nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2017‒01‒01
fourteen papers chosen by
Joseph Marchand
University of Alberta

  1. The Effect of Mandatory Paid Sick Leave Laws on Labor Market Outcomes, Health Care Utilization, and Health Behaviors By Kevin Callison; Michael F. Pesko
  2. Public Sector Personnel Economics: Wages, Promotions, and the Competence-Control Trade-off By Charles M. Cameron; John M. de Figueiredo; David E. Lewis
  3. The growth and human capital structure of new firms over the business cycle By Brixy, Udo; Murmann, Martin
  4. Empowering Mothers and Enhancing Early Childhood Investment: Effect on Adults Outcomes and Children Cognitive and Non-Cognitive Skills By Victor Lavy; Giulia Lotti; Zizhong Yan
  5. Innovation, Creative Destruction and Structural Change: Firm-level Evidence from European Countries By Bernhard Dachs; Martin Hud; Christian Köhler; Bettina Peters
  6. The Productivity Challenge What to expect from better-quality labour and capital inputs? By Vincent Vandeberghe
  7. Do You Dare? The Effect of Economic Conditions on Entrepreneurship among College Graduates By Hendrik Beiler
  8. The impact of trade and technology on wage components By Borrs, Linda; Knauth, Florian
  9. Overeducation among Italian graduates: do different measures actually diverge? By Luca Cattani; Giovanni Guidetti; Giulio Pedrini
  10. Do CEOs matter? Corporate performance and the CEO life cycle By Limbach, Peter; Schmid, Markus M.; Scholz-Daneshgari, Meik
  11. Does work harm academic performance of students? Evidence using propensity score matching By Tjasa Bartolj; Saso Polanec
  12. The New Lifecycle of Women’s Employment: Disappearing Humps, Sagging Middles, Expanding Tops By Claudia Goldin; Joshua Mitchell
  13. A collective household labor supply model with children and non-participation: Theory and empirical application By Jaime Andres Sarmiento Espinel; Edwin van Gameren
  14. Why Has Income Inequality in Germany Increased from 2002 to 2011? A Behavioral Microsimulation Decomposition By Robin Jessen

  1. By: Kevin Callison (Grand Valley State University); Michael F. Pesko (Cornell University)
    Abstract: We evaluate the impact of paid sick leave (PSL) mandates on labor market outcomes, the utilization of health care services, and health behaviors for private sector workers in the United States. By exploiting geographic and temporal variation in PSL mandate adoption, we compare changes in outcomes for workers in counties affected by a PSL mandate to changes for those in counties with no mandate. Additionally, we rely on within-county variation in the propensity to gain PSL following a mandate to estimate policy effects for workers most likely to acquire coverage. Results indicate that PSL mandates lead to increased access to PSL benefits, especially for women without a college degree. We find that PSL laws reduce average weekly hours worked and private sector employment, but appear to have no effect on job tenure or labor force participation. PSL mandates are associated with sizable reductions in emergency department utilization and increases in general practitioner visits. Finally, we present suggestive evidence that PSL mandates lead to more days binge drinking.
    Keywords: Paid sick leave, labor market, health care, health behaviors
    JEL: I18 I12 J21 J23 J32
    Date: 2016–11
  2. By: Charles M. Cameron; John M. de Figueiredo; David E. Lewis
    Abstract: We model personnel policies in public agencies, examining how wages and promotion standards can partially offset a fundamental contracting problem: the inability of public sector workers to contract on performance, and the inability of political masters to contract on forbearance from meddling. Despite the dual contracting problem, properly constructed personnel policies can encourage intrinsically motivated public sector employees to invest in expertise, seek promotion, remain in the public sector, and develop policy projects. However, doing so requires internal personnel policies that sort "slackers" from "zealots." Personnel policies that accomplish this task are quite different in agencies where acquired expertise has little value in the private sector, and agencies where acquired expertise commands a premium in the private sector. Finally, even with well-designed personnel policies, there remains an inescapable trade-off between political control and expertise acquisition.
    JEL: H11 J24 J45 K2
    Date: 2016–12
  3. By: Brixy, Udo (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]); Murmann, Martin (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany])
    Abstract: "Recent research suggests that employment in young firms is more negatively impacted during economic downturns than employment in incumbent firms. This questions the effectiveness of policies that promote entrepreneurship to fight crises. We complement prior research that is mostly based on aggregate data by analyzing cyclical effects at the firm level. Using new linked employer-employee data on German start-ups we show that under constant human capital of the firms' founders, employment growth in less than 11/2-yearold start-ups reacts countercyclically and employment growth in older start-ups reacts procyclically. The young start-ups realize their countercyclical growth by hiring qualified labor market entrants who might be unable to find employment in incumbent firms during crises. This mechanism is highly important in economic and management terms and has not been revealed by prior research." (Author's abstract, IAB-Doku) ((en))
    JEL: E32 J23 L26 M13 L25 L11 D22
    Date: 2016–12–19
  4. By: Victor Lavy; Giulia Lotti; Zizhong Yan
    Abstract: Empowering women and enhancing children’s early development are two important goals that are often pursued via independent policy initiatives in developing countries. In this paper we study a unique approach that pursues both goals at the same time: empowering mothers through tools that also advance their children’s development. A program operated by AVSI, an Italian NGO, in a poor neighborhood of Quito, Ecuador, targets parents of children from birth to age 5. It provides family advisor-guided parent training sessions once every two weeks for groups of six to eight mothers and their children. We find that the program empowered women in various dimensions, including higher labor force participation and employment, higher likelihood of a full-time job in the formal-sector and higher wages. Treated mothers are also more likely to continue their education, make independent decisions regarding their own finances, have greater role in intra-household decisions, especially on issues involving children’s education and discipline and increase parental inputs into their children’s development. We find that treated children improve their cognitive and non-cognitive skills, for example, they are less likely to repeat a grade or temporarily drop-out from schooling, are less absent from and have improved behaviors in school, have better attitudes towards learning, and achieve higher scores on cognitive tests. Applying a recently suggested factor model of children's relative non-cognitive skills reaffirms our finding of significant gains in children non-cognitive skills. All results hold when we estimate aggregate treatment impacts, use summary indices instead of individual outcomes in order to account for multiple inference, when we use entropy balancing to adjust for differences in pre-treatment covariates, and when we use other robustness checks.
    JEL: I25 O15
    Date: 2016–12
  5. By: Bernhard Dachs (Austrian Institute of Technology, Vienna); Martin Hud (ZEW Centre for European Economic Research, Mannheim); Christian Köhler (ZEW Centre for European Economic Research, Mannheim); Bettina Peters (ZEW, Mannheim, and CREA, University of Luxembourg)
    Abstract: The shift of employment from lower to higher productive firms is an important driver for structural change and industry dynamics. We investigate this reallocation in terms of employment gains and losses from innovation. New employment created by product innovation may be offset by employment losses in related products, known as ‘cannibalisation’ or ‘business stealing’ effects in the literature, by employment losses from process and organisational innovation and by general productivity increases. The paper investigates this effect empirically with a large dataset from the European Community Innovation Survey (CIS). We find that employment gains and losses increase with technology intensity of the sector. High-technology manufacturing shows the strongest employment gains and losses from innovation, followed by knowledge-intensive services, low- technology manufacturing and less knowledge-intensive services. The net contribution of innovation to employment growth is mostly positive, an exception being manufacturing industries in recession periods.
    Keywords: Innovation, employment, reallocation, technology intensity, compensation effect, displacement effect, cannibalisation effect.
    JEL: O33 J23 C26 D2
    Date: 2016
  6. By: Vincent Vandeberghe (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))
    Abstract: The aim of this paper is to develop and implement an analytical framework assessing whether better-quality inputs, via a rise of TFP, could compensate an ageing-induced slowing of economic growth. Here "better-quality" means more educated and older/more experienced workforces; and also better-quality capital proxied by its ICT content. Economic theory predicts that these trends should raise TFP. To assess these predictions, we use EU-KLEMS data, with information on the age/education mix of the workforce, as well as the importance on ICT in total capital, for 34 industries within 16 OECD countries, between 1970 and 2005. We generalise the Hellerstein-Neumark labour-quality index method to simulateneously capture workers’ age/experience or education contribution to TFP growth, alonside that of ICT. The conclusion of the paper is that the quality of inputs matters for TFP. We find robust microeconometric evidence that better-educated and older/more experienced workers are more productive than their less-educated and younger/less-experienced peers. Also, ICT capital turns out to be more productive than other forms of capital. And when used in a growth accounting exercise covering the 1995-2005 period, these estimates suggest that up to 40% of the recorded TFP growth could be ascribed to the rising quality of inputs.
    Keywords: TFP growth, Ageing, Input quality, ICT
    JEL: J11 J24 D24 O30
    Date: 2016–12–15
  7. By: Hendrik Beiler
    Abstract: I estimate the effect of business cycle conditions on the decision to enter entrepreneurship after college graduation. I proxy for economic conditions at the field of study level, constructed from industry growth rates which I weight to fields of study using employees' industry - college major distribution. This enables to control for unobserved differences between graduation cohorts such as technological change or shifts in cohort composition. Using administrative survey data for Germany, I find that a one percentage point increase in employment growth in the year of graduation raises entry into entrepreneurship by about 30% in the first year after graduation. The effect halves in the second year and is close to zero in the third and fourth year after graduation. Interestingly, exit from entrepreneurship decreases slightly, which suggests that the additional entrepreneurs are fairly stable in the first years after entry. Taken together, my results imply that "lucky" graduation cohorts are persistently more likely to enter and persist in entrepreneurship than "recessionary" cohorts, at least during the first four years after graduation that I examine. My results have relevant implications for policy measures such as startup subsidies, since entrepreneurship is commonly acknowledged as a central source of job creation and economic dynamism.
    Keywords: Entrepreneurship, Business Cycles, Higher Education, Occupational Choice, Firm Entry
    JEL: L26 E32 I23 J23 J24 M13
    Date: 2016–11–01
  8. By: Borrs, Linda; Knauth, Florian
    Abstract: We use a large sample of German workers to analyze the effect of low-wage competition with China and Eastern Europe (the East) on the wage structure within German manufacturing industries. Utilizing the method by Abowd et al. (1999), we decompose wages into firm and worker components. We find that the rise of market access and competitiveness of the East has a substantial impact on the dispersion of the worker wage component and in part on positive assortative matching. Trade fails to explain changes in the firm wage premium. The rising dispersion in worker-specific wages can be attributed to increasing skill premia and to changes in the extensive margin of the workforce, leading to a wage polarization for the remaining within-industry workers. We also account for technological change by considering how many routine-intensive jobs are substituted within an industry. The more routine jobs are cut, the higher is the effect on wage inequality, especially on the dispersion of worker-specific wages. Overall, trade explains up to 19% of the recent increase in wage inequality and slightly exceeds the technology effect that accounts for approximately 17%.
    Keywords: wage decomposition,wage inequality,globalization,gravity
    JEL: F16 J31 O33 F14
    Date: 2016
  9. By: Luca Cattani (Department of Economics and SDIC, University of Bologna); Giovanni Guidetti (Department of Economics and SDIC, University of Bologna); Giulio Pedrini (Interuniversity Research Centre for Public Services (CRISP), University of Milan-Bicocca, SDIC, University of Bologna)
    Abstract: In this paper, we explore three dimensions of educational mismatch among graduates: incidence, impact on earnings and possible determinants of overeducation. Our analysis focuses on Italian graduates and refers to the cohort that graduated in 2007 using data from the AlmaLaurea survey on graduates entering the labour market. A new measure of overeducation is introduced and jointly examined along with an alternative measure based on workers’ self-assessment. After having run estimates of the impact of overeducation on earnings and analyzed possible determinants of educational mismatch, we conclude that the two definitions of overeducation measure quite different things and in particular that "traditional” measures based on workers’ self-assessment are affected by individuals’ characteristics and by workers’ expectations and perceptions concerning the job post. However, effects on wages are very similar no matter what definition is adopted.
    Keywords: educational mismatches, human capital, graduate labour markets.
    JEL: I2 J31
    Date: 2016–12
  10. By: Limbach, Peter; Schmid, Markus M.; Scholz-Daneshgari, Meik
    Abstract: We examine how CEOs' impact on firm value varies over time. We document a hump-shaped relation between CEO tenure and firm value which is subject to meaningful variation depending on industry dynamics, the business cycle, and CEOs' adaptability to changes. Semi-parametric estimations, stock returns to sudden deaths and to takeover announcements, as well as tests for extrapolation, survivor-ship, and endogenous CEO-firm matching and turnover confirm our results. They suggest that a considerable fraction of high-tenure CEOs is no longer the optimal match for their firms which seem to have difficulties, due to governance rather than labor market frictions, replacing incumbent CEOs.
    Keywords: CEO adaptability,(within-)CEO heterogeneity,CEO tenure,CEO term limits,environmental dynamics,firm value,investments
    JEL: G30 G34 J24
    Date: 2016
  11. By: Tjasa Bartolj; Saso Polanec
    Abstract: In this article we analyze the effects of student work on academic performance for college students. In order to reduce the endogeneity bias due to selection into treatment, we use propensity score matching technique. This approach allows us to estimate the average treatment effects on the treated separately for different years of study, which is not possible when inside instruments are used to deal with endogeneity of student work. We find predominantly negative treatment effects for all measures of academic performance (GPA, exam attempts, exams passed, and likelihood of passing a year), although many of these are economically and statistically insignificant. We supplement existing studies that do not estimate separate treatment effects for different years of study by showing that work while in college harms study outcomes mostly in the first year of study—by passing smaller number of exams and thereby increasing the likelihood of failing a year. Our results are consistent with evidence on difficulty with adjusting to college studies of first-year students, who face many uncertainties that affect finding the optimal allocation of time between studies, work and leisure.
    Date: 2016–11
  12. By: Claudia Goldin; Joshua Mitchell
    Abstract: A new lifecycle of women’s employment emerged with cohorts born in the 1950s. For prior cohorts, lifecycle employment had a hump shape; it increased from the twenties to the forties, hit a peak and then declined starting in the fifties. The new lifecycle of employment is initially high and flat, there is a dip in the middle and a phasing out that is more prolonged than for previous cohorts. The hump is gone, the middle is a bit sagging and the top has greatly expanded. We explore the increase in cumulative work experience for women from the 1930s to the 1970s birth cohorts using the SIPP and the HRS. We investigate the changing labor force impact of a birth event across cohorts and by education and also the impact of taking leave or quitting. We find greatly increased labor force experience across cohorts, far less time out after a birth and greater labor force recovery for those who take paid or unpaid leave. Increased employment of women in their older ages is related to more continuous work experience across the lifecycle.
    JEL: J16 J21
    Date: 2016–12
  13. By: Jaime Andres Sarmiento Espinel (Universidad Militar Nueva Granada); Edwin van Gameren (El Colegio de México)
    Abstract: We extend the collective model of household behavior to consider public consumption (expenditures on children), together with non-participation in the labor market. Identification of individual preferences and the sharing rule from observing each individual’s labor supply and the total expenditure on the public good rests on the existence of a distribution factor and the existence and uniqueness of individual reservation wages at which both members are indifferent whether a member participates or not. Using a sample of Mexican nuclear families, collective rationality is not rejected. No evidence is found that empowering mothers is more beneficial for children than empowering fathers.
    Keywords: collective models; labor supply; non-participation; public goods; children; intrahousehold decision-making; reservation wages; sharing rule
    JEL: D11 D12 D13 J12 J13 J22
    Date: 2016–12
  14. By: Robin Jessen
    Abstract: I propose a method to decompose changes in income inequality into the contributions of policy changes, wage rate changes, and population changes while considering labor supply reactions. Using data from the Socio-Economic Panel (SOEP), I apply this method to decompose the increase in income inequality in Germany from 2002 to 2011, a period that saw tax reductions and a controversial overhaul of the transfer system. The simulations show that tax and transfer reforms have had an inequality reducing effect as measured by the Mean Log Deviation and the Gini coefficient. For the Gini, these effects are offset by labor supply reactions. In contrast, policy changes explain part of the increase in the ratio between the 90th and the 50th income percentile. Changes in wage rates have led to a decrease in income inequality. Thus, the increase in inequality was mainly due to changes in the population.
    Keywords: Inequality, Decomposition, Labor Supply, Microsimulation, Policy Reform
    JEL: D31 I38 J31
    Date: 2016

This nep-lma issue is ©2017 by Joseph Marchand. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.