nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2017‒08‒27
sixteen papers chosen by
Joseph Marchand
University of Alberta

  1. Should the maximum duration of fixed-term contracts increase in recessions? Evidence from a law reform By Martins, Pedro S.
  2. Learning by hiring, network centrality and within-firm wage dispersion By Ambra, Poggi; Piergiovanna, Natale
  3. Economic effects of overtime premium flexibility: Firm- and worker-level evidence from a law reform By Martins, Pedro S.
  4. Top Earners: Cross-Country Facts By Alejandro Badel; Moira Daly; Mark Huggett; Martin Nybom
  5. Racial/Ethnic Differences In Non-Work At Work By Daniel S. Hamermesh; Katie R. Genadek; Michael C. Burda;
  6. Quantifying the effect of labor market size on learning externalities By Peters, Jan Cornelius
  7. Risky Business? The Effect of Majoring in Business on Earnings and Educational Attainment By Rodney J. Andrews; Scott Imberman; Michael Lovenheim
  8. Social Security Contributions and the Business Cycle By Alexander Meyer-Gohde;
  9. The Gender Wage Gap among College Graduates in Italy By Daniela Piazzalunga
  10. Long-term care reform and the labor supply of informal caregivers – evidence from a quasi-experiment By Geyer, J.; Korfhage, T.;
  11. The response of income inequality to positive oil rents shocks in Iran: Implications for the post-sanction period By Mohammad Reza Farzanegan; Tim Krieger
  12. The Rise of Market Power and the Macroeconomic Implications By De Loecker, Jan; Eeckhout, Jan
  13. Employment in family firms: Less but safe? Analyzing labor demand of German family firms with a treatment model for panel data By Kölling, Arnd
  14. The exporter wage premium when firms and workers are heterogeneous By Egger, Hartmut; Egger, Peter; Kreickemeier, Udo; Moser, Christoph
  15. Estimating Counterfactual Treatment Effects to Assess External Validity By Yu-Chin Hsu; Tsung-Chih Lai; Robert P. Lieli
  16. Innovation, inequality and the skill premium By Riccardo Leoncini

  1. By: Martins, Pedro S.
    Abstract: Fixed-term contracts (FTCs) may be an important tool to promote employment, particularly in recessions or when permanent contracts are costly. Therefore, it may be useful to vary some of the legal parameters of FTCs over the business cycle, namely increasing their flexibility during downturns. We evaluate this idea by examining the effects of a 2011 law that increased the maximum duration of FTCs in Portugal, in the midst of a recession. Our analysis is based on regression-discontinuity (and difference-in-differences) methods and linked panel data. We find a considerable take up of this measure, as conversions to permanent contracts drop by 20%. Worker churning is reduced significantly, as mobility of eligible fixed-term workers to other firms drops by 10%. Employment also increases significantly for younger workers.
    Keywords: Employment law,worker mobility,segmentation,counterfactual evaluation
    JEL: J23 J41 J63
    Date: 2017
  2. By: Ambra, Poggi; Piergiovanna, Natale
    Abstract: In this paper, we highlight knowledge as specific channel through which labour mobility affects conditional within-firm wage dispersion. We present a model in which workers acquire knowledge on the job and firms pursue a policy of learning-by-hiring. The latter generates workers flows that connect directly and indirectly firms in a network. The model predicts that firms central to the network, those with the most heterogeneous workforce in terms of past employers, have the highest wage dispersion. Using 1990-2001 Veneto (a region of Italy) matched employer-employee data, we map workers flows between firms and build the network formed by all the firms. For each firm, we assess its network centrality. In our data conditional within-firm wage dispersion turns out to be increasing in network centrality, confirming the prediction of the model.
    Keywords: Wage dispersion; Labour mobility, Network; Knowledge transfer
    JEL: J31 J62 L14
    Date: 2017–08–19
  3. By: Martins, Pedro S.
    Abstract: In 2012, a new law allowed firms in Portugal to reduce the overtime premium paid by half. Until then, as in other countries, premiums were subject to a minimum level. We analyse matched panel data, including worker-level (base and overtime) hours and pay, to study the effects of the resulting greater flexibility in overtime pay setting. We find that half of the firms using overtime in 2011 did reduce their overtime premiums consistently with the reform, in particular firms making greater use of overtime and paying higher premiums. Using difference-in-differences matching and a long list of covariates, we also find that those firms that cut overtime premiums exhibit significant relative increases in overtime usage, employment and sales following the reform. Our results also highlight the important but not exclusive role of legal restrictions on downward nominal pay rigidity.
    Keywords: Working time,wage rigidity,employment resilience,labour reforms
    JEL: J22 J23 J38
    Date: 2017
  4. By: Alejandro Badel (Bureau of Labor Statistics and Georgetown University); Moira Daly (Copenhagen Business School); Mark Huggett (Georgetown University); Martin Nybom (Stockholm University)
    Abstract: We provide a common set of life-cycle earnings statistics based on administrative data from the United States, Canada, Denmark and Sweden. We find three qualitative patterns, which are common across countries. First, top-earnings inequality increases over the working lifetime. Second, the extreme right tail of the earnings distribution becomes thicker with age over the working lifetime. Third, top lifetime earners exhibit dramatically higher earnings growth over their working lifetime. Models of top earners should account for these three patterns and, importantly, for how they quantitatively differ across countries.
    Keywords: Earnings, Inequality, top earners, top incomes
    JEL: D31 D91 H21 J31
    Date: 2017–08
  5. By: Daniel S. Hamermesh; Katie R. Genadek; Michael C. Burda;
    Abstract: See content.
    Keywords: time use, work effort, racial differences, discrimination
    JEL: J15 J22 J31
    Date: 2017–08
  6. By: Peters, Jan Cornelius
    Abstract: This paper provides empirical evidence that individual labor productivity significantly depends on the size of the local labor market in which a worker previously acquired work experience. The analysis uses German micro data from the Institute for Employment Research (IAB) on transitions to employment within the period 2005 to 2011 and individual employment biographies from 1975 onwards. Analyzing the wages associated with the newly established employment relationships, suggests that dynamic agglomeration economies in general, and learning externalities in particular, play an important role in explaining individual labor productivity. Workers receive a significantly higher wage after acquiring experience in urban than in non-urban labor markets. Doubling local employment in all labor markets in which experience was acquired, increases the productivity of a worker with two years of work experience by more than 0.7 percent. After 10 years of experience the corresponding gain amounts to about three percent, after 30 years to about four percent.
    Keywords: Agglomeration economies,Human capital externalities,Learning,Regional disparities,Urban wage growth premium,Transition to employment
    JEL: R10 R23 J31
    Date: 2017
  7. By: Rodney J. Andrews (The University of Texas at Dallas); Scott Imberman (University of Houston); Michael Lovenheim (Cornell University)
    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.
    Keywords: postsecondary education, higher education, college major, returns to education
    JEL: I23 J24
    Date: 2017–08
  8. By: Alexander Meyer-Gohde;
    Abstract: This paper examines magnitudes and business cycle dynamics of social security contributions (SSC). In most OECD countries studied, we document a negative covariation of payroll tax burdens with GDP and GDP growth at business cycle and lower frequencies. We assess the overall magnitude of the distortion following Barro and Redlick (2011). For most countries, average marginal SSC tax rates exceed average rates, but the latter tracks the former tightly. Changes in average payroll tax burdens are mostly accounted for by changes in tax schedules rather than shifts in the earnings distribution over time. For many countries, SSC rates behave like estimated values of the “labor wedge” (Chari et al. 2007, Brinca et al., 2016).
    Keywords: business cycle, payroll tax, social security contributions, labor wedge
    JEL: E24 E32 J32 H55
    Date: 2017–08
  9. By: Daniela Piazzalunga
    Abstract: The paper investigates the gender wage gap among recently graduated people, controlling for job and academic variables and for the field of study, as women lag in highly remunerative majors. The raw gender gap in hourly wages is 5.6%. Although including academic variables and the field of study, on top of job-related variables, slightly reduces the unexplained gap, the latter still accounts for most of the total difference. Using quantile decomposition, the paper shows that the unexplained gap increases along the wage distribution, indicating a glass ceiling effect. Heterogeneities arise across fields of study: the largest total gap emerges in Law, Political-Social sciences, and Economics-Statistics. In most disciplines, there is a significant unexplained gap – from 3.3% (Medicine), to 8.7% (Law), up to 9.6% (Agriculture) – which constitutes the largest share of the difference, confirming that most of the wage gap remains unexplained also by major. Finally, I use geographical differences to explore the influence of institutional and macro-economic variables, as well as of attitudes towards gender norms. Results indicate that childcare and part-time availability are correlated with lower gender wage gaps, while traditional gender norms are associated with higher gaps.
    Keywords: Gender wage gap, Oaxaca-Blinder decomposition, College graduates, Quantile decomposition, Field of study, Regional differences
    JEL: J16 J31 J71
    Date: 2017–08
  10. By: Geyer, J.; Korfhage, T.;
    Abstract: Germany introduced a new insurance for long-term care in 1995 as part of its social security system. Benefits from the long-term care insurance are not means tested and only depend on the required level of care. The new scheme improved the situation for households wanting to organize informal care at home and it changed the incentives for potential informal caregivers. We exploit this reform as a quasi-experiment and examine its effect on the labor supply of caregivers who live in the same household as the care recipient. We find strong negative labor market effects for men but not for women.
    Keywords: labor supply; long-term care; long-term care insurance; quasi-experimental approach;
    JEL: J22 H31 I13
    Date: 2017–08
  11. By: Mohammad Reza Farzanegan (Philipps-Universität Marburg); Tim Krieger (Albert-Ludwigs-Universität Freiburg)
    Abstract: We study the short and long run responses of income inequality to the positive oil and gas rents per capita shocks in Iran from 1973 to 2012. Using vector autoregression (VAR)-based impulse response functions, we find a positive and statistically significant response of income inequality to oil rents booms within 4 years after the shock. The Autoregressive-Distributed Lag (ARDL) results show that a 10 percent increase in oil and gas rents per capita leads to 1.1 percent increase in income inequality in the long run. The results are robust after controlling for income-distribution channels in Iran. Our analysis can help policy makers to evaluate and accommodate the possible positive or negative effects of lifting sanctions on inequalities in Iran.
    Keywords: oil rents; inequality; VAR; ARDL; sanctions; Iran
    JEL: Q33 Q38 D63
    Date: 2017
  12. By: De Loecker, Jan; Eeckhout, Jan
    Abstract: We document the evolution of markups based on firm-level data for the US economy since 1950. Initially, markups are stable, even slightly decreasing. In 1980, average markups start to rise from 18% above marginal cost to 67% now. There is no strong pattern across industries, though markups tend to be higher, across all sectors of the economy, in smaller firms and most of the increase is due to an increase within industry. We do see a notable change in the distribution of markups with the increase exclusively due to a sharp increase in high markup firms. We then evaluate the macroeconomic implications of an increase in average market power, which can account for a number of secular trends in the last 3 decades: 1. decrease in labor share; 2. increase in capital share; 3. decrease in low skill wages; 4. decrease in labor force participation; 5. decrease in labor flows; 6. decrease in migration rates; 7. slowdown in aggregate output.
    Keywords: Markups; Market Power; Secular Trends; Labor Market.
    JEL: D2 D4 E2 J3 K2 L1
    Date: 2017–08
  13. By: Kölling, Arnd
    Abstract: This paper analyzes the differences in labor demand and labor turnover between family and nonfamily firms. The majority of firms in modern economies and, therefore, also in Germany are family controlled. These firms seem to have better employment performance than non-family controlled companies. Therefore, this study applies a treatment model for panel data using family firms as a treatment indicator. Moreover, a propensity score estimation is introduced to the model to control for selectivity. The results of the estimations indicate that labor demand is possibly larger because of family members joining the firms as extra employees. Moreover, labor turnover is lower, thus supporting the assumption that family firms offer some kind of implicit contracts to their employees and are more loss averse than other establishments. However, evidence of these results for establishments with 20 or more employees is generally weaker, indicating that the differences between both types of firms decrease with firm size.
    Keywords: Labor Demand,Family Firms,Firm Size,Treatment Model,Panel Data
    JEL: J23 D22 G32 C21 C23
    Date: 2017
  14. 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: Exporter wage premium,Heterogeneous firms,Ability differences of workers,Positive assortative matching,Trade and wage inequality
    JEL: C31 F12 F15 J31
    Date: 2017
  15. By: Yu-Chin Hsu (Institute of Economics, Academia Sinica, Taipei, Taiwan); Tsung-Chih Lai (Department of Economics Feng Chia University); Robert P. Lieli (Department of Economics Central European University)
    Abstract: We propose statistical methods for assessing the external validity of treatment effect estimates obtained in a specific status-quo environment. In particular, we estimate counterfactual quantile treatment effects that would obtain if one were to change the composition of the population targeted by the status-quo treatment. Assuming unconfoundedness, and the invariance of the conditional distributions of the potential outcomes, the parameter of interest is identified and can be nonparametrically estimated by a kernel-based method. Viewed as a random function over the continuum of quantile indices, the estimator converges weakly to a zero mean Gaussian process at the parametric rate. Exploiting this result, we propose a multiplier bootstrap procedure to construct uniform confidence bands. We provide similar results for the counterfactually treated subpopulation and the average effect. As an application, we estimate the counterfactual quantile treatment effect of the Job Corps training program in the U.S. under various scenarios. The results suggest that strong economic conditions and the skill hypotheses both help explain the earlier finding in the literature that the program was ineffective at low quantiles of the earnings distribution.
    Keywords: counterfactual analysis, external validity, program evaluation, multiplier bootstrap, Job Corps JEL Classification: C13, C31, J24, J30
    Date: 2017–08
  16. By: Riccardo Leoncini (Freiburg Institute for Advanced Studies (FRIAS), University of Freiburg (D); Research Institute on Sustainable Economic Growth (IRCrES), National Research Council, Milan (I); AlmaMater University of Bologna (I).)
    Abstract: The relationship between innovation and inequality is analysed on a panel of 148 countries for a 50 year span, from 1963-2012. A non linear relationship is found that links innovation to inequality, and which appears to be rather different whether variables representing either input or output of innovative effort are considered. In both cases in fact there appears to be a threshold that once is overcame reverses the relationship. In particular, in the case of innovative inputs a positive relationship with inequality reverses once the threshold is crossed, while the opposite holds for innovative outputs, for which the relationship is initially negative to become positive as, for instance, the number of patents increases over a certain threshold. It is nally possible to exploit these di erent patterns, to provide a truly innovation-based analysis of the patterns of skill premium for US, France, Germany and Great Britain. In all these case, the ratio of R&D to Patents shows a robust negative relationship with the skill premium. In particular, when the ratio of R&D to Patents is low (implying a relatively high overall level of appropriability) increasing patterns of the skill premium result. The opposite happens when the ratio is high (implying a relatively low appropriability level), determining a decrease in the skill premium.
    Keywords: innovation, income inequality, skill premium
    JEL: O33 D63 J24
    Date: 2017–08

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