nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2018‒01‒22
sixteen papers chosen by
Joseph Marchand
University of Alberta

  1. The Long-Run Effects of the Earned Income Tax Credit on Women’s Earnings By David Neumark; Peter Shirley
  2. Does Federally-Funded Job Training Work? Nonexperimental Estimates of WIA Training Impacts Using Longitudinal Data on Workers and Firms By Fredrik Andersson; Harry J. Holzer; Julia I. Lane; David Rosenblum; Jeffrey Smith
  3. Commuting and Sickness Absence By Goerke, Laszlo; Lorenz, Olga
  4. Changes across Cohorts in Wage Returns to Schooling and Early Work Experiences By Jared Ashworth; V. Joseph Hotz; Arnaud Maurel; Tyler Ransom
  5. Health shocks and labour market outcomes: evidence from professional football By Carrieri, V.;; Jones, A.M.;; Principe, F.;
  6. Labor Market Concentration By José Azar; Ioana Marinescu; Marshall I. Steinbaum
  7. Money vs. time: family income, maternal labor supply, and child development By Francesco Agostinelli; Giuseppe Sorrenti
  8. Are Teacher Pensions "Hazardous" for Schools? By Patten Priestley Mahler
  9. The Employee Clientele of Corporate Leverage: Evidence from Personal Labor Income Diversification By Jie (Jack) He; Tao Shu; Huan Yang
  10. The ‘China Shock’, Exports and U.S. Employment: A Global Input-Output Analysis By Robert C. Feenstra; Akira Sasahara
  11. Fresh Air Eases Work – The Effect of Air Quality on Individual Investor Activity By Steffen Meyer; Michaela Pagel
  12. When Corporate Social Responsibility Backfires: Theory and Evidence from a Natural Field Experiment By John A. List; Fatemeh Momeni
  13. The Social Origins of Inventors By Aghion, Philippe; Akcigit, Ufuk; Hyytinen, Ari; Toivanen, Otto
  14. Are School-Provided Skills Useful at Work? Results of the Wiles Test By Liwiński, Jacek; Pastore, Francesco
  15. Entrepreneurship and State Taxation By E. Mark Curtis; Ryan Decker
  16. The Importance of Education and Skill Development for Economic Growth in the Information Era By Charles R. Hulten

  1. By: David Neumark; Peter Shirley
    Abstract: We use longitudinal data on marriage and children from the Panel Study of Income Dynamics to characterize women’s exposure to the federal and state Earned Income Tax Credit (EITC) during their first two decades of adulthood. We then use measures of this exposure to estimate the long-run effects of the EITC on women’s earnings as mature adults. We find some evidence indicating that exposure to a more generous EITC when women were unmarried and had young (pre-school) children leads to higher earnings and hours, and perhaps wages, in the longer run. We also find some evidence that exposure to a more generous EITC when women had young children but were married leads to lower earnings and hours in the longer run. These longer-run effects are to some extent consistent with what we would expect if the short-run effects of the EITC on employment that are documented in other work, and predicted by theory, are reflected in effects of the EITC on cumulative labor market experience (and other consequences of labor market attachment) that influence earnings.
    JEL: H24 H71 J18 J22 J24
    Date: 2017–12
  2. By: Fredrik Andersson; Harry J. Holzer; Julia I. Lane; David Rosenblum; Jeffrey Smith
    Abstract: We study the job training provided under the US Workforce Investment Act (WIA) to adults and dislocated workers in two states. Our substantive contributions center on impacts estimated non-experimentally using administrative data. These impacts compare WIA participants who do and do not receive training. In addition to the usual impacts on earnings and employment, we link our state data to the Longitudinal Employer-Household Dynamics (LEHD) data at the US Census Bureau, which allows us to estimate impacts on the characteristics of the firms at which participants find employment. We find moderate positive impacts on employment, earnings and desirable firm characteristics for adults, but not for dislocated workers. Our primary methodological contribution consists of assessing the value of the additional conditioning information provided by the LEHD relative to the data available in state Unemployment Insurance (UI) earnings records. We find that value to be zero.
    Keywords: job training, active labor market program, program evaluation, Workforce Investment Act, administrative data
    JEL: I38 J08 J24
    Date: 2018–01
  3. By: Goerke, Laszlo (IAAEU, University of Trier); Lorenz, Olga (IAAEU, University of Trier)
    Abstract: We investigate the causal effect of commuting on sickness absence from work using German panel data. To address reverse causation, we use changes in commuting distance for employees who stay with the same employer and who have the same residence during the period of observation. In contrast to previous papers, we do not observe that commuting distances are associated with higher sickness absence, in general. Only employees who commute long distances are absent about 20% more than employees with no commutes. We explore various explanations for the effect of long distance commutes to work and can find no evidence that it is due to working hours mismatch, lower work effort, reduced leisure time or differences in health status.
    Keywords: sickness absence, absenteeism, commuting, health, labour supply
    JEL: I10 J22 R2 R40
    Date: 2017–11
  4. By: Jared Ashworth; V. Joseph Hotz; Arnaud Maurel; Tyler Ransom
    Abstract: This paper investigates the wage returns to schooling and actual early work experiences, and how these returns have changed over the past twenty years. Using the NLSY surveys, we develop and estimate a dynamic model of the joint schooling and work decisions that young men make in early adulthood, and quantify how they affect wages using a generalized Mincerian specification. Our results highlight the need to account for dynamic selection and changes in composition when analyzing changes in wage returns. In particular, we find that ignoring the selectivity of accumulated work experiences results in overstatement of the returns to education.
    JEL: C33 I21 J22 J24
    Date: 2017–12
  5. By: Carrieri, V.;; Jones, A.M.;; Principe, F.;
    Abstract: The negative association between health shocks and labour market outcomes is a well-established finding in the health and labour economics literatures. However, due to lack of data, most of the contributions focus on elderly workers and analyse labour force participation as their main outcome. This paper uses traumatic injuries as a source of exogenous variation in professional football players’ health to provide estimates of the causal impact of a health shock on two main labour market outcomes: annual net wages and the probability of renegotiating the contract between club and player. We have built a unique longitudinal dataset recording information about wages, injuries and other characteristics of the universe of professional football players in the Italian Serie A from 2009 to 2014. We employ panel fixed effects models combined with an IV strategy, which uses the average number of yellow cards received by the team as an instrument. We find that injuries reduce the net wage in the following season by around 12%. This result is mainly driven by precautionary reasons due to the club’s concern about depreciation in the player’s human capital rather than by a direct effect of the shock on the player’s productivity.
    Keywords: health shocks; top incomes; football; panel data; instrumental variables;
    JEL: C26 D31 I1 J24 J31
    Date: 2018–01
  6. By: José Azar; Ioana Marinescu; Marshall I. Steinbaum
    Abstract: A product market is concentrated when a few firms dominate the market. Similarly, a labor market is concentrated when a few firms dominate hiring in the market. Using data from the leading employment website, we calculate labor market concentration for over 8,000 geographic-occupational labor markets in the US. Based on the DOJ-FTC horizontal merger guidelines, the average market is highly concentrated. Using a panel IV regression, we show that going from the 25th percentile to the 75th percentile in concentration is associated with a 15-25% decline in posted wages, suggesting that concentration increases labor market power.
    JEL: J2 J3 L1 L4
    Date: 2017–12
  7. By: Francesco Agostinelli; Giuseppe Sorrenti
    Abstract: We study the effect of family income and maternal hours worked on child development. Our instrumental variable analysis suggests different results for cognitive and behavioral development. An additional $1,000 in family income improves cognitive development by 4.4 percent of a standard deviation but has no effect on behavioral development. A yearly increase of 100 work hours negatively affects both outcomes by approximately 6 percent of a standard deviation. The quality of parental investment matters and the substitution effect (less parental time) dominates the income effect (higher earnings) when the after-tax hourly wage is below $13.50. Results call for consideration of child care and minimum wage policies that foster both maternal employment and child development.
    Keywords: Child development, family income, maternal labor supply
    JEL: H24 H31 I21 I38 J13 J22
    Date: 2018–01
  8. By: Patten Priestley Mahler (Centre College)
    Abstract: I use a detailed panel of data and a unique modeling specification to explore how public schoolteachers respond to the incentives embedded in North Carolina’s retirement system. Like most public-sector retirement plans, North Carolina’s teacher pension implicitly encourages teachers to continue working until they are eligible for their pension benefits, and then leave soon afterward. I find that teachers with higher levels of quality, as measured by a teacher’s value-added to her students’ achievement test scores, are more responsive to the “pull” of teacher pensions. Younger teachers, those with higher salaries, and nonwhite teachers are also more likely to stay during the pension “pull.” All teachers show a strong response to the pension “push,” with about a quarter of teachers leaving every year once they become eligible for their pension. I depart from other models of teacher retirement by using a Cox proportional hazard model. Given that salaries are generally fixed by the state, I find that the number of years a teacher must work before she is eligible for her full pension benefit is the major driver of variation in pension wealth. This specification has the benefit of a flexible baseline hazard that can easily capture the sharp incentives driving a teacher’s retirement decision that are dependent on her proximity to retirement eligibility, and can flexibly account for differences driven by local labor market conditions. These analyses highlight important unintended effects that inform education policies going forward to ensure the retention of high-quality teachers in all types of schools.
    Keywords: Teacher Retirement, Teacher Pensions, Public Expenditure, Public Pensions, State Finance, Nonwage Benefits
    JEL: H55 H72 H75 J26 J32 I21
    Date: 2017–12
  9. By: Jie (Jack) He; Tao Shu; Huan Yang
    Abstract: Using employee job-level data, we empirically test the equilibrium matching between a firm’s debt usage and its employee job risk aversion (“clientele effect”), as predicted by the existing theories. We measure job risk aversion for a firm’s employees using their labor income concentration in the firm, calculated as the fraction of the employees’ total personal labor income or total household labor income that is accounted for by their income from this particular firm. Using a sample of about 1,400 U.S. public firms from 1990-2008, we find a robust negative relation between leverage and employee job risk aversion, which is consistent with the clientele effect. Specifically, when a firm’s existing employees have higher labor income concentration in it, the firm tends to have lower contemporaneous and future leverage. Moreover, in terms of new hires, firms with lower leverage are more likely to recruit employees with less alternative labor income. Our results continue to hold after we control for firm fixed effects, other employee characteristics such as wages, gender, age, race, and education, and managerial risk attitudes. Further, the matching between a firm’s leverage and its workers’ labor income concentration in it is more pronounced for firms with higher labor intensity and those in financial distress.
    Keywords: clientele effect, personal labor income diversification, employee job risk aversion, leverage, capital structure, Longitudinal Employer-Household Dynamics database
    JEL: G30 G32 G39
    Date: 2018–01
  10. By: Robert C. Feenstra; Akira Sasahara
    Abstract: We quantify the impact on U.S. employment from imports and exports during 1995-2011, using the World Input-Output Database. We find that the growth in U.S. exports led to increased demand for 2 million jobs in manufacturing, 0.5 million in resource industries, and a remarkable 4.1 million jobs in services, totaling 6.6 million. One-third of those service sector jobs are due to the intermediate demand from merchandise (manufacturing and resource) exports, so the total labor demand gain due to merchandise exports was 3.7 million jobs. In comparison, U.S. merchandise imports from China led to reduced demand of 1.4 million jobs in manufacturing and 0.6 million in services (with small losses in resource industries), with total job losses of 2.0 million. It follows that the expansion in U.S. merchandise exports to the world relative to imports from China over 1995-2011 created net demand for about 1.7 million jobs. Comparing the growth of U.S. merchandise exports to merchandise imports from all countries, we find a fall in net labor demand due to trade, but comparing the growth of total U.S. exports to total imports from all countries, then there is a rise in net labor demand because of the growth in service exports.
    JEL: F14 O19
    Date: 2017–11
  11. By: Steffen Meyer; Michaela Pagel
    Abstract: This paper shows that air quality has a significantly negative effect on the likelihood of individual investors to sit down, log in, and trade in their brokerage accounts controlling for investor-, weather-, traffic-, and market-specific factors. In perspective, a one standard deviation increase in fine particulate matter leads to the same reduction in the probability of logging in and trading as a one standard deviation increase in sunshine. We document this effect for low levels of pollution that are commonly found throughout the developed world. As individual investor trading can be a proxy for everyday cognitively-demanding tasks such as office work, our findings suggest that the negative effects of pollution on white-collar work productivity are much more severe than previously thought. To our knowledge, this is the first study to demonstrate a negative impact of pollution on a measure of white-collar productivity at the individual level in a western country.
    JEL: D14 G11 J22 J24 Q51 Q53
    Date: 2017–11
  12. By: John A. List; Fatemeh Momeni
    Abstract: Corporate Social Responsibility (CSR) has become a cornerstone of modern business practice, developing from a “why” in the 1960s to a “must” today. Early empirical evidence on both the demand and supply sides has largely confirmed CSR's efficacy. This paper combines theory with a large-scale natural field experiment to connect CSR to an important but often neglected behavior: employee misconduct and shirking. Through employing more than 3000 workers, we find that our usage of CSR increases employee misbehavior - 20% more employees act detrimentally toward our firm by shirking on their primary job duty when we introduce CSR. Complementary treatments suggest that “moral licensing” is at work, in that the “doing good” nature of CSR induces workers to misbehave on another dimension that hurts the firm. In this way, our data highlight a potential dark cloud of CSR, and serve to forewarn that such business practices should not be blindly applied.
    JEL: C93 D03
    Date: 2017–12
  13. By: Aghion, Philippe; Akcigit, Ufuk; Hyytinen, Ari; Toivanen, Otto
    Abstract: In this paper we merge three datasets - individual income data, patenting data, and IQ data - to analyze the determinants of an individual's probability of inventing. We find that: (i) parental income matters even after controlling for other background variables and for IQ, yet the estimated impact of parental income is greatly diminished once parental education and the individual's IQ are controlled for; (ii) IQ has both a direct effect on the probability of inventing an indirect impact through education. The effect of IQ is larger for inventors than for medical doctors or lawyers. The impact of IQ is robust to controlling for unobserved family characteristics by focusing on potential inventors with brothers close in age. We also provide evidence on the importance of social family interactions, by looking at biological versus non-biological parents. Finally, we find a positive and significant interaction effect between IQ and father income, which suggests a misallocation of talents to innovation.
    Keywords: education; Innovation; inventors; IQ; parental background; Social mobility
    JEL: I24 J18 J24 O31
    Date: 2017–12
  14. By: Liwiński, Jacek (University of Warsaw); Pastore, Francesco (Università della Campania Luigi Vanvitelli)
    Abstract: We test for the signalling hypothesis versus human capital theory using the Wiles test (1974) in a country which has experienced a dramatic increase in the supply of skills. For this purpose, we construct a job match index based on the usefulness of the school-provided skills and the relevance of the job performed to the field of study. Then we regress the first earnings of graduates on this index using OLS and Heckit to control for omitted heterogeneity of the employed. The data we use come from a representative tracer survey of Poles who left secondary schools or graduated from HEIs over the period of 1998-2005. We find that only the HEI graduates obtain a wage premium from skills acquired in the course of formal education. This finding is robust to a large number of robustness checks with different indicators of the educational mismatch and instrumental variables.
    Keywords: education, skills, signalling, job matching, wages, Heckman correction
    JEL: J24 J31
    Date: 2017–11
  15. By: E. Mark Curtis; Ryan Decker
    Abstract: Entrepreneurship plays a vital role in the economy, yet there exists little well-identified research into the effects of taxes on startup activity. Using recently developed county-level data on startups, we examine the effect of states' corporate, personal and sales tax rates on new firm activity and test for cross-border spillovers in response to these policies. We find that new firm employment is negatively—and disproportionately—affected by corporate tax rates. We find little evidence of an effect of personal and sales taxes on entrepreneurial outcomes. Our results are robust to changes in the tax base and other state-level policies.
    Keywords: Labor supply and demand ; Entrepreneurship ; Firm dynamics ; Taxation
    JEL: L26 D22 H71 H25 J23
    Date: 2018–01–11
  16. By: Charles R. Hulten
    Abstract: The neoclassical growth accounting model used by the BLS to sort out the contributions of the various sources of growth in the U.S. economy accords a relatively small role to education. This result seems at variance with the revolution in information technology and the emergence of the “knowledge economy”, or with the increase in educational attainment and the growth in the wage premium for higher education. This paper revisits this result using “old fashioned” activity analysis, rather than the neoclassical production function, as the technology underlying economic growth. An important feature of this activity-based technology is that labor and capital are strong complements, and both inputs are therefore necessary for the operation of an activity. The composition of the activities in operation at any point in time is thus a strong determinant of the demand for labor skills, and changes in the composition driven by technical innovation are a source of the increase in the demand for more complex skills documented in the literature. A key result of this paper is that the empirical sources-of-growth results reported by BLS could equally have been generated by the activity-analysis model. This allows the BLS results to be interpreted in a very different way, one that assigns a greater importance to labor skills and education.
    JEL: J24 O47
    Date: 2017–12

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