nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2017‒10‒29
sixteen papers chosen by
Joseph Marchand
University of Alberta

  1. Effects of Emigration on Rural Labor Markets By Agha Ali Akram; Shyamal Chowdhury; Ahmed Mushfiq Mobarak
  2. Worker separation under performance pay : Empirical evidence from Finland By Jones, Derek C.; Kalmi, Panu; Kato, Takao; Mäkinen, Mikko
  3. Countercyclical Endogenous Uncertainty Shocks, Efficiency Wages and Procyclical Precautionary Labor Productivity By Jean-Michel Grandmont
  4. Uber vs. Taxi: A Driver’s Eye View By Joshua D. Angrist; Sydnee Caldwell; Jonathan V. Hall
  5. Non-Contributory Health Insurance and Household Labor Supply: Evidence from Mexico By Gabriella Conti; Rita Ginja, Renata Narita
  6. Product Market Competition and Employer Provided Training in Germany By Heywood, John S.; Jirjahn, Uwe; Pfister, Annika
  7. The Economics of Scale-Up By Jonathan M.V. Davis; Jonathan Guryan; Kelly Hallberg; Jens Ludwig
  8. Religious Competition and Reallocation: The Political Economy of Secularization in the Protestant Reformation By Davide Cantoni; Jeremiah Dittmar; Noam Yuchtman
  9. Ranking Firms Using Revealed Preference By Isaac Sorkin
  10. So similar and yet so different: A comparative analysis of a firm's cost and benefits of apprenticeship training in Austria and Switzerland By Luca Moretti; Martin Mayerl; Samuel Muehlemann; Peter Schloegl; Stefan C. Wolter
  11. All Together Now: Leveraging Firms to Increase Worker Productivity Growth By Nathaniel Hilger
  12. Overeducation and the Gender Pay Gap in Italy. A Double Selectivity Approach By Carolina Castagnetti; Luisa Rosti; Marina Toepfer
  13. Higher Education Funding Reforms: A Comprehensive Analysis of Educational and Labor Market Outcomes in England By Azmat, Ghazala; Simion, Stefania
  14. Was Domar Right? Serfdom and Factor Endowments in Bohemia By Klein, Alex; Ogilvie, Sheilagh C.
  15. Prevalence of Diseases and Health Care Utilization ofthe Self-Employed Artists and TheirEmpirical Determinants: Evidence From a Slovenian Survey By Andrej Sarkar
  16. The Context-Bound University Selectivity Premium By Milla, Joniada

  1. By: Agha Ali Akram; Shyamal Chowdhury; Ahmed Mushfiq Mobarak
    Abstract: Rural to urban migration is an integral part of the development process, but there is little evidence on how out-migration transforms rural labor markets. Emigration could benefit landless village residents by reducing labor competition, or conversely, reduce productivity if skilled workers leave. We offer to subsidize transport costs for 5792 potential seasonal migrants in Bangladesh, randomly varying saturation of offers across 133 villages. The transport subsidies increase beneficiaries’ income due to better employment opportunities in the city, and also generate the following spillovers: (a) A higher density of offers increases the individual take-up rate, and induces those connected to offered recipients to also migrate. The village emigration rate increases from 35% to 65%. (b) This increases the male agricultural wage rate in the village by 4.5-6.6%, and the available work hours in the village by 11-14%, which combine to increase income earned in the village, (c) There is no intra-household substitution in labor supply, but primary workers within households earn more during weeks in which many of their village co-residents moved away. (d) The wage bill for agricultural employers increases, which reduces their profit, with no significant change in yield. (e) Food prices increase by 2.7% on net, driven by an increase in the price of (fish) protein, and offset by (f) a decrease in the price of non-tradables like prepared food and tea. Seasonal migration subsidies not only generate large direct benefits, but also indirect spillover benefits by creating slack in the village-of-origin labor market during the lean season.
    JEL: J43 J61 O1 O18 R13 R23
    Date: 2017–10
  2. By: Jones, Derek C.; Kalmi, Panu; Kato, Takao; Mäkinen, Mikko
    Abstract: This paper investigates the role of individual incentive (II) and group incentive (GI) pay as determinants of worker separation. We use a large linked employer-employee panel data set for full-time male manufacturing workers during 1997-2006 from Finland. We follow actual job spells and switches of individual employees and define separation as worker exit from his current employer. The key finding for white-collar workers is that group incentive pay is associated significantly with increased probability of separation and hence diminished employment stability, but in large firms only. For blue-collar workers our results consistently indicate that individual incentive pay is associated with a decreased probability of separation and hence enhanced employment stability, both in small and large firms. Our finding that group incentive pay increases the risk of separation for white-collar workers is more consistent with theoretical work such as Lazear (2000) and Fehr and Gaechter (2000), while uncovering that individual incentive pay decreases employment stability for blue-collar workers supports theoretical work such as Parent (1999) and Paarsch and Shearer (2000).
    JEL: J33 M52 J31 J62 J63
    Date: 2017–10–19
  3. By: Jean-Michel Grandmont (Department of Economics, University Of Venice Cà Foscari; CREST (EXCESS, UMR CNRS 9194), University of Paris-Saclay, France; and RIEB Fellow, University of Kobe, Japan)
    Abstract: This work introduces a new mechanism generating procyclical comovements of labor productivity, employment, through endogenous variations of workers’ effort, in a simple model with efficiency wages, near a locally indeterminate steady state. A current endogenous countercyclical uncertainty shock makes risk averse workers more willing to provide imperfectly monitored “precautionary effort” by increasing their expected utility gain of not shirking. If workers’ relative prudence is small and decreasing fast near the steady state, firms’ efficiency wage contracts generate significant endogenous procyclical variations of effort, employment and labor productivity, in particular when the capital-efficient labor elasticity of substitution is smaller than and close to 1.
    Keywords: Efficiency wages, unemployment, expectation driven business cycles, conditionally heteroskedastic sunspots, countercyclical uncertainty shocks, prudence, procyclical labor effort and productivity
    JEL: D81 D84 E10 E24 E32 J30 J41
  4. By: Joshua D. Angrist; Sydnee Caldwell; Jonathan V. Hall
    Abstract: Ride-hailing drivers pay a proportion of their fares to the ride-hailing platform operator, a commission-based compensation model used by many internet-mediated service providers. To Uber drivers, this commission is known as the Uber fee. By contrast, traditional taxi drivers in most US cities make a fixed payment independent of their earnings, usually a weekly or daily medallion lease, but keep every fare dollar net of expenses. We assess these compensation models from a driver’s point of view using an experiment that offered random samples of Boston Uber drivers opportunities to lease a virtual taxi medallion that eliminates the Uber fee. Some drivers were offered a negative fee. Drivers’ labor supply response to our offers reveals a large intertemporal substitution elasticity, on the order of 1.2. At the same time, our virtual lease program was under-subscribed: many drivers who would have benefitted from buying an inexpensive lease chose to opt out. We use these results to compute the average compensation required to make drivers indifferent between ride-hailing and a traditional taxi compensation contract. The results suggest that ride-hailing drivers gain considerably from the opportunity to drive without leasing.
    JEL: J18 J22 J41 J58
    Date: 2017–09
  5. By: Gabriella Conti; Rita Ginja, Renata Narita
    Abstract: A central topic in the global health agenda is universal health coverage (UHC). The primary goal of social health insurance schemes is to protect beneficiaries from the health and financial consequences of adverse health events. While in this sense there is scope for government intervention in providing insurance, the impacts of UHC on labor markets in developing countries are less clear. We study this issue using the case of Mexico, which introduced in 2002 a non-contributory health insurance scheme directed to the half of the country’s population uncovered by Social Security protection (the Seguro Popular, SP). Since before SP uninsured individuals could only access affordable health care through their employer, the introduction of a non-contributory public health insurance scheme could have resulted in large effects on the labor market. In practice, SP is a transfer(tax) to the informal(formal) sector workers and to the nonemployed. On the one hand, if the value placed on SP benefits is high, the introduction of fully subsidized health insurance can lead to negative impacts on employment and/or formality. On the other hand, wages in equilibrium might compensate the increase in benefits in the informal sector, in which case the impact on formality and employment is ambiguous. We start analyzing the effects of SP on labor market outcomes by exploiting its staggered introduction across municipalities using a difference-in-differences strategy on the Mexican Labor Force Survey data. We show that the implementation of SP in a municipality is associated with an increase in informality by 4% for low-education families with children. Then, to study why the policy change had limited impacts on the labor market, we develop and estimate a novel household search model which incorporates the value of SP as well as the pre-reform valuation assigned to the amenities in the formal sector relative to the alternatives (i.e., informal sector and non-employment), in order to understand whether access to free health services is valued by household members when they make their labor market decisions. Our structural model is able to replicate both the stocks of household types by Social Security coverage and the transitions in and out of employment and between formal and informal jobs in the pre-reform period. The results show that the steady-state marginal willingness to pay for the health insurance coverage provided by SP is very low, amounting to only 1.3%-4.2% of the mean wage in the informal sector. Lastly, using the model to simulate counterfactual scenarios of employment and labor formality under different valuations of the new health system implemented in Mexico, we find that the willingness to pay for SP would have had to be significantly greater than it was to have substantial impacts on the economy.
    Keywords: Health Insurance; Social Security; Informality
    JEL: I13 J33 J42 O17
    Date: 2017–10–23
  6. By: Heywood, John S. (University of Wisconsin, Milwaukee); Jirjahn, Uwe (University of Trier); Pfister, Annika (University of Trier)
    Abstract: Using German establishment data, this paper examines the relationship between product market competition and the extent of employer provided training. We demonstrate that high product market competition is associated with increased training except when the competition is so severe as to threaten liquidation to a firm. We take this as evidence of an inverted U-shaped relationship. We also make clear that while this relationship is very evident for the service sector it is largely missing for manufacturing where we confirm earlier results of no relationship.
    Keywords: competition, employer provided training, manufacturing, services
    JEL: J24 L00 M53
    Date: 2017–09
  7. By: Jonathan M.V. Davis; Jonathan Guryan; Kelly Hallberg; Jens Ludwig
    Abstract: Most randomized controlled trials (RCT) of social programs test interventions at modest scale. While the hope is that promising programs will be scaled up, we have few successful examples of this scale-up process in practice. Ideally we would like to know which programs will work at large scale before we invest the resources to take them to scale. But it would seem that the only way to tell whether a program works at scale is to test it at scale. Our goal in this paper is to propose a way out of this Catch-22. We first develop a simple model that helps clarify the type of scale-up challenge for which our method is most relevant. Most social programs rely on labor as a key input (teachers, nurses, social workers, etc.). We know people vary greatly in their skill at these jobs. So social programs, like firms, confront a search problem in the labor market that can lead to inelastically-supplied human capital. The result is that as programs scale, either average costs must increase if program quality is to be held constant, or else program quality will decline if average costs are held fixed. Our proposed method for reducing the costs of estimating program impacts at large scale combines the fact that hiring inherently involves ranking inputs with the most powerful element of the social science toolkit: randomization. We show that it is possible to operate a program at modest scale n but learn about the input supply curves facing the firm at much larger scale (S × n) by randomly sampling the inputs the provider would have hired if they operated at scale (S × n). We build a simple two-period model of social-program decision making and use a model of Bayesian learning to develop heuristics for when scale-up experiments of the sort we propose are likely to be particularly valuable. We also present a series of results to illustrate the method, including one application to a real-world tutoring program that highlights an interesting observation: The noisier the program provider’s prediction of input quality, the less pronounced is the scale-up problem.
    JEL: D24 I2 J2 L25 L38 M5
    Date: 2017–10
  8. By: Davide Cantoni; Jeremiah Dittmar; Noam Yuchtman
    Abstract: Using novel microdata, we document an unintended, first-order consequence of the Protestant Reformation: a massive reallocation of resources from religious to secular purposes. To understand this process, we propose a conceptual framework in which the introduction of religious competition shifts political markets where religious authorities provide legitimacy to rulers in exchange for control over resources. Consistent with our framework, religious competition changed the balance of power between secular and religious elites: secular authorities acquired enormous amounts of wealth from monasteries closed during the Reformation, particularly in Protestant regions. This transfer of resources had important consequences. First, it shifted the allocation of upper-tail human capital. Graduates of Protestant universities increasingly took secular, especially administrative, occupations. Protestant university students increasingly studied secular subjects, especially degrees that prepared students for public sector jobs, rather than church sector-specific theology. Second, it affected the sectoral composition of fixed investment. Particularly in Protestant regions, new construction shifted from religious toward secular purposes, especially the building of palaces and administrative buildings, which reflected the increased wealth and power of secular lords. Reallocation was not driven by preexisting economic or cultural differences. Our findings indicate that the Reformation played an important causal role in the secularization of the West.
    JEL: E02 J24 N13 N33
    Date: 2017–10
  9. By: Isaac Sorkin
    Abstract: This paper estimates workers' preferences for firms by studying the structure of employer-to-employer transitions in U.S. administrative data. The paper uses a tool from numerical linear algebra to measure the central tendency of worker flows, which is closely related to the ranking of firms revealed by workers' choices. There is evidence for compensating differential when workers systematically move to lower-paying firms in a way that cannot be accounted for by layoffs or differences in recruiting intensity. The estimates suggest that compensating differentials account for over half of the firm component of the variance of earnings.
    JEL: E24 J01 J3 J32 J42
    Date: 2017–10
  10. By: Luca Moretti (University of Bern); Martin Mayerl (Austrian Institute for Research on Vocational Training (ÖIBF), Vienna); Samuel Muehlemann (LMU Munich, IZA Bonn); Peter Schloegl (Alpen-Adria-Universität Klagenfurt & Austrian Institute for Research on Vocational Training (ÖIBF), Vienna); Stefan C. Wolter (University of Bern & CESifo Munich & IZA Bonn)
    Abstract: The authors compare a firm's costs and benefits of providing apprenticeship training in Austria and Switzerland, using two original micro data sets. While both countries share a number of similarities, including an extensive vocational education and training (VET) system, and a common border, there are some important institutional differences. On average, a Swiss firm generates a net profit of 3400 Euro per apprentice and per year of training, while an Austrian firm incurs net costs of 4200 Euro. Applying matching models, we find that this difference is largely driven by a higher relative apprentice pay in Austria, which in turn is associated with collective bargaining agreements and competition with alternative school-based VET pathways. However, Austrian firms can still generate a return on their training investment, partly due to wage subsidies, but mostly by retaining a high share of apprentices as skilled workers, and thereby save on future hiring costs.
    Keywords: Apprenticeship training, cost-benefit analysis, initial VET, hiring costs
    JEL: J24 J31 J44
    Date: 2017–10
  11. By: Nathaniel Hilger
    Abstract: I describe a new policy that endows firms with limited-duration, virtual shares in their own workers’ future realized earnings growth. The policy seeks to leverage employers to address a key challenge of the modern world: increasing worker skills well into adulthood. I label the policy “generalized experience rating” (GER) because it builds on the more narrow experience rating long embodied in the US unemployment insurance system. GER can be interpreted as a Pigouvian tax, and as a mandate alleviating an adverse selection problem. I discuss many design issues and potential unintended consequences. I conclude the policy may warrant further research.
    JEL: J38 J62 J68
    Date: 2017–10
  12. By: Carolina Castagnetti (Department of Economics and Management, University of Pavia); Luisa Rosti (Department of Economics and Management, University of Pavia); Marina Toepfer (Institute of Economics, University of Hohenheim)
    Abstract: We use a large Italian data set (ISFOL-PLUS 2005-2014) to estimate the gender pay gap (GPG) among overeducated workers. We show that overeducation is an important driver of the GPG. This result holds when controlling for sample selection and endogeneity problems, too. Neglecting selectivity issues may lead to the conclusion that discrimination is the most important driver of the GPG. Yet, when accounting for self-selection and endogeneity bias overeducation is found to merely reflect unobserved differences in personal characteristics such as innate ability. The selection coefficients for both the participation and the overeducation decision allow explaining almost the entire GPG.
    Keywords: gender pay gap, double selection, Italy, discrimination, wages.
    JEL: J16 J31 J71
    Date: 2017–10
  13. By: Azmat, Ghazala; Simion, Stefania
    Abstract: This paper investigates the impact of changes in the funding of higher education in England on students' choices and outcomes. Over the last two decades - through three major reforms in 1998, 2006 and 2012 - undergraduate university education in public universities moved from being free to students and state funded to charging substantial tuition fees to all students. This was done in conjunction with the government offering generous means-tested maintenance grants and loans. Using detailed longitudinal micro-data that follows all students attending state schools in England (more than 90 percent of all school-aged children) from lower education to higher education, we document the socio-economic distributional effects of the 2006 and 2012 policy reforms on a comprehensive set of outcomes, including enrolment, relocation decisions, selection of institution, program of study, and performance within university. For a subset of students, we track them after completing higher education, allowing us to study the labor market effects of the policy reforms. Despite the substantial higher education funding reforms, we do not find large aggregate effect on student enrolment or on other margins. Moreover, the small negative impacts found on the enrolment were largely borne on those in higher parts of the wealth distribution – reducing the enrolment gap across socio-economic groups.
    Keywords: career choices; career outcomes; Higher education; means-tested support; tuition fees
    JEL: I22 I23 I29 J30
    Date: 2017–10
  14. By: Klein, Alex; Ogilvie, Sheilagh C.
    Abstract: Do factor endowments explain serfdom? Domar (1970) conjectured that high land-labor ratios caused serfdom by increasing incentives to coerce labor. But historical evidence is mixed and quantitative analyses are lacking. Using the Acemoglu-Wolitzky (2011) framework and controlling for political economy variables by studying a specific serf society, we analyze 11,349 Bohemian serf villages in 1757. The net effect of higher land-labor ratios was indeed to increase coercion. The effect greatly increased when animal labor was included, and diminished as land-labor ratios rose. Controlling for other variables, factor endowments significantly influenced serfdom. Institutions, we conclude, are shaped partly by economic fundamentals.
    Keywords: serfdom; land-labor ratio; institutions; labor coercion; rural-urban interaction
    JEL: J47 N33 O43 P48
    Date: 2017–10
  15. By: Andrej Sarkar (Institute for Economic Research (IER) and Faculty of Economics, University of Ljubljana, Ljubljana, Slovenia)
    Abstract: Empirical studies on precarious work are still at their beginnings, even more so when the health of precarious workers is under concern. Commonly, precarious workers are assumed to have the inferior health to the employees and even to the population in general, although some recent studiesfound counter evidence to this claim. In particular, studies on the labor market of artists have so far almost completely neglected the question of the health of the artists,and this study tries to fill in this large and important void. In the study, we employ a survey of Slovenian self-employed artists, undertaken in 2015, to study the determinants of the prevalence of diseases and health utilization of self-employed artists in Slovenia using econometric modelling and network analysis. We study and find the determinants, influencing the prevalence of each type of the most common disease among the self-employed artists, determine the most common groupings/multiple diseases among this population, and, finally, study the determinants of health care utilization of self-employed artists and model the heterogeneity in the observed sample. Aninteresting result lies in determining two differentgroups according to their health care utilization and providingtheir interpretation which fits into the existing literature on artist labor markets.
    Keywords: self-employed artists, diseases, health care utilization, multiple diseases, determinants, heterogeneity
    JEL: Z11 Z18 C45 C38 J44 I14
    Date: 2017–09
  16. By: Milla, Joniada (Saint Mary’s University)
    Abstract: In this paper I present a selective survey of the empirical literature on wage premium to university selectivity focusing mainly on the context of the country under analysis and the identification strategies employed. I then estimate the wage premium to university selectivity using Canadian data and two popular methods to correct for non-random selection in universities of different quality: matching methods and instrumental variables (IV). I estimate a wage premium of 7% using the matching estimator, and a premium of 14.8% using the IV estimator for alumni of selective Canadian universities 4–6 years after graduation. My findings are in line with the literature on countries with a moderately differentiated higher education system that has low variation in tuition fees and is well supported by public funds.
    Keywords: university selectivity, wage premium, context
    JEL: C21 I23 J30
    Date: 2017–09

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