nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2017‒07‒30
sixteen papers chosen by
Joseph Marchand
University of Alberta

  1. Hours Worked in Selected OECD Countries: an Empirical Assessment By Vincenzo Atella; Lorenzo Carbonari; Paola Samà
  2. Analyzing Wage Differentials by Fields of Study: Evidence from Turkey By Antonio Di Paolo; Aysıt Tansel
  3. Going beyond LATE: Bounding Average Treatment Effects of Job Corps Training By Chen, Xuan; Flores, Carlos A.; Flores-Lagunes, Alfonso
  4. Using Tax Deductions to Promote Lifelong Learning: Real and Shifting Responses By Van den Berge, Wiljan; Jongen, Egbert L. W.; van der Wiel, Karen
  5. Young, Gifted and Lazy? The Role of Ability and Labor Market Prospects in Student Effort Decisions By Adrian Chadi; Marco de Pinto; Gabriel Schultze
  6. The Effects of the Affordable Care Act on Health Insurance Coverage and Labor Market Outcomes By Mark Duggan; Gopi Shah Goda; Emilie Jackson
  7. Labor Market Effects of Urban Riots: an Experimental Assessment By Emmanuel DUGUET; David GRAY; Yannick L’HORTY; Loïc du PARQUET; Pascale PETIT
  8. Employment growth following takeovers By Geurts, Karen; Van Biesebroeck, Johannes
  9. Numeracy and the quality of on-the-job decisions: Evidence from loan officers By Brown, Martin; Kirschenmann, Karolin; Spycher, Thomas
  10. Why Has Regional Income Convergence in the U.S. Declined? By Peter Ganong; Daniel W. Shoag
  11. Rising wage dispersion between white-collar and blue-collar workers and market concentration: The case of the USA, 1966-2011 By Dögüs, Ilhan
  12. The Exporter Wage Premium When Firms and Workers Are Heterogeneous By Egger, Hartmut; Egger, Peter; Kreickemeier, Udo; Moser, Christoph
  13. The Unemployment Insurance Taxable Wage Base Mystery By Parsons, Donald O.
  14. The convergence of the gender pay gap: An alternative estimation approach By Castagnetti, Carolina; Rosti, Luisa; Töpfer, Marina
  15. Declining labor-labor exchange rates as a cause of inequality growth By Tangian, Andranik S.
  16. Does It Matter How and How Much Politicians are Paid? By Duha T. Altindag; Elif S. Filiz; Erdal Tekin

  1. By: Vincenzo Atella (CEIS & DEF, University of Rome "Tor Vergata"); Lorenzo Carbonari (CEIS & DEF, University of Rome "Tor Vergata"); Paola Samà (DEF, University of Rome "Tor Vergata")
    Abstract: In this paper, we empirically assess the evolution of the aggregate hours worked, with a particular emphasis on their age structure, in a sample of OECD countries, along the period 1970-2007. We show that the age composition of the workforce has a large and statistically significant ffect on hours worked volatility. To exploit the multilevel structure of our data, we use a Mixed Linear Model to investigate the consequences of (i) demographic change, (ii) sector-specific and (iii) country-specific factors on hours worked by \young"(aged 15-29) and \prime-aged"(29+) individuals. We show that changes in workforce demographics, captured by the ratio between population older than 29 and population younger than 29, are strongly and significantly correlated with the amount of hours worked by \young"individuals. We also document the impact of sectoral capital intensity and profitability on the dynamics of (aggregate) hours worked. Finally, we show that productive public expenditure, here proxied by the public investment in ICT, is beneficial for the hours worked both by young and prime-aged individuals.
    Keywords: Aggregate hours of work, Labor market institutions
    JEL: E2 J2 J6
    Date: 2017–07–21
  2. By: Antonio Di Paolo (Department of Econometrics, University of Barcelona, Barcelona, Spain); Aysıt Tansel (Department of Economics, METU; Institute for the Study of Labor (IZA) Bonn, Germany; Economic Research Forum (ERF) Cairo, Egypt)
    Abstract: This paper analyzes the drivers of wage differences among college graduates who hold a degree in a different field of study. We focus on Turkey, an emerging country that is characterized by a sustained expansion of higher education. We estimate conditional wage gaps by field of study using OLS regressions. Average differentials are subsequently decomposed into the contribution of observable characteristics (endowment) and unobservable characteristics (returns). To shed light on distributional wage disparities by field of study, we provide estimates along the unconditional wage distribution by means of RIF-Regressions. Finally, we also decompose the contribution of explained and unexplained factors in accounting for wage gaps along the whole distribution. As such, this is the first work providing evidence on distributional wage differences by college major for a developing country. The results indicate the existence of important wage differences by field of study, which are partly accounted by differences in observable characteristics (especially occupation and, to a lesser extent, employment sector). These pay gaps are also heterogeneous over the unconditional distribution of wages, as is the share of wage differentials that can be attributed to differences in observable characteristics across workers with degrees in different fields of study.
    Keywords: Fields of Study, Wage Differentials, Decomposition, Unconditional Wage Distribution, Turkey
    JEL: J31 J24 I23 I26
    Date: 2017–07
  3. By: Chen, Xuan; Flores, Carlos A.; Flores-Lagunes, Alfonso
    Abstract: We derive nonparametric sharp bounds on average treatment effects with an instrumental variable (IV) and use them to evaluate the effectiveness of the Job Corps training program for disadvantaged youth. We focus on the population average treatment effect (ATE) and the average treatment effect on the treated (ATT), which are parameters not point identified with an IV under heterogeneous treatment effects. The main assumptions employed to bound the ATE and ATT are monotonicity in the treatment of the average outcomes of specified subpopulations, and mean dominance assumptions across the potential outcomes of these subpopulations. Importantly, the direction of the mean dominance assumptions can be informed from data, and some of our bounds do not require an outcome with bounded support. We employ these bounds to assess the effectiveness of Job Corps using data from a randomized social experiment with non-compliance (a common feature of social experiments). Our empirical results indicate that the effect of Job Corps on eligible applicants (the target population) four years after randomization is to increase weekly earnings and employment by at least $24:61 and 4:3 percentage points, respectively, and to decrease yearly dependence on public welfare benefits by at least $84:29. Furthermore, the effect of Job Corps on participants (the treated population) is to increase weekly earnings by between $28:67 and $43:47, increase employment by between 4:9 and 9:3 percentage points, and decrease public benefits received by between $108:72 and $140:29. Finally, some of our results point to positive average effects of Job Corps on the labor market outcomes of those individuals who decide not to enroll in Job Corps regardless of their treatment assignment (the so-called never takers), suggesting that these individuals would benefit from participating in Job Corps.
    Keywords: Training programs,Program evaluation,Average treatment effects,Bounds,Instrumental variables
    JEL: J30 C13 C21
    Date: 2017
  4. By: Van den Berge, Wiljan (CPB Netherlands Bureau for Economic Policy Analysis); Jongen, Egbert L. W. (CPB Netherlands Bureau for Economic Policy Analysis); van der Wiel, Karen (CPB Netherlands Bureau for Economic Policy Analysis)
    Abstract: Policymakers are concerned about potential underinvestment in lifelong learning. In this paper we study to what extent a tax deduction helps to stimulate post-initial training. Specifically, we employ a regression kink and regression discontinuity design as jumps in tax bracket rates generate exogenous variation in the effective costs of lifelong learning. Using high quality data on tax returns of the universe of Dutch taxpayers, we find that the tax deduction has heterogeneous effects on lifelong learning. Low-income singles show no response. For high-income singles we find an effect of 10% on the probability to use the tax deduction. Furthermore, ignoring shifting of expenses between partners leads to spurious large estimates for primary earners and spurious negative estimates for secondary earners.
    Keywords: lifelong learning, tax deduction, RKD, RDD
    JEL: C21 H20 J24
    Date: 2017–07
  5. By: Adrian Chadi (Institute for Labour Law and Industrial Relations in the European Union (IAAEU)); Marco de Pinto (Institute for Labour Law and Industrial Relations in the European Union (IAAEU)); Gabriel Schultze (Institute for Labour Law and Industrial Relations in the European Union (IAAEU))
    Abstract: This paper examines the decision-making process of students from an economic perspective in order to understand what determines an in- dividual’s willingness to provide effort. Our theoretical model predicts that ability and job market prospects are positive determinants. Ana- lyzing a novel dataset on thousands of German students, however, we instead find that ability has a significantly negative effect on effort. It seems that the marginal gain of increasing effort in terms of higher ex- pected income after studying is lower for high-ability students compared to low-ability students. In regard to the second determinant, the evi- dence rejects a similar argument, according to which great job market prospects may impair student effort. Applying an instrumental vari- able approach based on official unemployment data on regional labor markets, we can confirm our prediction on the positive role of perceived employment prospects in actual student behavior.
    Keywords: higher education, effort, study time, leisure, ability, labor market data
    JEL: I23 J22 J24
    Date: 2017–05
  6. By: Mark Duggan; Gopi Shah Goda; Emilie Jackson
    Abstract: The Affordable Care Act (ACA) includes several provisions designed to expand insurance coverage that also alter the tie between employment and health insurance. In this paper, we exploit variation across geographic areas in the potential impact of the ACA to estimate its effect on health insurance coverage and labor market outcomes in the first two years after the implementation of its main features. Our measures of potential ACA impact come from pre-existing population shares of uninsured individuals within income groups that were targeted by Medicaid expansions and federal subsidies for private health insurance, interacted with each state’s Medicaid expansion status. Our findings indicate that the majority of the increase in health insurance coverage since 2013 is due to the ACA and that areas in which the potential Medicaid and exchange enrollments were higher saw substantially larger increases in coverage. While labor market outcomes in the aggregate were not significantly affected, our results indicate that labor force participation reductions in areas with higher potential exchange enrollment were offset by increases in labor force participation in areas with higher potential Medicaid enrollment
    JEL: H31 H51 J18 J20 J38
    Date: 2017–07
  7. By: Emmanuel DUGUET (Université Paris-Est Créteil, France); David GRAY (University of Ottawa, ON, Canada); Yannick L’HORTY (Université Paris-Est Marne la Vallée, France); Loïc du PARQUET (Université du Maine, France); Pascale PETIT (Université Paris-Est Marne la Vallée, France)
    Abstract: We propose to measure the effects of urban riots on the labour market prospects of workers residing in affected areas through the channel of labour market discrimination based on locality. We investigate the case of the French riots of 2007, which were very geographically concentrated. The town of Villiers-le-Bel is selected as the treatment unit because it received a uniquely high degree of unfavourable exposure in the media. Two other towns serve control groups: i) Sarcelles, which is contiguous to Villiers-le-Bel, has a similar socio-economic-demographic profile, and did experience some rioting activity, and ii) Enghien-les-Bains, which is considered to be economically advantaged and did not experience rioting activity. Using the technique of correspondence testing, we are able to discern disparities in call-back rates for fictitious candidates who respond to actual job postings over four dimensions: gender, ethnic origin, locality of residence (advantaged vs. disadvantaged), and the degree of media exposure during the riots. We propose a new empirical approach to measure discrimination across several dimensions that integrates a set of relevant parameters into one unified system of equations with a compact and tidy structure. We decomposed the probability of receiving a callback for any candidate of given characteristics as a function of several parameters that are evaluated through difference-in-differences estimators. We find statistically significant negative effects of a pure media exposure effect. All other factors held constant, people residing in the area which received negative publicity were 3.2 percentage points less likely to receive a callback. The group of workers who tend to be the most associated with the riots, i.e. men of North African origin (at least in terms of perceptions), are the least affected by potential discrimination by region of residence, while women of French origin are the most affected.
    Keywords: Labour market discrimination, Call-back rates, Discrimination, Urban riots
    JEL: C93 J71 R23
    Date: 2017
  8. By: Geurts, Karen; Van Biesebroeck, Johannes
    Abstract: We use a comprehensive sample of takeovers in Belgium to show that they are remarkably common and an important part of many firms' growth process. They affect both small and large firms and, over a five-year period, 17 percent of private employment. We estimate the impact of takeovers on employment growth of the merged entity using an empirical framework that explicitly takes into account that mergers are formed by pairs of firms. It allows for post-merger employment outcomes that are heterogeneous and determined jointly by the characteristics of both partners. The average merger is estimated to reduce employment by 8% over a four-year period, but the contraction can be three times as large for some types of mergers, while employment expands for other types.
    Keywords: efficiency defense; Firm Dynamics; M&A; Matching; merger
    JEL: J23 L23
    Date: 2017–07
  9. By: Brown, Martin; Kirschenmann, Karolin; Spycher, Thomas
    Abstract: We examine how the numeracy level of employees influences the quality of their on-the-job decisions. Based on an administrative dataset of a retail bank we relate the performance of loan officers in a standardized math test to the accuracy of their credit assessments of small business borrowers. We find that loan officers with a high level of numeracy are more accurate in assessing the credit risk of borrowers. The effect is most pronounced during the pre-crisis credit boom period when it is arguably more difficult to pick out risky borrowers.
    Keywords: behavioral banking,numeracy,loan officers,screening
    JEL: G21 J24
    Date: 2017
  10. By: Peter Ganong; Daniel W. Shoag
    Abstract: The past thirty years have seen a dramatic decline in the rate of income convergence across states and in population flows to high-income places. These changes coincide with a disproportionate increase in housing prices in high-income places, a divergence in the skill-specific returns to moving to high-income places, and a redirection of low-skill migration away from high-income places. We develop a model in which rising housing prices in high-income areas deter low-skill migration and slow income convergence. Using a new panel measure of housing supply regulations, we demonstrate the importance of this channel in the data.
    JEL: E24 J23 J24 R14 R23 R52
    Date: 2017–07
  11. By: Dögüs, Ilhan
    Abstract: In this paper, I address the simple question "What types of employees have been steadily paid more by what type of employers?" and I suggest that rising market concentration has a significant structural impact on the wage differentials between white and blue-collar workers. The innovative contribution of this paper is to reveal this relationship of structural causality, which has been hitherto absent from the literature. The argument is tested via fred.stlouisfed annual datasets for the USA between 1966 and 2011 using Vector Autoregressive Model. The findings show that the responses of wage dispersion to one-unit shock in market concentration are positive and significant over a period of 10 years. Furthermore, 18% of variations in wage dispersion in the short-run and 30% of variations in the long-run are explained by market concentration.
    Keywords: market concentration,wage differentials,white-collar and blue-collar workers
    JEL: L1 D4 J31
    Date: 2017
  12. By: Egger, Hartmut; Egger, Peter; Kreickemeier, Udo; Moser, Christoph
    Abstract: We set up a trade model with heterogeneous firms and a worker population that is heterogeneous in two dimensions: workers are either skilled or unskilled, and within each skill category there is a continuum of abilities. Workers with high abilities, both skilled and unskilled, are matched to firms with high productivities, and this leads to wage differentials within each skill category across firms. Self-selection of the most productive firms into exporting generates an exporter wage premium, and our framework with skilled and unskilled workers allows us to decompose this premium into its skill-specific components. We employ linked employer-employee data from Germany to structurally estimate the parameters of the model. Using these parameter estimates, we compute an average exporter wage premium of 5 percent. The decomposition by skill turns out to be quantitatively highly relevant, with exporting firms paying no wage premium at all to their unskilled workers, while the premium for skilled workers is 12 percent.
    Keywords: Ability differences; Exporter wage premium; Heterogeneous Firms
    JEL: C31 F12 F15 J31
    Date: 2017–07
  13. By: Parsons, Donald O. (George Washington University)
    Abstract: Unemployment insurance experts lament the low Federal taxable wage base (TWB), last increased to $7000 per worker in 1982. The Federal TWB sets only a system minimum and by 2014 all but two states had TWBs that exceeded the minimum, opening up state TWB choice for study. States do align TWB with state payroll earnings. Indeed TWB/WAGE ratios within states have been remarkably stable for decades, though the ratio varies dramatically across states. Critics seem especially concerned about the tax regressivity of low TWBs, but the hypothesis that more progressive states choose less regressive (higher) TWBs is flatly rejected by the data. Earlier UI analysts focused on employer insurance equity, and the resistance of low cost, high-wage (stable) employers to subsidizing high cost, low-wage (unstable) employers. These analysts provided convincing evidence that (i) employers believed this to be the key issue, and (ii) the TWB did redistribute the insurance premium burden in the hypothesized direction. Across states – wage levels constant – economies characterized by greater income inequality and a preponderance of large (low turnover) firms are associated with lower TWBs. Apparently critics were right to imagine a link between wages and the TWB, but ignored the fact that this matching could be done better across location.
    Keywords: unemployment insurance, taxable wage base, experience rating
    JEL: J65 J41 J33
    Date: 2017–07
  14. By: Castagnetti, Carolina; Rosti, Luisa; Töpfer, Marina
    Abstract: So far, little work has been done on directly estimating differences of wage gaps. Stud- ies estimating pay differentials, generally compare them across different subsamples. This comparison does not allow to conduct any inference or, in the case of decompositions, to confront the respective decomposition components across subsamples. We propose an exten- sion of an Oaxaca-Blinder type decomposition based on the omitted variable bias formula to directly estimate the change in pay gaps across subsamples. The method proposed can be made robust to the index-number problem of the standard Oaxaca-Blinder decomposition and to the indeterminacy problem of the intercept-shift approach. Using Italian micro data, we estimate the difference in the gender pay gap across time (2005 and 2014). By applying our proposed decomposition, we find that the convergence of the gender pay gap over time is only driven by the catching-up of women in terms of observable characteristics, while the impact of anti-discrimination legislation is found to be negligible.
    Keywords: Pay Gap,Omitted Varibale Bias Formula,Oaxaca-Blinder Decomposition
    JEL: J7 J13 J31
    Date: 2017
  15. By: Tangian, Andranik S.
    Abstract: The current trends in the capital/labor split and the impacts thereof on the growth of inequality are one of the main concerns of national governments, European Commission and international organizations like UN, ILO, IMF, OECD and WB. These trends are usually studied at the macro level of functional distribution of income, that is, among capital and labor, and less with regard to productivity, remuneration policies or some other particular factors. In this paper, we contribute to the studies of the second type, explaining the decreasing labor income share in terms of unpaid working time and underpaid hourly earnings. For this purpose, we refer to the decreasing labor-labor exchange rate, i.e. devaluation of one's labor in exchange for other's labor embodied in the commodities affordable for one's earnings. We show that the productivity growth allows employers to compensate workers with always a lower labor equivalent, i.e. increasingly underpay works, maintaining however an impression of fair pay due to an increasing purchasing power of earnings. This conclusion is based on the OECD 1990-2014 data for G7 countries (Canada, France, Germany, Italy, Japan, United Kingdom and United States) and Denmark (known for the world least inequality). Then statistically significant implications for the growth of inequality are derived and some policy suggestions are formulated like taxing the enterprises with the inner Gini that surpasses the national level.
    Keywords: inequality,productivity,hourly earnings,consumer prices,housing prices,labor-labor exchange rate
    JEL: D31 D63 E31 E64 J24 J3 O47
    Date: 2017
  16. By: Duha T. Altindag; Elif S. Filiz; Erdal Tekin
    Abstract: An important question in representative democracies is how to ensure that politicians behave in the best interest of citizens rather than their own private interests. Aside from elections, one of the few institutional devices available to regulate the actions of politicians is their pay structure. In this paper, we provide fresh insights into the impact of politician salaries on their performance using a unique law change implemented in 2012 in Turkey. Specifically, the members of the parliament (MPs) in Turkey who are retired from their pre-political career jobs earn a pension bonus on top of their MP salaries. The law change in 2012 significantly increased the pension bonus by pegging it to 18 percent of the salary of the President of Turkey, while keeping the salaries of non-retired MPs unchanged. By exploiting the variation in total salaries caused by the new law in a difference-in-differences framework, we find that the salary increase had a negative impact on the performance of the retired MPs. In particular, the overall performance of these MPs was lowered by 12.3 percent of a standard deviation as a result of the increase in salary caused by the new law. This finding is robust to numerous specification tests. Furthermore, results obtained from an auxiliary analysis suggest that one of the mechanisms through which MPs reduce their performance is absenteeism.
    JEL: J22 J26 J33 J45
    Date: 2017–07

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