nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2016‒10‒09
sixteen papers chosen by
Joseph Marchand
University of Alberta

  1. History dependence in wages and cyclical selection: Evidence from Germany By Bauer, Anja; Lochner, Benjamin
  2. Within and Between Firm Trends in Job Polarization: Role of Globalization and Technology By Pekkala Kerr, Sari; Maczulskij, Terhi; Maliranta, Mika
  3. The Third Worker: Assessing the Trade-off between Employees and Contractors By Martins, Pedro S.
  4. Are Labor Supply Decisions Consistent with Neoclassical Preferences? Evidence from Indian Boat Owners By Gine, Xavier; Martinez-Bravo, Monica; Vidal-Fernández, Marian
  5. The Skill Content of Occupations across Low and Middle Income Countries: Evidence from Harmonized Data By Dicarlo, Emanuele; Lo Bello, Salvatore; Monroy-Taborda, Sebastian; Oviedo, Ana Maria; Sanchez Puerta, Maria Laura; Santos, Indhira
  6. Do Employers Learn from Public, Subjective, Performance Reviews? By Alex Wood-Doughty
  7. Business Owners, Employees and Firm Performance By Maliranta, Mika; Nurmi, Satu
  8. Are Quebecers More Stressed Out at Work than Others? An Investigation into the Differences between Quebec and the Rest of Canada in the Level of Work Stress By Golnaz Sedigh; Rose Anne Devlin; Gilles Grenier
  9. Labor Market Imperfections and the Firm's Wage Setting Policy By Félix, Sónia; Portugal, Pedro
  10. Earnings among Nine Ethnic Minorities and the Han Majority in China's Cities By Gustafsson, Björn Anders; Yang, Xiuna
  11. War and the Stock of Human Capital By Jorge M. Agüero; Muhammad F. Majid
  12. Does political ideology hinder insights on gender and labor markets? By Stern, Charlotta
  13. Personnel policy adjustments when apprentice positions are unfilled: Evidence from German establishment data By Hinz, Tina
  14. Effects of IT-enabled Monitoring on Labor Contracting in Online Platforms: Evidence from a Natural Experiment By Chen Liang; Yili Hong; Bin Gu
  15. Are financial retirement incentives more effective if pension knowledge is high? By Giesecke, Matthias; Yang, Guanzhong
  16. Gender Quotas: Challenging the Boards, Performance, and the Stock Market By Ferrari, Giulia; Ferraro, Valeria; Profeta, Paola; Pronzato, Chiara D.

  1. By: Bauer, Anja (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]); Lochner, Benjamin
    Abstract: "Using administrative data from Germany, this paper analyzes the relation between wages and past and current labor market conditions. Specifically, it explores whether the data is more consistent with implicit contract models (Beaudry/DiNardo, 1991) or a matching model with on-the-job search and cyclical selection (Hagedorn/Manovskii, 2013). The data suggests that wages are related to past labor market conditions as contract theories postulate. However, past labor market conditions also affect contemporaneous wages through the evolution of the match qualities over a worker's job history - the main hypothesis of the selection model. Refining the selection model by taking into account within company job regrading, we find that wages of workers who switched employers and occupations at the same time respond stronger to the cycle than wages of job stayers. In contrast, wages of workers who only switch employers or occupations are not more cyclical than wages of workers who stay at their previous employer and in their previous occupation." (Author's abstract, IAB-Doku) ((en))
    JEL: E24 E32 J31 J41
    Date: 2016–09–29
  2. By: Pekkala Kerr, Sari; Maczulskij, Terhi; Maliranta, Mika
    Abstract: This paper analyzes occupational polarization within and across firms using comprehensive matched employer-employee panel data from Finland. The occupational distribution in Finland has been polarizing over the last few decades, with mid-level production and clerical jobs eroding while low-skill service occupations and high-skill specialist occupations gain share. We find that the phenomenon is taking place within existing firms, as well as due to firm entry and exit. Service jobs are increasing through the entry-exit dynamics, but also via establishment level restructuring among continuing firms. Routine jobs, including mid-level plant operating jobs, are being destroyed both among continuing firms and at the entry-exit margin. The share of high-level occupations increases largely within continuing firms. Within the continuing firms the job polarization appears to be related to the trade of goods and services, as well as the outsourcing of tasks. Firms with high R&D expenditures and ICT use are more prone to lay off process and production workers.
    Keywords: Job polarization, offshoring, international trade, firm, establishment, technology, R&D, ICT
    JEL: J24 J31 O33
    Date: 2016–10–03
  3. By: Martins, Pedro S. (Queen Mary, University of London)
    Abstract: Firms make labour demand decisions not only between permanent and non-permanent employees but also increasingly more between employees and contractors. Indeed, this third work format can be attractive, also when employment protection law is restrictive. This paper examines empirically this scarcely researched trade-off drawing on a recent reform in Portugal that cut the severance pay of new employee hires while leaving unchanged the regulations affecting contractors. Our analysis draws on difference-in-differences methods and original high-frequency firm-level panel data on both employees and contractors. We find that the reduction in severance pay had a large relative positive effect on the wage bills and worker counts of employees compared to contractors. This result, robust to a number of checks, highlights the role of labour regulations as an additional driver of more flexible labour formats.
    Keywords: employment law, segmentation, duality, future of work
    JEL: J23 J41 J63
    Date: 2016–09
  4. By: Gine, Xavier (World Bank); Martinez-Bravo, Monica (CEMFI, Madrid); Vidal-Fernández, Marian (University of Sydney)
    Abstract: This paper studies the labor supply of South Indian boat owners using daily labor participation decisions of 249 boat owners during seven years. We test the standard neoclassical model of labor supply and find that boat owners' labor participation depends positively on expected earnings but also on recent accumulated earnings, albeit weakly. Participation elasticities with respect to expected earnings range between 0.8 and 1.3 and about -0.05 and -0.01 with respect to changes in recent income. While the standard neoclassical model is statistically rejected, it is a good approximation of the labor supply behavior of boat owners in southern India.
    Keywords: intertemporal labor supply, daily income
    JEL: J22 J31
    Date: 2016–09
  5. By: Dicarlo, Emanuele (University of Zurich); Lo Bello, Salvatore (Universidad Carlos III de Madrid); Monroy-Taborda, Sebastian (World Bank); Oviedo, Ana Maria (World Bank); Sanchez Puerta, Maria Laura (World Bank); Santos, Indhira (World Bank)
    Abstract: Using new and harmonized worker-level survey data on tasks at work in the developing world, this paper constructs, for the first time, a measure of the skill content of occupations for 10 low and middle-income countries. Following Autor, Levy and Murnane (2003), Acemoglu and Autor (2011), and Autor and Handel (2013), we map tasks into non-routine analytical, non-routine interpersonal, and routine & manual skill groups. We find significant differences in the skill mix used by workers across different occupations, with selected white-collar occupations being intensive in Analytical and Interpersonal skills, while others— mostly blue collar, but not only— being more intensive in Routine and Manual skills. We also find that the rankings of occupations along the skill dimensions are quite stable across countries, and they correlate significantly higher between middle- and low-income countries than between them and the United States. Hence, the common practice of assuming the same skill structure for occupations in the United States and other countries can be misleading. Finally, we find that the heterogeneity of skill content between occupations (within countries) tends to decrease with the level of income, while the heterogeneity within occupations decreases only weakly (or not at all) for higher income levels. Taken together, these results suggest that as countries develop, they tend to adopt and use certain skills more widely, especially across occupations. This may suggest some degree of specialization in skills content of tasks as countries develop, especially moving towards less occupation-specific Analytical or Interpersonal skills that are becoming increasingly relevant across the board.
    Keywords: skills, occupational classification, skill biased, skill building, specific human capital
    JEL: J24
    Date: 2016–09
  6. By: Alex Wood-Doughty (Department of Economics, University of California, Santa Barbara, CA 93106)
    Abstract: Much of the new “gig economy” relies on reputation systems to reduce problems of asymmetric information. In most cases, these reputation systems function well by soliciting unbiased feedback from buyers and sellers. However, certain features of onlinelabor markets create incentives for employers to misreport worker performance. This paper tests whether employers learn about worker productivity from public, subjective, performance reviews using data from a large online labor market. Starting with a simple model of employer learning in the presence of potentially biased reviews, I derive testable hypotheses about the relationship between public information and wages, worker attrition, and contract renewals. I find that these public reviews provide substantial information to the market and that other firms use them to learn about the productivity of workers. I also find evidence that these reviews affect how long workers stay in the labor market. Finally, using data on applications, I provide evidence of a mechanism for honest reviews. I show that workers punish firms that leave negative reviews by refusing to work for them again. Together, this body of evidence suggests that reputation systems in online labor markets provide significant information to both workers and firms and help reduce problems of asymmetric information.
    Keywords: online labor markets; reputation systems; employer learning
    JEL: D82 D83 J31 J49
    Date: 2016–09
  7. By: Maliranta, Mika; Nurmi, Satu
    Abstract: Abstract The novel Finnish Longitudinal OWNer-Employer-Employee (FLOWN) database was used to analyze how the characteristics of owners and employees relate to firm performance as determined by labor productivity, survival and employment growth. Focusing on the role of the owner’s formal education and previous experience as an employee, the results show that previous experience in a high-productivity firm strongly predicts high productivity and probability of survival for the entrepreneur’s new firm. This can be interpreted as evidence of knowledge spillover through labor mobility. Strikingly, firms established in times of intensive excess job reallocation were found to exhibit superior productivity performance in the later phases of their life cycles.
    Keywords: Entrepreneurship, ownership, firm performance, human capital, diffusion of knowledge
    JEL: L25 L26 J24 J62 O33
    Date: 2016–10–06
  8. By: Golnaz Sedigh (Department of Economics, University of Ottawa, Ottawa, ON); Rose Anne Devlin (Department of Economics, University of Ottawa, Ottawa, ON); Gilles Grenier (Department of Economics, University of Ottawa, Ottawa, ON)
    Abstract: Stress at work is costly to individuals as well as employers, causing productivity to suffer and worker compensation claims to increase. Irrespective of how the data are grouped, individuals in Quebec are much more likely to report high work stress relative to those in any other Canadian province. Here we explore why this might be the case. Using pooled cross-sectional data from eight cycles of the Canadian Community Health Survey, spanning 2003-2012, we show that several factors are related to work stress, including chronic diseases, mental health, and lifestyle choices like smoking and drinking. Nevertheless, living in Quebec is persistently associated with higher reported work stress. We discuss whether contextual factors, like Quebec’s child-care policy and its legal regime may help us understand this result better; a ‘cultural’ explanation is explored, as is the possibility that Quebecers simply report more stress. While residents of Quebec do not appear to differ from others with respect to the prevalence of some ‘stress-related’ health conditions – pointing to a cultural component to the explanation – they are absent from work more often than others, suggesting that the costs to Quebec of this phenomenon are real.
    Keywords: Stress au travail, Enquête sur la santé dans les collectivités canadiennes, comparaisons interprovinciales de stress, Québec, Canada
    JEL: J28 J08
    Date: 2016
  9. By: Félix, Sónia (Universidade Nova de Lisboa); Portugal, Pedro (Banco de Portugal)
    Abstract: We use matched employer-employee data and firm balance sheet data to investigate the importance of firm productivity and firm labor market power in explaining firm heterogeneity in wage formation. We use a linear regression model with one interacted high dimensional fixed effect to estimate 5-digit sector-specific elasticity of output with respect to input factors directly from the production function. This allows to derive firm specific price-cost mark-up and elasticity of labor supply. The results show that firms possess a considerable degree of product and labor market power. Furthermore, we find evidence that firm's monopsony power affects negatively the earnings of its workers and firm's total factor productivity is considerably associated with higher earnings, ceteris paribus. We also find that firms use monopsony power for wage differentiation between male and female workers.
    Keywords: monopsony, wage setting, labor market frictions
    JEL: J31 J20 J42
    Date: 2016–09
  10. By: Gustafsson, Björn Anders (University of Gothenburg); Yang, Xiuna (China Development Research Foundation)
    Abstract: This paper asks if economic growth and steps towards a market economy have affected earnings gaps between the Han and nine large urban ethnic minorities: Zhuang, Hui, Manchurian, Tujia, Uighur, Miao, Tibetan, Mongol and Korean. It also asks how earnings premiums and earnings penalties have changed for the nine ethnic minorities. For the analysis we use a subsample of the 2005 China's Inter-Census Survey. We find examples of three different changes over time in earnings premiums and earnings penalties: One ethnic minority for whom the development has been more favourable than for the Han majority; a second category in which development has been similar; and a third category for which development has been unfavourable. We conclude from the analysis that it can be misleading to infer the experience of one ethnic minority from that of another.
    Keywords: earnings, ethnic minorities, Uighur, Tibetan, Korean
    JEL: J15 J31 J71 P23
    Date: 2016–09
  11. By: Jorge M. Agüero (University of Connecticut); Muhammad F. Majid (McGill Institute for Health and Social Policy)
    Abstract: We expand the literature on the costs of conflict by studying how wars affect the stock of human capital. Applying a “missing people” approach to censuses before and after the 1994 Rwandan genocide, we show that the size of the educated cohort shrunk by 39 percent. This effect contrasts with the demographic trends observed in other African countries during the same period and in Rwanda pre-genocide where the less educated are more likely to be missing. We show that excess missing rate of the educated found after the genocide is driven by deaths of educated Hutus, rather than refugee flows or even the ethnic targeting of Tutsis. We discuss how this loss affects labor markets post-conflict, the returns to education and we document the bias of studies that focus on impact of wars on the accumulation of human capital.
    Keywords: Costs of War, Genocide, Education, Mortality, Rwanda
    JEL: J10 J24 I15
    Date: 2016–10
  12. By: Stern, Charlotta (Department of Sociology, Stockholm University and The Ratio Institute)
    Abstract: Sociology is a field where a large majority of professors lean left. The left-leaning ideology is visible in studies of gender differences in labor markets. In such studies, a left-feminist ideology of equality is taken to be self-evident. Defining equality to equate to slim-outcome difference, however, pre-destines all differences to be seen as outcomes of culturally defined social constructions and discrimination. In this chapter it is hypothesized that this has produced tabooed topics in the field. One such taboo is the acknowledging of differences between men and women. Such differences challenge the left-feminism’s notion of equality in terms of slim-outcome-difference. Research on evolution and preferences is downplayed in favor of cultural explanations. Cultural explanations interpret differences between men and women in labor market behavior as constructed, as largely driven by gender stereotypes and discrimination. The notion that differences can stem from biology or from the choices made by individuals pursuing a lifestyle different than those prescribed by gender researchers is seldom entertained. I hypothesize that the situation stems from gender sociology being dominated by left-feminist ideology.
    Keywords: Labor market; Sociology
    JEL: J40 Z10
    Date: 2016–09–30
  13. By: Hinz, Tina
    Abstract: German firms have increasing difficulties in filling apprentice positions. I study how firms adjust their personnel policies when they face unfilled apprentice positions. Using the IAB Establishment Panel (2008-2014) and applying fixed effects panel estimations, I find that small firms react by hiring more unskilled workers. I do not observe an intensified use of personnel policies directed at the existing workforce, such as further training, retention of apprenticeship graduates or conversion of fixed-term into permanent contracts. Moreover, the results do not indicate that firms with unfilled apprentice positions turn away from apprenticeship training. My findings suggest that most training firms may not regard unfilled apprentice positions as a serious problem (so far).
    Abstract: Deutsche Betriebe haben immer größere Schwierigkeiten ihre Ausbildungsstellen zu besetzen. Dieses Papier untersucht, wie Betriebe ihre personalpolitischen Maßnahmen anpassen, wenn Ausbildungsstellen unbesetzt bleiben. Unter Verwendung des IAB-Betriebspanels (2008-2014) und Schätzung mit betriebsfixen Effekten zeigt sich, dass kleine Firmen mehr geringqualifizierte Beschäftigte einstellen. Betriebe reagieren nicht mit einer intensiveren Nutzung von Maßnahmen der betrieblichen Weiterbildung, Übernahme von Auszubildenden oder Entfristung von Beschäftigten. Zusätzlich gibt es kein Anzeichen dafür, dass Betriebe mit unbesetzten Ausbildungsstellen ihre Ausbildungsaktivität verringern. Somit deuten die Ergebnisse darauf hin, dass Ausbildungsbetriebe mit unbesetzten Ausbildungsstellen (noch) keinen Handlungsbedarf sehen.
    Keywords: apprenticeship training,personnel policy,Germany
    JEL: I29 J24 J63 M53
    Date: 2016
  14. By: Chen Liang (Department of Information Systems, W.P. Carey School of Business, Arizona State University, USA); Yili Hong (Department of Information Systems, W.P. Carey School of Business, Arizona State University, USA); Bin Gu (Department of Information Systems, W.P. Carey School of Business, Arizona State University, USA)
    Abstract: Two-sided platforms are typically plagued with asymmetric information, limiting market efficiency. Situated in the context of the increasingly popular online platforms for labor contracting (herein referred to as “online labor markets†), this paper investigates whether the implementation of an IT-enabled monitoring system mitigates moral hazard in online platforms and the consequences thereof. Our identification hinges on a natural experiment at Freelancer when it introduced an IT-enabled monitoring system with enhanced offline tracking features in August 2015. Based on a unique dataset including 17,827 fixed-price projects and 8,563 time-based projects matched on observable characteristics, we employ a difference-in-differences (DID) approach to identify the treatment effect of the monitoring system implementation on various outcomes from both the employer (demand) side and the contractor (demand) side, including employer contractor choice, platform entry barrier and employer surplus. We found that the implementation of the monitoring system lowers the employers’ preference for high-reputation bidders in time-based projects, and thus reduces the reputation premiums and partially lowers the entry barrier for contractors who have not yet established a reputation on the platform. Specifically, using fixed-price projects as the baseline, on average, the implementation of the monitoring system increased the number of bids by 17.4% (primarily from bidders with no prior experience on the platform) and increased employer surplus in time-based projects by 21.5%. Our results testify the partial substitution relationship between reputation systems and monitoring systems, and suggest that IT-enabled monitoring systems have a significant effect on alleviating moral hazards, reducing agency costs, and intensifying supply-side platform competition.
    Keywords: platforms; online labor market; moral hazard; monitoring systems; reputation systems; entry barrier; contract type
    JEL: J23 J41 J46
    Date: 2016–09
  15. By: Giesecke, Matthias; Yang, Guanzhong
    Abstract: We elicit preferences for retirement timing in a laboratory experiment. Subjects make retirement choices under different payoff schemes that introduce variation in financial incentives. Testing ceteris paribus conditions of the financial incentive alone shows a considerable delay of retirement once early retirement becomes financially less attractive. However, varying available information as another treatment parameter reveals considerable heterogeneity in the functioning of these incentives. Subjects who are explicitly informed about the expected pension wealth respond more strongly to financial incentives compared to those who only know their pension annuity. We conclude that the financial consequences of retirement choices become more salient to the decision maker once being informed on a forward-looking measure of pension benefits.
    Abstract: Wir untersuchen die Wirkung finanzieller Anreize auf das Rentenalter im Rahmen eines Laborexperiments. Die Teilnehmer wählen ein Renteneintrittsalter, wobei sich die Auszahlungsstruktur hinsichtlich des erwarteten Rentenbarwerts als Funktion des Rentenalters unterscheidet. Konsistent mit der quasi-experimentellen Literatur zeigt sich zunächst eine deutliche Verschiebung des Rentenalters, wenn Frühverrentung finanziell relativ weniger attraktiv ist. Allerdings offenbart sich substantielle Heterogenität in der Wirkungsweise des finanziellen Anreizes, wenn die Menge an verfügbarer Information variiert. Teilnehmer, die explizit über den erwarteten Rentenbarwert für ein entsprechendes Rentenalter informiert sind, reagieren deutlich stärker auf finanzielle Anreize als diejenigen, die lediglich die jeweilige Annuität kennen. Das Ergebnis macht deutlich, dass die finanziellen Konsequenzen von Renteneintrittsentscheidungen in relevantem Ausmaß offensichtlicher werden, wenn Entscheidungsträger über den Barwert als vorausschauendes Maß von periodischen Rentenbezügen informiert sind.
    Keywords: retirement age,financial incentives,information treatment,pension knowledge,financial literacy
    JEL: C91 H55 J26
    Date: 2016
  16. By: Ferrari, Giulia (INED, France); Ferraro, Valeria (Boston College); Profeta, Paola (Bocconi University); Pronzato, Chiara D. (University of Turin)
    Abstract: In 2011, Italy introduced gender quotas for boards of directors of companies listed on its stock market. Comparing before and after the reform within firms, we find that quotas are associated with a higher share of female board directors, higher levels of education of board members, and a lower share of older members. We then use the reform period as an instrument for the share of female directors and find no significant impact on firms' performance. Interestingly, we find that the share of female directors is associated with a lower variability of stock market prices. We also run event studies on the stock price reaction to the introduction of gender quotas. A positive effect of the quota law on stock market returns emerges at the date of the board's election. Our results are consistent with gender quotas giving rise to a beneficial restructuring of the board, which is positively received by the market.
    Keywords: education, age, financial markets
    JEL: J20 J48 J78
    Date: 2016–09

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