nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2017‒07‒23
thirteen papers chosen by
Joseph Marchand
University of Alberta

  1. Risky Business? The Effect of Majoring in Business on Earnings and Educational Attainment By Rodney J. Andrews; Scott A. Imberman; Michael F. Lovenheim
  2. Margins of Labor Market Adjustment to Trade By Rafael Dix-Carneiro; Brian K. Kovak
  3. Gender Wage Gaps and Risky vs. Secure Employment: An Experimental Analysis By SeEun Jung; Chung Choe; Ronald L. Oaxaca
  4. The Labor Market Effects of Opening the Border: Evidence from Switzerland By Andreas Beerli; Giovanni Peri
  5. The Global Gender Gap in Labor Income By Tewodros Makonnen Gebrewolde; James Rockey
  6. Executive Compensation: A Survey of Theory and Evidence By Alex Edmans; Xavier Gabaix; Dirk Jenter
  7. So close yet so unequal: Spatial inequality in American cities By ANDREOLI Francesco; PELUSO Eugenio
  8. The Arrival of Fast Internet and Employment in Africa By Jonas Hjort; Jonas Poulsen
  9. Productivity, Taxes, and Hours Worked in Spain: 1970–2015 By Juan Carlos Conesa; Timothy J. Kehoe
  10. Where Women Make The Difference. The Effects of Corporate Board Gender Quotas on Firms’ Performance across Europe By Simona, Comi; Mara, Grasseni; Federica, Origo; Laura, Pagani;
  11. The Employment Effects of Minimum Wages: Some Questions We Need to Answer By David Neumark
  12. The consequences of public employment: evidence from Italian municipalities By Marta Auricchio; Emanuele Ciani; Alberto Dalmazzo; Guido de Blasio
  13. Human capital and urban growth in Italy, 1981-2001 By Francesco Giffoni; Matteo Gomellini; Dario Pellegrino

  1. By: Rodney J. Andrews; Scott A. Imberman; Michael F. Lovenheim
    Abstract: One of the most important decisions a student can make during the course of his or her college career is the choice of major. The field of study a student selects translates directly into the types of skills and knowledge he or she will obtain during college, and it can influence the type of career chosen after postsecondary education ends. Business is one of the most popular majors in the US, accounting for 19% of all college degrees granted. We study the impact of choosing a business major using a regression discontinuity design that exploits GPA cutoffs for switching majors in some Texas universities. Even though nearly 60% of marginal business majors would have majored in a STEM field otherwise, we find large and statistically significant increases in earnings of 80% to 130% 12+ years after college entry, driven mainly by women. These are considerably larger than OLS estimates that condition on a rich set of demographic, high school achievement, and high school fixed-effects controls, which is consistent with students choosing majors based on comparative advantage. We do not find statistically significant effects of majoring in business on educational outcomes, except for positive effects on male 6-year graduation rates.
    JEL: I23 I26 J24
    Date: 2017–07
  2. By: Rafael Dix-Carneiro; Brian K. Kovak
    Abstract: We use both longitudinal administrative data and cross-sectional household survey data to study the margins of labor market adjustment following Brazil's early 1990s trade liberalization. We document how workers and regional labor markets adjust to trade-induced changes in local labor demand, examining various adjustment margins, including earnings and wage changes; interregional migration; shifts between tradable and nontradable employment; and shifts between formal employment, informal employment, and non-employment. Our results provide insight into the regional labor market effects of trade, and have important implications for policies that address informal employment and that assist trade-displaced workers.
    JEL: F14 F16 J46 J61
    Date: 2017–07
  3. By: SeEun Jung (Department of Economics, Inha University); Chung Choe (Hanyang University); Ronald L. Oaxaca (University of Arizona)
    Abstract: In addition to discrimination, market power, and human capital, gender differences in risk preferences might also contribute to observed gender wage gaps. We conduct laboratory experiments in which subjects choose between a risky (in terms of exposure to unemployment) and a secure job after being assigned in early rounds to both types of jobs. Both jobs involve the same typing task. The risky job adds the element of a known probability that the typing opportunity will not be available in any given period. Subjects were informed of the exogenous risk premium being offered for the risky job. Women were more likely than men to select the secure job, and these job choices accounted for between 40% and 77% of the gender wage gap in the experiments. That women were more risk averse than men was also manifest in the Pratt-Arrow Constant Absolute Risk Aversion parameters estimated from a random utility model adaptation of the mean-variance portfolio model.
    Keywords: Occupational Choice, Gender Wage Differentials, Risk Aversion, Lab Experiment
    JEL: J16 J24 J31 C91 D81
    Date: 2017–07
  4. By: Andreas Beerli (KOF Swiss Economic Institute, ETH Zurich, Switzerland); Giovanni Peri
    Abstract: Between 1999 and 2004 Switzerland fully opened its border region (BR) to cross-border workers (CBW), who are foreign residents commuting to Switzerland for work. In this paper, we exploit the timing of implementation and the fact that CBW commute almost exclusively to municipalities close to the border to estimate the effect of this policy on foreign labor supply and on native labor market outcomes, using a difference-in-difference approach. We find that opening the border to CBW increased their employment within 10 minutes of commuting time from the border by 4 to 5 percentage points. The increased inflow was mainly constituted of highly-educated workers and it was associated with an increase of wages of highly-educated Swiss workers and no significant changes of wages of other workers. We also find weak evidence that employment and hours worked by less educated native workers increased. Native highly-educated workers became more likely to fill top managerial positions after the liberalization and they became more likely to stay in border regions. Occupation upgrading and complementarity with highly-educated natives, particularly strong in highskilled manufacturing and knowledge-intensive services, contribute to explaining these effects of CBW on natives.
    Keywords: border region, free labor mobility, policy change, cross-border workers, labor markets
    JEL: F22 J24 J61
    Date: 2017–06
  5. By: Tewodros Makonnen Gebrewolde; James Rockey
    Abstract: This paper introduces a new measure of economic gender inequality (EGI) based on the ratio of women’s share of national labor income to men’s. This measure captures both the principles of equal pay for equal work and non-discrimination. Importantly, it can be calculated from existing data and is comparable across countries and time. We show that EGI has only been improving slowly and that current aggregate EGI is equivalent to 1.2 billion women working for nothing. Moreover, this gap is expected to increase in coming decades. Instrumental variable estimates suggest that while increases in income reduce EGI, living standards will have to triple for equality to be achieved in countries such as Mexico or Turkey.
    Keywords: Economic Gender Inequality, Global Distribution of Income, Modernization Hypothesis
    JEL: J16 J71 D33 O15
    Date: 2017–07
  6. By: Alex Edmans; Xavier Gabaix; Dirk Jenter
    Abstract: This paper reviews the theoretical and empirical literature on executive compensation. We start by presenting data on the level of CEO and other top executive pay over time and across firms, the changing composition of pay; and the strength of executive incentives. We compare pay in U.S. public firms to private and non-U.S. firms. We then critically analyze three non-exclusive explanations for what drives executive pay -- shareholder value maximization by boards, rent extraction by executives, and institutional factors such as regulation, taxation, and accounting policy. We confront each hypothesis with the evidence. While shareholder value maximization is consistent with many practices that initially seem inefficient, no single explanation can account for all facts and historical trends; we highlight major gaps for future research. We discuss evidence on the effects of executive pay, highlighting recent identification strategies, and suggest policy implications grounded in theoretical and empirical research. Our survey has two main goals. First, we aim to tightly link the theoretical literature to the empirical evidence, and combine the insights contributed by all three views on the drivers of pay. Second, we aim to provide a user-friendly guide to executive compensation, presenting shareholder value theories using a simple unifying model, and discussing the challenges and methodological issues with empirical research.
    JEL: D31 D86 G34 M12
    Date: 2017–07
  7. By: ANDREOLI Francesco; PELUSO Eugenio
    Abstract: Rich income data and a new methodology are employed to investigate patterns and consequences of spatial inequality in American cities over the last 35 years. New Gini-type indices, which assess spatial inequality using individual neighborhoods of variable size as primitives, uncover from the data robust evidence of growing income inequality within the neighborhood. The welfare implications of this trend are investigated through reduced-form models, addressing potential bias due to sorting across and within cities. An exogenous increase of the income mix in the neighborhood is found to yield a signi cant drop in intergenerational mobility gains for young people.
    Keywords: Neighborhood inequality; Gini; individual neighborhood; geostatistics; census; ACS; causal neighborhood effects; life expectancy; divided city; mixed city
    JEL: C21 D33 D63 I23 J22 R23
    Date: 2017–07
  8. By: Jonas Hjort; Jonas Poulsen
    Abstract: To show how fast Internet affects employment in Africa, we exploit the gradual arrival of submarine Internet cables and maps of the terrestrial cable network. Robust difference-in-differences estimates from three datasets covering 12 countries show large positive effects on employment rates, with little job displacement across space. A decrease in workers’ likelihood of holding unskilled jobs is offset by a bigger increase in employment in higher-skill occupations. Less educated workers’ employment rate also rises. Firm level data available for some countries indicate that increased firm entry, productivity, and exporting lead to higher job-creation (and/or -saving). Average incomes and wealth rise.
    JEL: D20 J20 O10
    Date: 2017–07
  9. By: Juan Carlos Conesa; Timothy J. Kehoe
    Abstract: In the early 1970s, hours worked per working-age person in Spain were higher than in the United States. Starting in 1975, however, hours worked in Spain fell by 40 percent. We find that 80 percent of the decline in hours worked can be accounted for by the evolution of taxes in an otherwise standard neoclassical growth model. Although taxes play a crucial role, we cannot argue that taxes drive all of the movements in hours worked. In particular, the model underpredicts the large decrease in hours in 1975–1986 and the large increase in hours in 1994–2007. The lack of productivity growth in Spain during 1994–2015 has little impact on the model’s prediction for hours worked.
    JEL: C68 E13 E24 H31
    Date: 2017–07
  10. By: Simona, Comi; Mara, Grasseni; Federica, Origo; Laura, Pagani;
    Abstract: We study the effect of corporate board gender quotas on firm performance in Belgium, France, Italy and Spain. The empirical analysis is based on accounting panel data from Bureau Van Dijk’s Amadeus. Our identification strategy relies on both double and triple difference estimators with ex-ante matching. We find that gender quotas had either a negative or an insignificant effect on firm performance in the countries considered with the exception of Italy, where we find a positive impact on productivity. We then focus on Italy and offer possible explanations for the positive effect of gender quotas using detailed information on board members’ characteristics.
    Keywords: Gender quotas, corporate governance, firm performance, productivity
    JEL: G30 G38 J3
    Date: 2017–07–12
  11. By: David Neumark
    Abstract: The literature on the employment effects of minimum wages is about a century old, and includes hundreds of studies. Yet the debate among researchers about the employment effects of minimum wages remains intense and unsettled. This essay discussed the key questions that have arisen in the past research that, if we can answer them, may prove most useful in making sense of the conflicting evidence. I also focus on additional questions we should consider to better inform the policy debate, in particular in the context of the very high minimum wages coming on line in the United States, about which past research is quite uninformative.
    JEL: J23 J38
    Date: 2017–07
  12. By: Marta Auricchio (Bank of Italy); Emanuele Ciani (Bank of Italy); Alberto Dalmazzo (University of Siena); Guido de Blasio (Bank of Italy)
    Abstract: We investigate the consequences of public employment on local economies. We start by presenting a spatial-equilibrium framework, to highlight that the housing market is an important channel through which a variation in public employment affects private employment. We then provide empirical evidence from Italian municipalities, focusing on the strong contraction in the public sector workforce that occurred between the last two Censuses (2001-2011). We use an IV identification strategy that exploits the fact that variations in local public employment were strongly influenced by central government decisions, with little reference to the economic conditions of the municipalities. Our results suggest that exogenous contractions in public employment lead to an increase of private jobs, and that competition in the housing market seems to be a relevant explanation for this finding.
    Keywords: local labor markets, public employment
    JEL: J45 J60 R12
    Date: 2017–07
  13. By: Francesco Giffoni (CSIL); Matteo Gomellini (Bank of Italy); Dario Pellegrino (Bank of Italy)
    Abstract: This paper analyses the contribution of human capital, measured using the share of residents holding a college degree, to urban growth, gauged by the growth in employment, between 1981 and 2001. According to our estimates, starting with a ten per cent higher share of college-educated residents was associated with a higher growth in employment in the 0.5-2.2 per cent range. These results hold when considering both the municipal and the local labour market (LLM) levels, and they are robust to a wide set of urban characteristics. Our findings are confirmed using a measure of education dating back to 1931 as an instrument for human capital. Furthermore, we exploit a spatial localization model with human capital premiums to disentangle the estimated effect into two components related to productivity and life quality respectively. We find that productivity contributed to more than 60 per cent of the effect of human capital on urban growth at municipal level, and to over 90 per cent at the wider LLM level.
    Keywords: urban growth, human capital
    JEL: R11 N94 J24
    Date: 2017–07

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