nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2016‒06‒18
fifteen papers chosen by
Joseph Marchand
University of Alberta

  1. International Trade and Job Polarization: Evidence at the Worker-Level By Wolfgang Keller; Hâle Utar
  2. How important is precautionary labor supply? By Jessen, Robin; Rostam-Afschar, Davud; Schmitz, Sebastian
  3. Cognitive skills, non-cognitive skills, and family background: Evidence from sibling correlations By Anger, Silke; Schnitzlein, Daniel D.
  4. Estimation of a Roy/Search/Compensating Differential Model of the Labor Market By Taber, Christopher; Vejlin, Rune Majlund
  5. Green Skills By Davide Consoli; Giovanni Marin; David Poop; Francesco Vona
  6. Public Wages, Public Employment, and Business Cycle Volatility: Evidence from U.S. Metro Areas By Boeing-Reicher, Claire A.; Caponi, Vincenzo
  7. Permanent Jobs, Employment Protection and Job Content By Kahn, Lawrence M.
  8. Can War Foster Cooperation? By Michal Bauer; Christopher Blattman; Julie Chytilová; Joseph Henrich; Edward Miguel; Tamar Mitts
  9. The Changing Nature of Gender Selection into Employment: Europe over the Great Recession By Juan J. Dolado; Cecilia Garcia-Peñalosa; Linas Tarasonis
  10. College Attrition and the Dynamics of Information Revelation By Peter Arcidiacono; Esteban Aucejo; Arnaud Maurel; Tyler Ransom
  11. Peer Quality and the Academic Benefits to Attending Better Schools By Mark Hoekstra; Pierre Mouganie; Yaojing Wang
  12. Coerced Labor in the Cotton Sector: How Global Commodity Prices (Don't) Transmit to the Poor By Danzer, Alexander M.; Grundke, Robert
  13. How Physicians Affect Patients’ Employment Outcomes Through Deciding on Sick Leave Durations By Alexander Ahammer
  14. Symposium on Child Development and Parental Investment: Introduction By Francesconi, Marco; Heckman, James J.
  15. Testing for the Ratchet Effect: Evidence from a Real-Effort Work Task By Cardella, Eric; Depew, Briggs

  1. By: Wolfgang Keller; Hâle Utar
    Abstract: This paper examines the role of international trade for job polarization, the phenomenon in which employment for high- and low-wage occupations increases but mid-wage occupations decline. With employer-employee matched data on virtually all workers and firms in Denmark between 1999 and 2009, we use instrumental-variables techniques and a quasi-natural experiment to show that import competition is a major cause of job polarization. Import competition with China accounts for about 17% of the aggregate decline in mid-wage employment. Many mid-skill workers are pushed into low-wage service jobs while others move into high-wage jobs. The direction of movement, up or down, turns on the skill focus of workers’ education. Workers with vocational training for a service occupation can avoid moving into low-wage service jobs, and among them workers with information-technology education are far more likely to move into high-wage jobs than other workers.
    JEL: F16 I24 J21
    Date: 2016–06
  2. By: Jessen, Robin; Rostam-Afschar, Davud; Schmitz, Sebastian
    Abstract: We quantify the importance of precautionary labor supply using data from the German Socio- Economic Panel (SOEP) for 2001-2012. We estimate dynamic labor supply equations augmented with a measure of wage risk. Our results show that married men choose about 2.5% of their hours of work or one week per year on average to shield against unpredictable wage shocks. This implies that about 26% of precautionary savings are due to precautionary labor supply. If self-employed faced the same wage risk as the median civil servant, their hours of work would reduce by 4%.
    Keywords: wage risk,labor supply,precautionary saving,life cycle,dynamic panel data
    JEL: D91 J22 C23
    Date: 2016
  3. By: Anger, Silke; Schnitzlein, Daniel D.
    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
  4. By: Taber, Christopher (University of Wisconsin-Madison); Vejlin, Rune Majlund (Aarhus University)
    Abstract: In this paper we develop a model capturing key features of the Roy model, a search model, compensating differentials, and human capital accumulation on-the-job. We establish which features of the model can be non-parametrically identified and which cannot. We estimate the model and use it to assess the relative contribution of the different factors for overall wage inequality. We find that Roy model inequality is the most important component accounting for the majority of wage variation. We also demonstrate that there is substantial interaction between the other features – most notably the importance of the job match obtained by search frictions varies from around 9% to around 29% depending on how we account for other features. Compensating differentials and search are both very important for explaining other features of the data such as the variation in utility. Search is important for turnover, but so is compensating differentials: 1/3 of all choices between two jobs would have resulted in a different outcome if the worker only cared about wages.
    Keywords: search, compensating differentials, Roy Model, wage inequality
    JEL: J31 J32 J24
    Date: 2016–05
  5. By: Davide Consoli (INGENIO (CSIC-UPV) (Institute of Innovation and Knowledge Management) (CSIV-UPV)); Giovanni Marin (Scuola Superiore Sant'Anna [Pisa]); David Poop (Syracuse University); Francesco Vona (OFCE)
    Abstract: The catchword ‘green skills’ has been common parlance in policy circles for a while, yet there is little systematic empirical research to guide public intervention for meeting the demand for skills that will be needed to operate and develop green technology. The present paper proposes a data-driven methodology to identify green skills and to gauge the ways in which the demand for these competences responds to environmental regulation. Accordingly, we find that green skills are high-level analytical and technical now-how related to the design, production, management and monitoring of technology. The empirical analysis reveals that environmental regulation triggers technological and organizational changes that increase the demand for hard technical, engineering and scientific skills. Our analysis suggests also that this is not just a compositional change in skill demand due to job losses in sectors highly exposed to trade and regulation.
    Keywords: Green technology; Green skill; Environmental Regulation and Green Skills
    JEL: J24 Q52
    Date: 2015–04
  6. By: Boeing-Reicher, Claire A. (Kiel Institute for the World Economy); Caponi, Vincenzo (CREST)
    Abstract: Based on data from a cross section of U.S. metro areas, we show that public employment correlates negatively with business cycle volatility, hinting at a stabilizing effect of public employment, while public wages correlate weakly and positively with business cycle volatility, hinting at a destabilizing effect of public wages. To explain these relationships, we set up a search and matching model that contains a government sector and a role for government spending in product markets. This latter mechanism affects how the outside option behaves, and this mechanism can help a search and matching model to generate wage-reducing and stabilizing effects of public employment. Without this mechanism, a search and matching model cannot generate these effects.
    Keywords: public employment, public wages, business cycle volatility, crowding out, search and matching
    JEL: E32 E63 J21
    Date: 2016–05
  7. By: Kahn, Lawrence M. (Cornell University)
    Abstract: Using Programme for the International Assessment of Adult Competencies (PIAAC) data for 21 countries, I study the impact of employment protection laws (EPL) on job content. Economic theories predict that stricter protection increases workers' willingness to make firm-specific investments. These theories also predict that stricter protection leads firms to raise their hiring and promotion standards for permanent jobs. Both of these mechanisms predict higher levels of job content in permanent than in temporary jobs; further, it is predicted that stricter EPL increases the gap in job content between permanent and temporary jobs due both to workers' investments and firm hiring standards. I found support for both sets of predictions. First, in almost all cases, workers' self-reported use of influence, reading, writing, planning, numeracy and ict skills, and their task discretion, were higher in permanent than in temporary jobs. Second, stricter EPL raised the gap in job content for influence, reading, writing and planning skills used in permanent jobs vs. temporary jobs, controlling for industry, occupation and human capital. This finding suggests that workers are making firm-specific (or perhaps occupation- or industry- specific) investments that raise their productivity levels and thus warrant higher level job content. These effects became larger when I did not control for industry, occupation, government employment, and human capital variables including schooling, actual labor market experience, cognitive test scores and nativity status. The larger effects of EPL without these controls provide some indirect support for the idea that EPL leads firms to raise their hiring standards.
    Keywords: job content, skills, permanent employment, employment protection laws, temporary jobs
    JEL: J31 J42
    Date: 2016–05
  8. By: Michal Bauer; Christopher Blattman; Julie Chytilová; Joseph Henrich; Edward Miguel; Tamar Mitts
    Abstract: In the past decade, nearly 20 studies have found a strong, persistent pattern in surveys and behavioral experiments from over 40 countries: individual exposure to war violence tends to increase social cooperation at the local level, including community participation and prosocial behavior. Thus while war has many negative legacies for individuals and societies, it appears to leave a positive legacy in terms of local cooperation and civic engagement. We discuss, synthesize and reanalyze the emerging body of evidence, and weigh alternative explanations. There is some indication that war violence especially enhances in-group or "parochial" norms and preferences, a finding that, if true, suggests that the rising social cohesion we document need not promote broader peace.
    JEL: C80 D74 H56 O10 O12 O40
    Date: 2016–06
  9. By: Juan J. Dolado (European University Institute); Cecilia Garcia-Peñalosa (Aix-Marseille University (Aix Marseille School of Economics), EHESS & CNRS); Linas Tarasonis (Aix-Marseille School of Economics (Aix-Marseille University), EHESS & CNRS)
    Abstract: The aim of this paper is to evaluate the role played by selectivity issues induced by nonemployment in explaining gender wage gap patterns in the EU since the onset of the Great Recession. We show that male selection into the labour market, traditionally disregarded, has increased. This is particularly the case in peripheral European countries, where dramatic drops in male unskilled jobs have taken place during the crisis. As regards female selection, traditionally positive, we document mixed findings. While it has declined in some countries, as a result of increasing female LFP due to an added-worker effect, it has become even more positive in other countries. This is due to adverse labour demand shifts in industries which are intensive in temporary work where women are over-represented. These adverse shifts may have more than offset the rise in unskilled female labour supply.
    Keywords: Sample Selection, Gender Wage Gap
    JEL: J31
    Date: 2016–06–01
  10. By: Peter Arcidiacono; Esteban Aucejo; Arnaud Maurel; Tyler Ransom
    Abstract: This paper investigates the role played by informational frictions in college and the workplace. We estimate a dynamic structural model of schooling and work decisions, where individuals have imperfect information about their schooling ability and labor market productivity. We take into account the heterogeneity in schooling investments by distinguishing between two- and four-year colleges, graduate school, as well as science and non-science majors for four-year colleges. Individuals may also choose whether to work full-time, part-time, or not at all. A key feature of our approach is to account for correlated learning through college grades and wages, whereby individuals may leave or re-enter college as a result of the arrival of new information on their ability and productivity. Our findings indicate that the elimination of informational frictions would increase the college graduation rate by 9 percentage points, and would increase the college wage premium by 32.7 percentage points through increased sorting on ability.
    JEL: C35 D83 J24
    Date: 2016–06
  11. By: Mark Hoekstra; Pierre Mouganie; Yaojing Wang
    Abstract: Despite strong demand for attending high schools with better peers, there is mixed evidence on whether doing so improves academic outcomes. We estimate the cognitive returns to high school quality using administrative data on a high-stakes college entrance exam in China. To overcome selection bias, we use a regression discontinuity design that compares applicants barely above and below high school admission thresholds. Results indicate that while peer quality improves significantly across all sets of admission cutoffs, the only increase in performance occurs from attending Tier I high schools. Further evidence suggests that the returns to high school quality are driven by teacher quality, rather than peer quality or class size.
    JEL: I21 I24 I26 J24
    Date: 2016–06
  12. By: Danzer, Alexander M. (Catholic University of Eichstätt-Ingolstadt); Grundke, Robert (University of Munich)
    Abstract: This paper investigates the economic fortunes of coerced vs. free workers in a global supply chain. To identify the differential treatment of otherwise similar workers we resort to a unique exogenous labor demand shock that affects wages in voluntary and involuntary labor relations differently. We identify the wage pass-through by capitalizing on Tajikistan's geographic variation in the suitability for cotton production combined with a surge in the world market price of cotton in 2010/11 in two types of firms: randomly privatized small farms and not yet privatized parastatal farms, the latter of which command political capital to coerce workers. The expansion in land attributed to cotton production led to increases in labor demand and wages for cotton pickers; however, the price hike benefits only workers on entrepreneurial private farms, whereas coerced workers of parastatal enterprises miss out. The results provide evidence for the political economy of labor coercion and for the dependence of the economic lives of many poor on the competitive structure of local labor markets.
    Keywords: coerced labor, export price, price pass-through, cotton, wage, local labor market, Tajikistan
    JEL: J47 J43 F16 O13 Q12
    Date: 2016–05
  13. By: Alexander Ahammer
    Abstract: I analyze how general practitioners (GPs) indirectly a ect their patients’ employment outcomes by deciding on the length of sickness absences. I use an instrumental variables framework where spell durations are identified through supply-side certification measures estimated from the data. I find that a marginal day of sick leave – that is, a day of sick leave which is only certified because a worker’s GP has a high propensity to certify sick leaves – decreases employment probabilities persistently by 0.45 percentage points – 0.69 percentage points up to 18 months after the sick leave. Conversely, the risk of becoming unemployed increases by 0.28 percentage points – 0.44 percentage points due to the additional day of sick leave. These e ects are mostly driven by men with comparably low job tenure and migratory background. Several robustness checks show that identification is not impaired by endogenous matching between patients and GPs. My results bear important implications for doctors: Whenever medically justifiable, it may be beneficial to certify shorter sick leaves in order to protect employment status of the patient.
    Keywords: Sick leave duration; employment; general practitioners; supply-variation
    JEL: I10 J21 J60
    Date: 2016–06
  14. By: Francesconi, Marco (University of Essex); Heckman, James J. (University of Chicago)
    Abstract: This paper introduces the EJ Symposium on Child Development by reviewing the literature and placing the contributions of the papers in the Symposium in the context of a vibrant literature.
    Keywords: child development, education, dynamic complementarity
    JEL: H43 I21 I24 J13 J24
    Date: 2016–05
  15. By: Cardella, Eric (Texas Tech University); Depew, Briggs (Louisiana State University)
    Abstract: The "ratchet effect" refers to a phenomenon where workers whose compensation is based on productivity strategically restrict their output, relative to their capability, because they rationally anticipate that high levels of output will be met with increased or "ratcheted-up" expectations in the future. While there is ample anecdotal evidence suggesting the presence of the ratchet effect in real workplaces, it is difficult to actually empirically identify output restriction among workers. In this study, we implement a novel experimental design using a real-effort work task and a piece-rate incentive scheme to directly test for the presence of the ratchet effect using two different methods for evaluating productivity: (i) when productivity is evaluated based on the output of each individual worker, and (ii) when productivity is evaluated collectively based on the output of a group of workers. We find strong evidence of the ratchet effect when productivity is evaluated at the individual-level. However, we find very little evidence of the ratchet effect when productivity is evaluated collectively at the group-level. We attribute the latter result to the free-riding incentive that emerges when productivity is evaluated at the group-level. Furthermore, we find the ratchet effect re-emerges if workers are able to communicate. Our experimental design, combined with using a real-effort work task, also allows us to shed light on an important dynamic implication of the ratchet effect that has not yet been examined in the literature – the role of the ratchet effect on future productivity via learning-by-doing.
    Keywords: ratchet effect, output restriction, piece-rate pay, real-effort task, learning-by-doing
    JEL: J30 J40 D70 D01 C92
    Date: 2016–06

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