nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2016‒04‒16
fourteen papers chosen by
Joseph Marchand
University of Alberta

  1. Asymmetric information in external versus internal promotions By Bossler, Mario; Grunau, Philipp
  2. Cognitive Skills, Non-Cognitive Skills, and Family Background: Evidence from Sibling Correlations By Silke Anger; Daniel D. Schnitzlein
  3. The Production of Human Capital in Developed Countries: Evidence from 196 Randomized Field Experiments By Roland G. Fryer, Jr
  4. Optimal Contracting with Subjective Evaluation: The Effects of Timing, Malfeasance and Guile By W. Bentley MacLeod; Teck Yong Tan
  5. Productivity Trends in the Canadian Transport Sector: An Overview By Matthew Calver; Fanny McKellips
  6. Heterogeneous effects of high school peers on educational outcomes By Mendolia, Silvia; Paloyo, Alfredo R.; Walker, Ian
  7. Changing fortunes during economic transition: Low-wage persistence before and after German unification By Gürtzgen, Nicole; Nolte, André
  8. Wellbeing Evidence for the Assessment of Progress By Anand, Paul; Roope, Laurence; Peichl, Andreas
  9. Incidence, Optimal Use and Rationale of Place-Based Job Creation Programs By Sachiko Kazekami
  10. Domestic Outsourcing in the United States: A Research Agenda to Assess Trends and Effects on Job Quality By Annette Bernhardt; Rosemary L. Batt; Susan Houseman; Eileen Appelbaum
  11. A Stable 4% Inflation Could Get Canadians One Half Million More Jobs By Pierre Fortin
  12. Consumption Taxes and Divisibility of Labor under Incomplete Markets By Tomoyuki Nakajima; Shuhei Takahashi
  13. Historical trades, skills and agglomeration economies By Ehrl, Philipp; Monteiro Monasterio, Leonardo
  14. Spanish real wages in the Northern-Western European mirror, 1500-1800. On the timings and magnitude of the Little Divergence in Europe. By Ernesto López Losa; Santiago Piquero Zarauz

  1. By: Bossler, Mario (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]); Grunau, Philipp (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany])
    Abstract: "Individuals have two possible channels through which to obtain a managerial position: external and internal promotions. Employing the revised German Employment Register, we compare external and internal promotions by using multinomial logit regressions while accounting for workplace heterogeneity. Individual characteristics are hypothesized to exert differential effects because of their observability within and across workplaces. We find that actual working hours are a more important source of information for internal versus external promotions. By contrast, formal vocational degrees and initial job task complexity, which are also externally observed, are a relatively more important signal for external promotions. Consistent with statistical discrimination, women and foreigners face a more pronounced disadvantage in external promotions. For women, this differential effect is fully driven by promotions to executive positions characterized by high task complexity. Moreover, actual working hours show a strong positive interaction effect on women's prospects of promotion." (Author's abstract, IAB-Doku) ((en))
    Keywords: beruflicher Aufstieg - Determinanten, interner Arbeitsmarkt, zwischenbetriebliche Mobilität, Beschäftigtenstatistik, Führungskräfte, Berufsnachwuchs, berufliche Qualifikation, Arbeitszeit, Beförderung, Tätigkeitsmerkmale, Frauen, Ausländer, Entscheidungsfindung, Personalauswahl
    JEL: J41 J70 M12 M51
    Date: 2016–03–31
  2. By: Silke Anger; Daniel D. Schnitzlein
    Abstract: This paper estimates sibling correlations in cognitive and non-cognitive skills to evaluate the importance of family background for skill formation. Based on a large representative German dataset including IQ test scores and measures of non-cognitive skills, a restricted maximum likelihood model indicates a strong relationship between family background and skill formation. Sibling correlations in non-cognitive skills range from 0.22 to 0.46; therefore, at least one-fifth of the variance in these skills results from shared sibling-related factors. Sibling correlations in cognitive skills are higher than 0.50; therefore, more than half of the inequality in cognition can be explained by shared family background. Comparing these findings with those in the intergenerational skill transmission literature suggests that intergenerational correlations capture only part of the influence of family on children’s cognitive and non-cognitive skills, as confirmed by decomposition analyses and in line with previous findings on educational and income mobility.
    Keywords: Sibling correlations, family background, non-cognitive skills, cognitive skills, intergenerational mobility
    JEL: J24 J62
    Date: 2016
  3. By: Roland G. Fryer, Jr
    Abstract: Randomized field experiments designed to better understand the production of human capital have increased exponentially over the past several decades. This chapter summarizes what we have learned about various partial derivatives of the human capital production function, what important partial derivatives are left to be estimated, and what – together – our collective efforts have taught us about how to produce human capital in developed countries. The chapter concludes with a back of the envelope simulation of how much of the racial wage gap in America might be accounted for if human capital policy focused on best practices gleaned from randomized field experiments.
    JEL: I0 J0 J38
    Date: 2016–03
  4. By: W. Bentley MacLeod; Teck Yong Tan
    Abstract: We introduce a general Principal-Agent model with subjective evaluation and malfeasance characterized by two-sided asymmetric information on performance that allows for an arbitrary information structure. Two generic contract forms are studied. An authority contract has the Principal reveal his information before the Agent responds with her information. Under such a contract, the Agent's compensation varies only with the Principal's information, while her information is used to punish untruthful behavior by the Principal. Conversely, a sales contract has the Agent reveal her information first. In this case, the Agent's performance incentives are affected by the information revealed by both parties. Because the Agent's information affects her compensation, the information revelation constraints are more complex under a sales contract, and provide a way to integrate Williamson's (1975) notion of guile into agency theory. We find that designing sales contracts for expert agents, such as physicians and financial advisors, are significantly more complex than designing optimal authority contracts.
    JEL: D86 J33 J41
    Date: 2016–04
  5. By: Matthew Calver; Fanny McKellips
    Abstract: In recent decades, the overall growth in productivity of many subsectors of the Canadian transportation and warehousing sector has been above average. In particular, while labour productivity (real GDP per worker) grew an average of 0.64 per cent per year between 2000 and 2014 in the transportation and warehousing sector, labour productivity grew an average of 1.83 per cent per year in the truck transportation subsector, 3.25 per cent per year in the air transportation subsector and 2.09 per cent in the train transportation subsector for the same period. Conversely, in the urban transit subsector, labour productivity decreased an average of 0.76 per cent per year between 2000 and 2014. This report provides a detailed analysis of output, input and productivity trends in four subsectors of the Canadian transportation and warehousing sector. It also examines drivers of the productivity growth for each subsector as well as policies that could enable faster growth. Given the impact that the transportation sector has on many Canadian industries as well as the Canadian economy, maintaining productivity growth is important.
    Keywords: Transportation, Canada, Productivity, Rail Transportation, Air Transportation, Trucking Transportation, Urban Transit, Public Policy, Technological Change
    JEL: O33 R41 L90 L91 L92 L93 L98
    Date: 2016–04
  6. By: Mendolia, Silvia; Paloyo, Alfredo R.; Walker, Ian
    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.
    Abstract: Durch die Zusammenführung des "Longitudinal Study of Young People in England" (LSYPE) Datensatzes und des "National Pupil Database" Datensatzes soll der Zusammenhang von Begabung im Umfeld des Schülers und dessen schulischen Leistungen untersucht werden. Insbesondere konzentriert sich die Untersuchung auf den Effekt von der Begabung des Umfeldes - messbar durch Testergebnisse der (Mit-)Schüler im Alter von 14 Jahren - auf die Wahrscheinlichkeit des Besuchs einer Universität, bzw. auf Testergebnisse im Alter von 16 und 18 Jahren. Die Identifikationsstrategie basiert auf der Messung der Begabung des Umfeldes des Umfeldes der Schüler. Im Speziellen wird das Umfeld derjenigen Schüler, die zusammen mit einem Individuum die High School besucht haben, beleuchtet, indem Schüler ausgewählt werden, die mit diesen - jedoch nicht mit dem Individuum - die Grundschule, jedoch nicht die High School besucht haben. Diese "peers-of-peers" Begabung wird genutzt, indem Testergebnisse im Alter von 14 Jahren mit Testergebnissen im Alter von elf Jahren instrumentiert werden. Weiterhin werden Quantilsregressionen genutzt, um die Höhe des Einflusses von Mitschülern an verschiedenen Punkten der Ergebnisverteilung herauszuarbeiten. Die Ergebnisse zeigen, dass die Begabung der Mitschüler einen leichten Einfluss auf die Testergebnisse mit 16 bzw. 18 Jahren hat. Besonders groß ist der negative Einfluss auf die Ergebnisse eines Individuums an einer High School mit einem hohen Anteil vergleichsweise "schlechter" Mitschüler. Weiterhin konnte ein stärkerer Effekt auf Schüler am unteren Ende der Notenverteilung festgestellt werden, insbesondere im Alter von 16 Jahren.
    Keywords: peer effects,instrumental variables,test scores
    JEL: I20 J24
    Date: 2016
  7. By: Gürtzgen, Nicole; Nolte, André
    Abstract: This paper studies whether the transition from a centrally planned to a market economy offers new perspectives for those who, in economic terms, were relatively deprived under the old regime. Previous empirical research on this question has been limited by the availability of representative longitudinal micro-data that track individuals' labour market careers across different political regimes. Our study seeks to fill this research gap by looking at the transition of Eastern Germany following German Unification. Using a unique large-scale German administrative data set, we measure individuals' relative economic position by exploiting information on whether individuals were in the bottom of the pre-unification wage distribution. We then address the question of how workers' low or high-wage status determines their wage and labour market status within and across different regimes. We document strong evidence of a dynamic selection process into low-wage employment after Unification. Furthermore, consistent with a weak connection between individuals' true productivity and their pre-unification low-wage status, the extent of across regime state dependence is found to be small in magnitude and appears to vanish over time. For males, the small extent of across regime dependence is found to be most pronounced among the medium and high-skilled, suggesting the depreciation of general human capital as a potential explanation.
    Keywords: Low Pay Dynamics,Economic Transition,State Dependence
    JEL: J31 J64 P21 C33 C35
    Date: 2016
  8. By: Anand, Paul (The Open University); Roope, Laurence (University of Oxford); Peichl, Andreas (ZEW Mannheim)
    Abstract: In recent years considerable interest has developed in going 'beyond GDP' to develop measures of economic progress which are more explicitly based on human wellbeing. This work has been inspired, in part, by Sen's non-utilitarian approach to welfare economics, but has been constrained by a lack of empirical indicators relating to human potential. In this paper, therefore, we develop a framework for understanding wellbeing, drawing closely on Sen's seminal contributions to welfare economics, as well as the economic literature on life satisfaction, and use it to generate novel data for the USA and UK consistent with all the components of the theory. We use these data to illustrate some of the life quality analyses that might follow. Specifically, we investigate how various indicators of capability are distributed by ethnicity and gender, and compare and contrast the types of capability which appear relatively strong/weak within each country. In addition, we consider the extent to which life satisfaction and daily activities depend on resources and non-cognitive skills. The paper concludes that with an expansion of the scope of routinely collected survey data, it is feasible to empirically implement fully Sen's theory to provide a much richer account of the wellbeing outcomes that derive from economic progress than is currently the case.
    Keywords: wellbeing, stochastic dominance, life satisfaction, Sen
    JEL: D60 I31
    Date: 2016–03
  9. By: Sachiko Kazekami (Chukyo University)
    Abstract: First, this paper empirically evaluates the incidence of the Japanese place-based job creation program, which has been rarely studied in Japan. The program increases employment, especially in the agricultural, retail trade and service sectors that most treated cities promote. Second, this paper explores the cities that the program most affects. Those with large aging populations and those with small working age population decrease the effects of the program. Third, this paper assesses the rationale of this program and does not observe a strong reduction in sales, workers or establishments in the neighboring cities of the treated city.
    Keywords: Place-based policy, job creation, unemployment, rationale, externality effect
    JEL: J23 J68 R23 H22 H23
    Date: 2016–03
  10. By: Annette Bernhardt (University of California-Berkeley); Rosemary L. Batt (Cornell University); Susan Houseman (W.E. Upjohn Institute for Employment Research); Eileen Appelbaum (Center for Economic and Policy Research)
    Abstract: The goal of this paper is to develop a comprehensive research agenda to analyze trends in domestic outsourcing in the United States—firms’ use of contractors and independent contractors—and its effects on job quality and inequality. In the process, we review definitions of outsourcing, the available scant empirical research, and limitations of existing data sources. We also summarize theories that attempt to explain why firms contract out for certain functions and assess their predictions about likely impacts on job quality. We then lay out in detail a major research initiative on domestic outsourcing, discussing the questions it should answer and providing a menu of research methodologies and potential data sources. Such a research investment will be a critical resource for policymakers and other stakeholders as they seek solutions to problems arising from the changing nature of work.
    Keywords: Outsourcing, subcontracting, independent contractors, staffing services, earnings inequality, job quality, data limitations, managerial theory
    JEL: L24 L22 J31
    Date: 2016–03
  11. By: Pierre Fortin
    Abstract: The Inflation-Control Agreement between the Government and the Bank of Canada is reviewed and renewed every five years. In this paper, I propose that the upcoming 2016 agreement increase the inflation target by 2 percentage points, from the current 2% to 4%. I first note that the room to stimulate economic activity and employment when the Bank of Canada judges that it is needed has narrowed dangerously in the past 25 years. I argue that the only fully effective means of freeing the Bank from the operational straightjacket into which it has fallen is setting the inflation target at 4% instead of 2%. I then report of evidence that the strong resistance of Canadian employers and employees to money wage cuts generates a significant permanent trade-off between inflation and unemployment at the macro level when inflation is less than 5%. Combining these two strands of observations, I conclude that moving to 4% inflation would generate about one half million more permanent jobs for Canadians and, over time, add some $50 billion per year to domestic income.
    Keywords: Inflation target, zero lower bound, anchoring of expectations, downward nominal wage rigidity, Bank of Canada, inflation-control agreement, monetary policy.
    JEL: E5 E6 H3 J3
    Date: 2016
  12. By: Tomoyuki Nakajima (Institute of Economic Research, Kyoto University and Canon Institute for Global Studies.); Shuhei Takahashi (Institute of Economic Research, Kyoto University)
    Abstract: We analyze lump-sum transfers financed through consumption taxes in a heterogeneous- agent model with uninsured idiosyncratic wage risk and endogenous labor supply. The model is calibrated to the U.S. economy. We find that consumption inequality and uncertainty decrease with transfers much more substantially under divisible than indi- visible labor. Increasing transfers by raising the consumption tax rate from 5% to 35% decreases the consumption Gini by 0.04 under divisible labor, whereas it has almost no effect on the consumption Gini under indivisible labor. The divisibility of labor also affects the relationship among consumption-tax financed transfers, aggregate saving, and the wealth distribution.
    Keywords: Transfers; Consumption taxes; Inequality; Uncertainty; Divisibility of labor; Incomplete markets
    JEL: E62 D31 J22 C68
    Date: 2016–03
  13. By: Ehrl, Philipp; Monteiro Monasterio, Leonardo
    Abstract: We exploit differences in the spatial distribution of industrial and liberal occupations in the years 1872 and 1920 to instrument for today's concentration of interpersonal and analytical skills in Brazil. The data suggest that the local supply of knowledge and manufacturing provided by these historical trades favored a growth path that has shaped the occupational structure until the present day, whereby the existence of a large local consumer market was a necessary condition for this development. By means of these instruments, we present causal evidence that the regional concentration of interpersonal and analytical skills generates positive wage externalities. Particularly university graduates and workers without formal education benefit most from these agglomeration economies.
    Keywords: agglomeration economies, skills, long-run industrial development, Brazil
    JEL: C26 J31 N16 R12
    Date: 2016–04–07
  14. By: Ernesto López Losa (Universidad del País Vasco/Euskal Herriko Unibertsitatea, Spain); Santiago Piquero Zarauz
    Abstract: The aim of this paper is twofold. First, to present a new estimation of real wages for Early Modern Spain with regard to a subsistence line -understood as a theoretical minimum of consumption necessary to meet basic human needs and to sustain an active life. Second, to contribute, with new evidence, to the debate on the economic divergence before the Industrial Revolution. In broad terms, our results describe a general picture of low real wages in Spain in the long run, although there are regional variations in levels and timings that challenge previous perceptions, particularly in the case of urban Castile. In terms of international comparisons, our data suggests different chronologies and magnitudes of the Spanish divergence. As we attempt to demonstrate, two issues conditioned the dimension of the gap on real wages between Spain and the European North-Western core, as displayed in the recent literature. The first is related to the available Spanish evidence; the second deals with some methodological choices in the composition of the subsistence baskets –namely, the “oatmeal effect’. The question we discuss here is whether the Spanish Little Divergence was as great and early as it has been suggested; or, turning it around, whether the European North-west was, in respect of real wages, so exceptional before 1800. Calculations will show that the divergence did not appear clearly until the early 18th century, and that North-western European real wages for labourers were not that far from the bare subsistence line as they appeared to be. Our paper provides some different responses to the issue of the timing of the Spanish divergence and questions the conventional wisdom on its magnitude.
    Keywords: Early Modern Europe, Little Divergence, real wages, subsistence ratios, history of wages and prices.
    JEL: N01 N30 N33 E32 J31
    Date: 2016–03

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