nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2016‒10‒02
eleven papers chosen by
Joseph Marchand
University of Alberta

  1. Occupational Choice in Early Industrializing Societies: Experimental Evidence on the Income and Health Effects of Industrial and Entrepreneurial Work By Christopher Blattman; Stefan Dercon
  2. Labour market reforms in Korea to promote inclusive growth By Randall S. Jones; Kohei Fukawa
  3. Does it pay to move? Returns to regional mobility at the start of the career for tertiary education graduates By Maier, Michael F.; Sprietsma, Maresa
  4. Measuring and Decomposing the Distance to the Shapley Wage Function with Limited Data By Victor Aguiar; Roland Pongou; Jean-Baptiste Tondji
  5. Women ask for less (only from men): Evidence from alternating-offer bargaining in the field By Hernandez-Arenaz, Iñigo; Iriberri, Nagore
  6. The Impact of Chinese Import Competition on the Local Structure of Employment and Wages: Evidence from France. By C. Malgouyres
  7. The Rise and Nature of Alternative Work Arrangements in the United States, 1995-2015 By Lawrence F. Katz; Alan B. Krueger
  8. Aggregate Recruiting Intensity By Alessandro Gavazza; Simon Mongey; Giovanni L. Violante
  9. The dynamics of health and labour market transitions at older ages: evidence from a multi-state model By Harris, M.N.; Zhao, X.; Zucchelli, E.
  10. Child Poverty, the Great Recession, and the Social Safety Net in the United States By Marianne Bitler; Hilary Hoynes; Elira Kuka
  11. Got rejected? Real effects of not getting a loan By Berg, Tobias

  1. By: Christopher Blattman; Stefan Dercon
    Abstract: As low-income countries industrialize, workers choose between informal self-employment and low-skill manufacturing. What do workers trade off, and what are the long run impacts of this occupational choice? Self-employment is thought to be volatile and risky, but to provide autonomy and flexibility. Industrial firms are criticized for poor wages and working conditions, but they could offer steady hours among other advantages. We worked with five Ethiopian industrial firms to randomize entry-level applicants to one of three treatment arms: an industrial job offer; a control group; or an “entrepreneurship” program of $300 plus business training. We followed the sample over a year. Industrial jobs offered more hours than the control group’s informal opportunities, but had little impact on incomes due to lower wages. Most applicants quit the sector quickly, finding industrial jobs unpleasant and risky. Indeed, serious health problems rose one percentage point for every month of industrial work. Applicants seem to understand the risks, but took the industrial work temporarily while searching for better work. Meanwhile, the entrepreneurship program stimulated self-employment, raised earnings by 33%, provided steady work hours, and halved the likelihood of taking an industrial job in future. Overall, when the barriers to self-employment were relieved, applicants appear to have preferred entrepreneurial to industrial labor.
    JEL: F16 J24 J81 O14 O17
    Date: 2016–09
  2. By: Randall S. Jones; Kohei Fukawa
    Abstract: Labour market reforms are essential to promote social cohesion by removing obstacles to employment, particularly for women, youth and older persons. In addition to reducing income inequality and poverty, such reforms would also sustain economic growth as Korea’s working-age population begins to decline in 2017. Breaking down labour market duality is crucial to reduce the wide wage disparity. Better conditions for non-regular workers would in turn promote greater labour participation. Increasing the take-up of maternity and parental leave, expanding the availability of high-quality childcare, reducing working time, narrowing the large gender wage gap and eliminating discrimination would also increase opportunities for women. Boosting youth employment from its current low level requires addressing labour market mismatch by better aligning the skills learned in school with those demanded by employers. Reducing the emphasis on seniority in setting wages by moving to more flexible systems and expanding training to improve the skills of older persons would allow them to extend their careers, thereby reducing old-age poverty. Des réformes du marché du travail en Corée pour promouvoir une croissance inclusive Les réformes du marché du travail sont essentielles pour promouvoir la cohésion sociale en supprimant les obstacles à l'emploi, en particulier pour les femmes, les jeunes et les personnes âgées. En plus de réduire l'inégalité de revenus et la pauvreté, de telles réformes soutiendraient la croissance économique, alors que la population en âge de travailler en Corée commence à décliner en 2017. Mettre fin au dualisme du marché du travail est crucial pour réduire la forte disparité des salaires. De meilleures conditions pour les travailleurs non réguliers favoriseraient à leur tour une participation accrue au marché du travail. L'augmentation de la prise de congés de maternité et parental, l'expansion de la disponibilité des services de garde d’enfants de haute qualité, une réduction du temps de travail, une réduction de l'important écart salarial entre hommes et femmes et l'élimination des discriminations accroîtraient les opportunités pour les femmes. Pour augmenter l'emploi des jeunes à partir de son faible niveau actuel, il est nécessaire de traiter le problème de l'inadéquation de l'offre et de la demande de travail par une meilleure adéquation entre les compétences acquises à l'école avec celles exigées par les employeurs. Réduire l'accent sur l'ancienneté dans la fixation des salaires en introduisant des systèmes plus flexibles et élargir la formation pour améliorer les compétences des plus anciens permettraient à ces derniers de prolonger leur carrière, réduisant ainsi la pauvreté des personnes âgées.
    Keywords: dualism, non-regular workers, work-life balance, labour market
    JEL: J21 J24 J26 J31
    Date: 2016–09–21
  3. By: Maier, Michael F.; Sprietsma, Maresa
    Abstract: Decisions taken at the start of one's career have long-term consequences and one important decision graduates have to make is whether to be regionally mobile when looking for the first job. We investigate whether being regionally mobile for the first job following graduation rather than to stay in the place of graduation pays off. Existing research on regional mobility mostly focuses on job-to-job mobility. We analyse the determinants of early career mobility and estimate a bivariate probit model to account for the dependency between the migration decisions for tertiary education and for the first job. In order to account for self-selection with respect to migration decisions, we exploit variation in the availability of university places at the regional level. Our results show that there is significant dependency between migration decisions made before and after tertiary education. Secondly, using an IV estimation strategy, we find significantly positive wage returns to regional mobility for the first job.
    Keywords: regional mobility,wages,university education,early career
    JEL: J31 J61
    Date: 2016
  4. By: Victor Aguiar (Department of Economics, University of Western Ontario); Roland Pongou (Department of Economics, University of Ottawa); Jean-Baptiste Tondji (Department of Economics, University of Ottawa)
    Abstract: We study the Shapley wage function, a wage scheme in which a worker's pay depends both on the number of hours worked and on the output of the firm. We then provide a way to measure the distance of an arbitrary wage scheme to this function in limited datasets. In particular, for a fixed technology and a given supply of labor, this distance is additively decomposable into violations of the classical axioms of efficiency, equal treatment of identical workers, and marginality. The findings have testable implications for the different ways in which popular wage schemes violate basic properties of distributive justice in market organizations. Applications to the linear contract and to other well-known compensation schemes are shown.
    Keywords: Shapley wage function, firm, fairness violations, linear contract, bargaining, limited data
    JEL: C71 C78 D20 D30 J30
    Date: 2016
  5. By: Hernandez-Arenaz, Iñigo; Iriberri, Nagore
    Abstract: We study gender differences and gender interaction effects in bargaining. Data from a TV show offer a unique opportunity to observe both bargaining outcomes and behavior, with sizable stakes. The matching between male proposers (strong position) and female responders (weak position) is different from all other matchings. No differences are observed in opening offers, but women demand less from men than from women. This differential behavior yields bargaining outcomes that are more favorable for men and less favorable for women when male proposers encounter female responders.
    Keywords: Alternating-offer bargaining; field data.; gender differences; gender interaction effects
    JEL: C72 J16 J31
    Date: 2016–09
  6. By: C. Malgouyres
    Abstract: The rapid rise of Chinese exports over the past two decades has raised concerns about manufacturing jobs and wage inequality in high-income countries. Spill-overs beyond the manufacturing sector are an important issue given the large size of the non-traded sector in modern economies as well as the imperfect spatial mobility of households. In this paper, I estimate the impact of Chinese import competition onto the structure of employment and wages of local labor markets in France, with an emphasis on spill-overs effects beyond manufacturing and the degree of local wage inequality. Local employment and total labor income in both manufacturing and non-manufacturing are negatively affected by rising exposure to imports. The estimates imply that each local manufacturing job destroyed by Chinese import competition results in the loss of about 1.5 local job outside of manufacturing. These substantial “local multiplier effects” are however much lower when expressed in terms of hours worked or earnings rather than job count. Import competition from China polarized the local structure of employment in the manufacturing sector. The wage distribution is uniformly negatively affected in manufacturing while the non-traded sector experiences wage polarization, i.e. a rise in upper-tail inequality and a decline in bottom-tail inequality. While overall wage inequality is on average not affected, I show that it increased in response to trade shocks in areas where the minimum wage is only weakly binding.
    Keywords: wage distribution, international trade, import competition, local labor markets.
    JEL: F16 J23 J31 R11 R23
    Date: 2016
  7. By: Lawrence F. Katz; Alan B. Krueger
    Abstract: To monitor trends in alternative work arrangements, we conducted a version of the Contingent Worker Survey as part of the RAND American Life Panel in late 2015. The findings point to a significant rise in the incidence of alternative work arrangements in the U.S. economy from 2005 to 2015. The percentage of workers engaged in alternative work arrangements – defined as temporary help agency workers, on-call workers, contract workers, and independent contractors or freelancers – rose from 10.7 percent in February 2005 to 15.8 percent in late 2015. The percentage of workers hired out through contract companies showed the largest rise, increasing from 1.4 percent in 2005 to 3.1 percent in 2015. Workers who provide services through online intermediaries, such as Uber or Task Rabbit, accounted for 0.5 percent of all workers in 2015. About twice as many workers selling goods or services directly to customers reported finding customers through offline intermediaries than through online intermediaries.
    JEL: J2 J3 J81
    Date: 2016–09
  8. By: Alessandro Gavazza; Simon Mongey; Giovanni L. Violante
    Abstract: We develop a model of firm dynamics with random search in the labor market where hiring firms exert recruiting effort by spending resources to fill vacancies faster. Consistent with micro evidence, in the model fast-growing firms invest more in recruiting activities and achieve higher job-filling rates. In equilibrium, individual decisions of hiring firms aggregate into an index of economy-wide recruiting intensity. We use the model to study how aggregate shocks transmit to recruiting intensity, andwhether this channel can account for the dynamics of aggregate matching efficiency around the Great Recession. Productivity and financial shocks lead to sizable pro-cyclical fluctuations inmatching efficiency through recruiting effort. Quantitatively, the main mechanism is that firms attain their employment targets by adjusting their recruiting effort as labor market tightness varies. Shifts in sectoral composition can have a sizable impact on aggregate recruiting intensity. Fluctuations in new-firm entry, instead, have a negligible effect despite their contribution to aggregate job and vacancy creations.
    JEL: E24 E32 J21 J23 J63
    Date: 2016–09
  9. By: Harris, M.N.; Zhao, X.; Zucchelli, E.
    Abstract: Despite its clear relevance and policy significance, there is still sparse evidence on the effects of ill-health on the dynamics of labour state transitions among older individuals. We provide novel evidence by considering retirement as mobility among full-time work, part-time work, self-employment and inactivity, using a dynamic multinomial choice model that simultaneously accounts for state dependence, individual-level and state-specific unobserved heterogeneity, captivity and correlations between labour market states. We also simulate the dynamic paths for the four labour states from both transitory and permanent health shocks. We find strong state dependence for all four labour states even after accounting for individual effects. Both ill-health and health shocks are found to greatly increase the probability of leaving full-time employment into inactivity, and we find some evidence of part-time and self-employment paths. Significant evidence is found for “captivity†effects for the “inactive†state, and correlations across labour states. We also show that the degree of state dependence is over-estimated and, for men, the effects of ill health under-estimated, if unobserved individual effects are not controlled for in dynamic models.
    Keywords: health; dynamic labour transitions; captivity; unobserved heterogeneity;
    JEL: C23 I10 J24 J2
    Date: 2016–09
  10. By: Marianne Bitler; Hilary Hoynes; Elira Kuka
    Abstract: In this paper, we comprehensively examine the effects of the Great Recession on child poverty, with particular attention to the role of the social safety net in mitigating the adverse effects of shocks to earnings and income. Using a state panel data model and data for 2000 to 2014, we estimate the relationship between the business cycle and child poverty, and we examine how and to what extent the safety net is providing protection to at-risk children. We find compelling evidence that the safety net provides protection; that is, the cyclicality of after-tax-and-transfer child poverty is significantly attenuated relative to the cyclicality of private income poverty. We also find that the protective effect of the safety net is not similar across demographic groups, and that children from more disadvantaged backgrounds, such as those living with non-Hispanic black or Hispanic, single, or particularly immigrant household heads-or immigrant spouses, experience larger poverty cyclicality than non-Hispanic white, married, or native household heads with native spouses. Our findings hold across a host of choices for how to define poverty. These include measures based on absolute thresholds or more relative thresholds. They also hold for measures of resources that include not only cash and near cash transfers net of taxes but also several measures of medical benefits.
    JEL: I3 J22
    Date: 2016–09
  11. By: Berg, Tobias
    Abstract: Using a lender cut-off rule that generates plausibly exogenous variation in credit supply, I analyze real effects of loan rejections in a sample of small and medium-sized enterprises. I find that loan rejections reduce asset growth, investments, and employment, and these effects are concentrated among low liquidity firms. Precautionary savings motives aggravate real effects: firms whose loan applications got rejected increase cash holdings and cut non-cash assets in excess of the requested loan amount. These results point to the amplifying effect of precautionary savings motives in the transmission of credit supply shocks. JEL Classification: G21, G32, J23
    Keywords: credit supply, liquidity demand, precautionary savings, real effects
    Date: 2016–09

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