nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2017‒09‒03
twenty papers chosen by
Joseph Marchand
University of Alberta

  1. What Drives the Gender Wage Gap? Examining the Roles of Sorting, Productivity Differences, and Discrimination By Sin, Isabelle; Stillman, Steven; Fabling, Richard
  2. Minimum Wages and Vocational Training Incentives in Germany By Kim Leonie Kellermann
  3. The Dynamics of Gender Earnings Differentials: Evidence from Establishment Data By Barth, Erling; Pekkala Kerr, Sari; Olivetti, Claudia
  4. Labour market resilience: The role of structural and macroeconomic policies By Alexander Hijzen; Andreas Kappeler; Mathilde Pak; Cyrille Schwellnus
  5. The effect of fertility timing on labor market work duration By Angelov, Nikolay; Johansson, Per; Lee, Myoung-jae
  6. Optimal Progressivity with Age-Dependent Taxation By Heathcote, Jonathan; Storesletten, Kjetil; Violante, Giovanni L.
  7. Are Mutual Fund Managers Paid For Investment Skill? By Ibert, Marcus; Kaniel, Ron; van Nieuwerburgh, Stijn; Vestman, Roine
  8. Race Matters: Income Shares, Income Inequality, and Income Mobility for All U.S. Races By Randall Akee; Maggie R. Jones; Sonya R. Porter
  9. Do Good Working Conditions Make You Work Longer? Evidence on Retirement Decisions Using Linked Survey and Register Data By Böckerman, Petri; Ilmakunnas, Pekka
  10. Promotion through Connections: Favors or Information? By Yann Bramoull\'e; Kenan Huremovi\'c
  11. Examining the link between health measures, management practices and establishment performance By Broszeit, Sandra; Laible, Marie-Christine
  12. The Effect of Partial Retirement on Labor Supply, Public Balances and the Income Distribution: Evidence from a Structural Analysis By Songül Tolan
  13. Job Search Behavior among the Employed and Non-Employed By R. Jason Faberman; Andreas I. Mueller; Ayşegül Şahin; Giorgio Topa
  14. Women in Top Incomes: Evidence from Sweden 1974–2013 By Boschini, Anne; Gunnarsson, Kristin; Roine, Jesper
  15. Engineering Educational Opportunity: Impacts of 1970s and 1980s Policies to Increase the Share of Black College Graduates with Major in Engineering or Computer Science By Catherine J. Weinberger
  16. Excluded Generation: The Growing Challenges of Labor Market Insertion for Egyptian Youth By Assaad, Ragui; Krafft, Caroline
  17. Obesity Based Labour Market Discrimination in South Africa: A Dynamic Panel Analysis By Junita Henry; Umakrishnan Kollamparambil
  18. The Effect of Non-Permanent Contractual Employment on Financial Hardship By Neha Swami
  19. The Joint Effects of a Health Insurance and a Public Works Scheme in Rural Ethiopia By Shigute, Zemzem; Strupat, Christoph; Burchi, Francesco; Alemu, Getnet; Bedi, Arjun S.
  20. Political Distribution Risk and Aggregate Fluctuations By Drautzburg, Thorsten; Fernandez-Villaverde, Jesus; Guerron-Quintana, Pablo

  1. By: Sin, Isabelle (Motu Economic and Public Policy Research Trust); Stillman, Steven (Free University of Bozen/Bolzano); Fabling, Richard (Independent Researcher)
    Abstract: As in other OECD countries, women in New Zealand earn substantially less than men with similar observable characteristics. In this paper, we use a decade of annual wage and productivity data from New Zealand's Linked Employer-Employee Database to examine different explanations for this gender wage gap. Sorting by gender at either the industry or firm level explains less than one-fifth of the overall wage gap. Gender differences in productivity within firms also explain little of the difference seen in wages. The relationships between the gender wage-productivity gap and both age and tenure are inconsistent with statistical discrimination being an important explanatory factor for the remaining differences in wages. Relating across industry and over time variation in the gender wage-productivity gap to industry-year variation in worker skills, and product market and labor market competition, we find evidence that is consistent with taste discrimination being important for explaining the overall gender wage gap. Explanations based on gender differences in bargaining power are less consistent with our findings.
    Keywords: gender wage gap, discrimination, sorting, productivity, competition
    JEL: J16 J31 J71
    Date: 2017–08
  2. By: Kim Leonie Kellermann (University of Münster, Center for Interdisciplinary Economics, Münster, Germany)
    Abstract: We examine the impact of sector-specific minimum wages in Germany on the willingness of youths to undergo vocational training. The theoretical intuition on the impact of wage floors on education is ambiguous. On the one hand, they raise the opportunity cost of education and prevent further skill accumulation. On the other hand, they lower the employment probability of unskilled workers, promoting additional training. Employing a mixed logit model, we estimate the probability of opting for an apprenticeship for a GSOEP-based sample of youths aged 17 to 24. Unlike the evidence from other countries, we find that increasing sectoral wage floors have a positive effect on training probabilities. Due to binding minimum wages, the demand for unskilled workers declines which lowers the opportunity cost of education. High requirements with regard to professional skills reinforce the effect.
    Keywords: Minimum wages, education, vocational training, occupational choice, discrete choice
    JEL: C33 I21 I28 J24
    Date: 2017–08
  3. By: Barth, Erling (Institute for Social Research, Oslo); Pekkala Kerr, Sari (Wellesley College); Olivetti, Claudia (Boston College)
    Abstract: We use a unique match between the 2000 Decennial Census of the United States and the Longitudinal Employer Household Dynamics (LEHD) data to analyze how much of the increase in the gender earnings gap over the lifecycle comes from shifts in the sorting of men and women across high- and low-pay establishments and how much is due to differential earnings growth within establishments. We find that for the college educated the increase is substantial and, for the most part, due to differential earnings growth within establishment by gender. The between component is also important. Differential mobility between establishments by gender can explain 27 percent of the widening of the pay gap for this group. For those with no college the relatively small increase of the gender gap over the lifecycle can be fully explained by differential moves by gender across establishments. The evidence suggests that, for both education groups, the between-establishment component of the increasing wage gap is due almost entirely to those who are married.
    Keywords: gender pay gap, establishment wage differentials, earnings growth
    JEL: J16 J31
    Date: 2017–08
  4. By: Alexander Hijzen; Andreas Kappeler; Mathilde Pak; Cyrille Schwellnus
    Abstract: This paper provides an overview of labour market resilience in the wake of the Great Recession of 2008-09 and the role played by macroeconomic and structural policies. The OECD unemployment rate has returned to close to its pre-crisis level, but the unemployment cost of the Great Recession has nonetheless been very large and long-lasting in many countries. Moreover, as the recovery in output has been weak relative to the recovery in employment, labour productivity and wage growth remain low. Labour market resilience depends crucially on macroeconomic and labour market policy settings. Macroeconomic policies are highly effective in limiting employment declines during economic downturns and preventing that cyclical increases in unemployment become structural. Spending on active labour market policies needs to respond strongly to cyclical increases in unemployment to promote a quick return to work in the recovery and preserve the mutual-obligations ethos of activation regimes. Overly strict employment protection for regular workers reduces resilience by promoting the use of temporary contracts and slowing job creation in the recovery. Co-ordinated collective bargaining systems can promote resilience by facilitating wage and working-time adjustments.
    Keywords: fiscal policy, labour market policy, politiques budgétaires, politiques du marché de travail, resilience, résilience
    JEL: E6 J3 J6
    Date: 2017–09–04
  5. By: Angelov, Nikolay (UCLS – Uppsala Center for Labour Studies); Johansson, Per (Uppsala universitet, IFAU, IZA); Lee, Myoung-jae (Department of Economics, Korea University)
    Abstract: We provide a framework for the estimation of the impact of fertility timing on female long-term labor supply, measured as labor market work duration. We show that the genuine treatment is waiting time to birth rather than birth per se. In the application we control for the joint decision of fertility and labor supply by using the ‘same-sex’ instrument in a control function setting. We find that having a third child will in general reduce the labor market work duration. The magnitude of the effect depends to a large extent on the mothers’ age at second birth but also on the waiting time to the third child and the education level.
    Keywords: Labor supply; Parenthood; Retirement; Dynamic treatment assignment; Censored regression
    JEL: C24 C26 C51 J22
    Date: 2017–08–18
  6. By: Heathcote, Jonathan (Federal Reserve Bank of Minneapolis); Storesletten, Kjetil (University of Oslo); Violante, Giovanni L. (Princeton University)
    Abstract: This paper studies optimal taxation of labor earnings when the degree of tax progressivity is allowed to vary with age. We analyze this question in a tractable equilibrium overlapping-generations model that incorporates a number of salient trade-offs in tax design. Tax progressivity provides insurance against ex-ante heterogeneity and earnings uncertainty that missing markets fail to deliver. However, taxes distort labor supply and human capital investments. Uninsurable risk cumulates over the life cycle, and thus the welfare gains from income compression via progressive taxation increase with age. On the other hand, average labor productivity rises with age, and thus the welfare losses from progressive taxation's distortionary impact on labor supply also increase with age. The optimal age-varying system balances these distortions. In a calibrated version of the economy, we quantify the welfare gains of moving from the optimal age-invariant to the optimal age-dependent system and find that they are negligible.
    Keywords: Tax progressivity; Tagging; Income distribution; Skill investment; Labor supply; Partial insurance; Government expenditures; Welfare
    JEL: D30 E20 H20 H40 J22 J24
    Date: 2017–08–04
  7. By: Ibert, Marcus; Kaniel, Ron; van Nieuwerburgh, Stijn; Vestman, Roine
    Abstract: Compensation of mutual fund managers is paramount to understanding agency frictions in asset delegation. We collect a unique registry-based dataset on the compensation of Swedish mutual fund managers. We find a concave relationship between pay and revenue, in contrast to how investors compensate the fund company (firm). We also find a surprisingly weak sensitivity of pay to performance, even after accounting for the indirect effects of performance on revenue. Firm-level fixed effects, revenues, and profits add substantial explanatory power for compensation.
    Keywords: financial sector income; mutual fund performance; Portfolio manager compensation
    JEL: G00 G23 J24 J31 J33 J44
    Date: 2017–08
  8. By: Randall Akee; Maggie R. Jones; Sonya R. Porter
    Abstract: This paper presents income shares, income inequality, and income immobility measures for all race and ethnic groups in the United States using the universe of U.S. tax returns matched at the individual level to U.S. Census race data for 2000–2014. Whites and Asians have a disproportionately large share of income in top quantiles. Income for most race groups ranges between 50–80 percent of the corresponding White income level consistently across various percentiles in the overall income distribution—suggesting that class alone cannot explain away overall income differences. The rate of income growth at the 90th percentile exceeds that of the 50th and 10th percentiles for all race and ethnic groups; divergence is largest for Whites, however, in the post-Great Recession era. Income immobility is largest for the highest-income races. Overall, these results paint a picture of a rigid income structure by race and ethnicity over time.
    JEL: C81 D31 D63 J15 J31
    Date: 2017–08
  9. By: Böckerman, Petri (Labour Institute for Economic Research); Ilmakunnas, Pekka (Aalto University)
    Abstract: We analyze the potential role of adverse working conditions and management practices in the determination of employees' retirement behavior. Our data contain both comprehensive information regarding perceived job disamenities, job satisfaction, and intentions to retire from nationally representative cross-sectional surveys and information on employees' actual retirement decisions from longitudinal register data that can be linked to the surveys. Using a trivariate ordered probit model, we observe that job dissatisfaction arising from adverse working conditions is significantly related to intentions to retire, and this in turn is related to actual retirement during the follow-up period.
    Keywords: working conditions, job satisfaction, retirement, new management practices
    JEL: J26 J28 J53
    Date: 2017–08
  10. By: Yann Bramoull\'e; Kenan Huremovi\'c
    Abstract: Connections appear to be helpful in many contexts such as obtaining a job, a promotion, a grant, a loan or publishing a paper. This may be due to favoritism or to information conveyed by connections. Attempts at identifying both effects have relied on measures of true quality, generally built from data collected long after promotion. This empirical strategy faces important limitations. Building on earlier work on discrimination, we propose a new method to identify favors and information from classical data collected at time of promotion. Under natural assumptions, we show that promotion decisions look more random for connected candidates, due to the information channel. We obtain new identification results and show how probit models with heteroscedasticity can be used to estimate the strength of the two effects. We apply our method to the data on academic promotions in Spain studied in Zinovyeva & Bagues (2015). We find evidence of both favors and information effects at work. Empirical results are consistent with evidence obtained from quality measures collected five years after promotion.
    Date: 2017–08
  11. By: Broszeit, Sandra; Laible, Marie-Christine (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany])
    Abstract: "We examine the relationship between establishment-level health measures, Anglo-Saxon management practices and labor productivity, as well as median wages. Based on the observation that management practices are positively associated with establishment outcomes, we test whether health measures have a distinct effect on their own, or if they are already comprised in management practices. Using representative survey data from the German Management and Organizational Practices Survey, we find a strong increase in the use of health measures from 2008 to 2013, predominantly in large establishments. Fixed effects regressions confirm that management practices significantly increase labor productivity, however, health measures do not. The reverse is true for median wages, such that health measures are positively associated with median wages, but management practices are not." (Author's abstract, IAB-Doku) ((en))
    Keywords: betriebliches Gesundheitsmanagement, Lohnhöhe, Arbeitsproduktivität, Unternehmensführung, IAB-Datensatz Management Practices
    JEL: D22 I15 J24 L2 M2
    Date: 2017–08–17
  12. By: Songül Tolan
    Abstract: This paper develops a structural dynamic retirement model to investigate effects and corresponding underlying mechanisms of a partial retirement program on labor supply, fiscal balances, and the pension income distribution. The structural approach allows for disentangling the two counteracting mechanisms that drive the employment effects of partial retirement: 1) the crowding-out from full-time employment, and 2) the movement from early retirement or unemployment to partial retirement. It also allows for investigating the role of financial compensations in a partial retirement program. Based on a unique German administrative dataset, I perform counterfactual policy simulations that analyze the role of partial retirement combined with financial subsidies and an increased normal retirement age. The results show that partial retirement extends working lives but reduces the overall employment volume. The fiscal consequences of partial retirement are negative but substantially less so when wages and pensions in partial retirement remain uncompensated. Partial retirement decreases inequality in pension income and provides a way to smooth consumption especially for retirees in lower income deciles in the context of an increased normal retirement age.
    Keywords: Retirement, Partial Retirement, Social Security and Public Pensions, Structural estimation, Dynamic Discrete Choice
    JEL: C61 J26 H55
    Date: 2017
  13. By: R. Jason Faberman; Andreas I. Mueller; Ayşegül Şahin; Giorgio Topa
    Abstract: Using a unique new survey, we study the relationship between search effort and outcomes for employed and non-employed workers. We find that the employed fare better than the non-employed in job search: they receive more offers per application and are offered higher pay even after controlling for observable characteristics. We use an on-the-job search model with endogenous search effort and find that unobserved heterogeneity explains less than a third of the residual wage offer differential. The model calibrated using various moments from our survey provides a good fit to the data and implies a reasonable flow value of unemployment.
    JEL: E24 J29 J60
    Date: 2017–08
  14. By: Boschini, Anne (SOFI, Stockholm University); Gunnarsson, Kristin (Uppsala University); Roine, Jesper (Stockholm Institute of Transition Economics)
    Abstract: Using a large, register-based panel data set we study gender differences in top incomes in Sweden over the period 1974–2013. We find that, while women are still a minority of the top decile group, and make up a smaller share the higher up in the distribution we move, their presence has steadily increased in all top groups over the past four decades. Top income women are wealthier and rely more on capital incomes, but the difference, relative to men, has decreased since the 1970s. Over this period capital incomes have in general become more important in the top, but the share of working-rich women has gone up, while the opposite is true for men. Realized capital gains are more important for top income women but turn out to be of a more transitory nature than for men. Mobility is generally higher for top income women compared to top income men but the trend since the 1990s is toward increased gender equality in this respect too. Finally, we find important differences between top income women and men in terms of marital status and family composition. Overall, our results suggest that many of the findings in the top income literature have a clear gender component and that understanding gender equality in the top of the distribution requires studying not only earnings and labour market outcomes but also incomes from other sources.
    Keywords: income inequality, income distribution, gender inequality, top incomes, capital incomes, realized capital gains
    JEL: D13 D31 H20 J16 J31
    Date: 2017–08
  15. By: Catherine J. Weinberger
    Abstract: Throughout the 1970s and 1980s, U.S. institutions of higher education began to address long-standing patterns of exclusion. Initial efforts to improve the access of black students to engineering education focused on six historically black engineering colleges, and evolved into a truly nationwide movement. Later, a larger group of Historically Black Colleges and Universities (HBCUs) expanded educational opportunities in engineering, computer science and other technical fields, "to prepare their students for expanded career choices." Geographic and institutional features of the higher education infrastructure led to differential impacts of these policies on students born in different states. A data panel assembled for the project links changes in educational opportunities to current outcomes. The panel includes more than 30 years of complete counts of the number of bachelor's degrees conferred in each field by each U.S. institution of higher education (collected by the U.S. Department of Education and the Engineering Manpower Commission), merged to current labor force data. These data facilitate description of the geography and timing of changes in opportunities for black college students to choose engineering or computer science college majors, and current labor market outcomes among those born in the right place and time to pursue careers in these fields.
    JEL: J24 J31
    Date: 2017–08
  16. By: Assaad, Ragui (University of Minnesota); Krafft, Caroline (St. Catherine University)
    Abstract: Youth in Egypt hold rising aspirations for their adult lives, yet face an increasingly uncertain and protracted transition from school to work and thus into adulthood. This paper investigates how labor market insertion has been evolving over time in Egypt and how the nature of youth transitions relates to gender and social class. We demonstrate that youth today face poorer chances of transitioning into a good job than previous generations, despite large increases in educational attainment. Social class is playing an increasing role in determining the success of the transition from school to work in Egypt. Whether youth successfully make transitions to formal jobs, embark on such transitions and fail, or pursue a traditional route to adulthood depends on a complex and changing interaction between their own educational attainment and the resources of their families. In light of these findings, we discuss the policies that can help facilitate successful transitions for struggling youth in Egypt.
    Keywords: transition from school to work, youth, adulthood, life course, Egypt
    JEL: I24 J24 J45 J62 O15
    Date: 2017–08
  17. By: Junita Henry; Umakrishnan Kollamparambil
    Abstract: There is increasing concern regarding obesity related healthcare costs in South Africa. Obesity is also seen to have far reaching effects that seep into labour market outcomes (Barnett & Kumar, 2009). Using NIDS panel data, this study aims to examine the relationship between Body Mass Index and employment status as well as wage levels. This is done using a probit and tobit model and thereafter a system GMM model to take endogeneity into account. Thereafter, the paper uses ethnicity backed obesity thresholds to measure the discrimination obese individuals face on the probability of becoming employed and their wages earned once employed. It is found that obesity is indeed, an influencing factor and a source of discrimination within the labour market in South Africa. Moreover, this discrimination is seen to be more so for females than males.
    Keywords: Obesity, unemployment, Wages, Discrimination, Labour market, South Africa
    JEL: I14 J71 J31
    Date: 2017–08
  18. By: Neha Swami (Melbourne Institute: Applied Economic & Social Research and Department of Economics, The University of Melbourne)
    Abstract: This study uses longitudinal data from the Household, Income and Labour Dynamics in Australia (HILDA) survey to examine the difference in the experience of financial hardship between permanent and two forms of non-permanent employment:-fixed-term and casual employment, separately for men and women. It estimates multivariate ordered logit fixed-effects models that account for time-invariant unobserved heterogeneity, common macroeconomic shocks and a rich set of individual level characteristics, and finds that for both men and women, compared to permanent employment, casual employment is associated with increased financial hardship. Fixed-term employment is not associated with increased financial hardship for either men or women. For men, the strong positive association between casual employment and financial hardship is largely explained by fewer hours of work and a higher vulnerability to employment shocks (job loss and job change). For women, particularly those with caring responsibilities, working fewer hours and experiencing employment shocks (job loss and job change) explain some of the association between casual employment and financial hardship, but even after allowing for these factors casual employment per se continues to have a strong positive association with the experience of financial hardship.
    Keywords: Non-permanent employment, financial hardship, HILDA Survey, blow-up and cluster fixed-effects ordered-logit model
    JEL: J3 J4
    Date: 2017–08
  19. By: Shigute, Zemzem (ISS, Erasmus University Rotterdam); Strupat, Christoph (German Development Institute); Burchi, Francesco (German Development Institute); Alemu, Getnet (University of Addis Ababa, Ethiopia); Bedi, Arjun S. (ISS, Erasmus University Rotterdam)
    Abstract: Rural households in Ethiopia are exposed to a variety of covariate and idiosyncratic risks. In 2005, the Ethiopian government introduced the Productive Safety Net Program (PSNP) and in 2011 launched the Community Based Health Insurance Scheme (CBHI). This paper analyses the interaction between the two schemes and their joint effect on health care utilization, labor supply, asset accumulation and borrowing. The empirical analysis relies on three rounds of individual-level panel data collected in 2011, 2012 and 2013 and on several rounds of qualitative work. We find that individuals covered by both programs, as opposed to neither, are 5 percentage points more likely to use outpatient care and are 21 percentage points more likely to participate in off-farm work. Furthermore, participation in both programs is associated with a 5 percent increase in livestock, the main household asset, and a 27 percent decline in debt. These results suggest that at least in Ethiopia bundling of interventions enhances protection against multiple risks and shows the potential of linked social protection schemes.
    Keywords: Ethiopia, Productive Safety Net Program, Community Based Health Insurance Scheme, joint effect
    JEL: J22 I15
    Date: 2017–08
  20. By: Drautzburg, Thorsten (Federal Reserve Bank of Philadelphia); Fernandez-Villaverde, Jesus (Federal Reserve Bank of Philadelphia); Guerron-Quintana, Pablo (Federal Reserve Bank of Philadelphia)
    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: Political redistribution risk; bargaining shocks; aggregate fluctuations; partial filter; historical narrative
    JEL: E32 E37 E44 J20
    Date: 2017–08–21

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