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on Labor Markets - Supply, Demand, and Wages |
| By: | Broadway, Barbara (Melbourne Institute of Applied Economic and Social Research); Kalb, Guyonne (Melbourne Institute of Applied Economic and Social Research); McVicar, Duncan (Queen's University Belfast); Martin, Bill (University of Queensland) |
| Abstract: | The introduction of the Australian Paid Parental Leave scheme in 2011 provides a rare opportunity to estimate the labour supply and employment impacts of publicly-funded paid leave on mothers in the first year post-partum. The almost universal coverage of the scheme coupled with detailed survey data collected specifically for this purpose means that eligibility for paid leave under the scheme can be plausibly taken as exogenous following a standard propensity score matching exercise. In line with much of the existing literature, we find a positive impact on leave taking in the first half year and on the probability of eventually returning to work in the first year. The paper provides new evidence of a positive impact on continuing in the same job and under the same conditions. Further new evidence shows that disadvantaged mothers – low income, less educated, without access to employer-funded leave – respond most to the scheme. |
| Keywords: | labour supply, parental leave, mothers, duration analysis, propensity score matching |
| JEL: | J13 J18 J22 |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp9801&r=lma |
| By: | Bender, Stefan; Bloom, Nicholas; Card, David; Van Reenen, John; Wolter, Stefanie |
| Abstract: | Recent research suggests that much of the cross-firm variation in measured productivity is due to differences in use of advanced management practices. Many of these practices - including monitoring, goal setting, and the use of incentives - are mediated through employee decision-making and effort. To the extent that these practices are complementary with workers' skills, better-managed firms will tend to recruit higher-ability workers and adopt pay practices to retain these employees. We use a unique data set that combines detailed survey data on the management practices of German manufacturing firms with longitudinal earnings records for their employees to study the relationship between productivity, management, worker ability, and pay. As documented by Bloom and Van Reenen (2007) there is a strong partial correlation between management practice scores and firm-level productivity in Germany. In our preferred TFP estimates only a small fraction of this correlation is explained by the higher human capital of the average employee at better-managed firms. A larger share (about 13%) is attributable to the human capital of the highest-paid workers, a group we interpret as representing the managers of the firm. And a similar amount is mediated through the pay premiums offered by better-managed firms. Looking at employee inflows and outflows, we confirm that better-managed firms systematically recruit and retain workers with higher average human capital. Overall, we conclude that workforce selection and positive pay premiums explain just under 30% of the measured impact of management practices on productivity in German manufacturing. |
| Keywords: | Management practices; productivity; wages |
| JEL: | L2 M2 O32 O33 |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:11187&r=lma |
| By: | David Gill; Victoria Prowse; Zdenka Kissova; Jaesun Lee |
| Abstract: | Rank-order relative-performance evaluation, in which pay, promotion and symbolic awards depend on the rank of workers in the distribution of performance, is ubiquitous. Whenever firms use rank-order relative-performance evaluation, workers receive feedback about their rank. Using a real-effort experiment, we aim to discover whether workers respond to the specific rank that they achieve. In particular, we leverage random variation in the allocation of rank among subjects who exerted the same effort to obtain a causal estimate of the rank response function that describes how effort provision responds to the content of rank-order feedback. We find that the rank response function is U-shaped. Subjects exhibit 'first-place loving' and 'last-place loathing', that is subjects work hardest after being ranked first or last. We discuss implications of our findings for the optimal design of firms' performance feedback policies, workplace organizational structures and incentives schemes. |
| Keywords: | Relative performance evaluation, Relative performance feedback, Rank order feedback, Dynamic effort provision, Real effort experiment, Flat wage, Fixed wage, Taste for rank, Status seeking,Social esteem, Self esteem, Public feedback, Private feedback. |
| JEL: | C23 C91 J22 M12 |
| Date: | 2016–03–03 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:wpaper:783&r=lma |
| By: | Boll, Christina; Bublitz, Elisabeth |
| Abstract: | Regarding gender differences, theory suggests that in a partnership the individual with the lower working hours and earnings position should exhibit lower training participation rates. Since women are more likely to match this description, we investigate whether systematic group differences explain gender variation. Across all countries, male workers are not affected by their earnings position. For female workers in Germany, but not Italy or the Netherlands, working part-time instead of full-time corresponds with a decrease in course length by 5.5 hours. Also, regarding German parttime employed women, single earners train 5.6 hours more than secondary earners. The findings of our study hold at the extensive and the intensive margin, suggesting that Germany faces particular household-related obstacles regarding gender differences in job-related training. |
| Keywords: | further education and training,gender differences,country comparisons |
| JEL: | J16 J24 M53 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:hwwirp:172&r=lma |
| By: | Egebark, Johan (Research Institute of Industrial Economics (IFN)) |
| Abstract: | I study the link between taxes and youth self-employment. I make use of a Swedish reform, implemented in 2007–09, which suddenly made the payroll tax and the self-employment tax vary by age. The results suggest that youth self-employment is insensitive to tax reductions, both in the short run and in the somewhat longer run. I also study the effect of the tax reductions on income. For those that are defined as self-employed, I find positive effects on income from self-employment, and negative effects on income from wage employment. This finding suggests that the lower taxes caused the self-employed to reallocate time from employment to self-employment. |
| Keywords: | Youth unemployment; Self-employment tax; Tax subsidy; Self-employment |
| JEL: | H25 H32 J23 J38 J68 |
| Date: | 2016–03–10 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:1117&r=lma |
| By: | Gagliarducci, Stefano (University of Rome Tor Vergata); Manacorda, Marco (Queen Mary, University of London) |
| Abstract: | In this paper we investigate the effect of family connections to politicians on individuals' labor market outcomes. We combine data for Italy over almost three decades from longitudinal social security records on a random sample of around 1 million private sector employees with the universe of around 500,000 individuals ever holding political office, and we exploit information available in both datasets on a substring of each individual's last name and municipality of birth in order to identify family ties. Using a diff-in-diff analysis that follows individuals as their family members enter and leave office, and correcting for the measurement error induced by our fuzzy matching method, we estimate that the monetary return to having a politician in the family is around 3.5 percent worth of private sector earnings and that each politician is able to extract rents for his family worth between one fourth and one full private sector job per year. The effect of nepotism is long lasting, extending well beyond the period in office. Consistent with the view that this is a technology of rent appropriation on the part of politicians, the effect increases with politicians' clout and with the resources available in the administration where they serve. |
| Keywords: | Nepotism, family connections, politics, rent appropriation |
| JEL: | D72 D73 H72 J24 J30 M51 |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp9841&r=lma |
| By: | Sabia, Joseph J. (San Diego State University); Nguyen, Thanh Tam (San Diego State University) |
| Abstract: | A number of recent studies have found that medical marijuana laws (MMLs) are associated with increased marijuana use among adults, in part due to spillover effects into the recreational market. This study is the first to explore the labor market consequences of MMLs. Using repeated cross-sections of the Current Population Survey from January 1990 to December 2014, we find that the enforcement of MMLs is associated with a 2 to 3 percent reduction in hourly earnings for young adult males. The effect is particularly pronounced when examining MMLs that include a collective cultivation provision. For women and older males, there is little evidence of adverse labor market effects of MMLs. We conclude that the health effects of MMLs may adversely affect labor market productivity of young males. |
| Keywords: | medical marijuana laws, productivity, wages |
| JEL: | J31 J38 I18 |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp9831&r=lma |
| By: | Borowczyk-Martins, Daniel (Sciences Po, Paris); Lalé, Etienne (University of Bristol) |
| Abstract: | We document that fluctuations in part-time employment play a major role in movements in hours per worker, especially during cyclical swings in the labor market. Building on this result, we propose a novel representation of the intensive margin based on a stock-flow framework. The evolution of part-time employment is predominantly explained by cyclical changes in transitions between full-time and part-time employment, which occur overwhelmingly at the same employer and entail large changes in individuals' working hours. We discuss implications for a large class of macroeconomic models that map individual decisions along the extensive/intensive margins onto aggregate labor market outcomes. |
| Keywords: | employment, hours, part-time work, Great Recession |
| JEL: | E24 E32 J21 |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp9847&r=lma |
| By: | Klosse, Saskia (Faculty of Law, Maastricht University); Muysken, Joan (UNU-MERIT & SBE, Maastricht University) |
| Abstract: | In the European labour market there is a clear scope for improvement in activity rates. Moreover, sustainable employment is impeded by the pervasiveness of temporary work, self-employment and part-time work. As a consequence there is a clear role for active inclusion policies, complemented by stimulating macroeconomic policies. However, the implementation of appropriate policies, initiated in 2008, never really took off and stagnated due to the austerity measures enforced after the financial crisis. For that reason we propose to experiment with Job Guarantee (JG) projects. On the one hand, JG projects should provide a macroeconomic stimulus to the economy by employing everybody who is out of work in JG jobs at the minimum wage. On the other hand, JG projects could stop the downward trend in job quality and foster inclusive labour markets by providing quality jobs and sustainable employment. We propose to finance the JG Scheme by redirecting social security (administration) funds, by including JG elements in the European Investment Plan (also known as the Juncker Plan) and to spend part of the € 60 billion which the ECB is injecting each month in the Euro Area on job guarantee projects. |
| Keywords: | inclusive labour market policies, job guarantee, sustainable employment |
| JEL: | J48 E60 J21 J68 |
| Date: | 2016–03–03 |
| URL: | http://d.repec.org/n?u=RePEc:unm:unumer:2016011&r=lma |
| By: | Brant Abbott (Institute for Fiscal Studies); Giovanni Gallipoli (Institute for Fiscal Studies and University of British Columbia); Costas Meghir (Institute for Fiscal Studies and Yale University); Gianluca Violante (Institute for Fiscal Studies) |
| Abstract: | This paper examines the equilibrium effects of alternative financial aid policies intended to promote college participation. We build an overlapping generations life-cycle, heterogeneous-agent, incomplete-markets model with education, labor supply, and consumption/saving decisions. Driven by both altruism and paternalism, parents make inter vivos transfers to their children. Both cognitive and non-cognitive skills determine the non-pecuniary cost of schooling. Labor supply during college, government grants and loans, as well as private loans, complement parental resources as means of funding college education. We find that the current financial aid system in the U.S. improves welfare, and removing it would reduce GDP by 4-5 percentage points in the long-run. Further expansions of government-sponsored loan limits or grants would have no salient aggregate effects because of substantial crowding-out: every additional dollar of government grants crowds out 30 cents of parental transfers plus an equivalent amount through a reduction in student’s labor supply. However, a small group of high-ability children from poor families, especially girls, would greatly benefit from more generous federal aid. |
| Keywords: | Education, Financial Aid, Intergenerational Transfers, Altruism, Paternalism, Credit Constraints, Equilibrium. |
| JEL: | E24 I22 J23 J24 |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:ifs:ifsewp:16/04&r=lma |
| By: | Martins, Pedro S. (Queen Mary, University of London); Snell, Andy (University of Edinburgh); Stüber, Heiko (Institute for Employment Research (IAB), Nuremberg); Thomas, Jonathan P. (University of Edinburgh) |
| 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 firm's 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 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp9849&r=lma |
| By: | Miguel Ángel Borrella Mas (Dpto. Fundamentos del Análisis Económico); Mariano Bosch Mossi (Universidad de Alicante); Marcello Sartarelli (Dpto. Fundamentos del Análisis Económico) |
| Abstract: | Non-contributory pensions, designed to reduce old-age poverty particularly in countries with low contributory coverage, may induce a variety of household behavioural responses. This paper tests whether they vary with beneficiaries number and gender in Bolivia, one of the countries with the lowest contributory coverage worldwide. Taking advantage of a discontinuity in eligibility at age 60 in the Renta Dignidad pension, we estimate these effects by using a bi-dimensional regression discontinuity design, with spouses' age as forcing variables. We find that, despite increasing income, the impact on poverty is mixed and not significant. Although potentially puzzling, this is rationalised by household responses. When receiving two pensions, household size increases due to beneficiaries' adult children working in the household and to grandchildren. In addition, female labour supply decreases weakly. When receiving one, instead, transfers to other households increase only if the beneficiary is male. Our results suggest that variation in beneficiaries number and gender plays a relevant role in explaining pension positive spillovers to households with no elderly. |
| Keywords: | Consumption, labour supply, living arrangements, poverty, regression discontinuity, Renta Dignidad, social pension |
| JEL: | D13 H2 J22 J26 |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:ivi:wpasad:2016-02&r=lma |
| By: | Christopher Avery; Brian Cadman; Gavin Cassar |
| Abstract: | We analyze the promotions and firings of NCAA Division 1 college basketball and college football coaches to assess whether these coaches are rewarded for the academic performance of their players in promotion and retention decisions. We find that an increase in Academic Progress Rate, as measured by the NCAA, for a college team in either sport significantly reduces the probability that the coach is fired at the end of the season. We find little to no evidence that an increase in the Academic Progress Rate enhances the chances of advancement (in the form of outside job offers) for these coaches. |
| JEL: | I20 I23 J24 M51 |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:22120&r=lma |
| By: | Azmat, Ghazala (Queen Mary, University of London); Bagues, Manuel F. (Aalto University); Cabrales, Antonio (University College London); Iriberri, Nagore (University of the Basque Country) |
| Abstract: | This paper studies the effect of providing feedback to college students on their position in the grade distribution by using a randomized control experiment. This information was updated every six months during a three-year period. In the absence of treatment, students' underestimate their position in the grade distribution. The treatment significantly improves the students' self-assessment. We find that treated students experience a significant decrease in their educational performance, as measured by their accumulated GPA and number of exams passed, and a significant improvement in their self-reported satisfaction, as measured by survey responses obtained after information is provided but before students take their exams. Those effects, however, are short lived, as students catch up in subsequent periods. Moreover, the negative effect on performance is driven by those students who underestimate their position in the absence of feedback. Those students who overestimate initially their position, if anything, respond positively. |
| Keywords: | relative performance feedback, ranking, randomized field experiment, school performance |
| JEL: | J71 J44 |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp9853&r=lma |
| By: | Doorley, Karina (LISER (CEPS/INSTEAD)); Pestel, Nico (IZA) |
| Abstract: | This paper examines the effect of wealth on labour market behaviour. Providing convincing evidence on this relationship is challenging since wealth and labour supply may be endogenously determined. We overcome this by looking at wealth shocks in the form of inheritances, distinguishing between unanticipated and anticipated inheritances. We provide a theoretical framework which outlines how an individual's labour market behaviour may be expected to react to a wealth shock under different circumstances including perfect/imperfect anticipation and a credit constrained environment. We test our model predictions using rich household and individual level micro-data for Germany. We find that women decrease their hours of work in response to an inheritance. Both men and women are more likely to stay self-employed after a large inheritance and male entrepreneurs are also more likely to recruit. The effect of inheritances on the self-employed is amplified for those who are credit constrained. The magnitude of these effects is similar for anticipated and unanticipated inheritances but the timing varies, with effects visible before the event in the case of anticipated inheritances. |
| Keywords: | inheritance, wealth, labour supply, self-employment, Germany |
| JEL: | D31 J22 L26 |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp9822&r=lma |
| By: | Böckerman, Petri (Labour Institute for Economic Research); Laaksonen, Seppo (University of Helsinki); Vainiomäki, Jari (University of Tampere) |
| Abstract: | We perform decompositions and regression analyses that test the routinization hypothesis and implied job polarization at the firm level. Prior studies have focused on the aggregate, industry or local levels. Our results for the abstract and routine occupation groups are consistent with the routinization hypothesis at the firm level. The observed changes are linked to ICT adoption. Thus, disappearing middle-level (routine) work can be traced to firm-level technological change. |
| Keywords: | skill-biased technological change, job polarization, routinization |
| JEL: | J23 J24 J31 O33 |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp9851&r=lma |
| By: | James Harrigan; Ariell Reshef; Farid Toubal |
| Abstract: | Using administrative employee-firm-level data on the entire private sector from 1994 to 2007, we show that the labor market in France has polarized: employment shares of high and low wage occupations have grown, while middle wage occupations have shrunk. During the same period, the share of hours worked in technology-related occupations ("techies") grew substantially, as did imports and exports, and we explore the causal links between these trends. Our paper is among the first to analyze polarization in any country using firm-level data, and we show how polarization occured within firms, but mostly due to changes in the composition of firms (between firms). Motivated by the fact that technology adoption is mediated by technically qualified managers and technicians, we use a new measure of the propensity of a firm to adopt new technology: its employment share of techies. Using the subsample of firms that are active over the whole period, we show that firms with more techies in 2002 saw greater polarization, and grew faster, from 2002 to 2007. Offshoring reduced employment growth. Among blue-collar workers in manufacturing, importing caused skill upgrading while exporting caused skill downgrading. To control for the endogeneity of firm-level techies and trade in 2002, we use values of techies and trade from 1994 to 1998 as instruments. We conclude that technological change, mediated through techies, is an important cause of polarization in France. Firm-level trade had important effects in manufacturing. |
| JEL: | D3 F1 F16 J2 O3 |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:22110&r=lma |
| By: | Lake, James (Southern Methodist University); Millimet, Daniel L. (Southern Methodist University) |
| Abstract: | Using US local labor markets between 1990 and 2010, we analyze the heterogeneous impact of rising trade exposure on employment growth of 'good' and 'bad' jobs. Three salient findings emerge. First, rising local exposure to import competition, via falling US tariffs or rising Chinese import penetration, reduces (increases) employment growth of bad (good) jobs. Conversely, improved local access to export markets, via falling foreign tariffs, increases (reduces) employment growth of bad (good) jobs. Second, falling US tariff protection is substantially more important, economically and statistically, than rising Chinese import penetration. Third, globalization generates occupational polarization but not job polarization. |
| Keywords: | trade liberalization, China, local labor markets, job polarization, occupational polarization |
| JEL: | F13 J21 J31 |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp9814&r=lma |
| By: | Jean-Michel Grandmont (ICEF, Department of Economics, University Ca' Foscari di Venezia at San Giobbe, Italy) |
| Abstract: | This work introduces a new mechanism that is able to generate procyclical comovements of aggregate labor productivity, employment and real wages, through endogenous variations of workers' effort, in a simple model involving structural unemployment, efficiency wages, financial market imperfections and expectations driven conditionally heteroskedastic sunspots business cycles, near a locally indeterminate steady state. Owing to imperfect effort monitoring, workers' effort level equates their disutility of effort to their expected utility gain of not shirking, in terms of their earned real income, and of the resulting anticipated random consumption. A positive current (consumption) sunspot shock generates a countercyclical uncertainty shock, i.e. a drecrease of the anticipated sunspot volatility, and makes risk averse workers more willing to provide "precautionary effort" by increasing their expected utility gain of not shirking. If workers' relative prudence is small and decreasing fast near the steady state, profit maximizing firms' choice of effciency wage contracts generates significant endogenous procyclical variations of effort and employment, in particular when the capital-efficient labor elasticity of substitution is smaller than 1. |
| Keywords: | Efficiency wages, Unemployment, Expectation driven business cycles, Conditionally heteroskedastic sunspots, Countercyclical uncertainty shocks, Prudence, Procyclical labor effort and productivity |
| JEL: | E00 E24 E32 J41 |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:kob:dpaper:dp2016-14&r=lma |
| By: | Matteo Foschi |
| Abstract: | I analyse the optimal contracting behaviour of an employer who faces workers with different, incorrect beliefs about their own productivity. While the literature has focused mostly on the exploitative (when the principal knows agents’ types, Eliaz and Spiegler, 2006) and speculative (when the principal has priors on agents’ types, Eliaz and Spiegler, 2008) aspects of contracts, I introduce the assumption that workers’ naïveté depends on their actual productivity level. The employer uses this information to form posteriors on agents’productivity and design more efficient contracts. In particular, I highlight the employer’s trade-off between exploiting strongly naïve workers and designing efficient contracts for the most widespread type of worker, according to her posteriors. |
| Keywords: | Self-Awareness, Naïveté, Contract, Screening, Non-Common Priors, Mechanism Design, Multidimensional Types. |
| JEL: | D42 D82 D84 D86 J41 |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:lec:leecon:16/03&r=lma |
| By: | David de la Croix; Matthias Doepke; Joel Mokyr |
| Abstract: | In the centuries leading up to the Industrial Revolution, Western Europe gradually pulled ahead of other world regions in terms of technological creativity, population growth, and income per capita. We argue that superior institutions for the creation and dissemination of productive knowledge help explain the European advantage. We build a model of technological progress in a pre-industrial economy that emphasizes the person-to-person transmission of tacit knowledge. The young learn as apprentices from the old. Institutions such as the family, the clan, the guild, and the market organize who learns from whom. We argue that medieval European institutions such as guilds, and specific features such as journeymanship, can explain the rise of Europe relative to regions that relied on the transmission of knowledge within extended families or clans. |
| JEL: | E02 J24 N10 N30 O33 O43 |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:22131&r=lma |
| By: | W. Bentley MacLeod |
| Abstract: | The purpose of this essay is to discuss the “human capital” approach to inference. Observed decisions by experts can be used to organize data on their decisions using simple machine learning techniques. The fact that the human capital of these experts is heterogeneous implies that errors in decision making are inevitable, which in turn allows us to identify the conditional average treatment effect for a wider class of situations than would be possible with randomized control trials. This point is illustrated with some data from medical decision making in the context of treating depression, heart disease, and adverse childbirth events. |
| JEL: | C1 I1 I18 J24 |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:22123&r=lma |