nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2016‒07‒30
eighteen papers chosen by
Joseph Marchand
University of Alberta

  1. The Effects of Aggregate and Gender-Specific Labor Demand Shocks on Child Health By Marianne Page; Jessamyn Schaller; David Simon
  2. Minimum Wage Effects on Labor Market Outcomes in Turkey By Hatice Burcu Gurcihan Yunculer; Caglar Yunculer
  3. How do regulated and unregulated labor markets respond to shocks? Evidence from immigrants during the Great Recession By Guriev, Sergei; Speciale, Biagio; Tuccio, Michele
  4. The Causes of Peer Effects in Production: Evidence from a Series of Field Experiments By John J. Horton; Richard J. Zeckhauser
  5. Pensions and Late Career Teacher Retention By Dongwoo Kim; Cory Koedel; Shawn Ni; Michael Podgursky; Weiwei Wu
  6. Firm Response to Competitive Shocks: Evidence from China’s Minimum Wage Policy By Harald Hau; Yi Huang; Gewei Wang
  7. Do returns to education depend on how and who you ask ? By Serneels,Pieter Maria; Beegle,Kathleen G.; Dillon,Andrew S.
  8. Common Ownership, Competition, and Top Management Incentives By Miguel Antón; Florian Ederer; Mireia Giné; Martin Schmalz
  9. Persistence of Shocks and the Reallocation of Labor By Roys, Nicolas
  10. Like Father, Like Daughter (Unless There Is a Son): Sibling Sex Composition and Women's STEM Major Choice in College By Oguzoglu, Umut; Ozbeklik, Serkan
  11. The effects of reform scenarios for unemployment benefits and social assistance on financial incentives to work and poverty in Lithuania By Jekaterina Navicke; Silvia Avram; Lilas Demmou
  12. No Pain, No Gain: The Effects of Exports on Effort, Injury, and Illness By Hummels, David; Munch, Jakob R.; Xiang, Chong
  13. International Trade and Labor Market Discrimination By Richard Chisik; Julian Emami Namini
  14. Covering: Mutable characteristics and perceptions of voice in the U.S. Supreme Court By Chen, Daniel L.; Halberstam, Yosh; Yu, Alan
  15. A Response of the Economy to Changes in Employment Structure By Shapoval Alexander; Goncharenko Vasily
  16. Do Parents Tax Their Children? Teenage Labour Supply and Financial Support By Holford, Angus J.
  17. Measures, drivers and effects of green employment : evidence form US local labor markets, 2006-2014 By Francesco Vona; Giovanni Marin
  18. Missing Men: World War II Casualties and Structural Change By Christoph Eder

  1. By: Marianne Page; Jessamyn Schaller; David Simon
    Abstract: In this paper, we estimate the relationship between cyclical changes in aggregate labor market opportunities and child health outcomes. In addition to using state unemployment rates to proxy for labor market conditions, as is common in the existing literature, we construct predicted employment growth indices that allow us to separately identify demand-induced changes in labor market opportunities for fathers and mothers. In contrast with prominent studies of adult health, we find no evidence that negative shocks to general economic conditions are associated with improvements in contemporaneous measures of children’s health. We do find, however, that focusing on gender-inclusive economic variables obscures the extent to which the labor market affects children. Specifically, we find evidence that improvements in labor market conditions facing women are associated with worse child health, while improvements in men’s labor market conditions have smaller positive effects on child health. These patterns, which are consistent with previous findings on the effects of individual parental employment and job displacement, suggest that family income and maternal time use are both important mechanisms mediating the effects of aggregate labor market conditions on child health.
    JEL: I1 J0 J23
    Date: 2016–07
  2. By: Hatice Burcu Gurcihan Yunculer; Caglar Yunculer
    Abstract: This paper estimates the impact of minimum wages on the labor market outcomes in Turkey using the sizable minimum wage increase in 2004. Utilizing a quasi-experimental approach we provide new evidence from a developing country where the minimum wage is binding to a great extent. The increase took place in a period of strong economic growth and cost to the employer was partially subsidized by the government. Our results suggest that minimum wage increase of 2004 compressed the wage distribution from below. Using degree of impact measures we estimate that a 1 percent surge in the minimum wage increased wages by an extra 0.22-0.35 percent. Wage response was lower for informally working, low educated and young employees. Higher minimum wage was accompanied by an increase in the likelihood of informal employment. The minimum wage increase did raise working hours, suggesting that firms may have tried to offset part of the increase in the labor cost by increasing employment at the intensive margin. Estimations do not point out to an adverse impact for the overall employment. But due to data limitations results on employment are less robust. Furthermore, looking at the impact of minimum wages on the formal and informal divide, our results do not support the predictions of the dual market hypothesis on wages. We observe wage increase not only for the formal but also for the informal employees pointing out to the presence of a "lighthouse" effect previously documented for some other developing countries.
    Keywords: Minimum wage, Turkey, Difference in differences, Informality
    JEL: J31 J42 R23
    Date: 2016
  3. By: Guriev, Sergei; Speciale, Biagio; Tuccio, Michele
    Abstract: We study wage adjustment during the recent crisis in regulated and unregulated labor markets in Italy. Using a unique dataset on immigrant workers, we show that before the crisis wages in the formal and informal sectors moved in parallel (with a 15 percent premium in the formal labor market). During the crisis, however, formal wages did not adjust down while wages in the unregulated informal labor market fell so that by 2013 the gap had grown to 32 percent. The difference was particularly salient for workers in "simple" occupations where there is high substitutability between immigrant and native workers. Calibrating a simple model of spillovers between formal and informal markets, we find that less than 10 percent of workers who lost a formal job during the crisis move to the informal sector. We also find that if the formal sector wages were fully flexible, the decline in formal employment would be in the range of 1.5-4.5 percent - much lower than 16 percent decline that we observe in the data.
    Keywords: great recession; Immigration; Labor market regulation; wage rigidity
    JEL: E24 J31 J61
    Date: 2016–07
  4. By: John J. Horton; Richard J. Zeckhauser
    Abstract: Workers respond to the output choices of their peers. What explains this well documented phenomenon of peer effects? Do workers value equity, fear punishment from equity-minded peers, or does output from peers teach them about employers’ expectations? We test these alternative explanations in a series of field experiments. We find clear evidence of peer effects, as have others. Workers raise their own output when exposed to high-output peers. They also punish low-output peers, even when that low output has no effect on them. They may be embracing and enforcing the employer’s expectations. (Exposure to employer-provided work samples influences output much the same as exposure to peer-provided work.) However, even when employer expectations are clearly stated, workers increase output beyond those expectations when exposed to workers producing above expectations. Overall, the evidence is strongly consistent with the notion that peer effects are mediated by workers’ sense of fairness related to relative effort.
    JEL: J01 J24 J3
    Date: 2016–07
  5. By: Dongwoo Kim (University of Missouri); Cory Koedel (University of Missouri); Shawn Ni (University of Missouri); Michael Podgursky (University of Missouri); Weiwei Wu (University of Missouri)
    Abstract: A vast research literature is devoted to analyzing causes of and potential remedies for early-career teacher attrition. However, much less attention has been paid to late-career attrition among experienced teachers, which is driven primarily by retirement plan incentives. Although there is some variation across states, it is generally the case that late-career teachers retire at much younger ages than their professional counterparts. Moreover, given the well-documented returns to teaching experience, late-career exits are on average more costly to students in K-12 schools than early-career exits. This study uses structural estimates from a dynamic retirement model to simulate the effect of targeted retention bonuses for senior teachers rated as effective or teaching in high-need fields. While the cost per incremental year of instruction is expensive in the short run, it declines over time. Moreover, because labor supply decisions are forward-looking, a temporary bonus has much smaller effects than a permanent one. These findings highlight the value of stability in policies aimed at extending teachers’ careers. Overall our results suggest that carefully-targeted retention bonuses can be useful tool in raising the quality of the teaching workforce and closing achievement gaps.
    Keywords: public pensions, retirement, worker retention, teacher retention
    JEL: H5 J2 J3
    Date: 2016–07
  6. By: Harald Hau (University of Geneva, GSEM, Geneva Finance Research Institute); Yi Huang (Graduate Institute of International and Development Studies); Gewei Wang (Graduate Institute of International and Development Studies)
    Abstract: The large regional variation of minimum wage changes in 2002—08 implies that Chinese manufacturing firms experienced competitive shocks as a function of firm location and their low-wage employment share. We find that minimum wage hikes accelerate the input substitution from labor to capital in low-wage firms, reduce employment growth, but also accelerate total factor productivity growth–particularly among the less productive firms under private Chinese or foreign ownership, but not among state-owned enterprises. The heterogeneous firm response to labor cost shocks can be explained by differences in governance or management practice, but is difficult to reconcile with the idea that competitive pressure is a substitute for governance quality.
    Keywords: Firm productivity, capital investment, minimum wage policy
    JEL: D24 G31 J24 J31 O14
    Date: 2016–07
  7. By: Serneels,Pieter Maria; Beegle,Kathleen G.; Dillon,Andrew S.
    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, into wage employment and in terms of completed schooling. There has been much less exploration of 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. The 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.
    Date: 2016–07–18
  8. By: Miguel Antón (IESE Business School, Universidad de Navarra); Florian Ederer (Cowles Foundation, Yale University); Mireia Giné (IESE Business School, Universidad de Navarra); Martin Schmalz (University of Michigan)
    Abstract: Standard corporate finance theories assume the absence of strategic product market interactions or that shareholders don’t diversify across industry rivals; the optimal incentive contract features pay-for-performance relative to industry peers. Empirical evidence, by contrast, indicates managers are rewarded for rivals’ performance as well as for their own. We propose common ownership of natural competitors by the same investors as an explanation. We show theoretically and empirically that executives are paid less for own performance and more for rivals’ performance when the industry is more commonly owned. The growth of common ownership also helps explain the increase in CEO pay over the past decades.
    Keywords: Common ownership, competition, CEO pay, management incentives, governance
    JEL: D21 G30 G32 J31 J41
    Date: 2016–07
  9. By: Roys, Nicolas (Federal Reserve Bank of St. Louis)
    Abstract: This paper proposes a theoretical and quantitative analysis of the reallocation of labor across firms in response to idiosyncratic shocks of different persistence. Creating and destroying jobs is costly and workers are paid a share of the value of the marginal worker. The model predicts that employment and labor costs react differently to transitory shocks and permanent shocks. Quantitative evaluation of the model on a panel of French firms shows the model’s performance. Modest adjustment costs are needed to reproduce observed job reallocation and inaction rates. Removing adjustment costs leads to productivity gains of 1% at the steady state. These gains are 50% larger in a economy with only transitory shocks and an order of magnitude lower in an economy with only permanent shocks. Bargaining dampens the reallocation of labor across firms, leading to larger efficiency losses from adjustment costs.
    Keywords: Firm Dynamics; Adjustment Costs; Misallocation; Persistence of Shocks
    JEL: E24 J21 J23
    Date: 2016–07–12
  10. By: Oguzoglu, Umut (University of Manitoba); Ozbeklik, Serkan (Claremont McKenna College)
    Abstract: We investigate the potential role of fathers in females' decision to choose a science, technology, engineering and mathematics (STEM) major in college. The main innovation of our paper is to analyze how sibling sex composition affects the probability of being a STEM major in college for females whose fathers are in a STEM occupation. Using the National Longitudinal Survey of Youth 1979 (NLSY79), we find that, for females, having brother(s) significantly decreases the likelihood of choosing a STEM major in college when their fathers are also in a STEM occupation. The inclusion of variables pertaining to respondents' attitudes toward traditional gender roles, birth order, and the presence of an older brother as well as frequently used cognitive skill measures does not change the results. Thus, the observed effect appears to be driven by change in the college major preferences of females. We replicate the analysis using a more recent data set from the U.S. and data from Australia, and find similar results. Our findings suggest that fathers are much more likely to transmit occupation-specific tastes and preferences to their daughters in the absence of a son potentially, contributing to the persistence of the gender gap in STEM majors in college.
    Keywords: STEM, gender gap, college major, siblings sex composition, intergenerational transmission
    JEL: J24 J16 I23
    Date: 2016–07
  11. By: Jekaterina Navicke; Silvia Avram; Lilas Demmou
    Abstract: In 2015 the Lithuanian government launched an ambitious Social Model reform agenda aimed at balancing flexibility of the labour market and security provided through the system of social protection. We simulate alternative scenarios for reforming the unemployment benefit and cash social assistance systems in Lithuania. We first analyse a reform of the social insurance unemployment benefit along the lines currently proposed by the Lithuanian authorities within the new “Social Model”. The social assistance reforms were left outside of the Social Model. However, social assistance, as currently designed, has strong negative effects on the work incentives of the recipients. We construct and consider several reform scenarios: extending the current system of in-work payments; establishing earnings disregards; and modifying the equivalence scale for family. We look at the effects of reforms on financial incentives to search and accept a vacancy as measured by the share of additional income that is taxed away through direct taxes, social insurance contributions or through benefit withdrawal when increasing labour supply (effective marginal tax rate). We also investigate the impact of reforms on poverty, income distribution as well as their first-order financial costs. We use microsimulation techniques applied to a representative sample of Lithuanian households. Our simulations are carried out using EUROMOD –a static tax-benefit microsimulation model developed for the European Union. The model uses micro-data from the 2012 Lithuanian component of the European Union-Survey of Income and Living Conditions (SILC). This Working Paper relates to the 2016 OECD Economic Survey of Lithuania ( Les effets de différents scénarios de réforme des assurances chômage et aides sociales sur les incitations financières au travail et la pauvreté en Lituanie En 2015, le gouvernement Lituanien a lancé un programme de réforme ambitieux du modèle social visant à trouver un équilibre entre flexibilité de la législation du marché du travail et sécurité fournie par le système de protection sociale. Nous simulons des scénarios alternatifs de réformes des allocations d’assurance chômage et du régime d’aide sociale (allocations payées sous forme d’aide en liquidités) en Lituanie. Nous analysons d'abord les effets d’une réforme de l'allocation d'assurance chômage selon les lignes actuellement proposées par les autorités lituaniennes dans le cadre du nouveau « Modèle Social ». Ce nouveau modèle social ne prévoit pas de reformes de l'aide sociale. Toutefois, le régime d’aide sociale, tel qu'il est actuellement conçu, a des effets fortement négatifs sur les incitations au travail des bénéficiaires. Nous construisons et considérons plusieurs scénarios de réforme du régime d’aide social: une extension du système de prestations liées à l’exercice d’un emploi; la mise en place de mesures d’exemptions de rémunération; et une réforme du facteur d‘équivalence tenant compte de la taille des familles lors de l’octroi des allocations. Nous examinons les effets des réformes sur les incitations financières à rechercher et accepter un poste tel que mesuré par la part du revenu supplémentaire qui est effectivement imposé via les impôts directs, les cotisations d'assurance sociale ou par le retrait des prestations (taux effectif marginal d'imposition). Nous étudions également l'impact des réformes sur la pauvreté, la répartition des revenus ainsi que leurs coûts financiers (de premier tour). Nous utilisons des techniques de microsimulation appliqués à un échantillon représentatif des ménages lituaniens. Nos simulations sont effectuées à l'aide du modèle statique de micro-simulation des taxes et prestations sociales EUROMOD développé pour l'Union européenne. Le modèle utilise des micro-données tirées de l’enquête de l’Union Européenne sur les conditions de revenu et de vie (SILC) 2012. Ce document de travail se rapporte à l’Étude économique de l’OCDE de la Lituanie 2016 ( ique-lituanie.htm).
    Keywords: in-work benefits, effective tax rate, simulations, social assistance benefits, unemployment benefits, taux de taxation effective, aide sociale, simulations, Allocation d’assurance chômage, prestations liées à l'exercice d'un emploi
    JEL: D04 D3 I3 J2 J6
    Date: 2016–07–26
  12. By: Hummels, David (Purdue University); Munch, Jakob R. (University of Copenhagen); Xiang, Chong (Purdue University)
    Abstract: Increased job effort can raise productivity and income but put workers at increased risk of illness and injury. We combine Danish data on individuals' health with Danish matched worker-firm data to understand how rising exports affect individual workers' effort, injury, and illness. We find that when firm exports rise for exogenous reasons: 1. Workers work longer hours and take fewer sick-leave days; 2. Workers have higher rates of injury, both overall and correcting for hours worked; and 3. Women have higher sickness rates. For example, a 10% exogenous increase in exports increases women's rates of injury by 6.4%, and hospitalizations due to heart attacks or strokes by 15%. Finally, we develop a novel framework to calculate the marginal dis-utility of any non-fatal disease, such as heart attacks, and to aggregate across multiple types of sickness conditions and injury to compute the total utility loss. While the ex-ante utility loss for the average worker is small relative to the wage gain from rising exports, the ex-post utility loss is much larger for those who actually get injured or sick.
    Keywords: demand shocks, worker effort, health
    JEL: I1 F1 J2 F6
    Date: 2016–07
  13. By: Richard Chisik (Ryerson University, Toronto, Canada); Julian Emami Namini (Erasmus University Rotterdam, the Netherlands)
    Abstract: We embed a competitive search model with labor market discrimination, or nepotism, into a two-sector, two-country framework in order to analyze how labor market discrimination impacts the pattern of international trade and also how trade trade affects discrimination. Discrimination, or nepotism, reduces the matching probability and output in the skilled-labor intensive differentiated-product sector so that the country with more discriminatory firms has a comparative advantage in the simple sector. As countries alter their production mix in accordance with their comparative advantage, trade liberalization can then reinforce the negative effect of discrimination on development in the more discriminatory country and reduce its effect in the country with fewer discriminatory firms. Similarly, the profit difference between non-discriminatory and discriminatory firms increases in the less discriminatory country and shrinks in the more discriminatory one. In this way trade can further reduce discrimination in a country where it is less prevalent and increase it where it is more firmly entrenched.
    Keywords: Discrimination; Nepotism; International Trade; Competitive Search
    JEL: F16 F66 J71
    Date: 2016–07–28
  14. By: Chen, Daniel L.; Halberstam, Yosh; Yu, Alan
    Abstract: The emphasis on “fit” as a hiring criterion has raised the spectrum of a new form of subtle discrimination (Yoshino 1998; Bertrand and Duflo 2016). Under complete markets, correlations between employee characteristics and outcomes persist only if there exists animus for the marginal employer (Becker 1957), but who is the marginal employer for mutable characteristics? Using data on 1,901 U.S. Supreme Court oral arguments between 1998 and 2012, we document that voice-based snap judgments based on lawyers’ identical introductory sentences, “Mr. Chief Justice, (and) may it please the Court?”, predict court outcomes. The connection between vocal characteristics and court outcomes is specific only to perceptions of masculinity and not other characteristics, even when judgment is based on less than three seconds of exposure to a lawyer’s speech sample. Consistent with employers irrationally favoring lawyers with masculine voices, perceived masculinity is negatively correlated with winning and the negative correlation is larger in more masculine-sounding industries. The first lawyer to speak is the main driver. Among these petitioners, males below median in masculinity are 7 percentage points more likely to win in the Supreme Court. Justices appointed by Democrats, but not Republicans, vote for lessmasculine men. Female lawyers are also coached to be more masculine and women’s perceived femininity predict court outcomes. Republicans, more than Democrats, vote for more feminine-sounding females. A de-biasing strategy is tested and shown to reduce evaluators’ tendency to perceive masculine voices as more likely to win. Perceived masculinity explains 3-10% additional variance compared to the current best prediction model of Supreme Court votes.
    Keywords: Identity, Phonology, Judicial Decision-Making
    JEL: J15 J78 K41
    Date: 2016–07
  15. By: Shapoval Alexander; Goncharenko Vasily
    Abstract: This paper examines the response of economies to shocks in demand. The analysis is performed by using a general equilibrium model with monopolisti ompetition in hi-tech sectors, perfect ompetition in a traditional sector, labor market frictions, and bargaining that determines wages. We posit that labor market frictions result in unemployment in the equilibrium. Under a positive shock in demand, new individuals become unemployed. If the elasticity of substitution between varieties of dierentiated goods is a decreasing/increasing function, then the intersector wage inequality enlarges/falls. In the first case, all individuals gain but those who lost their jobs.
    JEL: L11 D11 E2 J31
    Date: 2016–07–22
  16. By: Holford, Angus J. (University of Essex)
    Abstract: This paper models child employment and parental pocket money decisions as a non-cooperative game. Assuming that the child human capital is a household public good and that the relationship between child human capital and employment is concave, we compare the welfare obtained under different decision-making mechanisms and test the predictions of the model for a cohort of English teenagers in compulsory education. Our results support a situation in which parents 'tax' their children's earnings, withdrawing financial support as the child increases his working hours. This strategy forces the child to internalise the social cost of his activities.
    Keywords: intra-household transfers, pocket money, child labour supply, noncooperative game, human capital
    JEL: C52 C72 D13 J22
    Date: 2016–07
  17. By: Francesco Vona (Observatoire français des conjonctures économiques); Giovanni Marin (Scuola Superiore Sant'Anna)
    Abstract: This paper explores the nature and the key empirical regularities ofgreen employment in US local labor markets between 2006 and 2014. Weconstruct a new measure of green employment based on the task contentof occupations. Descriptive analysis reveals the following: 1. the share of green employment oscillates between 2 and 3 percent, and its trend isstrongly pro-cyclical; 2. green jobs yield a 4 percent wage premium; 3.despite moderate catching-up across areas, green jobs remain more geographically concentrated than similar non-green jobs; and 4. the top greenareas are mostly high-tech. As regards the drivers, changes in environmental regulation are a secondary force compared to the local endowment of green knowledge and resilience in the face of the great recession. To assess the impact of moving to greener activities, we estimate that one additional green job is associated with 4.2 (2.4 in the crisis period) newjobs in non-tradable activities in the local economies.
    Keywords: Green employment; Local labor markets; Environmental regulation; Environmental technologies; Local multipliers
    JEL: J23 O33 Q52 R23
    Date: 2016–07
  18. By: Christoph Eder
    Abstract: A shock to the sector composition of the local labor market can affect long-run economic development of a location. Because structural change ultimately shifts labor from agriculture to services, an early transition to manufacturing may hamper long-run prosperity. The identification strategy exploits military World War II (WWII) casualties in Austrian municipalities as an exogenous shock to the local labor market. WWII casualties shifted labor out of agriculture into manufacturing in the short-run, which eventually led to a differential path of structural change. In the long-run, I find a strong and robust negative effect of WWII casualties on subsequent economic output.
    Keywords: structural change, local labor markets, spatial equilibrium, World War II, Austria
    JEL: O14 J40 N14 R11 R12
    Date: 2016–07

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