nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2018‒04‒16
twenty-two papers chosen by
Joseph Marchand
University of Alberta

  1. Social subsidies and marketization - the role of gender and skill By Duval-Hernandez, Robert; Fang, Lei; Ngai, L. Rachel
  2. Does State Aid for Broadband Deployment in Rural Areas Close the Digital and Economic Divide? By Wolfgang Briglauer; Niklas S. Dürr; Oliver Falck; Kai Hüschelrath
  3. Early Gender Gaps among University Graduates By Francesconi, Marco; Parey, Matthias
  4. Competing for Talent By Yuhta Ishii; Aniko Ory; Adrien Vigier
  5. Pension Shocks and Wages By Pawel Adrjan; Brian Bell
  6. Does Ignorance of Economic Returns and Costs Explain the Educational Aspiration Gap? Evidence from Representative Survey Experiments By Lergetporer, Philipp; Werner, Katharina; Woessmann, Ludger
  7. Optimal Education Policy and Human Capital Accumulation in the Context of Brain Drain By Slobodan DJAJIĆ; Frédéric DOCQUIER; S. Michael MICHAEL
  8. Measuring the Social and Externality Benefits of Influenza Vaccination By Corey White
  9. Classifying Occupations According to Their Skill Requirements in Job Advertisements By Jyldyz Djumalieva; Antonio Lima; Cath Sleeman
  10. Monopsony in Online Labor Markets By Arindrajit Dube; Jeff Jacobs; Suresh Naidu; Siddharth Suri
  11. NAFTA and the Wages of Married Women By Shushanik Hakobyan; John McLaren
  12. Coal Demand, Market Forces, and US Coal Mine Closures By Brett Jordan; Ian Lange; Johsua Linn
  13. Offshoring and non-monotonic employment effects across industries in general equilibrium By Baumgarten, Daniel; Irlacher, Michael; Koch, Michael
  14. The Farmer, the Blue-collar, and the Monk: Understanding economic development through saturations of demands and non-homothetic productivity gains By Gray, Elie; Grimaud, André; Le Bris, David
  15. Regional Economic Development in Europe, 1900-2010: A Description of the Patterns By Joan R. Rosés; Nikolaus Wolf
  16. Competitiveness and Wage Bargaining Reform in Italy By Alvar Kangur
  17. Estimating a Model of Qualitative and Quantitative Education Choices in France By Belzil, Christian; Poinas, François
  18. The long-reach of fathers’ earnings on children’s skills in two-parent families: Parental investments, family processes, and children’s language skills By Natasha Cabrera; Ronald Mincy; Hyunjoon Um
  19. The Geography of Talent: Development Implications and Long-Run Prospects By Michal BURZYŃSKI; Christoph DEUSTER; Frédéric DOCQUIER
  20. Early retirement decisions: Lessons from a dynamic structural modelling By Eric Delattre; Richard Moussa
  21. Personal Liberties, Religiosity, and Effort By Joan-Maria Esteban; Gilat Levy; Laura Mayoral
  22. Production Integration in the European Union By Hakan Nordström; Harry Flam

  1. By: Duval-Hernandez, Robert; Fang, Lei; Ngai, L. Rachel
    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: 2018–02–14
  2. By: Wolfgang Briglauer; Niklas S. Dürr; Oliver Falck; Kai Hüschelrath
    Abstract: We evaluate the impact of a major European state aid programme for broadband deployment applied to rural areas in the German state of Bavaria in the years 2010 and 2011. Using matched difference-in-differences estimation strategies, we find that aided municipalities have – depending on broadband quality – between 18.4 and 25.4 percentage points higher broadband coverage than non-aided municipalities. This increase in broadband coverage, closing the digital divide, results in an average increase of six employed individuals living in the respective aid-receiving municipalities while leaving the number of employed (measured at the place of work) or self-employed individuals and wages unaffected. We therefore conclude that an increase in broadband coverage through state aid protects rural areas from depopulation, but does not contribute to a further closing of the economic divide in the form of creating new jobs.
    Keywords: : government policy, state aid, ex-post evaluation, broadband, employment, rural areas, European Union, Germany, Bavaria
    JEL: D62 D73 G38 H23 J23 K23 L52 L96 L98 R23
    Date: 2018
  3. By: Francesconi, Marco (University of Essex); Parey, Matthias (University of Essex)
    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: gender wage gap, field of study, university graduates, Germany
    JEL: J16 J31 J71
    Date: 2018–02
  4. By: Yuhta Ishii (Centro de Investigaci´on Econ´omica, Mexico); Aniko Ory (Cowles Foundation, Yale University); Adrien Vigier (BI Norwegian Business School)
    Abstract: In many labor markets, e.g., for lawyers, consultants, MBA students, and professional sport players, workers get offered and sign long-term contracts even though waiting could reveal significant information about their capabilities. This phenomenon is called unraveling. We examine the link between wage bargaining and unraveling. Two firms, an incumbent and an entrant, compete to hire a worker of unknown talent. Informational frictions prevent the incumbent from always observing the entrant’s arrival, inducing unraveling in all equilibria. We analyze the extent of unraveling, surplus shares, the average talent of employed workers, and the distribution of wages within and across firms.
    Keywords: Unraveling, Talent, Wage Bargaining, Competition, Uncertainty
    JEL: C7 D8 J3
    Date: 2018–02
  5. By: Pawel Adrjan; Brian Bell
    Abstract: Abstract How do wages respond to firm-level idiosyncratic cost shocks? We create a unique dataset that links longitudinal data on workers’ compensation to the unexpected costs that UK firms have been forced to pay to plug large deficits in their legacy defined benefit pension plans. We show that firms are able to share the burden of such costs when a significant share of their workers are current or former members of the plan. We also investigate how compensation responds to the closure of defined benefit plans to future benefit accrual. We find that firms are able to use such closures to effectively reduce total compensation of workers who are plan members. These results point to significant frictions in the labour market, which we show are a direct result of the pension arrangement that workers have. Closing schemes has an implicit cost for firms since it reduces the frictions that workers face.
    Keywords: Wages, Pensions, Frictions
    JEL: J31 J32 G32
    Date: 2018–04–05
  6. By: Lergetporer, Philipp (ifo Munich); Werner, Katharina (ifo Munich); Woessmann, Ludger (ifo and LMU Munich)
    Abstract: The gap in university enrollment by parental education is large and persistent in many countries. In our representative survey, 74 percent of German university graduates, but only 36 percent of those without a university degree favor a university education for their children. The latter are more likely to underestimate returns and overestimate costs of university. Experimental provision of return and cost information significantly increases educational aspirations. However, it does not close the aspiration gap as university graduates respond even more strongly to the information treatment. Persistent effects in a follow-up survey indicate that participants indeed process and remember the information. Differences in economic preference parameters also cannot account for the educational aspiration gap. Our results cast doubt that ignorance of economic returns and costs explains educational inequality in Germany.
    Keywords: inequality; higher education; university; aspi ration; information; returns to education; survey experiment;
    JEL: D83 I24 J24 H75
    Date: 2018–04–11
  7. By: Slobodan DJAJIĆ (FERDI); Frédéric DOCQUIER (Université Catholique de Louvain); S. Michael MICHAEL (Departement of Economics - University of 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: 2018–03
  8. By: Corey White (Department of Economics, California Polytechnic State University)
    Abstract: Vaccination represents a canonical example of externalities in economics, yet there are few estimates of their magnitudes. I provide evidence on the social and externality benefits of influenza vaccination in two settings. First, using pre-existing differences in state-level vaccination rates interacted with exogenous annual variation in vaccine quality, I estimate of the impacts of aggregate vaccination rates on mortality and work absences in the United States. Scaled nationally, I find that a one percentage point increase in the vaccination rate results in 1,134 fewer deaths and 8.9 million fewer work hours lost due to illness each year. The mortality reductions are concentrated among individuals 75 and older, but over half of the effect is attributable to the vaccination of people under 75, suggesting a considerable externality effect. Second, I examine a setting in which vaccination is targeted at a group with extremely high externality benefits: vaccination mandates for health care workers. I find that mandates lead to reductions in hospital diagnoses for influenza in affected counties, consistent with substantial externality impacts. For both the general population and the population of health care workers, the estimates suggest that programs increasing vaccine take-up are likely to be cost-effective under reasonable assumptions about the costs.
    Keywords: Vaccine, Vaccination, Influenza, Flu, Externality, Health
    JEL: I12 I18 D62 H23
    Date: 2018
  9. By: Jyldyz Djumalieva; Antonio Lima; Cath Sleeman
    Abstract: In this work, we propose a methodology for classifying occupations based on skill requirements provided in online job adverts. To develop the classification methodology, we apply semi-supervised machine learning techniques to a dataset of 37 million UK online job adverts collected by Burning Glass Technologies. The resulting occupational classification comprises four hierarchical layers: the first three layers relate to skill specialisation and group jobs that require similar types of skills. The fourth layer of the hierarchy is based on the offered salary and indicates skill level. The proposed classification will have the potential to enable measurement of an individual's career progression within the same skill domain, to recommend jobs to individuals based on their skills and to mitigate occupational misclassification issues. While we provide initial results and descriptions of occupational groups in the Burning Glass data, we believe that the main contribution of this work is the methodology for grouping jobs into occupations based on skills.
    Keywords: labour demand, occupational classification, online job adverts, big data, machine learning, word embeddings
    JEL: C18 J23 J24
    Date: 2018–03
  10. By: Arindrajit Dube; Jeff Jacobs; Suresh Naidu; Siddharth Suri
    Abstract: On-demand labor platforms make up a large part of the “gig economy.” We quantify the extent of monopsony power in one of the largest on-demand labor platforms, Amazon Mechanical Turk (MTurk), by measuring the elasticity of labor supply facing the requester (employer) using both observational and experimental variation in wages. We isolate plausibly exogenous variation in rewards using a double-machine-learning estimator applied to a large dataset of scraped MTurk tasks. We also re-analyze data from 5 MTurk experiments that randomized payments to obtain corresponding experimental estimates. Both approaches yield uniformly low labor supply elasticities, around 0.1, with little heterogeneity.
    JEL: J01 J42
    Date: 2018–03
  11. By: Shushanik Hakobyan; John McLaren
    Abstract: Using US Census data for 1990-2000, we estimate effects of NAFTA on US wages, focusing on differences by gender. We find that NAFTA tariff reductions are associated with substantially reduced wage growth for married blue-collar women, much larger than the effect for other demographic groups. We investigate several possible explanations for this finding. It is not explained by differential sensitivity of female-dominated occupations to trade shocks, or by household bargaining that makes married women workers less able to change their industry of employment than other workers. We find some support for an explanation based on an equilibrium theory of selective non-participation in the labor market, whereby some of the higher-wage married women workers in their industry drop out of the labor market in response to their industry's loss of tariff. However, this does not fully explain the findings so we are left with a puzzle.
    JEL: F13 F16 J31
    Date: 2018–03
  12. By: Brett Jordan (University of Alaska Anchorage); Ian Lange (Division of Economics and Business, Colorado School of Mines); Johsua Linn (University of Maryland and Resources for the Future)
    Abstract: Economic transitions have the potential to displace workers and cause social unrest. Coal mine closures in the eastern United States due to the changing electricity system and the resulting employment losses in rural areas have become salient issues for all levels of government. Previous research has not distinguished among the potential causes of recent mine closures, such as rising production costs and decreasing coal demand from the electricity sector. This analysis utilizes unique data on coal mine and power plant operation to estimate the impact of supply and demand factors on mine closure. We model closure as a function of expected profits, which allows us to compare the effects on mine closure of specific demand and supply shocks to expected mine profits. Our results suggest that each shock substantially affected coal mine employment. Increasing costs of producing Appalachian coal have had the largest impact on closures with lower natural gas prices and lower electricity demand each accounting for a substantial number of closures additionally.
    Keywords: Coal Mining; Firm Exit; Fuel Procurement
    JEL: L51 L71 Q53
    Date: 2018–04
  13. By: Baumgarten, Daniel; Irlacher, Michael; Koch, Michael
    Abstract: We address the mismatch between existing theoretical models and standard empirical practice in the analysis of the labor market effects of offshoring. While theory focuses on one-sector or two-sector models, empirical studies exploit variation in offshoring across a large number of industries, typically including a linear offshoring term in the analysis. Thereby, these studies implicitly assume a monotonic relationship and ignore general-equilibrium effects across industries. We analyze the effects of offshoring across a continuum of industries with different shares of offshorable tasks that are linked through labor and capital markets in general oligopolistic equilibrium (GOLE). Our main result is that offshoring generates a hump-shaped pattern of employment changes across industries. While the relocation effect reduces employment in offshoring-intensive industries, labor demand in industries with a high prevalence of domestic production falls because of rising domestic wages and firm exits in general equilibrium. In the empirical part, we test the non-monotonic employment effects of offshoring across industries by focusing on Germany after the fall of the Iron Curtain. We find strong empirical support for the hump shape in the changes of employment across industries with different scopes for offshoring, which is almost entirely due to the extensive margin, underscoring the importance of establishment entry and exit. Finally, we discuss important implications for empirical and theoretical research arising from our study.
    Keywords: General oligopolistic equilibrium; Task offshoring; Offshoring and employment; Industry heterogeneity
    JEL: F12 F16 F23 J23 L13
    Date: 2018–03–22
  14. By: Gray, Elie; Grimaud, André; Le Bris, David
    Abstract: To explain the process of development historically documented, we consider a model with three economic sectors (agriculture, manufacturing and services) characterized by different productivity gains and by saturation levels in the demands of agricultural and manufactured goods. Our parsimonious model captures within a single framework the process of development which is characterized by the structural changes in the workforce across sectors, variable growth rates (an initial “Malthusian regime” exhibiting slow growth, a fast growth regime after a takeoff, and a gradual slow down leading to a possible new stagnation) and the relative evolutions of prices across sectors. Reasonable calibration generates results quantitatively close to the observed empirical facts.
    Keywords: Growth model ; Structural change ; Unified growth; Economic development ; Saturation of demands
    JEL: N1 O1 O4
    Date: 2018–03
  15. By: Joan R. Rosés; Nikolaus Wolf
    Abstract: We provide the first long-run dataset of regional employment structures and regional GDP and GDP per capita in 1990 international dollars, stretching over more than 100 years. These data allow us to compare regions over time, among each other, and to other parts of the world. After some brief notes on methodology we describe the basic patterns in the data in terms of some key dimensions: variation in the density of population and economic activity, the spread of industry and services and the declining role of agriculture, and changes in the levels of GDP and GDP per capita. We next discuss patterns of convergence and divergence over time and their explanations in terms of short-run adjustment and long-run fundamentals. Also, we document for the first time a secular decrease in spatial coherence from 1900 to 2010. We find a U-shaped development in geographic concentration and regional income inequality, similar to the finding of a U-shaped pattern of personal income inequality.
    Keywords: regional inequality, Europe, long-run
    JEL: D31 N10 N90 R10
    Date: 2018
  16. By: Alvar Kangur
    Abstract: The growth of Italian exports has lagged that of euro area peers. Against the backdrop of unit labor costs that have risen faster than those in euro area peers, this paper examines whether there is a competitiveness challenge in Italy and evaluates the framework of wage bargaining. Wages are set at the sectoral level and extended nationally. However, they do not respond well to firm-specific productivity, regional disparities, or skill mismatches. Nominally rigid wages have also implied adjustment through lower profits and employment. Wage developments explain about 45 percent of the manufacturing unit labor cost gap with Germany. In a search-and-match DSGE model of the Italian labor market, this paper finds substantial gains from moving from sectoral- to firm-level wage setting of at least 3.5 percentage points lower unemployment (or higher employment) rate and a notable improvement in Italy’s competitiveness over the medium term.
    Date: 2018–03–16
  17. By: Belzil, Christian; Poinas, François
    Abstract: We estimate a structural model of education choices in which individuals choose between a professional (or technical) and a general track at both high school and university levels using French panel data (Génération 98 ). The average per-period utility of attending general high school (about 10,000 euros per year) is 20% higher than that of professional high school (about 8000 euros per year). About 64% of total higher education enrollments are explained by this differential. At the same time, professional high school graduates would earn 5% to 6% more than general high school graduates if they both entered the labor market around age 18. The return to post-high school general education is highly convex (as in the US) and is reaped mostly toward the end of the higher education curriculum. Public policies targeting an increase in professional high school enrollments of 10 percentage points would require a subsidy of 300 euros pervyear of professional high school.
    Keywords: Education choices; returns to schooling; professional education; structural model
    JEL: C51 I23 J24
    Date: 2018–03
  18. By: Natasha Cabrera (University of Maryland); Ronald Mincy (Columbia University); Hyunjoon Um (Columbia University)
    Abstract: Using a sample of 735 two-parent families drawn from the FFCWS, we examined the direct and indirect associations between fathers’ permanent earnings during the early childhood and children’s cognitive and behavioral outcomes at ages 5 and 9 through parental investments, family processes, and children’s skills at age 3. We found that fathers’ earnings in the early years were significantly related to children’s language skills at age 5 but not to aggressive behavior or to any outcomes at age 9. The association between earnings and language skills at age 5 and math and reading at age 9 were mediated by cognitively stimulating materials and children’s language skills at age 5. The effect sizes are small and the mediating effects of fathers’ earnings on reading and math are only for children of the highest earning fathers. For two-parent families, policies to increase fathers’ earnings alone will have little impact on children’s development.
    Keywords: Early and middle childhood, FFCW, parental investment, coresidence
    JEL: I24 J31
    Date: 2018
  19. By: Michal BURZYŃSKI (CREA - University of Luxembourg); Christoph DEUSTER (IRES - Université Catholique de Louvain); Frédéric DOCQUIER (Université Catholique de Louvain)
    Abstract: This paper characterizes the recent evolution of the geographic distribution of talent, and studies its implications for development inequality. Assuming the continuation of recent educational and immigration policies, it produces integrated projections of income, population, urbanization and human capital for the 21st century. To do so, we develop and parameterize a two-sector, two-class, world economy model that endogenizes education decisions, population growth, labor mobility, and income disparities across countries and across regions/sectors (agriculture vs. nonagriculture). We find that the geography of talent matters for global inequality, whatever the size of technological externalities. Low access to education and the sectoral allocation of talent have substantial impacts on inequality, while the effect of international migration is small. We conclude that policies targeting access to all levels of education and sustainable urban development are vitalto reduce demographic pressures and global inequality in the long term.
    Keywords: human capital, migration, Urbanization, growth, inequality.
    JEL: E24 J24 O15
    Date: 2018–03
  20. By: Eric Delattre; Richard Moussa (Université de Cergy-Pontoise, THEMA)
    Abstract: Early retirement has many causes according to economic and sociological literature. These causes may be the preference for leisure, nancial and health conditions, and social environment. In our paper, we aim to specify and estimate an econometric model to assess the early retirement decision-making process for aged workers. We specify a worker's utility function from which we derive worker's probability to retire earlier that depends on her health stock, estate value and preference for future. We also estimate an health production and an health consumption functions that are key factors in the individual's decision to retire earlier. Thus, we show that our model disentangles between three groups of workers: (i) those who choose early retirement, (ii) those who will never choose early retirement and (iii) those who are uncertain about early retirement. We also show that our predicted early retirement probability is a good predictor of early retirement as it is causal for observed early retirement.
    Keywords: Early retirement, Grossmann Model, Space-state model, Causality
    JEL: C32 C51 I12 J26
    Date: 2018
  21. By: Joan-Maria Esteban; Gilat Levy; Laura Mayoral
    Abstract: In this paper we study the role of religiosity in influencing the choice of labor effort. Many religions promote restrictions on personal liberties such as divorce, abortion, gender parity, or gay marriage, often regulated by law. We assume that the higher the degree of religiosity of an individual, the less he enjoys such personal liberties, and the less he likes to be in a society which allows them, while seculars enjoy such liberties. By standard consumer theory, the differential valuation induced by religiosity influences individual decisions on other dimensions as well, notably labour supply. We show empirically that this nexus holds and that the size of the effect is large. Specifically, we construct an index of personal liberties and find solid evidence in support of the joint effect of religiosity and liberties on labor effort. Our empirical results indicate that religiosity interacted with the legal level of liberties has a significant and strong negative effect on labor supply and that increases in the cap on liberties have a negative effect on the labor supply of the religious individuals and positive for the secular.
    Keywords: religiosity, personal liberties, labor supply
    JEL: Z12 J22
    Date: 2018–03
  22. By: Hakan Nordström; Harry Flam
    Abstract: Measured by trade in intermediate inputs, economic integration has increased between 2000 and 2014 between members of the European Union and even more with non-members. Integration is negatively related to economic size and positively to the number of years as a member. Germany is the largest hub in the production network and the centre of gravity has moved eastward. Older member states are increasingly exporting service inputs and new member states primary and manufacturing inputs. Wages are increasing faster in countries with low initial wages, indicating wage convergence as a result of production integration.
    Keywords: global value chains, economic integration, input-output models, wage convergence
    JEL: E10 F10 J31
    Date: 2018

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