nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2017‒03‒26
sixteen papers chosen by
Joseph Marchand
University of Alberta

  1. Public Wage Spillovers: The Role of Individual Characteristics and Employer Wage Policies By Álmos Telegdy
  2. Earnings Inequality and Mobility Trends in the United States: Nationally Representative Estimates from Longitudinally Linked Employer-Employee Data By John M. Abowd; Kevin L. McKinney; Nellie L. Zhao
  3. Recent changes in British wage inequality: Evidence from firms and occupations By Daniel Schäfer; Carl Singleton
  4. The Changing Nature of Gender Selection into Employment: Europe over the Great Recession By Juan J. Dolado; Garcia-Peñalosa, Cecilia; Tarasonis, Linas
  5. Minimum wage impacts on wages and hours worked of low-income workers in Ecuador By Sara Wong
  6. Does the Strength of Incentives Matter for Elected Officials? A Look at Tax Collectors By Sutirtha Bagchi
  7. A Real-Business-Cycle model with reciprocity in labor relations and fiscal policy: the case of Bulgaria By Vasilev, Aleksandar
  8. Corporate Employee-Engagement and Merger Outcomes By Liang, H.; Renneboog, Luc
  9. Only the brave? Risk and time preferences of decision makers and firms’ investment in worker training By Jansen, Anika; Pfeifer, Harald; Raecke, Julia
  10. Training Contracts, Employee Turnover, and the Returns from Firm-sponsored General Training By Mitchell Hoffman; Stephen V. Burks
  11. Annuity Options in Public Pension Plans: The Curious Case of Social Security Leveling By Robert L. Clark; Robert G. Hammond; Melinda S. Morrill; David Vanderweide
  12. Capital-Task Complementarity and the Decline of the U.S. Labor Share of Income By Musa Orak
  13. The secret to job satisfaction is low expectations: How perceived working conditions differ from actual ones By Simona Cicognani; Martina Cioni; Marco Savioli
  14. Reduction of child poverty in Serbia: Improved cash-transfers or higher work incentives for parents? By Jelena Zarkovic Rakic Author-Name: Nicholas-James Clavet Author-Name: Luca Tiberti Author-Name: Marko Vladisavljevic Author-Name: Aleksandra Anic Author-Name: Gorana Krstic Author-Name: Sasa Randelovic
  15. Reevaluating Agricultural Productivity Gaps with Longitudinal Microdata By Joan Hamory Hicks; Marieke Kleemans; Nicholas Y. Li; Edward Miguel
  16. CEO Behavior and Firm Performance By Oriana Bandiera; Stephen Hansen; Andrea Prat; Raffaella Sadun

  1. By: Álmos Telegdy (Magyar Nemzeti Bank (Central Bank of Hungary))
    Abstract: Using a large and unexpected public wage increase in Hungary which changed the public wage premium in 2002 from -17 to +7.5 percent from one month to the next, I study wage spillovers from the public to the corporate sector. I proxy the exposure of corporate workers to the public sector with the variation of the share of public sector employment within labor market segments defined by gender, experience, occupation and region. Controlling for worker-firm joint fixed effects, the analysis finds that the public wage increase induced a 1.4 percentage points wage differential between two workers situated at the 25th and the 75th percentile of the exposure measure, which corresponds to an elasticity of 0.42. The firm’s exposure to the public sector (measured as the average of individual exposures of the firm’s workforce) produces twice as high wage effects and a corresponding elasticity of 0.96. The spillover affected primarily the wages of males, young workers and the highly educated. The analysis also finds that employers raised the wages of incumbent, rather than, newly hired employees, and that bonuses increased more than regular wages.
    Keywords: Wage Spillover; Public Sector; Employer Wage Effects; Hungary
    JEL: J23 J31 J45
    Date: 2017
  2. By: John M. Abowd; Kevin L. McKinney; Nellie L. Zhao
    Abstract: Using earnings data from the U.S. Census Bureau, this paper analyzes the role of the employer in explaining the rise in earnings inequality in the United States. We first establish a consistent frame of analysis appropriate for administrative data used to study earnings inequality. We show that the trends in earnings inequality in the administrative data from the Longitudinal Employer-Household Dynamics Program are inconsistent with other data sources when we do not correct for the presence of misused SSNs. After this correction to the worker frame, we analyze how the earnings distribution has changed in the last decade. We present a decomposition of the year-to-year changes in the earnings distribution from 2004-2013. Even when simplifying these flows to movements between the bottom 20%, the middle 60% and the top 20% of the earnings distribution, about 20.5 million workers undergo a transition each year. Another 19.9 million move between employment and nonemployment. To understand the role of the firm in these transitions, we estimate a model for log earnings with additive fixed worker and firm effects using all jobs held by eligible workers from 2004-2013. We construct a composite log earnings firm component across all jobs for a worker in a given year and a non-firm component. We also construct a skill-type index. We show that, while the difference between working at a low-or middle-paying firm are relatively small, the gains from working at a top-paying firm are large. Specifically, the benefits of working for a high-paying firm are not only realized today, through higher earnings paid to the worker, but also persist through an increase in the probability of upward mobility. High-paying firms facilitate moving workers to the top of the earnings distribution and keeping them there.
    Date: 2017–01
  3. By: Daniel Schäfer; Carl Singleton
    Abstract: Using a dataset covering a large sample of employees and their mostly very large employers, we study the dynamics of British wage inequality over the past two decades. Contrary to other studies, we find little evidence that recent increases in inequality have been driven by differences in the average wages paid by firms. Instead greater dispersion within firms can account for the majority of changes to the wage distribution. After controlling for the changing occupational content of employee wages, the role of average firm residual differences is approximately zero; the modestly increasing trend in between-firm wage inequality is explained by a combination of changes in between-occupation inequality and the occupational specialisation of firms. It is possible that previous studies, which assign some of the importance of changes in the between-firm component to industry, have misrepresented a significant role for occupations. These results are robust across measures of hourly, weekly and annual wages.
    Keywords: wage inequality, within-firm inequality, occupational wage premium
    JEL: E24 J31
    Date: 2017–01–01
  4. By: Juan J. Dolado; Garcia-Peñalosa, Cecilia; Tarasonis, Linas
    Abstract: The aim of this paper is to evaluate the role played by selectivity issues induced by nonemployment in explaining gender wage gap patterns in the EU since the onset of the Great Recession. We show that male selection into the labour market, traditionally disregarded, has increased. This is particularly the case in peripheral EU countries, where dramatic drops in male unskilled jobs have taken place during the crisis. As regards female selection, traditionally positive, we document mixed findings. While it has declined in some countries, as a result of increasing female LFP due to an added-worker effect, it has become even more positive in other countries. This is due to adverse labour demand shifts in industries which are intensive in temporary work where women are over-represented. These adverse shifts may have more than offset the rise in unskilled female labour supply.
    Keywords: Sample selection,gender wage gaps,gender employment gaps
    JEL: J31
    Date: 2017
  5. By: Sara Wong
    Abstract: The minimum wage policy in Ecuador aims to raise the real income of low-wage workers. We analyze the effects of the January 2012 increase in minimum wages on wages and hours worked of low-wage workers. Individuals may select themselves into the occupations of the groups of workers who are covered by the minimum wage legislation, or into those who are not. We apply a difference-in-differences estimation as an identification strategy to account for selection on unobservables. We construct individual panel data from a household panel. The main results suggest a significant and positive effect of the minimum wage increase on the wages of affected workers, increasing their wages by 0.41% to 0.48% for each 1% increase in minimum wages, relative to the earnings of unaffected workers. Results from hours worked highlight several variables that should be accounted for to find significant and sensible estimations that differentiate between full time work and other heterogeneous effects on the treated group.
    JEL: J21 J23 J38
    Date: 2017
  6. By: Sutirtha Bagchi (Department of Economics, Villanova School of Business, Villanova University)
    Abstract: In Pennsylvania local property taxes are collected by elected officials, known as tax collectors, whose compensation varies widely in both structure and level across municipalities. This paper analyses the existence of a pay-performance relationship for these officials. Using data on the percentage of real estate taxes that are actually collected at the municipal level, the paper finds that as the compensation tax collectors receive goes up, they collect more in taxes. This relationship is however true only for collectors who are compensated on a commission basis and not for collectors compensated on the basis of a flat salary. The paper also finds no relationship between the share of votes received by the tax collector and the percentage of property taxes collected during the previous term. This observation may account for the lack of a positive relationship between pay and performance for collectors compensated on the basis of a salary.
    Keywords: Tax Collectors; Politician Salary; Productivity; Pay for Performance
    JEL: H70 J45 J33 D72 M52
    Date: 2017–03
  7. By: Vasilev, Aleksandar
    Abstract: In this paper we introduce reciprocity in labor relations and government sector to investigate how well the real wage rigidity that results out of that arrangement ex- plains business cycle fluctuations in Bulgaria. The reciprocity mechanism described in this paper follows Danthine and Kurmann (2010) and is generally consistent with micro-studies, e.g. Lozev et all. (2011) and Paskaleva (2016), while at the same time comes into contrast with models with efficiency wages of no-shirking type that empha- size the importance of aggregate labor market conditions as the main determinant in wage setting, e.g. Vasilev (2017). Rent-sharing considerations, and worker's own past wages turn out to be the most important aspects of how labor contracting happens. In contrast, aggregate economic conditions, as captured by the employment rate, are not found to be quantitatively important for wage dynamics. Overall, the model with reciprocity and fiscal policy performs well vis-a-vis data, especially along the labor market dimension, and in addition dominates the market-clearing labor market frame- work featured in the standard RBC model, e.g Vasilev (2009).
    Keywords: reciprocity,efficiency wages,general equilibrium,gift exchange,fiscal policy,Bulgaria
    JEL: E24 E32 J41
    Date: 2017
  8. By: Liang, H.; Renneboog, Luc (Tilburg University, Center For Economic Research)
    Abstract: Extending the theories of employee incentives and inalienability of human capital, we investigate the link between a firm’s engagement in employee issues and the returns to shareholders around mergers and acquisitions (M&As) and analyze an international sample of 4,565 M&A deals from 48 countries. We find that stronger employee-engagement—especially in terms of monetary benefits—by the acquiring firm is positively related to shareholder returns in domestic deals, but this positive effect is attenuated in cross-border deals, whereas workforce diversity, training and development, or health and safety do not affect shareholder value. The attenuating effect of cross-border deals is stronger when uncertainty about post-merger labor integration is higher and when economic nationalism in the target’s country is stronger, consistent with an explanation based on the inalienability of human capital and employment policies. Moreover, we find that most effects of employee-engagement on shareholder returns are driven by the acquirer rather than the target, and that they persist in the long run post-merger.
    Keywords: employee-engagement; labor protection; monetary incentives; mergers and acquisitions (&As)
    JEL: G34 M14 J24
    Date: 2017
  9. By: Jansen, Anika (federal institute for vocational education and training (bibb), bonn); Pfeifer, Harald (federal institute for vocational education and training (bibb), bonn); Raecke, Julia (federal institute for vocational education and training (bibb), bonn)
    JEL: J24 J31
  10. By: Mitchell Hoffman; Stephen V. Burks
    Abstract: Firms may be reluctant to provide general training if workers can quit and use their gained skills elsewhere. “Training contracts” that impose a penalty for premature quitting can help alleviate this inefficiency. Using plausibly exogenous contractual variation from a leading trucking firm, we show that two training contracts significantly reduced post-training quitting, particularly when workers are approaching the end of their contracts. Simulating a structural model, we show that observed worker quit behavior exhibits aspects of optimization (for one of the two contracts), and that the contracts increased firm profits from training and reduced worker welfare relative to no contract.
    JEL: J24 J41 M53
    Date: 2017–03
  11. By: Robert L. Clark; Robert G. Hammond; Melinda S. Morrill; David Vanderweide
    Abstract: Social Security Leveling is an annuity option that allows participants to receive a level income before and after age 62. The retiree receives a larger pension benefit prior to age 62, but then the pension benefit is lowered at age 62 when the individual is expected to claim Social Security benefits. This option is not uncommon in public pension plans, yet little is known about how this option is used in practice and its impact on well-being in retirement. Our study uses a combination of administrative records and survey data from recent North Carolina public sector retirees. We find that one-third of all retirees selecting a single life annuity between 2009 and 2014 opted for Social Security Leveling. The evidence suggests that individuals are choosing this option in a way that is consistent with their stated preferences and a consumption smoothing motive. However, we also see higher rates of ex post “regret” in the annuity choice among those choosing the level income option.
    JEL: H55 J26 J38
    Date: 2017–03
  12. By: Musa Orak
    Abstract: This paper provides evidence that shifts in the occupational composition of the U.S. workforce are the most important factor explaining the trend decline in the labor share over the past four decades. Estimates suggest that while there is unitary elasticity between equipment capital and non-routine tasks, equipment capital and routine tasks are highly substitutable. Through the lenses of a general equilibrium model with occupational choice and the estimated production technology, I document that the fall in relative price of equipment capital alone can explain 72 percent of the observed decline in the U.S. labor share. In addition, I find that differences in labor share trends across sectors can be accounted for by varying sensitivities of cost of production to the price of equipment capital.
    Keywords: Labor share ; Technological change ; Capital-task complementarity ; Elasticity of substitution ; Job polarization ; Bayesian estimation
    JEL: C11 E22 E23 E25 J24 J31
    Date: 2017–03
  13. By: Simona Cicognani; Martina Cioni; Marco Savioli
    Abstract: Working conditions exert a major influence on accidents and illnesses at work as well as on job satisfaction and health, yet very little research has examined the determinants of working conditions. By exploiting the Italian Labour Force Survey, this paper provides evidence on the underlying factors affecting working conditions. It provides a behavioural interpretation of the results, which stems from the discrepancy between actual and expected working conditions. Workers declare their perceived working conditions influenced by the difference between the actual and the expected working conditions. Variables concerning personal characteristics, such as gender, education and being employed in the first job, shift expectations about working conditions and accordingly perceived working conditions. On the contrary, variables related to work characteristics, such as working full time, with shifts and in a large place, affect actual and thus perceived working conditions (negatively).
    Keywords: Working conditions; Expectations; Perceptions; Actual conditions; Job satisfaction
    JEL: D84 J24 J28
    Date: 2017–03
  14. By: Jelena Zarkovic Rakic Author-Name: Nicholas-James Clavet Author-Name: Luca Tiberti Author-Name: Marko Vladisavljevic Author-Name: Aleksandra Anic Author-Name: Gorana Krstic Author-Name: Sasa Randelovic
    Abstract: Based on the 2013 Serbian Survey of Income and Living Conditions (SILC) and on the Serbian version of the EUROMOD platform, we evaluate the poverty and distributive effects on children of various reform (benefit and employment) strategies concerning the two major social benefit programs in Serbia: child allowance and social monetary assistance. Both the first and second-order effects of the proposed reforms are considered. For the second-round impacts, a structural labour supply model on parents has been estimated. Our results show that a benefit strategy (which also combats fiscal evasion) is preferred to an employment strategy which aims at raising the work incentives by parents
    Keywords: child poverty, tax and benefit reforms, labour supply, Serbia
    JEL: J22 J13 J18
    Date: 2017
  15. By: Joan Hamory Hicks; Marieke Kleemans; Nicholas Y. Li; Edward Miguel
    Abstract: Recent research has pointed to large gaps in labor productivity between the agricultural and non-agricultural sectors in low-income countries, as well as between workers in rural and urban areas. Most estimates are based on national accounts or repeated cross-sections of micro-survey data, and as a result typically struggle to account for individual selection between sectors. This paper contributes to this literature using long-run individual-level panel data from two low-income countries (Indonesia and Kenya). Accounting for individual fixed effects leads to much smaller estimated productivity gains from moving into the non-agricultural sector (or urban areas), reducing estimated gaps by over 80 percent. Per capita consumption gaps between non-agricultural and agricultural sectors, as well as between urban and rural areas, are also close to zero once individual fixed effects are included. Estimated productivity gaps do not emerge up to five years after a move between sectors, nor are they larger in big cities. We evaluate whether these findings imply a re-assessment of the current conventional wisdom regarding sectoral gaps, discuss how to reconcile them with existing cross-sectional estimates, and consider implications for the desirability of sectoral reallocation of labor.
    JEL: J43 O13 O15 R23
    Date: 2017–03
  16. By: Oriana Bandiera; Stephen Hansen; Andrea Prat; Raffaella Sadun
    Abstract: We measure the behavior of 1,114 CEOs in Brazil, France, Germany, India, UK and US using a new methodology that combines (i) data on every activity the CEOs undertake during one workweek and (ii) a machine learning algorithm that projects these data onto scalar CEO behavior indices. Low values of the index are associated with plant visits, and one-on-one meetings with production or suppliers, while high values correlate with meetings with high-level C-suite executives, and several functions together, both from inside and outside the firm. We use these data to study the correlation between CEO behavior and firm performance within the framework of a firm-CEO assignment model. We show results consistent with significant firm-CEO assignment frictions, which appear to be more severe in lower-income regions. The productivity loss generated by inefficient assignment is equal to 13% of the productivity gap between high- and low-income countries in our sample.
    JEL: J22 J24 M12 O4
    Date: 2017–03

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