nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2018‒05‒28
fifteen papers chosen by
Joseph Marchand
University of Alberta

  1. Opioids and the Labor Market By Aliprantis, Dionissi; Schweitzer, Mark E.
  2. Do Board Gender Quotas Matter? Selection, Performance and Stock Market Effects By Ferrari, Giulia; Ferraro, Valeria; Profeta, Paola; Pronzato, Chiara D.
  3. Physical Disability and Labor Market Discrimination: Evidence from a Field Experiment By Bellemare, Charles; Goussé, Marion; Lacroix, Guy; Marchand, Steeve
  4. Changing the Structure of Minimum Wages: Firm Adjustment and Wage Spillovers By Giupponi, Giulia; Machin, Stephen
  5. Graded Return-To-Work as a Stepping Stone to Full Work Resumption By Kools, Lieke; Koning, Pierre
  6. The career dynamics of high-skilled women and men: Evidence from Sweden By Albrecht, James; Bronson, Mary Ann; Skogman Thoursie, Peter; Vroman, Susan
  7. Does Ignorance of Economic Returns and Costs Explain the Educational Aspiration Gap? Evidence from Representative Survey Experiments By Lergetporer, Philipp; Werner, Katharina; Woessmann, Ludger
  8. When Work Disappears: Manufacturing Decline and the Falling Marriage-Market Value of Young Men By Autor, David; Dorn, David; Hanson, Gordon H.
  9. Survey Item-Response Behavior as an Imperfect Proxy for Unobserved Ability: Theory and Application By Kassenboehmer, Sonja C.; Schurer, Stefanie
  10. Bad Investments and Missed Opportunities? Postwar Capital Flows to Asia and Latin America By Ohanian, Lee E.; Restrepo-Echavarria, Paulina; Wright, Mark L. J.
  11. Effects of Taxes and Safety Net Pensions on life-cycle Labor Supply, Savings and Human Capital: the Case of Australia By Fedor Iskhakov; Michael Keane
  12. Economic Growth in the EU: Is Flexicurity a Help or a Hindrance? By Hilary Clistina Ingham
  13. Statistical Discrimination and Affirmative Action in the Lab By Dianat, Ahrash; Echenique, Federico; Yariv, Leeat
  14. Benefit reform for employment and equal opportunity in Finland By Jon Kristian Pareliussen; Hyunjeong Hwang
  15. Competitiveness at the country-sector level: New measures based on global value chains By Marczak, Martyna; Beissinger, Thomas

  1. By: Aliprantis, Dionissi (Federal Reserve Bank of Cleveland); Schweitzer, Mark E. (Federal Reserve Bank of Cleveland)
    Abstract: This paper finds evidence that opioid availability decreases labor force participation while a large labor market shock does not influence the share of opioid abusers. We first identify the effect of availability on participation using the geographic variation in opioid prescription rates. We use a combination of the American Community Survey (ACS) and Centers for Disease Control and Prevention (CDC) county-level prescription data to examine labor market patterns across both rural and metropolitan areas of the United States from 2007 to 2016. Individuals in areas with higher prescription rates are less likely to participate after accounting for standard demographic factors and regional controls. This relationship remains significant for important demographic groups when increasingly strong panel data controls, including a full set of geographic fixed effects and measures of local labor market conditions in 2000, are introduced to the regressions. We also investigate the possibility of reverse causality, using the Great Recession as an instrument to identify the effect of weak labor demand on opioid abuse. The share abusing opioids did not increase after the onset of the Great Recession. The evidence on the frequency of abuse is more ambiguous since the identified increases could be the continuation of a pre-trend.
    Keywords: Opioid Prescription Rate; Labor Force Participation; Great Recession; Opioid Abuse;
    JEL: I10 J22 J28 R12
    Date: 2018–05–15
  2. By: Ferrari, Giulia (INED, France); Ferraro, Valeria (Boston College); Profeta, Paola (Bocconi University); Pronzato, Chiara D. (University of Turin)
    Abstract: From business to politics and academia, the economic effects of the introduction of gender quotas are under scrutiny. We provide new evidence based on the introduction of mandatory gender quotas for boards of directors of Italian companies listed on the stock market. Comparing before and after the reform within firms, we find that quotas are associated with a higher share of female board directors, higher levels of education of board members, and a lower share of older members. We then use the reform period as an instrument for the share of female directors and find no significant impact on firms' performance. Interestingly, the share of female directors is associated with a lower variability of stock market prices. We also run event studies on the stock price reaction to both the announcement and the introduction of gender quotas. A positive effect of the quota law on stock market returns emerges at the date of the board's election. Our results are consistent with gender quotas giving rise to a beneficial restructuring of the board, which is positively received by the market.
    Keywords: education, age, financial markets
    JEL: J20 J48 J78
    Date: 2018–04
  3. By: Bellemare, Charles (Université Laval); Goussé, Marion (Université Laval); Lacroix, Guy (Université Laval); Marchand, Steeve (Université Laval)
    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: 2018–04
  4. By: Giupponi, Giulia (London School of Economics); Machin, Stephen (London School of Economics)
    Abstract: This paper analyses the economic impact of a significant change to the structure of a minimum wage setting policy. The context is the United Kingdom where government mandated an unexpected change in the structure of minimum wages and their setting in 2016 by introducing a new minimum wage – the National Living Wage (NLW) – for workers aged 25 and over. The new NLW rate was significantly higher than the minimum wage for those under age 25. The analysis studies the consequences of this change in a sector containing many low wage workers, the care homes industry. The new minimum wage structure and associated higher minimum wage for those aged 25 and above significantly affected wages, but at the same time with little evidence of adverse employment effects, nor firm closure. Rather the margin of adjustment used to offset the sizable wage cost shock was a significant deterioration of the quality of care services. There is also strong evidence of wage spillovers as younger workers wages rose in tandem with the higher adult minimum wage, but with no impact on their employment. Based on further empirical tests, employer preference for fairness seems to offer the most plausible explanation for these results.
    Keywords: minimum wage structure, employment, wage spillovers
    JEL: J23 J31
    Date: 2018–04
  5. By: Kools, Lieke (University of Leiden); Koning, Pierre (Leiden University)
    Abstract: There is increasing evidence that graded return-to-work is an effective tool for the rehabilitation of sick-listed workers. Still, little is known on the optimal timing and level of grading in return-to-work trajectories, as well as the allocation of trajectories across worker types. To fill this gap, we analyze whether the effectiveness of graded return-to-work depends on the starting moment of the trajectory and the initial level of graded work resumption. We use administrative data from a Dutch private workplace reintegration provider. In order to correct for the selection bias inherent to the evaluation of activation strategies, we exploit the discretionary room of the case managers in setting up treatment plans. In correspondence with previous literature we find that graded return-to-work reduces sick spells with eighteen weeks within the first two years after reporting sick. However, the probability of work resumption after two years remains unchanged. Work resumption can be achieved faster when graded return-to-work is started earlier or at a higher rate of initial work resumption. These findings how- ever do not hold for individuals who have problems related to mental health.
    Keywords: activation, long-term sickness absence, graded return-to-work
    JEL: I18 C26
    Date: 2018–04
  6. By: Albrecht, James (Department of Economics, Georgetown University); Bronson, Mary Ann (Department of Economics, Georgetown University); Skogman Thoursie, Peter (Department of Economics, Stockholm University); Vroman, Susan (Department of Economics, Georgetown University)
    Abstract: In this paper, we use matched worker-firm register data from Sweden to examine the career dynamics of high-skill women and men. Specifically, we track wages for up to 20 years among women and men born in the years 1960 - 70 who completed a university degree in business or economics. These women and men have similar wages and earnings at the start of their careers, but their career paths diverge substantially as they age. These men and women also have substantial differences in wage paths associated with becoming a parent. We look at whether firm effects account for the differences we observe between women's and men's wage profiles. We document differences between the firms where men work and those where women work. However, a wage decomposition suggests that these differences in firm characteristics play only a small role in explaining the gender log wage gap among these workers. We then examine whether gender differences in firm-to-firm mobility help explain the patterns in wages that we see. Men and women both exhibit greater mobility early in their careers, but there is little gender difference in this firm-to-firm mobility. We find that the main driver of the gender difference in log wage profiles are that men experience higher wage gains than women do both as "switchers" and as "stayers".
    Keywords: Wages; Earnings; Gender gaps; Firms
    JEL: J16 J31
    Date: 2018–05–22
  7. By: Lergetporer, Philipp (Ifo Institute for Economic Research); Werner, Katharina (Ifo Institute for Economic Research); Woessmann, Ludger (Ifo Institute for Economic Research)
    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, aspiration, information, returns to education, survey experiment
    JEL: D83 I24 J24 H75
    Date: 2018–04
  8. By: Autor, David (MIT); Dorn, David (University of Zurich); Hanson, Gordon H. (University of California, San Diego)
    Abstract: We exploit the gender-specific components of large-scale labor demand shocks stemming from rising international manufacturing competition to test how shifts in the relative economic stature of young men versus young women affected marriage, fertility and children's living circumstances during 1990-2014. On average, trade shocks differentially reduce employment and earnings of young adult males. Consistent with Becker's model of household specialization, shocks to male's relative earnings reduce marriage and fertility. Consistent with prominent sociological accounts, these shocks heighten male idleness and premature mortality, and raise the share of mothers who are unwed and the share of children living in below-poverty, single-headed households.
    Keywords: import competition, trade flows, single-parent families, household structure, mortality, fertility, marriage market, local labor markets
    JEL: F16 J12 J13 J21 J23
    Date: 2018–04
  9. By: Kassenboehmer, Sonja C. (Monash University); Schurer, Stefanie (University of Sydney)
    Abstract: We develop and test an economic model of the cognitive and non-cognitive foundations of survey item- response behavior. We show that a summary measure of response behaviour – the survey item-response rate (SIRR) – varies with cognitive and less so with non-cognitive abilities, has a strong individual fixed component and is predictive of economic outcomes because of its relationship with ability. We demonstrate the usefulness of SIRR, although an imperfect proxy for cognitive ability, to reduce omitted-variable biases in estimated wage returns. We derive both necessary and sufficient conditions under which the use of an imperfect proxy reduces such biases, providing a general guideline for researchers.
    Keywords: survey item-response behavior, imperfect proxy variables, behavioral proxy, cognitive ability, personality traits, selection on unobservables
    JEL: J24 C18 C83 I20 J30
    Date: 2018–04
  10. By: Ohanian, Lee E. (Federal Reserve Bank of Minneapolis); Restrepo-Echavarria, Paulina (Federal Reserve Bank of St Louis); Wright, Mark L. J. (Federal Reserve Bank of Minneapolis)
    Abstract: After World War II, international capital flowed into slow-growing Latin America rather than fast-growing Asia. This is surprising as, everything else equal, fast growth should imply high capital returns. This paper develops a capital flow accounting framework to quantify the role of different factor market distortions in producing these patterns. Surprisingly, we find that distortions in labor markets — rather than domestic or international capital markets — account for the bulk of these flows. Labor market distortions that indirectly depress investment incentives by lowering equilibrium labor supply explain two-thirds of observed flows, while improvement in these distortions over time accounts for much of Asia’s rapid growth.
    Keywords: Capital flows; Labor markets; Domestic capital markets; International capital markets
    JEL: E21 F21 F41 J20
    Date: 2018–05–14
  11. By: Fedor Iskhakov; Michael Keane
    Abstract: In this paper we structurally estimate a life-cycle model of consumption/savings, labor supply and retirement, using data from the Australian HILDA panel. We use the model to evaluate effects of the Australian aged pension system and tax policy on labor supply, consumption and retirement decisions. Our model accounts for human capital accumulation via learning by doing, as well as wealth accumulation and decumulation over the life cycle, uninsurable wage risk, credit constraints, a non-absorbing retirement decision, and labor market frictions. We account for the ’bunching’ of hours by discretizing job offers into several hours levels, allowing us to investigate labor supply on both intensive and extensive margins. Our model allows us to quantify the effects of anticipated and unanticipated tax and pension policy changes at different points of the life cycle. Our results imply that the Australian Aged Pension system as currently designed is very poorly targeted, so that means testing and other program rules could be improved.
    Keywords: Labor supply, human capital accumulation, retirement, pensions, taxes, struc-tural model, anticipated and unanticipated policy changes, counterfactual simulations
    JEL: J22 J24 J26 C63
    Date: 2018–05
  12. By: Hilary Clistina Ingham
    Abstract: In the light of the recent economic crisis, flexicurity has permeated many European Union (EU) policies with the hope that more flexible labour markets alongside modern social security systems and active learning can reinvigorate economic growth. This paper employs a variant of the Solow growth model to examine the impact that flexicurity had on economic growth in 27 EU Member States for the years 2000 to 2015. Using principal components to capture the multi-faceted concept of flexicurity, the results reveal that, in isolation, flexicurity failed to provide any growth stimulus. Lifelong learning, active labour market policy and modern security systems proved However, incorporating the role of the social partners and trust into the model provided a more positive picture of the flexicurity-growth relationship.
    Keywords: Economic Growth, Flexicurity, European Union
    JEL: J38 J48 J51 J83 O47
    Date: 2018
  13. By: Dianat, Ahrash; Echenique, Federico; Yariv, Leeat
    Abstract: We present results from laboratory experiments studying the impacts of affirmative action policies. We induce statistical discrimination in simple labor-market interactions between firms and workers. We then introduce affirmative-action policies that vary in the size and duration of a subsidy firms receive for hiring discriminated-against workers. These different affirmative-action policies have nearly the same effect and practically eliminate discriminatory hiring practices. However, once lifted, few positive effects remain and discrimination reverts to its initial levels. One exception is lengthy affirmative-action policies, which exhibit somewhat longer-lived effects. Stickiness of beliefs, which we elicit, helps explain the evolution of these outcomes.
    Keywords: affirmative action; experiments; statistical discrimination
    JEL: C91 D04 J71
    Date: 2018–05
  14. By: Jon Kristian Pareliussen; Hyunjeong Hwang
    Abstract: The combination of different working-age benefits, childcare costs and income taxation creates complexity, reduces work incentives and holds back employment. Major disincentives in Finland are related to tapering rules for unemployment benefits, social assistance and the housing benefit, the extended unemployment benefit for older workers, the childcare fee structure and the homecare allowance. Improved benefit design combined with efficient activation policies can reduce complexity and remove the strongest disincentives while minimising adverse fiscal and social impacts. Replacing current benefits with a basic income would improve incentives for many, but with a drastic redistribution of income and likely increasing poverty as a result. Merging working-age benefits with similar aims and coordinating their tapering against earnings would on the other hand consistently improve work incentives and transparency, while preserving social protection. Once the new income registry comes online, linking benefit payments to real-time incomes, combined with strengthened work incentives, would make for a truly efficient and inclusive benefit system, fit for the future of work. This Working Paper relates to the 2018 OECD Economic Survey of Finland ( y-finland.htm).
    Keywords: basic income, Finland, inequality, universal credit, welfare reform, work incentives
    JEL: D3 H53 H55 J38
    Date: 2018–05–25
  15. By: Marczak, Martyna; Beissinger, Thomas
    Abstract: We propose the so-called domestic "embodied unit labor costs" (EULC) at the country-sector level as a new cost-related basis for measures of international competitiveness. EULC take into account that a sector's labor costs constitute only a small share of its total cost which to a large extent consist of expenses for inter- mediate goods from other sectors. In line with a simple Leontief-type model, the proposed measure is constructed as a weighted average of unit labor costs of all do- mestic sectors contributing to the final goods of a specific sector. The contribution is expressed in value-added terms and takes global supply chains into account. We also show how EULC can be consistently calculated for sectoral aggregates such as the tradable goods sector. Based on EULC we propose the 'embodied real effec- tive exchange rate' (EREER) at the country-sector level as a new competitiveness indicator where the relevance of trading partners is quantified by an appropriate value-added measure. The chosen value-added concept replaces gross exports tra- ditionally used as the weight basis in effective exchange rates. Using the World Input-Output Database (WIOD) we employ the proposed indicators to shed new light on changes in cost competitiveness at the sectoral level for Germany, and compare the empirical evidence with selected other euro area countries.
    Keywords: unit labor costs,real effective exchange rate,global supply chains,input-output analysis,sectoral analysis,international competitiveness,WIOD,Germany
    JEL: J30 C67 E01 F16 F23
    Date: 2018

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