nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2017‒08‒06
eleven papers chosen by
Joseph Marchand
University of Alberta

  1. Income or Leisure? On the Hidden Benefits of (Un-) Employment By Adrian Chadi; Clemens Hetschko
  2. Hours, Occupations, and Gender Differences in Labor Market Outcomes By Andrés Erosa; Luisa Fuster; Gueorgui Kambourov; Richard Rogerson
  3. The Impacts of Environmental Regulation on the U.S. Economy By Ann E. Ferris; Richard Garbaccio; Alex Marten; Ann Wolverton
  4. Exporting and Organizational Change By Caliendo, Lorenzo; Monte, Ferdinando; Rossi-Hansberg, Esteban
  5. What if Wages Fell During a Recession? By Joy A. Buchanan; Daniel Houser
  6. When Demand Increases Cause Shakeouts By Thomas N. Hubbard; Michael J. Mazzeo
  7. Beauty, Job Tasks, and Wages: A New Conclusion About Employer Taste-Based Discrimination By Todd Stinebrickner; Ralph Stinebrickner; Paul Sullivan
  8. You get what you 'pay' for: Academic attention, career incentives and changes in publication portfolios of business and economics researchers By Omar Adam Ayaita; Kerstin Pull; Uschi Backes-Gellner
  9. An Investigation Into the Stability of the Big-Five in Germany By Schäfer, Konrad C.
  10. Inequality and Competitive Effort: The Roles of Asymmetric Resources, Opportunity and Outcomes By FALLUCCHI Francesco; RAMALINGAM Abhijit
  11. Political Distribution Risk and Aggregate Fluctuations By Drautzburg, Thorsten; Fernández-Villaverde, Jesús; Guerron-Quintana, Pablo A.

  1. By: Adrian Chadi (Institute for Labour Law and Industrial Relations in the European Union); Clemens Hetschko (Freie Universität Berlin, School of Business and Economics)
    Abstract: We study the usually assumed trade-off between income and leisure in labor supply decisions using comprehensive German panel data. We compare non-employed individuals after plant closures with employed people regarding both income and time use as well as their subjective perceptions of these two factors. We find that the gain of non-working time translates intohigher satisfaction with free time, while time spent on hobbiesincreases to a lesser extent than home production. Additionally, satisfaction with family life increases, which may be a hidden benefit of being unemployed. In contrast, satisfaction with income strongly declines when becoming jobless. Identity utility from earning a living may play the role of a hidden benefit of employment. Finally, we examine subjective assessments of income and leisure as potential predictors for job take-up. Non-employed people are particularly likely to take up a job soon when they are dissatisfied with their income.
    Keywords: labor supply, plant closure, leisure, work-family conflict, life satisfaction, income satisfaction, free time satisfaction, family satisfaction
    JEL: D01 D13 I31 J22 J64 J65
    Date: 2017–06
  2. By: Andrés Erosa; Luisa Fuster; Gueorgui Kambourov; Richard Rogerson
    Abstract: We document a robust negative relationship between the log of mean annual hours in an occupation and the standard deviation of log annual hours within that occupation. We develop a unified model of occupational choice and labor supply that features heterogeneity across occupations in the return to working additional hours and show that it can match the key features of the data both qualitatively and quantitatively. We use the model to shed light on gender differences in labor market outcomes that arise because of gender asymmetries in home production responsibilities. Our model generates large gender gaps in hours of work, occupational choices, and wages. In particular, an exogenous difference in time devoted to home production of ten hours per week increases the observed gender wage gap by roughly eleven percentage points and decreases the share of females in high hours occupations by fourteen percentage points. The implied misallocation of talent across occupations has significant aggregate effects on productivity and welfare.
    JEL: E2 J2
    Date: 2017–07
  3. By: Ann E. Ferris; Richard Garbaccio; Alex Marten; Ann Wolverton
    Abstract: Concern regarding the economic impacts of environmental regulations has been part of the public dialogue since the beginning of the U.S. EPA. Even as large improvements in environmental quality occurred, government and academia began to examine the potential consequences of regulation for economic growth and productivity. In general, early studies found measurable but not severe effects on the overall national economy. While price increases due to regulatory requirements outweighed the stimulative effect of investments in pollution abatement, they nearly offset one another. However, these studies also highlighted potentially substantial effects on local labor markets due to the regional and industry concentration of plant closures. More recently, a substantial body of work examined industry-specific effects of environmental regulation on the productivity of pollution-intensive firms most likely to face pollution control costs, as well as on plant location and employment decisions within firms. Most econometric-based studies found relatively small or no effect on sector-specific productivity and employment, though firms were less likely to open plants in locations subject to more stringent regulation compared to other U.S. locations. In contrast, studies that used economy-wide models to explicitly account for sectoral linkages and intertemporal effects found substantial sector-specific effects due to environmental regulation, including in sectors that were not directly regulated. It is also possible to think about the overall impacts of environmental regulation on the economy through the lens of benefit-cost analysis. While this type of approach does not speak to how the costs of regulation are distributed across sectors, it has the advantage of explicitly weighing the benefits of environmental improvements against their costs. If benefits are greater than costs, then overall social welfare is improved. When conducting such exercises, it is important to anticipate the ways in which improvements in environmental quality may either directly improve the productivity of economic factors – such as through the increased productivity of outdoor workers – or change the composition of the economy as firms and households change their behavior. If individuals are healthier, for example, they may choose to reallocate their time between work and leisure. While introducing a role for pollution in production and household behavior can be challenging, studies that have partially accounted for this interconnection have found substantial impacts of improvements in environmental quality on the overall economy.
    Keywords: Economic impacts, environmental regulation, economic productivity, employment, plant location, social welfare, health benefits
    JEL: Q52 Q53 Q58
    Date: 2017–07
  4. By: Caliendo, Lorenzo; Monte, Ferdinando; Rossi-Hansberg, Esteban
    Abstract: We study the effect of exporting on the organization of production within firms. Using French employer-employee matched data together with data on a firm's exporting activity, we find that firms that enter the export market and expand substantially reorganize by adding layers of management, hiring more and paying, on average, lower wages to workers in all pre-existing layers. In contrast, firms that enter the export market and expand little do not reorganize and pay higher average wages in all pre-existing layers. We then present some evidence that these effects are causal using pre-sample variation in the destination composition of exports, in conjunction with real exchange rate variation across countries. Our results are consistent with a growing literature using occupations to study the internal structure of firms and how their organization responds to opportunities in export markets.
    Keywords: exports; firm organization
    JEL: D22 F16 J24 J31 L23
    Date: 2017–07
  5. By: Joy A. Buchanan (Brock School of Business, Samford University); Daniel Houser (Interdisciplinary Center for Economic Science and Department of Economics, George Mason University)
    Abstract: Many economies exhibit downward wage rigidity. Surveys of managers by Bewley [1999] and Campbell and Kamlani [1997] indicate that employers hold wages rigid because they believe morale will suffer after a wage cut. Otherwise, there is little evidence for how employers’ beliefs about workers contribute to wage rigidity and whether those beliefs are accurate. We demonstrate that effort falls after workers experience a wage cut and also that workers form reference points from wage contracts. Despite this partial confirmation of the †morale theory†as an explanation for wage rigidity, half of the employers in our experiment cut wages and lose money as a result. Because our design allows us to compare beliefs and effort precisely, we find that when employers don’t believe the morale theory they will not hold wages rigid. In a treatment where a recession is offset by nominal inflation, real wage cuts do not have a significant effect. Loss averse employers are less likely to cut wages and more likely to correctly predict the negative effect of wage cuts.
    Keywords: experimental economics
    JEL: C92 D84 J31
    Date: 2017–06
  6. By: Thomas N. Hubbard; Michael J. Mazzeo
    Abstract: Standard economic models that guide competition policy imply that demand increases should lead to more, not fewer firms. However, Sutton’s (1991) model illustrates that in some cases, demand increases can catalyze competitive responses that bring about shake-outs. This paper provides empirical evidence of this effect in the 1960s-1980s hotel and motel industry, an industry where quality competition increasingly took the form of whether firms supplied outdoor recreational amenities such as swimming pools. We find that openings of new Interstate Highways are associated with increases in hotel employment, but decreases in the number of firms, in local areas. We further find that while highway construction is associated with increases in hotel employment in both warm and cold places, it only leads to fewer firms in warm places (where outdoor amenities were more valued by consumers). Finally, we find no evidence of this effect in other industries that serve highway travelers, gasoline retailing or restaurants, where quality competition is either less important or quality is supplied more through variable costs. We discuss the implications of these results for competition policy, and how they highlight the importance and challenge of distinguishing between “natural” and “market-power-driven” increases in concentration.
    JEL: L11 L41
    Date: 2017–07
  7. By: Todd Stinebrickner (University of Western Ontario); Ralph Stinebrickner (Berea College); Paul Sullivan (American University)
    Abstract: We use novel data to show that the beauty wage premium exists only in jobs where attractiveness is plausibly a productive characteristic. A large premium exists in jobs that require substantial amounts of interpersonal interaction, but no such premium exists in jobs that require working with information and data. This is inconsistent with employer taste-based discrimination, which would favor attractive workers in all jobs. Our unique task data address concerns that measurement error in the importance of interpersonal tasks may bias results towards employer discrimination. Our conclusions are in stark contrast to all previous research that uses a similar approach.
    Date: 2017
  8. By: Omar Adam Ayaita (University of Tuebingen); Kerstin Pull (University of Tuebingen); Uschi Backes-Gellner (University of Zurich)
    Abstract: Since the 1990s, research on publication outputs in business and economics has almost exclusively focused on journal articles. While earlier work has shown that journal articles and other publications were indeed complements in the 70s and 80s, we find that this is no longer the case when we include the most recent decades. Apparently, the notable shift in the scientific community's attention in the 90s on journal articles and the corresponding incentives towards publications in internationally highly ranked journals led researchers to one-sidedly focus on journal publications at the expense of other publication forms. To see whether the aggregate result also holds for individual researchers, we perform a cluster analysis and find four different types of individual researchers: "Journal Specialists", "Book- Based Publishers", a small group of "Highly Productive All-round Publishers" and a large group of what we call "Inconspicuous" researchers, with a very modest publication productivity in all forms. In addition we find that the individual researchers' age matters for their publication patterns: in our sample more experienced researchers are less productive with respect to journal articles, but more productive with respect to other publication forms. This, however, is not the result of an individual career effect. Rather, it is to be attributed to a cohort effect: among today's active researchers the younger cohorts are more productive in journal articles than the older cohorts. Our explanation based on our personnel economics analysis is as follows: the younger cohorts were in their socialization and hiring phase more strongly affected by the newly introduced incentives towards only international journal publications - and have thus reacted more strongly to the "regime change" resulting from the scientific community's one-sided attention to publications in internationally highly ranked journals.
    Keywords: Research productivity; publication forms; journal articles
    JEL: A14 I23 J24
    Date: 2017–07
  9. By: Schäfer, Konrad C.
    Abstract: This paper investigates the stability of the Big-Five personality traits based on the German Socio-Economic Panel (SOEP) from 2005, 2009, and 2013. The results indicate that the population means only show little variance over the eight year time frame. There is no link between age and mean-levels, and only minor changes of the mean-levels of the Big-Five over time for the working age population (25-64 years of age) in Germany. However, there are intra-individual changes which can partly be explained by adverse life events. They impact the Big-Five traits and thereby contradict the general finding of stability of the traits in the literature. Exploratory fixed effects wage estimations that exploit the intra-individual changes in the Big-Five find no significant effects for men but positive effects of agreeableness and conscientiousness on women's wages.
    Keywords: Non-cognitive skills; Big-Five; personality traits, wages
    JEL: C18 J3
    Date: 2017–07
  10. By: FALLUCCHI Francesco; RAMALINGAM Abhijit
    Abstract: We study the effects of different sources of inequality in a commonplace economic interaction: competition. We investigate how individuals react to different types of inequality in experimental two-player Tullock contests where contestants expend resources to win a prize. We study three different sources of inequality: resources, abilities and possible outcomes. We find that overall competitive effort is greater in the presence of inequality in abilities than other inequalities. Unlike other forms, inequality in abilities elicits a very aggressive reaction from disadvantaged players relative to their advantaged opponents. The Quantal Response Equilibrium (QRE) suggests that financial incentives are less salient in the presence of a biased contest procedure.
    Keywords: rent seeking; contest; experiment; inequality; inequity; Quantal Response Equilibrium
    JEL: C91 C92 D31 D63 J78
    Date: 2017–07
  11. By: Drautzburg, Thorsten; Fernández-Villaverde, Jesús; Guerron-Quintana, Pablo A.
    Abstract: We argue that political distribution risk is an important driver of aggregate fluctuations. To that end, we document significant changes in the capital share after large political events, such as political realignments, modifications in collective bargaining rules, or the end of dictatorships, in a sample of developed and emerging economies. These policy changes are associated with significant fluctuations in output and asset prices. Using a Bayesian proxy-VAR estimated with U.S. data, we show how distribution shocks cause movements in output, unemployment, and sectoral asset prices. To quantify the importance of these political shocks for the U.S. as a whole, we extend an otherwise standard neoclassical growth model. We model political shocks as exogenous changes in the bargaining power of workers in a labor market with search and matching. We calibrate the model to the U.S. corporate non-financial business sector and we back up the evolution of the bargaining power of workers over time using a new methodological approach, the partial filter. We show how the estimated shocks agree with the historical narrative evidence. We document that bargaining shocks account for 34% of aggregate fluctuations.
    Keywords: Aggregate fluctuations; bargaining shocks; historical narrative.; partial filter; Political redistribution risk
    JEL: E32 E37 E44 J20
    Date: 2017–07

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