
  10. By: Bhavya Aggarwal; Lekha S. Chakraborty
    Abstract: Against the backdrop of the 2030 UN Agenda for Sustainable Development, this paper analyzes the measurement issues in gender-based indices constructed by the United Nations Development Programme (UNDP) and suggests alternatives for choice of variables, functional form, and weights. While the UNDP Gender Inequality Index (GII) conceptually reflects the loss in achievement due to inequality between men and women in three dimensions--health, empowerment, and labor force participation--we argue that the assumptions and the choice of variables to capture these dimensions remain inadequate and erroneous, resulting in only the partial capture of gender inequalities. Since the dimensions used for the GII are different from those in the UNDP's Human Development Index (HDI), we cannot say that a higher value in the GII represents a loss in the HDI due to gender inequalities. The technical obscurity remains how to interpret GII by combining women-specific indicators with indicators that are disaggregated for both men and women. The GII is a partial construct, as it does not capture many significant dimensions of gender inequality. Though this requires a data revolution, we tried to reconstruct the GII in the context of Asia-Pacific using three scenarios: (1) improving the set of variables incorporating unpaid care work, pay gaps, intrahousehold decision making, exposure to knowledge networks, and feminization of governance at local levels; (2) constructing a decomposed index to specify the direction of gender gaps; and (3) compiling an alternative index using Principal Components Index for assigning weights. The choice of countries under the three scenarios is constrained by data paucity. The results reveal that the UNDP GII overestimates the gap between the two genders, and that using women-specific indicators leads to a fallacious estimation of gender inequality. The estimates are illustrative. The implication of the results broadly suggests a return to the UNDP Gender Development Index for capturing gender development, with an improvised set of choices and variables.
    Keywords: Gender Inequality; Unpaid Work; Human Development; Composite Indicator
    JEL: D63 J16 J31 O15
    Date: 2016–02
  11. By: Gabaix, Xavier; Lasry, Jean-Michel; Lions, Pierre-Louis; Moll, Benjamin
    Abstract: The past forty years have seen a rapid rise in top income inequality in the United States. While there is a large number of existing theories of the Pareto tail of the long-run income distributions, almost none of these address the fast rise in top inequality observed in the data. We show that standard theories, which build on a random growth mechanism, generate transition dynamics that are an order of magnitude too slow relative to those observed in the data. We then suggest two parsimonious deviations from the canonical model that can explain such changes: "scale dependence" that may arise from changes in skill prices, and "type dependence," i.e. the presence of some "high-growth types." These deviations are consistent with theories in which the increase in top income inequality is driven by the rise of "superstar" entrepreneurs or managers.
    Keywords: inequality; operator methods; Pareto distribution; speed of transition; superstars
    JEL: D31 E24
    Date: 2015–12
  12. By: Grossman, Gene; Helpman, Elhanan; Oberfield, Ezra; Sampson, Thomas
    Abstract: Evidence for the United States suggests balanced growth despite falling investment-good prices and less than unitary elasticity of substitution between capital and labor. This is inconsistent with the Uzawa Growth Theorem. We extend Uzawa's theorem to show that introducing human capital accumulation in the standard way does not resolve the puzzle. However, balanced growth is possible if education is endogenous and capital is more complementary with schooling than with raw labor. We describe balanced growth paths for several neoclassical growth models with capital-augmenting technological progress and endogenous schooling. The balanced growth path in an overlapping-generations model in which individuals choose their time in school matches key features of the U.S. record.
    Keywords: balanced growth; capital-skill complementarity; neoclassical growth; technological progress
    JEL: E1 J2 O1 O4
    Date: 2016–01

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