nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2018‒02‒19
23 papers chosen by
Joseph Marchand
University of Alberta

  1. Sources of Displaced Workers' Long-Term Earnings Losses By Marta Lachowska; Alexandre Mas; Stephen A. Woodbury
  2. Wage Dynamics and Returns to Unobserved Skill By Lance Lochner; Youngmin Park; Youngki Shin
  3. Social Insurance and Occupational Mobility By German Cubas; Pedro Silos
  4. Overeducation wage penalty among Ph.D. holders. An unconditional quantile regression analysis on Italian data By Gaeta, Giuseppe Lucio; Lubrano Lavadera, Giuseppe; Pastore, Francesco
  5. Children and Gender Inequality: Evidence from Denmark By Henrik Kleven; Camille Landais; Jakob Egholt Søgaard
  6. Hysteresis in Employment among Disadvantaged Workers By Fallick, Bruce C.; Krolikowski, Pawel
  7. Wage mobility, wage inequality, and tasks: Empirical evidence from Germany, 1984-2014 By Coban, Mustafa
  8. Insurance, Redistribution, and the Inequality of Lifetime Income By Victoria Prowse; Daniel Kemptner; Peter Hahn
  9. Distributional Gains of Near Higher Earners By Charles M Beach
  10. Do CCTs Improve Employment and Earnings in the Very Long-Term? Evidence from Mexico By Adriana D. Kugler; Ingrid Rojas
  11. What Do Workplace Wellness Programs Do? Evidence from the Illinois Workplace Wellness Study By Damon Jones; David Molitor; Julian Reif
  12. Migration in China: to Work or to Wed? By Arnaud Dupuy
  13. Changing demand for general skills, technological uncertainty, and economic growth By Masashi Tanaka
  14. The Effect of Incentives in Non-Routine Analytical Team Tasks - Evidence From a Field Experiment By Englmaier, Florian; Grimm, Stefan; Schindler, David; Schudy, Simeon
  15. Household Time Use Among Older Couples: Evidence and Implications for Labor Supply Parameters By Richard Rogerson; Johanna Wallenius
  16. Does postponing minimum retirement age improve healthy behaviors before retirement? Evidence from middle-aged Italian workers By Bertoni, M.;; Brunello, G.;; Mazzarella, G.;
  17. If not now, when? The timing of childbirth and labour market outcomes By Matteo Picchio; Claudia Pigini; Stefano Staffolani; Alina Verashchagina
  18. Longevity, Education, and Income: How Large is the Triangle? By Hoyt Bleakley
  19. The Power of Working Longer By Gila Bronshtein; Jason Scott; John B. Shoven; Sita N. Slavov
  20. AI as the next GPT: a Political-Economy Perspective By Manuel Trajtenberg
  21. Changing Business Dynamism and Productivity: Shocks vs. Responsiveness By Ryan A. Decker; John C. Haltiwanger; Ron S. Jarmin; Javier Miranda
  23. Skills for the 21st Century: Findings and Policy Lessons from the OECD Survey of Adult Skills By John P. Martin

  1. By: Marta Lachowska (W.E. Upjohn Institute for Employment Research); Alexandre Mas (Princeton University); Stephen A. Woodbury (Michigan State University and W.E. Upjohn Institute for Employment Research)
    Abstract: We estimate the earnings losses of a cohort of workers displaced during the Great Recession and decompose those long-term losses into components attributable to fewer work hours and to reduced hourly wage rates. We also examine the extent to which the reduced earnings, work hours, and wages of these displaced workers can be attributed to factors specific to pre- and post-displacement employers; that is, to employer-specific fixed effects. The analysis is based on employer-employee linked panel data from Washington State assembled from 2002–2014 administrative wage and unemployment insurance (UI) records. Three main findings emerge from the empirical work. First, five years after job loss, the earnings of these displaced workers were 16 percent less than those of comparison groups of non-displaced workers. Second, earnings losses within a year of displacement can be explained almost entirely by lost work hours; however, five years after displacement, the relative earnings deficit of displaced workers can be attributed roughly 40 percent to reduced hourly wages and 60 percent to reduce work hours. Third for the average displaced worker, lost employer-specific premiums account for about 11 percent of long-term earnings losses and nearly 25 percent of lower long-term hourly wages. For workers displaced from employers paying top-quintile earnings premiums (about 60 percent of the displaced workers in the sample), lost employer-specific premiums account for more than half of long-term earnings losses and 83 percent of lower long-term hourly wages.
    Keywords: Earnings, hours, wages, displaced workers, unemployment, reemployment policy, administrative data, difference-in-differences, employer- vs. individual-specific earnings and wage differentials
    JEL: C21 J22 J23 J38 J65
    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 PSID, we estimate that the returns to unobserved skills have declined by as much as 50% since the mid-1980s despite a sizable increase in residual inequality. Instead, the variance of skills rose over this period due to increasing variability in life cycle 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-educated men.
    JEL: J24 J31
    Date: 2018–01
  3. By: German Cubas (Department of Economics, University of Houston); Pedro Silos (Department of Economics, Temple University)
    Abstract: This paper studies how insurance from progressive taxation improves the matching of workers to occupations. We propose an equilibrium dynamic assignment model to illustrate how social insurance encourages mobility. Workers experiment to find their best occupational fit in a process filled with uncertainty. Risk aversion and limited earnings insurance induce workers to remain in unfitting occupations. We estimate the model using microdata from the United States and Germany. Higher earnings uncertainty explains the U.S. higher mobility rate. When workers in the United States enjoy Germany's higher progressivity, mobility rises. Output and welfare gains are large.
    Keywords: Progressive Taxation, Social Insurance, Occupational Choice
    JEL: E21 H24 J31
    Date: 2018–02
  4. By: Gaeta, Giuseppe Lucio; Lubrano Lavadera, Giuseppe; Pastore, Francesco
    Abstract: The wage effect of overeducation has only recently been investigated in the case of Ph.D. holders. The existing contributions rely on OLS estimates that allow measuring the average effect of being educationally mismatched at the mean of the conditional wage distribution. This paper, instead, observes the heterogeneity of the overeducation penalty along the hourly wage distribution and according to the study field and sector of employment (academic/non-academic) of Ph.D. holders. We estimate a Recentered Influence Function. The results reveal that overeducation hits the wages of those Ph.D. holders who are employed in the academic sector and in non-R&D jobs outside of the academic sector. Instead, no penalty exists among those who carry out R&D outside the Academia. The size of the penalty is higher among those who are in the mid-top of the wage distribution and hold a Social Science and Humanities specialization.
    Keywords: Job-education mismatch,Overeducation,Wages,Ph.D. holders,Unconditional quantile regression,Italy
    JEL: C26 I23 J13 J24 J28
    Date: 2018
  5. By: Henrik Kleven; Camille Landais; Jakob Egholt Søgaard
    Abstract: Despite considerable gender convergence over time, substantial gender inequality persists in all countries. Using Danish administrative data from 1980-2013 and an event study approach, we show that most of the remaining gender inequality in earnings is due to children. The arrival of children creates a gender gap in earnings of around 20% in the long run, driven in roughly equal proportions by labor force participation, hours of work, and wage rates. Underlying these “child penalties”, we find clear dynamic impacts on occupation, promotion to manager, sector, and the family friendliness of the firm for women relative to men. Based on a dynamic decomposition framework, we show that the fraction of gender inequality caused by child penalties has increased dramatically over time, from about 40% in 1980 to about 80% in 2013. As a possible explanation for the persistence of child penalties, we show that they are transmitted through generations, from parents to daughters (but not sons), consistent with an influence of childhood environment in the formation of women’s preferences over family and career.
    JEL: J13 J16 J21 J22 J31
    Date: 2018–01
  6. By: Fallick, Bruce C. (Federal Reserve Bank of Cleveland); Krolikowski, Pawel (Federal Reserve Bank of Cleveland)
    Abstract: We examine hysteresis in employment-to-population ratios among less-educated men using state-level data. Results from dynamic panel regressions indicate a moderate degree of hysteresis: The effects of past employment rates on subsequent employment rates can be substantial but essentially dissipate within three years. This finding is robust to a number of variations. We find no substantial asymmetry in the persistence of high vs. low employment rates. The cumulative effect of hysteresis in the business cycle surrounding the 2001 recession was mildly positive, while the effect in the cycle surrounding the 2008–09 recession was, through 2016, decidedly negative. Additional simulations suggest that the employment benefits of temporarily running a “high-pressure” economy are small.
    Keywords: hysteresis; employment persistence; labor market tightness; unemployment;
    JEL: E24 J21 J24
    Date: 2018–02–06
  7. By: Coban, Mustafa
    Abstract: Using the German Socio-Economic Panel and a newly available task database for Germany, the evolution of wage inequality, wage mobility, and the origins of wage mobility are studied. Since 2006 the increase in the German wage inequality has markedly slowed down, but there is a steady decline in wage mobility since 2000. In particular, workers in the services sector have ceteris paribus a significantly lower wage mobility than in the manufacturing sector. This result is mainly driven by the decrease of wage mobility in the health care and social services sector. Impact of a worker's unemployment spells and occupation on wage mobility has strengthened over the observation period. Between 2006 and 2013 wage and employment growth have been even polarized, but the routinezation hypothesis can only partially confirmed for wage mobility patterns. Workers who mainly perform manual tasks have a lower wage mobility over the observation period, but workers in cognitive routine occupations show a higher and increasing wage mobility over time compared to manual non-routine workers. In order to examine asymmetries in the effects of basic covariates on a worker's downward and upward wage mobility, multinomial logit estimations were applied. Except for the part-time workers, there are no obvious differences for the remaining covariates.
    Keywords: wage inequality,wage mobility,task approach,polarization hypothesis
    JEL: J31 J24
    Date: 2017
  8. By: Victoria Prowse; Daniel Kemptner; Peter Hahn
    Abstract: In this paper, we study how the tax-and-transfer system reduces the inequality of lifetime income by redistributing lifetime earnings between individuals with different skill endowments and by providing individuals with insurance against lifetime earnings risk. Based on a dynamic life-cycle model, we nd that redistribution through the tax-andtransfer system offsets around half of the inequality in lifetime earnings that is due to differences in skill endowments. At the same time, taxes and transfers mitigate around 60% of the inequality in lifetime earnings that is attributable to employment and health risk. Progressive taxation of annual earnings provides little insurance against lifetime earnings risk. The lifetime insurance effects of taxation may be improved by moving to a progressive tax on lifetime earnings. Similarly, the lifetime insurance and redistributive effects of social assistance may be improved by requiring wealthy individuals to repay any social assistance received when younger.
    Keywords: Lifetime earnings; lifetime income; tax-and-transfer system; taxation; unemployment insurance; disability bene ts; social assistance; inequality; redistribution; insurance; endowments; risk; dynamic life-cycle models.
    JEL: D63 H23 I24 I38 J22 J31
    Date: 2017–12
  9. By: Charles M Beach (Queen's University)
    Abstract: This paper looks at changes in employment and relative wages of near higher earnings (NHE) workers between middle-class (MC) and higher earners (HE) in Canada over 2000-2015. An approach is also forwarded for evaluating these changes in terms of underlying demand and supply factors. It is found that the NHE behaves as a transition group between quite different patterns of change of the MC and HE groups, and that these changes have been recently attenuating. The MC group experienced a downward shift in employment demand, the HE group an upward shift in demand, and the NHE group an upward shift in supply of workers.
    Keywords: Income equality, Canadian earnings, near higher earnings
    JEL: C12 J20 J31
    Date: 2018–02
  10. By: Adriana D. Kugler; Ingrid Rojas
    Abstract: We assess long-term impacts of the Mexican conditional cash transfer (CCT) program on youth employment and earnings. We rely on the original random assignment into early and late treatment localities, which introduced CCTs in 1998 and 2000. We focus on children between 7 and 16 years of age in 1997, who we follow up to 17 years later. Using the household surveys between 2003 and 2015, we find that those with greater time of exposure to CCTs had greater increases in educational attainment. Moreover, we find significant and positive impacts of the program on the likelihood and quality of employment.
    JEL: I38 J24 O38
    Date: 2018–01
  11. By: Damon Jones; David Molitor; Julian Reif
    Abstract: Workplace wellness programs cover over 50 million workers and are intended to reduce medical spending, increase productivity, and improve well-being. Yet, limited evidence exists to support these claims. We designed and implemented a comprehensive workplace wellness program for a large employer with over 12,000 employees, and randomly assigned program eligibility and financial incentives at the individual level. Over 56 percent of eligible (treatment group) employees participated in the program. We find strong patterns of selection: during the year prior to the intervention, program participants had lower medical expenditures and healthier behaviors than non-participants. However, we do not find significant causal effects of treatment on total medical expenditures, health behaviors, employee productivity, or self-reported health status in the first year. Our 95% confidence intervals rule out 78 percent of previous estimates on medical spending and absenteeism. Our selection results suggest these programs may act as a screening mechanism: even in the absence of any direct savings, differential recruitment or retention of lower-cost participants could result in net savings for employers.
    JEL: I1 J3 M5
    Date: 2018–01
  12. By: Arnaud Dupuy (CREA, Université du Luxembourg)
    Abstract: This paper develops a model encompassing both Becker's matching model, and Tinbergen-Rosen's hedonic model. We study its properties and provide identification and estimation strategies. Using data on internal migration in China, we estimate the model and compute equilibrium under counter-factual alternatives to decompose the migration surplus. Our findings reveal that about 1/5 of the migration surplus of migrant women is generated in the marriage market and 3/5 in the labor market. We also find that the welfare of urban men married with a migrant wife would have been 10% lower had their migrant wives not entered the urban marriage market.
    Keywords: Sorting in many local markets, marriage market, hedonic and matching models.
    JEL: D3 J21 J23 J31
    Date: 2018
  13. By: Masashi Tanaka (Graduate School of Economics, Osaka University)
    Abstract: We develop a simple endogenous growth model featuring individuals f choices between general and firm-specific skills, endogenous technological innovation, and a government subsidy for education. General skills are less productive than are specific skills, but they enable workers to operate all technologies in the economy. We show that demand for general skills increases as countries catch up to the world technology frontier. Further, using aggregated data for 12 European OECD counties, we calibrate the model and compare the theoretical prediction with the data. In cross-country comparisons, we find that the returns on general skills and the impact of general education expenditure on GDP are higher in countries with higher total factor productivity. These findings support our theoretical argument of the positive relationship between firms f demand for general skills and countries f stages of development.
    Keywords: General and specific skills, Technological uncertainty, Education policy, Distance to world technology frontier
    JEL: J24 O33 O40 I22
    Date: 2018–01
  14. By: Englmaier, Florian (LMU Munich); Grimm, Stefan (LMU Munich); Schindler, David (Tilburg University); Schudy, Simeon (LMU Munich)
    Abstract: Despite the prevalence of non-routine analytical team tasks in modern economies, little is known about how incentives influence performance in these tasks. In a field experiment with more than 3000 participants, we document a positive effect of bonus incentives on the probability of completion of such a task. Bonus incentives increase performance due to the reward rather than the reference point (performance threshold) they provide. The framing of bonuses (as gains or losses) plays a minor role. Incentives improve performance also in an additional sample of presumably less motivated workers. However, incentives reduce these workers\' willingness to \"explore\" original solutions.
    Keywords: team work; bonus; incentives; loss; gain; non-routine; exploration;
    JEL: C92 C93 J33 D03 M52
    Date: 2018–02–08
  15. By: Richard Rogerson; Johanna Wallenius
    Abstract: Using the Consumption Activities Mail Survey (CAMS) module in the HRS we document how time allocations change for individuals within a household when one or more members transitions from full time work to not working. Our basic finding is that the ratio of home production to leisure time is approximately constant for both family members. We then build a model of household labor supply to understand the implications of this finding for preferences and the home production function. We conclude that this fact suggests a relatively large elasticity of substitution between the leisure of the two members. For commonly used preference specifications, this also implies a large (i.e., greater than one) intertemporal elasticity of substitution for leisure.
    JEL: E24 J22
    Date: 2018–01
  16. By: Bertoni, M.;; Brunello, G.;; Mazzarella, G.;
    Abstract: By increasing the residual working horizon of employed individuals, pension reforms that rise minimum retirement age can affect individual investment in health-promoting behaviors before retirement. Using the expected increase in minimum retirement age induced by a 2004 Italian pension reform and a difference-in-differences research design, we show that middleaged Italian males affected by the reform reacted to the longer working horizon by increasing regular exercise, with positive consequences for obesity and self-reported satisfaction with health.
    Keywords: retirement; working horizon; healthy behaviors; pension reforms;
    JEL: H55 I12 J26
    Date: 2018–02
  17. By: Matteo Picchio (Di.S.E.S. - Universita' Politecnica delle Marche); Claudia Pigini (Di.S.E.S. - Universita' Politecnica delle Marche); Stefano Staffolani (Di.S.E.S. - Universita' Politecnica delle Marche); Alina Verashchagina (Di.S.E.S. - Universita' Politecnica delle Marche)
    Abstract: We study the effect of childbirth and its timing on female labour market outcomes in italy. The impact on yearly labour earnings and participation is traced up to 21 years since school completion by estimating a factor analytic model with dynamic selection into treatments. We find that childbearing, especially the first delivery, negatively affects female labour supply. Women having their first child soon after school completion are able to catch up with childless women only after 12-15 years. The timing matters, with minimal negative consequences observed if the first child is delayed up to 7-9 years after exiting formal education
    Keywords: Female labour supply; fertility; discrete choice models; dynamic treatment effect; factor analytic model
    JEL: C33 C35 J13 J22
    Date: 2018–02
  18. By: Hoyt Bleakley
    Abstract: While health affects economic development and wellbeing through a variety of pathways, one commonly suggested mechanism is a "horizon" channel in which increased longevity induces additional education. A recent literature devotes much attention to how much education responds to increasing longevity, while this study asks instead what impact this specific channel has on wellbeing (welfare). I note that death is like a tax on human-capital investments, which suggests the use of a standard public-economics tool: triangles. I construct estimates of the triangle gain if education adjusts to lower adult mortality. Even for implausibly large responses of education to survival differences, almost all of today's low-human-development countries, if switched instantaneously to Japan's survival curve, would place a value on this channel of less than 15% of income. Calibrating the model with well-identified micro- and cohort-level studies, I find that the horizon triangle for the typical low-income country is instead less than a percent of lifetime income. Gains from increased survival in the 20th-century are similarly sized.
    JEL: J24 N3 O1
    Date: 2018–01
  19. By: Gila Bronshtein; Jason Scott; John B. Shoven; Sita N. Slavov
    Abstract: This paper compares the relative strengths of working longer vs. saving more in terms of increasing a household’s affordable, sustainable standard of living in retirement. Both stylized households and actual households from the Health and Retirement Study are examined. We assume that workers commence Social Security benefits when they retire. The basic result is that delaying retirement by 3-6 months has the same impact on the retirement standard of living as saving an additional one-percentage point of labor earnings for 30 years. The relative power of saving more is even lower if the decision to increase saving is made later in the work life. For instance, increasing retirement saving by one percentage point ten years before retirement has the same impact on the sustainable retirement standard of living as working a single month longer. The calculations of the relative power of working longer and saving more are done for a wide range of realized rates of returns on saving, for households with different income levels, and for singles as well as married couples. The results are quite invariant to these circumstances.
    JEL: D14 H55 J26
    Date: 2018–01
  20. By: Manuel Trajtenberg
    Abstract: History suggests that dismal prophecies regarding the impact of great technological advances rarely come to pass. Yet, as many occupations will indeed vanish with the advent of AI as the new General Purpose Technology (GPT), we should search for ways to ameliorate the detrimental effects of AI, and enhance its positive ones, particularly in: (1) education and skills development: revamp the centuries-old “factory model” of education, and develop instead skills relevant for an AI-based economy – analytical, creative, interpersonal, and emotional. (2) The professionalization of personal care occupations, particularly in healthcare and education; these are to provide the bulk of future employment growth, yet as performed today involve little training and technology, and confer low wages. New, higher standards and academic requirements could be set for these occupations, which would enable AI to benefit both providers and users. (3) Affect the direction of technical advance – we distinguish between “human-enhancing innovations” (HEI), that magnify and enhance sensory, motoric, and other such human capabilities, and “human-replacing innovations” (HRI), which replace human intervention, and often leave for humans mostly “dumb” jobs. AI-based HEI’s have the potential to unleash a new wave of creativity and productivity, particularly in services, whereas HRI’s might just decrease employment and give rise to unworthy jobs.
    JEL: J24 O3 O33 O38
    Date: 2018–01
  21. By: Ryan A. Decker; John C. Haltiwanger; Ron S. Jarmin; Javier Miranda
    Abstract: The pace of job reallocation has declined in all U.S. sectors since 2000. In standard models, aggregate job reallocation depends on (a) the dispersion of idiosyncratic productivity shocks faced by businesses and (b) the marginal responsiveness of businesses to those shocks. Using several novel empirical facts from business microdata, we infer that the pervasive post-2000 decline in reallocation reflects weaker responsiveness in a manner consistent with rising adjustment frictions and not lower dispersion of shocks. The within-industry dispersion of TFP and output per worker has risen, while the marginal responsiveness of employment growth to business-level productivity has weakened. The responsiveness in the post-2000 period for young firms in the high-tech sector is only about half (in manufacturing) to two thirds (economy wide) of the peak in the 1990s. Counterfactuals show that weakening productivity responsiveness since 2000 accounts for a significant drag on aggregate productivity.
    JEL: D24 E24 J23 L26
    Date: 2018–01
  22. By: Dagmara Nikulin (Gdansk University of Technology, Gdansk, Poland); Maciej Berêsewicz (Poznañ University of Economics and Business, Centre for Small Area Estimation, Statistical Office in Poznañ, Poznan, Poland)
    Abstract: The main goal of our article is to bridge the gap in the regional analysis of informal employment in Poland and in particular to indicate the propensity for informal work in the working age population, to test if informal activities are typical for marginalized people (less educated, unemployed, older) and to identify the regional and spatial heterogeneity in the propensity. We use data from the ‘Human Capital Balance 2010-2014’ survey. Results indicate a strong relationship between the probability of informal work and age, sex and labour force status. Moreover, a strong spatial dependency can be observed.
    Keywords: Informal employment propensity, unregistered work, shadow economy, spatial Bayesian analysis, INLA
    JEL: J21 R12 R23
    Date: 2018–01
  23. By: John P. Martin (Geary Institute for Public Policy, University College Dublin)
    Abstract: The OECD Survey of Adult Skills is the jewel in the crown of its Programme for the International Assessment of Adult Competencies (PIAAC). This paper argues that the findings and policy lessons from the project to date justify the high hopes which were placed in PIAAC when detailed planning for the project began in 2003. First, it presents a brief recap of PIAAC and its two predecessor international skills surveys. Second, it outlines the main themes which have been investigated to date using data from PIAAC. Third, the main findings and policy lessons drawn from PIAAC are highlighted. Finally, looking forward to the second cycle of PIAAC, for which planning is now underway, the paper suggests some priority areas for improvements to the survey design in order to add to its analytical usefulness and enhance its utility to policy makers.
    Keywords: PIAAC, skills, returns to skills, skills mismatch, skills use, lifelong learning
    JEL: I24 J24 J62 M53
    Date: 2018–01–28

This nep-lma issue is ©2018 by Joseph Marchand. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.