nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2017‒02‒12
fifteen papers chosen by
Joseph Marchand
University of Alberta

  1. Labor market imperfections and the firm’s wage setting policy By Sónia Félix; Pedro Portugal
  2. Family Economics Writ Large By Jeremy Greenwood; Nezih Guner; Guillaume Vandenbroucke
  3. Minimum Wages and Consumer Credit : Impacts on Access to Credit and Traditional and High-Cost Borrowing By Lisa J. Dettling; Joanne W. Hsu
  4. Individualism vs. collectivism: How inherited cultural values affect labor market outcomes of second generation immigrants in the US By Höckel, Lisa Sofie
  5. The Effect of Medical Marijuana Laws on the Labor Supply of Older Adults: Evidence from the Health and Retirement Study By Hersch Nicholas, Lauren; Maclean, J. Catherine
  6. Slow to Hire, Quick to Fire: Employment Dynamics with Asymmetric Responses to News* By Cosmin Ilut; Matthias Kehrig; Martin Schneider
  7. Coping with creative destruction: Reducing the costs of firm exit By Dan Andrews; Alessandro Saia
  8. Hollywood’s Wage Structure and Discrimination By Maria Navarro Paniagua; Sofia Izquierdo Sanchez
  9. Rebalancing Turkey’s growth by improving resource allocation and productivity in manufacturing By Aslihan Atabek; Dan Andrews; Rauf Gönenç
  10. Rise of Services and Female Employment: Strength of the Relationship By Serife Genc Ileri; Gonul Sengul
  11. Concentrating on the Fall of the Labor Share By Autor, David; Dorn, David; Katz, Lawrence; Patterson, Christina; Van Reenen, John
  12. Occupational Choice and Matching in the Labor Market By Eric Mak; Aloysius Siow
  13. The role of employer, job and employee characteristics for flexible working time : An empirical analysis of overtime work and flexible working hours' arrangements By Zapf, Ines; Weber, Enzo
  14. Migration patterns and labor market outcomes in Tunisia By Anda David; Mohamed Ali Marouani
  15. Asset Specificity, Human Capital Acquisition, and Labor Market Competition By MORITA, Hodaka; TANG, Cheng-Tao

  1. By: Sónia Félix; Pedro 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 us 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 a firm’s monopsony power negatively affects the earnings of its workers, and firm’s total factor productivity is closely associated with higher earnings, ceteris paribus. We also find that firms use monopsony power for wage differentiation between male and female workers.
    JEL: J31 J20 J42
    Date: 2017
  2. By: Jeremy Greenwood; Nezih Guner; Guillaume Vandenbroucke
    Abstract: Powerful currents have reshaped the structure of families over the last century. There has been (i) a dramatic drop in fertility and greater parental investment in children; (ii) a rise in married female labor-force participation; (iii) a significant decline in marriage and a rise in divorce; (iv) a higher degree of positive assortative mating; (v) more children living with a single mother; (vi) shifts in social norms governing premarital sex and married women's roles in the workplace. Macroeconomic models explaining these aggregate trends are surveyed. The relentless flow of technological progress and its role in shaping family life are stressed.
    JEL: D58 E1 E13 J1 J12 J13 J2 J22 N30 O11 O15 O3
    Date: 2017–01
  3. By: Lisa J. Dettling; Joanne W. Hsu
    Abstract: Proponents of minimum wage legislation point to its potential to raise earnings and lift families out of poverty, while opponents argue that disemployment effects lead to net welfare losses. But these arguments typically ignore the possibility that minimum wage policy has spillover effects on other aspects of households’ financial circumstances. This paper examines how state-level minimum wage changes affect the decisions of lenders and low-income borrowers. Using data derived from direct mailings of credit offers, debt recorded in credit reports, and survey-reported usage of alternative credit products, we broadly find that when minimum wages rise, access to credit expands for lower-income households, who in turn, use more traditional credit and less high-cost alternatives. Specifically, for each $1 increase in the minimum wage, lower-income households receive 7 percent more credit card offers, with higher limits and improved terms. Further, there is a drop in usage of high-cost borrowing: payday borrowing falls 40 percent. Finally, we find that borrowers are also better able to manage their debt: delinquency rates fall by 5 percent. Overall, our results suggest that minimum wage policy has positive spillover effects by relaxing borrowing constraints among lower income households.
    Keywords: Consumer debt ; Credit constraints ; Credit limit ; Credit supply ; Delinquency ; Minimum wages ; Payday loans
    JEL: D12 J38 D14
    Date: 2017–01–15
  4. By: Höckel, Lisa Sofie
    Abstract: The labor market performance of second generation immigrants is a crucial determinant of integration. Labor market returns to their different cultural traits, however, have been rarely researched within the economic literature. This study provides insight on the link between the level of collectivism at the country of ancestry and labor market outcome of second generation immigrants in the US. Using 1994 - 2014 survey data, we analyze the relationship between inherited cultural values and the economic outcome of more than 21,000 male homogamous second generation immigrants. We use the historical disease environment of the country of ancestry as a measurement for collectivism since collectivistic values have been particularly advantageous in countries with a greater prevalence of disease-causing pathogens. We find that higher scores of collectivism are associated with higher labor force participation and income earned in the US. The number of hours worked and self-selection into jobs that require collectivistic traits are the main determinants of the positive impact of collectivism on earnings.
    Keywords: labor force participation,occupational choice,migration,cultural values
    JEL: A13 F22 J14 J24
    Date: 2017
  5. By: Hersch Nicholas, Lauren (Johns Hopkins University); Maclean, J. Catherine (Temple University)
    Abstract: We study the effect of state medical marijuana laws on labor supply among older adults; the demographic group with the highest rates of many health conditions for which marijuana may be an effective treatment. We use the Health and Retirement Study to study this question and estimate differences-in-differences regression models. We find that passage of a state medical marijuana law leads to increases in labor supply among older adults. These effects should be considered as policymakers determine how best to regulate access to medical marijuana.
    Keywords: older adults, labor supply, medical marijuana, regulation, medication
    JEL: I10 I18 J20
    Date: 2017–01
  6. By: Cosmin Ilut; Matthias Kehrig; Martin Schneider
    Abstract: Concave hiring rules imply that firms respond more to bad shocks than to good shocks. They provide a united explanation for several seemingly unrelated facts about employment growth in macro and micro data. In particular, they generate countercyclical movement in both aggregate conditional “macro” volatility and cross-sectional “micro” volatility as well as negative skewness in the cross section and in the time series at different level of aggregation. Concave establishment level responses of employment growth to TFP shocks estimated from Census data induce significant skewness, movements in volatility and ampli cation of bad aggregate shocks.
    Keywords: business cycles, time varying volatility, asymmetric adjustment, skewness
    JEL: D2 D8 E2 J2
    Date: 2017–01
  7. By: Dan Andrews; Alessandro Saia
    Abstract: A policy framework that does not unduly inhibit the creative destruction process is vital to sustaining productivity growth. Yet, a key question is what happens to workers who lose their jobs due to this process and what are the policies that minimise the costs of worker displacement? Accordingly, this paper exploits a retrospective panel of workers in 13 European countries over the period 1986-2008 to explore the factors which shape the re-employment prospects of workers displaced due to firm exit. The results suggest that higher spending on active labour market policies (ALMPs), financed through an offsetting reduction in spending on passive measures, can aid the re-employment prospects of displaced workers. There may also be a case to better tailor ALMPs to workers displaced by firm exit to the extent that the re-employment probabilities of this group of workers are more sensitive to ALMPs than workers that are displaced for other involuntary reasons. The effectiveness of ALMPs is also enhanced by lower entry barriers in product markets and higher public sector efficiency, while reductions in the labour tax wedge can aid the re-employment prospects of displaced workers. Finally, regional mobility emerges as a key channel through which workers who lose their job due to plant closure become re-employed, suggesting that housing market policies may also be relevant. Accompagner la destruction créatrice : Réduire les coûts liés aux fermetures d'entreprises. Un cadre politique qui n’entrave pas indûment le processus de destruction créatrice est indispensable pour soutenir la croissance de la productivité. Cependant, une question cruciale est de savoir ce qu’il advient aux employés qui perdent leur emploi à cause de ce processus, et quelles sont les politiques qui minimisent les coûts des déplacements de main-d'oeuvre. En conséquent ce papier explore, sur la base d’un panel rétrospectif de travailleurs de 13 pays européens sur la période 1986-2008, les facteurs qui déterminent la ré-employabilité des travailleurs ayant perdu leur emploi en raison d’une fermeture d’entreprise. Les résultats suggèrent que des dépenses plus importantes sur les politiques actives du marché du travail (PAMT), financées par une réduction concomitante des dépenses sur les politiques passives, peut améliorer les possibilités de ré-emploi des travailleurs déplacés. Il peut également être bénéfique de mieux cibler les PAMT sur les travailleurs déplacés en raison d’une fermeture d’entreprise, dans la mesure où les probabilités de ré-emploi sont plus sensibles aux PAMT pour ce groupe de travailleurs que pour les travailleurs ayant perdu leur emploi pour d’autres raisons involontaires. L’efficacité des PAMT est également renforcée par la baisse des barrières à l’entrée et par une plus grande efficacité du secteur public, alors que l’allégement du coin fiscal sur le travail peut aider les chances de ré-emploi des travailleurs déplacés. Enfin, la mobilité régionale émerge comme un moyen important par lequel les travailleurs qui perdent leur emploi en raison d’une fermeture d’entreprise peuvent retrouver un emploi, ce qui suggère que les politiques du logement peuvent également être pertinentes.
    Keywords: job displacement, labour market policies, layoffs
    JEL: J38 J58 J63 J68
    Date: 2017–02–07
  8. By: Maria Navarro Paniagua; Sofia Izquierdo Sanchez
    Abstract: The labour market for actors remains mostly unexplored. In this paper, we start by analysing how Hollywood wages have changed over time. We then proceed to examine the determinants of wages. One of our key findings is that there are substantial wage differences among male and female actors in Hollywood. A Blinder-Oaxaca decomposition suggests that 45% of the differences in the gender-wage gap can be attributed to discrimination.
    Keywords: Gender wage gap, discrimination, Superstars, Actors/Hollywood, Inequality
    JEL: J16 J31 J71 L82
    Date: 2017
  9. By: Aslihan Atabek (OECD); Dan Andrews (OECD); Rauf Gönenç (OECD)
    Abstract: Turkey’s manufacturing sector has expanded considerably but not efficiently and competitively enough. This paper documents the drivers of its recent growth and diversification, and the factors that have held it back. It documents its segmentation and the outsized tail of poorly performing firms, which undermines aggregate productivity growth. Low productivity eases job creation in the short term, but undermines it in the long run and holds back improvements in living standards because of competitiveness losses. A core of well-performing firms (“frontier firms”) is not growing at full potential because of shortcomings in the policy framework. Intermediary (“follower”) firms sustain competition and deliver jobs, but tend to fall behind in productivity. Lower productivity units (“laggards”), which employ a large share of the low-skilled majority of the working age population, survive mostly thanks to the incomplete enforcement of rules and regulations. The resulting stalemate requires a coherent strategy of “systemic upgrading” of the business environment. This would enable all firms to operate in compliance with the law and on a level-playing field, under supportive regulations, taxation and innovation incentives. All firms could then achieve stronger productivity gains and the most promising firms could grow faster. At the same time, a credible flexicurity system needs to be put in place that facilitates adjustment in the labour market while protecting those affected by structural change. Rééquilibrer la croissance turque en améliorant l’allocation des ressources et la productivité Le secteur manufacturier s’est considérablement développé en Turquie, mais pas de manière suffisamment efficace et compétitive. Ce document décrit les moteurs de sa croissance récente et de sa diversification, et les facteurs qui ont freiné sa performance. Il met en évidence sa segmentation et le poids excessif des entreprises peu performantes, qui nuit à sa croissance et à sa productivité globale. Le ralentissement de la productivité accélère la création d'emplois à court terme, mais mine le niveau de vie à long terme en raison de pertes de compétitivité. Un noyau d'entreprises très performantes («entreprises frontières») ne se développe pas à plein potentiel, en raison de lacunes dans le cadre fourni par les politiques. Un groupe d’entreprises intermédiaires («entreprises suiveurs») soutiennent la concurrence et offrent des emplois, mais leur productivité ne croit pas vite. Des unités encore inférieures en productivité (les «entreprises retardataires») emploient une proportion importante de la majorité peu qualifiée de la population en âge de travailler, et survivent grâce à l'application incomplète des lois et des règlementations. Les blocages qui en résultent appellent une stratégie cohérente de «mise à niveau systémique» de l'environnement des affaires. Cela permettrait à toutes les entreprises d'opérer en conformité avec la loi et en une concurrence équitable, dans un cadre favorable de règles, de taxes et d’incitations à l’innovation. Toutes les entreprises pourraient alors réaliser des gains de productivité plus importants et les entreprises les plus prometteuses pourraient croître plus vite. En même temps, un système de flexicurité crédible doit être mis en place, pour faciliter les ajustements sur le marché du travail tout en protégeant les personnes touchées par les changements structurels.
    Keywords: growth, informality, labour markets, productivity, structural change, taxation
    JEL: J2 J3 O1 O4 O5
    Date: 2017–02–08
  10. By: Serife Genc Ileri; Gonul Sengul
    Abstract: Recent literature focuses on the relationship between rise of services and female employment, arguing that the former is the driving force behind the rise in the latter in developed economies. In this paper we challenge this link by focusing on a developing country. Turkey stands out among other OECD countries with its unusually low female employment rate accompanied with a quite low service employment share. We investigate whether the female employment rate in Turkey will ascend to the current ranks of developed countries when it catches up with the current service shares of employment of those countries. We address this question in a multi sector structural transformation model with goods, service and home production. Using the calibrated model, we simulate the structural transformation path of the economic activity in Turkey away from other sectors into services. Our results suggest that rise of services by itself is not sufficient to generate the increase in female employment that is comparable to the experiences of developed countries. High comparative advantage of females in service sector is needed to achieve the desired increase, the channel that lacks in the Turkish case. More research is needed to understand the roots of female comparative advantage in service sector and its links to structural transformation.
    Keywords: Female labor supply, Structural transformation, Home production, Sectoral labor allocation
    JEL: E24 J16 J22
    Date: 2017
  11. By: Autor, David; Dorn, David; Katz, Lawrence; Patterson, Christina; Van Reenen, John
    Abstract: The recent fall of labor's share of GDP in numerous countries is well-documented, but its causes are poorly understood. We sketch a 'superstar firm' model where industries are increasingly characerized by 'winner take most' competition, leading a small number of highly profitable (and low labor share) firms to command growing market share. Building on Autor et al. (2017), we evaluate and confirm two core claims of the superstar firm hypothesis: the concentration of sales among firms within industries has risen across much of the private sector; and industries with larger increases in concentration exhibit a larger decline in labor's share.
    Keywords: Labor Share; Sales Concentration
    JEL: E24 J31 L11
    Date: 2017–01
  12. By: Eric Mak; Aloysius Siow
    Abstract: Integrating Roy with Becker, this paper studies occupational choice and matching in the labor market. Our model generates occupation earnings distributions which are right skewed, have firm fixed effects, and large changes in aggregate earnings inequality without significant changes in within firm inequality. The estimated model fits the earnings distribution both across and within firms in Brazil in 1999. It shows that the recent decrease in aggregate Brazilian earnings inequality is largely due to the increase in her educational attainment over the same years. A simulation of skilled biased technical change in the model also qualitatively fit the recent changes in earnings inequality in the United States.
    Keywords: occupational choice, matching, earnings distribution, inequality
    JEL: J J31
    Date: 2017–02–03
  13. By: Zapf, Ines (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]); Weber, Enzo (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany])
    Abstract: Modern working societies face the challenge to combine the establishments' with the employees' needs for working-time flexibility. The authors investigate the determinants of overtime and different working hours' arrangements using the German Linked Employer-Employee Study of the Socio-Economic Panel (SOEP-LEE) and logistic regression models. The results show that employer and job characteristics are most important for determining overtime and the different working hours' arrangements, underlining the power of employers with regard to working-time flexibility. Employee characteristics play the least important role, although employees can flexibly organize their working times and can benefit from certain arrangements, such as self-determined working hours and flexitime within a working hours account. The study provides evidence that working-time flexibility in Germany is mainly employer-oriented. However, through demographic changes and a possible lack of qualified personnel, employee- friendly arrangements are likely to gain importance.
    JEL: J2 J81
    Date: 2017–02–06
  14. By: Anda David (AFD and DIAL, Paris); Mohamed Ali Marouani (Paris1-Pantheon-Sorbonne University (IEDES, UMR Développement et Société), DIAL and ERF)
    Abstract: This article focuses on the external effects of emigration on non-migrants and particularly on the interactions with labor market outcomes in Tunisia before and after the revolution. Using the new Tunisia Labor Market Panel Survey (TLMPS) we conduct an in-depth analysis of the structure and dynamics of migration in Tunisia including the profile of migrants and their origin households, mainly in terms of skills and spatial composition. We also investigate transition matrices, employment status, income for current migrants and returnees and the evolution of remittances. Our analysis confirms the role of emigration as a security valve for the Tunisian labor market. Moreover, origin households of migrants have a significantly higher wealth index. Remittances play a significant role for the Tunisian economy and at the household level. Our analysis also tends to confirm the effects of remittances on labor supply of non migrants which can have a negative impact on Tunisia’s unemployment rate when a crisis in destination countries affects negatively the remittance rate.
    Keywords: International migration, labor market, remittances, returnees, revolution, Tunisia.
    JEL: F22 F24 J21
    Date: 2017–01
  15. By: MORITA, Hodaka; TANG, Cheng-Tao
    Abstract: Firms let their employees operate assets to produce goods and services. Firm-specificity of asset and human capital, key concepts of transaction cost economics and labor economics respectively, play important roles in determining firms' productivity and welfare consequences of their competition. How are the degrees of firm-specificity of asset and human capital determined? We address this question through exploring a new model that captures interconnections among asset specificity, human capital acquisition, managerial capability, and labor mobility. We consider a two-period model with two firms, where period 1 is the skill-acquisition period and period 2 is the output period. In the beginning of period 1, each firm chooses a level of its asset specificity and employs a certain number of workers from the labor market. The level of asset specificity is interpreted as the extent to which the firm tailors its asset to the unique features of the firm's business strategies and products. A firm's second-period productivity is determined by its managerial capability, the extent to which its asset is tailored, and its workers' familiarity with its asset specificity. Managerial capability here means the capability of a firm's top management to develop an effective strategy and create a unique competitive position. We find that, as the importance of managerial capability increases, the labor mobility increases, and both the level of asset specificity and firm size decrease. When a firm chooses the specificity of its asset and the number of workers it employs in period 1, it estimates how many workers it will retain and how many workers it will hire from its rival in period 2. A higher importance of managerial capability increases the difference of period 2 productivity between a high-capability and a low-capability firm. Then, as the importance of managerial capability increases, each firm anticipates higher labor mobility, because a larger number of workers will move from a low-capability to a high-capability firm. Anticipation of higher labor mobility, in turn, reduces each firm's incentives to hire more workers and increase the level of asset specificity in period 1. We discuss implications of our model in the contexts of cross-industry and cross-country comparisons. In a newly emerging industry or in a business undergoing revolutionary technological changes, a business's success critically depends on the quality of its strategic decision making because these industries face a high level of uncertainty. Whereas in industries facing lower levels of uncertainty, strategic decision making is less important. These arguments suggest that the importance of managerial capability is higher in the former types of industries, and the importance tends to be lower in the latter types of industries. Our model then predicts that labor mobility is higher, specificity of asset and human capital is lower, and average firm size is smaller in industries of the former type and vice-versa in industries of the latter type. Also, as the economy makes a transition from industrial capitalism to post-industrial capitalism, modern economies are becoming increasingly knowledge intensive which renders the disadvantage to the firms that heavily rely on physical assets. Our model yields new implications regarding the consequences of the transition.
    Keywords: Asset specificity, competition, firm size, firm specificity, human capital, managerial capability
    JEL: J24 L20 M50
    Date: 2017–01

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