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on Labor Markets - Supply, Demand, and Wages |
| By: | Wolfgang Keller; William W. Olney |
| Abstract: | This paper identifies globalization as a factor behind the rapid increase in executive compensation and inequality over the last few decades. Employing comprehensive data on top executives at major U.S. companies, we show that compensation is higher at more global firms. We find that pay responds not only to firm size and technology but also to exports conditional on other firm characteristics. Export shocks that are not related to the executive’s talent and actions also increase executive compensation, indicating that globalization is influencing compensation through pay-for-non-performance. Furthermore, this effect is asymmetric, with executive compensation increasing due to positive export shocks but not decreasing due to negative shocks. Finally, export shocks primarily affect discretionary forms of compensation of more powerful executives at firms with poor corporate governance, as one would expect if globalization has enhanced rent-capture opportunities. Overall, these results indicate that globalization has played a more central role in the rapid growth of executive compensation and U.S. inequality than previously thought, and that both higher returns to top talent and rent-capture are important parts of this story. |
| Keywords: | inequality, executive compensation, globalization, exports |
| JEL: | F16 F14 M12 J31 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6701&r=lma |
| By: | Brian K. Kovak; Lindsay Oldenski; Nicholas Sly |
| Abstract: | Estimating the causal effect of offshoring on domestic employment is difficult because of the inherent simultaneity of multinational firms' domestic and foreign affiliate employment decisions. In this paper, we resolve this identification problem using variation in Bilateral Tax Treaties (BTTs), which reduce the effective cost of offshore activity by mitigating double taxation. We derive a panel difference-in-differences research design from a standard model of multinational firms, demonstrating the simultaneity problem and showing how to resolve it using BTTs as an instrument for offshore employment. We confirm that new treaty implementation is uncorrelated with existing employment trends, and use Bureau of Economic Analysis data on U.S. multinational firms to measure the domestic employment effects of offshore activity. Overall, we find modest positive effects of offshore activity on domestic employment. A 10 percent BTT-induced increase in affiliate employment drives a 1.8 percent increase in employment at the U.S. parent firm, with smaller effects at the industry and regional levels. Underlying these results is substantial heterogeneity based on offshoring margin and firm organizational structure. For example, increased foreign affiliate activity in vertically oriented multinational firms drives declining employment among non-multinationals in the same industry, and multinational firms opening new affiliates exhibit much smaller domestic employment growth than those expanding existing affiliates. Throughout the analysis, OLS estimates are much larger than the IV estimates, consistent with upward simultaneity bias. Overall, our results indicate that greater offshore activity raises net employment by U.S. firms, albeit with underlying job loss and reallocation of workers. |
| JEL: | F16 F23 J20 J30 |
| Date: | 2017–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:23947&r=lma |
| By: | Harald Hau; Yi Huang; Gewei Wang |
| Abstract: | The large regional variation in minimum wage levels in the period 2002-08 in China implies that Chinese manufacturing firms experienced competitive shocks as a function of firm location and their low-wage employment share. We find that minimum wage hikes accelerate the input substitution from labor to capital, reduce employment growth and accelerate total factor productivity growth–particularly among the less productive firms under private Chinese or foreign ownership, but not among state-owned enterprises. The heterogeneous firm response to labor cost shocks can be explained by differences in management practices, and suggests that management quality and competitive pressure are complementary. |
| Keywords: | firm productivity, capital investment, minimum wage policy |
| JEL: | D24 G31 J24 J31 O14 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6637&r=lma |
| By: | Sigurd Mølster Galaasen (Norges Bank (Central Bank of Norway)) |
| Abstract: | Old-age pension reform is on the agenda across the OECD, and a key target is to delay retirement. Most of these countries also have a disability insurance (DI) program accounting for a large share of labor force exits. This paper builds a quantitative life-cycle model with endogenous retirement to study how DI and old-age pension (OA-pension) systems interact with health and wages to determine retirement age, with particular focus on the macroeconomic effects of OA-pension reforms. Individuals face uncertain future health status and wages, and if in bad health they are eligible for DI if they choose to retire before reaching the statutory retirement age. I calibrate the model to the Norwegian economy and explore the effects of raising the statutory retirement age and cutting OA-pension on labor supply and public finances. The main contribution of the paper is that I, in contrast to standard macro pension models, include DI as another endogenous margin of retirement. I show that failure to account for this margin might severely bias the analysis of OA-pension reforms. |
| Keywords: | Retirement, disability insurance, life-cycle, pension reform |
| JEL: | E2 E6 H31 H55 J26 |
| Date: | 2017–10–23 |
| URL: | http://d.repec.org/n?u=RePEc:bno:worpap:2017_20&r=lma |
| By: | Ruediger Bachmann; Christian Bayer; Christian Merkl; Stefan Seth; Heiko Stüber; Felix Wellschmied |
| Abstract: | We study the relationship between employment growth and worker flows in excess of job flows (churn) at the establishment level using the new German AWFP dataset spanning from 1975–2014. Churn is above 5 percent of employment along the entire employment growth distribution and most pronounced at rapidly-adjusting establishments. We find that the patterns of churn along the employment growth distribution can be explained by separation rate shocks and time-to-hire frictions. These shocks become larger on average during boom periods leading to procyclical worker churn. Distinguishing between separations into non-employment and to other establishments, we find that separations to other establishments drive all procyclical churn. In a secondary contribution, we compare German worker and job flows with their US counterparts and recent US findings. |
| Keywords: | job flows, worker flows, churn, job-to-job transitions, aggregate fluctuations |
| JEL: | E20 E24 E32 J23 J63 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6702&r=lma |
| By: | Julia Müller; Thorsten Upmann |
| Abstract: | While the output of a team is evident, the productivity of each team member is typically not readily identifiable. In this paper we consider the problem of measuring the productivity of team members. We propose a new concept of coworker productivity, which we refer to as eigenvalue productivity (EVP). We demonstrate the existence and uniqueness of our concept and show that it possesses several desirable properties. Also, we suggest a procedure for specifying the required productivity matrix of a team, and illustrate the operational practicability of EVP by means of three examples representing different types of the available data. |
| Keywords: | coworker productivity, eigenvalue productivity, centrality, team production |
| JEL: | D24 J24 L23 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6679&r=lma |
| By: | Alessandro Iaria; Carlo Schwarz; Fabian Waldinger |
| Abstract: | We show that WWI and the subsequent boycott against Central scientists severely interrupted international scientific cooperation. After 1914, citations to recent research from abroad decreased and paper titles became less similar (evaluated by Latent Semantic Analysis), suggesting a reduction in international knowledge flows. Reduced international scientific cooperation led to a decline in the production of basic science and its application in new technology. Specifically, we compare productivity changes for scientists who relied on frontier research from abroad, to changes for scientists who relied on frontier research from home. After 1914, scientists who relied on frontier research from abroad published fewer papers in top scientific journals, produced less Nobel Prize-nominated research, introduced fewer novel scientific words, and introduced fewer novel words that appeared in the text of subsequent patent grants. The productivity of scientists who relied on top 1% research declined twice as much as the productivity of scientists who relied on top 3% research. Furthermore, highly prolific scientists experienced the starkest absolute productivity declines. This suggests that access to the very best research is key for scientific and technological progress. |
| Keywords: | frontier knowledge, scientific production, international knowledge flows, WWI |
| JEL: | O3 N3 N4 O31 O5 N30 N40 J44 I23 |
| Date: | 2017–10 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1506&r=lma |
| By: | Charles Beach (Queen's University) |
| Abstract: | This paper extends the statistical inference approach developed in Beach (2016) to look at income changes over different regions of an income distribution. Specifically, it looks at relative-mean earnings (RME) ratios and mean earnings levels for lower earners, middle-class (MC) workers and higher earners in Canada since 1970. Formulas are developed for (asymptotic) standard errors of these distributional statistics. The most consistent pattern since 1980 has been the marked decline in RME for MC workers, which has been highly statistically significant. Since 2005, however, real earnings levels have increased significantly and have been broadly shared across these earnings groups. |
| Keywords: | Income equality, Canadian earnings, Statistical inference |
| JEL: | C12 C46 J20 J31 |
| Date: | 2017–11 |
| URL: | http://d.repec.org/n?u=RePEc:qed:wpaper:1393&r=lma |