nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2017‒06‒11
seventeen papers chosen by
Joseph Marchand
University of Alberta

  1. The Labor Market Gender Gap in Denmark: Sorting Out the Past 30 Years By Gallen, Yana; Lesner, Rune V.; Vejlin, Rune Majlund
  2. Worker Overconfidence: Field Evidence and Implications for Employee Turnover and Returns from Training By Burks, Stephen V.; Hoffman, Mitchell
  3. Harsh Times: Do Stressors Lead to Labor Market Losses? By Maczulskij, Terhi; Böckerman, Petri
  4. Disability Benefits, Consumption Insurance, and Household Labor Supply By David Autor; Andreas Ravndal Kostol; Magne Mogstad; Bradley Setzler
  5. Body-Weight and Women's Hours of Work: More Evidence That Marriage Markets Matter By Grossbard, Shoshana; Mukhopadhyay, Sankar
  6. How Useful Is the Concept of Skills Mismatch? By McGuinness, Seamus; Pouliakas, Konstantinos; Redmond, Paul
  7. Regulation, institutions and productivity: New macroeconomic evidence from OECD countries By Balázs Égert
  8. Selection on Ability and the Early Career Growth in the Gender Wage Gap By Fraga, Eduardo; Gonzaga, Gustavo; Soares, Rodrigo R.
  9. Eliciting Permanent and Transitory Undeclared Work from Matched Administrative and Survey Data By Elek, Peter; Köllő, J&aacutenos
  10. Intergenerational effect of education reform program and maternal education on children’s educational and labor outcomes: evidence from Nepal By Vinish Shrestha; Rashesh Shrestha
  11. Racing against Time in Research: A Study of the 1995 U.S. Patent Law Amendment By Kim, Jinyoung
  12. Per Capita Income and the Demand for Skills By Justin Caron; Thibault Fally; James Markusen
  13. Long-Run Effects of Severe Economic Recessions on Male BMI Trajectories and Health Behaviors By Nizalova, Olena Y.; Norton, Edward C.
  14. High-Impact Minimum Wages and Heterogeneous Regions By Vom Berge, Philipp; Frings, Hanna
  15. Closing or Reproducing the Gender Gap? Parental Transmission, Social Norms and Education Choice By Humlum, Maria Knoth; Nandrup, Anne Brink; Smith, Nina
  16. The impact of exposure to cash transfers on education and labor market outcomes By Paredes-Torres, Tatiana
  17. Sir! I'd Rather Go to School, Sir! By Majbouri, Mahdi

  1. By: Gallen, Yana (Harris School, University of Chicago); Lesner, Rune V. (Aarhus University); Vejlin, Rune Majlund (Aarhus University)
    Abstract: We document the declining gap between the average earnings of women and men in Denmark from 1980 to 2010. The decline in the earnings gap is driven by increased labor force participation and in-creases in hours worked by women, and to a smaller extent by a decline in the gender wage gap. The gap has declined least among higher earning women – the average wage of the top 10 percent of fe-male earners is 28-33% lower than the average wage of the top 10 percent of male earners. Women are becoming more educated and are a larger share of the professional labor force than in previous decades, but a substantial wage gap of about 10 percent remains for the youngest cohorts even after controlling for age, education, experience, occupation, and firm choice. Unlike the case of the US, dif-ferences in educational attainment, occupational choice, industry, and experience explained about 15 percentage points of the Danish wage gap in 1980, but now these factors explain only about 6 percent-age points of the Danish wage gap. In fact, though variation in the wage gap across occupations is sub-stantial, this variation is not correlated with the fraction of the occupation which is female. The data show a great deal of sorting and segregation across industries, occupations, and even firms. However, this sorting does not explain more than half of the wage gap. We conclude that a great deal of the re-maining disparity between the wages of women and men is tied to the differential effects of parenthood by gender.
    Keywords: gender pay gap, sorting
    JEL: J71 J31
    Date: 2017–05
  2. By: Burks, Stephen V. (University of Minnesota, Morris); Hoffman, Mitchell (University of Toronto)
    Abstract: Combining weekly productivity data with weekly productivity beliefs for a large sample of truckers over two years, we show that workers tend to systematically and persistently over-predict their productivity. If workers are overconfident about their own productivity at the current firm relative to their outside option, they should be less likely to quit. Empirically, all else equal, having higher productivity beliefs is associated with an employee being less likely to quit. To study the implications of overconfidence for worker welfare and firm profits, we estimate a structural learning model with biased beliefs that ac-counts for many key features of the data. While worker overconfidence moderately decreases worker welfare, it also substantially increases firm profits. This may be critical for firms (such as the main one we study) that make large initial investments in worker training.
    Keywords: overconfidence, biased learning, turnover, truckload, firm-sponsored training, truck driver
    JEL: J24 D03 M53 J41
    Date: 2017–05
  3. By: Maczulskij, Terhi (Labour Institute for Economic Research); Böckerman, Petri (Labour Institute for Economic Research)
    Abstract: This paper examines the effects of past stressful life events on subsequent labor market success using data on twins matched to comprehensive register-based, individual-level information on income and employment status. The long-term labor market outcomes are measured during 20-year follow-up. We use the within-twin method to account for unobservable family and genetic confounders. The twin design reveals three important findings. First, stressors lead to worse labor market outcomes. Second, men are more affected by financial and job-related stressors, while women are more affected by family stressors. Third, the negative effects that stressors have on labor market outcomes diminish as time passes.
    Keywords: stressors, stressful life events, employment, earnings, co-twin control, twins
    JEL: I31 J24 J31
    Date: 2017–05
  4. By: David Autor; Andreas Ravndal Kostol; Magne Mogstad; Bradley Setzler
    Abstract: While a mature literature finds that Disability Insurance (DI) receipt discourages work, the welfare implications of these findings depend on two rarely studied economic quantities: the full cost of DI allowances to taxpayers, summing over DI transfer payments, benefit substitution to or from other transfer programs, and induced changes in tax receipts; and the value that individuals and families place on receiving benefits in the event of disability. We comprehensively assess these missing margins in the context of Norway's DI system, drawing on two strengths of the Norwegian environment. First, Norwegian register data allow us to characterize the household impacts and fiscal costs of disability receipt by linking employment, taxation, benefits receipt, and assets at the person and household level. Second, random assignment of DI applicants to Norwegian judges who differ systematically in their leniency allows us to recover the causal effects of DI allowance on individuals at the margin of program entry. Accounting for the total effect of DI allowances on both household labor supply and net payments across all public transfer programs substantially alters our picture of the consumption benefits and fiscal costs of disability receipt. While DI allowance causes a significant increase in household income and consumption on average, it has little impact on income or consumption of married applicants because spousal earnings responses (via the added worker effect) and benefit substitution entirely offset DI benefit payments among those who are allowed relative to those who are denied. To develop the welfare implications of these findings, we estimate a dynamic model of household behavior that translates employment, reapplication and savings decisions into revealed preferences for leisure and consumption. We find that household valuation of receipt of DI benefits is considerably greater for single and unmarried individuals than for married couples because spousal labor supply substantially buffers household income and consumption in the event of DI denial.
    JEL: H53 H55 I38 J22
    Date: 2017–06
  5. By: Grossbard, Shoshana (San Diego State University); Mukhopadhyay, Sankar (University of Nevada, Reno)
    Abstract: Higher body-weight (BMI) can affect labor supply via its effects on outcomes in both labor markets and marriage markets. To the extent that it is associated with lower prospects of being in couple and obtaining intra-couple transfers, we expect that higher BMI will increase willingness to supply labor in labor markets, especially for women. We use US panel data from the NLSY79 and NLSY97 to examine whether body weight influences hours of work in the labor market. We use sibling BMI as an instrument for own BMI to address potential endogeneity of BMI in hours worked. We find that White women with higher BMI work more. This is true for both single and married White women. Results for other groups of women and men produce mixed results. The extended analysis suggests that what drives the relationship between BMI and hours worked is not lower market wages earned by high-BMI women, but rather lower spousal transfers to married women or lower expected intra-marriage transfers to single women.
    Keywords: obesity, labor supply, marriage prospects, intra-household division of resources
    JEL: J22 I12 J12
    Date: 2017–05
  6. By: McGuinness, Seamus (Economic and Social Research Institute, Dublin); Pouliakas, Konstantinos (European Centre for the Development of Vocational Training (Cedefop)); Redmond, Paul (ESRI, Dublin)
    Abstract: The term skill mismatch is very broad and can relate to many forms of labour market friction, including vertical mismatch, skill gaps, skill shortages, field of study (horizontal) mismatch and skill obsolescence. In this paper we provide a clear overview of each concept and discuss the measurement and inter-relatedness of different forms of mismatch. We present a comprehensive analysis of the current position of the literature on skills mismatch and highlight areas which are relatively underdeveloped and may warrant further research. Using data from the European Skills and Jobs Survey, we assess the incidence of various combinations of skills mismatch across the EU. Finally, we review the European Commission's country specific recommendations and find that skills mismatch, when referring to underutilised human capital in the form of overeducation and skills underutilisation, receives little policy attention. In cases where skills mismatch forms part of policy recommendations, the policy advice is either vague or addresses the areas of mismatch for which there is the least available evidence.
    Keywords: skill mismatch, overeducation, skill shortages, skill gaps, European skills and jobs survey, policy
    JEL: J24 I20 I28
    Date: 2017–05
  7. By: Balázs Égert
    Abstract: Empirical research on the drivers of multi-factor productivity (MFP) is abundant at the firm- and industry level but surprisingly little research has been conducted on the determinants of MFP at the macroeconomic level. In this paper, we seek to understand the drivers of country-level MFP with a special emphasis on product and labour market policies and the quality of institutions. For a panel of OECD countries, we find that anticompetitive product market regulations are associated with lower MFP levels and that higher innovation intensity and greater openness go in tandem with higher MFP. We also find that the impact of product market regulations on MFP may depend on the level of labour market regulations. Better institutions, a more business friendly environment and lower barriers to trade and investment amplify the positive impact of R&D spending on MFP. Finally, we also show that cross-country MFP variations can be explained to a considerable extent by cross-country variation in labour market regulations, barriers to trade and investment and institutions (including corruption).
    Keywords: human capital, measurement, multi-factor productivity, OECD
    JEL: C2 J2 O4
    Date: 2017–06–08
  8. By: Fraga, Eduardo (Yale University); Gonzaga, Gustavo (Pontifical Catholic University of Rio de Janeiro (PUC-Rio)); Soares, Rodrigo R. (Columbia University)
    Abstract: This paper analyzes the effect of selection on ability on the evolution of the gender wage gap during the first years of professional life. We use longitudinal data with 16 years of the early career history of formal sector workers in Brazil. The panel allows us to build a measure of unobserved ability that we use to analyze the dynamics of labor market selection across genders as individuals age. We focus on the cohort born in 1974, for which we have a close to complete history of formal labor market participa-tion. For this cohort, the average ability of formally employed men improved in relation to that of women during the first years of professional life. The selection of men and women into the labor mar-ket was similar at age 21, but by age 31 high‐ability men (one standard deviation above the mean) had a probability of employment 1.6 percentage point higher than their high‐ability female counter-parts. This contributed to the increase in the conditional gender wage gap observed in the early career, as the ability distribution of employed women deteriorated in relation to that of employed men. Our estimates suggest that, for the 1974 cohort, this mechanism explains 32% of the cumulative growth in the conditional gender wage gap between ages 21 and 36.
    Keywords: gender wage gap, selection, ability, lifecycle
    JEL: J16 J21 J31 J71
    Date: 2017–05
  9. By: Elek, Peter (Eötvös Lorand University); Köllő, J&aacutenos (Hungarian Academy of Sciences)
    Abstract: We study the undeclared work patterns of Hungarian employees in relatively stable jobs, using a panel dataset that matches individual-level self-reported Labour Force Survey data with administrative rec-ords of the Pension Directorate for 2001–2006. We estimate the determinants of undeclared work us-ing Heckman-type random-effects panel probit models, and develop a two-regime model to separate permanent and transitory undeclared work, where the latter follows a Markov chain. We find that about 6-7 per cent of workers went permanently unreported for six consecutive years, and a further 4 per cent were transitorily unreported in any given year. The models show lower reporting rates – es-pecially in the permanent segment – among males, high-school graduates, those in agriculture and transport, various forms of atypical employment, and small firms. Transitory non-reporting may be partly explained by administrative records missing for technical reasons. The results suggest that (i) the 'aggregate labour input method' widely used in Europe can indeed be a simple yet reliable tool to es-timate the size of informal employment, although it slightly overestimates the true magnitude of black work (ii) the long-term pension consequences of undeclared work are substantial because of the high share of permanent non-reporting.
    Keywords: undeclared work, labour input method, matched administrative-survey data, random-effects panel probit with endogenous selection, Markov chain
    JEL: C23 C25 H26 J46
    Date: 2017–05
  10. By: Vinish Shrestha; Rashesh Shrestha
    Abstract: We examine a potential intergenerational determinant of child labor by investigating the effect of maternal education on children0s educational and labor outcomes. To account for endogeneity of mother's education, we use the Nepal Education System Plan (NESP) (1971), one of the first education reforms in the country, as an exogenous source of variation. We find that NESP increased educational outcomes among females that were most likely affected by the reform due to their birth year and district of birth. Furthermore, an increase in mother's highest level of schooling increases a child's probability of finishing 5th grade only among mothers from a higher caste households. We find modest effects of mother's education on child labor outcomes, with the IV estimate indicating that a year increase in mother's education reduces a child's weekly work by approximately an hour. The IV estimates are about two-fold larger than the OLS estimates in most cases. We caution that exclusion based on social hierarchy should be considered when promoting maternal education as a medium to improve children's well-being in developing nations like Nepal.
    Keywords: returns to education, maternal education, child labor, schooling
    JEL: I26 J20 I30
    Date: 2017
  11. By: Kim, Jinyoung (Korea University)
    Abstract: Teamwork in research has been on the rise and so has the size of R&D teams. This paper offers an ex-planation for increasing team size that we call the "racing against time" hypothesis: With innovation races more competitive globally, R&D firms need to finish research projects as quickly as possible and therefore have an incentive to put together a team with more R&D personnel. We test this hypothesis against a natural experiment that took place in 1995 when the U.S. patent law was amended.
    Keywords: teamwork, team size, R&D, patent, racing against time
    JEL: D23 J23 O32
    Date: 2017–05
  12. By: Justin Caron; Thibault Fally; James Markusen
    Abstract: Almost all of the literature about the growth of income inequality and the relationship between skilled and unskilled wages approaches the issue from the production side of general equilibrium (skill-biased technical change, international trade). Here, we add a role for income-dependent demand interacted with factor intensities in production. We explore how income growth and trade liberalization influence the demand for skilled labor when preferences are non-homothetic and income-elastic goods are more intensive in skilled labor, an empirical regularity documented in Caron, Fally and Markusen (2014). In one experiment, counterfactual simulations show that sector neutral productivity growth, which generates shifts in consumption towards skill-intensive goods, leads to significant increases in the skill premium: in developing countries, a one percent increase in productivity leads to a 0.1 to 0.25 percent increase in the skill premium. In several countries, including China and India, simulations suggest that the historical growth experienced in the last 25 years may have led to an increase in the skill premium of more than 10%. In a second experiment, we show that trade cost reductions generate quantitatively very different outcomes once we account for non- homothetic preferences. These imply substantially less predicted net factor content of trade and allow for a shift in consumption patterns caused by trade-induced income growth. Overall, the negative effect of trade cost reductions on the skill premium predicted for developing countries under homothetic preferences (Stolper-Samuelson) is strongly mitigated, and sometimes reversed.
    JEL: F10 F16 J31 O10
    Date: 2017–06
  13. By: Nizalova, Olena Y. (University of Kent); Norton, Edward C. (University of Michigan)
    Abstract: With periodic recessions and the rising costs of health care, it is important to know how labor market participation and insecurity affects health outcomes. Yet, this line of research faces a number of methodological challenges which this paper aims to address. We turn to Ukraine's experience after the col-lapse of the USSR to investigate how exogenous labor market shocks during severe recessions affect men's body mass index (BMI) and health-related behaviors. We use growth curve models to analyze BMI trajectories from 2003 to 2007 and find that past exogenous shocks (e.g., plant closings, bankruptcies, restructuring, and privatization) from 1986 to 2003 significantly change the BMI-age relationship for men. We also find a long-lasting effect on drinking behavior that is decreasing with age, while the effect on the probability of smoking is constant across all ages. At the same time, there is no effect on the probability of engaging in vigorous or moderate physical activity.
    Keywords: job loss, labour market exclusion, lay-offs, recession, BMI, growth curve, life course
    JEL: I12 J21 J65
    Date: 2017–05
  14. By: Vom Berge, Philipp (Institute for Employment Research (IAB), Nuremberg); Frings, Hanna (RWI)
    Abstract: We estimate the effects of the introduction and subsequent increases of a substantial minimum wage in Germany's main construction industry on wage and employment growth rates. Using a regional dataset constructed from individual employment histories, we exploit the spatial dimension and border discontinuities of the regional data to account for spillovers between districts and unobserved heterogeneity at the local level. The results indicate that the minimum wage increased the wage growth rate for East Germany but did not have a significant impact on the West German equivalent. The estimated effect on the employment growth rate reveals a contraction in the East of about 1.2 percentage points for a one-standard-deviation increase in the minimum-wage bite, amounting to roughly one quarter of the overall decline in the growth rate. We observe no change for the West.
    Keywords: construction sector, Germany, minimum wage, spatial heterogeneity, spatial panel data
    JEL: J31 J38
    Date: 2017–05
  15. By: Humlum, Maria Knoth (Aarhus University); Nandrup, Anne Brink (Aarhus University); Smith, Nina (Aarhus University)
    Abstract: Over the last decade, the economic literature has increasingly focused on the importance of gender identity and sticky gender norms in an attempt to explain the persistence of the gender gaps. Using detailed register data on the latest cohorts of Danish labour market entrants, this paper examines the intergenerational correlation in gender-stereotypical choice of education. Although to some extent picking up inherited and acquired skills, our results suggest that if parents exhibit gender stereotypical labour market behaviour, children of the same sex are more likely to choose a gender stereotypical education. The associations are strongest for sons. Exploiting the detailed nature of our data, we use birth order and sibling sex composition to shed light on the potential channels through which gender differences in educational preferences are transmitted across generations. We propose that such transmissions may attenuate the final closing of the gender gap.
    Keywords: intergenerational transmission, gender differences, gender identity, social norms
    JEL: I23 J16 J24
    Date: 2017–05
  16. By: Paredes-Torres, Tatiana
    Abstract: This paper studies the short and long-term effects of exposure to Bono de Desarrollo Humano (BDH), the main unconditional cash transfer program in Ecuador, on young people’s education and labor market outcomes. Using individual administrative panel data and a regression discontinuity design, I estimate the short-term impact of BDH, as well as the differential impact of a long exposure (10 years) versus a short exposure to BDH (five years). In the short-run, treated children experienced gains in enrollment and schooling, but those gains dissipated after five more years of treatment. This explains why after ten years of exposure, treated children aged 18-21 were not more likely to finish high school when compared to similar children who were only treated during the first five years of the program. Regarding labor market outcomes, BDH had a negative but not statistically significant impact on the probability of working among the young children who were treated either during five or ten years and did not increase job opportunities among young adults.
    Keywords: cash transfers, regression discontinuity, Ecuador, education, labor market outcomes, long-term effects, short-term effects, Bono de Desarrollo Humano, human capital, poverty, developing countries, regression discontinuity
    JEL: H23 I22 I24 I25 I28 I38 J24 O15
    Date: 2017–05
  17. By: Majbouri, Mahdi (Babson College)
    Abstract: Military service is a popular method of army recruitment for governments of developing countries that are particularly prone to conflict. This study contributes to the largely underresearched issues of mili-tary service by looking at an unintended consequence of a military service exemption policy and an-swering a principal question: is there a fear of conscription among the youth? It uses a discontinuity in the military service law in an under-researched country, Iran, and offers causal evidence that fear of conscription entices young men to get more education against their will. This exogenous increase is used to estimate returns to education.
    Keywords: conscription, coercive labor market, natural experiment, regression discontinuity, higher-educational attainment
    JEL: I23 J47 I26 N35
    Date: 2017–05

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