nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2018‒06‒11
nineteen papers chosen by
Joseph Marchand
University of Alberta

  1. The Transformation of Manufacturing and the Decline in U.S. Employment By Kerwin Kofi Charles; Erik Hurst; Mariel Schwartz
  2. Organisational Accreditation and Worker Upskilling in Britain By Haile, Getinet Astatike
  3. An international comparison of the contribution to job creation by high growth firms By Anyadike-Danes, Michael; Bjuggren, Carl Magnus; Dumont, Michel; Gottschalk, Sandra; Hölzl, Werner; Johansson, Dan; Maliranta, Mika; Myrann, Anja; Nielsen, Kristian; Zheng, Guanyu
  4. When Work Disappears: Manufacturing Decline and the Falling Marriage Market Value of Young Men By David H. Autor; David Dorn; Gordon H. Hanson
  5. The Wider Impacts of High-Technology Employment: Evidence from U.S. Cities By Thomas Kemeny; Taner Osman
  6. Working Paper 04-18 - Removing youth sub-minimum wage rates in Belgium: did it affect youth employment? By Maritza López-Novella
  7. Understanding the Decline of U.S. Manufacturing Employment By Susan N. Houseman; Brad J. Hershbein
  8. The Geography of Alternative Work By Bäckman , Claes; Hanspal , Tobin
  9. Using Social Connections and Financial Incentives to Solve Coordination Failure: A Quasi-Field Experiment in India's Manufacturing Sector By Afridi, Farzana; Dhillon, Amrita; Li, Sherry Xin; Sharma, Swati
  10. Educator Incentives and Educational Triage in Rural Primary Schools By Gilligan, Daniel O.; Karachiwalla, Naureen; Kasirye, Ibrahim; Lucas, Adrienne; Neal, Derek
  11. Are Schools Different? Wellbeing and Commitment among Staff in Schools and Elsewhere By Bryson, Alex; Stokes, Lucy; Wilkinson, David
  12. Attention and Selection Effects By Sandro Ambuehl; Axel Ockenfels; Colin Stewart
  13. Constrained public goods in networks By Adelina Gschwandtner; Richard McManus
  14. Inheritance taxation in a model with intergenerational time transfers By Pascal Belan; Erwan Moussault
  15. Non-base wage components as a source of wage adaptability to shocks: Evidence from European firms, 2010-2013 By Jan Babecky; Clémence Berson; Ludmila Fadejeva; Ana Lamo; Petra Marotzke; Fernando Martins; Pawel Strzelecki
  16. Just Like A Woman? New Comparative Evidence on the Gender Income Gap across Eastern Europe and Central Asia By Blunch, Niels-Hugo
  17. A nudge to quit? The effect of a change in pension information on annuitization, labor supply and retirement choices among older workers By Hagen, Johannes; Hallberg, Daniel; Sjögren Lindquist, Gabriella
  18. A Cautionary Note on the Reliability of the Online Survey Data: The Case of Wage Indicator By Smyk, Magdalena; Tyrowicz, Joanna; van der Velde, Lucas
  19. Exploring Brexit with dynamic spatial panel models : some possible outcomes for employment across the EU regions By Fingleton, Bernard

  1. By: Kerwin Kofi Charles (Edwin A. and Betty L. Bergman Distinguished Service Professor, Harris School of Public Policy); Erik Hurst (V. Duane Rath Professor of Economics, Booth School of Business; Deputy Director of BFI); Mariel Schwartz (University of Chicago)
    Abstract: Using data from a variety of sources, this paper comprehensively documents the dramatic changes in the manufacturing sector and the large decline in employment rates and hours worked among prime-aged Americans since 2000. We use cross-region variation to explore the link between declining manufacturing employment and labor market outcomes. We find that manufacturing decline in a local area in the 2000s had large and persistent negative effects on local employment rates, hours worked and wages. We also show that declining local manufacturing employment is related to rising local opioid use and deaths. These results suggest that some of the recent opioid epidemic is driven by demand factors in addition to increased opioid supply. We conclude the paper with a discussion of potential mediating factors associated with declining manufacturing labor demand including public and private transfer receipt, sectoral switching, and inter-region mobility. Overall, we conclude that the decline in manufacturing employment was a substantial cause of the decline in employment rates during the 2000s particularly for less educated prime age workers. Given the trends in both capital and skill deepening within this sector, we further conclude that many policies currently being discussed to promote the manufacturing sector will have only a modest labor market impact for less educated individuals.
    Keywords: employment, manufacturing, labor market outcomes
    JEL: E24 J21 J23 R23
    Date: 2018–05
  2. By: Haile, Getinet Astatike (University of Nottingham)
    Abstract: Britain has lagged behind the G7 countries in labour productivity in recent years. There is also an emerging concern about a potential post-Brexit skills deficit. Upskilling the existing workforce via on-the-job training may be a vital policy tool available. Using a panel of organisations and their 'Investors in People' accreditation status, this paper empirically examines if accreditation promotes upskilling. Fixed effects estimates reveal that accreditation enhances on-the-job training but only in private sector organisations. Difference-in-differences estimates using unaccredited and di-accredited organisations as alternative matched comparators reinforce the FE findings. Policy may have to further engender accreditation schemes that boost worker upskilling to address the productivity concerns and to cope with the rapid technological changes better.
    Keywords: on-the-job training, organisation, accreditation, impact, panel data
    JEL: J24 L5 M53 D22
    Date: 2018–04
  3. By: Anyadike-Danes, Michael (Aston Business School and Enterprise Research Centre, UK); Bjuggren, Carl Magnus (Research Institute of Industrial Economics (IFN), Sweden); Dumont, Michel (Federal Planning Bureau and Ghent University, Belgium); Gottschalk, Sandra (ZEW, Germany); Hölzl, Werner (Austrian Institute of Economic Research (WIFO)); Johansson, Dan (Örebro University School of Business); Maliranta, Mika (ETLA and University of Jyväskylä, Finland); Myrann, Anja (Ragnar Frisch Centre for Economic Research, Norway); Nielsen, Kristian (Aalborg University, Denmark); Zheng, Guanyu (Productivity Commission, New Zealand)
    Abstract: This paper addresses three simple questions: how should the contribution of HGFs to job creation be measured? how much does this contribution vary across countries? to what extent does the cross-country variation depend on variation in the proportion of HGFs in the business population? The first is a methodological question which we answer using a more highly articulated version of the standard job creation and destruction accounts. The other two are empirical questions which we answer using a purpose-built dataset assembled from national firm-level sources and covering nine countries, spanning the ten three year periods from 2000/03 to 2009/12. The basic principle governing the development of the accounting framework is the choice of appropriate comparators. Firstly, when measuring contributions to job creation, we should focus on just job creating firms, otherwise we are summing over contributions from firms with positive, zero, and negative job creation numbers. Secondly, because we know growth depends in part on size, the ’natural’ comparison for HGFs is with job creation by similar-sized firms which simply did not grow as fast as HGFs. However, we also show how the measurement framework can be further extended to include, for example, a consistent measure of the contribution of small job creating firms. On the empirical side, we find that the HGF share of job creation by large job creating firms varies across countries by a factor of two, from around one third to two thirds. A relatively small proportion of this cross-country variation is accounted for by variations in the influence of HGFs on job creation. On average HGFs generated between three or four times as many jobs as large non-HGF job creating firms, but this ratio is relatively similar across countries. The bulk of the cross-country variation in HGF contribution to job creation is accounted for by the relative abundance (or rarity) of HGFs. Moreover, we also show that the measurement of abundance depends upon the choice of measurement framework: the ’winner’ of a cross-national HGF ’beauty context’ on one measure will not necessarily be the winner on another.
    Keywords: high-growth firms; firm growth; job creation
    JEL: D22 E24 L11 L25 L26 M13
    Date: 2018–05–08
  4. By: David H. Autor; David Dorn; Gordon H. Hanson
    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: marriage market, fertility, mortality, household structure, single-parent families, trade flows, import competition, local labor markets
    JEL: F16 J12 J13 J21 J23
    Date: 2018
  5. By: Thomas Kemeny (Queen Mary, University of London); Taner Osman (University of California, Los Angeles)
    Abstract: Innovative, high-technology industries are commonly described as drivers of regional development. ‘Tech’ workers earn high wages, but they are also said to generate knock-on effects throughout the local economies that host them, spurring growth in jobs and wages in nontradable activities. At the same time, in iconic high-tech agglomerations like the San Francisco Bay Area, the home of Silicon Valley, the success of the tech industry creates tensions, in part as living costs rise beyond the reach of many non-tech workers. Across a large sample of U.S. cities, this paper explores these issues systematically. Combining annual data on wages, employment and prices from the Quarterly Census of Employment and Wages, the Department of Housing and Urban Development and the Consumer Price Index, it estimates how growth in tradable tech employment affects the real, living-cost deflated wages of local workers in nontradable sectors. Results indicate that high-technology employment has significant, positive, but modest effects on the real wages of workers in nontradable sectors. These effects appear to be spread consistently across different kinds of nontradable activities. In terms of substantive wider impacts, tech appears benign, though fairly ineffectual.
    Keywords: high-technology, inequality, real wages, nontradable services; specialization, housing
    JEL: E24 J21 J31 L86 O18 R11 R31
    Date: 2018–05
  6. By: Maritza López-Novella
    Abstract: Between April 2013 and January 2015, youth sub-minimum wage rates were repealed in Belgium. We identify the impact of the reform by comparing outcomes before and after the withdrawal, across eligible and ineligible categories of young workers, and across abolishing and not abolishing joint committees. Our results show that the reform had a small positive impact on wages and on retention rates and a comparable but negative impact on accession rates.
    Keywords: Minimum wages, Youth sub-minimum rates, Youth employment, Policy evaluation, Triple difference estimator, Propensity score matching
    JEL: J38 J31 J21
    Date: 2018–03–16
  7. By: Susan N. Houseman (W.E. Upjohn Institute for Employment Research); Brad J. Hershbein
    Abstract: U.S. manufacturing experienced a precipitous and historically unprecedented decline in employment in the 2000s. Many economists and other analysts—pointing to decades of statistics showing that manufacturing real (inflation-adjusted) output growth has largely kept pace with private sector real output growth, that productivity growth has been much higher, and that the sector’s share of aggregate employment has been declining—argue that manufacturing’s job losses are largely the result of productivity growth (assumed to reflect automation) and are part of a long-term trend. Since the 1980s, however, the apparently robust growth in manufacturing real output and productivity have been driven by a relatively small industry—computer and electronic products, whose extraordinary performance reflects the way statistical agencies account for rapid product improvements in the industry. Without the computer industry, there is no prima facie evidence that productivity caused manufacturing’s relative and absolute employment decline. This paper discusses interpreting labor productivity statistics, which capture many factors besides automation, and cautions against using descriptive evidence to draw causal inferences. It also reviews the research literature to date, which finds that trade significantly contributed to the collapse of manufacturing employment in the 2000s, but finds little evidence of a causal link to automation.
    Keywords: manufacturing, productivity, price deflators, trade, offshoring, outsourcing, automation
    JEL: J21 J24
    Date: 2018–06
  8. By: Bäckman , Claes (Department of Economics, Lund University); Hanspal , Tobin (Research Center SAFE, Goethe University, Frankfurt, Germany)
    Abstract: The increase in alternative working arrangements has sparked a debate over the positive impact of increased flexibility against the negative impact of decreased financial security. We study the prevalence and determinants of intermediated work in order to document the relative importance of the arguments for and against this recent labor market trend. We link data on individual participation and losses from a Federal Trade Commission settlement with a Multi-Level Marketing firm with detailed county-level information. Participation is greater in middle-income areas and in areas where female labor market non-participation is higher, suggesting that flexibility offers real benefits. However, losses from MLM participation are higher in areas with lower education levels and higher income inequality, suggesting that the downsides of alternative work are particularly high in certain demographics. Our results illustrate that the advantages and disadvantages of alternative work arrangements accrue to different groups.
    Keywords: Intermediated work; Multi-level marketing; Gig-economy; Entrepreneurship; Consumer financial protection
    JEL: G21 J21 J22 L26
    Date: 2018–05–30
  9. By: Afridi, Farzana (Indian Statistical Institute); Dhillon, Amrita (King's College London); Li, Sherry Xin (University of Texas at Dallas); Sharma, Swati (Indian Statistical Institute)
    Abstract: Production processes are often organised in teams, yet there is limited evidence on whether and how social connections and financial incentives affect productivity in tasks that require coordination among workers. We simulate assembly line production in a lab-in-the-field experiment in which workers exert real effort in a minimum-effort game in teams whose members are either socially connected or unconnected and are paid according to the group output. We find that group output increases by 15% and wasted individual output is lower by 30% when workers are socially connected with their co-workers. Unlike the findings of existing research, increasing the power of group-based financial incentives does not reduce the positive effect of social connections. Our results are driven by men whose average productivity is significantly lower than that of women. These findings can be explained by pro-social behavior of workers in socially connected teams.
    Keywords: caste-based networks, social incentives, financial incentives, minimum effort game, coordination, trust
    JEL: C93 D20 D22 D24 J33
    Date: 2018–05
  10. By: Gilligan, Daniel O. (International Food Policy Research Institute); Karachiwalla, Naureen (IFPRI, International Food Policy Research Institute); Kasirye, Ibrahim (Economic Policy Research Centre); Lucas, Adrienne (University of Delaware); Neal, Derek (University of Chicago)
    Abstract: In low-income countries, primary school students often fall far below grade level and primary dropout rates remain high. Further, in some countries, educators encourage their weaker students to drop out before reaching the end of primary school. These educators hope to avoid the negative attention that authorities direct to a school when its students perform poorly on the primary leaving exams that governments use to certify primary completion and eligibility for secondary school. We report the results of an experiment in rural Uganda that sought to reduce dropout rates in grade six and seven by offering bonus payments to grade six teachers that rewarded each teacher for the performance of each of her students relative to comparable students in other schools. Teachers responded to this Pay for Percentile (PFP) incentive system in ways that raised attendance rates two school years later from .56 to .60. These attendance gains were driven primarily by outcomes in treatment schools that provide textbooks for grade six math students, where two-year attendance rates rose from .57 to .64. In these same schools, students whose initial skills levels prepared them to use grade six math texts enjoyed significant gains in math achievement. We find little evidence that PFP improved attendance or achievement in schools without books even though PFP had the same impact on reported teacher effort in schools with and without books. We conjecture that teacher effort and books are complements in education production and document several results that are consistent with this hypothesis.
    Keywords: achievement, dropout, educational triage, incentives, Uganda, complements in education production, teaching at the right level
    JEL: I0 J3 O1
    Date: 2018–05
  11. By: Bryson, Alex (University College London); Stokes, Lucy (National Institute of Economic and Social Research (NIESR)); Wilkinson, David (University College London)
    Abstract: Using nationally representative linked employer-employee data for Britain in 2004 and 2011 we find school staff are more satisfied and more contented with their jobs than "like" employees in other workplaces. The differentials are largely accounted for by the occupations school employees undertake and perceptions of job quality. School employees are also more committed to their organization than non-school employees, a difference that remains large and statistically significant having conditioned on job quality, human resource management practices (HRM), managerial style and other features of employees' working environment. Using panel data for workplaces and their employees observed in 2004 and 2011 we find increases in organizational commitment are linked to improvements in workplace performance in schools, but not in other workplaces.
    Keywords: schools, teachers, job satisfaction, job contentment, organizational commitment, school performance, human resource management, managerial style
    JEL: I21
    Date: 2018–04
  12. By: Sandro Ambuehl; Axel Ockenfels; Colin Stewart
    Abstract: Who participates in transactions when information about the consequences must be learned? We show theoretically that decision makers for whom acquiring and processing information is more costly not only respond more strongly to changes in incentive payments for participating but also decide to participate based on worse information. With higher payments, the pool of participants consists of a larger proportion of individuals who have a worse understanding of the consequences of their decision. We conduct a behavioral experiment that confirms these predictions, both for experimental variation in the costs of information acquisition and for various measures of information costs, including school grades and cognitive ability. These findings are relevant for any transaction combining a payment for participation with uncertain yet learnable consequences.
    Keywords: Experiment, rational inattention, repugnant transactions, incentives
    JEL: D83 D91 C91
    Date: 2018–05–25
  13. By: Adelina Gschwandtner; Richard McManus
    Abstract: We study the pay of UK universities chief executives (‘vice-chancellors’) over a ten year period. Although there is a correlation between pay and performance, with better performing institutions paying higher salaries, we find limited evidence that this relationship is causal; that is, we find no statistically significant link that a change in pay leads to a change in performance, or vice-versa. Instead, we find strong support for an asymmetric benchmarking behaviour, where those institutions with below average pay increase their vice-chancellor’s salaries quicker than those with above average pay. We simulate a model whereby different institutions target different places of the distribution of salaries and demonstrate that inflation of pay can be explained by this behaviour.
    Keywords: Executive Compensation; Performance Pay; Efficiency Wages; Benchmark
    JEL: G3 J33 Z13
    Date: 2018–05
  14. By: Pascal Belan; Erwan Moussault (Université de Cergy-Pontoise, THEMA)
    Abstract: We consider a two-period overlapping generation model with rational altruism a la Barro, where time transfers and bequests are available to parents. Starting from a steady state where public spendings are nanced through taxation on capital income and labor income, we analyze a tax reform that consists in a shift of the tax burden from capital income tax towards inheritance tax. In the standard Barro model with no time transfer and inelastic labor supply, such a policy decreases steady-state welfare. In our setting, inheritance tax modi es parent's trade-o between time transfers and bequests. We identify situations where the tax reform increases welfare for all generations. Welfare improvement mainly depends on the magnitude of the e ect of higher time transfers on the labor supply of the young.
    Keywords: family transfers, altruism, time transfers, inheritance tax.
    JEL: D64 H22 H24 J22
    Date: 2018
  15. By: Jan Babecky; Clémence Berson; Ludmila Fadejeva; Ana Lamo; Petra Marotzke; Fernando Martins; Pawel Strzelecki
    Abstract: This paper provides evidence on the role of non-base wage components as a channel for firms to adjust labour costs in the event of adverse shocks. It uses data from a firm-level survey for 25 European countries that covers the period 2010–2013. We find that firms subject to nominal wage rigidities, which prevent them from adjusting base wages, are more likely to cut non-base wage components in order to adjust labour costs when needed. Firms thus use non-base wage components as a buffer to overcome base wage rigidity. We further show that while non-base wage components exhibit some degree of downward rigidity, they do so to a lesser extent than base wages.
    Keywords: downward nominal wage rigidity, bonuses, firm survey, European Union
    JEL: J30 J32 C81 P5
    Date: 2018–05
  16. By: Blunch, Niels-Hugo
    Abstract: I examine the incidence and determinants of the gender income gap in Kazakhstan, Macedonia, Moldova, Serbia, Tajikistan, and Ukraine using recent household data based on an identical survey instrument across countries. Four main results are established, using a range of estimators, including OLS, interval regression, and quantile regression: (1) the presence of a substantively large gender income gap (favoring males) in all six countries; (2) some evidence of a gender-related glass ceiling in some of these countries; (3) some evidence that endowments diminish the income gaps, while the returns to characteristics increase the gaps; and (4) while observed individual characteristics explain part of the gaps, a substantial part of the income gap is left unexplained. In sum, these results are consistent with the presence of income discrimination towards females but at the same time also point towards the importance of continued attention towards institutions and economic policy for decreasing the gender income gap in these former formally gender neutral economies — notably through attention towards the maternity and paternity leave system, as well as public provision of child care.
    Keywords: Gender,income gap,Oaxaca-Blinder decomposition,detailed decomposition,maternity/paternity leave policies,Eastern Europe and Central Asia
    JEL: J16 J31 J7
    Date: 2018
  17. By: Hagen, Johannes; Hallberg, Daniel; Sjögren Lindquist, Gabriella
    Abstract: Nudge is about affecting behavior in a certain way through small changes to the choice architecture. However, a nudge may also affect behaviors that the architect did not intend. We show that such spillover effects exist in a highly policy relevant context where the use of nudge is widespread; retirement. Specifically, we find that an exogenous application form change in the Swedish pension system that highlighted a five-year payout on the expense of a life annuity not only increased the demand for the nudged payout (as expected), but also induced individuals to retire earlier. We attribute the effects to decision-framing.
    Keywords: annuity,pension,nudge,decision framing
    JEL: D91 J26 J32
    Date: 2018
  18. By: Smyk, Magdalena (University of Warsaw); Tyrowicz, Joanna (University of Warsaw); van der Velde, Lucas (GRAPE)
    Abstract: We investigate the reliability of data from the Wage Indicator (WI), the largest online survey on earnings and working conditions. Comparing WI to nationally representative data sources for 17 countries reveals that participants of WI are not likely to have been representatively drawn from the respective populations. Previous literature has proposed to utilize weights based on inverse propensity scores, but this procedure was shown to leave reweighted WI samples different from the benchmark nationally representative data. We propose a novel procedure, building on covariate balancing propensity score, which achieves complete reweighting of the WI data, making it able to replicate the structure of nationally representative samples on observable characteristics. While rebalancing assures the match between WI and representative benchmark data sources, we show that the wage schedules remain different for a large group of countries. Using the example of a Mincerian wage regression, we find that in more than a third of the cases, our proposed novel reweighting assures that estimates obtained on WI data are not biased relative to nationally representative data. However, in the remaining 60% of the analyzed 95 datasets systematic differences in the estimated coefficients of the Mincerian wage regression between WI and nationally representative data persists even after reweighting. We provide some intuition about the reasons behind these biases. Notably, objective factors such as access to the Internet or richness appear to matter, but self-selection (on unobservable characteristics) among WI participants appears to constitute an important source of bias.
    Keywords: Wage Indicator, online surveys, propensity score matching, weights
    JEL: C81 J30 J31
    Date: 2018–04
  19. By: Fingleton, Bernard
    Abstract: Starting with a reduced form derived from standard urban economics theory, this paper estimates the possible job-shortfall across UK and EU regions using a time-space dynamic panel data model with a Spatial Moving Average Random Effects (SMA-RE) structure of the disturbances. The paper provides a logical rational for the presence of spatial and temporal dependencies involving the endogenous variable, leading to estimates based on a dynamic spatial Generalized Moments (GM) estimator proposed by Baltagi, Fingleton and Pirotte (2018). Given state-of-the art interregional trade estimates, the simulations are based on a linear predictor which utilizes different regional interdependency matrices according to assumptions about interregional trade post-Brexit.
    Keywords: Brexit; Interregional trade; Urban economics theory; Panel data; Spatial lag; Spatio-temporal lag; Dynamic; Spatial moving average; Prediction; Simulation.
    JEL: C23 C33 C53 E27 F10 J21 R12
    Date: 2018–05–06

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