nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2017‒11‒12
twenty papers chosen by
Joseph Marchand
University of Alberta

  1. Firm export diversification and change in workforce composition By Sarah Guillou; Tania Treibich
  2. Does Low Skilled Immigration Cause Human Capital Polarization? Evidence from Italian Provinces By Brunello, Giorgio; Lodigiani, Elisabetta; Rocco, Lorenzo
  3. Serving the Public Interest in Several Ways: Theory and Empirics By Dur, Robert; van Lent, Max
  4. Antecedents of Overtime Work: The Case of Junior Academics By Frei, Irina; Grund, Christian
  5. Preventing NEETs during the Great Recession: The Effects of a Mandatory Activation Program for Young Welfare Recipients By Cammeraat, Emile; Jongen, Egbert L. W.; Koning, Pierre
  6. Assortative Mating and Earnings Inequality in France By Frémeaux, Nicolas; Lefranc, Arnaud
  7. Working, Volunteering and Mental Health in the Later Years By Mosca, Irene; Wright, Robert E.
  8. Early Tracking, Academic vs. Vocational Training and the Value of 'Second Chance' Options By Biewen, Martin; Tapalaga, Madalina
  9. Does Medicaid Generosity Affect Household Income? By Kumar, Anil
  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 Moretti, Luca; Mayerl, Martin; Mühlemann, Samuel; Schlögl, Peter; Wolter, Stefan C.
  11. Service offshoring and firm employment By Eppinger, Peter S.
  12. Spatial-Ethnic Inequalities: The Role of Location in the Estimation of Ethnic Wage Differentials By Longhi, Simonetta
  13. Is there a Glass Ceiling over Germany? By Matthias Collischon
  14. Heterogeneity and the Public Sector Wage Policy By Gomes, Pedro Maia
  15. Higher Education Funding Reforms: A Comprehensive Analysis of Educational and Labor Market Outcomes in England By Azmat, Ghazala; Simion, Stefania
  16. The Local Effects of the Texas Shale Boom on Schools, Students, and Teachers By Marchand, Joseph; Weber, Jeremy
  17. Resolving the Public Sector Wage Premium Puzzle by Indirect Inference By Minford, Patrick; Wang, Yi; Zhou, Peng
  18. Overoptimistic Entrepreneurs: Predicting Wellbeing Consequences of Self-Employment By Odermatt, Reto; Powdthavee, Nattavudh; Stutzer, Alois
  19. Labour Market Polarization in Advanced Countries: Impact of Global Value Chains, Technology, Import Competition from China and Labour Market Institutions By Koen Breemersch; Jože P. Damijan; Jozef Konings
  20. An Assessment of the National Establishment Time Series (NETS) Database By Keith Barnatchez; Leland Crane; Ryan Decker

  1. By: Sarah Guillou (OFCE-Sciences PO Paris, France); Tania Treibich (Maastricht University and Sant'Anna school of Advanced Studies)
    Abstract: The objective of this paper is to show that part of the fixed cost of firms’ trade expansion is due to the acquisition of new internal capabilities (e.g. technology, production processes or skills), which imply a costly change in the firm’s internal labor organisation. We investigate the relationship between a firm’s structure of labor, in terms of relative number of managers, and the scope of its export portfolio, in terms of product-destination varieties. The empirical analysis is based on a matched employer- employee dataset covering the population of French firms from tradable sectors over theperiod 2009-2014. Our analysis suggests that market expansion, and in particular export diversification, is associated with a change in the firm’s workforce composition, namely an increase in the number of managerial layers and in the ratio of managers. We show how these results are consistent with a simple model where the complexity of a firm’s operations increases in the number of product-destination couples exported, and where managers’ role is to address the unsolved problems arising from such increased complexity of operations.
    Keywords: Export diversification, Managers, Occupations, Employer-Employee data.
    JEL: F16 E24 C14 D22
    Date: 2017–10–09
  2. By: Brunello, Giorgio (University of Padova); Lodigiani, Elisabetta (University of Padova); Rocco, Lorenzo (University of Padova)
    Abstract: While there is a vast literature considering the labour market effects of immigration, less has been done to investigate how immigration affects the educational choices of young natives. Using Italian provincial data and an instrumental variables strategy, we show that the recent increase in the immigration of low skilled labour has produced human capital polarization, i.e. the contemporaneous increase in the share of natives with less than high school and not enrolled in school and in the share with a college degree or enrolled in college. This evidence is stronger for males than for females. We adapt the standard Card's model of educational choice and spell out under what conditions human capital polarization occurs. We estimate wage equations by gender and find that these conditions are satisfied, especially for Italian males.
    Keywords: low skilled, immigration, human capital, Italy
    JEL: J26 H55 J21 J14 J11
    Date: 2017–10
  3. By: Dur, Robert (Erasmus University Rotterdam); van Lent, Max (Leiden University)
    Abstract: We develop a model where people differ in their altruistic preferences and can serve the public interest in two ways: by making donations to charity and by taking a public service job and exerting effort on the job. Our theory predicts that people who are more altruistic are more likely to take a public service job and, for a given job, make higher donations to charity. Comparing equally altruistic workers, those with a regular job make higher donations to charity than those with a public service job by a simple substitution argument. We subsequently test these predictions using cross-sectional data from Germany on self-reported altruism, sector of employment, and donations to charity. In addition, we use panel data from the Netherlands on volunteering and sector of employment. We find support for most of our predictions.
    Keywords: altruism, charitable donations, volunteering, public service motivation, public sector employment, self-selection
    JEL: D64 H11 J45 M50
    Date: 2017–10
  4. By: Frei, Irina (RWTH Aachen University); Grund, Christian (RWTH Aachen University)
    Abstract: Despite the ongoing public debate about precarious working conditions in academia, there is only little evidence on working hours and overtime work for the group of (non-tenured) junior academics. By using unique longitudinal survey data on the occupational situation and careers of doctoral students and doctorate holders in STEM fields in Germany, we explore potential antecedents of overtime. We find that overtime hours are less pronounced among firm employees holding a doctorate and among postdocs than they are among doctoral students. This result holds in the cross-section and also when examining status changes (from doctoral student to postdoc or to firm employee holding a doctorate) in difference-in-differences estimations. In contrast to firm employees, overtime hours are considerably positively associated with part-time contracts for doctoral students. Furthermore, our results reveal that individuals' career orientation is positively associated with extra hours. In contrast, individuals with family responsibilities and a stronger preference for leisure time spend significantly fewer hours at work.
    Keywords: working time, overtime, part-time employment, academia
    JEL: I23 J22 M51
    Date: 2017–10
  5. By: Cammeraat, Emile (Leiden University); Jongen, Egbert L. W. (CPB Netherlands Bureau for Economic Policy Analysis); Koning, Pierre (Leiden University)
    Abstract: We study the impact of a mandatory activation program for young welfare recipients in the Netherlands. Introduced at the end of 2009, the goal of the program was to prevent so-called NEETs (individuals not in employment, education or training). We use a large administrative data set for the period 1999-2012 and employ differences-in-differences and regression discontinuity to estimate the effects of the reform. We find that the reform reduced the number of NEETs on welfare, increased the number of NEETs not on welfare, and had no effect on the overall number of NEETs. Our finding that the reform did not reduce the total number of NEETs contrasts with previous studies, which may be due to the fact that the reform took place during a severe economic recession.
    Keywords: NEETs, mandatory activation programs, differences-in-differences, regression discontinuity
    JEL: C21 H31 J21
    Date: 2017–10
  6. By: Frémeaux, Nicolas (University of Paris 2); Lefranc, Arnaud (University of Cergy-Pontoise)
    Abstract: This paper analyzes economic assortative mating and its contribution to inequality in France. We first provide descriptive evidence on the statistical association in several socio-economic attributes of partners among French couples (annual earnings, potential earnings, education, occupation). Second, we assess the contribution of assortative mating to earnings inequality between couples. Contrary to previous estimates, we account for possible biases in the estimation of assortative mating arising from sample-selection into the labor force. We also provide a new method for assessing the contribution of assortative mating to inequality in couple's potential earnings. Our results indicate a strong degree of assortative mating in France. The correlation coefficient for education is above 0.6. The correlation in earnings is lower but sizable: around 0.17 for annual earnings, when including zeroes; around 0.35 for full-time equivalent earnings and up to 0.49 when using multi-year average earnings. We show that assortative mating tends to increase inequality among couples, compared to random mating. For annual earnings, the effect is non-negligible and accounts for 3 to 9% of measured inequality. The effect of assortative mating on household potential earnings is much larger and amounts to 10 to 20% for observed inequality.
    Keywords: assortative mating, inequality, earnings, labor supply, France
    JEL: J12 J22 D31
    Date: 2017–10
  7. By: Mosca, Irene (Trinity College Dublin); Wright, Robert E. (University of Strathclyde)
    Abstract: This paper examines the effect that working for pay and volunteering has on the mental health of older Irish women and men. Data from four waves of The Irish Longitudinal Study of Ageing (TILDA) are used. Three measures that capture different dimensions of mental health are considered. Ordinary least squares regression estimates suggest that both working for pay and volunteering have statistically significant and substantially large positive effects on mental health. However, these effects are less well defined when fixed effects regression is used. The analysis also suggests that combining working for pay with volunteering is more beneficial in terms of mental health than either working for pay or volunteering on their own. That is, there is something "extra" from engaging in both activities. The estimates also suggest a possible trade-off between working for pay and volunteering in terms of mental health benefits. Volunteering may be a "good mental health substitute" for working for pay. The extent of this substitutability is particularly important amongst older people, since participation in paid employment decreases while volunteering increases in older age. Higher levels of volunteering may compensate for the mental health loss associated with lower levels of working for pay. If this is the case, policies that promote volunteering may be cost-effective if they result in higher levels of self-sufficiency amongst older people.
    Keywords: mental health, working, volunteering, older people
    JEL: I12 J14 J22
    Date: 2017–10
  8. By: Biewen, Martin (University of Tuebingen); Tapalaga, Madalina (University of Tübingen)
    Abstract: This paper employs the dynamic treatment effects methodology proposed by Heckman et al. (2016, 2017) to examine educational transitions and expected returns in the German education system which is characterized by rigid early tracking but with options to revise track choices at later stages. We document strong sorting of individuals along observed and unobserved characteristics across the stages of the system. We consider expected wage returns to track choices including the continuation values arising from the options opened up by choosing a certain track. Expected returns to choosing higher tracks are generally positive but highly heterogenous. We find sorting on gains at many but not all stages of the system. A considerable percentage of the population exercises 'second chance' options to revise earlier track choices. The value of these options strongly depends on parental background as individuals from higher backgrounds are better able to exploit the possibilities opened up by these options at later stages. We present estimates of wage returns to different forms of vocational and academic training free of ability and sorting bias. Returns to academic training are particularly heterogenous.
    Keywords: heterogeneous returns, vocational training, educational expansion, sorting on gains
    JEL: C3 I21 J31
    Date: 2017–10
  9. By: Kumar, Anil (Federal Reserve Bank of Dallas)
    Abstract: Almost all recent literature on Medicaid and labor supply has used Affordable Care Act (ACA)- induced Medicaid eligibility expansions in various states as natural experiments. Estimated effects on employment and earnings differ widely due to differences in the scope of eligibility expansion across states. Using a Regression Kink Design (RKD) framework, this paper takes a uniquely different approach to the identification of the effect of Medicaid generosity on household income. Both state-level data and March CPS data from 1980–2013 suggest that generous federal funding of state-level Medicaid costs have a modest negative effect on household income. The negative impact of Medicaid generosity on household income is more pronounced at the lower end of the household income distribution and on the income and earnings of female heads.
    Keywords: Medicaid; household income; labor supply
    JEL: C31 I13 J08 J22
    Date: 2017–10–01
  10. By: Moretti, Luca (University of Bern); Mayerl, Martin (Austrian Institute for Research on Vocational Training (ÖIBF)); Mühlemann, Samuel (University of Munich); Schlögl, Peter (University of Klagenfurt); Wolter, Stefan C. (University of Bern)
    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: Eppinger, Peter S.
    Abstract: Major technological advances have recently spurred a new wave of offshoring in services, which used to be non-tradable. Should service workers in developed countries worry about their jobs? Trade theory has given a nuanced answer to this question, suggesting that efficiency gains from offshoring may counteract direct job losses, which leaves the predicted net effect ambiguous. This paper investigates the employment effects of service offshoring in a newly combined and exceptionally detailed panel dataset, covering almost the entire universe of German firms' service imports over the years 2002-2013. It exploits firm-specific export supply shocks by partner countries and service types as an instrumental variable to find that service offshoring has increased firm employment. In line with the canonical trade in tasks model, the employment gains are greater in firms with higher initial levels of service offshoring.
    Keywords: service offshoring,employment,firm-level data,service trade,trade in tasks
    JEL: F16 F14 J23
    Date: 2017
  12. By: Longhi, Simonetta (University of Reading)
    Abstract: Analyses of ethnic and racial wage differentials neglect the fact that minorities cluster in urban and in more deprived areas. This paper estimates ethnic wage differentials by comparing minorities to the majority in the same local labour market and therefore facing similar socio-economic conditions. Location is important: in the UK ethnic wage differentials and their variation across areas are partly explained by job characteristics and especially occupation. Since minorities in some areas are worse off compared to minorities in other areas, there may be scope for policy to incentivise mobility of specific groups.
    Keywords: race, ethnicity, wage differentials, spatial location, unequal distribution, multilevel models
    JEL: J31 J71 R10 R23
    Date: 2017–10
  13. By: Matthias Collischon
    Abstract: This paper analyzes the gender wage gap across the wage distribution using 2010 data from the German statistical agency. I investigate East and West Germany and the public sector separately to account for potential heterogeneities in wage gaps. I apply unconditional and conditional quantile regression methods to investigate the differences between highly paid men and women in distributions conditional and unconditional on covariates. The results indicate increasing gender wage gaps in all estimations, suggesting that there is indeed a glass ceiling over Germany even after controlling for a large set of observable characteristics (including occupation and industry). This finding is even more pronounced when also taking bonus payments into account.
    Keywords: Gender wage gap; gender pay gap; glass ceiling
    JEL: C21 J16 J31
    Date: 2017–11
  14. By: Gomes, Pedro Maia (Birkbeck, University of London)
    Abstract: A model with search and matching frictions and heterogeneous workers was established to evaluate a reform of the public sector wage policy in steady-state. The model was calibrated to the UK economy based on Labour Force Survey data. A review of the pay received by all public sector workers to align the distribution of wages with the private sector reduces steady-state unemployment by 1.4 percentage points.
    Keywords: public sector employment, public sector wages, public sector wage premium, unemployment, skilled workers, worker heterogeneity
    JEL: E24 E62 J45
    Date: 2017–10
  15. By: Azmat, Ghazala (Sciences Po, Paris); Simion, Stefania (University of Edinburgh)
    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: higher education, tuition fees, means-tested support, career choices, career outcomes
    JEL: I22 I23 I29 J30
    Date: 2017–10
  16. By: Marchand, Joseph (University of Alberta, Department of Economics); Weber, Jeremy (University of Pittsburgh)
    Abstract: This study explores how the Texas shale boom affected schools, students, and teachers. Using variation in geology across school districts and oil prices over time, the evidence shows that test scores in the average shale district declined despite tripling the tax base and creating a revenue windfall. Greater spending went to capital projects and servicing debt, not to teachers. Higher labor market wages did not affect student completion rates, but a growing gap in wages between the private and education sectors contributed to greater teacher turnover and more inexperienced teachers, which helps explain the decline in test scores.
    Keywords: local labor markets; local public finances; resource booms; schools; students; teachers
    JEL: H70 I22 J24 J40 Q33 R23
    Date: 2017–10–31
  17. By: Minford, Patrick (Cardiff Business School); Wang, Yi (Cardiff Metropolitan University); Zhou, Peng (Cardiff Business School)
    Abstract: This paper investigates the public sector wage premium in the UK using a microfounded eco-nomic model and indirect inference. The neoclassical wage determination model is tested and estimated without introducing any gap between the theoretical and empirical models. To test if the model is true, four types of econometric methods are used to summarise the data features, based on which we can evaluate the distance between the observed data and the model-simu-lated data in the test. When the distance is minimised, we estimated a public sector wage pre-mium between 6% and 7% using both traditional microeconometrics and indirect inference. In addition, selection bias test can be incorporated into the indirect inference procedures in a straightforward way, and we find no evidence for it in the data. Finally, in a simulation based on the estimated model, we show that it is not the non-market factors, but the total costs and benefits of working in different sectors and the pure market force, that create the public sector wage premium. There is no inefficiency or unfairness in the labour market to justify govern-ment intervention.
    Keywords: Public Sector Wage Premium, Selection Bias, Indirect Inference, Monte Carlo
    JEL: C21 C35 J31 J45
    Date: 2017–10
  18. By: Odermatt, Reto (University of Basel); Powdthavee, Nattavudh (University of Warwick); Stutzer, Alois (University of Basel)
    Abstract: The formation of expectations is a fundamental part of the process when people decide about engaging in an entrepreneurial venture. We evaluate the accuracy of newly self-employed people's predictions of their overall future wellbeing. Based on individual panel data for Germany, we find that they are overly optimistic when we compare their predicted life satisfaction with their actual life satisfaction five years later on. This overoptimism also holds for those entrepreneurs who successfully remain in business for at least five years. A possible reason might be that they underestimate the heavy workload reflected in higher working hours than desired and the drop in leisure satisfaction.
    Keywords: adaptation, overoptimism, life satisfaction, projection bias, wellbeing, self-employed
    JEL: D83 D91 J20 I31
    Date: 2017–10
  19. By: Koen Breemersch (University of Leuven); Jože P. Damijan (University of Ljubljana); Jozef Konings (Nazarbayev University)
    Abstract: This paper explores the effects of offshoring, technology and Chinese import competition on labor market polarization in European countries. We find that polarization occurs mostly as a result of polarization within individual industries, while the reallocation of employment away from less polarized industries towards more highly polarized industries also contributed to a lesser extent. In manufacturing, within-industry polarization is mostly associated with technological change, but we also find some tentative evidence that Chinese import competition contributed as well. In other private industries outside of manufacturing, technological change and offshoring are the most relevant forces affecting within-industry polarization. The process of between-industry polarization is driven by widespread deindustrialization in developed countries. We find that Chinese import competition contributed to the decline of employment in the less polarized manufacturing industries. Differences in labor market institutions only explain a limited amount of cross-country variation in the association of polarization and the three forces we consider.
    JEL: E24 F14 F16 J23 J31 L60 O47
    Date: 2017–10–31
  20. By: Keith Barnatchez; Leland Crane; Ryan Decker
    Abstract: The National Establishment Time Series (NETS) is a private sector source of U.S. business microdata. Researchers have used state-specific NETS extracts for many years, but relatively little is known about the accuracy and representativeness of the nationwide NETS sample. We explore the properties of NETS as compared to official U.S. data on business activity: The Census Bureau's County Business Patterns (CBP) and Nonemployer Statistics (NES) and the Bureau of Labor Statistics' Quarterly Census of Employment and Wages (QCEW). We find that the NETS universe does not cover the entirety of the Census-based employer and nonemployer universes, but given certain restrictions NETS can be made to mimic official employer datasets with reasonable precision. The largest differences between NETS employer data and official sources are among small establishments, where imputation is prevalent in NETS. The most stringent of our proposed sample restrictions still allows scope that cover s about three quarters of U.S. private sector employment. We conclude that NETS microdata can be useful and convenient for studying static business activity in high detail.
    Keywords: CBP ; NAICS ; NETS ; QCEW ; Business microdata ; Employment ; Establishment size
    JEL: C81 J21 Y10 R10
    Date: 2017–11–03

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