nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2016‒07‒16
twenty papers chosen by
Joseph Marchand
University of Alberta

  1. Worker-Level Consequences of Import Shocks By Nilsson Hakkala, Katariina; Huttunen, Kristiina
  2. What Do Performance Appraisals Do? By Peter Cappelli; Martin Conyon
  3. The March of the Techies: Technology, Trade, and Job Polarization in France, 1994-2007 By James Harrigan; Ariell Reshef; Farid Toubal
  4. Boosting skills for all in the Netherlands By Rafal Kierzenkowski; Aleksandra Paciorek; Gabor Fulop
  5. Immigrant Entrepreneurship By Sari Pekkala Kerr; William R. Kerr
  6. Does Employee Stock Ownership Work? Evidence from publicly-traded firms in Japan By KATO Takao; MIYAJIMA Hideaki; OWAN Hideo
  7. Trade Induced Skill Upgrading: Lessons from the Danish and Portuguese Experiences By Gu, Grace; Malik, Samreen; Pozzoli, Dario; Rocha, Vera
  8. Global Value Chains and Trade in Value-Added: An Initial Assessment of the Impact on Jobs and Productivity By OECD
  9. A Test of Adverse Selection in the Market for Experienced Workers By Kevin Lang; Russell Weinstein
  10. The Effects of Mentor Quality, Exposure, and Type on Junior Officer Retention in the United States Army By Susan Payne Carter; Whitney Dudley; David S. Lyle; John Z. Smith
  11. Much Ado About Nothing? The Wage Effect of Holding a Ph.D. Degree But Not a Ph.D. Job Position By Gaeta, Giuseppe Lucio; Lavadera, Giuseppe Lubrano; Pastore, Francesco
  12. Commitment in the Household: Evidence from the Effect of Inheritances on the Labor Supply of Older Married Couples By Blau, David M.; Goodstein, Ryan
  13. How harmful are cuts in public employment and wage in times of high unemployment? By Thomas COUDERT; Thierry BETTI
  14. Child labour in China By Tang, Can; Zhao, Liqiu; Zhao, Zhong
  15. Simplifying Teaching: A Field Experiment with Online "Off-the-Shelf" Lessons By C. Kirabo Jackson; Alexey Makarin
  16. Intended College Enrollment and Educational Inequality: Do Students Lack Information? By Frauke H. Peter; Vaishali Zambre
  17. A new insight on the inflation persistence: the role of severance pay By Thomas COUDERT
  18. Learning About Oneself: The Effects of Signaling Academic Ability on School Choice By Bobba, Matteo; Frisancho, Veronica
  19. Social welfare benefits and their impacts on labour market participation among men and women in Mongolia By Gassmann, Franziska; Francois, Daphne; Zardo Trindade, Lorena
  20. Incentive schemes, private information and the double-edged role of competition for agents By Christina Bannier; Eberhard Feess; Natalie Packham; Markus Walzl

  1. By: Nilsson Hakkala, Katariina (Aalto University); Huttunen, Kristiina (Aalto University)
    Abstract: We analyse the effects of imports on employment and earnings by distinguishing between import competition in final products and firms' use of imports in production (offshoring). We use Finnish worker-firm data merged with product-level trade data. We focus on Chinese imports and instrument them by changes in China's share of world exports to other EU countries. Both types of importing increase the job loss risk for all workers and, in particular, for workers in production occupations. An increase in import competition has larger negative effects than an increase in offshoring. Production workers suffer the largest earnings losses, while for high- skilled workers the wage-effect is positive.
    Keywords: offshoring, import competition, employment, earnings
    JEL: F16 J23 J31 J63 L23
    Date: 2016–07
  2. By: Peter Cappelli; Martin Conyon
    Abstract: This paper investigates employee performance appraisals using data from a single US firm between 2001 and 2007. We find that performance appraisals are both informative and drive important components of the employment contract. We find that employee appraisal scores vary considerably both between and within individuals over time. In addition, we show that employee performance appraisal scores are related to a range of important employment outcomes, including merit pay and bonuses, promotions, demotions and dismissals, as well as employee quits.
    JEL: J33 J41 J63
    Date: 2016–07
  3. By: James Harrigan; Ariell Reshef; Farid Toubal
    Abstract: Using administrative employee-firm-level data on the entire private sector from 1994 to 2007, we show that the labor market in France has polarized: employment shares of high and low wage occupations have grown, while middle wage occupations have shrunk. During the same period, the share of hours worked in technology-related occupations ("techies") grew substantially, as did imports and exports, and we explore the causal links between these trends. Our paper is among the first to analyze polarization in any country using firm-level data, and we show how polarization occurred within firms, but mostly due to changes in the composition of firms (between firms). Motivated by the fact that technology adoption is mediated by technically qualified managers and technicians, we use a new measure of the propensity of a firm to adopt new technology: its employment share of techies. Using the subsample of firms that are active over the whole period, we show that firms with more techies in 2002 saw greater polarization, and grew faster, from 2002 to 2007. Offshoring reduced employment growth. Among blue- collar workers in manufacturing, importing caused skill upgrading while exporting caused skill downgrading. To control for the endogeneity of firm-level techies and trade in 2002, we use values of techies and trade from 1994 to 1998 as instruments. We conclude that technological change, mediated through techies, is an important cause of polarization in France. Firm-level trade had important effects in manufacturing.
    Keywords: job polarization;technological change;offshoring;skill bias;firm level data
    JEL: J2 O3 D3 F1 F16 F66
    Date: 2016–06
  4. By: Rafal Kierzenkowski; Aleksandra Paciorek; Gabor Fulop
    Abstract: Strong and adequate skills are essential to support workers’ productivity and to ensure robust employment outcomes. Developing workers’ skills would also increase their personal satisfaction and wages, contributing in making growth more inclusive. The Netherlands performs well in terms of competences of a large part of the population. Moreover, the country has been successful in adjusting the required level of skills over time. The education system plays a key role in developing skills and achieves good results, but there is room to make vocational education and lifelong learning less job-specific to better adapt to new economic trends. There is scope to use more effectively existing skills at work of youth entering the labour market and entrepreneurs, and to reduce labour market mismatches. Another challenge is to help some people to acquire skills by facilitating their labour market integration – in particular first- and second-generation immigrants, long-term unemployed, and people with low educational attainment and health problems -, which requires stronger targeted active labour market policies. Développer les compétences de tous aux Pays-Bas Des compétences solides et adéquates sont indispensables pour asseoir la productivité des travailleurs et assurer des résultats satisfaisants sur le plan de l’emploi. Développer les compétences des travailleurs aurait également pour effet d’accroître leur degré de satisfaction personnelle et leurs salaires, contribuant ainsi à rendre la croissance plus inclusive. Les Pays-Bas obtiennent de bons résultats du point de vue des compétences d’une large fraction de la population. En outre, le pays a réussi à ajuster le niveau de compétences requis au fil du temps. Le système éducatif joue un rôle clé dans le développement des compétences et donne de bons résultats, mais il est encore possible de rendre l’enseignement professionnel et l’apprentissage tout au long de la vie moins spécifiques à un type donné d’emploi afin de favoriser une meilleure adaptation aux nouvelles tendances économiques. Il existe également une marge permettant d’utiliser plus efficacement les actuelles compétences au travail des jeunes entrant sur le marché du travail et des entrepreneurs, et de réduire les problèmes d’appariements sur le marché du travail. Un autre enjeu consiste à aider certaines personnes à acquérir des compétences en facilitant leur intégration sur le marché du travail, en particulier les immigrés de première et deuxième générations, les chômeurs de longue durée et les personnes ayant un faible niveau d’études ou des problèmes de santé, ce qui suppose de déployer plus vigoureusement des politiques actives du marché du travail ciblées.
    Keywords: education, active labour market policies, entrepreneurship, skills, labour markets
    JEL: I28 J24 J48 L26
    Date: 2016–06–30
  5. By: Sari Pekkala Kerr; William R. Kerr
    Abstract: We examine immigrant entrepreneurship and the survival and growth of immigrant-founded businesses over time relative to native-founded companies. Our work quantifies immigrant contributions to new firm creation in a wide variety of fields and using multiple definitions. While significant research effort has gone into understanding the economic impact of immigration into the United States, comprehensive data for quantifying immigrant entrepreneurship are difficult to assemble. We combine several restricted-access U.S. Census Bureau data sets to create a unique longitudinal data platform that covers 1992-2008 and many states. We describe differences in the types of businesses initially formed by immigrants and their medium-term growth patterns. We also consider the relationship of these outcomes to the immigrants' age at arrival to the United States.
    JEL: F22 J15 J44 J61 L26 M13 O31 O32 O33
    Date: 2016–07
  6. By: KATO Takao; MIYAJIMA Hideaki; OWAN Hideo
    Abstract: This paper provides novel evidence on the effects of employee stock ownership (ESO), using new panel data on Japanese ESO plans for a highly representative sample of publicly-traded firms in Japan (covering more than 75% of all firms listed on Tokyo Stock Exchange) over 1989-2013. Unlike most prior studies, we focus on the effects of changes in varying attributes of existing ESO—the effects on the intensive margin. Our fixed effect estimates show that an increase in the strength of the existing ESO plans measured by stake per employee results in statistically significant productivity gains. Furthermore, such productivity gains are found to lead to profitability gains since wage gains from ESO plans are statistically significant yet rather modest. Our analysis of Tobin's Q suggests that the market tends to view such gains from ESO plans as permanent. We further find that increasing the stake of the existing core participants is more effective in boosting gains from ESO plans than bringing in more employees into the trust. Reassuringly, our key results are found to be robust to the use of instrumental variables to account for possible endogeneity of ESO plans. Finally, we explore possible interplays between ESO plans and firm characteristics such as ownership structure and firm size/age. First, the positive effects on productivity, profitability, wages and Tobin's Q are found to become larger as the proportion of powerful institutional investors and foreign investors rises, implying that the growing importance of such powerful outside shareholders may be reducing the adverse managerial entrenchment effect of ESO plans. Second, productivity gains from ESO plans are found to be more limited for smaller and younger firms. We interpret the finding as evidence in favor of the institutional complementarity view that ESO plans are an integral part of the Japanese High Performance Work System (HPWS)—a complementary cluster of human resource management practices which are more pervasive among larger and older firms in Japan.
    Date: 2016–06
  7. By: Gu, Grace (University of California, Santa Cruz); Malik, Samreen (New York University, Abu Dhabi); Pozzoli, Dario (Copenhagen Business School); Rocha, Vera (Copenhagen Business School)
    Abstract: We study how the skill distribution for the whole economy responds to changes in the skill premium which are induced by trade integration. Using administrative data for both Denmark (1993-2012) and Portugal (1993-2011), we perform a two-step empirical analysis. In the first stage we predict the skill premium changes which are triggered by exogenous trade shocks. In the second step we estimate the impact of such changes on the skill distribution. The main results for Denmark show that both the average and the standard deviation of skills increase as a result of trade integration. For Portugal we find instead that the impact of trade mediated by skill premium changes is negligible and not statistically significant. These results are rationalized by using the lens of a simple theoretical intuition.
    Keywords: skill premium, skill upgrading, trade integration, labor market frictions
    JEL: F16 J24
    Date: 2016–07
  8. By: OECD
    Abstract: This paper contributes to a better understanding of the impact of global value chains (GVCs) on jobs and productivity by providing new evidence on employment embodied in value-added trade flows. Linking jobs data to the Trade in Value-Added (TiVA) indicators first highlights that a large share of employment in OECD and key partner countries relies on consumption taking place abroad and for most countries this share has increased between 1995 and 2011. There are differences across industries in the share of jobs embodied in exports but in all industries a majority of these jobs originates in the service sector. In almost all countries, the jobs embodied in exports are shifting towards high-skill and medium-skill occupations. Within GVCs, there is also a shift from employment in core manufacturing activities to employment in service support functions such as R&D, distribution, logistics, marketing, sales and customer services. The impact of GVCs on the number of people engaged in each industry is the combination of several factors but related to specialisation patterns and the evolution of productivity. In this assessment, it is important to look at the whole value chain and not to focus only on industries where GVCs are prevalent. Job creation in sectors less exposed to GVCs is the consequence of productivity gains in sectors the most integrated in GVCs.
    Keywords: productivity, trade, employment, trade in tasks, global value chains, occupations
    JEL: F16 F23 J24
    Date: 2016–07–07
  9. By: Kevin Lang; Russell Weinstein
    Abstract: We show that in labor market models with adverse selection, otherwise observationally equivalent workers will experience less wage growth following a period in which they change jobs than following a period in which they do not. We find little or no evidence to support this prediction. In most specifications the coefficient has the opposite sign, sometimes statistically significantly so. When consistent with the prediction, the estimated effects are small and statistically insignificant. We consistently reject large effects in the predicted direction. We argue informally that our results are also problematic for a broader class of models of competitive labor markets.
    JEL: J3
    Date: 2016–07
  10. By: Susan Payne Carter; Whitney Dudley; David S. Lyle; John Z. Smith
    Abstract: Despite the prevalence of mentor relationships in the workplace, little is known about their impact on labor market outcomes, including job retention. Using plausibly exogenous assignment of protégés to mentors in the U.S. Army, we find positive retention effects for protégés assigned to high-performing immediate and senior supervisors. These positive effects are strongest for those with high SAT scores. We find virtually no evidence of type-matched mentoring effects on retention, except when mentors are also high-performing. For protégés serving under high-performing mentors, matching on high SAT score and home division positively impacts protégé retention.
    JEL: J01 J08 J24 J53 J63
    Date: 2016–07
  11. By: Gaeta, Giuseppe Lucio (University of Naples L’Orientale); Lavadera, Giuseppe Lubrano (University of Salerno); Pastore, Francesco (University of Naples II)
    Abstract: This paper contributes to the literature on overeducation by empirically investigating its effects on wages among Ph.D. holders. We analyze data collected in 2009 by the Italian National Institute of Statistics (ISTAT) through a large cross-sectional survey of Ph.D. recipients that allowed us observing their work placement few years after the completion of their studies. We extend previous contributions by providing an analysis based on the identification of genuine overeducation as resulting from the interaction of respondents' assessments that concern the usefulness of their Ph.D. title in order to get and to carry out their current job. The potential endogeneity of self-reported genuine overeducation is corrected by using an instrumental variables approach where the provincial incidence of overeducation among those that share the same educational profile of respondents is used as instrument. Our results suggest that genuine over-education is particularly detrimental for individual wages. It leads to a wage penalty of about between 23% and 25%, more than twice bigger than average, a sizeable gap for the country's compressed wage structure. These results allow us to better understanding the effects of job-education mismatch and provide some useful insights into the evaluation of the career outcomes of doctoral graduates.
    Keywords: job-education mismatch, genuine overeducation, overskilling, job satisfaction, wages, Ph.D. holders
    JEL: C26 I23 I26 J13 J24 J28
    Date: 2016–07
  12. By: Blau, David M. (Ohio State University); Goodstein, Ryan
    Abstract: We study the effect of receiving an inheritance on the labor force participation (LFP) of both the recipient and the recipient's spouse in a population of older married couples. An inheritance is not subject to laws governing division of marital property at divorce, because it is not acquired with income earned during marriage. Hence it plays the role of a "distribution factor" in the intrahousehold allocation of resources, increasing bargaining power of the recipient. Controlling for inheritance expectations, we interpret the receipt of an inheritance as a shock to wealth. Our results indicate that receiving an inheritance reduces LFP of the recipient by four percentage points, comparable in magnitude to the effect of a decline in health. However, an inheritance has little or no effect on LFP of the spouse. These estimates are inconsistent with a dynamic, collective model of the household in which spouses have the ability to commit to an ex ante efficient allocation. The results are consistent with a model of limited commitment in which a shock to household resources can alter bargaining power. We discuss the implications for reform of Social Security spouse and survivor benefits.
    Keywords: inheritances, commitment, labor force participation, retirement, collective model of household
    JEL: J22 J26
    Date: 2016–07
  13. By: Thomas COUDERT (LaRGE Research Center, Université de Strasbourg); Thierry BETTI
    Abstract: Since 2010 public employment and public-sector salaries have been significantly reduced in most Euro Area member states. In this article we show to what extent these cuts in the public sector have been costly particularly in terms of employment and output. In a New Keynesian model with a two-sector labor market, we demonstrate that the cost of these spending cuts on employment and output is significantly larger in periods of high unemployment. We also exhibit that cuts in public employment and wage in a Eurozone prone to high unemployment have only a limited ability to reduce deficit.
    Keywords: Fiscal Policy, Public Employment, Public Wage, Labor Market, Unemployment.
    JEL: E62 J38
    Date: 2016
  14. By: Tang, Can (Renmin University of China); Zhao, Liqiu (Renmin University of China); Zhao, Zhong (Renmin University of China)
    Abstract: We present the first systematic study on child labour in China. Child labour is not a negligible social phenomenon in China; about 7.74% of children aged from 10 to 15 were working in 2010, and they worked for 6.75 hours per day on average, and spent 6.42 hours less per day on study than other children. About 90% of child labourers were still in school and combined economic activity with schooling. Our results show that child labour participation is positively associated with school dropout rate. A child living in a rural area is more likely to work. Compared with place of residence, the gender of a child is less important. The educational level of the household head and its interaction with the gender of the household head seem to be unimportant. However, household assets per capita and household involvement in non-agricultural activities are negatively related to the incidence of child labour. A child from a household with more adults is less likely to work. The prevalence of child labour in China exhibits significant regional variations. The child labour incidence is correlated with the development level of each region: the Western region has the highest percentage of child labour, followed by the Eastern and Central region.
    Keywords: Child labour, Early leavers, School dropouts, Working hours, China
    JEL: J43 J81 O15
    Date: 2016–06–21
  15. By: C. Kirabo Jackson; Alexey Makarin
    Abstract: We analyze an experiment in which middle-school math teachers were randomly given access to “off-the-shelf” lessons designed to develop students’ deep understanding. These lessons were provided online, but are designed to be taught by teachers in a traditional classroom setting. Teaching involves multiple complementary tasks, but we model two: imparting knowledge and developing understanding. In our model, lessons designed to develop understanding substitute for teacher effort on this task so that teachers who may only excel at imparting knowledge can be effective overall – simplifying the job of teaching. Providing teachers with online access to the lessons with supports to promote their use increased students’ math achievement by about 0.08 of a standard deviation. These effects appear to be mediated by the lessons promoting deep understanding, and teachers therefore being able to provide more individualized attention. Benefits were much larger for weaker teachers, suggesting that weaker teachers compensated for skill deficiencies by substituting the lessons for their own efforts. The intervention is highly scalable and is more cost effective than most policies aimed at improving teacher quality.
    JEL: I20 J0 J48
    Date: 2016–07
  16. By: Frauke H. Peter; Vaishali Zambre
    Abstract: Despite increasing access to university education, students from disadvantaged or non-academic family backgrounds are still underrepresented at universities. In this regard, the economic literature mainly studies the effect of financial constraints on post-secondary educational decisions. Our knowledge on potential effects of other constraints regarding university education is more limited. We investigate the causal relationship between information and educational expectations using data from a German randomized controlled trial in which students in high schools were treated with information on the benefits as well as on different funding possibilities for university education. We find that the provision of information increases intended college enrollment for students from a non-academic family background, while it leads students from academic backgrounds to lower their enrollment intentions. Our results suggest that educational inequality can be reduced by providing students with relevant information, while simultaneously improving post-secondary education matches.
    Keywords: Randomized controlled trial, information deficit, educational expectation, college enrollment, educational inequality
    JEL: I21 I24 J24
    Date: 2016
  17. By: Thomas COUDERT (LaRGE Research Center, Université de Strasbourg)
    Abstract: The aim of this paper is to highlight the interaction between inflation persistence and the labor market institutions in a New Keynesian model with a search and matching labor market. In this framework, I reintroduce severance pay and show that the negotiation of this severance pay creates a new real rigidity into wage dynamics. Indeed, following the bonding critique, in a context of free negotiation and in presence of firing costs, workers agree to pay a share of severance pay in order to reduce the burden on firms. Then, a contribution system appears, affecting the real wage dynamics and inflation persistence through the New Keynesian Phillips curve.
    Keywords: Labor Market Search, Severance Pay, Wage Bargaining, Inflation Persistence.
    JEL: E31 E32 J31
    Date: 2016
  18. By: Bobba, Matteo; Frisancho, Veronica
    Abstract: This paper examines the role of perceived academic ability in shaping curricular choices in secondary school. We design and implement a field experiment that provides individualized feedback on performance in a mock version of the admission test taken to gain entry into high school in the metropolitan area of Mexico City. This intervention reduces the gap between expected and actual performance, shrinks the variance of the individual ability distributions and shifts stated preferences over high school tracks, with better performing students choosing more academically-oriented options. Such a change in application portfolios affects placement outcomes within the school assignment system, while it does not seem to entail any short-term adjustment costs in terms of high school performance. Guided by a simple model in which Bayesian agents choose school tracks based on their perceived ability distribution, we empirically document the interplay between variance reductions and mean changes in beliefs enabled by the information intervention.
    Keywords: information, Bayesian updating, biased beliefs, school choice.
    JEL: D83 I21 I24 J24
    Date: 2016–06
  19. By: Gassmann, Franziska (UNU‐MERIT, Maastricht University); Francois, Daphne (UNU‐MERIT, Maastricht University); Zardo Trindade, Lorena (Center for Social Policy Herman Deleeck, University of Antwerp)
    Abstract: Aside from providing income support to individuals in dire situations, social welfare benefits may unintentionally influence labour decisions, such as whether or not to take up a job, how many hours to work and which type of work to opt for. This paper investigates the relationship between social welfare benefits and labour market outcomes, measured by labour market participation and work intensity for women and men in Mongolia. Mongolia has an extensive system of social welfare benefits, which are mainly allocated based on categorical criteria, and the country suffers from relatively low labour market participation. The empirical analysis uses data from the 2012 Mongolian Household Socio-economic Survey and applies standard regression analysis and quasi-experimental methods. The paper pays particular attention to women since - in spite of the fact that their level of education is similar to that of men - their labour market participation is considerably lower compared to men. The results of the analysis indicate that social welfare receipt does not affect the labour market participation of men, but it has a negative impact on women. In terms of hours worked, men in beneficiary households tend to work more hours, while women work fewer hours if they are social welfare recipients.
    Keywords: social welfare benefits, labour market participation, Mongolia
    JEL: I38 J22
    Date: 2016–06–03
  20. By: Christina Bannier; Eberhard Feess; Natalie Packham; Markus Walzl
    Abstract: This paper examines the effect of imperfect labor market competition on the efficiency of compensation schemes in a setting with moral hazard and risk-averse agents, who have private information on their productivity. Two vertically differentiated firms compete for agents by offering contracts with fixed and variable payments. The superior firm employs both agent types in equilibrium, but the competitive pressure exerted by the inferior firm has a strong impact on contract design: For high degrees of vertical differentiation, i.e. low competition, low-ability agents are under-incentivized and exert too little effort. For high degrees of competition, high-ability agents are over-incentivized and bear too much risk. For a range of intermediate degrees of competition, however, agents' private information has no impact and both contracts are second-best. Interim efficiency of the least-cost separating allocation in the inferior firm is a sufficient condition for equilibrium existence. If this is violated, there can only be equilibria where the inferior firm ''overbids'', i.e. where it would not break even when attracting both agent types. Adding horizontal differentiation allows for pure-strategy equilibria even when there would be no equilibrium without overbidding in the pure vertical model, but equilibria with overbidding fail to exist.
    Keywords: Incentive compensation, screening, imperfect labor market competition, vertical differentiation, horizontal differentiation, risk aversion
    JEL: D82 D86 J31 J33
    Date: 2016–07

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