nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2017‒01‒08
eighteen papers chosen by
Joseph Marchand
University of Alberta

  1. Is There a Preferential Treatment for Locals in the Labor Market? Evidence from Takeovers By Colussi, Tommaso; Romano, Livio
  2. The Impact of Depression on Employment of Older Workers in Europe By Justine Knebelmann; Christopher Prinz
  3. The Sooner the Better? Compulsory Schooling Reforms in Sweden By Fischer, Martin; Karlsson, Martin; Nilsson, Therese; Schwarz, Nina
  4. Large Scope Business Sector Reforms: Has the Swedish Business Sector Become More Entrepreneurial than the U.S. Business Sector? By Andersson, Fredrik; Heyman, Fredrik; Norbäck, Pehr-Johan; Persson, Lars
  5. Recent Flattening in the Higher Education Wage Premium: Polarization, Skill Downgrading, or Both? By Robert G. Valletta
  6. Distributional National Accounts: Methods and Estimates for the United States By Thomas Piketty; Emmanuel Saez; Gabriel Zucman
  7. Trust the Police? Self-Selection of Motivated Agents into the German Police Force By Friebel, Guido; Kosfeld, Michael; Thielmann, Gerd
  8. The Labour Market Effect of Immigration: Accounting for Effective Immigrant Work Experience in New Zealand By Tse, Michael M. H.; Maani, Sholeh A.
  9. Searching for Wages in an Estimated Labor Matching Model By Chahrour, Ryan; Chugh, Sanjay; Potter, Tristan
  10. To Work for Yourself, for Others, or Not At All? How Disability Benefits Affect the Employment Decisions of Older Veterans By Courtney Coile; Mark Duggan; Audrey Guo
  11. Offshoring medium-skill tasks, low-skill unemployment and the skill-wage structure By Vallizadeh, Ehsan; Muysken, Joan; Ziesemer, Thomas
  12. Recent Trends in U.S. Top Income Shares in Tax Record Data Using More Comprehensive Measures of Income Including Accrued Capital Gains By Jeff Larrimore; Richard V. Burkhauser; Gerald Auten; Philip Armour
  13. Inequality in Human Capital and Endogenous Credit Constraints By Rong Hai; James J. Heckman
  14. Employee Representation and Flexible Working Time By Burdín, Gabriel; Pérotin, Virginie
  15. Women’s Investment in Career and Household Division of Labor By Catherine Sofer; Claire Thibout
  16. Targeting Policies: Multiple Testing and Distributional Treatment Effects By Steven F. Lehrer; R. Vincent Pohl; Kyungchul Song
  17. Locus of Control and Investment in Training By Caliendo, Marco; Cobb-Clark, Deborah A.; Seitz, Helke; Uhlendorff, Arne
  18. Formal but less equal: Gender wage gaps in formal and informal jobs in Brazil By Ben Yahmed, Sarra

  1. By: Colussi, Tommaso (IZA); Romano, Livio (Confindustria)
    Abstract: This work analyzes the extent to which local social networks affect workers' labor market outcomes and firms' economic performance. By exploiting variations in firms' ownership generated by takeovers, we find that belonging to the same community of origin as the new employer significantly increases an employee's job retention probability. Finally, we show that the share of local employees retained after the takeover is negatively associated with the probability of closure of the acquiring firm.
    Keywords: takeovers, local social networks, social capital, firm behavior
    JEL: D22 J24 J63 J7
    Date: 2016–12
  2. By: Justine Knebelmann (International Growth Centre); Christopher Prinz
    Abstract: According to the World Health Organization, depression is the highest ranking cause of disease in middle- and high income countries; it costs Europe around EUR 118 billion a year, mostly through lost productivity on the labour market, i.e. labour supply loss, sickness absence, and poor performance at the workplace. Using data from waves 1, 2 and 4 of the Survey of Health, Ageing and Retirement in Europe (SHARE), this paper seeks to assess the magnitude of the impact of depression on labour market outcomes of older workers, a population sub-group whose participation in the labour market is ever more crucial in view of rapid population ageing. For each of the studied outcomes, analyses show a substantial impact of depression, measured with the European Depression Scale. Using different methods to address endogeneity this paper finds that depression decreases the probability of being employed by 22 to 51 percentage points among the 50 to 64 year old age group. Older workers with the most symptoms are more than twice as likely as others to exit employment before retirement age. Finally, depression increases annual sickness absence duration by 7.2 days on average. These figures show the necessity for national and firm-level employment policies and programmes targeting the 50 and over population to include prevention of depression, increased awareness of depression and adequate medical support.
    JEL: C23 C31 I10 J22 J26
    Date: 2016–12–21
  3. By: Fischer, Martin (University of Duisburg-Essen); Karlsson, Martin (University of Duisburg-Essen); Nilsson, Therese (Lund University); Schwarz, Nina (University of Duisburg-Essen)
    Abstract: This paper evaluates the impact on earnings, pensions, and other labor market outcomes of two parallel educational reforms increasing instructional time in Swedish primary school. The reforms extended the compulsory years of schooling from 6 to 7 years and the annual term length from 34.5/36.5 to 39 weeks per year. Gradually introduced over the 1930-1950 period in more than 2,500 school districts, the extensions generated large exogenous variation in educational attainment at different points in primary school while the overall school system and curricula remained unchanged. The reforms thus constitute an ideal quasi-experimental setting for analyzing the long-run causal impact of compulsory education keeping other school characteristics fixed. With a majority of students receiving only primary schooling, both reforms affected large shares of the population and consequently had large impacts on educational attainment at the compulsory level. We find striking differences in impact between the two reforms, and between males and females. Estimated returns to compulsory schooling are robustly positive only for females, who experience a small increase in early career earnings (~ 2%) when exposed to a 7th year of schooling, and large and persistent increases in earnings (~ 4 – 5%) when exposed to an extended school year. The effects are driven by the extensive margin, in particular increased employment in the public sector.
    Keywords: educational reforms, compulsory schooling, term length, returns to education
    JEL: J24 J31 I28
    Date: 2016–12
  4. By: Andersson, Fredrik (Research Institute of Industrial Economics (IFN)); Heyman, Fredrik (Research Institute of Industrial Economics (IFN)); Norbäck, Pehr-Johan (Research Institute of Industrial Economics (IFN)); Persson, Lars (Research Institute of Industrial Economics (IFN))
    Abstract: Recent studies document a 30-year decline in various measures of entrepreneurship in the United States. In contrast, using detailed Swedish employer-employee data over the period 1990–2013, we find no decline in Swedish entrepreneurial activity. Aggregate net job creation is greatest among the youngest firms in the Swedish business sector. Moreover, most of the net job creation by young firms takes place in the expanding service sector. We argue that a key explanation for the high entrepreneurial activity in the Swedish business sector during the last two decades stems from economic reforms in the 1990s that mitigated several hurdles to entrepreneurship.
    Keywords: Entrepreneurship; Job dynamics; Matched employer-employee data; Industrial structure and structural change
    JEL: J23 K23 L26 L51
    Date: 2016–12–21
  5. By: Robert G. Valletta
    Abstract: Wage gaps between workers with a college or graduate degree and those with only a high school degree rose rapidly in the United States during the 1980s. Since then, the rate of growth in these wage gaps has progressively slowed, and though the gaps remain large, they were essentially unchanged between 2010 and 2015. I assess this flattening over time in higher education wage premiums with reference to two related explanations for changing U.S. employment patterns: (i) a shift away from middle-skilled occupations driven largely by technological change (“polarization”); and (ii) a general weakening in the demand for advanced cognitive skills (“skill downgrading”). Analyses of wage and employment data from the U.S. Current Population Survey suggest that both factors have contributed to the flattening of higher education wage premiums.
    JEL: I23 J24 J31
    Date: 2016–12
  6. By: Thomas Piketty; Emmanuel Saez; Gabriel Zucman
    Abstract: This paper combines tax, survey, and national accounts data to estimate the distribution of national income in the United States since 1913. Our distributional national accounts capture 100% of national income, allowing us to compute growth rates for each quantile of the income distribution consistent with macroeconomic growth. We estimate the distribution of both pre-tax and post-tax income, making it possible to provide a comprehensive view of how government redistribution affects inequality. Average pre-tax national income per adult has increased 60% since 1980, but we find that it has stagnated for the bottom 50% of the distribution at about $16,000 a year. The pre-tax income of the middle class—adults between the median and the 90th percentile—has grown 40% since 1980, faster than what tax and survey data suggest, due in particular to the rise of tax-exempt fringe benefits. Income has boomed at the top: in 1980, top 1% adults earned on average 27 times more than bottom 50% adults, while they earn 81 times more today. The upsurge of top incomes was first a labor income phenomenon but has mostly been a capital income phenomenon since 2000. The government has offset only a small fraction of the increase in inequality. The reduction of the gender gap in earnings has mitigated the increase in inequality among adults. The share of women, however, falls steeply as one moves up the labor income distribution, and is only 11% in the top 0.1% today.
    JEL: E01 H2 H5 J3
    Date: 2016–12
  7. By: Friebel, Guido (Goethe University Frankfurt); Kosfeld, Michael (Goethe University Frankfurt); Thielmann, Gerd (Deutsche Hochschule der Polizei)
    Abstract: We conduct experimental games with police applicants in Germany to investigate whether intrinsically motivated agents self-select into public service. Our focus is on trustworthiness and the willingness to enforce norms as key dimensions of intrinsic motivation in the police context. We find that police applicants are more trustworthy than non-applicants, i.e., they return higher shares as second-movers in a trust game. Furthermore, they invest more in rewards and punishment when they can enforce cooperation as a third party. Our results provide clear evidence for advantageous self-selection into the German police force, documenting an important mechanism by which the match between jobs and agents in public service can be improved.
    Keywords: self-selection, intrinsic motivation, public service, trustworthiness, norm enforcement
    JEL: C9 D64 D73 J45
    Date: 2016–12
  8. By: Tse, Michael M. H. (University of Auckland); Maani, Sholeh A. (University of Auckland)
    Abstract: This guide, updated for the 2016-17 job market season, describes the U.S. academic market for new Ph.D. economists and offers advice on conducting an academic job search. It provides data, reports findings from published papers, describes practical details, and includes links to online resources. Topics addressed include: preparing to go on the market; applying for academic jobs; the JOE Network, which is the AEA's electronic clearinghouse for the job market; signaling; interviewing at the ASSA meetings; campus visits; the secondary market scramble; offers and negotiating; getting off to a good start as an assistant professor; diversity; and dual job searches.
    Keywords: human capital, immigrants, effective work experience, wage effects, employment effects, regions
    JEL: J61 J62 J31 J3 J24
    Date: 2016–12
  9. By: Chahrour, Ryan (Boston College); Chugh, Sanjay (Ohio State University); Potter, Tristan (Drexel University)
    Abstract: We estimate a real business cycle economy with search frictions in the labor market in which the latent wage follows a non-structural ARMA process. The estimated model does an excellent job matching a broad set of quantity data and wage indicators. Under the estimated process, wages respond immediately to shocks but converge slowly to their long-run levels, inducing substantial variation in labor's share of surplus. These results are not consistent with either a rigid real wage or flexible Nash bargaining. Despite inducing a strong endogenous response of wages, neutral shocks to productivity account for the vast majority of aggregate fluctuations in the economy, including labor market variables.
    Keywords: Search and Matching; Wages; Unemployment; Business Cycles
    JEL: E24 E32
    Date: 2016–12–20
  10. By: Courtney Coile; Mark Duggan; Audrey Guo
    Abstract: The U.S. Department of Veterans Affairs Disability Compensation (DC) program provides disability benefits to nearly one in five military veterans in the US and its annual expenditures exceed $60 billion. We examine how the receipt of DC benefits affects the employment decisions of older veterans. We make use of variation in program eligibility resulting from a 2001 policy change that increased access to the program for Vietnam veterans who served with “boots on the ground” in the Vietnam theater but not for other veterans of that same era. We find that the policy-induced increase in program enrollment decreased labor force participation and induced a substantially larger switch from wage employment to self-employment. This latter finding suggests that an exogenous increase in income spurred many older veterans to start their own businesses. Additionally, we estimate that one in four veterans who entered the DC program due to this policy change left the labor force, estimates in the same range as those from recent studies of the Social Security Disability Insurance (SSDI) program.
    JEL: J22
    Date: 2016–12
  11. By: Vallizadeh, Ehsan (Institute for Employment Research (IAB), and SBE, Maastricht University); Muysken, Joan (UNU-MERIT, CofFEE-Europe and SBE, Maastricht University); Ziesemer, Thomas (UNU-MERIT, and SBE, Maastricht University)
    Abstract: This paper studies the direct and indirect channels through which offshoring affects the domestic skillwage structure and employment opportunities. To identify these channels, we develop a task-based model with unemployment that accounts for skill heterogeneity and endogenous allocation of domestic tasks to skill groups and abroad. A decline in offshoring costs of medium skill-intensive tasks induces i) a specialization effect towards low and high skill-intensive tasks, explaining one source of wage polarization, ii) an internal skill-task reallocation effect, and iii) a productivity effect due to production cost reductions. The key determinants of these channels are the elasticity of substitution between domestic and offshore tasks and the elasticity of task productivity schedules between domestic skill groups and between domestic and offshore workers across tasks.
    Keywords: Skill-Task Assignment, Offshoring, Productivity Effect, Equilibrium Unemployment, Skill-Wage Structure
    JEL: F16 F66 J21 J24 J64
    Date: 2016–12–14
  12. By: Jeff Larrimore; Richard V. Burkhauser; Gerald Auten; Philip Armour
    Abstract: Access to IRS personal income tax records improves researchers’ ability to track U.S. income and inequality, especially at the very top of the distribution (Piketty and Saez 2003). However, rather than following standard Haig-Simons income definitions, tax form income measures were designed to implement the Internal Revenue Code. Using IRS tax record data since 1989 statistically matched to Survey of Consumer Finances and Census data for income sources not available in tax data, we explore the robustness of levels and trends in inequality using the top income literature’s tax return market income definition (Saez 2016) to more comprehensive income measures. We find that focusing solely on market income misses the important redistributive effects of government taxes and transfers. In addition, we find that the use of taxable realized capital gains changes the level and trend in top incomes relative to an accrued capital gains measure that is more consistent with Haig-Simons income definitions.
    JEL: D31 H24 J3
    Date: 2016–12
  13. By: Rong Hai; James J. Heckman
    Abstract: This paper investigates the determinants of inequality in human capital with an emphasis on the role of the credit constraints. We develop and estimate a model in which individuals face uninsured human capital risks and invest in education, acquire work experience, accumulate assets and smooth consumption. Agents can borrow from the private lending market and from government student loan programs. The private market credit limit is explicitly derived by extending the natural borrowing limit of Aiyagari (1994) to incorporate endogenous labor supply, human capital accumulation, psychic costs of working, and age. We quantify the effects of cognitive ability, noncognitive ability, parental education, and parental wealth on educational attainment, wages, and consumption. We conduct counterfactual experiments with respect to tuition subsidies and enhanced student loan limits and evaluate their effects on educational attainment and inequality. We compare the performance of our model with an influential ad hoc model in the literature with education-specific fixed loan limits. We find evidence of substantial life cycle credit constraints that affect human capital accumulation and inequality. The constrained fall into two groups: those who are permanently poor over their lifetimes and a group of well-endowed individuals with rising high levels of acquired skills who are constrained early in their life cycles. Equalizing cognitive and noncognitive ability has dramatic effects on inequality. Equalizing parental backgrounds has much weaker effects. Tuition costs have weak effects on inequality.
    JEL: I2 J2
    Date: 2016–12
  14. By: Burdín, Gabriel (Leeds University Business School); Pérotin, Virginie (Leeds University Business School)
    Abstract: This paper provides evidence on the effect of employee representation on working time flexibility in private-sector European establishments. A 2002 European Union directive granted information, consultation and representation rights to employees on a range of key business, employment and work organization issues beyond a certain firm size. We exploit the quasi-experimental variation in employee representation introduced by the implementation of the Directive in four countries (Cyprus, Ireland, Poland and the UK) with no previous legislation on the subject. The empirical analysis is based on repeated cross-section establishment-level data from the last three rounds of the European Company Survey. Difference-in-difference estimates suggest that the Directive had a positive and significant effect on both employee representation and the utilisation of flexible working-time arrangements for eligible establishments. The greater use of flexible working-time schemes is driven by establishments in which no local wage-negotiations take place and those with a high proportion of female workers. Our results are consistent with the idea that employee representation provides an endogenous rule-enforcement mechanism in second-best scenarios in which incomplete contracting problems are pervasive and third-party arbitration is unfeasible. Quite paradoxically, the relaxation of shareholders' property rights and the limits imposed on managerial discretion as a result of the operation of employee representation seem necessary to achieve certain valuable forms of organizational flexibility in market economies.
    Keywords: employment, flexible working time, employee representation
    JEL: D23 J22 J50
    Date: 2016–12
  15. By: Catherine Sofer (Centre d’Economie de la Sorbonne and Paris School of Economics); Claire Thibout (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)
    Abstract: The effects of women’s strong investments in career on the intra-household division of labor, particularly the share of partners in domestic work, constitute important but unaddressed issues. We use the 2010 French Time Use survey, focusing on two-income couples. We first build indicators of female investment in career, measured in comparison to other similar women or to the woman’s partner. We then investigate how the partners allocate time according to the intensity of women’s investment. To achieve this objective, we estimate a five-equation model of domestic and labor market work by partners and the use of domestic help. We show that couples where women are invested in career tend to share tasks more equally. These women do less domestic work during weekdays. This diminution is partly compensated on weekends by their partners, but also slightly by women themselves on weekends when they invest more in their careers than their partners do. Also, when they are heavily invested in their careers compared to other women, they tend to use more often domestic help. However, even when women dedicate themselves more than their partners to their careers, women still spend more time on domestic tasks than their partners on average, implying no role reversal in the division of labor.
    Keywords: Time use, gender, division of labor, domestic production, household decisionmaking
    JEL: D13 J16 J22
    Date: 2016–12
  16. By: Steven F. Lehrer; R. Vincent Pohl; Kyungchul Song
    Abstract: Economic theory often predicts that treatment responses may depend on individuals’ characteristics and location on the outcome distribution. Policymakers need to account for such treatment effect heterogeneity in order to efficiently allocate resources to subgroups that can successfully be targeted by a policy. However, when interpreting treatment effects across subgroups and the outcome distribution, inference has to be adjusted for multiple hypothesis testing to avoid an overestimation of positive treatment effects. We propose six new tests for treatment effect heterogeneity that make corrections for the family-wise error rate and that identify subgroups and ranges of the outcome distribution exhibiting economically and statistically significant treatment effects. We apply these tests to individual responses to welfare reform and show that welfare recipients benefit from the reform in a smaller range of the earnings distribution than previously estimated. Our results shed new light on effectiveness of welfare reform and demonstrate the importance of correcting for multiple testing.
    JEL: C12 C21 I38 J22
    Date: 2016–12
  17. By: Caliendo, Marco (University of Potsdam); Cobb-Clark, Deborah A. (University of Sydney); Seitz, Helke (University of Potsdam); Uhlendorff, Arne (CREST)
    Abstract: This paper extends standard models of work-related training by explicitly incorporating workers' locus of control into the investment decision. Our model both differentiates between general and specific training and accounts for the role of workers and firms in training decisions. Workers with an internal locus of control are predicted to engage in more general training than are their external co-workers because their subjective expected investment returns are higher. In contrast, we expect little relationship between specific training and locus of control because training returns largely accrue to firms rather than workers. We then empirically test the predictions of our model using data from the German Socioeconomic Panel (SOEP). We find that, consistent with our model, locus of control is related to participation in general but not specific training. Moreover, we provide evidence that locus of control influences participation in general training through its effect on workers' expectations about future wage increases. Specifically, general training is associated with a much larger increase in the expected likelihood of receiving a future pay raise for those with an internal rather than external locus of control, while we do not find any relationship in the case of specific training. Actual post-training wages for those who receive general or specific training do not depend on locus of control.
    Keywords: human capital investment, on-the-job training, locus of control, wage expectations
    JEL: J24 C23 D84
    Date: 2016–12
  18. By: Ben Yahmed, Sarra
    Abstract: In developing countries, a large share of employees work informally and are not covered by employment protection legislation. I study here how gender wage inequality differs across formal and informal jobs in Brazil. The raw gender wage gap is higher in informal jobs (13%) compared to formal jobs (5%), but I show that this difference is an artefact of different male and female selection processes. First, women have better observable characteristics than men and the female advantage is stronger among formal employees. Second, men and women entering formal and informal jobs have different unobservable characteristics. Controlling for endogenous selection into formal vs. informal jobs, I find that the gender gap in wage offers is high and increases with education in formal jobs. In informal jobs, however, estimated wage offers are the same for men and women. I discuss the potential implications of these findings regarding the effect of labour market regulation on gender wage gaps.
    Keywords: gender wage gaps,informality,selection into work statuses,Brazil
    JEL: J31 O17
    Date: 2016

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