nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2016‒10‒16
thirteen papers chosen by
Joseph Marchand
University of Alberta

  1. The Loss of Production Work: Evidence from Quasi-Experimental Identification of Labour Demand Functions By Elias Einiö
  2. Valuing Alternative Work Arrangements By Alexandre Mas; Amanda Pallais
  3. Can overtime premium flexibility promote employment? Firm-and worker-level evidence from a labour law reform By Pedro S. Martins
  4. Should the maximum duration of fixed-term contracts increase in recessions? Evidence from a law reform By Pedro S. Martins
  5. Teaching, Teachers Pensions and Retirement across Recent Cohorts of College Graduate Women By Maria D. Fitzpatrick
  6. Wage Inequality and Skill Supplies in a Globalised World By Lorenzo Rotunno; Adrian Wood
  7. The Impact of Medical Marijuana Laws on the Labor Supply and Health of Older Adults: Evidence from the Health and Retirement Study By Lauren Hersch Nicholas; Johanna Catherine Maclean
  8. A Bayesian Look at American Academic Wages: The Case of Michigan State University By Majda Benzidia; Michel Lubrano
  9. Impact of apprenticeships on individuals and firms: Lessons for evaluating Modern Apprenticeships in Scotland By Matej Bajgar; Chiara Criscuolo
  10. The Economic Effects of Weather: Evidence from Big Data on Small Places By Wilson, Daniel J.
  11. Do Savings Increase in Response to Salient Information about Retirement and Expected Pensions? By Mathias Dolls; Philipp Doerrenberg; Andreas Peichl; Holger Stichnoth
  12. What are production, work and consumption? Trans-historical re-conceptualisations By Edvinsson, Rodney
  13. Does state aid for broadband deployment in rural areas close the digital and economic divide? By Briglauer, Wolfgang; Dürr, Niklas S.; Falck, Oliver; Hüschelrath, Kai

  1. By: Elias Einiö
    Abstract: This paper examines changes in the structure of labour demand in plant-level panel data. I exploit variation in wages across local labour markets induced by the collapse of Finland's Soviet-dependent industry in the early 1990s to identify a labour demand model for plants producing for non-Soviet markets, which were not directly affected by the Soviet shock. I find a labour demand shift against workers in production occupations which accelerates in the 2000s, when industry patterns begin to diverge. Industry heterogeneity suggests that variation in industry structure may partly explain the differential development of wages and employment across countries.
    Keywords: labour demand function, occupation, offshoring, manufacturing, panel data, production work, technical change
    JEL: F16 J23 J24 O33
    Date: 2016–10
  2. By: Alexandre Mas; Amanda Pallais
    Abstract: We use a field experiment to study how workers value alternative work arrangements. During the application process to staff a national call center, we randomly offered applicants choices between traditional M-F 9 am – 5 pm office positions and alternatives. These alternatives include flexible scheduling, working from home, and positions that give the employer discretion over scheduling. We randomly varied the wage difference between the traditional option and the alternative, allowing us to estimate the entire distribution of willingness to pay (WTP) for these alternatives. We validate our results using a nationally-representative survey. The great majority of workers are not willing to pay for flexible scheduling relative to a traditional schedule: either the ability to choose the days and times of work or the number of hours they work. However, the average worker is willing to give up 20% of wages to avoid a schedule set by an employer on a week’s notice. This largely represents workers’ aversion to evening and weekend work, not scheduling unpredictability. Traditional M-F 9 am – 5 pm schedules are preferred by most jobseekers. Despite the fact that the average worker isn’t willing to pay for scheduling flexibility, a tail of workers with high WTP allows for sizable compensating differentials. Of the worker-friendly options we test, workers are willing to pay the most (8% of wages) for the option of working from home. Women, particularly those with young children, have higher WTP for work from home and to avoid employer scheduling discretion. They are slightly more likely to be in jobs with these amenities, but the differences are not large enough to explain any wage gaps.
    JEL: J16 J24 J31 J38 M50
    Date: 2016–09
  3. By: Pedro S. Martins
    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.JEL codes: J22, J23, J38
    Keywords: working time, wage rigidity, employment resilience, labour reforms
    Date: 2016
  4. By: Pedro S. Martins
    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%.JEL codes: J23, J41, J63
    Keywords: employment law, worker mobility, segmentation, counterfactual evaluation
    Date: 2016
  5. By: Maria D. Fitzpatrick
    Abstract: Labor force participation rates of college-educated women ages 60 to 64 increased by 20 percent (10 percentage points) between 2000 and 2010. One potential explanation for this change stems from the fact that fewer college-educated women in the more recent cohorts were ever teachers. This occupational shift could affect the length of women’s careers because teaching is a profession where workers are covered by defined benefit pensions and, generally, defined benefit pensions allow workers to retire earlier than Social Security. I provide evidence supporting the hypothesis and show that older college-educated women who worked as teachers do not experience increases in labor force participation as large as their counterparts who never taught.
    JEL: H55 J2
    Date: 2016–09
  6. By: Lorenzo Rotunno (Aix-Marseille University (Aix-Marseille School of Economics), CNRS, & EHESS); Adrian Wood (University of Oxford)
    Abstract: We investigate empirically how the relative wages of skilled and unskilled workers vary with their relative supplies in open economies. The investigation is based on a Heckscher-Ohlin model that is more general than the canonical version and related to recent advances in trade theory. Our results bridge the gap between trade economists and labour economists in views on the role of national labour markets in wage determination when countries trade. As labour economists believe, relative wages are sensitive to variation in skill supplies in open economies. As trade economists believe, however, this sensitivity decreases with openness to trade.
    Keywords: Heckscher-Ohlin, trade and wages, wage inequality, labour markets
    JEL: F11 F16 J23 J31
    Date: 2016–10
  7. By: Lauren Hersch Nicholas; Johanna Catherine Maclean
    Abstract: We study the effect of state medical marijuana laws (MMLs) on labor supply and health outcomes among older adults; the demographic group with the highest rates of many chronic conditions for which marijuana may be an effective treatment. Using 1992 - 2012 Health and Retirement Study data to estimate differences-in-differences models, we find that MML implementation leads to increases in labor supply among older adults along with improvement in health for older men and mixed health effects for women. These effects should be considered as policymakers determine how best to regulate access to medical marijuana.
    JEL: I10 I18 J20
    Date: 2016–09
  8. By: Majda Benzidia (Aix-Marseille University (Aix-Marseille School of Economics), CNRS & EHESS); Michel Lubrano (Aix-Marseille University (Aix-Marseille School of Economics), CNRS & EHESS)
    Abstract: The paper investigates academic wage formation, taking as a benchmark the Michigan State University. We model wage distributions using a hybrid mixture formed by a lognormal distribution for regular wages and a Pareto distributions for higher wages, using a Bayesian approach. With this model, we test for the presence of superstars in the Pareto member by comparing inequality in the two members. We found some evidence of superstars when recruiting Assistant Professors. However, a dynamic analysis reveals that they have a higher rate of outing, and, if they stay, a lower rate of wage increase. For full professors, we found a phenomenon of wage compression as if there were a kind of higher bound, which is just the contrary of a superstar phenomenon.
    Keywords: wage determination, academic market, superstars, tournaments theory, human capital, Mincer equation, Bayesian inference, hybrid mixtures
    JEL: C10 C11 C46 J20 J24 J30 J45
    Date: 2016–10
  9. By: Matej Bajgar; Chiara Criscuolo
    Abstract: This review summarises existing studies evaluating the impact of apprenticeships on individuals and firms and provides a brief overview of relevant evaluations in three related policy areas: education; active labour market programmes; and private on-the-job training. Based on the reviewed literature, it draws a number of lessons that are relevant for evaluating apprenticeship programmes in OECD member countries, such as the Modern Apprenticeships in Scotland. First, rigorous evaluation depends on the existence of suitable, high-quality data. Second, the measured effects of apprenticeships depend on the time elapsed since the end of the training period. Third, the outcomes most commonly examined in the existing literature are wages and the probability of employment. Fourth, it is important to employ methods that take into account not only observed but also unobserved individual characteristics. Finally, comparing apprentices to different “control groups” might provide different and complementary evidence on the impact of apprenticeships.
    Keywords: impact, training, apprenticeships, evaluation, return to schooling
    JEL: I26 J24 M53
    Date: 2016–10–11
  10. By: Wilson, Daniel J. (Federal Reserve Bank of San Francisco)
    Abstract: The effects of weather on the economy, outside of agriculture, have been surprisingly understudied. This paper exploits vast granular local data on employment and weather – with over 10 million county-industry-month observations – to estimate dynamic panel data (DPD) models of weather’s short-run effects. The estimates from this model provide an in-depth understanding of exactly how weather affects the economy at the local level. Temperature (by season), precipitation, snowfall, and the frequency of very hot and very cold days within a month are found to have significant effects on local employment growth. The effects are generally transitory, with some key exceptions, and vary substantially across industries and regions. The fitted county DPD model then is used to generate estimates of the total weather effect on national employment growth. I evaluate the in-sample and out-of-sample explanatory power of these estimates, compared with estimates from a national time-series model. While the estimated weather effects from the national time-series model yield a better in-sample fit, the estimated effects from the nationally-aggregated county DPD model provide a better out-of-sample fit.
    JEL: J21 Q54 R11
    Date: 2016–09–30
  11. By: Mathias Dolls; Philipp Doerrenberg; Andreas Peichl; Holger Stichnoth
    Abstract: How can retirement savings be increased? We explore a unique policy change in the context of the German pension system to study this question. As of 2004, the German pension authority started to send out annual letters providing detailed and comprehensible information about the pension system and individual expected pension payments. This reform did not change the level of pensions, but only manipulated the knowledge about and salience of expected pension payments. Using German tax return data, we exploit two discontinuities in the age cutoffs of receiving such a letter to study their effects on private retirement savings. Our results show that the letters increase private retirement savings. The effects are fairly sizable and persistent over several years. We further show that the letter increases labor earnings, and that the increase in savings partly crowds out charitable donations. Moreover, we present evidence suggesting that both information and salience drive the savings effect. Our paper adds to a recent literature showing that policies that go beyond the traditional neoclassical reasoning can be powerful to increase savings rates.
    JEL: D14 H24 H55 J26
    Date: 2016–09
  12. By: Edvinsson, Rodney (Dept. of Economic History, Stockholm University)
    Abstract: This paper argues for trans-historical reformulations of the basic economic concepts of production, work and consumption. The definition of the production boundary by System of National Accounts (SNA) is inconsistent from a scientific point of view. For example, while some non-market and illegal services are viewed as productive, others are not, and services and goods are treated differently. The definition proposed by feminist economics, the so-called third person criterion, is consistent, but in need for further development; furthermore, it is a definition of work and not of production. The purpose of this study is to investigate whether it is possible to formulate a non-eclectic set of logically consistent definitions that could be considered variations of a common underlying understanding across various theoretical traditions – mainly Classical, Neoclassical, Institutional, Marxist, Feminist and Keynesian Economics – of how humans consciously change external nature in order satisfy human needs. Important issues concern how to deal with violence, double counting of transaction costs, human capital formation, non-market activities and causation of final consumption. Production, work and consumption are defined as relations between events, the subject matter and the agent, and in the main definitions reduced to non-economic sentences. Even the utility concept is avoided. First-order logic is used, complemented with modal operators for some of the sentences. In this study, it is shown that production, work and consumption all share the common feature of intentional physical transformation of the intrinsic properties of the subject matter. The object transformed during the productive activity and work must at some point in time be external to the agent. For work, the purpose of transforming an external object must not lie in the transformation of the agent. A productive activity must potentially be able to cause the satisfaction of human needs, or final consumption, which is not a condition for work or required by the third-person criterion. Final consumption involves the transformation of the subject matter that is a final purpose for the consumer or serves as a purpose for transforming the consumer. Using a criterion applied by the institutional economist Cheung to identify transaction costs, this study defines social reproduction as an activity that would not occur in a Robinson Crusoe economy. Social reproduction occurs under an institutional setting. We can further differentiate between coercive and non-coercive social reproduction. In this study, eight different definitions of production are presented. The definition of agent external production is close to the third person criterion, but the possible causation of future final consumption is included as a condition for a productive activity. It is also related to the basic neoclassical model with its assumptions of no transaction costs. The definition of agent external non-coercive production entails that transformations of persons against their own will, whether legally or illegally performed, are unproductive activities. The definition of agent external non-social production entails that all socially reproductive activities are unproductive, and comes close to the distinction made by Classical and Marxist economists of productive and unproductive work. Humanity external production only includes the transformation of non-persons. The three definitions of time scale invariant production entails that human capital formation could be considered productive activities. Market production comes close to Keynesian theory and the present definition of SNA, with the difference that it excludes non-market goods production. The present study also opens for the possibility of unproductive work, for example failed production or professional murder, and productive final consumption that does not involve any work, for example hobby-hunting, play with children or research activity for own pleasure. Which definition of production is applied greatly affects the modelling and empirical application of growth theory and the analysis of the driving forces in economic history. For example, assume trade causes labour productivity outside of trade to increase four-fold due to specialisation, while the share of GDP in total working time increases from nil to half. With the same value added per productive hour and with total hours worked kept constant, the value added of agent external production then records a four-fold increase, while that of non-social production only a doubling. Similarly, during wars the SNA GDP often increases substantially, while the concept of agent external non-coercive production entails that all war expenses are treated as unproductive. Time frame invariant production grows faster than agent external production during expansions of the education system. Market production could serve important analytical purposes, for example to investigate the relation between money supply and inflation, but should be rid of inconsistencies such as the inclusion of non-market goods production.
    Keywords: GDP; production; work; consumption; economic philosophy; SNA
    JEL: A10 B13 B14 B40 B50 B51 B52 B54 D10 E00 E21 E23 J00 J24 N00 N01 O00
    Date: 2016–10–09
  13. By: Briglauer, Wolfgang; Dürr, Niklas S.; Falck, Oliver; Hüschelrath, Kai
    Abstract: We evaluate the impact of a major European state aid program for broadband deployment applied to rural areas in the German State of Bavaria in the years 2010 and 2011. Using difference-in-differences estimation strategies, we find that aided municipalities have - depending on broadband quality - a between 16.8 and 23.2 percent higher broadband coverage than non-aided municipalities. This increase in broadband coverage - closing the digital divide - results in an increase of on average seven employed individuals living in the respective aid-receiving municipalities while leaving the number of employed or selfemployed individuals or wages unaffected. We therefore conclude that an increase in broadband coverage through state aid prevents rural areas from depopulation, but does not contribute to a further closing of the economic divide in the form of creating new jobs.
    Keywords: government policy,state aid,ex-post evaluation,broadband,employment, rural areas,European Union,Germany,Bavaria
    JEL: D62 D73 G38 H23 J23 K23 L52 L96 L98 R23
    Date: 2016

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