nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2017‒04‒23
seventeen papers chosen by
Joseph Marchand
University of Alberta

  1. Do Payroll Tax Breaks Stimulate Formality? Evidence from Colombia’s Reform By Adriana Kugler; Maurice Kugler; Luis Omar Herrera Prada
  2. A Real-Business-Cycle Model with Reciprocity in Labor Relations and Fiscal Policy: The Case of Bulgaria By Aleksandar Vasilev
  3. When Harry Fired Sally: The Double Standard in Punishing Misconduct By Egan, Mark L.; Matvos, Gregor; Seru, Amit
  4. Returns to Postgraduate Education in Portugal: Holding on to a Higher Ground? By Almeida, André; Figueiredo, Hugo; Cerejeira, João; Portela, Miguel; Sá, Carla; Teixeira, Pedro
  5. Consumer Loan Response to Permanent Labor Income Shocks: Evidence from a Major Minimum Wage Increase By Guney, Ibrahim Ethem; Hacihasanoglu, Yavuz Selim; Tumen, Semih
  6. Hysteresis via Endogenous Rigidity in Wages and Participation By Cynthia L. Doniger; J. David Lopez-Salido
  7. Immigration Restrictions as Active Labor Market Policy: Evidence from the Mexican Bracero Exclusion - Working Paper 451 By Michael Clemens, Ethan Lewis, Hannah Postel
  8. The Long Reach of Education: Health, Wealth, and DI Participation By James M. Poterba; Steven F. Venti; David A. Wise
  9. Occupational mismatch of immigrants in Europe: The role of education and cognitive skills By Cim, Merve; Kind, Michael Sebastian; Kleibrink, Jan
  10. The employment impact of microcredit program participation in Bangladesh: Evidence from a longitudinal household survey By Hussain, A.K.M. Ghulam; Nargis, Nigar; Ashiquzzaman, S.M.; Khalil, Fahad
  11. Leisure and effort at work: incorporating self-employment into urban markets By J. Ignacio, Giménez-Nadal; Jose Alberto, Molina; Jorge, Velilla
  12. Efficient Supply of Human Capital: Role of College Major By Cho, Sungjin; Kam, Jihye; Lee, Soohyung
  13. Performance Pay and Applicant Screening By Jirjahn, Uwe; Mohrenweiser, Jens
  14. Earnings over the Life Course: General versus Vocational Education By Bart Golsteyn; Anders Stenberg
  15. Are Generalists Beneficial to Corporate Shareholders? Evidence from Sudden Deaths By André Betzer; Maximilian Ibel; Hye Seung (Grace) Lee; Peter Limbach; Jesus M. Salas
  16. The Value of Flexible Work: Evidence from Uber Drivers By M. Keith Chen; Judith A. Chevalier; Peter E. Rossi; Emily Oehlsen
  17. The Productivity Advantage of Serial Entrepreneurs By Kathryn L. Shaw; Anders Sørensen

  1. By: Adriana Kugler; Maurice Kugler; Luis Omar Herrera Prada
    Abstract: Alternative work arrangements have grown rapidly around the world. In Latin America, these alternative work arrangements have long been part of the labor market and have continued to grow. The informal sector grew rapidly in Latin America over the past few decades comprising up to half of the working population in many countries. Some attribute the growth in alternative work arrangements and informality to regulations and taxes, while others argue that it is precisely the lack of enforcement of regulations that allows unprotected employment arrangements to flourish. We examine whether reducing taxes associated with employment stimulates formal sector employment. We exploit the fact that the Tax Reform introduced in Colombia in 2012 affected only certain types of workers and not others. In particular, workers earning less than 10 minimum wages (MW) and self-employed workers with more than 2 employees experienced a reduction of payroll taxes of 13.5% between 2013 and 2014. We use the Colombian Household Surveys, Social Security records and the Monthly Manufacturing Sample to conduct difference-in-difference analyses of the reform. We find evidence of increased formal employment for the affected groups after the reform using all three datasets. We find that the probability of formal employment and the likelihood of transitioning into registered employment increased for the affected groups after the reform. We also find that the level and share of permanent employment relative to temp employment grew after the reform for those earnings less than 10 MW. The results are greatest for those in smaller firms and those earnings close to the MW.
    JEL: H2 J2 J24 J31
    Date: 2017–04
  2. By: Aleksandar Vasilev (Department of Economics, American University in Bulgaria)
    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 explains business cycle uctuations 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 eciency wages of no-shirking type that emphasize 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: general equilibrium, reciprocity, gift exchange, eciency wages, unemployment, fiscal policy, Bulgaria
    JEL: E24 E32 J41
    Date: 2017–03
  3. By: Egan, Mark L. (University of MN); Matvos, Gregor (University of Chicago); Seru, Amit (Stanford University)
    Abstract: We examine gender discrimination in the financial advisory industry. We study a less salient mechanism for discrimination, firm discipline following missteps. There are substantial differences in the punishment of misconduct across genders. Although both female and male advisers are disciplined for misconduct, female advisers are punished more severely. Following an incidence of misconduct, female advisers are 20% more likely to lose their jobs and 30% less likely to find new jobs relative to male advisers. Females face harsher punishment despite engaging in less costly misconduct and despite a lower propensity towards repeat offenses. Relative to women, men are three times as likely to engage in misconduct, are twice as likely to be repeat offenders, and engage in misconduct that is 20% costlier. Evidence suggests that the observed behavior is not driven by productivity differences across advisers. Rather, we find supporting evidence for taste-based discrimination. For females, a disproportionate share of misconduct complaints is initiated by the firm, instead of customers or regulators. Moreover, there is significant heterogeneity among firms. Firms with a greater percentage of male executives/owners at a given branch tend to punish female advisers more severely following misconduct and also tend to hire fewer female advisers with past record of misconduct.
    JEL: D18 G24 G28 J71
    Date: 2017–03
  4. By: Almeida, André; Figueiredo, Hugo; Cerejeira, João; Portela, Miguel; Sá, Carla; Teixeira, Pedro
    Abstract: In this paper we use a large official employer-employee dataset, which includes almost the whole universe of business firms, to document and decompose the rising graduates postgraduates’ wage differentials in Portugal. Using a non-parametric matching exercise, we pay particular attention to differences in the assignment of these two groups of workers across occupations and tasks. This allows us to disentangle different sources of postgraduates’ relative earnings and look at the creation of postgraduate jobs . We further look, however, at displacement and deskilling effects due to relative demand inertia as possible sources of such evolution of the relative earnings. Our results show that both displacement and deskilling effects, particularly of graduates with only a first-degree, appear to be at least as important as direct productivity effects in explaining postgraduates premiums. We also conclude that the relative importance of the former has been steadily increasing overtime and that, on the contrary, the net creation of high-paying, postgraduate-only jobs has been relatively modest. This suggests that postgraduate degrees have largely worked as a way of holding on to a higher ground in the labour market.
    Keywords: Postgraduate,Wage Differentials,Inequality,Polarization,Skills
    JEL: C21 J24 J31
    Date: 2017
  5. By: Guney, Ibrahim Ethem; Hacihasanoglu, Yavuz Selim; Tumen, Semih
    Abstract: We investigate the impact of a substantial minimum wage increase, which became effective in January 2016, on consumer loans in Turkey. Using bank-level data and designing an original identification strategy, we ask whether the loans provided by banks with a historically high share of low-wage loan customers have increased relative to those provided by banks with a historically low share of low-wage loan customers after January 2016. Our results suggest that consumer loan flows have displayed a limited but statistically and economically meaningful increase following the minimum wage hike. This increase mostly comes from the increase in long-term general-purpose loans. Vehicle loans have also increased, while there is no change in housing loans. In the overall, the minimum wage hike has generated a moderate and transitory increase in the flow of consumer loans extended to low-wage earners in Turkey|perhaps due to delayed consumption effect. Consumption of durables, which can further increase household borrowing capacity through collateralized debt channel, has only slightly and temporarily increased. The underlying long-term trends in the stock of consumer loans have hardly changed.
    Keywords: Consumer loans,labor income shocks,minimum wages,triple difference
    JEL: D14 E24 G21 J31
    Date: 2017
  6. By: Cynthia L. Doniger; J. David Lopez-Salido
    Abstract: We model hysteresis in the labor market as resulting from a strategic complementarity in firms' wage setting and workers' job search strategies. Strategic complementarity results in a continuum of possible equilibria with higher-wage equilibria welfare dominating lower-wage equilibria. Further, we specify a protocol for revelation of the new equilibria following shocks such that the model exhibits (1) periods of endogenous rigidity in wages and participation, (2) persistent changes in wages, participation, and output in response to transitory movements in labor productivity, (3) sluggish recoveries including both a "jobless" phase and a "wageless" phase. Furthermore, regardless of the history, expansions are insufficiently robust in the sense that misallocation remains during expansions.
    Keywords: Hysteresis ; Jobless Recovery ; Kinked Labor Supply ; Real Rigidity ; Strategic Complementarity ; Wageless Recovery
    JEL: D83 E24 J42
    Date: 2017–04–11
  7. By: Michael Clemens, Ethan Lewis, Hannah Postel
    Abstract: An important class of active labor market policy has received little rigorous impact evaluation: immigration barriers intended to improve the terms of employment for domestic workers by deliberately shrinking the workforce. Recent advances in the theory of endogenous technical change suggest that such policies could have limited or even perverse labor market effects, but empirical tests are scarce. We study a natural experiment that excluded almost half a million Mexican ‘bracero’ seasonal agricultural workers from the United States, with the stated goal of raising wages and employment for domestic farm workers. We build a simple model to clarify how the labor market effects of bracero exclusion depend on assumptions about production technology, and test it by collecting novel archival data on the bracero program that allow us to measure state-level exposure to exclusion for the first time. We reject the wage effect of bracero exclusion required by the model in the absence of induced technical change, and fail to reject the hypothesis that exclusion had no eect on US agricultural wages or employment. Important mechanisms for this result include both adoption of less labor-intensive technologies and shifts in crop mix.
    JEL: J08 J38 F22 J61
    Date: 2017–04
  8. By: James M. Poterba; Steven F. Venti; David A. Wise
    Abstract: Education is strongly related to participation in the Social Security Disability Insurance (DI) program. To explore this relationship, we describe the correlation between education and DI participation, and then explore how four factors related to education – health, wealth, occupation, and employment – feature in this correlation. We label these four factors “pathway” variables. We find that a large component of the relationship between education and DI participation – more than one-third for men, and over two-thirds for women – can be attributed to the correlation of education with health, and of health with DI receipt. We use data from the Health and Retirement Study for the 1992-2012 period to explore the corresponding roles for each of the pathway variables, and also to study how changes over time in these variables, such as the widening gap between the health status of those with high and low educational attainment, have affected DI participation.
    JEL: H53 H55 I26
    Date: 2017–04
  9. By: Cim, Merve; Kind, Michael Sebastian; Kleibrink, Jan
    Abstract: Occupational mismatch is a wide-spread phenomenon among immigrants in many European countries. Mismatch, predominantly measured in terms of education, is often regarded as a waste of human capital. Such discussions, however, ignore the imperfect comparability of international educational degrees when comparing immigrants to natives. An accurate analysis of occupational mismatch requires looking beyond internationally incomparable educational degrees and considering more comparable skill measures. Using PIAAC data, it is possible to exploit internationally comparable cognitive skill measures to analyze the presence of mismatch disparities between immigrants and natives. This allows us to examine whether overeducation implies only an apparent phenomenon or rather a genuine overqualification observed also in the form of cognitive overskilling. In this study, we analyze differences in the incidence of being overeducated and being cognitively overskilled between immigrants and natives in 11 European countries. Results show that immigrants are more likely to be overeducated than natives, while the opposite is true for being cognitively overskilled. Furthermore, significant heterogeneity among immigrants in the incidence of overeducation and cognitive overskilling can be detected.
    Keywords: Occupational mismatch,migration,education,cognitive skills
    JEL: I21 J15 J24 J71
    Date: 2017
  10. By: Hussain, A.K.M. Ghulam; Nargis, Nigar; Ashiquzzaman, S.M.; Khalil, Fahad
    Abstract: Microcredit program, originating in Bangladesh in the late 1970s, has played an important role to meet the financing needs of the impoverished communities around the world. While the successes and failures of microcredit in lifting the poor out of poverty have been recorded in a wide array of literature, the employment outcome of participating in a microcredit program as a pathway to poverty reduction has been studied much less. Using two waves of longitudinal data on over 2000 households, we examine the employment impact of microcredit program in Bangladesh during 1998-2004. The longitudinal nature of data allows us fixed effects estimation of the effect of microcredit program participation on self-employment hours and household labor income isolating the biases that may result from non-random program placement, censoring in self-employment work hours and income data, and non-random sample selection of households or individuals as participants who already have entrepreneurial skills or pre-existing household conditions favourable to self-employment activities. The fixed effects estimate shows that households that participate in microcredit program work on average 245 hours longer in self-employment activities and earn 9.4% higher labor income than non-participant households. These extra hours are equivalent to around 7 weeks of employment for a person. The income effect of microcredit program participation is more discernible on household labor income than on total household income due to lack of direct link of microcredit program with non-labor income sources such as remittance. The participating households at the bottom of the income distribution appear to have gained more than those at the upper end suggesting equalizing effect of microcredit program participation over and above the positive effect on employment and income growth. Thus microcredit program in Bangladesh has succeeded in providing employment generating capacities to participants and raised the potential for income growth that contributed to poverty reduction.
    Keywords: microcredit,self-employment,labor income,poverty
    JEL: I32 J21 J22 J43 J46
    Date: 2017
  11. By: J. Ignacio, Giménez-Nadal; Jose Alberto, Molina; Jorge, Velilla
    Abstract: In this paper, we study self-employment in a theoretical setting derived from urban efficiency wages spatial models, where leisure and effort at work are complementary. Our model shows that unemployment tends to concentrate far from business districts, in contrast to employment and self-employment. The self-employed tend to live closer to workplaces than do the employed, as commuting has relatively negative effects, given that it affects productivity and thus earnings. We use data from the American Time Use Survey 2003-2014 to analyze the spatial distribution of self-employment, employment, and unemployment across metropolitan areas in the US, focusing on the relationship between commuting time and the probability of employment and self-employment. Our results show that employment and self-employment are negatively related to commuting, in comparison to unemployment, while self-employment is associated with shorter commutes, in contrast to those of employees, giving support to the theoretical background.
    Keywords: Employment, self-employment, commuting, leisure, shirking, American Time Use Survey.
    JEL: J21 J22 R12 R41
    Date: 2017–03–28
  12. By: Cho, Sungjin (Seoul National University); Kam, Jihye (University of Wisconsin-Madison); Lee, Soohyung (University of Maryland)
    Abstract: This study examines the extent to which changing the composition of college majors among working-age population may affect the supply of human capital or effective labor supply. We use the South Korean setting, in which the population is rapidly aging, but where, despite their high educational attainment, women and young adults are still weakly attached to the labor market. We find that Engineering majors have an advantage in various outcomes such as likelihood of being in the labor force, being employed, obtaining long-term position, and earnings, while Humanities and Arts/Athletics majors show the worst outcomes. We then conduct a back-of-the-envelope calculation of the impact of the recently proposed policy change to increase the share of Engineering majors by 10 percent starting in 2017. Our calculation suggests that the policy change may have a positive but small impact on labor market outcomes.
    Keywords: returns to schooling, college major, economics of education, gender gap, human capital, aging
    JEL: I2 J2 J4
    Date: 2017–03
  13. By: Jirjahn, Uwe; Mohrenweiser, Jens
    Abstract: Using German establishment data, we show that the relationship between intensity of performance pay and intensity of applicant screening depends on the nature of production. In establishments with increased multitasking, performance pay is positively associated with applicant screening. By contrast, in establishments without increased multitasking, performance pay is negatively associated with applicant screening. The findings fit the hypothesis that performance pay induces a positive self-sorting of employees if jobs are less multifaceted. In this case, employers with a high intensity of performance pay do not need intensive applicant screening to ensure a high quality of matches between workers and jobs. However, if jobs are more multifaceted, performance pay can entail problems of adverse self-sorting. In order to mitigate or overcome these problems, employers making intensive use of performance pay also screen applicants more intensively.
    Keywords: Performance pay,multitasking,self-sorting,applicant screening,non-managerial employees,managerial employees
    JEL: J33 J60 M51 M52
    Date: 2017
  14. By: Bart Golsteyn (Maastricht University and SOFI); Anders Stenberg (Stockholm University)
    Abstract: Two common hypotheses regarding the relative benefits of vocational versus general education are (1) that vocational skills enhance relative short-term earnings and (2) that general skills enhance relative long-term earnings. Empirical evidence for these hypotheses has remained limited. Based on Swedish registry data of individuals in short (2-year) upper secondary school programs, this study provides a first exploration of individuals’ earnings across nearly complete careers. The descriptive earnings patterns indicate support for both hypotheses (1) and (2). The support holds when controlling for GPA and family fixed effects and also when taking into account enrollment in further education and fertility decisions.
    Keywords: human capital, vocational education, life cycle, tracking
    JEL: J24 J64 J31 I20
    Date: 2017–04
  15. By: André Betzer (BUW - Schumpeter School of Business and Economics); Maximilian Ibel (BUW - Schumpeter School of Business and Economics); Hye Seung (Grace) Lee (Fordham University); Peter Limbach (University of Cologne - Centre for Financial Research (CFR)); Jesus M. Salas (College of Business at Lehigh University)
    Abstract: This study documents a positive, economically meaningful impact of executives’ general managerial skills on shareholder value. Examining 171 sudden executive deaths over thirty years, we find that a one-standarddeviation increase in the general ability index corresponds to at least a 1.5 percentage point decrease in abnormal stock returns to death announcements. Generalists are found to be significantly more valuable for firms with fewer growth prospects where difficult tasks (e.g., restructurings) need to be performed and adaptations to changing business environments become necessary. Our results provide a market-based explanation for the documented generalist hiring premium and the increasing share of generalists.
    Keywords: executive heterogeneity, managerial work experience, firm value
    JEL: G30 G34 J24
    Date: 2017–04
  16. By: M. Keith Chen; Judith A. Chevalier; Peter E. Rossi; Emily Oehlsen
    Abstract: Participation in flexible contract work has increased dramatically over the last decade, often in settings where new technologies lower the transaction costs of providing labor flexibly. One prominent example of this is the ride-sharing company Uber, which allows drivers to provide (or not provide) rides anytime they are willing to accept prevailing prices for this service. An Uber-style arrangement offers workers flexibility in both setting a customized work schedule and also adjusting it throughout the day. Using high-frequency data of hourly earnings for Uber drivers, we document the ways in which drivers utilize this real-time flexibility and we estimate the driver surplus generated by this flexibility. We estimate how drivers' reservation wages vary in high frequency from hour to hour, which allows us to study the surplus and supply implications of both flexible and traditional work arrangements. Our results indicate that, while the Uber relationship may have other drawbacks, Uber drivers benefit significantly from real-time flexibility, earning more than twice the surplus they would in less flexible arrangements. If required to supply labor inflexibly at prevailing wages, they would also reduce the hours they supply by more than two-thirds. The implications of our findings for the future of flexible work are discussed.
    JEL: J22 L91
    Date: 2017–03
  17. By: Kathryn L. Shaw; Anders Sørensen
    Abstract: Serial entrepreneurs, who open more than one business, are found to have higher sales and higher productivity than novice entrepreneurs, who open one business. Using panel data on entrepreneurs and their firms from Denmark for 2001-2013, the serial entrepreneur has 67% higher sales than the novice, but also opens firms that are larger in terms of the initial capital and labor, and thus is 39% more productive. There are subsets of firms that perform especially well – serial entrepreneurs that hold a portfolio of overlapping ongoing firms perform the best, as do those that open as limited liability firm rather than proprietorships. Female serial entrepreneurs do as well as male serial entrepreneurs relative to the performance of novices of their own genders. The second firms of the serial entrepreneurs also stay in business longer than the first (and only) firms of the novices.
    JEL: G24 J24 L26 M13
    Date: 2017–04

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