nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2016‒09‒04
fourteen papers chosen by
Joseph Marchand
University of Alberta

  1. Wage Decompositions Using Panel Data Sample Selection Correction By Oaxaca, Ronald L.; Choe, Chung
  2. Downward Nominal Wage Rigidity in Canada: Evidence from Micro- Level Data By Dany Brouillette; Olena Kostyshyna; Natalia Kyui
  3. Peer Effects in Parental Leave Decisions By Welteke, Clara; Wrohlich, Katharina
  4. Do Women Ask? By Artz, B., Goodall, Amanda.H., Oswald, Andrew.J
  5. Hours Worked in Europe and the US: New Data, New Answers By Bick, Alexander; Brüggemann, Bettina; Fuchs-Schündeln, Nicola
  6. The Outlook for U.S. Labor-Quality Growth By Canyon Bosler; Mary C. Daly; John G. Fernald; Bart Hobijn
  7. The Effects of the Early Retirement Age on Retirement Decisions By Dayanand S. Manoli; Andrea Weber
  8. The Effect of Population Aging on Economic Growth, the Labor Force and Productivity By Maestas, Nicole; Mullen, Kathleen J.; Powell, David
  9. Measures, Drivers and Effects of Green Employment: Evidence from US Local Labor Markets, 2006-2014 By Francesco Vona; Giovanni Marin; Davide Consoli
  10. Tracking Wage Inequality Trends with Prices and Different Trade Models: Evidence from Mexico By Halliday, Timothy J.; Lederman, Daniel; Robertson, Raymond
  11. The economic impacts of telecommunications networks and broadband internet: A survey By Bertschek, Irene; Briglauer, Wolfgang; Hüschelrath, Kai; Kauf, Benedikt; Niebel, Thomas
  12. Working Paper: The Compensation of Highly Paid Professionals: How Much Is Rent? By Dean Baker
  13. The Fight-or-Flight Response to the Joneses By Barnett, Richard; Bhattacharya, Joydeep; Bunzel, Helle
  14. Essays on Delegated Search and Temporary Work Agencies By Raattamaa, Tomas

  1. By: Oaxaca, Ronald L. (University of Arizona); Choe, Chung (Hanyang University)
    Abstract: This paper analyzes wage decomposition methodology in the context of panel data sample selection embedded in a correlated random effects setting. Identification issues unique to panel data are examined for their implications for wage decompositions. As an empirical example, we apply our methodology to German Socio-Economic Panel (GSOEP) data with which we investigate gender wage differentials in the German Labor Market. Our results highlight the sensitivity of inferences about potential discrimination to how elements of the panel data selection model are assigned to explained and unexplained components.
    Keywords: decomposition, panel data, GSOEP, sample selection
    JEL: J31 J71 C00
    Date: 2016–08
  2. By: Dany Brouillette; Olena Kostyshyna; Natalia Kyui
    Abstract: We assess the importance of downward nominal wage rigidity (DNWR) in Canada using both firm- and worker-level microdata. In particular, we analyze employer-level administrative data from the Major Wage Settlements (MWS) and household-based survey data from the Survey of Labour Income Dynamics (SLID). MWS data cover large unionized firms in Canada, while SLID is a rich rotating panel representative of the employed population in Canada. Combining both sources of information allows for a more extensive analysis of DNWR in the Canadian labour market. The results suggest that, on average, the effects of DNWR added about 0.2 to 0.4 percentage points to wage growth between 1994 and 2011; as well, the estimated effects increased in the years following the Great Recession in 2008–09. That includes a higher proportion of workers affected by DNWR (which rose from 16 to 32 per cent) and a larger impact on average wage growth. DNWR’s effects on average wage growth were also much stronger during periods of lower CPI inflation in Canada and are positively related to provincial unemployment rates. Finally, we provide an extensive analysis of the heterogeneity in the effects of DNWR. For example, its impact is more pronounced among smaller firms, lower occupational levels, immigrants and older workers. Overall, population ageing and an increasing proportion of immigrants may continue to increase the effects of DNWR in Canada, while the continuing shift toward service industries, declining unionization rates and the increasing educational attainment of the Canadian population may reduce them.
    Keywords: Econometric and statistical methods, Labour markets
    JEL: J3 E24 J30
    Date: 2016
  3. By: Welteke, Clara (DIW Berlin); Wrohlich, Katharina (DIW Berlin)
    Abstract: This paper analyzes to what extent parental leave decisions of mothers with young children depend on the decisions made by their coworkers. The identification of peer effects, which are defined as indirect effects of the behavior of a social reference group on individual outcomes, bears various challenges due to correlated characteristics within social groups and endogenous group membership. We overcome these challenges by exploiting quasi-random variation in the costs of parental leave during a narrow window around a cutoff date, induced by a parental leave benefit reform in Germany. The reform encourages mothers to remain at home during the first year following childbirth. Administrative linked employer-employee panel data enable us to assign a peer group to all individuals who work in the same establishment and occupational group. While there is a growing literature on peer effects, few studies look at peer effects in the context of parental leave decisions. We argue, however, that mothers with young children are particularly susceptible to peer behavior at the workplace due to preferences for conformity with peer group behavior as well as the career-related uncertainty that mothers face. Our results suggest that maternal decisions regarding the length of parental leave are significantly influenced by coworker decisions, in particular in situations with high uncertainty.
    Keywords: peer effects, social interaction, labor supply, family policy
    JEL: C31 J22 D04
    Date: 2016–08
  4. By: Artz, B., Goodall, Amanda.H., Oswald, Andrew.J (University of Wisconsin at Oshkosh; Cass Business School, City University London and IZA Bonn; CAGE Research Centre, University of Warwick, and IZA Bonn)
    Abstract: Women typically earn less than men. The reasons are not fully understood. Previous studies argue that this may be because (i) women 'don't ask' and (ii) the reason they fail to ask is out of concern of the quality of their relationships at work. This account is difficult to assess with standard labor-economics data sets. Hence we examine direct survey evidence. Using matched employer-employee data from 2013-2014, the paper find that the women-don't-ask account is incorrect. Once an hours-of-work variable is included in 'asking' equations, hypotheses (i) and (ii) can be rejected. Women do ask. However, women do not get.
    Keywords: matched employer-employee data; female discrimination; wages; gender
    JEL: J31 J71
    Date: 2016
  5. By: Bick, Alexander (Arizona State University); Brüggemann, Bettina (McMaster University); Fuchs-Schündeln, Nicola (Goethe University Frankfurt)
    Abstract: We use national labor force surveys from 1983 through 2011 to construct hours worked per person on the aggregate level and for different demographic groups for 18 European countries and the US. We find that Europeans work 19% fewer hours than US citizens. Differences in weeks worked and in the educational composition each account for one third to one half of this gap. Lower hours per person than in the US are in addition driven by lower weekly hours worked in Scandinavia and Western Europe, but by lower employment rates in Eastern and Southern Europe.
    Keywords: labor supply, employment, hours worked, Europe-US hours gap, demographic structure
    JEL: E24 J21 J22
    Date: 2016–08
  6. By: Canyon Bosler; Mary C. Daly; John G. Fernald; Bart Hobijn
    Abstract: Over the past 15 years, labor-quality growth has been very strong—defying nearly all earlier projections—and has added around 0.5 percentage points to an otherwise modest U.S. productivity picture. Going forward, labor quality is likely to add considerably less and may even be a drag on productivity growth in the medium term. Using a variety of methods, we project that potential labor-quality growth in the longer run (7 to 10 years out) is likely to fall in the range of 0.1 to 0.25 percent per year. In the medium term, labor-quality growth could be lower or even negative, should employment rates of low-skilled workers make a cyclical rebound towards pre-recession levels. The main uncertainties in the longer run are whether the secular decline in employment of low-skilled workers continues and whether the Great Recession pickup in educational attainment represents the start of a new boom or is simply a transitory reaction to a poor economy.
    JEL: J24 O47 O51
    Date: 2016–08
  7. By: Dayanand S. Manoli; Andrea Weber
    Abstract: We present quasi-experimental evidence on the effects of increasing the Early Retirement Age (ERA) on older workers' retirement decisions. The analysis is based on social security reforms in Austria in 2000 and 2004, and administrative data allows us to distinguish between pension claims and job exits. Using a Regression Kink Design, we estimate that, within a birth cohort, a 1.0-year increase in the ERA leads to a 0.4-year increase in the average job exiting age and a 0.5-year increase in the average pension claiming age. When the ERA increases, many older workers remain in their jobs longer.
    JEL: H55 J21 J26
    Date: 2016–08
  8. By: Maestas, Nicole; Mullen, Kathleen J.; Powell, David
    Abstract: Population aging is widely assumed to have detrimental effects on economic growth yet there is little empirical evidence about the magnitude of its effects. This paper starts from the observation that many U.S. states have already experienced substantial growth in the size of their older population and much of this growth was predetermined by historical trends in fertility. We use predicted variation in the rate of population aging across U.S. states over the period 1980-2010 to estimate the economic impact of aging on state output per capita. We find that a 10% increase in the fraction of the population ages 60+ decreases the growth rate of GDP per capita by 5.5%. Two-thirds of the reduction is due to slower growth in the labor productivity of workers across the age distribution, while one-third arises from slower labor force growth. Our results imply annual GDP growth will slow by 1.2 percentage points this decade and 0.6 percentage points next decade due to population aging.
    Keywords: population aging, GDP growth, demographic transitions
    JEL: J11 J14 J23 J26 O47
    Date: 2016–08
  9. By: Francesco Vona (OFCE-SciencesPo, Sophia Antipolis); Giovanni Marin (IRCrES-CNR, Milan); Davide Consoli (INGENIO CSIC-UPV, Valencia)
    Abstract: This paper explores the nature and the key empirical regularities of green employment in US local labor markets between 2006 and 2014. We construct a new measure of green employment based on the task content of occupations. Descriptive analysis reveals the following: 1. the share of green employment oscillates between 2 and 3 percent, and its trend is strongly 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 green areas 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) new jobs 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
  10. By: Halliday, Timothy J. (University of Hawaii at Manoa); Lederman, Daniel (World Bank); Robertson, Raymond (Texas A&M University)
    Abstract: Mexican wage inequality rose following Mexico's accession to the General Agreement on Tariffs and Trade/World Trade Organization in 1986. Since the mid-1990s, however, wage inequality has been falling. Since most trade models suggest that output prices can affect factor prices, this paper explores the relationship between output prices and wage inequality. The rise of inequality can be explained by the evolution of the relative price of skill-intensive goods relative to unskilled-intensive goods, but these prices flattened by 1999 and thus cannot explain the subsequent decline in wage inequality. An alternative trade model with firm heterogeneity driven by variations in the relative price of tradable relative to non-tradable goods can explain the decline in wage inequality. The paper compares this model's predictions with Mexican inequality statistics using data on output prices, census data, and quarterly household survey data. In spite of the model's simplicity, the model's predictions match Mexican variables reasonably well during the years when wage inequality fell.
    Keywords: Mexico, inequality, labor markets, firm heterogeneity
    JEL: F66 J31
    Date: 2016–08
  11. By: Bertschek, Irene; Briglauer, Wolfgang; Hüschelrath, Kai; Kauf, Benedikt; Niebel, Thomas
    Abstract: We provide a structured overview of the quantitative literature on the economic impacts of telecommunications networks and broadband internet. Differentiating between wireline and wireless technologies as well as broadband availability and broadband adoption, respectively, we review studies investigating the impacts on economic growth, employment and regional development as well as productivity and firm performance. Eventually, the survey does not only allow the identification of main research gaps but also provides useful information for policy makers on the significance and importance of communication networks for social welfare.
    Keywords: Telecommunications,Broadband,Economic Growth,Employment,Regional Development,Productivity
    JEL: D24 J23 J24 L96 O33 O47
    Date: 2016
  12. By: Dean Baker
    Abstract: Highly educated professionals in the United States, such as doctors and lawyers, earn salaries that are considerably higher than their counterparts in other wealthy countries. In many cases the ratios of pay in the United States to that of other wealthy countries exceeds two to one. These gaps are not explained by differences in per capita income, which are not nearly as large, or pay scales more generally. In many occupations U.S. workers get lower pay than their counterparts in other wealthy countries. This paper examines the evidence that the pay gap is due to protectionist measures that restrict competition. The most important of these protectionist measures are licensing practices that both unnecessarily restrict domestic competition and also prevent foreign-trained professionals from practicing their profession in the United States. There is a considerable amount of money at stake in excess pay for U.S. professionals. Higher pay for doctors alone costs close to $100 billion annually (more than 0.5 percent of GDP). Adding in the excess pay for other professionals could double this amount.
    JEL: J J4
    Date: 2016–08
  13. By: Barnett, Richard (School of Economics Drexel University); Bhattacharya, Joydeep (Department of Economics Iowa State University); Bunzel, Helle (Department of Economics Iowa State University)
    Abstract: This paper studies the fight-or-flight ambivalence people show towards the success of the proverbial Joneses. If an agent cares about leisure and his consumption relative to a benchmark set by the Joneses, his preferences display the keeping-up-with-the-Joneses (KUJ) property if an increase in the benchmark urges him to substitute away from leisure into work, allowing him to finance more consumption; the opposite is labeled running-away-from-the-Joneses (RAJ). The long literature, thus far, assumes these definitions apply globally: if any agent’s preferences display KUJ (or RAJ), everyone’s will. In an otherwise-standard environment with endowment heterogeneity, we showcase the possibility that these definitions may apply locally but not globally. This means heterogeneous agents sharing the same underlying preferences may respond very differently to the Joneses: while some may choose to keep up, others, possibly their close neighbors, may choose to run away. Depending on the benchmark, the same agent may exhibit KUJ and RAJ on different parts of the consumption space. The analysis is novel because a) such fight-or-flight conflict does not arise in existing models of consumption externalities, b) it arises endogenously here, and c) it exposes a deep connection between the fight-or flight-response and wealth-dependent risk aversion of agents and explains the behavior in terms of textbook income/substitution effects.
    Keywords: leisure distribution; rat race; wealth-dependent risk aversion; keeping up with the Joneses; income inequality
    JEL: E20 I31 J22
    Date: 2016–08–31
  14. By: Raattamaa, Tomas (Department of Economics, Umeå University)
    Abstract: Paper [I] models a game, where two temporary work agencies (TWAs) compete to fill a vacancy at a client firm (CF). They simultaneously choose how much effort to expend, based on their expectation of how good their opponents best candidate will be. I then show that this will make the TWAs overconfident, as the rational way of judging your own probability of winning is not looking at the opponents expected best, but comparing how much effort your opponent will expend. Paper [II] examines the misaligned incentives in the temporary work agency sector, where we first look at pure recruiting contracts, that either require payment on delivery, or payment on some specified point in time. We then look at the incentives of recruit-and-rent contracts, where the worker is leased to the client firm. We assume that the better the worker, the higher the probability that the client firm is going to want to hire him/her. If that happens then the TWA will no onger get revenues from said worker, incentivizing the TWA to not always deliver the first match it finds, if it is too good. Lastly we look at how competition can dampen this perverse incentive. Paper [III] models the waiting behavior that can occur if a TWA is contracted to find a worker for a specific time far in the future; the TWA will postpone effort. This behavior is modeled for two types of TWAs; one that is rational and plans ahead, and another that does not plan ahead at all, but instead only looks at the immediate future. I find that the one that only looks at the immediate future starts exerting effort earlier than the planner. After looking at optimal contracts under perfect monitoring and hidden action I provide two extensions. I first show that for the principal to want to delegate search to a rational TWA, the agent has to be better than the CF, by some factor, as it has to make up in efficiency what the principal loses in moral hazard, when the agent waits longer than the principal would like it to. Lastly I prove that it is profit maximizing for the principal to contract one agent and give it a deadline earlier than when the principal would need the worker, and then replace that agent with a competitor if the first one has not succeeded by that earlier deadline. Paper [IV] estimates at the effect of family experience on relative transition probability into the temporary work agency sector. Using register data for all of Sweden we run a bias-reduced logistic regression, where we include various factors that affect the probability of young adults (aged 18-34) entering the sector. This paper ties in to the literature on occupational inheritance, as well as the literature on changing social norms. We find that having had a parent, sibling or partner in the TWA sector increases your probability of entering the sector yourself.
    Keywords: delegated search; principal-agent; matching; transition probability; temporary work agencies
    JEL: D81 D83 D86 J41 J44
    Date: 2016–08–19

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