nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2017‒07‒16
eighteen papers chosen by
Joseph Marchand
University of Alberta

  1. Pitfalls in the Development of Falsification Tests: An Illustration from the Recent Minimum Wage Literature By Clemens, Jeffrey
  2. Does Random Selection of Commissioners Improve the Quality of Selected Candidates? An Investigation in the Italian Academia By Checchi, Daniele; De Poli, Silvia; Rettore, Enrico
  3. Measuring Rents from Public Employment: Regression Discontinuity Evidence from Kenya - Working Paper 457 By Nicholas Barton; Tessa Bold; Justin Sandefur
  4. The Knowledge Spillover Theory of Intrapreneurship, Labour Mobility and Innovation by Firm Size By Braunerhjelm, Pontus; Ding, Ding; Thulin, Per
  5. Why Is Unemployment Duration a Sorting Criterion in Hiring? By Van Belle, Eva; Caers, Ralf; De Couck, Marijke; Di Stasio, Valentina; Baert, Stijn
  6. First-place loving and last-place loathing: How rank in the distribution of performance affects effort provision By David Gill; Zdenka Kissova; Jaesun Lee; Victoria Prowse
  7. The Minimum Wage and the Great Recession: A Response to Zipperer and Recapitulation of the Evidence By Clemens, Jeffrey
  8. Measures, Drivers and Effects of Green Employment: Evidence from US Local Labor Markets, 2006-2014 By Francesco Vona; Giovanni Marin; Davide Consoli
  9. Additional Evidence and Replication Code for Analyzing the Effects of Minimum Wage Increases Enacted During the Great Recession By Clemens, Jeffrey; Wither, Michael
  10. Tony Atkinson and His Legacy By Brandolini, Andrea; Jenkins, Stephen P.; Micklewright, John
  11. Survey Under-Coverage of Top Incomes and Estimation of Inequality: What Is the Role of the UK's SPI Adjustment? By Burkhauser, Richard V.; Herault, Nicolas; Jenkins, Stephen P.; Wilkins, Roger
  12. Public employment services under decentralization: evidence from a natural experiment By Lukas Mergele, Michael Weber
  13. Access to and Returns from Unpaid Graduate Internships By Holford, Angus J.
  14. Gender Matters in Economic Empowerment Interventions: A Research Review - Working Paper 456 By Mayra Buvinic; Megan O’Donnell
  15. Dissolving the entrepreneurship puzzle: Applying Fréchet distributions to Lazear’s occupational choice model By Hårsman, Björn; Mattsson, Lars-Göran
  16. Working from Home and the Willingness to Accept a Longer Commute By de Vos, Duco; Meijers, Evert J.; van Ham, Maarten
  17. A critical comparison of migration policies: Entry fee versus quota By Stark, Oded; Byra, Lukasz; Casarico, Alessandra; Übelmesser, Silke
  18. General Equilibrium Evaluation of Temporary Employment By Yang, Guanyi

  1. By: Clemens, Jeffrey
    Abstract: This paper examines a ``falsification test'' from the recent minimum wage literature. The analysis illustrates several pitfalls associated with developing and interpreting such exercises, which are increasingly common in applied empirical work. Clemens and Wither (2014) present evidence that minimum wage increases contributed to the magnitude of employment declines among low-skilled groups during the Great Recession. Zipperer (2016) presents regressions that he interprets as falsification tests for Clemens and Wither's baseline regression. He interprets his results as evidence that Clemens and Wither's estimates are biased. In this paper, I demonstrate that Zipperer's falsification tests are uninformative for their intended purpose. The properties of clustered robust standard errors do not carry over from Clemens and Wither's baseline specification (27 treatment states drawn from 50) to Zipperer's falsification tests (3 or 5 ``placebo treatment'' states drawn from 23). Confidence intervals calculated using a setting-appropriate permutation test extend well beyond the tests' point estimates. Further, I show that the sub-samples to which Zipperer's procedure assigns ``placebo treatment status'' were disproportionately affected by severe housing crises. His test's point estimates are highly sensitive to the exclusion of the most extreme housing crisis experiences from the sample. An inspection of data on the housing market, prime aged employment, overall unemployment rates, and aggregate income per capita reveals the test's premise that regional neighbors form reasonable counterfactuals to be incorrect in this setting.
    Keywords: Falsification Test; Program Evaluation; Minimum Wage
    JEL: C18 J2 J3
    Date: 2017–06–14
  2. By: Checchi, Daniele (University of Milan); De Poli, Silvia (FBK-IRVAPP); Rettore, Enrico (University of Trento)
    Abstract: We study a reform occurred in Italy in 2008 in the formation of selection committees for qualifying as university professor. Prior to the reform members of the selection committees were elected by their peers, after the reform they have been randomly drawn. This policy was intended to increase the equality of opportunities of candidates via a reduction of the role played by connections to commissioners. Results show that the reform was ineffective in reducing the probability contribution of being an insider, but attenuated the impact of being connected to a commissioner without significantly raising the impact of scientific quality of candidates on the outcome of competitions. We also find that candidates internalised the changed environment and adapted their strategy of application.
    Keywords: university recruitment, incentives, negotiation, formal procedures
    JEL: M51 I23 D82 J45
    Date: 2017–06
  3. By: Nicholas Barton; Tessa Bold; Justin Sandefur (Center for Global Development)
    Abstract: Public employees in many developing economies earn much higher wages than similar private-sector workers. These wage premia may reflect an efficient return to effort or unobserved skills, or an inefficient rent causing labor misallocation. To distinguish these explanations, we exploit the Kenyan government’s algorithm for hiring eighteen-thousand new teachers in 2010 in a regression discontinuity design. Fuzzy regression discontinuity estimates yield a civil-service wage premium of over 100 percent (not attributable to observed or unobserved skills), but no effect on motivation, suggesting rent-sharing as the most plausible explanation for the wage premium.
    Keywords: civil servants, teachers, public sector wages, wage gap, motivation
    JEL: H1 J3 O1
    Date: 2017–06–21
  4. By: Braunerhjelm, Pontus (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Ding, Ding (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Thulin, Per (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: Presenting The Knowledge Spillover Theory of Intrapreneurship, we examine how labour mobility impacts innovation distributed on firm size. A matched employer-employee dataset, pooled with firm-level patent application data, is implemented in the analysis. We provide new evidence that knowledge workers’ mobility has a positive and strongly significant impact on all firms’ innovation output, measured as patent applications. The patterns and effects differ between large and small firms. More precisely, for small firms, intraregional mobility of knowledge workers that have previously worked in a patenting firm (the learning-by-hiring effect) are shown to be statistically and economically highly significant, whereas only limited impact could be detected for firms losing knowledge workers (the-learning-by-diaspora effect).
    Keywords: Labour mobility; knowledge diffusion; innovation; social networks
    JEL: J24 O31 R23
    Date: 2017–07–13
  5. By: Van Belle, Eva (Ghent University); Caers, Ralf (KU Leuven); De Couck, Marijke (Free University of Brussels); Di Stasio, Valentina (Nuffield College, Oxford); Baert, Stijn (Ghent University)
    Abstract: Recent evidence from large-scale field experiments has shown that employers use job candidates' unemployment duration as a sorting criterion. In the present study, we investigate the mechanisms underlying this pattern. To this end, we conduct a lab experiment in which participants make hiring decisions concerning fictitious job candidates with diverging unemployment durations. In addition, these participants rate the job candidates on statements central to four theoretical mechanisms often related to the scarring effect of unemployment: general signalling theory, (perceived) skill loss, queuing theory, and rational herding. We use the resulting data to estimate a multiple mediation model, in which the effect of the duration of unemployment on hiring intentions is mediated by the four theories. The lower hiring chances of the long-term unemployed turn out to be dominantly driven by the perception of longer unemployment spells as a signal of lower motivation. Recent evidence from large-scale field experiments has shown that employers use job candidates' unemployment duration as a sorting criterion. In the present study, we investigate the mechanisms underlying this pattern. To this end, we conduct a lab experiment in which participants make hiring decisions concerning fictitious job candidates with diverging unemployment durations. In addition, these participants rate the job candidates on statements central to four theoretical mechanisms often related to the scarring effect of unemployment: general signalling theory, (perceived) skill loss, queuing theory, and rational herding. We use the resulting data to estimate a multiple mediation model, in which the effect of the duration of unemployment on hiring intentions is mediated by the four theories. The lower hiring chances of the long-term unemployed turn out to be dominantly driven by the perception of longer unemployment spells as a signal of lower motivation.
    Keywords: unemployment scarring, signalling theory, queuing theory, rational herding
    JEL: J64 J24 J23 C91
    Date: 2017–07
  6. By: David Gill; Zdenka Kissova; Jaesun Lee; Victoria Prowse
    Abstract: Rank-order relative-performance evaluation, in which pay, promotion, symbolic awards and educational achievement depend on the rank of individuals in the distribution of performance, is ubiquitous. Whenever organizations use rank-order relative-performance evaluation, people receive feedback about their rank. Using a real-e?ort experiment, we aim to discover whether people respond to the specific rank that they achieve. In particular, we leverage random variation in the allocation of rank among subjects who exerted the same effort to obtain a causal estimate of the rank response function that describes how effort provision responds to the content of rank-order feedback. We find that the rank response function is U-shaped. Subjects exhibit ‘first-place loving’ and ‘last-place loathing’, that is subjects work hardest after being ranked first or last. We discuss implications of our findings for the optimal design of performance feedback policies, workplace organizational structures and incentives schemes.
    Keywords: Relative performance evaluation; Relative performance feedback; Rank order feedback; Dynamic effort provision; Real effort experiment; Flat wage; Fixed wage; Taste for rank; Status seeking; Social esteem; Self esteem; Public feedback; Private feedback
    JEL: C23 C91 J22 M12
    Date: 2017–06
  7. By: Clemens, Jeffrey
    Abstract: Clemens and Wither (2014) find that minimum wage increases contributed to employment declines among low-skilled individuals during the Great Recession. Zipperer (2016) argues that Clemens and Wither's estimates are biased. This paper assesses what underlies the difference between Zipperer's estimates and Clemens and Wither's estimates. I first show that Zipperer's control sets significantly attenuate the relationship between Clemens and Wither's ``treatment indicator'' variables and states' minimum wage rates. Scaling for this dilution of the underlying treatment accounts for nearly half of the difference between Zipperer's estimates and Clemens and Wither's estimates. Second, I show that the within-region variation on which Zipperer focuses attention biases his estimates towards positive values. Employment and income aggregates, as well as housing and construction indicators, reveal that within-region comparisons are prone to considerable upward bias. Florida, for example, experienced a far more severe housing decline than the regional neighbors for which several of Zipperer's specifications use it as the primary control. I show that Zipperer's estimates are quite sensitive to removing states with extreme housing crises from the sample, while the original Clemens and Wither estimates are not. I further show that Zipperer's specifications have implausible implications for the minimum wage's ``effects'' on employment within high skilled population groups. I conclude by recapitulating the basic facts underlying Clemens and Wither's assessment of the evidence.
    Keywords: Minimum Wage; Great Recession; Program Evaluation Methods
    JEL: J2 J3
    Date: 2017–06–14
  8. By: Francesco Vona (Observatoire Francais des Conjonctures Economiques (OFCE), France; Universite Cote d'Azur, SKEMA, CNRS, GREDEG, France.); Giovanni Marin (Department of Economics, Society and Politics, University of Urbino `Carlo Bo', Italy.); Davide Consoli (ZINGENIO[CSIC-UPV], Valencia, Spain.)
    Abstract: This paper explores the nature and the key empirical regularities of green employment in US local labor markets between 2006 and 2014. The main methodological novelty consists of a new measure of green employment based on the task content of occupations. Descriptive analysis reveals that: 1. the share of green employment is between 2 and 3 percent, with a strongly pro-cyclical trend; 2. the green wage premium is 4 percent; 3. green jobs are more geographically concentrated than similar non-green jobs; and 4. the top green areas are mostly high-tech. As regards to the drivers, direct changes in environmental regulation are a secondary force in explaining the 8-years growth of green jobs compared to the local amount of green subsidies within the American Recovery and Reinvestment Act (ARRA), the endowment of green knowledge and the resilience to the great recession. Assessing the impact of moving to greener activities, we find that one additional green job is associated with 4.2 (2.2 in the crisis period) new local jobs in non-tradable activities, and that this effect can be mostly ascribed to the green ARRA package.
    Keywords: Green employment; local labor markets; task-based approach; local multipliers; green American Recovery and Reinvestment Act; environmental policies
    JEL: J23 O33 Q52 R23
    Date: 2017–07
  9. By: Clemens, Jeffrey; Wither, Michael
    Abstract: In previous work (Clemens and Wither, 2014), we reported evidence that minimum wage increases contributed to declines in low-skilled individuals' employment during the Great Recession. Because this work has generated both interest and disagreement, we use the current paper to present the code underlying our baseline estimates and to present supplemental results. Our supplemental analysis focuses on choices that arise when processing wage and earnings data from the Survey of Income and Program Participation to isolate samples of ``low-skilled'' individuals. We further assess the relevance of several alternative approaches to sample selection. We show that these data processing and sample selection margins have little effect on the qualitative implications of our estimates. We present additional evidence that minimum wage increases had a negative effect on employment entry among individuals who were unemployed throughout our baseline period.
    Keywords: Minimum Wage; Great Recession; Program Evaluation
    JEL: J2 J3
    Date: 2017–06–14
  10. By: Brandolini, Andrea (Bank of Italy); Jenkins, Stephen P. (London School of Economics); Micklewright, John (University College London)
    Abstract: Tony Atkinson is universally celebrated for his outstanding contributions to the measurement and analysis of inequality, but he never saw the study of inequality as a separate branch of economics. He was an economist in the classical sense, rejecting any sub-field labelling of his interests and expertise, and he made contributions right across economics. His death on 1 January 2017 deprived the world of both an intellectual giant and a deeply committed public servant in the broadest sense of the term. This collective tribute highlights the range, depth and importance of Tony's enormous legacy, the product of over fifty years' work.
    Keywords: Anthony B. Atkinson, inequality, poverty, public economics
    JEL: D3 H00 I3
    Date: 2017–06
  11. By: Burkhauser, Richard V. (Cornell University); Herault, Nicolas (Melbourne Institute of Applied Economic and Social Research); Jenkins, Stephen P. (London School of Economics); Wilkins, Roger (Melbourne Institute of Applied Economic and Social Research)
    Abstract: Survey under-coverage of top incomes leads to bias in survey-based estimates of overall income inequality. Using income tax record data in combination with survey data is a potential approach to address the problem; we consider here the UK's pioneering 'SPI adjustment' method that implements this idea. Since 1992, the principal income distribution series (reported annually in Households Below Average Income) has been based on household survey data in which the incomes of a small number of 'very rich' individuals are adjusted using information from 'very rich' individuals in personal income tax return data. We explain what the procedure involves, reveal the extent to which it addresses survey under-coverage of top incomes, and show how it affects estimates of overall income inequality. More generally, we assess whether the SPI adjustment is fit for purpose and consider whether variants of it could be employed by other countries.
    Keywords: inequality, income inequality, survey under-coverage, SPI adjustment, top incomes, tax return data, survey data
    JEL: D31 C81
    Date: 2017–06
  12. By: Lukas Mergele, Michael Weber (Humboldt-Universität zu Berlin)
    Abstract: This paper studies whether the decentralization of public employment services (PES) increases job placements among the unemployed. Decentralizing PES has been a widely applied reform used by governments aiming to enhance their efficacy. However, economic theory is ambiguous about its effects, and empirical evidence has been scarce. Using a difference-in-differences design, we exploit unique within-country variation in decentralization provided by the partial devolution of German job centers in 2012. We find that decentralization reduces job placements by approximately 10%. Decentralized providers expand the use of active labor market programs and monitoring strategies which diminish job seekers’ reemployment prospects but shift costs to higher levels of government.
    Keywords: decentralization, public employment services, job placements
    JEL: H11 H75 I38 J48
    Date: 2017–06–20
  13. By: Holford, Angus J. (University of Essex)
    Abstract: We use the Destination of Leavers from Higher Education Survey (DLHE) to estimate the socio-economic gradient in access to unpaid internships among English and Welsh graduates six months after completing their first degree, and the return to this internship experience 3 years later in terms of salary, occupation, contract type and career satisfaction. We show a significant salary penalty at 3.5 years after graduation compared with those going straight into paid work or further study, but also that graduates from higher socio-economic status have an advantage in accessing internships while being significantly insulated from their negative effects.
    Keywords: higher education, internships, human capital, job satisfaction
    JEL: J24 J28 J31
    Date: 2017–06
  14. By: Mayra Buvinic (Center for Global Development); Megan O’Donnell
    Abstract: A review of the recent evaluation evidence on financial services and training interventions questions their gender neutrality and suggests that some design features in these interventions can yield more positive economic outcomes for women than for men. These include features in savings and ‘Graduation’ programs that increase women’s economic self-reliance and self-control, and the practice of repeated micro borrowing that increases financial risk-taking and choice. ‘Smart’ design also includes high quality business management and jobs skills training, and stipends and other incentives in these training programs that address women’s additional time burdens and childcare demands. Peer support may also help to increase financial risk taking and confidence in business decisions, and may augment an otherwise negligible impact of financial literacy training. These features help women overcome gender-related constraints. However, when social norms are too restrictive, and women are prevented from doing any paid work, no design will be smart enough. Subjective economic empowerment appears to be an important intermediate outcome for women that should be promoted and more reliably and accurately measured. More research is also needed on de-biasing service provision, which can be gender biased; lastly, whenever possible, results should be sex-disaggregated and reported for individuals as well as households.
    JEL: J16 J24 L25 L26 M53 O12
    Date: 2017–05–22
  15. By: Hårsman, Björn (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Mattsson, Lars-Göran (Royal Institute of Technology, Department of Transport Science)
    Abstract: The paper deals with the selection into entrepreneurship and more precisely with Lazear’s model of occupational choice between entrepreneurship and paid employment. The basic aim is to show that lower expected income for entrepreneurs vs. wage-employed is fully compatible with Lazear’s assumption that the selection into entrepreneurship is based upon income maximization – there is no “return to entrepreneurship puzzle”. We will prove this by deriving the theoretical implications that follow from the assumption that skills are Fréchet distributed. Another aim is to shed some empirical light on the resulting theoretical results. This is done by using individual level data from the Swedish employment register for 2004-2008 to compute the parameters of the Fréchet distribution and the corresponding income distributions for self-owners and wage employed. The paper contributes to earlier literature by resolving the so called income paradox and by demonstrating the rich possibilities for empirical studies inherent in the Lazear model.
    Keywords: entrepreneurship; occupational choice; self-owning; skill distribution; Fréchet distribution; entrepreneurship puzzle
    JEL: J24 J30 L26 M13
    Date: 2017–07–07
  16. By: de Vos, Duco (Delft University of Technology); Meijers, Evert J. (Delft University of Technology); van Ham, Maarten (Delft University of Technology)
    Abstract: It is generally found that workers are more inclined to accept a job that is located farther away from home if they have the ability to work from home one day a week or more (telecommuting). Such findings inform us about the effectiveness of telecommuting policies that try to alleviate congestion and transport related emissions, but they also stress that the geography of labour markets is changing due to information technology. We argue that estimates of the effect of working from home on commuting time are biased downward because most studies ignore preference based sorting (self-selection): workers who dislike commuting, and hence have shorter commutes, might also be more likely to work from home. In this paper we investigate to what extent working from home affects the willingness to accept a longer commute and we control for preference based sorting. We use 7 waves of data from the Dutch Labour Supply Panel and show that on average telecommuters have a 50 percent higher marginal cost of one-way commuting time, compared to non-telecommuters. We estimate the effect of telecommuting on commuting time using a fixed-effects approach and we show that preference based sorting biases cross-sectional results 27-28 percent downwards. Working from home allows people to accept 5.7 percent longer commuting times on average, and every additional 8 hours of working from home are associated with 3 percent longer commuting times.
    Keywords: telecommuting, commuting time, job search, job mobility, labour market area
    JEL: J32 R11 R41
    Date: 2017–07
  17. By: Stark, Oded; Byra, Lukasz; Casarico, Alessandra; Übelmesser, Silke
    Abstract: We ask which migration policy a developed country will choose when its objective is to attain the optimal skill composition of the country's workforce, and when the policy menu consists of an entry fee and a quota. We compare these two policies under the assumptions that individuals are heterogeneous in their skill level as well as in their skill type, and that individuals of one skill type, say "scientists," confer a positive externality on overall productivity whereas individuals of the other skill type, say "managers," do not confer such an externality. We find that a uniform entry fee encourages self-selection such that the migrants are only or mostly highly skilled managers. The (near) absence of migrant scientists has a negative effect on the productivity of the country's workforce. Under a quota: the migrants are (a) only averagely skilled managers if the productivity externality generated by the scientists is weak, or (b) only averagely skilled scientists if the productivity externality generated by the scientists is strong. In (a), a uniform entry fee is preferable to a quota. In (b), a quota is preferable to a uniform entry fee. If, however, the entry fee for scientists is sufficiently below the entry fee for managers, then migrants will be only or mostly highly skilled scientists, rendering a differentiated entry fee preferable to a quota even when the productivity externality is strong. Instituting a differentiated fee comes, though, at a cost: the fee revenue is not as high as it will be when migrants are only or mostly managers. We conclude that if maximizing the revenue from the entry fee is not the primary objective of the developed country, then a differentiated entry fee is the preferred policy.
    Keywords: International migration,A quota,A uniform entry fee,A differentiated entry fee,Heterogeneous human capital,Optimal skill composition of the developed country's workforce,Total factor productivity
    JEL: D62 F22 J24
    Date: 2017
  18. By: Yang, Guanyi
    Abstract: This paper studies the response of firms in an environment with heightened idiosyncratic risk and dual labor markets, a regular market with firing rigidity and a frictionless temporary labor market. I find that firing rigidity induces firms to switch from regular employment to temporary employment, and heightened risks amplify such behavior. Efficiency and welfare loss from friction and risk, though alleviated by a small extent, cannot be fully compensated by having temporary employment. This study also first extends the literature of temporary employment by examining its impact in the U.S. labor market.
    Keywords: Labor market misallocation, temporary employment, firing costs, idiosyncratic uncertainty, general equilibrium, heterogeneous agents
    JEL: C68 E24 J30
    Date: 2017–06

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