nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2018‒03‒26
27 papers chosen by
Joseph Marchand
University of Alberta

  1. Measuring Labor Market Segmentation from Incomplete Data By Noe Wiener
  2. People Management Skills, Employee Attrition, and Manager Rewards: An Empirical Analysis By Mitchell Hoffman; Steven Tadelis
  3. Degrees of Poverty: The Relationship between Family Income Background and the Returns to Education By Timothy J. Bartik; Brad J. Hershbein
  4. Do Dutch dentists extract monopoly rents? By Ketel, Nadine; Leuven, Edwin; Oosterbeek, Hessel; van der Klaauw, Bas
  5. The Effect of Incentives in Non-Routine Analytical Team Tasks - Evidence from a Field Experiment By Florian Englmaier; Stefan Grimm; David Schindler; Simeon Andreas Dermot Schudy
  6. Overeducation Wage Penalty among Ph.D. Holders: An Unconditional Quantile Regression Analysis on Italian Data By Gaeta, Giuseppe Lucio; Lubrano Lavadera, Giuseppe; Pastore, Francesco
  7. Skills, Signals, and Employability: An Experimental Investigation By Marc Piopiunik; Guido Schwerdt; Lisa Simon; Ludger Wößmann
  8. On the Political Economy of Income Taxation By Berliant, Marcus; Gouveia, Miguel
  9. What is the Cost of Privatization for Workers? By Olsson, Martin; Tåg, Joacim
  10. Head Start and Mothers' Work: Free Child Care or Something More? By Ariel Marek Pihl
  11. The Sensitivity of Structural Labor Supply Estimations to Modeling Assumptions By Max Löffler; Andreas Peichl; Sebastian Siegloch
  12. Early Gender Gaps Among University Graduates By Francesconi, Marco; Parey, Matthias
  13. Strategic Profit–Sharing in a Unionized Differentiated Goods Duopoly By Emmanuel Petrakis; Panagiotis Skartados
  14. The Impact of Obesity on Wages: the Role of Personal Interactions and Job Selection By Moro, Andrea; Tello-Trillo, D. Sebastian; Tempesti, Tommaso
  15. Beliefs and actions: How a shift in confidence affects choices By Barron, Kai; Gravert, Christina
  16. Shocked by Therapy? Unemployment in the First Years of the Socio-Economic Transition in Poland and its Long-Term Consequences By Myck, Michal; Oczkowska, Monika
  17. Return Migration and Self-Employment: Evidence from Kyrgyzstan By Brück, Tilman; Mahe, Clotilde; Naudé, Wim
  18. What drives productivity change in the manufacturing sector? Evidence from the metalworking industry in Ethiopia By Girum Abebe; Tigabu Degu; Gebrehiwot Ageba
  19. Employment Protection, Temporary Contracts and Firm-Provided Training: Evidence from Italy By Bratti, Massimiliano; Conti, Maurizio; Sulis, Giovanni
  20. The labour share and financialisation: Evidence from publicly listed firms By Guschanski, Alexander; Onaran, Özlem
  21. On the firms’ decision to hire academic scientists By Catalina Martínez; Sarah Parlane
  22. Income Volatility and the PSID: Past Research and New Results By Robert Moffitt; Sisi Zhang
  23. The Relationship between Union Membership and Net Fiscal Impact By Aaron Sojourner; José Pacas
  24. What Drives the Geography of Jobs in the US? Unpacking Relatedness By Teresa Farinha Fernandes; Pierre-Alexandre Balland; Andrea Morrison; Ron Boschma
  25. An Approach to the Problem of Employment in India By Deepankar Basu
  26. Why do industries coagglomerate? How Marshallian externalities differ by industry and have evolved over time By Dario Diodato; Frank Neffke; Neave O?Clery
  27. Firm-Specific Training By Felli, Leonardo; Harris, Christopher J

  1. By: Noe Wiener (Department of Economics, University of Massachusetts, Amherst and Department of Economics, The New School for Social Research, New York)
    Abstract: This paper proposes a measure of the intensity of competition in labor markets on the basis of limited data. Large-scale socioeconomic surveys often lack detailed information on competitive behavior. It is particularly difficult to determine whether a worker moves between the different segments of the labor market. Here, the Maximum Entropy principle is used to make inferences about the unobserved mobility decisions of workers in US household data. A class of models is proposed that reflects a parsimonious conception of competition in the Smithian tradition, as well as being consistent with a range of detailed behavioral models. The Quantal Response Statistical Equilibrium (QRSE) class of models can be seen to give robust microfoundations to the persistent patterns of wage inequality among equivalent workers. Furthermore, the QRSE effectively endogenizes the definition of labor market segments, allowing us to interpret the estimated competition intensities as partial measures of labor market segmentation. Models of this class generate predictions that capture between 97.5 and 99.5 percent of the informational content of the sample wage distributions. In addition to providing a very good fit to the wage data, the predictions are also consistent with bounded rationality of workers.
    Keywords: labor market competition, segmented labor markets, job mobility, wage inequality, statistical equilibrium, maximum entropy
    JEL: C18 J31 J42 J62
    Date: 2018
  2. By: Mitchell Hoffman; Steven Tadelis
    Abstract: How much do a manager's interpersonal skills with subordinates, which we call people management skills, affect employee outcomes? Are managers rewarded for having such skills? Using personnel data from a large, high-tech firm, we show that survey-measured people management skills have a strong negative relation to employee turnover. A causal interpretation is reinforced by research designs exploiting new workers joining the firm and managers moving jobs. However, people management skills do not consistently improve non-attrition outcomes. Better people managers are themselves more likely to receive higher subjective performance ratings and to be promoted.
    JEL: D23 J24 J33 L23 M50
    Date: 2018–02
  3. By: Timothy J. Bartik (W.E. Upjohn Institute for Employment Research); Brad J. Hershbein (W.E. Upjohn Institute for Employment Research)
    Abstract: Drawing on the Panel Study of Income Dynamics, we document a startling empirical pattern: the career earnings premium from a four-year college degree (relative to a high school diploma) for persons from low-income backgrounds is considerably less than it is for those from higher-income backgrounds. For individuals whose family income in high school was above 1.85 times the poverty level, we estimate that career earnings for bachelor’s graduates are 136 percent higher than earnings for those whose education stopped at high school. However, for individuals whose family income during high school was below 1.85 times the poverty level, the career earnings of bachelor’s graduates are only 71 percent higher than those of high school graduates. This lower premium amounts to $300,000 less in career earnings in present discounted value. We establish the prevalence and robustness of these differential returns to education across race and gender, finding that they are driven by whites and men and by differential access to the right tail of the earnings distribution.
    Keywords: inequality, return to education, career earnings profile, PSID, low-income
    JEL: I24 J24 J31
    Date: 2018–03
  4. By: Ketel, Nadine; Leuven, Edwin; Oosterbeek, Hessel; van der Klaauw, Bas
    Abstract: We exploit admission lotteries to estimate the payoffs to the dentistry study in the Netherlands. Using data from up to 22 years after the lottery, we find that in most years after graduation dentists earn around 50,000 Euros more than they would earn in their next-best profession. The payoff is larger for men than for women but does not vary with high school GPA. The large payoffs cannot be attributed to longer working hours, larger human capital investments or sacrifices in family outcomes. The natural explanation is that Dutch dentists extract a monopoly rent, which we attribute to the limited supply of dentists in the Netherlands. We discuss policies to curtail this rent.
    Keywords: dentists; monopoly rents; random assignment; Returns to education
    JEL: C36 I18 I23 J44
    Date: 2018–02
  5. By: Florian Englmaier; Stefan Grimm; David Schindler; Simeon Andreas Dermot Schudy
    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
  6. By: Gaeta, Giuseppe Lucio (University of Naples L’Orientale); Lubrano Lavadera, Giuseppe (University of Salerno); Pastore, Francesco (Università della Campania Luigi Vanvitelli)
    Abstract: The wage effect of job-education vertical mismatch (i.e. 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 mismatched at the mean of the conditional wages distribution. This paper, instead, observes the heterogeneity of the overeducation penalty along the wage distribution and according to Ph.D. holders' study field and sector of employment (academic/non-academic). We implement a Recentered Influence Function (RIF) to estimate an hourly wage equation and compare PhD holders who are over-educated with those who are not. 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: 2018–02
  7. By: Marc Piopiunik; Guido Schwerdt; Lisa Simon; Ludger Wößmann
    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
  8. By: Berliant, Marcus; Gouveia, Miguel
    Abstract: The literatures dealing with voting, optimal income taxation, and implementation are integrated here to address the problem of voting over income taxes. In contrast with previous articles, general nonlinear income taxes that affect the labor-leisure decisions of consumers who work and vote are allowed. Uncertainty plays an important role in that the government does not know the true realizations of the abilities of consumers drawn from a known distribution, but must meet the realization-dependent budget. Even though the space of alternatives is infinite dimensional, conditions on tax requirements such that a majority rule equilibrium exists are found. Finally, conditions are found to assure existence of a majority rule equilibrium when agents vote over both a public good and income taxes to finance it.
    Keywords: Voting; Income taxation; Public good
    JEL: D72 D82 H21 H41
    Date: 2018–02–07
  9. By: Olsson, Martin (Research Institute of Industrial Economics (IFN)); Tåg, Joacim (Research Institute of Industrial Economics (IFN))
    Abstract: The world is in the midst of a new wave of privatization, with record dollar amounts raised in both developed and developing countries. Using rich Swedish registry data covering two decades from the mid-1990s, we show that privatizations increased unemployment incidence by almost a fifth, and duration by a quarter, relative to peers who remained employed by a state-owned enterprise. This led to almost one million extra days of unemployment for the workers affected. Wages and labor force participation remain unchanged. Furthermore, we show that privatizations have been costly for workers, and therefore for society, only if they took place during recessions. These results shed new light on the welfare costs of privatization and how they can be mitigated.
    Keywords: Employment; Privatization; State-owned enterprises (SOEs); Unemployment
    JEL: J24 J63 L33 M51
    Date: 2018–03–05
  10. By: Ariel Marek Pihl
    Abstract: Head Start is the largest public pre-school program in the US, but it provides many additional services to families. This paper uses a discontinuity in grant writing assistance in the first year of the Head Start program to identify impacts on the work and welfare usage of mothers. Using restricted Decennial Census and administrative AFDC data I find that Head Start decreases employment rates and hours worked per week for single mothers. I also find a suggestive increase in welfare receipt for single mothers which is confirmed by an increase in the share of administrative welfare case-files that are single mother households. For all mothers combined there are no significant changes in work or welfare use. I also estimate long-run impacts, 10 years after a woman's child was eligible for Head Start. I find large and persistent declines in work for both non-white mothers and single mothers, accompanied by an increase in public assistance income and return to school. I argue that this is consistent with the 1960's era Head Start program's focus on encouraging quality parenting, parent participation and helping families access all benefits for which they were eligible.
    JEL: H53 I32 I38 J22
    Date: 2018–03
  11. By: Max Löffler; Andreas Peichl; Sebastian Siegloch
    Abstract: There is still considerable dispute about the magnitude of labor supply elasticities. While differences in estimates especially between micro and macro models are recently attributed to frictions and adjustment costs, we show that the variation in elasticities derived from structural labor supply models can also be explained by modeling assumptions. Specifically, we estimate 3,456 different models on the same data each representing a plausible combination of frequently made choices. While many modeling assumptions do not systematically affect labor supply elasticities, our controlled meta-analysis shows that results are very sensitive to the treatment of hourly wages in the estimation. For example, different (sensible) choices concerning the modeling of the underlying wage distribution and especially the imputation of (missing) wages lead to point estimates of elasticities between 0.2 and 0.65. We hence conclude that researchers should pay more attention to the robustness of their estimations with respect to the wage treatment.
    Keywords: Labor supply, elasticity, random utility models, wages
    JEL: C25 C52 H31 J22
    Date: 2018
  12. By: Francesconi, Marco; Parey, Matthias
    Abstract: We use data from six cohorts of university graduates in Germany to assess the extent of gender gaps in college and labor market performance twelve to eighteen months after graduation. Men and women enter college in roughly equal numbers, but more women than men complete their degrees. Women enter college with slightly better high school grades, but women leave university with slightly lower marks. Immediately following university completion, male and female full-timers work very similar number of hours per week, but men earn more than women across the pay distribution, with an unadjusted gender gap in full-time monthly earnings of about 20 log points on average. Including a large set of controls reduces the gap to 5-10 log points. The single most important proximate factor that explains the gap is field of study at university.
    Keywords: Field of study; gender wage gap; Germany; University graduates
    JEL: J16 J31 J71
    Date: 2018–02
  13. By: Emmanuel Petrakis (Department of Economics, University of Crete, Greece); Panagiotis Skartados
    Keywords: unionized oligopoly, bargaining, profit-sharing scheme
    JEL: J23 J33 J41
    Date: 2018–03–20
  14. By: Moro, Andrea; Tello-Trillo, D. Sebastian; Tempesti, Tommaso
    Abstract: We estimate the effects of obesity on wages accounting for the workers' sorting into jobs requiring different levels of personal interactions in the workplace. Using data from the National Longitudinal Survey of Youth 1979 combined with detailed information about jobs from O*Net, we find a wage penalty for obese white women. This penalty is higher in jobs that require a high level of personal interactions. Accounting for job selection does not significantly change the estimated wage penalty.
    Keywords: obesity,wages,selection,personal interactions
    JEL: I0 I12 I14 J31
    Date: 2018–01–03
  15. By: Barron, Kai; Gravert, Christina
    Abstract: Confidence is often seen as the key to success. Empirical evidence about whether such beliefs causally map into actions is, however, sparse. In this paper, we experimentally investigate the causal effect of an increase in confidence about one’s own ability on two central choices made by workers in the labor market: choosing between jobs with different incentive schemes, and the subsequent choice of how much effort to exert within the job. An increase in confidence leads to an increase in self-selection into uncertain ability-contingent payment schemes. This is detrimental for low ability workers. Policy implications are discussed.
    Keywords: Overconfidence; experiment; beliefs; real-effort; grade inflation
    JEL: C91 D03 J24 M50
    Date: 2018–02–12
  16. By: Myck, Michal (Centre for Economic Analysis, CenEA); Oczkowska, Monika (Centre for Economic Analysis, CenEA)
    Abstract: We examine long-term implications of unemployment for material conditions and well-being using the Polish sample from the Survey of Health, Ageing and Retirement in Europe (SHARE). Retrospective data from the SHARELIFE survey are used to reconstruct labour market experiences across the threshold of the socio-economic transformation from a centrally planned to a free market economy in Poland. These individual experiences are matched with outcomes observed in the survey about 20 years later to examine their correlation with unemployment at the time of the transition. We find that becoming unemployed in the early 1990s correlates significantly with income, assets and a number of measures of well-being recorded in 2007 and 2012. Using plant closures to reflect exogenous changes to labour market status at the time of the transition, we are able to confirm the causal effect of unemployment on income and house ownership 20 years later, but find no evidence for a long-term causal relationship between unemployment and such measures of well-being as life satisfaction, depression and subjective assessment of material conditions.
    Keywords: economic transition, unemployment, life histories, long-term effects
    JEL: J21 J63 P30
    Date: 2018–02
  17. By: Brück, Tilman (ISDC - International Security and Development Center); Mahe, Clotilde (Maastricht University); Naudé, Wim (Maastricht University)
    Abstract: A common finding of the migration literature is that migrants are more likely to choose self-employment upon return to their origin countries than non-migrants. This has led to the belief that return migration stimulates entrepreneurship in source countries and hence supports economic development. In this paper, we test these assertions, drawing on the Life in Kyrgyzstan Study, a rich longitudinal data set from a transition economy with high levels of international temporary migration. We find that for return migrants, self-employment is often a temporary occupational choice, suggesting that self-employment serves as a 'parking lot'. In addition, we find evidence that return migrants who were self-employed before migrating are less likely to opt for self-employment on their return, implying that migration disrupts self-employment trajectories. Both findings cast doubt on the common narrative of return migration stimulating entrepreneurship and therefore economic development.
    Keywords: occupational choice, entrepreneurship, migration, transition economies, Central Asia, Kyrgyzstan
    JEL: F22 J24 L26 P20
    Date: 2018–02
  18. By: Girum Abebe (Ethiopian Development Research Institute); Tigabu Degu (Ethiopian Development Research Institute); Gebrehiwot Ageba (Ethiopian Development Research Institute)
    Abstract: We employ longitudinal data to explore sources of heterogeneity in productivity among firms in the metalworking industry in Ethiopia. We measure multifactor and labor productivity using non-parametric and regression residual parametric approaches. We find a sizable improvement in both labor productivity and TFP over time, which is also accompanied by large productivity dispersion across firms in the industry. The decomposition of industry-level productivity indicate that productivity increases is mostly explained by the reallocation of market shares across plants in the industry and that firm exit is preceded by declining productivity trends. Our reduced model also indicates that labor productivity and TFP is significantly higher in firms with a large share of workers with vocational training background. Productivity, however, does not differ with firm ownership. These results are robust to the choice of productivity measures.
    Keywords: metalworking, labor productivity, TFP, exit, entry, human capital
    JEL: O12 D24 J24
    Date: 2018–03
  19. By: Bratti, Massimiliano (University of Milan); Conti, Maurizio (University of Genova); Sulis, Giovanni (University of Cagliari)
    Abstract: In this study, we leverage on Italy's size-contingent firing restrictions to identify the causal effect of employment protection legislation (EPL) on firm-provided training using a regression discontinuity design. Our analysis demonstrates that higher levels of EPL reduce incentives for firms to invest in workers' training. The number of trained workers falls by about 1.5-1.9 units at the threshold: this is not a negligible effect, corresponding to a 16-20% reduction in the number of trained workers. The results are robust to several sensitivity checks and controls for potential confounding factors (e.g. work councils). The effect of EPL on training is not mediated by different levels of investment in physical capital or propensities to innovate, while it is mostly accounted for by higher worker turnover and more use of temporary contracts, which entail less training, in firms with higher firing costs. Our study highlights the potential adverse effects of EPL on worker training in dual labour markets, owing to larger firms seeking to avoid the higher costs of EPL by means of temporary contracts.
    Keywords: employment protection legislation, firing costs, training, Italy
    JEL: J42 J63 J65 M53
    Date: 2018–02
  20. By: Guschanski, Alexander; Onaran, Özlem
    Abstract: This paper provides international evidence for the effect of financialisation on the labour share at the firm level. We test different hypotheses about the impact of financialisation on functional income distribution, while also controlling for the effect of technological change, market concentration, labour market institutions and globalisation. We use panel data for publicly listed non-financial companies globally and with a particular focus on the EU15 for the period of 1995-2016. We find a negative effect of financialisation on the labour share due to increased shareholder value orientation in all countries, while there is also evidence of a negative effect due to an increase in mark-ups in France and the UK. Additionally, our findings cast doubt on the hypotheses that the decline in the labour share in European publicly listed firms is due to technological change. Similarly, market concentration did not play an important role for the decline in the labour share. In contrast, we find that concentration has declined among publicly listed firms in Europe, and that concentration is not associated with declining labour shares.
    Keywords: labour share; income distribution; financialisation; market concentration; technology
    JEL: J3
    Date: 2018–03–05
  21. By: Catalina Martínez; Sarah Parlane
    Abstract: This paper provides a theoretical rationale for private investment in basic research. It explains the decision by some firms to hire scientists who have an intrinsic motivation to pursue academic research and allow them to do so while they also dedicate time to the firm’s applied agenda. We show that this decision maximizes firms’ profits in a context where basic and applied research activities are not strong substitutes and the opportunity cost, associated with deterring scientists from remaining in academia, is sufficiently low. Allowing scientists to pursue an academic agenda facilitates participation. When scientists are privately informed about their ’taste for science’, the contract requires that the more academically driven scientists dedicate greater attention to their personal agenda to satisfy incentive compatibility. When the reservation utility is weakly correlated with the scientist’s academic inclination, this restriction has no impact and the first best contract remains optimal. But as the correlation increases, the firms tend to select less academically driven scientists. Underinvestment in basic research is not triggered by the need to reduce informational rents which are non-existent as scientists face countervailing incentives. Instead it arises from the need to curb the increased cost of efforts.
    JEL: D82 D86 J31 J33 M31
    Date: 2018–02
  22. By: Robert Moffitt (Johns Hopkins); Sisi Zhang (The Urban Institute)
    Abstract: The Panel Study of Income Dynamics (PSID) has made more contributions to the study of income volatility than any other data set in the U.S. Its record of research is truly seminal. In this paper we first present the reasons that the PSID has made such major contributions to research on the topic. Then we review the major papers that have used the PSID to study income volatility and we compare their results to those using other data sets. Lastly, we present new results for male earnings volatility through 2014. We find that both gross volatility and the component consisting of only the variance of transitory shocks have experienced a large increase during the Great Recession after following similar trends to those previously established showing upward trends from the 1970s to the 1980s followed by a stable period until the Recession.
    Keywords: male earnings volatility, transitory shocks, Great Recession, PSID, history
    JEL: C23 J23
    Date: 2018–03
  23. By: Aaron Sojourner (University of Minnesota); José Pacas (University of Minnesota)
    Abstract: This paper develops the first evidence on how individuals’ union membership status affects their net fiscal impact, the difference between taxes they pay and cost of public benefits they receive, enriching our understanding of how labor relations interacts with public economics. Current Population Survey data between 1994 and 2015 in pooled cross-sections and individual first-difference models yield evidence that union membership has a positive net fiscal impact through the worker-level channels studied.
    Keywords: labor union, taxes, public economic, labor relations, industrial relations, public benefits, collective bargaining, net fiscal impact, social insurance
    JEL: J50 H25 J31
    Date: 2018–03
  24. By: Teresa Farinha Fernandes; Pierre-Alexandre Balland; Andrea Morrison; Ron Boschma
    Abstract: There is ample evidence of regions diversifying in new occupations that are related to pre- existing activities in the region. However, it is still poorly understood through which mechanisms related diversification operates. To unpack relatedness, we distinguish between three mechanisms: complementarity (interdependent tasks), similarity (sharing similar skills) and local synergy (based on pure co-location). We propose a measure for each of these relatedness dimensions and assess their impact on the evolution of the occupational structure of 389 US Metropolitan Statistical Areas (MSA) for the period 2005-2016. Our findings show that new jobs appearing in MSA?s are related to existing ones, while those more likely to disappear are more unrelated to a city?s jobs' portfolio. We found that all three relatedness dimensions matter, but local synergy shows the largest impact on entry and exit of jobs in US cities.
    Keywords: evolutionary economic geography, regional capabilities, jobs, skills, relatedness, similarity, complementarity, local synergy, US cities
    JEL: J24 O18 R10
    Date: 2018–03
  25. By: Deepankar Basu (Department of Economics, University of Massachusetts - Amherst)
    Abstract: The challenge of employment in the Indian economy, especially after it growth acceleration since the mid-1980s, relates to its quality rather than its quantity. While employment growth has kept pace with the labour force over the long run, what has grown is informal employment. The coexistence of rapid capital accumulation, robust output growth and lack of growth of formal employment can be understood using the well-known Harris-Todaro model of a dual economy. This framework highlights the key role of the wage gap between the modern and traditional sectors as a determinant of urban informal employment. Hence, one of the most effective and egalitarian ways to address the employment problem is to adopt policies to increase agricultural productivity and income, which can reduce the wage gap. Since crop yields in India are far lower than many other countries in the world, including China, Brazil, and Bangladesh, there is ample scope for land-augmenting and labour-absorbing technological change in Indian agriculture. Efforts to ramp up industrialization should be taken up in earnest only after the wage gap has been narrowed significantly.
    Keywords: employment, India, Harris-Todaro, agriculture
    JEL: J21 O10 O13
    Date: 2018
  26. By: Dario Diodato; Frank Neffke; Neave O?Clery
    Abstract: The fact that firms benefit from close proximity to other firms with which they can exchange inputs, skilled labor or know-how helps explain why many industrial clusters are so successful. Studying the evolution of coagglomeration patterns, we show that which type of agglomeration benefits firms has drastically changed over the course of a century and differs markedly across industries. Whereas, at the beginning of the twentieth century, industries tended to colocate with their value chain partners, in more recent decades the importance of this channels has declined and colocation seems to be driven more by similarities industries? skill requirements. By calculating industry-specific Marshallian agglomeration forces, we are able to show that, nowadays, skill- sharing is the most salient motive in location choices of services, whereas value chain linkages still explain much of the colocation patterns in manufacturing. Moreover, the estimated degrees to which labor and input-output linkages are reflected in an industry?s coagglomeration patterns help improve predictions of city-industry employment growth.
    Keywords: Coagglomeration, Marshallian externalities, labor pooling, value chains, manufacturing, services, regional diversification
    JEL: J24 O14 R11
    Date: 2018–03
  27. By: Felli, Leonardo; Harris, Christopher J
    Abstract: This paper investigates the market provision of firm-specific training, and identifies the inefficiencies associated with it. Within a general stochastic learning-by-doing model, there is a potential inefficiency in the market provision of firm-specific training. In order to determine whether this inefficiency is in fact present, we analyze two special cases of the model: the accelerated productivity-enhancement model and the accelerated learning model. In both models, the inefficiency is indeed present. However, the nature of the inefficiency depends on the balance between the two key components of training, namely productivity enhancement and employee evaluation. In the accelerated productivity-enhancement model, training results in an increase in productivity enhancement but no change in employee evaluation, and training is overprovided by the market. In the accelerated learning model, training results in a proportionate increase in both productivity enhancement and employee evaluation, and training is underprovided by the market. In both cases, turnover is inefficiently low.
    Keywords: Specific human capital; Training; Learning-by-doing; Turnover; Productivity enhancement; Employee evaluation
    JEL: D61 D86 J20 J24
    Date: 2018–02

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