nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2018‒03‒12
eighteen papers chosen by
Joseph Marchand
University of Alberta

  1. "Since you're so rich, you must be really smart": Talent and the Finance Wage Premium By Böhm, Michael; Metzger, Daniel; Strömberg, Per Johan
  2. Social Subsidies and Marketization: the role of gender and skill By Robert Duval-Hernandez; Lei Fang; L. Rachel Ngai
  3. Job market outcomes of IDPs: the case of Georgia By Karine Torosyan; Norberto Pignatti; Maksym Obrizan
  4. The Impact of Public Employment: Evidence from Bonn By Sascha Becker; Stephan Heblich; Daniel Sturm
  5. Technological Progress, the Supply of Hours Worked, and the Consumption-Leisure Complementarity By Andreas Irmen
  6. Retirement rigidities and the gap between effective and desired labour supply by older workers By Serena Trucchi; Elsa Fornero; Mariacristina Rossi
  7. Creative and science-oriented employees and firm-level innovation By Birkeneder, Antonia; Brunow, Stephan; Rodríguez-Pose, Andrés
  8. Bargaining to work: the effect of female autonomy on female labour supply By Chloé van Biljon; Dieter von Fintel; Atika Pasha
  9. Perceived Wages and the Gender Gap in STEM Fields By Osikominu, Aderonke; Pfeifer, Gregor
  10. University invention and the abolishment of the professor’s privilege in Finland By Ejermo, Olof; Toivanen, Hannes
  11. A ‘threat’ is a ‘Threat’: Incentive Effects of Firing Threats with Varying Degrees of Performance Information By Jordi Brandts; Brice Corgnet; Roberto Hernán-González; José M. Ortiz; Carles Solà
  12. Decision-making within the Household: The Role of Autonomy and Differences in Preferences By Alem, Yonas; Hassen, Sied; Köhlin, Gunnar
  13. Explaining the Decline in the U.S. Employment-to-Population Ratio: A Review of the Evidence By Katharine G. Abraham; Melissa S. Kearney
  14. Discriminate me - if you can! The disappearance of the gender pay gap among public-contest selected employees By Castagnetti, Carolina; Rosti, Luisa; Töpfer, Marina
  15. The Effect of Minority Veto Rights on Controller Tunneling By Fried, Jesse; Kamar, Ehud; Yafeh, Yishay
  16. Optimal Education Policy and Human Capital Accumulation in the Context of Brain Drain By Slobodan Djajić; Frédéric Docquier; Michael S. Michael
  17. Women’s education, employment status and the choice of birth control method: An investigation for the case of Turkey By Deniz Karaoğlan; Dürdane Sirin Saracoglu
  18. Two and a half million Syrian refugees, skill mix and capital intensity By Akgündüz, Yusuf Emre; Torun, Huzeyfe

  1. By: Böhm, Michael; Metzger, Daniel; Strömberg, Per Johan
    Abstract: Wages in the financial sector have experienced an extraordinary increase over the last few decades. A proposed explanation for this trend has been that the demand for skill has risen more in finance compared to other sectors. We use Swedish administrative data, which include detailed cognitive and non-cognitive test scores as well as educational performance, to examine the implications of this hypothesis for talent allocation and relative wages in the financial sector. We find no evidence that the selection of talent into finance has improved, neither on average nor at the top of the talent and wage distributions. A changing composition of talent or their returns cannot account for the surge in the finance wage premium. While these findings alleviate concerns about a "brain drain" into finance at the expense of other sectors, they also suggest that finance workers are capturing substantial rents that have increased over time.
    Keywords: Sectoral Wage Premia; Talent Allocation; Earnings Inequality; Compensation in Financial Industry
    JEL: G20 J24 J31
    Date: 2018–02
  2. By: Robert Duval-Hernandez (Economics Research Centre (CypERC) University of Cyprus; Centro de Investigación y Docencia Económicas (CIDE); Institute of Labor Economics (IZA)); Lei Fang (Economic Research Department Federal Reserve Bank of Atlanta); L. Rachel Ngai (Economics Department London School of Economics (LSE); Centre for Economic Policy Research (CEPR); Centre for Macroeconomics (CFM))
    Abstract: This paper decomposes the differences in aggregate market hours between US and Europe across gender-skill groups and finds that low-skilled women are the biggest contributors to aggregate differences, with the exception of Nordic countries. We develop a model to account for the gender-skill differences in market hours across countries. Taxes, which reduce market hours in favor of leisure and home production, explain a substantial fraction of the differences in hours for Southern and Central European countries. Subsidized family care, which reduces home hours of women in favor of market hours, explains the different pattern of hours in Nordic countries. Low-skilled women are more responsive to policy because of their comparative advantage in producing home services and the corresponding market substitutes.
    Keywords: Cross-country differences in market hours, Home production, Subsidies on family care
    JEL: E24 E62 J22
    Date: 2018–02
  3. By: Karine Torosyan (International School of Economics at Tbilisi State University); Norberto Pignatti (International School of Economics - Tbilisi); Maksym Obrizan (Kyiv School of Economics)
    Abstract: Internally displaced people (IDPs) constitute a serious economic, social and cultural problem for many countries, including countries in transition. Despite the importance of the problem, there are only a handful of previous studies investigating the issue of labor market outcomes of IDPs. We aim to fill this gap in the literature using 13 years of Integrated Household Surveys over 2004 - 2016 from Georgia, which experienced large flows of internal migrants from the early 1990s until now. Our analyses indicate that the labor market outcomes of IDPs are much worse than those of local residents. Specifically, IDPs are 3.9 to 11.2 percentage points less likely to be in the labor force, depending on the period and duration of IDP status. IDPs are also up to 11.6 percentage points more likely to be unemployed, sometimes even after 20 years of forced displacement. Finally, IDPs residing in a locality for more than 5 years receive persistently lower wages than local residents with similar characteristics, with the gap widening over time, reaching some 16 percentage points in the last period under analysis.
    Keywords: conflict, internally displaced people, IDPs, labor market outcomes, transition countries
    JEL: D74 J21 O15 P23 R23
    Date: 2018–03
  4. By: Sascha Becker; Stephan Heblich; Daniel Sturm
    Abstract: This paper evaluates the impact of public employment on private sector activity using the relocation of the German federal government from Berlin to Bonn in the wake of the Second World War as a source of exogenous variation. To guide our empirical analysis, we develop a simple economic geography model in which public sector employment in a city can crowd out private employment through higher wages and house prices, but also generates potential productivity and amenity spillovers. We find that relative to a control group of cities, Bonn experiences a substantial increase in public employment. However, this results in only modest increases in private sector employment with each additional public sector job destroying around 0.2 jobs in industries and creating just over one additional job in other parts of the private sector. We show how this finding can be explained by our model and provide several pieces of evidence for the mechanisms emphasized by the model.
    Keywords: economic geography, public employment, place-based policies, German division
    JEL: F15 J45 N44 R12
    Date: 2018
  5. By: Andreas Irmen
    Abstract: At least since 1870 hours worked per worker declined and real wages increased in many of today’s industrialized countries. The dual nature of technological progress in conjunction with a consumption-leisure complementarity explains these stylized facts. Technological progress drives real wages up and expands the amount of available consumption goods. Enjoying consumption goods increases the value of leisure. Therefore, individuals demand more leisure and supply less labor. This mechanism appears in an OLG-model with two-period lived individuals equipped with per-period utility functions of the generalized log-log type proposed by Boppart-Krusell (2016). The optimal plan is piecewise defined and hinges on the wage level. Technological progress moves a poor economy out of a regime with low wages and an inelastic supply of hours worked into a regime where wages increase further and hours worked continuously decline.
    Keywords: technological change, capital accumulation, endogenous labor supply, OLG-model
    JEL: D91 J22 O33 O41
    Date: 2018
  6. By: Serena Trucchi (Department of Economics, University Of Venice Cà Foscari); Elsa Fornero (University of Turin, CeRP-Collegio Carlo Alberto); Mariacristina Rossi (University of Turin, CeRP-Collegio Carlo Alberto; Netspar)
    Abstract: Our paper analyses the observed and desired labour supply of older workers and (recent) retirees in a country (Italy) with limited opportunities for exible work schedules. For this purpose, we use a unique dataset drawn from the Bank of Italy's Survey on Household Income and Wealth (SHIW) providing information on both desired and actual working hours. Our empirical analysis documents the gap between older individuals' desired and observed labour supply at both the extensive and the intensive margins and traces it back to gender, education and family composition. The paper provides useful insights into the potential effectiveness of policies such as gradual retirement and part-time work in increasing older workers' employment.
    Keywords: Retirement, desired labour supply, exible retirement
    JEL: J26 J14
    Date: 2018
  7. By: Birkeneder, Antonia; Brunow, Stephan; Rodríguez-Pose, Andrés
    Abstract: This paper examines the link between innovation and the endowments of creative and science-oriented STEM - Science, Technology, Engineering and Mathematics - workers at the level of the firm and at the city-/regional-level in Germany. It also looks into whether the presence of these two groups of workers has greater benefits for larger cities than smaller locations, thus justifying policies to attract these workers in order to make German cities 'smarter'. The empirical analysis is based on a probit estimation, covering 115,000 firm-level observations between 1998 and 2015. The results highlight that firms that employ creative and STEM workers are more innovative than those that do not. However, the positive connection of creative workers to innovation is limited to the boundaries of the firm, whereas that of STEM workers is as associated to the generation of considerable innovation spillovers. Hence, attracting STEM workers is more likely to end up making German cities smarter than focusing exclusively on creative workers.
    Keywords: Creative workers; Germany; Innovation; Smart Cities; Spillover; STEM workers
    JEL: J24 R23
    Date: 2018–02
  8. By: Chloé van Biljon (Department of Economics and ReSEP, Stellenbosch University); Dieter von Fintel (Department of Economics and ReSEP, Stellenbosch University); Atika Pasha (Department of Economics, University of Mannheim)
    Abstract: Female labour supply is an important outcome for measuring gender equality and is therefore regarded as one of the key indicators for women's empowerment. The empowerment of women through greater labour force participation is well documented in the literature. We argue, however, that the relationship between female labour force participation and empowerment is endogenous. We instead turn our attention to understanding whether greater female household autonomy causes participation in the labour market in the first place. Using the roll out of banking cards associated with the South African government cash transfers as an exogenous shock, we show that financial inclusion improves women's decision making power in the household. In response to this redistribution of bargaining power in the household, we provide evidence of increased female labour force participation. Our results show that becoming a primary decision maker leads to a 92 percentage point increase in the probability that women participate in the labour market.
    Keywords: Female labour force participation, SASSA cards, female autonomy, non-cooperative household bargaining model, South Africa, NIDS
    JEL: C36 C78 D13 J16 J22
    Date: 2018
  9. By: Osikominu, Aderonke; Pfeifer, Gregor
    Abstract: We estimate gender differences in elicited wage expectations among German University students applying for STEM and non-STEM fields. Descriptively, women expect to earn less than men and also have lower expectations about wages of average graduates across different fields. Using a two-step estimation procedure accounting for self-selection, we find that the gender gap in own expected wages can be explained to the extent of 54-69% by wage expectations for average graduates across different fields. However, gender differences in the wage expectations for average graduates across different fields do not contribute to explaining the gender gap in the choice of STEM majors.
    Keywords: college major choice; Gender Gap; STEM; wage expectations
    JEL: I21 J16 J31
    Date: 2018–02
  10. By: Ejermo, Olof (Department of Economic History, Lund University); Toivanen, Hannes (Teqmine)
    Abstract: In 2007 Finland changed ownership rights to inventions from its employees – "the professor’s privilege" – to universities. We investigate how this change affected academic patenting using new data on inventors and patenting in Finland for the period 1995- 2010. Matched sample panel data regressions using difference-in-differences show that patenting by individuals dropped by at least 29 percent after 2007. Unlike other countries studied, in Finland the reform was known before implementation. Adding the period after announcement to the reform period increases the drop in academic patenting to 46 percent. Our and others’ results call into question whether the European reform of the professor’s privilege were good innovation policy.
    Keywords: academic patenting; Finland; professor’s privilege; university ownership
    JEL: I23 I28 O31 O32 O34 O38
    Date: 2018–03–02
  11. By: Jordi Brandts; Brice Corgnet; Roberto Hernán-González; José M. Ortiz; Carles Solà
    Abstract: We study the incentive effect of firing threats when bosses have limited information about workers. We show that a minimal amount of individual information about workers’ effort such as the time spent at their work station is sufficient to ensure strong incentive effects. This supports the use of firing threats based on rudimentary yet uncontroversial measures of work performance such as absenteeism, in organizational settings in which only limited information about workers is available. Our results help understand the limited link between pay and performance observed in compensation contracts calling for an extension of the principal-agent model to take into account how workers (mis-)perceive the intensity of incentives.
    Keywords: firing threats, Incentives, informativeness principle, laboratory experiments
    JEL: C92 D23 D82
    Date: 2018–02
  12. By: Alem, Yonas (Department of Economics, School of Business, Economics and Law, Göteborg University); Hassen, Sied (Environment and Climate Research Center of the Ethiopian Development Research Institute); Köhlin, Gunnar (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: We use a field experiment to identify how differences in preferences and autonomy in decision-making result in sub-optimal adoption of technologies that can maximize the welfare of all members of the household. We create income-earning opportunities and elicit willingness- to-pay (WTP) for energy-efficient cookstoves through a real stove purchase experiment with randomly chosen wives, husbands and couples. Experimental results suggest that women, who often are responsible for cooking and for collecting fuelwood, reveal a higher preference than men for the improved stoves. Using an instrumental variables tobit estimator, we show that women who have higher decision-making autonomy reveal higher WTP than those who have lower decision-making autonomy. A follow-up survey conducted 15 months after the stove purchase show that autonomy does not affect stove use. Our findings highlight the importance of considering division of labor, different preferences, and bargaining power differences within the household when promoting adoption of new household technologies.
    Keywords: Preference Difference; Decision-making; Autonomy; Willingness-to-pay
    JEL: C93 D13 O12 Q56
    Date: 2018–03
  13. By: Katharine G. Abraham; Melissa S. Kearney
    Abstract: This paper first documents trends in employment rates and then reviews what is known about the various factors that have been proposed to explain the decline in the overall employment-to-population ratio between 1999 and 2016. Population aging has had a notable effect on the overall employment rate over this period, but within-age-group declines in employment among young and prime age adults have been at least as important. Our review of the evidence leads us to conclude that labor demand factors, in particular trade and the penetration of robots into the labor market, are the most important drivers of observed within-group declines in employment. Labor supply factors, most notably increased participation in disability insurance programs, have played a less important but not inconsequential role. Increases in the real value of the minimum wage and in the share of individuals with prison records also have contributed modestly to the decline in the aggregate employment rate. In addition to these factors, whose effects we roughly quantify, we also identify a set of potentially important factors about which the evidence is too preliminary to draw any clear conclusion. These include improvements in leisure technology, changing social norms, increased drug use, growth in occupational licensing, and the costs and challenges associated with child care. Our evidence-driven ranking of factors should be useful for guiding future discussions about the sources of decline in the aggregate employment-to-population ratio and consequently the likely efficacy of alternative policy approaches to increasing employment rates.
    JEL: J01 J21
    Date: 2018–02
  14. By: Castagnetti, Carolina; Rosti, Luisa; Töpfer, Marina
    Abstract: This paper analyzes the effect of public-contest recruitment on earnings for men and women using Italian microdata over a time period of ten years. We find that the gender pay gap vanishes and even reverses among the young, when employees are selected through public contests. The results suggest that selection mechanisms such as public contests may offer a way for merit-based and gender-fair wage setting. However, since public contests and the public sector are highly correlated, we analyze the gender pay gap taking the interconnection between the public and private sector as well as the open contest issue into account. By decomposing our results by sector we find that public contests represent a necessary but not sufficient condition for merit-based and gender-fair recruitment. Similarly, the institutional environment of the public sector is a necessary but not sufficient condition for making public contests merit-based and gender-fair screening devices. These two factors taken together, cause the disappearance of the gender pay gap.
    Keywords: Gender Pay Gap,Public-Contest Recruitment,Double Sample Selection
    JEL: J7 J13 J31
    Date: 2018
  15. By: Fried, Jesse; Kamar, Ehud; Yafeh, Yishay
    Abstract: A central challenge in the regulation of controlled firms is curbing controller tunneling. As independent directors and fiduciary duties are widely seen as not up to the task, a number of jurisdictions have given minority shareholders veto rights over these transactions. To assess these rights' efficacy, we exploit a 2011 regulatory reform in Israel that gave the minority the ability to veto pay packages of controllers and their relatives ("controller executives"). We find that the reform curbed the pay of controller executives and led some controller executives to quit their jobs, or work for free, in circumstances suggesting their pay would not have received approval. These findings suggest that minority veto rights can help curb controller tunneling.
    Keywords: controlling shareholders; corporate governance; corporate law; Executive compensation; minority shareholders; related party transactions; securities regulation; shareholder voting; tunneling; veto rights
    JEL: G18 G34 G38 J33 J38 K22 L20 M12 M52
    Date: 2018–02
  16. By: Slobodan Djajić (Graduate Institute (Geneva, Switerland)); Frédéric Docquier (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES), FNRS, National Fund for Scientific Research, Belgium and FERDI, Fondation pour les Etudes et Recherches sur le Developpement International, France); Michael S. Michael (Departement of Economics, University of Cyprus (Nicosia, Cyprus))
    Abstract: This paper revisits the question of how brain drain affects the optimal education policy of a developing economy. Our framework of analysis highlights the complementarity between public spending on education and students' efforts to acquire human capital in response to career opportunities at home and abroad. Given this complementarity, we find that brain drain has conflicting effects on the optimal provision of public education. A positive response is called for when the international earning differential with destination countries is large, and when the emigration rate is relatively low. In contrast with the findings in the existing literature, our numerical experiments show that these required conditions are in fact present in a large number of developing countries; they are equivalent to those under which an increase in emigration induces a net brain gain. As a further contribution, we study the interaction between the optimal immigration policy of the host country and education policy of the source country in a game-theoretic framework.
    Keywords: migration of skilled workers, immigration policy, education policy
    JEL: F22 J24 O15
    Date: 2018–02–20
  17. By: Deniz Karaoğlan (Department of Economics, Bahçeşehir University, Istanbul, Turkey); Dürdane Sirin Saracoglu (Department of Economics, Middle East Technical University, Ankara, Turkey)
    Abstract: In this study we investigate whether women’s education, labor market status and their status within the household have any impact on their choice of a birth control method in Turkey. We use the 2013 round of Demographic Health Survey (DHS) dataset which includes information about women’s education levels and occupation types as well as other socioeconomic status indicators. The DHS also reports whether women use relatively more effective modern (i.e. IUD, pill, etc.) or traditional (i.e. withdrawal) methods. In the empirical analysis, we apply multivariate logistic estimation techniques and control for women’s other indicators of socioeconomic status such as age, ethnicity, and wealth. We find that woman’s education level and urban residence are the leading determinants that explain the choice of modern contraceptive methods. We also observe that women who are unemployed, inactive or unpaid family workers are less likely to use modern contraceptive methods compared to wage-earner women.
    Keywords: Human capital theory; fertility; contraceptive choice; women’s socioeconomic status; logit estimation; Turkey
    JEL: J13 J21 J24
    Date: 2018–02
  18. By: Akgündüz, Yusuf Emre; Torun, Huzeyfe
    Abstract: We investigate how the rapid increase in the low-skilled labor supply induced by the inflow of 2.5 million Syrian refugees changed the tasks performed by native workers and the amount of capital used by firms in Turkey. Despite the unexpected nature of the refugee inflow, location choice of the refugees may be endogenous to the labor market opportunities of hosting regions. To handle this endogeneity issue, we use an instrument for the refugee intensity based on the distance of Turkish regions to the Syrian ones. The results based on Labor Force Survey suggest that the inflow of refugees increased natives’ task complexity, reducing the intensity of manual tasks, and raising the intensity of abstract, routine and ICT tasks. This effect is particularly strong for natives with medium level of education. Exploiting the administrative firm data that contains the entirety of firms in the country, we find that the firms reduced their fixed assets. The fixed asset reduction is largest in machinery and equipment, which can be interpreted as a decline in the capital intensity of production. We conclude that tasks provided by Syrian refugees are substitutes for natives’ manual tasks and firms’ capital, and complementary to natives’ more complex tasks.
    Keywords: Migration,refugees,labor-capital substitution,skills,tasks
    JEL: F22 J24 J21 D24
    Date: 2018

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