nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2016‒12‒04
thirteen papers chosen by
Joseph Marchand
University of Alberta

  1. The U-shape of Over-education? Human Capital Dynamics & Occupational Mobility over the Lifecycle. By Ammar Farooq
  2. Laws, Educational Outcomes, and Returns to Schooling: Evidence from the Full Count 1940 Census By Karen Clay; Jeff Lingwall; Melvin Stephens, Jr.
  3. Who is your perfect match? Educational norms, educational mismatch and firm profitability By Stephan Kampelmann; Benoît Mahy; François Rycx; Guillaume Vermeylen
  4. Labor Market Effects of Inconsistent Policy Interventions: Evidence from India’s Employment Guarantees By Bahal, G.; Shrivastava, A.
  5. Does federal contracting spur development? Federal contracts, income, output, and jobs in US cities By Gerritse, Michiel; Rodríguez-Pose, Andrés
  6. The Impact of the 1896 Factory and Shops Act on Victorian Labour Markets By Andrew Seltzer; Jeff Borland
  7. Worker Personality: Another Skill Bias beyond Education in the Digital Age By Eckhardt Bode; Stephan Brunow; Ingrid Ott; Alina Sorgner
  8. Workplace Support and Diversity in the Market for Public School Teachers By Steven, Bednar; Gicheva, Dora
  9. Recruiting for Small Business Growth: Micro-level Evidence By Gidehag, Anton; Lodefalk, Magnus
  10. The Spillover Effects of Affirmative Action on Competitiveness and Unethical Behavior By Ritwik Banerjee; Nabanita Datta Gupta; Marie Claire Villeval
  11. Problematic response margins in the estimation of the elasticity of taxable income By Kristoffer Berg; Thor O. Thoresen
  12. Identifying the Benefits from Home Ownership: A Swedish Experiment By Sodini, Paolo; van Nieuwerburgh, Stijn; Vestman, Roine; von Lilienfeld-Toal, Ulf
  13. Assessing the Effect of Payroll Taxes on Formal Employment: The Case of the 2012 Tax Reform in Colombia By Leonardo Fabio Morales; Carlos Medina

  1. By: Ammar Farooq
    Abstract: This paper analyzes the relationship between age and the skill requirements of jobs performed by workers. I document that the proportion of college degree holders working in occupations that do not require a college degree is U-shaped over the life cycle and that there is a rise in transitions to non-college jobs among prime age college workers. The downward trend at initial stages of the life cycle is consistent with workhorse models of labor mobility, however, the rising trend at middle stages of the career is not. Such movements down the occupation ladder are also accompanied by average wage losses of 10% from the previous year. I develop an equilibrium model of frictional occupation matching featuring skill accumulation and depreciation along with worker and firm heterogeneity that can match the life cycle profile of downward occupational mobility. The model shows that skill depreciation is the key driver of transitions to low skill jobs with age. Using the model, I simulate the impact of different types of structural change in the labor market and find that the welfare consequences of long term changes depend on the interaction of the life cycle and human capital investment dimension.
    JEL: E24 J24 J31 J62
    Date: 2016–11–23
  2. By: Karen Clay; Jeff Lingwall; Melvin Stephens, Jr.
    Abstract: This paper uses a new dataset on state compulsory attendance, continuation school, and child labor laws with the 1940 full count Census of Population to estimate the returns to schooling for native-born white men in the 1885-1912 birth cohorts. IV estimates of returns to schooling range from 0.064 to 0.079. Quantile IV estimates show that the returns to schooling were largest for the lowest quantiles, and were generally monotonically decreasing for higher quantiles. These findings suggest that early schooling laws may have contributed to the Great Compression by increasing education levels for white men at the bottom of the distribution.
    JEL: I26 J24 J31 N32
    Date: 2016–11
  3. By: Stephan Kampelmann; Benoît Mahy; François Rycx; Guillaume Vermeylen
    Abstract: We provide first evidence regarding the direct effect of educational norms and educational mismatch on the bottom line of firms across work environments. To do so, we use rich Belgian linked employer-employee panel data, rely on the methodological approach pioneered by Hellerstein et al. (1999), and estimate dynamic panel data models at the firm level. Our findings show an ‘inverted L’ profitability profile: undereducation is associated with lower profits, whereas higher levels of normal and overeducation are correlated with positive economic rents of roughly the same magnitude. The size of these effects is amplified in firms experiencing economic uncertainty or operating in high-tech sectors.
    Keywords: Educational mismatch; productivity-wage gaps; linked panel data
    JEL: J21 J24
    Date: 2016–11–29
  4. By: Bahal, G.; Shrivastava, A.
    Abstract: Recent evidence suggests that large employment guarantee schemes in India have increased private wages. Juxtaposed with this body of work are studies that show how the lack of administrative capacity, political will, and other supply factors cause program provision to be rather limited and highly variable across districts and over time. This paper attempts to understand the cost of variability in program provision in terms of the labor market outcomes. We find that in the presence of downward wage rigidity, forward-looking employers compress wage increases today because of the uncertainty regarding the level of program provision in the future. Our theory generates two key empirically verified predictions: (i) greater variability in program provision results in a larger compression of wage increases; and (ii) that compression of wage increases is more severe in districts where inflation is low relative to where inflation is high. This has important policy implications as we show that by simply reducing the variability in program provision, without increasing the average expenditure, can be welfare enhancing.
    Keywords: Employment guarantee, wage rigidity, uncertainty, welfare, NREGA, India
    JEL: I38 J31 J68 O12
    Date: 2016–12–14
  5. By: Gerritse, Michiel; Rodríguez-Pose, Andrés
    Abstract: Government contracts are frequently courted by firms and governments alike as a solution to generate more jobs, income, and economic growth. However, the development impact of government contracts remains controversial. This paper uses georeferenced data on United States (US) federal contracts, distinguishing between the location of the recipient and the location of performance, for the years 2005-2014 in order to assess the extent to which federal government contracting has contributed to job and wealth generation and economic growth in metropolitan areas of the US. The results of the analysis show that individuals living in cities with a higher share of contract spending per capita witnessed improvements in employment. Aggregate GDP per capita also rose in cities hosting the companies receiving the contracts. However, the effects - once reverse causality and spurious trends are controlled for using a fine-scale fixed effect strategy and instrumentation - are very small, raising reasonable questions about the viability of federal contracting as a vehicle for economic development.
    Keywords: Economic Growth; federal contracting; government spending; jobs; urban development; wages
    JEL: O23 R11 R38 R58
    Date: 2016–11
  6. By: Andrew Seltzer; Jeff Borland
    Abstract: This paper examines the effects of the Victorian Factory and Shops Act the first minimum wage law in Australia. The Act differed from modern minimum wage laws in that it established Special Boards, which set trade-specific minimum wage schedules. We use trade level data on average wages, employment, and other outcomes to examine the effects of changes in minimum wages. Although the minimum wages were binding, we find that the effects on employment and other outcomes were modest. We speculate that this was partly because the Special Boards, which were comprised mostly of employers and union officials, followed labour market conditions when setting wages for their trades.
    Keywords: Minimum wages, Australia, Factory and Shops Act
    JEL: J38 N37
    Date: 2016–12
  7. By: Eckhardt Bode; Stephan Brunow; Ingrid Ott; Alina Sorgner
    Abstract: We present empirical evidence suggesting that technological progress in the digital age will be biased not only with respect to skills acquired through education but also with respect to noncognitive skills (personality). We measure the direction of technological change by estimated future digitalization probabilities of occupations, and noncognitive skills by the Big Five personality traits from several German worker surveys. Even though we control extensively for education and experience, we find that workers characterized by strong openness and emotional stability tend to be less susceptible to digitalization. Traditional indicators of human capital thus measure workers’ skill endowments only imperfectly.
    Keywords: Worker personality, Noncognitive skills, Digital transformation, Direction of technical change, Germany
    JEL: C25 J24 O33
    Date: 2016
  8. By: Steven, Bednar (Elon University); Gicheva, Dora (University of North Carolina at Greensboro, Department of Economics)
    Abstract: Mentoring, and to a greater extent support from high-level administrators, has been shown to decrease worker turnover in general, but little is known about its differential impact on minority workers. Utilizing four waves of the Schools and Staffing Survey, we uncover a novel pattern of the effect of workplace support on turnover in the market for public school teachers. Support is most strongly associated with retention for minority teachers working in schools where minorities are under-represented. This effect is pronounced for teachers new to the profession and those in rural areas. This indicates that workplace support is essential in maintaining or growing minority representation in relatively less-diverse organizations.
    Keywords: teacher; turnover; workplace support; workplace diversity
    JEL: I21 J45 J62 M54
    Date: 2016–11–29
  9. By: Gidehag, Anton (Örebro University School of Business); Lodefalk, Magnus (Örebro University School of Business)
    Abstract: We examine the link between new employees in leading positions and subsequent productivity in small- and medium-sized (SME) enterprises. Managers and professionals are likely to possess important tacit knowledge. They are also in a position to influence the employing firm. Exploiting rich and comprehensive panel data for Sweden in the 2001-2010 period and employing semi-parametric and quasi-experimental estimation techniques, we find that newly recruited leading personnel have a positive and statistically significant impact on the productivity of the hiring SME. Interestingly, our results suggest that professionals with experience from international firms and enterprise groups contribute the most to total factor productivity. Overall, the findings suggest the importance of mobility of leading personnel for productivity-enhancing knowledge spillovers to SMEs.
    Keywords: recruitment; knowledge spillovers; firm growth; productivity; SME
    JEL: D22 D24 D83 J24 J62
    Date: 2016–10–31
  10. By: Ritwik Banerjee; Nabanita Datta Gupta (Department of Economics and Business Economics, Aarhus University, Denmark); Marie Claire Villeval
    Abstract: We conduct an artefactual field experiment to examine various spillover effects of Affirmative Action policies in the context of castes in India. We test a) if individuals who compete in the presence of Affirmative Action policies remain competitive in the same proportion after the policy has been removed, and b) whether having been exposed to the policy generates unethical behavior and spite against subjects from the category who has benefited from the policy. We find that these policies increase substantially the confidence of the lower caste members and motivate them to choose significantly more frequently a tournament payment scheme. However, we find no spillover effect on confidence and competitiveness once Affirmative Action is withdrawn: any lower caste’s gain in competitiveness due to the policy is then entirely wiped out. Furthermore, the strong existing bias of the dominant caste against the lower caste is not significantly aggravated by Affirmative Action.
    Keywords: Affirmative Action, castes, competitiveness, unethical behavior, field experiment
    JEL: C70 C91 J16 J24 J31 M52
    Date: 2016–11–29
  11. By: Kristoffer Berg; Thor O. Thoresen (Statistics Norway)
    Abstract: The elasticity of taxable income (ETI) is known to represent a summary measure of tax efficiency costs, which means that further information about the behavioral components of the ETI is not required for its use in tax policy design. However, as there are response margins that may cause biases in the estimation of the elasticity, we advise against neglecting information about the composition of the behavior seized by the ETI. When using responses of the Norwegian self-employed to the tax reform of 2006 for illustration, we discuss how four different responses relate to the overall ETI, given characteristics of the reform. Effects on working hours, on tax evasion, and from shifts in organizational form and across tax bases are discussed in terms of to what extent they represent sources to estimation bias, or enter into the ETI in a decompositional way. We provide empirical illustrations of the effects of each of these margins, and we show that the estimated ETI is biased downward because of organizational shifts.
    Keywords: elasticity of taxable income; self-employed; tax evasion; organizational shift
    JEL: H24 H26 H31 J2
    Date: 2016–11
  12. By: Sodini, Paolo; van Nieuwerburgh, Stijn; Vestman, Roine; von Lilienfeld-Toal, Ulf
    Abstract: This paper studies the economic benefits of home ownership. Exploiting a quasi-experiment surrounding privatization decisions of municipally-owned apartment buildings, we obtain random variation in home ownership for otherwise similar buildings with similar tenants. We link the tenants to their tax records to obtain information on demographics, income, mobility patterns, housing wealth, financial wealth, and debt. These data allow us to construct high-quality measures of consumption expenditures. Home ownership causes households to move up the housing ladder, work harder, and save more. Consumption increases out of housing wealth are concentrated among the home owners who sell subsequent to privatization and among those who receive negative income shocks, evidencing a collateral effect.
    Keywords: collateral effect; home ownership; housing wealth; mobility; MPC
    JEL: D12 D31 E21 G11 H31 J22 R21 R23 R51
    Date: 2016–11
  13. By: Leonardo Fabio Morales (Banco de la República de Colombia); Carlos Medina (Banco de la República de Colombia)
    Abstract: In 2013 Colombia implemented a tax reform which, among other things, reduced payroll taxes by a total of 13.5 percentage points of wages. In this paper we evaluate the effects of this component of the 2012 Colombian tax reform on firms’ formal employment and average wages. We construct a panel of firms based on their employees’ administrative records. In order to account for the endogeneity of the treatment, we use an instrumental variables technique that exploit the exogenous variation from the decisions of firms that are similar to each other in several dimensions, but belong to different economic sectors. Based on our preferred specification, we estimate a positive and significant increase in formal employment, as a result of the implementation of the reform, of a proximately 213k jobs in existing pre-reform firms. In the long run, these effects will increase to more than 600k jobs. The effect of the reform on the average wages paid by firms was also found to be positive for some sizes of firms, but the overall effect in the short run is rather small. **** En el año 2013 Colombia implementó una reforma tributaria que, entre otros cambios, redujo en 13.5 puntos porcentuales los impuestos a la nómina que las firmas son responsables de pagar. En este trabajo se realiza una evaluación de impacto de este componente particular de la reforma sobre empleo formal y salarios promedio pagados por las firmas. Para este fin se construye un panel de firmas formales usando datos administrativos de la planilla integrada de liquidación de aportes. Con el fin de controlar por posibles problemas de endogeneidad de la variable de tratamiento se usa una técnica de variables instrumentales que explota la variación exógena de decisiones de firmas que son similares entre sí en varias dimensiones, pero pertenecen a diferentes sectores económicos. Con base en la especificación preferida en el trabajo se concluye que, como resultado de la reforma se generaron en el corto plazo 213 mil nuevos trabajos formales en firmas que existían previamente a la reforma. En el largo plazo este efecto en empleo formal se incrementará a casi 600 mil nuevos empleos formales. El efecto de la reforma en el salario medio pagado por las firmas se estima positivo para algunos tamaños de firmas, sin embargo este efecto en el corto plazo es de una magnitud reducida. Classification JEL: E62, H25, J21, J3
    Keywords: fiscal policy, payroll taxes, formal employment, formal wages
    Date: 2016–11

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