nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2016‒09‒25
sixteen papers chosen by
Joseph Marchand
University of Alberta

  1. Can Overtime Premium Flexibility Promote Employment? Firm- and Worker-Level Evidence from a Labour Law Reform By Martins, Pedro S.
  2. Should the Maximum Duration of Fixed-Term Contracts Increase in Recessions? Evidence from a Law Reform By Martins, Pedro S.
  3. Discouraged worker effects and barriers against employment for immigrant and non-immigrant women By John K. Dagsvik; Tom Kornstad; Terje Skjerpen
  4. Do Women Ask? By Artz, Benjamin; Goodall, Amanda H.; Oswald, Andrew J.
  5. Genes, Education, and Labor Market Outcomes: Evidence from the Health and Retirement Study By Papageorge, Nicholas W.; Thom, Kevin
  6. Job Design and Skill Developments in the Workplace By Russo, Giovanni
  7. The Anticipation and Adaptation Effects of Intra- and Interpersonal Wage Changes on Job Satisfaction By Patric Diriwächter; Elena Shvartsman
  8. Knowledge Capital and Aggregate Income Differences: Development Accounting for U.S. States By Hanushek, Eric A.; Ruhose, Jens; Woessmann, Ludger
  9. Parents’ primary and secondary childcare time adjustment to market time: Evidence from Australian mothers and fathers By Huong Dinh; Maria Racionero
  10. International Trade and Labor Market Discrimination By Richard Chisik; Julian Emami Namini
  11. The Growth-Employment-Poverty Nexus in Latin America in the 2000s: Cross-Country Analysis By Guillermo Cruces; Gary S. Fields; David Jaume; Mariana Viollaz
  12. The Changing Occupational Distribution by College Major By Ransom, Michael R.; Phipps, Aaron
  13. Incarceration, Recidivism and Employment By Manudeep Bhuller; Gordon B. Dahl; Katrine V. Løken; Magne Mogstad
  14. Fixed wage contracts and monetary non-neutrality By Björklund, Maria; Carlsson, Mikael; Nordström Skans, Oskar
  15. The Welfare Impact of Global Migration in OECD Countries By Frédéric DOCQUIER; Amandine AUBRY; Michał BURZYŃSKI
  16. Measures, Drivers and Effects of Green Employment : evidence from US local Labor Markets, 2006-2014 By Francesco Vona; G. Marin; D. Consoli

  1. By: Martins, Pedro S. (Queen Mary, University of London)
    Abstract: In 2012, in the midst of a recession, a labour law reform in Portugal allowed firms to reduce the overtime premium paid to their workers by 50% or more. Until then, overtime premiums were set by law at a relatively high level and could not be cut unilaterally. We analyse matched employer-employee panel data, including worker-level base and overtime hours and pay, to shed light on the effects of the resulting greater flexibility in overtime pay setting. We find that half of the firms using overtime in 2011 did reduce their overtime premiums in a manner consistent with the reform, in particular those firms making greater use of overtime and paying higher premiums. Moreover, using difference-in-differences matching and a long list of covariates, we find that those firms that cut overtime premiums exhibit significant relative increases in overtime usage, employment and sales following the reform. Overall, our results highlight the important but not exclusive role of legal restrictions behind downward nominal pay rigidity. Our findings also suggest a significant potential of overtime pay flexibility to promote employment, even during a downturn.
    Keywords: working time, wage rigidity, employment resilience, labour reforms
    JEL: J22 J23 J38
    Date: 2016–09
  2. By: Martins, Pedro S. (Queen Mary, University of London)
    Abstract: Fixed-term contracts (FTCs) may be an important tool to promote hirings and employment, particularly in recessions or when permanent contracts are costly. Therefore, it may be useful to let some of the legal parameters of FTCs (as well as those of other labour market institutions) vary systematically over the business cycle, namely increasing their flexibility during downturns. We evaluate this idea by examining the short-term effects of a new law introduced in Portugal, in the midst of a recession, which increased the maximum duration of FTCs from three to four and a half years. Our analysis is based on regression-discontinuity (and difference-in-differences) methods, applied to matched panel data. We find a considerable take up of this measure, as conversions to permanent contracts drop by 20%. Moreover, while we do not detect significant effects on employment status in the subsequent year, worker churning is reduced significantly, as mobility of eligible fixed-term workers to other firms drops by 10%.
    Keywords: employment law, worker mobility, segmentation, counterfactual evaluation
    JEL: J23 J41 J63
    Date: 2016–09
  3. By: John K. Dagsvik; Tom Kornstad; Terje Skjerpen (Statistics Norway)
    Abstract: A phenomenon observed in many labor markets is that the supply of labor appears to depend on business cycles. In other words, workers who are searching for work become “discouraged” under unfavorable business cycle conditions because they believe that their chances of finding an acceptable job are so small that the costs of searching for work outweigh the benefits from searching. In this paper we present a new theoretical framework for job searching based on aggregate rational expectations, which is then used to analyze separately the discouraged worker effect for married/cohabiting immigrant women from non-Western countries and women born in Norway. The empirical results show that the search cost per unit of time is much higher for women born in Norway than for immigrant women. This means that an immigrant woman facing the same probability of obtaining work as a woman born in Norway is less likely to be discouraged from looking for work than a woman born in Norway. However, the actual expected search cost is higher for immigrant women than for women born in Norway. The reason for this is that the probability of obtaining an acceptable job is essentially lower for immigrant women compared to women born in Norway. Consequently, the fraction of discouraged workers is, for some groups, much higher for immigrant women than for women born in Norway, despite the fact that the search costs per unit of time for immigrant women are much lower than those for women born in Norway.
    Keywords: Discouraged workers; Aggregate rational expectations; Female immigrants; Labor force participation; Panel data; Random utility modelling
    JEL: C33 C35 J21 J22 J61 J64
    Date: 2016–08
  4. By: Artz, Benjamin (University of Wisconsin, Oshkosh); Goodall, Amanda H. (Cass Business School); Oswald, Andrew J. (University of Warwick)
    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 for 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 2013-14, the paper finds 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: 2016–09
  5. By: Papageorge, Nicholas W. (Johns Hopkins University); Thom, Kevin (New York University)
    Abstract: Recent advances have led to the discovery of specific genetic variants that predict educational attainment. We study how these variants, summarized as a genetic score variable, are associated with human capital accumulation and labor market outcomes in the Health and Retirement Study (HRS). We demonstrate that the same genetic score that predicts education is also associated with higher wages, but only among individuals with a college education. Moreover, the genetic gradient in wages has grown in more recent birth cohorts, consistent with interactions between technological change and labor market ability. We also show that individuals who grew up in economically disadvantaged households are less likely to go to college when compared to individuals with the same genetic score, but from higher-SES households. Our findings provide support for the idea that childhood SES is an important moderator of the economic returns to genetic endowments. Moreover, the finding that childhood poverty limits the educational attainment of high-ability individuals suggests the existence of unrealized human potential.
    Keywords: human capital, inequality, education, genes
    JEL: I24 J24
    Date: 2016–09
  6. By: Russo, Giovanni (European Centre for the Development of Vocational Training (Cedefop))
    Abstract: We investigate the relationship between job complexity and the skills development of adult workers in Europe using the Cedefop European Skills and Jobs Survey (ESJS). The results suggest that challenging workplaces, workplaces in which jobs are designed to include complex tasks, and which place high demands on workers' skills, also stimulate workers' skills development. Increasing the degree of job complexity has positive and robust effects on the degree of skill development, and so does an increase in work experience (tenure). The analysis stresses the importance of on-the-job learning and contextual workplace characteristics for adult workers' skills development.
    Keywords: job characteristics, job complexity, skills, skills development, learning
    JEL: J24
    Date: 2016–09
  7. By: Patric Diriwächter; Elena Shvartsman
    Abstract: This paper analyses how individual job satisfaction is affected by wage changes. In order to account for potential dynamic effects of wage changes on job satisfaction, we include lead and lag effects of income changes in our analysis. Furthermore, we examine the role of social comparisons, i.e., how an individual’s job satisfaction is driven not only by changes in his wages, but also by the size of these changes relative to wage changes within his reference group. Results from an individual fixed effects regression indicate that wage increases have a statistically significant positive effect on job satisfaction. This effect exhibits a dynamic pattern. We observe an anticipation effect of a positive wage change, i.e., individuals are more satisfied with their job one year ahead of the wage increase. Also, we find statistically significant positive, but declining effects on job satisfaction four years after the wage increase, i.e., partial adaptation. We find that an additional increase in job satisfaction is obtained when the individual’s wage increase exceeds the average wage increase for his reference group. However, this effect does not appear to persist, as it is only statistically significant in the first period after the wage change.
    Keywords: wage change, job satisfaction, anticipation and adaptation
    JEL: J28 M50 M52
    Date: 2016
  8. By: Hanushek, Eric A. (Stanford University); Ruhose, Jens (Leibniz University); Woessmann, Ludger (University of Munich)
    Abstract: Although many U.S. state policies presume that human capital is important for state economic development, there is little research linking better education to state incomes. We develop detailed measures of skills of workers in each state based on school attainment from census micro data and on cognitive skills from state- and country-of-origin achievement tests. These new measures of knowledge capital permit development accounting analyses calibrated with standard production parameters. We find that differences in knowledge capital account for 20-35 percent of the current variation in per-capita GDP among states, with roughly even contributions by school attainment and cognitive skills. Similar results emerge from growth accounting analyses, emphasizing the importance of appropriately measuring worker skills. These estimates support emphasis on school improvement as a strategy for state economic development.
    Keywords: economic growth, human capital, cognitive skills, schooling, U.S. states JEL Classification: O47, I25, J24
    Date: 2016
  9. By: Huong Dinh; Maria Racionero
    Abstract: Do mothers and fathers differ in the way they trade off childcare time for market time? We examine the effects of increases in own and partner’s market time on parents’ primary and secondary childcare time. We use time-diary data on couples with children from the 2006 Australian Time Use Survey and employ a system of censored regression equations of the time parents spend in primary childcare, secondary childcare and market work. We find that mothers and fathers adjust their childcare time differently depending on which partner (father or mother) changes market time, which childcare type (primary or secondary) is considered and the age group their youngest child belongs to (less than 5 years or 5-14 years old). Our results suggest that there is a gender difference in the way each member of the couple adjusts primary and secondary childcare time in response to an increase in own or partner’s market time that may need to be accounted for when considering policies to promote female labour participation.
    Keywords: childcare time, market time, gender, time use
    JEL: J13 J22
    Date: 2016–09
  10. By: Richard Chisik (Ryerson University); Julian Emami Namini (Erasmus University Rotterdam)
    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 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: 2016–09–14
  11. By: Guillermo Cruces (CEDLAS - UNLP , CONICET y IZA); Gary S. Fields (Cornell University y IZA); David Jaume (Cornell University); Mariana Viollaz (CEDLAS - UNLP)
    Abstract: In the great majority of Latin American countries in the 2000s, economic growth took place and brought about improvements in almost all labour market indicators and consequent reductions in poverty rates. Across countries, economic growth was not all that mattered; external factors were particularly important for changes in labour market conditions, while reductions in poverty were strongly related to improvements in earnings and employment indicators. Although the 2008 crisis affected some countries differently from others, nearly all labour market indicators were at least as high or higher by 2012 than immediately before the crisis in all countries but one.
    JEL: J21 J30 O10 O54
    Date: 2016–07
  12. By: Ransom, Michael R. (Brigham Young University); Phipps, Aaron (University of Virginia)
    Abstract: In this paper we examine the occupational distribution of individuals who hold bachelor degrees in particular fields in the United States using data from the various waves of the National Survey of College Graduates. We propose and calculate indexes that describe two related aspects of the occupational distribution by major field of study: distinctiveness (how dissimilar are the occupations of a particular major when compared with all other majors) and variety (how varied are the occupations among those who hold that particular major). We discuss theoretical properties of these indices and statistical properties of their estimates. We show that the occupational variety has increased since 1993 for most major fields of study, particularly between the 1993 and 2003 waves of the survey. We explore reasons for this broadening of the occupation distribution. We find that this has not led to an increase in reported mismatch between degree and occupation.
    Keywords: college major, occupation
    JEL: I23 J24
    Date: 2016–09
  13. By: Manudeep Bhuller; Gordon B. Dahl; Katrine V. Løken; Magne Mogstad
    Abstract: Understanding whether, and in what situations, time spent in prison is criminogenic or preventive has proven challenging due to data availability and correlated unobservables. This paper overcomes these challenges in the context of Norway’s criminal justice system, offering new insights into how incarceration affects subsequent crime and employment. We construct a panel dataset containing the criminal behavior and labor market outcomes of the entire population, and exploit the random assignment of criminal cases to judges who differ systematically in their stringency in sentencing defendants to prison. Using judge stringency as an instrumental variable, we find that imprisonment discourages further criminal behavior, and that the reduction extends beyond incapacitation. Incarceration decreases the probability an individual will reoffend within 5 years by 27 percentage points, and reduces the number of offenses over this same period by 10 criminal charges. In comparison, OLS shows positive associations between incarceration and subsequent criminal behavior. This sharp contrast suggests the high rates of recidivism among ex-convicts is due to selection, and not a consequence of the experience of being in prison. Exploring factors that may explain the preventive effect of incarceration, we find the decline in crime is driven by individuals who were not working prior to incarceration. Among these individuals, imprisonment increases participation in programs directed at improving employability and reducing recidivism, and ultimately, raises employment and earnings while discouraging further criminal behavior. Contrary to the widely embraced 'nothing works' doctrine, these findings demonstrate that time spent in prison with a focus on rehabilitation can indeed be preventive.
    JEL: J24 K42
    Date: 2016–09
  14. By: Björklund, Maria (Uppsala university); Carlsson, Mikael (Uppsala universitet and Sveriges Riksbank); Nordström Skans, Oskar (Uppsala universitet)
    Abstract: We study the importance of wage rigidities for the monetary policy transmission mechanism. Using uniquely rich micro data on Swedish wage negotiations, we isolate periods when the labor market is covered by fixed wage contracts. Importantly, negotiations are coordinated in time but their seasonal patterns are far from deterministic. Using a VAR model, we document that monetary policy shocks have a substantially larger impact on production during fixed wage episodes as compared to the average response. The results are not driven by the periodic structure, nor the seasonality, of the renegotiation episodes.
    Keywords: monetary policy; wages; nominal rigidities; micro data
    JEL: E23 E24 E58 J41
    Date: 2016–09–08
  15. By: Frédéric DOCQUIER (Université Catholique de Louvain); Amandine AUBRY (IRES - Université Catholique de Louvain); Michał BURZYŃSKI (IRES - Université Catholique de Louvain)
    Abstract: This paper quantifies the effect of global migration on the welfare of non-migrant OECD citizens. We develop an integrated, multi-country model that accounts for the interactions between the labor market, fiscal, and market size effects of migration, as well as for trade relations between countries. The model is calibrated to match the economic and demographic characteristics of the 34 OECD countries and the rest of the world, as well as trade flows between them in the year 2010. We show that recent migration flows have been beneficial for 69 percent of the non-migrant OECD population, and for 83 percent of non-migrant citizens of the 22 richest OECD countries. Winners are mainly residing in traditional immigration countries; their gains are substantial and are essentially due to the entry of immigrants from non OECD countries. Although labor market and fiscal effects are non-negligible in some countries, the greatest source of gain comes from the market size effect, i.e. the change in the variety of goods available to consumers.
    JEL: C68 F22 J24
    Date: 2016–07
  16. By: Francesco Vona (OFCE Sciences PO et SKEMA Business School); G. Marin (IRCrES-CNR); D. Consoli (INGENIO CSIC-UPV)
    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 geo- graphically concentrated than similar non-green jobs; and 4. the top green areas are mostly high-tech. As regards the drivers, changes in environ- mental 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 market, environmental regulation, environmental technologies, local multipliers
    JEL: J23 O33 Q52 R23
    Date: 2016–07

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