nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2016‒05‒08
thirteen papers chosen by
Joseph Marchand
University of Alberta

  1. Disability Insurance Benefits and Labor Supply Choices: Evidence from a Discontinuity in Benefit Awards By Müller, Tobias; Boes, Stefan
  2. Worker flows and Labour Market Adjustment during the Great Recession:Evidence from a Large Shock By Hartmut Lehmann; Tiziano Razzolini; Anzelika Zaiceva
  3. Your Retirement and My Health Behaviour: Evidence on Retirement Externalities from a Fuzzy Regression Discontinuity Design By Müller, Tobias; Shaikh, Mujaheed
  4. Returns To ITC Skills By Oliver Falck; Alexandra Heimisch; Simon Wiederhold
  5. GVCs, Jobs And Routine Content Of Occupations By Luca Marcolin; Sébastien Miroudot; Mariagrazia Squicciarini
  6. Entrepreneurial Choices of Initial Human Capital Endowments and New Venture Success By Vera Rocha; Mirjam van Praag; Timothy B. Folta; Anabela Carneiro
  7. Does home production drive structural transformation? By Alessio Moro; Solmaz Moslehi; Satoshi Tanaka
  8. Labor Market Effects of US Sick Pay Mandates By Pichler, Stefan; Ziebarth, Nicolas R.
  9. High Times: The Effect of Medical Marijuana Laws on Student Time Use By Chu, Yu-Wei Luke; Gershenson, Seth
  10. The Importance of Family Income in the Formation and Evolution of Non-Cognitive Skills in Childhood By Jason Fletcher; Barbara L. Wolfe
  11. The Long-term Consequences of Teacher Discretion in Grading of High-stakes Tests By Rebecca Diamond; Petra Persson
  12. The Agricultural Origins of Time Preference By Galor, Oded; Özak, Ömer
  13. Bank Capital Pressures, Loan Substitutability, and Nonfinancial Employment By Lee, Seung Jung; Stebunovs, Viktors

  1. By: Müller, Tobias; Boes, Stefan
    Abstract: This paper explores the effects of disability insurance (DI) benefits on the labor market decision of existing DI beneficiaries using a fuzzy regression discontinuity (RD) design. We identify the effect of DI benefits on the decision of working full-time, part-time or staying out of the labor force by exploiting a discontinuity in the DI benefit award rate above the age of 55. Overall, our results suggest that the Swiss DI system creates substantial lock-in effects which heavily influence the labor supply decision of existing beneficiaries: the benefit receipt increases the probability of working part-time by about 41%-points, decreases the probability of working full-time by about 42%-points but has little or no effects on the probability of staying out of the labor force for the average beneficiary. Therefore, DI benefits induce a shift in the labor supply of existing beneficiaries in the sense that they reduce their work intensity from working full-time to part-time which adds a possible explanation for the low DI outflow observed all across the OECD.
    Keywords: Disability insurance benefits; Labor market participation; Fuzzy regression discontinuity design Endogenous switching models; Maximum simulated likelihood
    JEL: C35 C36 J22
    Date: 2016
  2. By: Hartmut Lehmann; Tiziano Razzolini; Anzelika Zaiceva
    Abstract: This paper analyzes how the labor market adjusts to the Great Recession. To this aim, we use the data for Latvia, a country that have experienced one of the most severe recessions in Europe and a subsequent remarkable recovery. Employing longitudinal EU SILC data and a panel data set constructed by us from various waves of the Latvian Labour Force Survey (LLFS), we estimate worker transitions between labor market states. Labor market adjustment takes place predominantly at the extensive margin since it is driven by flows from permanent wage employment to unemployment. We also show that older, non-Latvian and above all less skilled workers are especially hard hit by the economic crisis. Estimated transitions between four mutually exclusive occupational groups demonstrate that downward mobility is very limited even during the Great Recession. Finally, wage regressions suggest that job mobility is not associated with increased labour productivity during and immediately after the crisis.
    Keywords: Labour market transitions, job and occupational mobility, Great Recession, Latvia
    JEL: J6 J21 P20 P23
    Date: 2016–04
  3. By: Müller, Tobias; Shaikh, Mujaheed
    Abstract: This paper presents evidence on intra-household retirement externalities by assessing the causal effect of partner's retirement on own health behaviour in Europe. We identify partner's retirement effects by applying a fuzzy regression discontinuity (RD) framework using retirement eligibility as an exogenous instrument for partner's retirement status. Using data from the Survey of Health, Ageing and Retirement in Europe (SHARE) we find that while partner's retirement increases own physical activity, it also increases smoking by up to 7 cigarettes a day and increases alcohol intake by 1-2 drinks per day. Furthermore, we find that physical activity increases only for individuals that are themselves retired pointing toward compensated effects that arise due to husband's and wife's retirement being complements. Similarly, an increase in alcohol intake is observed only if the individuals are themselves retired and an increase in smoking is only observed if the partner is a smoker suggesting mutual positive externalities and leisure complementarities.
    Keywords: Retirement Externalities, Health Behaviour, Fuzzy Regression Discontinuity Design
    JEL: C26 I12 J26
    Date: 2016
  4. By: Oliver Falck; Alexandra Heimisch; Simon Wiederhold
    Abstract: How important is mastering information and communication technologies (ICT) in modern labour markets? We present the first evidence on this question, drawing on unique data that provide internationally comparable information on ICT skills in 19 countries from the OECD Programme for the International Assessment of Adult Competencies (PIAAC). Our identification strategy relies on the idea that Internet access is important in the formation of ICT skills, and we implement instrumental-variable models that leverage exogenous variation in Internet availability across countries and across German municipalities. ICT skills are substantially rewarded in the labour market: returns are at 8% for a onestandard- deviation increase in ICT skills in the international analysis and are almost twice as large in Germany. Placebo estimations show that exogenous Internet availability cannot explain numeracy or literacy skills, suggesting that our identifying variation is independent of a person’s general ability. Our results further suggest that the proliferation of computers complements workers in executing abstract tasks that require ICT skills. Quelle est l'importance de la maîtrise des technologies de l’information et de la communication (TIC) sur les marchés du travail modernes ? Nous présentons ici les premières réponses à cette question, à partir de données uniques offrant des informations comparables à l’échelle internationale sur les compétences en TIC dans 19 pays. Notre stratégie d'identification repose sur l'idée que l'accès à Internet joue un rôle important dans la formation des compétences en TIC, et nous appliquons des modèles à variables instrumentales utilisant la variation exogène de l’accès à Internet entre les pays et entre différentes municipalités allemandes. Les compétences en TIC font l’objet d’une reconnaissance substantielle sur le marché du travail : les rendements s’établissent ainsi à 8 % pour une augmentation d'un écart-type des compétences en TIC dans l'analyse internationale et sont presque deux fois plus élevés en Allemagne. Des estimations placebo montrent qu’un accès exogène à Internet ne constitue pas un facteur explicatif des compétences en numératie ou en littératie, semblant indiquer que notre identification d’une variation est indépendante des aptitudes générales des individus. Nos résultats suggèrent en outre que la multiplication du nombre d’ordinateurs assiste les travailleurs dans l'exécution de tâches abstraites nécessitant des compétences en TIC.
    Keywords: earnings, international comparisons, ICT skills, broadband
    JEL: J31 K23 L96
    Date: 2016–05–05
  5. By: Luca Marcolin; Sébastien Miroudot; Mariagrazia Squicciarini
    Abstract: This work addresses the role of global value chains (GVCs), workforce skills, ICT, innovation and industry structure in explaining employment levels of routine and non-routine occupations. The analysis encompasses 28 OECD countries over the period 2000-2011. It relies on a new country-specific measure of routine intensity built using individual-level information from the OECD Programme for the International Assessment of Adult Competencies (PIAAC) survey, as well as on new industry-level Trade in Value Added (TiVA) indicators of offshoring and domestic outsourcing. The results suggest that employment in all types of occupations positively relate to innovation. With respect to offshoring patterns, a positive correlation is observed between the offshoring of inputs and domestic outsourcing with more routine-intensive jobs. Taken together, the results point to the existence of complex interactions between the routine content of occupations, skills, technology and trade, which do not allow for a neat identification of “winners” and “losers” in a GVC context.
    Keywords: employment, outsourcing, technology, global value chains, offshoring
    JEL: F16 F23 J24 O33
    Date: 2016–04–26
  6. By: Vera Rocha (Copenhagen Business School, Denmark); Mirjam van Praag (Copenhagen Business School, Denmark); Timothy B. Folta (University of Connecticut, United States); Anabela Carneiro (University of Porto, Portugal)
    Abstract: The founder (team)’s human capital is a vital determinant of future firm performance. This is a stylized fact. Less is known about the effect of the human capital of the initial workforce hired by the founder(s). We study the performance consequences of a founder’s choice of the initial workforce’s human capital (quantity and quality), besides the human capital of the founder(s). The analysis is based on matched employer-employee data and covers about 5,300 startups in manufacturing industries founded by individuals coming from employment between 1992 and 2007. We acknowledge that initial hiring decisions are endogenous and correlated with the human capital of the founders and the ownership structure of startups (single founder versus team of founders). Given the stickiness of initial choices, human capital decisions at entry turn out to be a close to irreversible matter with significant implications for post-entry survival and growth of the firm.
    Keywords: Human capital; entrepreneurship; startups; firm performance
    JEL: J24 L26 M13
    Date: 2016–04–22
  7. By: Alessio Moro; Solmaz Moslehi; Satoshi Tanaka
    Abstract: Using new home production data for the U.S., we estimate a model of structural transformation with a home production sector, allowing for both non-homotheticity of preferences and differential productivity growth in each sector. We report two main findings. First, the estimation results show that home services have a lower income elasticity than market services. Second, the slowdown in home labor productivity, started in the late 70s, is a key determinant of the rise of market services. Our counterfactual experiment shows that, without the slowdown, the share of market services would be lower by 5.8% in 2010.
    Keywords: Structural Change, Home Production, Services Sector
    JEL: E20 E21 L16
    Date: 2016–04
  8. By: Pichler, Stefan (ETH Zurich); Ziebarth, Nicolas R. (Cornell University)
    Abstract: This paper exploits temporal and spatial variation in the implementation of US sick pay mandates to assess their labor market consequences. We use the Synthetic Control Group Method (SCGM) and the Quarterly Census of Employment and Wages (QCEW) to estimate the causal effect of mandated sick leave on employment and wages. Our findings do not provide much evidence that employment or wages were significantly affected by the mandates which typically allow employees to earn one hour of paid sick leave per work week, up to seven days per year. Joint tests for all treatment regions let us exclude, with 90% statistical probability, that wages decreased by more than 1% as a result of the mandates. With 92% probability, we can exclude that employment decreased by more than 1%.
    Keywords: sick pay mandates, sick leave, medical leave, employer mandates, employment, wages, synthetic control group, United States, Quarterly Census of Employment and Wages (QCEW)
    JEL: I12 I13 I18 J22 J28 J32
    Date: 2016–04
  9. By: Chu, Yu-Wei Luke (Victoria University of Wellington); Gershenson, Seth (American University)
    Abstract: Twenty-three states and the District of Columbia have passed medical marijuana laws. Previous research shows that these laws increase marijuana use among adults. In this paper, we estimate the effects of medical marijuana laws (MML) on secondary and post-secondary students' time use using time diaries from the American Time Use Survey. We apply a difference-in-differences research design and estimate flexible fixed effects models that condition on state fixed effects and state-specific time trends. We find that on average, part-time college students in MML states spend 42 fewer minutes on homework, 37 fewer minutes attending class, and 60 more minutes watching television than their counterparts in non-MML states. However, we find no effects of MMLs on secondary or full-time college students. These results provide evidence on the mechanisms through which marijuana use affects educational outcomes, young peoples' behavioral responses to MMLs (and reduced costs of obtaining marijuana), and that the impact of MMLs on student outcomes are heterogeneous and stronger among disadvantaged students.
    Keywords: time use, medical marijuana, unintended consequences
    JEL: I18 K32 K42
    Date: 2016–04
  10. By: Jason Fletcher; Barbara L. Wolfe
    Abstract: Little is known about the relationship between family income and children’s non-cognitive (or socio-emotional) skill formation. This is an important gap, as these skills have been hypothesized to be a critical link between early outcomes and adult socioeconomic status. This paper presents new evidence of the importance of family income in the formation and evolution of children’s non-cognitive skills using a recent US panel dataset that tracks children between grades K-5. Findings suggest an important divergence in non-cognitive skills based on family income that accumulates over time and does not seem to be explained by children’s health status differences.
    JEL: I21 J24
    Date: 2016–04
  11. By: Rebecca Diamond; Petra Persson
    Abstract: This paper analyzes the long-term consequences of teacher discretion in grading of high-stakes tests. Evidence is currently lacking, both on which students receive test score manipulation and on whether such manipulation has any real, long-term consequences. We document extensive test score manipulation of Swedish nationwide math tests taken in the last year before high school, by showing significant bunching in the distribution of test scores above discrete grade cutoffs. We find that teachers use their discretion to adjust the test scores of students who have "a bad test day," but that they do not discriminate based on gender or immigration status. We then develop a Wald estimator that allows us to harness quasi-experimental variation in whether a student receives test score manipulation to identify its effect on students' longer-term outcomes. Despite the fact that test score manipulation does not, per se, raise human capital, it has far-reaching consequences for the beneficiaries, raising their grades in future classes, high school graduation rates, and college initiation rates; lowering teen birth rates; and raising earnings at age 23. The mechanism at play suggests important dynamic complementarities: Getting a higher grade on the test serves as an immediate signaling mechanism within the educational system, motivating students and potentially teachers; this, in turn, raises human capital; and the combination of higher effort and higher human capital ultimately generates substantial labor market gains. This highlights that a higher grade may not primarily have a signaling value in the labor market, but within the educational system itself.
    JEL: I20 J24
    Date: 2016–04
  12. By: Galor, Oded; Özak, Ömer
    Abstract: This research explores the origins of the distribution of time preference across regions. It advances the hypothesis, and establishes empirically that geographical variations in the natural return to agricultural investment have had a persistent effect on the distribution of time preference across societies. In particular, exploiting a natural experiment associated with the expansion of suitable crops for cultivation in the course of the Columbian Exchange, the research establishes that pre-industrial agro-climatic characteristics that were conducive to higher return to agricultural investment, triggered selection and learning processes that had a persistent positive effect on the prevalence of long-term orientation in the contemporary era.
    Keywords: Time preference, Delayed Gratification, Economic Growth, Culture, Agriculture, Economic Development, Evolution, Comparative Development, Human Capital, Education, Smoking
    JEL: D14 D9 E2 I12 I25 J24 J26 O1 O3 O4 Z1
    Date: 2016–04–12
  13. By: Lee, Seung Jung; Stebunovs, Viktors
    Abstract: We exploit the cross-state, cross-time variation in bank tangible capital ratios-brought about by bank branch deregulation on a state-by-state basis-to identify the effects of bank capital pressures on employment and firm dynamics during two waves of changes in bank capital regulation. We show that stronger capital pressures temporarily slowed down growth in employment in industries that depend on external finance, retarding growth in the average size of firms rather than in the number of firms. Such effects were particularly strong for smaller firms that may not have had access to national capital and bank loan markets. Our findings indicate that a tightening of capital requirements may have significant real effects, in part because of the lack of substitutes for bank loans.
    Keywords: Bank capital ratios ; bank capital regulation ; loan substitutability ; employment ; firm dynamics
    JEL: G21 G28 G30 J20 L25
    Date: 2016–04

This nep-lma issue is ©2016 by Joseph Marchand. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.