nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2016‒07‒09
fifteen papers chosen by
Joseph Marchand
University of Alberta

  1. Do Returns to Education Depend on How and Who You Ask? By Serneels, Pieter; Beegle, Kathleen; Dillon, Andrew
  2. The Effects of Compulsory Military Service Exemption on Education and Labor Market Outcomes: Evidence from a Natural Experiment By Torun, Huzeyfe; Tumen, Semih
  3. Search and matching frictions and business cycle fluctuations in Bulgaria By Vasilev, Aleksandar
  4. Effects of the Minimum Wage on Infant Health By George Wehby; Dhaval Dave; Robert Kaestner
  5. Youth Employment and Academic Performance: Production Functions and Policy Effects By Holford, Angus J.
  6. Firm-level Total Factor Productivity Growth: Canadian Freight Railways, 1986 to 2009 By James Uguccioni
  7. Pension Incentives and the Retirement Decisions of Couples By Atalay, Kadir; Barrett, Garry
  8. Effects of Credit Supply on Unemployment and Inequality By Bandyopadhyay, Subhayu; Dinopoulos, Elias; Unel, Bulent
  9. Ageing and Literacy Skills: Evidence from IALS, ALL and PIAAC By Barrett, Garry; Riddell, W. Craig
  10. Does the gender composition in couples matter for the division of labor after childbirth? By Moberg, Ylva
  11. The Benefits of Alternatives to Conventional College: Labor-Market Returns to Proprietary Schooling By Jepsen, Christopher; Mueser, Peter R.; Jeon, Kyung-Seong
  12. Returns to Office in National and Local Politics By Kotakorpi, Kaisa; Poutvaara, Panu; Terviö, Marko
  13. The Importance of School Systems: Evidence from International Differences in Student Achievement By Woessmann, Ludger
  14. Can Wage Subsidies Boost Employment in the Wake of an Economic Crisis? Evidence from Mexico By Bruhn, Miriam
  15. Inter-industry labor flows By Neffke, Frank; Otto, Anne; Weyh, Antje

  1. By: Serneels, Pieter (University of East Anglia); Beegle, Kathleen (World Bank); Dillon, Andrew (Michigan State University)
    Abstract: Returns to education remain an important parameter of interest in economic analysis. A large literature estimates returns to education in the labor market, often carefully addressing issues such as selection, both into wage employment and in terms of completed schooling. There has been much less exploration whether estimated returns are robust to survey design. Specifically, do returns to education differ depending on how information about wage work is collected? Using a survey experiment in Tanzania, this paper investigates whether survey methods matter for estimating mincerian returns to education. Results show that estimated returns vary by questionnaire design, but not by whether the information on employment and wages is self-reported or collected by a proxy respondent (another household member). The differences due to questionnaire type are substantial varying from 6 percentage points higher returns to education for the highest educated men, to 14 percentage points higher for the least educated women, after allowing for non-linearity and endogeneity in the estimation of these parameters. These differences are of similar magnitudes as the bias in OLS estimation, which receives considerable attention in the literature. The findings underline that survey design matters for the estimation of structural parameters, and that care is needed when comparing across contexts and over time, in particular when data is generated by different surveys.
    Keywords: returns to education, survey design, field experiment, development, Africa
    JEL: J24 J31 C83
    Date: 2016–06
  2. By: Torun, Huzeyfe (Central Bank of Turkey); Tumen, Semih (Central Bank of Turkey)
    Abstract: Based on a law enacted in November 1999, males born on or before December 31st 1972 are given the option to benefit from a paid exemption from compulsory military service in Turkey. Exploiting this natural experiment, we devise an empirical strategy to estimate the intention-to-treat effect of this paid exemption on education and labor market outcomes of the individuals in the target group. We find that the paid exemption reform reduces the years of schooling among males who are eligible to benefit from the reform relative to the ineligible males. In particular, the probability of receiving a college degree or above falls among the eligible males. The result is robust to alternative estimation strategies. We find no reduction in education when we implement the same exercises with (i) data on females and (ii) placebo reform dates. The interpretation is that the reform has reduced the incentives to continue education for the purpose of deferring military service. We also find suggestive evidence that the paid exemption reform reduces the labor income for males in the target group. The reduction in earnings is likely due to the reduction in education. It should be noted, however, that due to the characteristics of the population on the treatment margin, the external validity of these results should be assessed cautiously.
    Keywords: compulsory military service, draft avoidance, intention to treat, education, earnings
    JEL: C21 I21 I26 J21 J31
    Date: 2016–06
  3. By: Vasilev, Aleksandar
    Abstract: In this paper we investigate the quantitative importance of search and matching fric- tions in Bulgarian labor markets. This is done by augmenting an otherwise standard real business cycle model a la Long and Plosser (1983) with both a two-sided costly search and fiscal policy. This introduces a strong propagation mechanism that allows the model to capture the business cycles in Bulgaria better than earlier models. The model performs well vis-a-vis data, especially along the labor market dimension, and in addition dominates the market-clearing labor market framework featured in the stan- dard RBC model, e.g Vasilev (2009), as well as the indivisible labor extension used in Hansen (1985).
    Keywords: general equilibrium,unemployment and wages,business cycles,fiscal policy
    JEL: D51 E24 E32 J40
    Date: 2016
  4. By: George Wehby; Dhaval Dave; Robert Kaestner
    Abstract: The minimum wage has increased in multiple states over the past three decades. Research has focused on effects on labor supply, but very little is known about how the minimum wage affects health, including children’s health. We address this knowledge gap and provide an investigation focused on examining the impact of the effective state minimum wage rate on infant health. Using data on the entire universe of births in the US over 25 years, we find that an increase in the minimum wage is associated with an increase in birth weight driven by increased gestational length and fetal growth rate. The effect size is meaningful and plausible. We also find evidence of an increase in prenatal care use and a decline in smoking during pregnancy, which are some channels through which minimum wage can affect infant health.
    JEL: I1 I3 J2 J3
    Date: 2016–06
  5. By: Holford, Angus J. (University of Essex)
    Abstract: We identify the effects of part-time employment, study time at home, and attitudes in school, in the production function for educational performance among UK teenagers in compulsory education. Our approach identifies the factors driving differences between the reduced form 'policy effect' of in-school employment, and its direct effect or 'production function parameter'. Part-time employment is shown to reduce performance among girls but not boys, because employment crowds out both study time at home and positive attitude in school to a greater extent for girls than boys. Part-time work also induces earlier initiation into risky behaviours for girls than boys.
    Keywords: labour supply, human capital, education production function, child development
    JEL: C35 I21 J22 J24
    Date: 2016–06
  6. By: James Uguccioni
    Abstract: Canadian railways are a vital part of the country’s transportation sector, moving goods and people across the country. We perform firm-level productivity analysis of Canadian freight railways for 1986 to 2009, focusing on the two railways which dominate the market: Canadian National (CN) and Canadian Pacific (CP). We obtain total factor productivity (TFP) estimates both by constructing productivity indices and by econometrically estimating cost functions. Driven in part by operational improvements, the strong TFP growth at both firms considerably outpaced aggregate TFP growth in Canada over the period of interest. This robust TFP growth, together with significant capital deepening, led to impressive labour productivity gains. We pay special attention to the productivity effects of the 1995 privatization of CN. While CN enjoyed much stronger productivity growth over the 1986-2009 period than CP, its performance was equally superior before and after the 1995 privatization.
    Keywords: Rail, Transport, Productivity, Transportation, Canada, Total Factor Productivity, Multifactor Productivity
    JEL: D22 D24 H32 J24 L92
    Date: 2016–06
  7. By: Atalay, Kadir (University of Sydney); Barrett, Garry (University of Sydney)
    Abstract: Recent reforms to social security in many countries have sought to delay retirement. Given the family context in which retirement decisions are made, social security reforms have potentially important spill-over effects on the participation of spouses. This paper analyses the impact of women's pension incentives on the retirement decision of their husband. The 1993 Age Pension reform in Australia increased the eligibility age for Age Pension benefits for women. This reform caused an increase in participation of men married to women in the affected cohorts. The behavioral responses are due to wealth effects and preferences for shared leisure.
    Keywords: retirement, age pension, joint retirement, spousal effect
    JEL: D91 I38 J26
    Date: 2016–06
  8. By: Bandyopadhyay, Subhayu (Federal Reserve Bank of St. Louis); Dinopoulos, Elias (University of Florida); Unel, Bulent (Louisiana State University)
    Abstract: The Great Recession, which was preceded by the financial crisis, resulted in higher unemployment and inequality. We propose a simple model where firms producing varieties face labor-market frictions and credit constraints. In the model, tighter credit leads to lower output, lower number of vacancies, and higher directed-search unemployment. Where workers are more productive at higher levels of firm output, lower credit supply increases firm capital intensity, raises inequality by increasing the rental of capital relative to the wage, and has an ambiguous effect on welfare. At initial high levels of labor share in total costs tighter credit lowers welfare. This pattern reverses during an expansionary phase caused by higher credit availability.
    Keywords: monopolistic competition, functional inequality, search unemployment, credit constraints
    JEL: D43 E24 G21 J31 J64 L11
    Date: 2016–06
  9. By: Barrett, Garry (University of Sydney); Riddell, W. Craig (University of British Columbia, Vancouver)
    Abstract: We study the relationship between age and literacy skills using data from the IALS, ALL and PIAAC surveys. In cross-sectional data there is a negative partial relationship between literacy skills and age that is statistically significant indicating that literacy declines with age, especially after age 45. However, this relationship could reflect some combination of age and birth cohort effects. In order to isolate age effects, we use the three international surveys to create synthetic cohorts. Our analysis shows that in most participating OECD countries the negative slope of the literacy-age profile in cross-sectional data arises from offsetting ageing and cohort effects. In these countries more recent birth cohorts have lower levels of literacy and individuals from a given birth cohort lose literacy skills after they leave school at a rate greater than indicated by cross-sectional estimates. Finland, Italy and the Netherlands are exceptions to this pattern; in these countries more recent cohorts have higher literacy levels and the cross-sectional estimates overstate the rate at which literacy declines with age. Our birth cohort results suggest that there is not a general tendency for literacy skills to decline from one generation to the next, but that the majority of the countries examined are doing a poorer job of developing literacy skills in successive generations.
    Keywords: human capital, ageing, cognitive skills, literacy, cohort effects
    JEL: I20 J14 J24
    Date: 2016–06
  10. By: Moberg, Ylva (Department of Economics)
    Abstract: In this paper I compare the effect of entering parenthood on the spousal income gaps in lesbian and heterosexual couples using Swedish population wide register data. Comparing couples with similar pre-childbirth income gaps, a difference-in-differences strategy is used to estimate the impact of the gender composition of the couple on the spousal income gap after childbirth. The results indicate that the gender composition of the couple does matter for the division of labor after having children. Five years after childbirth the income gap is smaller in lesbian than in heterosexual couples also when comparing couples with the same pre-parenthood income gap. Heterosexual couples’ division of labor seems to be influenced by traditional gender norms, regardless of their pre-childbirth income gap. In lesbian couples the partners’ relative earnings before parenthood and a principle about fairness may be more important, as well as the partners’ preferences for giving birth as the birth giving partner typically spends more time on parental leave.
    Keywords: economics of gender; division of labor; labor supply; same-sex couples; transition to parenthood
    JEL: D13 J13 J16 J22
    Date: 2016–06–19
  11. By: Jepsen, Christopher (University College Dublin); Mueser, Peter R. (University of Missouri-Columbia); Jeon, Kyung-Seong (University of Missouri-Columbia)
    Abstract: This paper provides novel evidence on the labor-market returns to proprietary (also called for-profit) postsecondary school attendance. Specifically, we link administrative records on proprietary school attendance with quarterly earnings data for nearly 70,000 students. Because average age at school entry is 30 years of age, and because we have earnings data for five or more years prior to attendance, we estimate a person fixed-effects model to control for time-invariant differences across individuals. By five years after entry, quarterly earnings returns are around 26 percent for men and 21-22 percent for women. Average returns are quite similar for associate's degree programs and certificate programs, but vary substantially by field of study. Differences in return by gender are completely explained by differences in field of study.
    Keywords: postsecondary education, labor-market returns, proprietary schooling
    JEL: J24 I26
    Date: 2016–06
  12. By: Kotakorpi, Kaisa (University of Turku); Poutvaara, Panu (University of Munich); Terviö, Marko (Aalto University)
    Abstract: We estimate the effect of getting elected on future income development of political candidates. We present a bootstrap approach for measuring electoral closeness, which can be used to implement a regression discontinuity design in any electoral system. We apply the method to the Finnish proportional open list system. Being elected to parliament increases annual earnings initially by €20,000, and getting elected to a municipal council by €1,000. The returns to office for parliamentarians accrue mainly through higher wages during the time in office. Our results imply that the returns to office may be large even in the absence of corruption.
    Keywords: returns to office, elections, regression discontinuity
    JEL: D72 J45
    Date: 2016–06
  13. By: Woessmann, Ludger (Ifo Institute for Economic Research)
    Abstract: Students in some countries do far better on international achievement tests than students in other countries. Is this all due to differences in what students bring with them to school – socio-economic background, cultural factors, and the like? Or do school systems make a difference? This essay argues that differences in features of countries' school systems, and in particular their institutional structures, account for a substantial part of the cross-country variation in student achievement. It first documents the size and cross-test consistency of international differences in student achievement. Next, it uses the framework of an education production function to provide descriptive analysis of the extent to which different factors of the school system, as well as factors beyond the school system, account for cross-country achievement differences. Finally, it covers research that goes beyond descriptive associations by addressing leading concerns of bias in cross-country analysis. The available evidence suggests that differences in expenditures and class size play a limited role in explaining cross-country achievement differences, but that differences in teacher quality and instruction time do matter. This suggests that what matters is not so much the amount of inputs that school systems are endowed with, but rather how they use them. Correspondingly, international differences in institutional structures of school systems such as external exams, school autonomy, private competition, and tracking have been found to be important sources of international differences in student achievement.
    Keywords: student achievement, international comparison, education production function, schools, education, institutions, external exams, autonomy, competition, private schools, tracking, educational expenditure, teachers, instruction time, TIMSS, PISA
    JEL: I21 H52 L38 J24 D02
    Date: 2016–06
  14. By: Bruhn, Miriam (World Bank)
    Abstract: The rise in unemployment during an economic crisis poses a significant concern to policy makers. This paper measures the effect of a program in Mexico that granted firms in certain industries wage subsidies if they decided to keep their workers instead of letting them go during the recent economic crisis. The analysis uses monthly administrative data on employment at the industry level, along with propensity score matching to construct groups of eligible and ineligible durable goods manufacturing industries that display statistically identical pre‐program trends in employment. Difference‐in‐difference results show a positive but not statistically significant effect of the wage subsidies on employment during the program's eight‐month duration, ranging from 5.7 to 13.2 percent in magnitude, depending on the specification. The size of the effect increases to 24 percent after the program ended and the results indicate that employment after the program recovered faster in eligible industries than in ineligible industries.
    Keywords: wage subsidies, industrial policy, crisis mitigation, firm behavior
    JEL: J23 H32 L60
    Date: 2016–06
  15. By: Neffke, Frank; Otto, Anne (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]); Weyh, Antje (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany])
    Abstract: "Labor flows across industries reallocate resources and diffuse knowledge among economic activities. However, surprisingly little is known about the structure of such inter-industry flows. How freely do workers switch jobs among industries? Between which pairs of industries do we observe such switches? Do different types of workers have different transition matrices? Do these matrices change over time? Using German social security data, we generate stylized facts about inter-industry labor mobility and explore its consequences. We find that workers switch industries along tight paths that link industries in a sparse network. This labor-flow network is relatively stable over time, similar for workers in different occupations and wage categories and independent of whether workers move locally or over larger distances. When using these networks to construct inter-industry relatedness measures they prove better predictors of local industry growth rates than co-location or input-based alternatives. However, because industries that exchange much labor typically do not have correlated growth paths, the sparseness of the labor-flow network does not necessarily prevent a smooth reallocation of workers from shrinking to growing industries. To facilitate future research, the inter-industry relatedness matrices we develop are made available as an online appendix to this paper." (Author's abstract, IAB-Doku) ((en))
    Keywords: labour turnover, Arbeitskräftemobilität, zwischenbetriebliche Mobilität, sektorale Verteilung, Wirtschaftssektoren, Wirtschaftszweige, Wirtschaftsstrukturwandel
    JEL: J24 J62 R12 L14 O33
    Date: 2016–06–22

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