nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2018‒01‒08
fourteen papers chosen by
Joseph Marchand
University of Alberta

  1. The Effect of an Education-driven Labor Supply Shock on Firms' R&D Personnel By Patrick Lehnert; Curdin Pfister; Uschi Backes-Gellner
  2. Wage Dynamics and Returns to Unobserved Skill By Lance Lochner; Youngmin Park; Youngki Shin
  3. Changes in education, wage inequality and working hours over time By Davoine, Thomas; Mankart, Jochen
  4. Phasing out: routine tasks and retirement By Lucas van der Velde
  5. Within occupation wage dispersion and the task content of jobs By Lucas van der Velde
  6. Drivers of industrialisation: intersectoral evidence from the Low Countries in the nineteenth century By Philips, Robin C. M.; Földvàri, Péter; Van Leeuwen, Bas
  7. Labor Market Search, Informality and Schooling Investments By Bobba, Matteo; Flabbi, Luca; Levy Algazi, Santiago
  8. The Relative Importance of Personal Characteristics for Job Offers By Peter Hoeschler; Uschi Backes-Gellner
  9. The Short-Run Employment Effects of the German Minimum Wage Reform By Caliendo, Marco; Fedorets, Alexandra; Preuß, Malte; Schröder, Carsten; Wittbrodt, Linda
  10. Inferring Inequality with Home Production By Boerma, Job; Karabarbounis, Loukas
  11. On the Demand for Female Workers in Japan: The Role of ICT and Offshoring By Kozo Kiyota; Sawako Maruyama
  12. Wage Risk and the Skill Premium By Ctirad Slavik; Hakki Yazici
  13. The Effect of Court-Ordered Hiring Guidelines on Teacher Composition and Student Achievement By Cynthia (CC) DuBois; Diane Whitmore Schanzenbach
  14. Temporary agency employment in Germany: A strategic "buffer" for firms and regions in the crisis? By Neumann, Uwe

  1. By: Patrick Lehnert (University of Zurich); Curdin Pfister (University of Zurich); Uschi Backes-Gellner (University of Zurich)
    Abstract: This paper examines the effect of an R&D-specific labor supply shock produced by the establishment of tertiary vocational education institutions teaching and conducting applied R&D, the Universities of Applied Sciences, on the R&D personnel of private firms. We apply a difference-in-differences model, exploiting a quasi-natural experiment in the 1990s in Switzerland, the staggered establishment of these institutions. Using repeated cross-sectional data from the Swiss Earnings Structure Survey, we can precisely measure the R&D personnel of private firms, i.e., how much R&D personnel a firm employs and how much a firm spends on its R&D personnel in terms of wages. The education-driven labor supply shock has positive effects on both the percentage of R&D personnel and the wages paid to this personnel. Our assessments of effect heterogeneity suggest that these effects are driven by firms with 50 to 99 employees and firms in the manufacturing sector increasing their R&D personnel.
    Keywords: Innovation incentives, R&D, research institutions, skills
    JEL: I23 J24 O31 O32
    Date: 2017–12
  2. By: Lance Lochner; Youngmin Park; Youngki Shin
    Abstract: Economists disagree about the factors driving the substantial increase in residual wage inequality in the U.S. over the past few decades. We identify and estimate a general model of log wage residuals that incorporates: (i) changing returns to unobserved skills, (ii) a changing distribution of unobserved skills, and (iii) changing volatility in wages due to factors unrelated to skills. Using data from the Panel Study of Income Dynamics, we estimate that the returns to unobserved skills have declined by as much as 50% since the mid-1980s despite a sizeable increase in residual inequality. Instead, the variance of skills rose over this period because of increasing variability in lifecycle skill growth. Finally, we develop an assignment model of the labor market and show that both demand and supply factors contributed to the downward trend in the returns to skills over time, with demand factors dominating for non-college men.
    Keywords: Econometric and statistical methods, Labour markets
    JEL: C23 J24 J31
    Date: 2017
  3. By: Davoine, Thomas; Mankart, Jochen
    Abstract: The US skill premium and college enrollment have increased substantially over the past few decades. In addition, while low-wage earners worked more than highwage earners in 1970, the opposite was true in 2000. We show that a parsimonious neoclassical model featuring skill-biased technical change, endogenous education and labor supply decisions can explain the change in the college education rate between 1967 and 2000 as well as the trend in the wage-hours correlation. Moreover, we show analytically and quantitatively that endogenous labor supply is important. Assuming constant hours significantly biases the estimates of the effects of skillbiased technological progress on college enrollment and the skill premium. Further, we find that limiting the maximum number of hours someone can work lowers welfare for almost all generations. Since it increases the skill premium, the welfare loss is most severe for the low-skilled, reaching almost one percent of life-time consumption.
    Keywords: higher education,wage inequality,skill-biased technical change,labor supply,working time regulation
    JEL: I24 J2 J31
    Date: 2017
  4. By: Lucas van der Velde (Group for Research in Applied Economics (GRAPE); Warsaw School Economics)
    Abstract: Population ageing poses new challenges to the sustainability of the pension system and possibly to economic growth in advanced economies. In such context, calls are made to increase participation of workers close to their retirement age. Ageing occurs in a period where technological progress has changed the patterns of labor demand, away from physically demanding tasks (opportunity) and into more cognitive-interpersonal type of tasks (challenge). To understand the net effect, we analyze the relation between automation and labor supply of older workers. We explore whether exposure to technological change, measured by the task content of jobs, was connected to labor supply of older workers in Germany and Great Britain. Using panel data, we show that the adjustment in the number of hours of workers in occupations exposed to automation was small, and only negative for a subset of workers. The exposure to automation is related to somehow earlier retirement, but the size of the relation is small.
    Keywords: task content, routinization, retirement, labor supply, automation
    JEL: J24 J26
    Date: 2017
  5. By: Lucas van der Velde (Group for Research in Applied Economics (GRAPE); Warsaw School Economics)
    Abstract: The relation between income inequality and technological progress has many chapters, of which the most recent corresponds to the task content of jobs. Proponents of this theory suggest that falling prices of computational power coupled with the increasing power of computers leads to an increasing substitution of workers with computers and a hollowing of the middle of the income distribution. While empirical analysis on task content of jobs explain inequality between occupations, we test whether the framework can also foster our understanding of wage dispersion within occupations. Using European data, we obtain estimates of wage dispersion and residual wage dispersion for each occupation and relate it to the task content. The results suggest that non-routine intensive occupations presented greater wage dispersion, even after controlling for a variety of factors.
    Keywords: wage inequality, occupation, task content, routinization
    JEL: J31 J24
    Date: 2017
  6. By: Philips, Robin C. M.; Földvàri, Péter; Van Leeuwen, Bas
    Abstract: In this paper, we trace the causes of regional industrial development in the nineteenth century Low Countries by disentangling the complex relationship between industrialisation, technological progress and human capital formation. We use sectoral differences in the application of technology and human capital as the central elements to explain the rise in employment in the manufacturing sector during the nineteenth century, and our findings suggest a re-interpretation of the deskilling debate. To account for differences among manufacturing sectors, we use population and industrial census data, subdivided according to their present-day manufacturing sector equivalents of the International Standard Industrial Classification (ISIC). Instrumental variable regression analysis revealed that employment in the manufacturing sector was influenced by so-called upper- tail knowledge and not by average educational levels, providing empirical proof of a so-called deskilling industrialisation process. However, we find notable differences between manufacturing sectors. The textiles and clothing sectors show few agglomeration effects and limited use of steam-powered engines, and average education levels cannot adequately explain regional industrialisation. In contrast, the location of the fast- growing and innovative machinery-manufacturing sector was more influenced by technology and the availability of human capital, particularly upper-tail knowledge captured by secondary school attendance rates.
    Keywords: industrialization; deskilling; human capital; steam engine; labour; economic growth
    JEL: J24 L60 N13 N63 O14 O41
    Date: 2017–12–06
  7. By: Bobba, Matteo (Toulouse School of Economics); Flabbi, Luca (University of North Carolina, Chapel Hill); Levy Algazi, Santiago (Inter-American Development Bank)
    Abstract: We develop a search and matching model where firms and workers are allowed to form matches (jobs) that can be formal or informal. Workers optimally choose the level of schooling acquired before entering the labor market and whether searching for a job as unemployed or as self-employed. Firms optimally decide the formality status of the job and bargain with workers over wages. The resulting equilibrium size of the informal sector is an endogenous function of labor market parameters and institutions. We focus on an increasingly important institution: a "dual" social protection system whereby contributory benefits in the formal sector coexist with non-contributory benefits in the informal sector. We estimate preferences for the system – together with all the other structural parameters of the labor market – using labor force survey data from Mexico and the time-staggered entry across municipalities of a non-contributory social program. Policy experiments show that informality may be reduced by either increasing or decreasing the payroll tax rate in the formal sector. They also show that a universal social security benefit system would decrease informality, incentivize schooling, and increase productivity at a relative fiscal cost that is similar to the one generated by the current system.
    Keywords: labor market frictions, search and matching, Nash bargaining, informality, returns to schooling
    JEL: J24 J3 J64 O17
    Date: 2017–11
  8. By: Peter Hoeschler (University of Zurich); Uschi Backes-Gellner (University of Zurich)
    Abstract: We investigate the relative importance of different personal characteristics for firms' hiring decisions. Our design allows firms to observe potential workers during a long screening period. At the end of that period firms can decide to make job offers, thereby revealing their preferences about workers' personal characteristics. We connect real-world job offers and workers' personal characteristics, both of which are usually unobserved. To investigate the relative importance of various personal characteristics for the likelihood to receive a job offer, we use a unique panel data set of entry-level workers. We find that grades and non-cognitive skills are important for receiving a job offer, with the Big Five Personality traits being the most important predictor. We find no effects for intelligence or economic preferences.
    Keywords: Job Offers, Ability, Non-Cognitive Skills, Preferences, Vocational Education
    JEL: D03 M51 J24
    Date: 2017–12
  9. By: Caliendo, Marco (University of Potsdam); Fedorets, Alexandra (DIW Berlin); Preuß, Malte (Freie Universität Berlin); Schröder, Carsten (DIW Berlin); Wittbrodt, Linda (University of Potsdam)
    Abstract: We assess the short-term employment effects of the introduction of a national statutory minimum wage in Germany in 2015. For this purpose, we exploit variation in the regional treatment intensity, assuming that the stronger a minimum wage "bites" into the regional wage distribution, the stronger the regional labour market will be affected. In contrast to previous studies, we draw upon detailed individual wage data from the Structure of Earnings Survey (SES) 2014 and combine it with administrative information on regional employment. Moreover, using the Socio-Economic Panel (SOEP), we are able to affirm the absence of anticipation effects and verify the assumption of a common trend in wages before the reform. Based on hourly wages, we compute two regional bite indicators – the share of affected employees and the Kaitz index – for 141 regional labour markets. In order to get a broader picture, we construct and compare a variety of these measures, including a bite based on full-time workers only. All of these display a considerably strong correlation. Overall, we do not find a pronounced significant effect on regular (full- and part-time) employment in most specifications, although some estimations yield a small significant reduction amounting to 78,000 (roughly 0.3% of all regular jobs). The results concerning marginal employment are more pronounced. We find evidence that mini-jobs dropped substantially from 2014 to 2015, making for a reduction of about 180,000 jobs (about 2.4% of all mini-jobs). This result is robust to a variety of sensitivity tests.
    Keywords: minimum wage, regional bite, employment effects
    JEL: J23 J31 J38
    Date: 2017–12
  10. By: Boerma, Job (Federal Reserve Bank of Minneapolis); Karabarbounis, Loukas (Federal Reserve Bank of Minneapolis)
    Abstract: We revisit the causes, welfare consequences, and policy implications of the dispersion in households' labor market outcomes using a model with uninsurable risk, incomplete asset markets, and a home production technology. Accounting for home production amplifies welfare-based differences across households meaning that inequality is larger than we thought. Using the optimality condition that households allocate more consumption to their more productive sector, we infer that the dispersion in home productivity across households is roughly three times as large as the dispersion in their wages. There is little scope for home production to offset differences that originate in the market sector because productivity differences in the home sector are large and the time input in home production does not covary with consumption expenditures and wages in the cross section of households. We conclude that the optimal tax system should feature more progressivity taking into account home production.
    Keywords: Home production; Labor supply; Consumption; Inequality
    JEL: D10 D60 E21 J22
    Date: 2017–12–22
  11. By: Kozo Kiyota (Keio Economic Observatory, Keio University); Sawako Maruyama (Graduate School of Economics, Kobe University)
    Abstract: In light of the increasing importance of female labor participation in Japan, this paper examines the determinants of the demand for female workers. One of the contributions of this paper is that we shed light on the role of information and communication technology (ICT) and offshoring as determinants of female labor demand. Estimating a system of variable factor demands for manufacturing industries between 1980 and 2011, we find that, while the ICT capital stock has significantly positive effects on the demand for low, middle-high, and high skilled female workers, it has significantly negative effects on the demand for middle-low skilled female workers. In contrast, offshoring has insignificant effects on the demand for female workers. The results suggest that offshoring is at least neutral on the demand for female workers. A part of the increasing demand for female workers can be attributable to ICT, which contributes to narrow the gender wage gap in Japan.
    Keywords: Labor demand, Female Workers, Offshoring, Information and Communication Technology, Skills
    JEL: F14 J23
    Date: 2017–11–20
  12. By: Ctirad Slavik; Hakki Yazici
    Abstract: The skill premium has increased significantly in the United States in the last five decades. During the same period, individual wage risk has also increased. This paper proposes a mechanism through which a rise in wage risk increases the skill premium. Intuitively, a rise in uninsured wage risk increases precautionary savings, thereby boosting capital accumulation, which increases the skill premium due to capital-skill complementarity. Using a quantitative macroeconomic model, we find that the rise in wage risk observed between 1967 and 2010 increases the skill premium significantly. This finding is robust across a variety of model specifications.
    Keywords: skill premium; wage risk; capital-skill complementarity; precautionary savings
    JEL: E25 J31
    Date: 2017–12
  13. By: Cynthia (CC) DuBois; Diane Whitmore Schanzenbach
    Abstract: This paper examines the effect of a court-ordered hiring guidelines intended to increase the share of black teachers employed in a school district in Louisiana. We find that the court-ordered hiring policy significantly increased the share of teachers who are black in the district relative to the rest of the state, and to a matched synthetic control sample. The policy also increased the share of new teachers hired who are black, and decreased the student-teacher representation gap, defined as the difference in enrollment share black among students and teachers in a district. There were increases in the share of black teachers observed in both predominately white and predominately black schools in the district. The policy had no measurable impacts—either positive or negative—on district-level measures of student achievement.
    JEL: I21 I28 J7
    Date: 2017–12
  14. By: Neumann, Uwe
    Abstract: In many European countries the number of employees hired via temporary work agencies has increased considerably over the past two decades, up to around 2% of the total workforce in the European Union today. Different studies have found the demand for agency employment to precede GDP growth. This paper explores to what extent firms utilised agency work as a strategic 'buffer' to adapt to variation in labour demand in Germany over the period 2006-2014, i.e. before, during and after the crisis of 2008/2009. Drawing on microdata from a representative employer survey (IAB Establishment Panel) and statistics on regional labour markets, the analysis finds only limited evidence on a systematic firm-level buffer function of temporary agency work. Rather, in many firms hiring from agencies is possibly part of a business strategy relying on flexible recruitment. An analysis of the average treatment effect on the treated (ATT) using a propensity score matching procedure suggests that particularly in regions with high unemployment, such flexibility during the crisis supported adaptation of client firms to economic change, since they were less reluctant than non-clients to hire after the crisis.
    Keywords: Temporary agency work,regional labour markets,establishment data,propensity score matching
    JEL: L25 J23 M54 R11
    Date: 2017

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