nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2018‒05‒14
sixteen papers chosen by
Joseph Marchand
University of Alberta

  1. Labor Market Quotas By Suzanne Bijkerk; Silvia Dominguez-Martinez; Jurjen Kamphorst; Otto Swank
  2. Product market competition and gender discrimination By Dudley Cooke; Ana P. Fernandes; Priscila Ferreira
  3. Hours Worked of the Self-Employed and Agglomeration By Cai, Zhengyu
  4. Coal Demand, Market Forces, and US Coal Mine Closures By Brett Jordan; Ian A. Lange; Joshua Linn
  5. On Barriers to Technology Adoption, Appropriate Technology and Deep Integration (with implications for the European Union) By Mercenier, Jean; Voyvoda, Ebru
  6. And Thou Shalt Honor: children’s caregiving, work and religion By Mazzotta, Fernanda; Bettio, Francesca; Zigante, Valentina
  7. From Elitist to Sustainable Earnings: Is there a group legitimacy in financial flows? By Charles, Aurelie; Vujić, Sunčica
  8. Heterogeneous human capital, inequality and growth: the role of patience and skills By Borissov, Kirill; Bosi, Stefano; Ha-Huy, Thai; Modesto, Leonor
  9. Financial incentives to work for disability insurance recipients - Sweden’s special rules for continuous deduction By Andersson, Josefine
  10. Finding meaning through work: eudaimonic well-being and job type in the US and UK By Andrew Bryce
  11. The Danish Matched Employer-Employee Data By Emmanuele Bobbio; Henning Bunzel
  12. The Changing Structure of Immigration to the OECD: What Welfare Effects on Member Countries? By Michal Burzynski; Frédéric Docquier; Hillel Rapoport
  13. Physical Disability and Labor Market Discrimination: Evidence from a Field Experiment By Charles Bellemare; Marion Gousse; Guy Lacroix; Steeve Marchand
  14. The Elasticity of Taxable Income in the Presence of Intertemporal Income Shifting By Aspen Gorry; R. Glenn Hubbard; Aparna Mathur
  15. Optimal Default Policies in Defined Contribution Pension Plans when Employees are Biased By Asen Ivanov
  16. Implications for Aggregate Inflation of Sectoral Asymmetries: An Epirical Implication By McKay Andy; Pirttilä Jukka; Schimanski Caroline

  1. By: Suzanne Bijkerk (Erasmus School of Economics); Silvia Dominguez-Martinez (University of Amsterdam); Jurjen Kamphorst (Erasmus School of Economics); Otto Swank (Erasmus School of Economics)
    Abstract: Under-representation of women in high level positions is widespread and persistent. We analyze the consequences of labor market quotas for the wages of women in high level positions. The key point of our paper is that quotas cause asymmetric information about why women work in high level positions. Firms know why they have assigned their own female employees to high level positions, but do not know why women at other firms have been assigned to those positions. A winner’s curse, reducing competition for women in high level positions, results. This widens the gender pay gap. We show that ex ante women are better-off without quotas. Next, we investigate how quotas affect incentives for employers to learn the abilities of women to make better job-assignment decisions. Then, under specific conditions women may benefit from quotas.
    Keywords: labor market quota; winners curse; screening
    JEL: D83 J22
  2. By: Dudley Cooke (University of Exeter); Ana P. Fernandes (University of Exeter); Priscila Ferreira (University of Minho, NIMA)
    Abstract: This paper presents novel empirical evidence for the prediction from Becker’s (1957) famous theory, that competition will drive discrimination out of the market. We use a comprehensive firm entry deregulation reform in Portugal as a quasi-natural experiment to study the effect of increased product market competition on gender discrimination. We use employer-employee data for the universe of private sector firms and workers, and exploit the staggered implementation of the reform across municipalities for identification. Increased competition following the deregulation reduces the gender pay gap for medium- and high-skill workers but not for the low-skilled. The gender pay gap is also reduced for workers in managerial positions, except for the CEO. We also find that the share of females in managerial positions increased in affected municipalities. Existing evidence has shown that gender discrimination reduces output; our findings suggest that deregulation can contribute to reduce inefficiencies arising from gender discrimination.
    Keywords: Deregulation, Discrimination, Entry, Gender Pay Gap, Product Market Competition, Wage Structure.
    JEL: J16 J31 J71
    Date: 2018–05
  3. By: Cai, Zhengyu
    Abstract: This paper investigates the causal effects of agglomeration on hours worked by the self-employed. The IV estimations instrument for urbanization and localization using the minimum distance from the work Public Use Microdata Area centroid to the United States’ coastlines and estimated industry share in 1930. The 2SLS results demonstrate that urbanization and localization decrease and increase hours worked of the self-employed, respectively. These results are mainly from outsourcing and competition, whereas sorting, simultaneity, and agglomeration wage effect are less likely to be influential. Additionally, only small business owners perceive the pressures of competition in localization economies. The young unincorporated self-employed are more likely to be affected by peer competitors, whereas the elder unincorporated perceive more pressures from large firms.
    Keywords: Self-employed,hours worked,urbanization,localization,competition,coastlines
    JEL: J10 J22 J31 R11 R12
    Date: 2018
  4. By: Brett Jordan; Ian A. Lange; Joshua Linn
    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
  5. By: Mercenier, Jean; Voyvoda, Ebru
    Abstract: Based on two strands of research, namely ‘barriers to technology adoption’ and ‘appropriate technology’, we propose a formal reappraisal of ‘deep integration’, a broad concept often used in trade policy discussions. We then evaluate the 2004-7 EU enlargement wave utilizing this operational reappraisal. More specifically, we first estimate, using 2007 data, total labor productivity (TLP) in the 27 EU member states, and show that in all but a few sectors, new member states clearly stand below the lower envelope technology frontier of the older members in their use of skilled and unskilled labor. We interpret this as being the result of past barriers to technology adoption that are likely to be removed by the integration process into the EU, with these new counties’ TLP shifting to the incumbent members’ lower envelope. We then explore the potential effects on all 27 EU member states of this ‘deep integration’ experiment using a calibrated intertemporal multisectoral general equilibrium model. Our main finding is that, for most parameter configurations, workers’ welfare in incumbent member countries is not negatively impacted despite the rather drastic improvement in competitiveness experienced by new members.
    Keywords: Barriers to technology adoption, appropriate technology, technological upgrading, deep integration, European integration, calibrated general equilibrium
    JEL: D58 E23 F12 J31 O14 R13
    Date: 2018–04–25
  6. By: Mazzotta, Fernanda; Bettio, Francesca; Zigante, Valentina
    Abstract: In this paper we take a fresh look at the magnitude of the trade-off between caring informally for a parent and paid work. We adopt a simultaneous approach with a primary focus on how hours of care are influenced by hours of work rather than the other way round. We also investigate the role that filial obligations play in choices of caring versus working. Using the SHARE data (2004 and 2006) we find that the elasticity of informal care hours in response to working hours is around -0.18, small but not negligible. Moreover, we find that a one point decrease out of a seven point index measuring the strength of filial obligations reduces weekly hours of care by about one hour and half.
    Keywords: Informal care,caregiver, culture,endogeneity,Europe,SHARE
    JEL: I11 I12 J22 D10 Z10
    Date: 2018
  7. By: Charles, Aurelie; Vujić, Sunčica
    Abstract: Elite occupations are characterised by the magnitude of income accumulation which has been particularly exacerbated in the financialisation process. This paper however shows that the cumulative effects on group earnings is a pattern visible across the labour force. The case studies on the US and UK labour force in the financialisation era in effect show that elitist earnings are a group phenomenon for a dominant group, mainly white male or female, at the expense of other racial, ethnic, and gender groups. Learning from such group behaviour on financial accumulation and drawing on Sen’s rules of legitimacy (1981) in market interactions, the discussion then looks at the possibility of “sustainable earning” trends that feed into the financial needs for the green transition. The paper concludes that economic actors should be aware of the group legitimacy to financial flows, but that the group boundaries should be based on ecological-based entitlements rather than social-based entitlements to financial flows.
    Keywords: elite,income,inequality,social norms,stratification
    JEL: J31 J71 C32
    Date: 2018
  8. By: Borissov, Kirill; Bosi, Stefano; Ha-Huy, Thai; Modesto, Leonor
    Abstract: We extend the Lucas' 1988 model introducing two classes of agents with heterogeneous skills, discount factors and initial human capital endowments. We consider two regimes according to the planner's political constraints. In the first regime, that we call meritocracy, the planner faces individual constraints. In the second regime the planner faces an aggregate constraint, redistributing. We find that heterogeneity matters, particularly with redistribution. In the meritocracy regime, the optimal solution coincides with the BGP found by Lucas (1988) for the representative agent's case. In contrast, in the redistribution case, the solution for time devoted to capital accumulation is never interior for both agents. Either the less talented agents do not accumulate human capital or the more skilled agents do not work. Moreover, social welfare under the redistribution regime is always higher than under meritocracy and it is optimal to exploit existing differences. Finally, we find that inequality in human capital distribution increases in time and that, in the long run, inequality always promotes growth.
    Keywords: human capital, heterogenous patience and skills, inequality and growth.
    JEL: E24 O4 O41
    Date: 2018–04
  9. By: Andersson, Josefine (IFAU - Institute for Evaluation of Labour Market and Education Policy)
    Abstract: Evidence from around the world suggests that individuals who are awarded disability benefits in some cases still have residual working capacity, while disability insurance systems typically involve strong disincentives for benefit recipients to work. Some countries have introduced policies to incentivize disability insurance recipients to use their residual working capacities on the labor market. One such policy is the continuous deduction program in Sweden, introduced in 2009. In this study, I investigate whether the financial incentives provided by this program induce disability insurance recipients to increase their labor supply or education level. Retroactively determined eligibility to the program with respect to time of benefit award provides a setting resembling a natural experiment, which could be used to estimate the effects of the program using a regression discontinuity design. However, a simultaneous regime change of disability insurance eligibility causes covariate differences between treated and controls, which I adjust for using a matching strategy. My results suggest that the financial incentives provided by the program have not had any effect on labor supply or educational attainment.
    Keywords: disability Insurance; financial Incentives; continuous deduction; regression discontinuity design; propensity score matching; nearest neighbor matching
    JEL: H53 H55 I18 J22
    Date: 2018–05–03
  10. By: Andrew Bryce (Department of Economics, University of Sheffield)
    Abstract: Eudaimonic well-being is an important component of utility that reflects people’s preferences for having purpose and meaning in their lives. This paper presents analysis from the American Time Use Survey (ATUS) and the UK Annual Population Survey (APS) to show that the extent to which people find their work meaningful is significantly determined by the type of job they have. Much of the existing literature in this area provides theoretical or qualitative evidence, or evidence from small scale surveys, to identify the aspects of a job most conducive to eudaimonic well-being. This paper is the first to establish large scale quantitative evidence of the effects of job type on eudaimonic well-being across the whole population, based on two large national datasets. I find that jobs that combine professional autonomy with having a direct social impact within the context of a trusting relationship are found to be the most meaningful and worthwhile, controlling for selection into these jobs. These findings have some interesting implications for how wages are set in different labour markets.
    Keywords: subjective well-being; eudaimonic well-being; meaningful work
    JEL: B5 C1 J2
    Date: 2018–04
  11. By: Emmanuele Bobbio (Bank of Italy); Henning Bunzel (Department of Economics and Business Economics, Aarhus University, Denmark)
    Abstract: The Danish data constitutes a unique source of information: it covers and links together the universe of persons, establishments and firms for more than 30 years. In addition workers’ histories are constructed at the weekly level. The data has the potential to become a benchmark in social research, but access has been limited by the lack of systematic documentation. The chapter provides an introduction, with a particular emphasis on those portions more commonly used in labor market research. We establish a wide variety of descriptive statistics that can serve as a reference for future studies. The second part is dedicated to a more detailed analysis of wages and flows, for which the data is uniquely well suited. Returns to seniority are low on average and even lower for workers coming from unemployment; wage changes between jobs are large, but often negative and in these cases the wage remains persistently lower. Labor market turnover is high, the unconditional job and unemployment hazard display strong negative duration dependence. Also, higher wages are associated with a lower probability and duration of unemployment. Finally, we use the data to revisit the recent debate on the “ins and outs” of unemployment: the reduced form decomposition assigns 2/3 of unemployment volatility to the ue rate; the ue rate is procyclical, while the eu rate countercyclical and leads unemployment; the ee rate is procyclical, so the separation rate is essentially acyclical. These results are remarkably consistent with findings from U.S. data.
    Keywords: Danish MEE data, wage dispersion, job flows, personal wage dynamics, turnover, ins and outs of unemployment
    JEL: J21 J31 Y1
    Date: 2018–05–07
  12. By: Michal Burzynski; Frédéric Docquier; Hillel Rapoport
    Abstract: We investigate the welfare implications of two pre-crisis immigration waves (1991–2000 and 2001–2010) and of the post-crisis wave (2011–2015) for OECD native citizens. To do so, we develop a general equilibrium model that accounts for the main channels of transmission of immigration shocks – the employment and wage effects, the fiscal effect, and the market size effect – and for the interactions between them. We parameterize our model for 20 selected OECD member states. We find that the three waves induce positive effects on the real income of natives, however the size of these gains varies considerably across countries and across skill groups. In relative terms, the post-crisis wave induces smaller welfare gains compared to the previous ones. This is due to the changing origin mix of immigrants, which translates into lower levels of human capital and smaller fiscal gains. However, differences across cohorts explain a tiny fraction of the highly persistent, cross-country heterogeneity in the economic benefits from immigration.
    Keywords: immigration, welfare, crisis, inequality, general equilibrium
    JEL: C68 F22 J24
    Date: 2018
  13. By: Charles Bellemare; Marion Gousse; Guy Lacroix; Steeve Marchand
    Abstract: We investigate the determinants and extent of labor market discrimination toward people with physical disabilities using a large scale field experiment. Applications were randomly sent to 1477 private firms advertising open positions. We find that average callback rates of disabled and non-disabled applicants are respectively 14.4% and 7.2%. We find this differential does not result from accessibility constraints related to firm infrastructures. We also find that mentioning eligibility to a government subsidy to cover the cost of workplace adaptation does not increase callback rates. Finally, we estimate that a lower bound of the proportion of discriminating firms is 49.7%.
    Keywords: discrimination, disabilities, partial identification
    JEL: J71 J68
    Date: 2018
  14. By: Aspen Gorry; R. Glenn Hubbard; Aparna Mathur
    Abstract: Knowing the elasticity of taxable income (ETI) is crucial for understanding the effects of taxation on taxpayer behavior and consequently on tax revenues. Previous research finds that high-income individuals are the most sensitive to tax policy changes. However, these individuals have more opportunities to defer income to future tax bases by altering the composition of their compensation than lower-income individuals. This paper considers the taxable income elasticity when individuals can shift income across tax bases and thereby defer taxation. We decompose the elasticity of taxable income into a real response as well as an income shifting response. We measure the tax rate on deferred income by the expected tax gain from deferring income using stock options as developed by Hall and Liebman (2000). Our results demonstrate that income shifting is an important component of previous estimates of the ETI. Because shifted income is taxed at future dates, income shifting decreases the welfare loss from personal income taxation associated with previous estimates.
    JEL: G30 H24 H31 J33
    Date: 2018–04
  15. By: Asen Ivanov (Queen Mary University of London)
    Abstract: This paper analyses a model in which employees are biased in their perception of their optimal contribution rates or asset allocations in defined contribution pension plans. The optimal default is characterised as a function of the parameters. It is shown that, for some values of the parameters, forcing employees to actively decide is the optimal default policy. The total loss in the population at the optimal default policy can be nonmonotone in the parameters in counterintuitive ways.
    Keywords: optimal defaults, libertarian paternalism, nudging, pension plan design
    JEL: D14 D91 J26 J32
    Date: 2018–04–27
  16. By: McKay Andy; Pirttilä Jukka; Schimanski Caroline (Faculty of Management, University of Tampere)
    Abstract: A key policy problem in most developing countries is the size of the informal sector and its persistence over time. At the same time, these countries also need to increase their tax take. However, this may slow down the formalization of the economy. Evidence on the wages and characteristics of jobs in different sectors and on the impact of tax changes on the size of the informal sector in developing countries is, however, very limited. This paper therefore estimates the tax responsiveness of the extensive margin of formality, i.e. the propensity to participate in formal work as opposed to working as an informal worker,for four Sub-Saharan African countries. Using repeated cross-sections of household data and applying grouping estimator techniques, this paper finds only very small or statistically insignificant effects of taxes on the extent of formal work.
    Keywords: developing countries, Sub-Saharan Africa, taxation, labour supply, informality
    JEL: H31 J20 O17
    Date: 2018–04

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