nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2017‒09‒17
eight papers chosen by
Joseph Marchand
University of Alberta

  1. Quantifying the effect of labor market size on learning externalities By Peters, Jan Cornelius
  2. Does the negative effect of caregiving on work persist over time? By Heger, Dörte; Korfhage, Thorben
  3. Credit Crunch and Downward Nominal Wage Rigidities By Jean-François Rouillard
  4. Loss Aversion and the Quantity-Quality Tradeoff By Jared Rubin; Anya Samek; Roman M. Sheremeta
  5. The value of air quality in Chinese cities: Evidence from labor and property market outcomes By Xuan Huang; Bruno Lanz
  6. Gender, Willingness to Compete and Career Choices Along the Whole Ability Distribution By Thomas (T.) Buser; Noemi Peter; Stefan Wolter
  7. TV and entrepreneurship By Slavtchev, Viktor; Wyrwich, Michael
  8. Labour Income, Social Transfers and Child Poverty By Bruce Bradbury; Markus Jäntti; Lena Lindahl

  1. By: Peters, Jan Cornelius
    Abstract: We show for Germany that labor productivity as reflected in wage is, ceteris paribus, higher for workers who previously acquired work experience in rather urban labor markets with a large local workforce than in rather rural labor markets which are small in terms of regional employment. Our empirical analysis provides new evidence on the magnitude of these dynamic agglomeration gains by estimating the elasticity of wages with regard to the (cumulated) size of the local labor markets in which workers acquired experience. It shows that this elasticity increases with the level of individual experience to more than 0.06 implying that today's wage of a worker with 20 years of experience or more would be about four to five percent higher if the worker would have gained all his or her experience in local labor markets double the size of the labor markets in which he or she actually was working in the past. These identified dynamic agglomeration gains are supposed to be related to learning externalities. The analysis uses information on individual employment biographies and regional employment from 1975 onwards. The wage information refers to more than 300,000 entry wages of new employment relationships in Germany in the period 2005 to 2011. The depreciation of human capital is taken into account and that high-skilled workers presumably are the ones other workers learn the most from.
    Keywords: Dynamic agglomeration economies,Human capital externalities,Learning,Regional disparities,Dynamische Agglomerationsvorteile,Humankapitalexternalitäten,Lernen,Regionale Disparitäten
    JEL: R10 R23 J31
    Date: 2017
  2. By: Heger, Dörte; Korfhage, Thorben
    Abstract: Informal caregivers provide valuable services to elderly persons with long-term care needs. However, the time commitment of caregiving often competes against time spent in the labour force. In addition to the momentary trade-off, long-term consequences are possible since especially older workers might find it difficult to re-enter the labour market after a caregiving spell. While several studies document a negative relationship between caregiving and work, little is known about whether this effect is persistent over time. Analysing a large panel data set of 15 European countries and Israel, we show that care provision to an elderly parent has lasting negative effects on employment for both men and women but only women reduce their working hours.
    Keywords: informal care,labour market outcomes,short and medium term effects
    JEL: J14 J22
    Date: 2017
  3. By: Jean-François Rouillard (Département d'économique, Université de Sherbrooke)
    Abstract: Through the lens of a dynamic model that features financial frictions and downward nominal wage rigidities (DNWR), I simulate a credit crunch similar to the one experienced by the US during the 2007-09 recession. Since the constraint on nominal wage infl ation binds, this induces important cutbacks in hours worked. For a 2% infl ation- target regime, the minimal deviation of hours worked is 2.72 greater with DNWR than with flexible wages. Total losses in hours worked are also 43% lower when the infl ation target is elevated from 2% to 4%. Moreover, the model can account for a large part of the upward shift in the labor wedge that occurred during the recession. This result arises because the marginal rate of substitution of consumption for leisure signi cantly deviates from real wages with DNWR.
    Keywords: borrowing constraints, monetary policy, in flation target, labor wedge.
    JEL: E24 E32 E44 E52
    Date: 2017–09
  4. By: Jared Rubin (Argyros School of Business and Economics, Chapman University); Anya Samek (Dornsife College of Letters, Arts and Sciences, University of Southern California); Roman M. Sheremeta (Weatherhead School of Management, Case Western Reserve University)
    Abstract: Firms face an optimization problem that requires a maximal quantity output given a quality constraint. But how do firms incentivize quantity and quality to meet these dual goals, and what role do behavioral factors, such as loss aversion, play in the tradeoffs workers face? We address these questions with a theoretical model and an experiment in which participants are paid for both quantity and quality of a real effort task. Consistent with basic economic theory, higher quality incentives encourage participants to shift their attention from quantity to quality. However, we also find that loss averse participantsshift their attention from quality to quantity to a greater degree when quality is weakly incentivized. These results can inform managers of appropriate ways to structure contracts, and suggest benefits to personalizing contracts based on individual behavioral characteristics.
    Keywords: quantity, quality, experiment, incentives, real effort, loss aversion
    JEL: D24 J24 J31 J41
    Date: 2017
  5. By: Xuan Huang; Bruno Lanz
    Abstract: Using a dual-market sorting model of workers' location decisions, this paper studies the capitalization of air pollution in wages and property prices across Chinese cities. To account for endogeneity of air pollution in the determination of wages and property prices, we exploit quasi-experimental variations in air quality induced by a policy subsidizing coal-based winter heating in northern China, and document a discontinuity in average air quality for cities located north and south of the policy boundary. Using data for all 288 Chinese cities in 2011, we estimate an equilibrium relationship between wages and house prices for the entire system of Chinese cities, and specify a regression discontinuity design to quantify how variation in air quality induced by the policy affects this relationship locally. Our preferred estimates of the elasticity of wages and house prices with respect to PM10 concentration are 0.53 and -0.71 respectively. At the average of our sample, the willingness to pay for a marginal reduction in PM10 concentration is CNY 261.28 (about USD 40.50), with a significant share reflected in labor market outcomes.
    Keywords: Hedonic model; Air pollution; Labor market; House prices; Local public goods; Regression discontinuity
    JEL: H41 J31 R31 Q53
    Date: 2017–09
  6. By: Thomas (T.) Buser (University of Amsterdam; Tinbergen Institute, The Netherlands); Noemi Peter (University of Groningen); Stefan Wolter (University of Bern)
    Abstract: Men are generally found to be more willing to compete than women and there is growing evidence that willingness to compete is a predictor of individual and gender differences in career decisions and labor market outcomes. However, most existing evidence comes from the top of the education and talent distribution. In this study, we use incentivized choices from more than 1500 Swiss lower-secondary school students to ask how the gender gap in willingness to compete varies with ability and how willingness to compete predicts career choices along the whole ability distribution. Our main results are: 1. The gender gap in willingness to compete is essentially zero among the lowest-ability students, but increases steadily with ability and reaches 30-40 percentage points for the highest-ability students. 2. Willingness to compete predicts career choices along the whole ability distribution. At the top of the ability distribution, students who compete are more likely to choose a math or science-related academic specialization and girls who compete are more likely to choose academic over vocational education in general. At the middle, competitive boys are more likely to choose a business-oriented apprenticeship, while competitive girls are more likely to choose a math-intensive apprenticeship or an academic education. At the bottom, students who compete are more likely to succeed in securing an apprenticeship position. We also discuss how our findings relate to persistent gender differences in career outcomes.
    Keywords: willingness to compete; gender; career decisions
    JEL: D91 J16 J24
    Date: 2017–09–05
  7. By: Slavtchev, Viktor; Wyrwich, Michael
    Abstract: We empirically analyse whether television (TV) can influence entrepreneurial identity and incidence. To identify causal effects, we utilise a quasi-natural experiment setting. During the division of Germany after WWII into West Germany with a free-market economy and the socialistic East Germany with centrally-planned economy, some East German regions had access to West German public TV that - differently from the East German TV - transmitted images, values, attitudes and view of life compatible with the free-market economy principles and supportive of entrepreneurship. We show that during the 40 years of socialistic regime in East Germany entrepreneurship was highly regulated and virtually impossible and that the prevalent formal and informal institutions broke the traditional ties linking entrepreneurship to the characteristics of individuals so that there were hardly any differences in the levels and development of entrepreneurship between East German regions with and without West German TV signal. Using both, regional and individual level data, we show then that, for the period after the Unification in 1990 which made starting an own business in East Germany, possible again, entrepreneurship incidence is higher among the residents of East German regions that had access to West German public TV, indicating that TV can, while transmitting specific images, values, attitudes and view of life, directly impact on the entrepreneurial mindset of individuals. Moreover, we find that young individuals born after 1980 in East German households that had access to West German TV are also more entrepreneurial. These findings point to second-order effects due to inter-personal and inter-generational transmission, a mechanism that can cause persistent differences in the entrepreneurship incidence across (geographically defined) population groups.
    Keywords: entrepreneurship,TV,culture,occupational choice,institutions
    JEL: D02 D03 J24 L26 M13 O30 P20 P30 Z10
    Date: 2017
  8. By: Bruce Bradbury; Markus Jäntti; Lena Lindahl
    Abstract: This paper documents the variation in living standards of the poorest fifth of children in rich (and some middle-income) nations, with a focus on the relative importance and interaction of social transfers (net of taxes) and labour market incomes. Overall, the cross-national variation in the disposable income of disadvantaged children is comprised equally of variation in market and transfer income (with the two negatively correlated). The English-speaking countries stand out as all having relatively low market incomes, but substantial variation in transfer income. Their low market incomes reflect low employment hours in Australia and primarily low hours in the UK and Ireland, while in the US and Canada low hours and low pay contribute equally. Comparing incomes prior to and after the 2008 financial crisis, the real disposable incomes of the poorest fifth decreased substantially in Spain and in Ireland, but were relatively stable in other rich nations.
    Keywords: poverty,social transfers,wages,cross-national comparisons,LIS database
    JEL: I32 I38 J21
    Date: 2017–07

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