nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2016‒04‒04
seventeen papers chosen by
Joseph Marchand
University of Alberta

  1. Teacher Applicant Hiring and Teacher Performance: Evidence from DC Public Schools By Brian Jacob; Jonah E. Rockoff; Eric S. Taylor; Benjamin Lindy; Rachel Rosen
  2. Hiring incentives and/or firing cost reduction? Evaluating the impact of the 2015 policies on the Italian labour market By Paolo Sestito; Eliana Viviano
  3. What Has Been Happening to UK Income Inequality Since the Mid-1990s? Answers from Reconciled and Combined Household Survey and Tax Return Data By Richard V. Burkhauser; Nicolas Hérault; Stephen P. Jenkins; Roger Wilkins
  4. Effects of Welfare Reform on Women's Voting Participation By Dhaval M. Dave; Hope Corman; Nancy Reichman
  5. Heterogeneous Effects of High School Peers on Educational Outcomes By Mendolia, Silvia; Paloyo, Alfredo R.; Walker, Ian
  6. Increased Instruction Hours and the Widening Gap in Student Performance By Mathias Huebener; Susanne Kuger; Jan Marcus
  7. Bias in Returns to Tenure When Firm Wages and Employment Comove: A Quantitative Assessment and Solution By Pedro Martins; Andy Snell; Heiko Stueber; Jonathan Thomas
  8. Structural Reform in Germany By Krebs, Tom; Scheffel, Martin
  9. Capital Structure, Pay Structure and Job Termination By Jason Allen; James R. Thompson
  10. The Educational Consequences of Language Proficiency for Young Children By Yao, Yuxin; Ohinata, Asako; van Ours, Jan C.
  11. The Returns to College Persistence for Marginal Students: Regression Discontinuity Evidence from University Dismissal Policies By Ost, Ben; Pan, Weixiang; Webber, Douglas A.
  12. Working-Time Mismatch and Mental Health By Otterbach, Steffen; Wooden, Mark; Fok, Yin King
  13. Efficient Local Government Service Provision: The Role of Privatization and Public Sector Unions By Rhiannon Jerch; Matthew E. Kahn; Shanjun Li
  14. The Performance of Elected Officials: Evidence from State Supreme Courts By Elliott Ash; W. Bentley MacLeod
  15. Does Bilingualism among the Native Born Pay? By Chiswick, Barry R.; Miller, Paul W.
  16. Leisure and Learning - Activities and Their Effects on Child Skill Development By Peter Funk; Thorsten Kemper
  17. "Labour, profit and housing rent shares in Italian GDP: long-run trends and recent patterns" By Roberto Torrini

  1. By: Brian Jacob; Jonah E. Rockoff; Eric S. Taylor; Benjamin Lindy; Rachel Rosen
    Abstract: Selecting more effective teachers among job applicants during the hiring process could be a highly cost-effective means of improving educational quality, but there is little research that links information gathered during the hiring process to subsequent teacher performance. We study the relationship among applicant characteristics, hiring outcomes, and teacher performance in the Washington DC Public Schools (DCPS). We take advantage of detailed data on a multi-stage application process, which includes written assessments, a personal interview, and sample lessons, as well as the annual evaluations of all DCPS teachers, based on multiple criteria. We identify a number of background characteristics (e.g., undergraduate GPA) as well as screening measures (e.g., applicant performance on a mock teaching lesson) that strongly predict teacher effectiveness. Interestingly, we find that these measures are only weakly, if at all, associated with the likelihood of being hired, suggesting considerable scope for improving teacher quality through the hiring process.
    JEL: I2 J2 M51
    Date: 2016–03
  2. By: Paolo Sestito (Bank of Italy); Eliana Viviano (Bank of Italy)
    Abstract: In 2015 Italy adopted two different policies aimed at reducing labour market dualism and fostering employment: a generous permanent hiring subsidy and new regulations lowering firing costs and making them less uncertain. Using microdata for Veneto and exploiting some differences in the design of the policies, we evaluate the impact of each measure. Both contributed to double the monthly rate of conversion of fixed-term jobs into permanent positions. Moreover, around 40 per cent of new total gross hires with permanent job contracts occurred because of the incentives, whereas 5 per cent can be attributed to the new firing regulations . The new firing rules also made firms less reluctant to offer permanent job positions to yet untested workers. The possibility of benefitting from the incentives in case of a conversion also boosted temporary hiring, as it allowed firms to test for the quality of a job match.
    Keywords: job creation, firing costs, hiring incentives, labour market reforms
    JEL: J6 J21
    Date: 2016–03
  3. By: Richard V. Burkhauser (Department of Policy Analysis and Management, Cornell University); Nicolas Hérault (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne); Stephen P. Jenkins (Department ofSocial Policy, London School of Economics); Roger Wilkins (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)
    Abstract: Estimates of UK income inequality trends differ substantially according to whether estimates are based on household survey data (used for official statistics) or tax return data (used in the top incomes literature). We reconcile differences in variable definitions and combine survey and tax return data in order to take advantage of the much better coverage of top incomes in the latter, and provide improved estimates of UK inequality trends since the mid-1990s. We show there was a marked increase in income inequality in the early 2000s that survey-based estimates do not reveal, and our conclusions are robust to changes in the definitions of income, income-sharing unit, and summary inequality measure. In addition, our reconciled and combined data provide more comparable estimates of UK-US inequality trends than the top incomes literature to date. Classification-D31, C81
    Keywords: Inequality, income inequality, top income shares, HBAI, SPI, top incomes, tax return data, survey data
    Date: 2016–02
  4. By: Dhaval M. Dave; Hope Corman; Nancy Reichman
    Abstract: Voting is an important form of civic participation in democratic societies but a fundamental right that many citizens do not exercise. This study investigates the effects of welfare reform in the U.S. in the 1990s on voting of low income women. Using the November Current Population Surveys with the added Voting and Registration Supplement for the years 1990 through 2004 and exploiting changes in welfare policy across states and over time, we estimate the causal effects of welfare reform on women’s voting registration and voting participation during the period during which welfare reform unfolded. We find robust evidence that welfare reform increased the likelihood of voting by about 4 percentage points, which translates to about a 10% increase relative to the baseline mean. The effects were largely confined to Presidential elections, were stronger in Democratic than Republican states, were stronger in states with stronger work incentive policies, and appeared to operate through employment, education, and income.
    JEL: D72 H53 I38 J21
    Date: 2016–03
  5. By: Mendolia, Silvia (University of Wollongong); Paloyo, Alfredo R. (University of Wollongong); Walker, Ian (Lancaster University)
    Abstract: We investigate the relationship between peers' abilities and educational outcomes at the end of high school using data from the rich Longitudinal Study of Young People in England (LSYPE) matched to the National Pupil Database of children in state schools in England. In particular, we focus on the effect of peers' abilities, measured through achievements in Key Stage 3 (Age 14), on high powered test scores at Ages 16 and 18, and on the probability of attending university. Our identification strategy is based on a measure of the peers of peers' ability. In particular, for each individual, we look at her high school peers and select their primary school peers who do not attend the same high school and who did not attend the same primary school as the individual. We then use peers-of-peers ability, measured using Age 11 test scores as an instrument for high school average peer ability, measured using Age 14 test scores. We also use quantile regression to explore the effect of peers' ability on different parts of the distributions of the outcomes. Our results show that average of peers' abilities has a moderate positive effect on test scores at Ages 16 and 18, and that being in a school with a large proportion of low-quality peers can have a significantly detrimental effect on individual achievements. Furthermore, peers' ability seems to have a stronger effect on students at the bottom of the grade distribution, especially at Age 16.
    Keywords: peer effects, instrumental variables, test scores
    JEL: I20 J24
    Date: 2016–03
  6. By: Mathias Huebener; Susanne Kuger; Jan Marcus
    Abstract: Do increased instruction hours improve the performance of all students? Using PISA scores of students in ninth grade, we analyse the effect of a German education reform that increased weekly instruction hours by two hours (6.5 percent) over almost five years. In the additional time, students are taught new learning content. On average, the reform improves student performance. However, treatment effects are small and differ across the student performance distribution. While low-performing students do not benefit, highperforming students benefit the most. The findings suggest that increases in instruction hours can widen the gap between low- and high-performing students.
    Keywords: Instruction time, student achievement, PISA, G8-high school reform, quantile regressions, curriculum, difference-in-differences
    JEL: I21 I24 I28 D04 J24
    Date: 2016
  7. By: Pedro Martins; Andy Snell; Heiko Stueber; Jonathan Thomas
    Abstract: It is well known that, unless worker-firm match quality is controlled for, returns to firm tenure (RTT) estimated directly via reduced form wage (Mincer) equations will be biased. In this paper we argue that even if match quality is properly controlled for there is a further pervasive source of bias, namely the co-movement of firm employment and firm wages. In a simple mechanical model where human capital is absent and separation is exogenous we show that positively covarying shocks (either aggregate or firm level) to firms employment and wages cause downward bias in OLS regression estimates of RTT. We show that the long established procedures for dealing with "traditional" RTT bias do not circumvent the additional problem we have identified. We argue that if a reduced form estimation of RTT is undertaken, firm-year fixed effects must be added in order to eliminate this bias. Estimates from two large panel datasets from Portugal and Germany show that the bias is empirically important. Adding firm-year fixed effects to the regression increases estimates of RTT in the two respective countries by between 3.5% and 4.5% of wages at 20 years of tenure -? over 80% (50%) of the estimated RTT level itself. The results extend to tenure correlates used in macroeconomics such as the minimum unemployment rate since joining the firm. Adding firm-year fixed effects changes estimates of these estimates also.
    Keywords: Matched data, Tenure effects, Germany, Portugal
    JEL: J31 J63 C23
    Date: 2016–03
  8. By: Krebs, Tom (University of Mannheim); Scheffel, Martin (University of Cologne)
    Abstract: This paper provides a quantitative evaluation of the macroeconomic, distributional, and fiscal effects of three reform proposals for Germany: i) a reduction in the social security tax in the low-wage sector, ii) a publicly financed expansion of full-day child care and full-day schooling, and iii) the further deregulation of the professional service sector. The analysis is based on a macroeconomic model with physical capital, human capital, job search, and household heterogeneity. All three reforms have positive short-run and long-run effects on employment, wages, and output. The quantitative effects of the deregulation reform are relatively small due to the small size of the professional services in Germany. Policy reforms i) and ii) have substantial macroeconomic effects and positive distributional consequences. Ten years after implementation, reforms i) and ii) taken together increase employment by 1.6 percent, potential output by 1.5 percent, real hourly pre-tax wages in the low-wage sector by 3 percent, and real hourly pre-tax wages of women with children by 2.7 percent. The two reforms create fiscal deficits in the short-run, but they also generate substantial fiscal surpluses in the long-run. They are fiscally efficient in the sense that the present value of short-term fiscal deficits and long-term fiscal surpluses is positive for any interest (discount) rate less than 9 percent.
    Keywords: structural reform, Germany
    JEL: E24 E60 J2 J3
    Date: 2016–03
  9. By: Jason Allen; James R. Thompson
    Abstract: We develop a model to analyze the link between financial leverage, worker pay structure and the risk of job termination. Contrary to the conventional view, we show that even in the absence of any agency problem among workers, variable pay can be optimal despite workers being risk averse and firms risk neutral. We find that firms employing workers with safer projects (and lower probability of job termination) use more variable compensation, and that leverage is strictly increasing in the amount of variable pay. These two results lead to the main insight of the paper: the more likely it is that a worker is terminated, the lower a firm’s leverage. We provide empirical support for these predictions with a novel data set of all Canadian financial brokers and dealers. In the context of our empirical analysis, the model provides a novel mechanism to help explain why high leverage and high amounts of variable pay may be pervasive in financial relative to non-financial institutions.
    Keywords: Financial Institutions, Labour markets
    JEL: G24 J33
    Date: 2016
  10. By: Yao, Yuxin (Tilburg University); Ohinata, Asako (University of Leicester); van Ours, Jan C. (Tilburg University)
    Abstract: This paper studies the educational consequences of language proficiency by investigating the relationship between dialect-speaking and academic performance of 5-6 year old children in the Netherlands. We find that dialect-speaking has a modestly negative effect on boys' language test scores. In addition, we study whether there are spillover effects of peers' dialect-speaking on test scores. We find no evidence for spillover effect of peers' dialect-speaking. The test scores of neither Dutch-speaking children nor dialect-speaking children are affected by the share of dialect-speaking peers in the classroom.
    Keywords: dialect-speaking, test scores, spillover effects, language, academic performance
    JEL: J24 I2
    Date: 2016–03
  11. By: Ost, Ben (University of Illinois at Chicago); Pan, Weixiang (University of Illinois at Chicago); Webber, Douglas A. (Temple University)
    Abstract: We estimate the returns to college using administrative data on college enrollment matched to administrative data on weekly earnings. Utilizing the fact that colleges dismiss low-performing students based on exact GPA cutoffs, we use a regression discontinuity design to estimate the earnings impacts of college. Dismissed students are permitted to apply for readmission, but since relatively few do so, these students end up completing fewer years of school and are approximately 10 percentage points less likely to graduate college. Our estimates suggest that low-performing students (on the margin of college dismissal) derive substantial earnings benefits from college.
    Keywords: academic probation, returns to college, regression discontinuity
    JEL: I21 I23
    Date: 2016–03
  12. By: Otterbach, Steffen (University of Hohenheim); Wooden, Mark (Melbourne Institute of Applied Economic and Social Research); Fok, Yin King (Melbourne Institute of Applied Economic and Social Research)
    Abstract: Nationally representative panel survey data for Germany and Australia are used to investigate the impact of working-time mismatches (i.e., differences between actual and desired work hours) on mental health, as measured by the Mental Component Summary Score from the SF-12. Fixed effects and dynamic linear models are estimated, which, together with the longitudinal nature of the data, enable person-specific traits that are time invariant to be controlled for. The incorporation of dynamics also reduces concerns about the potential effects of reverse causation. The results suggest that overemployment (working more hours than desired) has adverse consequences for the mental health of workers in both countries. Underemployment (working fewer hours than desired), however, seems to only be of significance in Australia.
    Keywords: Australia, Germany, mental health, Mental Component Summary Score (SF-12), longitudinal data, work hours, working-time mismatch
    JEL: I12 J22
    Date: 2016–03
  13. By: Rhiannon Jerch; Matthew E. Kahn; Shanjun Li
    Abstract: Local governments spend roughly $1.6 trillion per year to provide a variety of public services ranging from police and fire protection to public schools and public transit. However, we know little about public sector’s productivity in delivering key services. To understand the productivity both over time and across space, we examine public bus service, which represents a standardized output for benchmarking the cost of local government service provision. There is significant dispersion across transit agencies in the operating cost per bus mile with the highest being more than three times as high as the lowest among top 20 largest cities by population. We estimate the cost savings from privatization and explore the political economy of why privatization rates are lower in high cost unionized areas. Our analysis finds that the full privatizaton could result in cost savings of $5.7 billion in 2011 and that the gain in economic efficiency from more closely aligning bus fares with production costs would be worth at least half a billion dollars.
    JEL: J3 J45 R4 R5
    Date: 2016–03
  14. By: Elliott Ash; W. Bentley MacLeod
    Abstract: This paper provides evidence on the effect of electoral institutions on the performance of public officials. Using panel data on state supreme courts between 1947 and 1994, we measure the effects of changes in judicial electoral processes on judge work quality – as measured by citations by later judges. Judges selected by non-partisan elections write higher-quality opinions than judges selected by partisan elections. Judges selected by technocratic merit commissions write higher-quality opinions than either partisan-elected judges or non-partisan-elected judges. Election-year politics reduces judicial performance in both partisan and non-partisan election systems. Giving stronger tenure to non-partisan-selected judges improves performance, while giving stronger tenure to partisan-selected judges has no effect. These results are consistent with the view that technocratic merit commissions have better information about the quality of candidates than voters, and that political bias can reduce the quality of elected officials.
    JEL: J24 K4
    Date: 2016–03
  15. By: Chiswick, Barry R. (George Washington University); Miller, Paul W. (Curtin University)
    Abstract: This paper uses the pooled data from the 2005-2009 American Community Survey to analyze the economic benefits of bilingualism to adult men born in the United States. Bilingualism among the native born is defined as speaking a language at home other than or in addition to English. Native born bilingualism is rare; only 6.5 percent report a non-English language, and of those 71 percent report Spanish. Most of the native born bilinguals report speaking English "very well" (85 percent), with most of the others speaking it "well" (10 percent). Other variables the same, bilinguals earn 4.7 percent less than monolingual English speakers, but the earnings differential varies sharply by the language spoken. Those who speak Native American languages, Pennsylvania Dutch and Yiddish have very low earnings, likely because they live in isolated geographic or cultural enclaves. Those who speak certain Western European and East Asian languages and Hebrew earn significantly more than monolingual English speakers. Spanish speakers earn 20 percent less than the monolingual English speakers overall, but other variables the same, have statistically significant seven percent lower earnings.
    Keywords: bilingualism, earnings, native born, linguistic enclaves
    JEL: J24 J31 F22
    Date: 2016–03
  16. By: Peter Funk; Thorsten Kemper
    Abstract: This paper studies how variations in leisure time allocation help explain the variations in school children's cognitive skills. We use representative data on the time use of American children from the Child Development Supplement (CDS) to the Panel Study of Income Dynamics (PSID). Our findings suggest that 1) including time use data significantly contributes to explaining the variation in math and reading test scores; 2) in a relative ranking of the effect of raising the time spent on a given activity on the math test score music is placed at the top, followed by learning, reading, sports, watching television, attending school and sleep (in descending order). For the reading test score music ranks first again and reading second, before learning, school, television, sports and sleep; 3) when comparing the effect of child activities with that of parental investments on test scores in the PSID data, it turns out that activities have no less explanatory power than investments, proxied by an established investment measure, with higher explanatory power for the production of math skills.
    Keywords: Child development, leisure time activities
    JEL: D13 I21 J13 J24
    Date: 2016–02–08
  17. By: Roberto Torrini (ANVUR and Bank of Italy)
    Abstract: The share of labour increased in the first half of the 1970s, declined slowly to its 1960s level in 2001, and since then has been rising. Between 1975 and 2001, the decline in the labour share was due in part to the recovery in profits, and in part to a steady increase in housing rents on GDP, to 13 per cent of value added (5% in 1975) and almost 40 per cent of capital income (20% in the mid-1970s). Net of housing rents, the share of profits fell to a historical low during the great recession. In the business sector net of housing, recovery of the labour share, magnified by the recent recession, was evident in manufacturing and industries other than regulated sectors (energy, transport, communications and finance), where privatizations and changes to regulation provoked a marked drop in the labour share in the late 1990s. I tentatively explain the trend reversal in the labour share, which started well before the onset of the crises, as due to a compression in the mark-ups on marginal costs and the difficulty experienced by Italian firms to be rewarded for their innovation efforts (product quality upgrading) in a more competitive environment.
    Keywords: factor shares, returns on capital, productivity, mark-ups
    JEL: E25 E22 E24 L32 L33 J30
    Date: 2016–03

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