nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2016‒07‒02
fifteen papers chosen by
Joseph Marchand
University of Alberta

  1. Firms and labor market inequality: Evidence and some theory By Card, David; Cardoso, Ana Rute; Heining, Jörg; Kline, Patrick
  2. Looking Good and Looking Smart By Olivier Gergaud; Victor Ginsburgh; florine f. Livat
  3. How Important is Precautionary Labor Supply? By Robin Jessen; David Rostam-Afschar; Sebastian Schmitz
  4. The Effect of Pollution on Worker Productivity: Evidence from Call-Center Workers in China By Tom Chang; Joshua Graff Zivin; Tal Gross; Matthew Neidell
  5. Neighborhood Effects, Peer Classification, and the Decision of Women to Work By Mota, Nuno; Patacchini, Eleonora; Rosenthal, Stuart S.
  6. Training, quality of management and firm level bargaining By Damiani, Mirella; Ricci, Andrea
  7. The Educational Success of China’s Young Generation of Rural-to-Urban Migrants By Pamela Lenton; Lu Yin
  8. A New Approach to an Age-Old Problem: Solving Externalities by Incenting Workers Directly By Greer K. Gosnell; John A. List; Robert Metcalfe
  9. The long-run impact of human capital on innovation and economic development in the regions of Europe. By Claude Diebolt; Ralph Hippe
  10. Informal versus Formal: A Panel Data Analysis of Earnings Gaps in Madagascar By Nordman, Christophe Jalil; Rakotomanana, Faly; Roubaud, François
  11. Matching Workers By Espen R. Moen; Eran Yashiv
  12. Decomposition Analysis of Earnings Inequality in Rural India: 2004-2012 By Khanna, Shantanu; Goel, Deepti; Morissette, René
  13. Monopsonistic Competition, Low-Wage Labour Markets, and Minimum Wages: An Empirical Analysis By Bachmann, Ronald; Frings, Hanna
  14. Because of you I did not give up - How peers affect perseverance By Gerhards, Leonie; Gravert, Christina
  15. Keeping College Options Open: A Field Experiment to Help All High School Seniors Through the College Application Process By Philip Oreopoulos; Reuben Ford

  1. By: Card, David; Cardoso, Ana Rute; Heining, Jörg (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]); Kline, Patrick
    Abstract: "We review the literature on firm-level drivers of labor market inequality. There is strong evidence from a variety of fields that standard measures of productivity - like output per worker or total factor productivity - vary substantially across firms, even within narrowly-defined industries. Several recent studies note that rising trends in the dispersion of productivity across firms mirror the trends in the wage inequality across workers. Two distinct literatures have searched for a more direct link between these two phenomena. The first examines how wages are affected by differences in employer productivity. Studies that focus on firm-specific productivity shocks and control for the non-random sorting of workers to more and less productive firms typically find that a 10% increase in value-added per worker leads to somewhere between a 0.5% and 1.5% increase in wages. A second literature focuses on firm-specific wage premiums, using the wage outcomes of job changers. This literature also concludes that firm pay setting is important for wage inequality, with many studies finding that firm wage effects contribute approximately 20% of the overall variance of wages. To interpret these findings, we develop a model where workplace environments are viewed as imperfect substitutes by workers, and firms set wages with some degree of market power. We show that simple versions of this model can readily match the stylized empirical findings in the literature regarding rent-sharing elasticities and the structure of firm-specific pay premiums." (Author's abstract, IAB-Doku) ((en))
    Keywords: Unternehmen, Produktivitätsunterschied, Lohnunterschied, Einkommenseffekte, abhängig Beschäftigte, Wertschöpfung, Arbeitsplatzwechsel, zwischenbetriebliche Mobilität, Lohnfindung, Betrieb, Lohntheorie, Gewinnbeteiligung, qualifikationsspezifische Faktoren
    JEL: D22 J31 J42
    Date: 2016–06–13
  2. By: Olivier Gergaud; Victor Ginsburgh; florine f. Livat
    Abstract: We analyze the link existing between perceived intelligence and perceived beauty. Here, perceived beauty encompasses a set of personal characteristics as suggested by Hakim’s (2010) erotic capital that allows to consider human capital in a broad sense including several dimensions of attractiveness and attitude and not only facial cues. The analysis is based on original survey data collected and compiled by Epoll Market Research that provides thorough information on how 3,620 American celebrities are perceived by a representative sample of the American population. These celebrities are prominent people in fields like cinema, sports, music, business, politics, etc. We correlate intelligence scores with scores on eleven available physical attributes linked with physical beauty (attractive, beautiful, charming, classy, cute, exciting, glamorous, handsome, physically fit, sexy, and stylish). Results show that being judged classy or charming is positively associated with intelligence whereas looking cute, physically fit, or sexy sends a negative signal about cognitive skills. Since pictures of celebrities are also shown (at random) at half of the participants of the surveys, we can also draw causal inferences on how this “natural experiment” changes perception and correlations.
    Keywords: perceived beauty cues; perceived intelligence; celebrities; natural experiment; survey data
    JEL: J24
    Date: 2016–06
  3. By: Robin Jessen (Freie Universitaet Berlin); David Rostam-Afschar (Freie Universitaet Berlin); Sebastian Schmitz (Freie Universitaet Berlin)
    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: 2016–06–03
  4. By: Tom Chang; Joshua Graff Zivin; Tal Gross; Matthew Neidell
    Abstract: We investigate the effect of pollution on worker productivity in the service sector by focusing on two call centers in China. Using precise measures of each worker’s daily output linked to daily measures of pollution and meteorology, we find that higher levels of air pollution decrease worker productivity by reducing the number of calls that workers complete each day. These results manifest themselves at commonly found levels of pollution in major cities throughout the developing and developed world, suggesting that these types of effects are likely to apply broadly. When decomposing these effects, we find that the decreases in productivity are explained by increases in time spent on breaks rather than the duration of phone calls. To our knowledge, this is the first study to demonstrate that the negative impacts of pollution on productivity extend beyond physically demanding tasks to indoor, white-collar work.
    JEL: J22 J24 Q51 Q53
    Date: 2016–06
  5. By: Mota, Nuno (Fannie Mae); Patacchini, Eleonora (Cornell University); Rosenthal, Stuart S. (Syracuse University)
    Abstract: We examine the influence of neighborhood peer effects on the decision of women to work using panel data that follows clusters of adjacent homes between 1985-1993. Modeling assumptions imply rank order restrictions that enable us to classify individuals into peer groups while identifying peer effects and underlying mechanisms. For women, peer effects influence labor supply in part because women appear to emulate the work behavior of nearby women with similar age children. For men, peer effects are mostly absent, consistent with inelastic work decisions. Geographically concentrated panel data are crucial for these estimates. Our approach could also be applied to other instances in which neighborhood peer effects are important.
    Keywords: neighborhood peer effects, female labor supply
    JEL: R2 J2
    Date: 2016–06
  6. By: Damiani, Mirella; Ricci, Andrea
    Abstract: Abstract The double aim of this paper is to investigate the link between firm training behaviour and the adoption of performance-related pay (PRP) and to verify how the quality of management contributes to explaining the strength of this link. Using Ordinary Least Squares Estimates and Fixed Effect Estimates for a sample of Italian firms, we find that training is a significant determinant of firm level bargaining on PRP. Furthermore, we find that managerial quality plays a significant positive role and suggest that this is because managerial quality favours the evolution of social norms based on wage bonuses that enhance trust, sustain collaborative relationships and motivate co-workers to train each other. Jel Classifications: M53; M52; J50; I20
    Keywords: Keywords: Training; Compensation; Management; Education
    JEL: J3 J33 M52 M53
    Date: 2016–06–21
  7. By: Pamela Lenton (Department of Economics, University of Sheffield); Lu Yin (Department of Economics, University of Sheffield)
    Abstract: The education policies introduced in the rural areas of China following the end of the ‘cultural revolution’ resulted in an improved provision of educational institutions along with better quality teachers which increased the educational attainment of young rural migrants and raised their career aspirations. This paper uses data from the Rural-Urban Migration in China (RUMiC) dataset for 2009, in a novel examination of the wage returns to schooling for young and old generations of rural-migrant and urban workers in order to ascertain whether the improved schooling has led to better outcomes. Another novel feature is the examination of the wage returns to over-, required and under-education. We find evidence that the wage return to schooling for young rural-to-urban migrants is larger than that for older migrant workers and that the return to schooling for young urban residents is lower than that of older workers. There is evidence of young migrants receiving a wage premium where they are overeducated for their job.
    Keywords: Human Capital; Rural-to-Urban Migration; Discrimination; Wage returns
    JEL: I26 J24 J71
    Date: 2016–06
  8. By: Greer K. Gosnell; John A. List; Robert Metcalfe
    Abstract: Understanding motivations in the workplace remains of utmost import as economies around the world rely on increases in labor productivity to foster sustainable economic growth. This study makes use of a unique opportunity to “look under the hood” of an organization that critically relies on worker effort and performance. By partnering with Virgin Atlantic Airways on a field experiment that includes over 40,000 unique flights covering an eight-month period, we explore how information and incentives affect captains’ performance. Making use of more than 110,000 captain-level observations, we find that our set of treatments—which include performance information, personal targets, and prosocial incentives—induces captains to improve efficiency in all three key flight areas: pre-flight, in-flight, and post-flight. We estimate that our treatments saved between 266,000-704,000 kg of fuel for the airline over the eight-month experimental period. These savings led to between 838,000-2.22 million kg of CO2 abated at a marginal abatement cost of negative $250 per ton of CO2 (i.e. a $250 savings per ton abated) over the eight-month experimental period. Methodologically, our approach highlights the potential usefulness of moving beyond an experimental design that focuses on short-run substitution effects, and it also suggests a new way to combat firm-level externalities: target workers rather than the firm as a whole.
    JEL: D01 J3 Q5 R4
    Date: 2016–06
  9. By: Claude Diebolt; Ralph Hippe
    Abstract: Human capital is supposed to be an important factor for innovation and economic development. However, the long-run impact of human capital on current innovation and economic development is still a black box, in particular at the regional level. Therefore, this paper makes the link between the past and the present. Using a large new dataset on regional human capital and other factors in the 19th and 20th century, we find that past regional human capital is a key factor explaining current regional disparities in innovation and economic development.
    Keywords: Human Capital, Economic Development, Innovation, Regions, Europe.
    JEL: I25 N90 O18 R11
    Date: 2016
  10. By: Nordman, Christophe Jalil (IRD, DIAL, Paris-Dauphine); Rakotomanana, Faly (National Institute of Statistics (INSTAT)); Roubaud, François (IRD, DIAL, Paris-Dauphine)
    Abstract: Little is known about the informal sector's income structure vis-à-vis the formal sector, despite its predominant economic weight in developing countries. While most of the papers on this topic are drawn from (emerging) Latin American, Asian or some African countries, Madagascar represents an interesting case. So far, very few studies in general, even less so in Sub-Saharan Africa, used panel data to provide evidence of the informal sector heterogeneity. Taking advantage of the 1-2-3 Surveys in Madagascar, a four-wave panel dataset (2000-2004), we assess the magnitude of various formal/informal sector earnings gaps. Is there an informal sector job earnings penalty? Do some informal sector jobs provide pecuniary premiums and which ones? Do possible gaps vary along the earnings distribution? Ignoring distributional issues is indeed a strong limitation, given the compound question of how informality affects earnings inequality. We address heterogeneity issues at three different levels: the worker, the employment status (wage employment vs. self-employment) and the earnings distribution. Standard earnings equations are estimated at the mean and at various conditional quantiles of the earnings distribution. The results suggest that the sign and magnitude of the formal-informal sector earnings gaps highly depend on the workers' employment status and on their relative position in the earnings distribution. In the case of a poor and fragile country like Madagascar, these findings provide new and robust empirical backups for the existence of a mix between the traditional exclusion vs. exit hypotheses of the informal sector.
    Keywords: informal sector, earnings gap, transition matrix, panel data, Madagascar
    JEL: J21 J23 J24 J31 O17
    Date: 2016–05
  11. By: Espen R. Moen (Økonomisk institutt Universitetet i Oslo); Eran Yashiv (Tel Aviv University; Centre for Macroeconomics (CFM))
    Abstract: This paper studies the matching of workers within the firm when the productivity of workers depends on how well they match with their co-workers. The firm acts as a coordinating device and derives value from this role. It is shown that a worker's contribution to firm value changes over time in a non-trivial way as co-workers are replaced by new workers. The paper derives optimal hiring and replacement policies, including an optimal stopping rule, and characterizes the resulting equilibrium in terms of worker flows, firm output and the distribution of firm values. Simulations of the model reveal a rich pattern of worker turnover dynamics and their connections to the resulting firm values distribution. The paper stresses the role of horizontal differences in worker productivity, which are different from vertical, assortative matching issues. It derives the rent from organizational capital, with worker complementarities playing a key role. We compare the model to match-specific productivity models and explore the essential differences, with the emphasis laid on worker interactions and complementarities.
    Keywords: Worker interactions, Firm value, Complementarity, Worker value, Organizational capital, Salop circle, Hiring, Firing, Match Quality, Optimal Stopping.
    JEL: E23 E24 D23 J24
    Date: 2016–06
  12. By: Khanna, Shantanu (University of Delhi); Goel, Deepti (Delhi School of Economics); Morissette, René (Statistics Canada)
    Abstract: We analyze the changes in earnings of paid workers (wage earners) in rural India from 2004/05 to 2011/12. Real earnings increased at all percentiles, and the percentage increase was larger at the lower end. Consequently, earnings inequality declined. Recentered Influence Function decompositions show that throughout the earnings distribution, except at the very top, both changes in 'worker characteristics' and in 'returns to these characteristics' increased earnings, with the latter having played a bigger role. Decompositions of inequality measures reveal that although the change in characteristics had an inequality increasing effect, chiefly attributable to increased education levels, inequality declined because workers at lower quantiles experienced greater improvements in returns to their characteristics than those at the top.
    Keywords: earnings, inequality, earnings distribution, rural India
    JEL: J30 J31 O53
    Date: 2016–05
  13. By: Bachmann, Ronald (RWI); Frings, Hanna (RWI)
    Abstract: This paper investigates the degree of monopsony power of employers in different industries against the background of a statutory minimum wage introduction in Germany in January 2015. A semi-structural estimation approach is employed based on a dynamic model of monopsonistic competition. The empirical analysis relies on a linked employer-employee data set which allows to control for heterogeneity both on the worker and on the firm side. The results show important differences in monopsonistic competition among low-wage industries: While retailing, the hotel and restaurant industry as well as agriculture can be described as monopsonistic labour markets, this is not true for other services and manufacturing of food products. From a policy point of view, the introduction of a uniform minimum wage may therefore lead to different employment reactions in industries with a similar minimum wage bite.
    Keywords: monopsony, minimum wage, low-wage industries, labor-supply elasticities, Germany
    JEL: J42 J31 J38
    Date: 2016–05
  14. By: Gerhards, Leonie (Department of Economics, University of Hamburg); Gravert, Christina (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: Various empirical papers have shown that peers affect productivity and behavior in the workplace. However, the mechanisms through which peers influence each other are still largely unknown. In this laboratory experiment we study a situation in which individuals might look at their peers' behavior to motivate themselves to endure in a task that requires perseverance. We test the impact of unidirectional peer effects under individual monetary incentives, controlling for ability and tactics. We find that peers significantly increase their observers' perseverance, while knowing about being observed does not significantly affect behavior. In a second experiment we investigate the motives to self-select into the role of an observing or an observant subject and what kind of peers individuals deliberately choose. Our findings provide first insights on the perception of peer situations by individuals and new empirical evidence on how peer groups emerge.
    Keywords: grit; perseverance; laboratory experiment; peer effects; real effort
    JEL: C91 D03 J24 M50
    Date: 2016–06
  15. By: Philip Oreopoulos; Reuben Ford
    Abstract: Recent research suggests that the college application process itself prevents access. This paper reports results from a large school-based experiment in which application assistance is incorporated into the high school curriculum for all graduating seniors at low-transition schools. Over three workshops, students were guided to pick programs of interest that they were eligible for, apply for real, and complete the financial aid application. The goal was to create a college option for exiting students to make the transition easier and more salient. On average, the program increased application rates from 64 to 78 per cent. College enrolment increased the following school year by 5.2 percentage points with virtually all of this increase in two-year community college programs. The greatest impact was for students who were not taking any university-track courses in high school: the application rate for these students increased by 24 percentage points with a nine per cent increase in two-year college enrolment. A second experiment was conducted two years later to explore several variations of the program. Offering personal assistance without waiving application fees had a negligible or even negative impact on applications and enrollment. Using laptops in homeroom classrooms instead of sending students to computer labs while combining the initial 2 workshops into one full-morning session increased application rates. However, subsequent enrollment effects were negligible. We provide some evidence consistent with the possibility that decreased guidance in choosing eligible programs was responsible for the second-experiment's decline in enrollment impacts.
    JEL: I20 I23 I28 J20
    Date: 2016–06

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