nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2018‒02‒05
twenty papers chosen by
Joseph Marchand
University of Alberta

  1. Probing the Effects of the Australian System of Minimum Wages on the Gender Wage Gap By Broadway, Barbara; Wilkins, Roger
  2. The Short-Term Distributional Effects of the German Minimum Wage Reform By Marco Caliendo; Alexandra Fedorets; Malte Preuss; Carsten Schröder; Linda Wittbrodt
  3. The Short-Run Employment Effects of the German Minimum Wage Reform By Marco Caliendo; Alexandra Fedorets; Malte Preuss; Carsten Schröder; Linda Wittbrodt
  4. Parents, Siblings and Schoolmates: The Effects of Family-School Interactions on Educational Achievement and Long-Term Labor Market Outcomes By Bertoni, Marco; Brunello, Giorgio; Cappellari, Lorenzo
  5. Skills, Signals, and Employability: An Experimental Investigation By Piopiunik, Marc; Schwerdt, Guido; Simon, Lisa; Woessmann, Ludger
  6. Dinner Table Human Capital and Entrepreneurship By Hans K. Hvide; Paul Oyer
  7. Does Sick Pay Affect Workplace Absence? By Bryson, Alex; Dale-Olsen, Harald
  8. Geography and Employer Recruiting By Weinstein, Russell
  9. Heterogeneous Effects of Credit Constraints on SMEs' Employment: Evidence from the Great Recession By Cornille, David; Rycx, Francois; Tojerow, Ilan
  10. The Price of Polarization: Estimating Task Prices under Routine-Biased Technical Change By Böhm, Michael Johannes
  11. Some Like It Hot: Assessing Longer-Term Labor Market Benefits from a High-Pressure Economy By Hotchkiss, Julie L.; Moore, Robert E.
  12. Why Do French Engineers Find Stable Jobs Faster than PhDs? By Margolis, David N.; Miotti, Luis
  13. Occupational Licensing in the European Union: Coverage and Wage Effects By Koumenta, Maria; Pagliero, Mario
  14. Structural Transformation, Marketization, and Household Production around the World By Bridgman, Benjamin; Duernecker, Georg; Herrendorf, Berthold
  15. Firm wage premia, industrial relations,and rent sharing in Germany By Boris Hirsch; Steffen Mueller
  16. The Effects of Supply Shocks in the Market for Apprenticeships: Evidence from a German High School Reform By Mühlemann, Samuel; Pfann, Gerard A.; Pfeifer, Harald; Dietrich, Hans
  17. Bureaucratic Competence and Procurement Outcomes By Francesco Decarolis; Leonardo M. Giuffrida; Elisabetta Iossa; Vincenzo Mollisi; Giancarlo Spagnolo
  18. Artificial Intelligence, Automation and Work By Daron Acemoglu; Pascual Restrepo
  19. Repercussions of Endogenous Fast Rising Top Inequality By Seungjin Han
  20. Opportunity versus Necessity Entrepreneurship: Two Components of Business Creation By Fairlie, Robert W.; Fossen, Frank M.

  1. By: Broadway, Barbara (Melbourne Institute of Applied Economic and Social Research); Wilkins, Roger (Melbourne Institute of Applied Economic and Social Research)
    Abstract: When wage setting is more regulated, the gender wage gap tends to decrease. We examine whether this holds for a complex system of occupation- and industry-specific minimum wages, which cover both low-pay and high-pay segments of the labour market. The system has the potential to close the gender wage gap by ensuring equal minimum pay for equal jobs, but it also has the potential to widen it by discriminating against jobs more commonly held by women. We carefully describe wage levels as well as returns to experience and their association with individual gender as well as the male employment share in the individual's field (industry or occupation) of work. We find that the gender wage gap among employees receiving a minimum wage is less than half the magnitude of the gap among other employees. Despite this, there is nonetheless evidence that, within the minimum-wage system, there is a wage penalty for employment in jobs more commonly held by women, although only for employees without university degrees. Our results suggest that, for university-educated women, the regulated setting of minimum wages helps to close the gender wage gap and counteracts the undervaluation of work typically undertaken by women. However, for less-educated women, who comprise approximately 82% of female minimum-wage employees, minimum wages could do more to close the gender wage gap if they were neutral with respect to the gender composition of jobs.
    Keywords: gender wage gap, minimum wages
    JEL: J31 J16
    Date: 2017–12
  2. By: Marco Caliendo; Alexandra Fedorets; Malte Preuss; Carsten Schröder; Linda Wittbrodt
    Abstract: This study quantifies the short-term distributional effects of the new statutory minimum wage in Germany. Using detailed survey data (German Socio-Economic Panel), we assess changes in the distributions of hourly wages, contractual and actual working hours, and monthly earnings. Our descriptive results indicate growth at the bottom of the hourly wage distribution in the post-reform year, but also considerable noncompliance among eligible employees. In a second step, we employ a difference-in-differences analysis and exploit regional variation in the "bite" of the intervention, measured by the share of employees in a geographical region with wages below the minimum wage prior to the reform. We document the reform's positive effect at the bottom of the wage distribution. However, we find a negative effect of the reform on contractual hours worked, which explains why there is no effect on monthly earnings. Given that actual hours worked decrease less than contractual hours, our evidence suggests an increase in unpaid overtime.
    Keywords: minimum wage, wage distribution, hourly wages, inequality
    JEL: J31 J38 J22
    Date: 2017
  3. By: Marco Caliendo; Alexandra Fedorets; Malte Preuss; Carsten Schröder; Linda Wittbrodt
    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 afirm 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
  4. By: Bertoni, Marco (University of Padova); Brunello, Giorgio (University of Padova); Cappellari, Lorenzo (Università Cattolica del Sacro Cuore)
    Abstract: We use Danish register data to investigate whether the effects of schoolmates' gender and average parental education on individual educational achievement, employment and earnings vary with individual family characteristics such as the gender of siblings and own parental education. We find that boys with sisters have worse employment prospects than boys with no sisters when exposed to a higher share of girls at school. The opposite is true for girls who have sisters. We also show that the benefits from exposure to "privileged" peers accrue mainly to "disadvantaged" students. These benefits decline when the dispersion of parental education increases. Overall, the size of the estimated effects is small.
    Keywords: education peer effects, gender, parental background, human capital production, long term outcomes
    JEL: I21 J16 J24
    Date: 2017–12
  5. By: Piopiunik, Marc (ifo Institute at the University of Munich); Schwerdt, Guido (University of Konstanz); Simon, Lisa (ifo Institute at the University of Munich); Woessmann, Ludger (ifo and LMU Munich)
    Abstract: As skills of labor-market entrants are usually not directly observed by employers, individuals acquire skill signals. To study which signals are valued by employers, we simultaneously and independently randomize a broad range of skill signals on pairs of resumes of fictitious applicants among which we ask a large representative sample of German human-resource managers to choose. We find that signals in all three studied domains - cognitive skills, social skills, and maturity - have a significant effect on being invited for a job interview. Consistent with the relevance, expectedness, and credibility of different signals, the specific signal that is effective in each domain differs between apprenticeship applicants and college graduates. While GPAs and social skills are significant for both genders, males are particularly rewarded for maturity and females for IT and language skills. Older HR managers value school grades less and other signals more, whereas HR managers in larger firms value college grades more.
    Keywords: signals; cognitive skills; social skills; resume; hiring; labor market;
    JEL: J24 J21
    Date: 2018–01–15
  6. By: Hans K. Hvide; Paul Oyer
    Abstract: We document three new facts about entrepreneurship. First, a majority of male entrepreneurs start a firm in the same or a closely related industry as their fathers’ industry of employment. Second, this tendency is correlated with intelligence: higher-IQ entrepreneurs are less likely to follow their fathers. Third, an entrepreneur that starts a firm in the same 5-digit industry as where his father was employed tends to outperform entrepreneurs in the same industry whose fathers did not work in that industry. We consider various explanations for these facts and conclude that “dinner table human capital”, where children obtain industry knowledge through their parents, is an important factor behind what type of firm is started and how well it performs.
    JEL: G3 J24 L26
    Date: 2018–01
  7. By: Bryson, Alex (University College London); Dale-Olsen, Harald (Institute for Social Research, Oslo)
    Abstract: Higher replacement rates often imply higher levels of absenteeism, yet even in generous welfare economies, private sick pay is provided in addition to the public sick pay. Why? Using comparative workplace data for the UK and Norway we show that the higher level of absenteeism in Norway compared to UK is related to the threshold in the Norwegian public sick pay legislation. This threshold's importance is confirmed in a Regression Kinked Design (RKD) analysis on the Norwegian micro-data. Private sick pay is provided as an employer-provided non-wage benefit and when training costs are high.
    Keywords: absenteeism, public sick pay, private sick pay, comparative
    JEL: H31 J22 J28 J32
    Date: 2017–12
  8. By: Weinstein, Russell (University of Illinois at Urbana-Champaign)
    Abstract: I analyze whether reducing geographic distance to high-wage jobs increases access to those employment opportunities. I collect office locations and campus recruiting strategies for over 70 prestigious banking and consulting firms, from 2000 to 2013. Using an event-study framework, I find firms are 2 times more likely to recruit at local universities after opening a nearby office, and 6 times more likely outside industry clusters. New target campuses outside industry clusters are less academically selective. The results suggest place-based policies may improve access to high-wage firms, and also suggest the importance of a university's local labor market for post-graduation outcomes.
    Keywords: employer recruiting, local labor markets, returns to college
    JEL: J23 J61
    Date: 2017–12
  9. By: Cornille, David (National Bank of Belgium); Rycx, Francois (Free University of Brussels); Tojerow, Ilan (Free University of Brussels)
    Abstract: This paper takes advantage of access to detailed matched bank-firm data to investigate whether and how employment decisions of SMEs have been affected by credit constraints in the wake of the Great Recession. Variability in banks' financial health following the 2008 crisis is used as an exogenous determinant of firms' access to credit. Findings, relative to the Belgian economy, clearly highlight that credit matters. They show that SMEs borrowing money from pre-crisis financially less healthy banks were significantly more likely to be affected by a credit constraint and, in turn, to adjust their labour input downwards than pre-crisis clients of more healthy banks. These results are robust across types of loan applications that were denied credit, i.e. applications to finance working capital, debt or new investments. Yet, estimates also show that credit constraints have been essentially detrimental for employment among SMEs experiencing a negative demand shock or facing strong product market competition. In terms of human resources management, credit constraints are not only found to foster employment adjustment at the extensive margin but also to increase the use of temporary layoff allowances for economic reasons. This outcome supports the hypothesis that short-time compensation programmes contribute to save jobs during recessions.
    Keywords: SMEs, banks' financial health, credit constraints, employment, short-time compensation programmes, Great Recession, matched bank-firm data
    JEL: C35 C36 D22 G01 G21 J21 J23
    Date: 2018–01
  10. By: Böhm, Michael Johannes (University of Bonn)
    Abstract: The debate about the impact of routine-biased technical change on wages revolves around the question whether occupational or overall wage distributions polarized. This paper instead argues that routine task prices should decline compared to abstract and manual task prices. I propose a new method, which exploits the sorting of workers into tasks and their associated wage growth in the Roy model, to estimate the changes in task prices under relatively weak assumptions. Empirical results for male workers in two U.S. datasets indicate that task prices polarized during the 1990s and 2000s. The estimates match the upper part of the wage distribution, and they are consistent with differences across countries and time periods in the lower part.
    Keywords: task prices, Roy Model, routine-biased technical change, polarization, wage distribution
    JEL: J23 J24 J31
    Date: 2017–12
  11. By: Hotchkiss, Julie L. (Federal Reserve Bank of Atlanta); Moore, Robert E. (Georgia State University)
    Abstract: This paper explores the evidence for positive hysteresis in the labor market. Using data from the National Longitudinal Surveys of Youth, we find that negative labor market outcomes during high-unemployment periods are mitigated by exposure to a high-pressure economy during the preceding expansion. Breaking total exposure into average intensity and duration suggests that these two dimensions have differing impacts depending on the outcome. Additionally, benefits are typically only statistically significantly different from no exposure for only a relatively few demographic groups.
    Keywords: hysteresis; unemployment; labor market gaps; labor force participation; wage gaps
    JEL: E24 E60 J31 J64
    Date: 2018–01–01
  12. By: Margolis, David N. (Paris School of Economics); Miotti, Luis (University of Paris 13)
    Abstract: This paper studies why PhDs in France take longer to find stable jobs than engineers. Using data from CEREQ's "Génération 2004" survey, we show that job finding rates of PhDs are lower than those of engineers and document the differences in their observable characteristics and fields of study. We show that this phenomenon is due to multiple factors: heterogeneity in student characteristics along observable (but not unobservable) dimensions and fields of study, directed search toward public sector positions (especially professors) among PhDs and reservation wages of PhDs for private sector jobs that are "too high" relative to their value of marginal product.
    Keywords: school-to-work transition, STEM, directed search, wage subsidies
    JEL: J24 I23 J64
    Date: 2017–12
  13. By: Koumenta, Maria; Pagliero, Mario
    Abstract: We present the first EU-wide study on the prevalence and labour market impact of occupational regulation in the EU. Drawing on a new EU Survey of Regulated Occupations, we find that licensing affects about 22 percent of workers in the EU, although there is significant variability across member states and occupations. On average, licensing is associated with a 4 percent higher hourly wages. Using decomposition techniques we show that rent capture accounts for one third of this effect and the remaining is attributed to signalling. We find considerable heterogeneity in the wage gains by occupation and level of educational attainment. Finally, occupational licensing increases wage inequality. After accounting for composition effects, licensing increases the standard deviation of wages by about 0.02 log points.
    Keywords: licensing; occupational regulation
    JEL: J31 J44
    Date: 2018–01
  14. By: Bridgman, Benjamin; Duernecker, Georg; Herrendorf, Berthold
    Abstract: We provide evidence on the patterns of household production in 43 developing and developed countries. Household hours account on average for nearly half of the total hours worked in the household and the market. The vast majority of household hours produce services. As GDP per capita increases, average total hours worked and average household hours per working-age population decrease while average market hours increase ("marketization"); hours producing services increase their share in total hours ("structural transformation"). The decrease in household hours is mostly due to changes in housework (cleaning, cooking etc.) and marketization is mostly due to changes in women's hours. Within countries, more educated people work more in the market and less in the household. We also impute the labor productivity of household production for 30 countries of our sample. We find that it is positively correlated with and much lower than that in the market.
    Keywords: Household production; Marketization; structural transformation
    JEL: J2 O3
    Date: 2017–12
  15. By: Boris Hirsch (Leuphana University Lueneburg, Germany); Steffen Mueller (Halle Institute for Economic Research (IWH) and University of Magdeburg, Germany)
    Abstract: This paper investigates the influence of industrial relations on firm wage premia in Germany. OLS regressions for the firm effects from a two-way fixed effects decomposition of workers’ wages by Card, Heining, and Kline (2013) document that average premia are larger in firms bound by collective agreements and in firms with a works council, holding constant firm performance. RIF regressions show that premia are less dispersed among covered firms but more dispersed among firms with a works council. Hence, deunionization is the only among the suspects investigated that contributes to explaining the marked rise in the premia dispersion over time.
    Keywords: firm wage premium, industrial relations, trade unions, works councils, bargaining power, rent sharing, wage inequality, Germany
    JEL: J31 J52 J53
    Date: 2018–02
  16. By: Mühlemann, Samuel (University of Munich); Pfann, Gerard A. (Maastricht University); Pfeifer, Harald (BIBB); Dietrich, Hans (Institute for Employment Research (IAB), Nuremberg)
    Abstract: This paper studies the effects of the G8 high school reform in Germany. The reform reduced minimum duration to obtain a high school degree (Abitur) from 9 to 8 years. First, we present a simple model based on a CES technology with heterogeneous inputs to conjecture possible effects of a supply shock of high education apprenticeships. Implementation of the reform across states (Länder) has been realized in different years. A difference-in-differences estimation strategy is used to identify the effects of one-time supply shock in market for high-educated apprentices. Training firms almost fully and immediately absorbed the additional supply of high school graduates in the apprenticeship market. No evidence is found for substitution effects between low and high education apprenticeships. The model explains that these effects may be due to sticky and too low collectively bargained wages for high education apprenticeships relative to their productivity. This renders the market for apprenticeships inefficient.
    Keywords: apprenticeship market, labor supply shock, G8 reform
    JEL: I21 J20
    Date: 2018–01
  17. By: Francesco Decarolis; Leonardo M. Giuffrida; Elisabetta Iossa; Vincenzo Mollisi; Giancarlo Spagnolo
    Abstract: To what extent does a more competent public workforce contribute to better economic outcomes? We analyze this question in the context of the US federal procurement by combining data on office-level competencies, federal workforce characteristics, and procurement performance. Using an instrumental variable strategy, we find that the effects of competence heterogeneity across bureaus are quantitatively important: if all federal bureaus were to obtain NASA's high level of competence (corresponding to the top 10 percent of competence), delays in contract execution would decline by 7.2 million days and price renegotiations would drop by $13.5 billion over the 2010-2015 period analyzed. Cooperation within the office appears to be a key driver of the findings.
    JEL: H11 H57 J45
    Date: 2018–01
  18. By: Daron Acemoglu; Pascual Restrepo
    Abstract: We summarize a framework for the study of the implications of automation and AI on the demand for labor, wages, and employment. Our task-based framework emphasizes the displacement effect that automation creates as machines and AI replace labor in tasks that it used to perform. This displacement effect tends to reduce the demand for labor and wages. But it is counteracted by a productivity effect, resulting from the cost savings generated by automation, which increase the demand for labor in non-automated tasks. The productivity effect is complemented by additional capital accumulation and the deepening of automation (improvements of existing machinery), both of which further increase the demand for labor. These countervailing effects are incomplete. Even when they are strong, automation in- creases output per worker more than wages and reduce the share of labor in national income. The more powerful countervailing force against automation is the creation of new labor-intensive tasks, which reinstates labor in new activities and tends to increase the labor share to counterbalance the impact of automation. Our framework also highlights the constraints and imperfections that slow down the adjustment of the economy and the labor market to automation and weaken the resulting productivity gains from this transformation: a mismatch between the skill requirements of new technologies, and the possibility that automation is being introduced at an excessive rate, possibly at the expense of other productivity-enhancing technologies.
    JEL: J23 J24
    Date: 2018–01
  19. By: Seungjin Han
    Abstract: This paper develops a fully-solvable equilibrium matching model of incomplete information with early skill acquisition to provide general theoretical insights into fast rising top income inequality observed in the United States. First, fast rising top income inequality is endogenously accommodated: In response to a change in each factor contributing to rising inequality, the equilibrium percentage changes in skill investment, income, and firm earnings are monotonically increasing in individual type, switching from negative to positive at respective cutoff types. Second, rising fractal top income inequality is associated with a downward shift in the Lorenz curve even when the whole income distribution is not Pareto. Third, rising income inequality has serious repercussions on welfare and efficiency. A change in each factor contributing to rising inequality makes individuals of type below a corresponding cutoff type worse off but individuals of type above better off. However, only changes in firm-related factors necessarily improve efficiency
    Keywords: matching, pre-match investment, incomplete information, fast rising top inequality, individual welfare, efficiency
    JEL: C78 D31 D82 G32 J30
    Date: 2018–01
  20. By: Fairlie, Robert W. (University of California, Santa Cruz); Fossen, Frank M. (University of Nevada, Reno)
    Abstract: A common finding in the entrepreneurship literature is that business creation increases in recessions. This counter-cyclical pattern is examined by separating business creation into two components: "opportunity" and "necessity" entrepreneurship. Although there is general agreement in the previous literature on the conceptual distinction between these two factors driving entrepreneurship, there are many challenges to creating a definition that is both objective and empirically feasible. We propose an operational definition of opportunity versus necessity entrepreneurship using readily available nationally representative data. We create a distinction between the two types of entrepreneurship based on the entrepreneur's prior work status that is consistent with the standard theoretical economic model of entrepreneurship. Using this definition we document that "opportunity" entrepreneurship is pro-cyclical and "necessity" entrepreneurship is counter-cyclical. We also find that "opportunity" vs. "necessity" entrepreneurship is associated with the creation of more growth-oriented businesses. The operational distinction proposed here may be useful for future research in entrepreneurship.
    Keywords: opportunity entrepreneurship, necessity entrepreneurship, business creation, business cycle
    JEL: J22 J23 L26
    Date: 2018–01

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