nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2018‒07‒09
sixteen papers chosen by
Joseph Marchand
University of Alberta

  1. The supply side of discrimination: evidence from the labor supply of Boston taxi drivers By Jackson, Osborne
  2. The Changing Structure of Immigration to the OECD: What Welfare Effects on Member Countries? By Michal Burzynski; Frédéric Docquier; Hillel Rapoport
  3. “What drives the spatial wage premium for formal and informal workers? The case of Ecuador” By Alessia Matano; Moisés Obaco; Vicente Royuela
  4. On the economics of forced labour. Did the employment of Prisoners-of-War depress German coal mining productivity in World War I? By Tobias A. Jopp
  5. The labor share in the service economy By Luis Díez Catalán
  6. Nonlinear household earnings dynamics, self-insurance, and welfare By Mariacristina De Nardi; Giulio Fella
  7. Pension reform: Disentangling retirement and savings responses By Lindeboom, M.; Montizaan, Raymond
  8. Understanding the gender wage gap differential between public and private sector in Italy: A quantile approach for panel data By Carolina Castagnetti; Maria Letizia Giorgetti
  9. State Merit Aid Programs and Youth Labor Market Attachment By David E. Frisvold; Melinda Pitts
  10. The Role of Human Capital Resources in East African Economies By Urgaia; Worku R.
  11. When does team remuneration work? An experimental study on interactions between workplace contexts By Bartke, Simon; Gelhaar, Felix
  12. Tax Progressivity and Self-Employment Dynamics By Arulampalam. Wiji; Papini, Andrea
  13. Does Ignorance of Economic Returns and Costs Explain the Educational Aspiration Gap? Evidence from Representative Survey Experiments By Lergetporer, Philipp; Werner, Katharina; Woessmann, Ludger
  14. Financial Incentives and Earnings of Disability Insurance Recipients: Evidence from a Notch Design By Ruh, Philippe; Staubli, Stefan
  15. Equilibrium wage rigidity in directed search By Gabriele Camera; Jaehong Kim
  16. Do higher salaries yield better teachers and better student outcomes? By Cabrera, José María; Webbink, Dinand

  1. By: Jackson, Osborne (Federal Reserve Bank of Boston)
    Abstract: This paper investigates supply-side discrimination in the labor market for Boston taxi drivers. Using data on millions of trips from 2010–2015, I explore whether the labor supply behavior of taxi drivers differs by the gender, racial/ethnic, or age composition of Boston neighborhoods. I find that disparities in shift hours due to neighborhood demographics exist even when differences in local earnings opportunities are taken into account. I observe heterogeneity in the amount that drivers discriminate and find that this discrimination is primarily statistical rather than taste-based. As drivers gain experience and learn to better anticipate wage variation, discrimination decreases.
    Keywords: discrimination; labor supply; Boston taxis; wage elasticity
    JEL: J22 J31 J71 L91
    Date: 2018–06–01
  2. 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: 2018–06
  3. By: Alessia Matano (AQR-IREA, University of Barcelona,); Moisés Obaco (AQR-IREA, University of Barcelona,); Vicente Royuela (AQR-IREA, University of Barcelona,)
    Abstract: This article investigates the incidence of agglomeration externalities in a typical developing country, Ecuador. In particular, we analyze the role of the informal sector within these relations, since informal employment accounts for a significant part of total employment in the developing countries. Using individual level data and instrumental variable techniques, we investigate the impact of spatial externalities, in terms of population size and local specialization, on the wages of workers in Ecuadorian cities. The results show that spatial externalities matter also for a typical developing country, especially as far as urbanization externalities are concerned. Moreover, analysis of the interaction between spatial externalities and the informal economy shows a general penalization for informal workers in terms of benefits arising from agglomeration externalities. Finally, by investigating the possible channels behind the heterogeneity found in spatial agglomeration gains between formal and informal workers, we show that the advantages from agglomeration for formal workers may well be accounted for by positive sorting and better gains from job changes, while for informal workers they arise from positive learning externalities.
    Keywords: Agglomeration Externalities; Developing Economies; Informal Employment; Workers’ Wages; FUAs; Ecuador. JEL classification: J31, J46, R23, R12
    Date: 2018–06
  4. By: Tobias A. Jopp (University of Regensburg)
    Abstract: The scholarly discourse about twentieth century forced labour has raised important questions. For example, how profitable and productive has the employment of forced labour been in different political and economic contexts? The dominant take-away from the literature is that forced labour comes with negative productivity, but positive production effects. Yet much evidence on productivity is anecdotal. To add a new quantitative take on this issue, this paper analyses the natural experiment conducted in World War I Ruhr coal mining, where, beginning with 1915, Prisoner-of-War (POW) labour was successively employed in many, but not all mines. The question to be answered is whether mines employing POW labour incurred significant labour productivity losses compared to non-POW employing mines that cannot be explained otherwise. To this end, we borrow from the treatment effects literature and implement two estimators – a baseline difference-in-difference fixed effects estimator and a doubly robust treatment effects estimator. Our study is the first to assess the productivity effects of POW employment using a full population of establishments of a particular industry. Our findings strongly support the view that the benefits from employing POW labour – i.e., the output-effect – came at the expense of a significant loss in productivity.
    Keywords: Coal, Difference-in-differences, Doubly-robust estimation, Germany, Prisoners of War, Productivity, Treatment effects, WWI
    JEL: D24 J24 N44 N54
    Date: 2018–06
  5. By: Luis Díez Catalán
    Abstract: Much research has documented a decline in the aggregate labor share in the United States and other countries. Yet, this is not a general phenomenon across industries. In fact, there has been a divergence between services and non-services industries in the United States since 1980.
    Keywords: Working Paper , Global Economy , USA , Europe
    JEL: E21 E24 E25
    Date: 2018–06
  6. By: Mariacristina De Nardi (UCL, Federal Reserve Bank of Chicago, IFS, CEPR, and NBER); Giulio Fella (Queen Mary University of London, CFM, and IFS)
    Abstract: Earnings dynamics are much richer than typically assumed in macro models with heterogeneous agents. This holds for individual-pre-tax and household-post-tax earnings and across administrative (Social Security Administration) and survey (Panel Study of Income Dynamics) data. We study the implications of two processes for household, post-tax earnings in a standard life-cycle model: a canonical earnings process (that includes a persistent and a transitory shock) and a rich earnings dynamics process (that allows for age-dependence of moments, non-normality, and nonlinearity in previous earnings and age). Allowing for richer earnings dynamics implies a substantially better t of the evolution of cross-sectional consumption inequality over the life cycle and of the individual-level degree of consumption insurance against persistent earnings shocks. Richer earnings dynamics also imply lower welfare costs of earnings risk, but, as the canonical earnings process, do not generate enough concentration at the upper tail of the wealth distribution.
    Keywords: Earnings risk, savings, consumption, inequality, life cycle
    JEL: D14 D31 E21 J31
    Date: 2018–06–15
  7. By: Lindeboom, M.; Montizaan, Raymond (ROA / Dynamics of the labour market)
    Abstract: In January 2006, the Dutch government implemented a pension reform that substantially reduced the public pension wealth of workers born in 1950 or later. At the same time, a tax-facilitated savings plan was introduced that substantially reduced the saving costs of all workers, irrespective of birth year. This paper uses linked administrative and survey data to assess the effect of the reform on the savings and retirement expectations and realizations of two virtually identical male cohorts that differ only in treatment status, the treated having been born in 1950 and the controls having been born in 1949. We show that retirement expectations are in line with realizations and that the reform had the intended effect on the labor supply for the larger part of the workers, namely, those without sufficient means to substantially increase private savings to counter the effect of the reform. These workers, who are generally in worse health, have zero substitution rates between private and public wealth. On the other hand, there is a group of mostly high-wage workers who participate in the tax-facilitated Life Course Savings Scheme and who increase private savings to fully counter the impact of the drop in public wealth. A further, unintended side effect of the introduction of the tax-facilitated savings plan is that high wage earners who are not affected by the drop in pension wealth retire even sooner than initially planned.
    Keywords: natural experiment, regression discontinuity, retirement, private wealth, public wealth, crowding out, substitution rate
    JEL: J26 H55 J14
    Date: 2018
  8. By: Carolina Castagnetti (Department of Economics and Management, University of Pavia); Maria Letizia Giorgetti (Department of Economics, Management and Quantitative Methods, University of Milano)
    Abstract: This paper analyzes the gender wage gaps across the wage distribution in both the private and public sectors in Italy for the years 2005-2010. We use quantile regression methods to estimate and decompose the gender wage gap at different points of the wage distribution. We find in both sectors a consistent level of gender wage gap (lower in the public sector) and an increasing path along the wage distribution. Counterfactual decomposition analysis supports the idea of a sticky floor mechanism in action in the private sector and of a glass ceiling in the public sector. In addition to standard decomposition techniques we propose a two step procedure that relies on a novel approach to estimating fixed effects quantile regressions. Its main advantage is that it allows the estimation of the marginal effect of the employment sector on wages at different points of the distribution, while accounting for both observable and time-invariant unobservable factors. When we control for employees’ observed and unobservable individual characteristics, the main finding is that the gender wage gap substantially decreases in both sectors. A second evidence is that the sticky floor effect in the private sector vanishes, while the glass ceiling effect in the public sector remains. The evidence from the longitudinal analysis amplifies the differences of the wage-setting mechanisms in the two sectors.
    Keywords: Gender wage gap, quantile regression for panel, public-private wage differential
    JEL: J3 J45
    Date: 2018–06
  9. By: David E. Frisvold; Melinda Pitts
    Abstract: This paper examines the impact of state merit-aid programs on the labor market attachment of high school-aged youths. The labor force participation rate of teenagers has fallen substantially in recent decades, coinciding with the introduction of merit-aid programs. These programs reduce the price of attending an in-state public college or university for high-achieving students and have the potential to influence students’ allocation of time and effort between labor market activities, human capital development, and other forms of leisure. We examine the influence of these programs based on their generosity, both in the amount of aid provided to a recipient and the percent of students who are recipients of aid, and in their selectivity. Our results suggest that programs that are more selective reduce labor force participation, but are not a significant cause in the decline in teenage labor force participation in recent decades.
    JEL: I2 J2
    Date: 2018–05
  10. By: Urgaia; Worku R.
    Abstract: This study deals with the role of human capital resources in economic growth. In economic growth, human capital is an important stock component that can affect the gross national income GNI more than gross domestic product GDP since GNI comprises the GDP itself and other income resources obtained from abroad. The empirical results of transmission mechanism channels in vector autoregressive model indicate that the observed human capital has long-run effects on the national income in a panel of nine East African countries from the year 1980 to 2015.The short-term transmission mechanism channels show that there is an important contribution of human capital resources HCR to the development of physical capital stock through GNI. The GNI has also a positive impact on the accumulation of physical capital stock via HCR. In addition, we also apply the time scaling decomposition of a panel wavelet analysis in Granger causality tests. The tests show that HCR and the GNI have a bi-directional causal relationship in the short-run, medium-and long-run. The recent trend shows that East Africa has the lowest level of human capital development which raises the issues of employment challenges faced by women more than men although it has achieved a rapid growth in expanding education. We, therefore, suggest that more due attention should be given to human capital resources than any other in attempt to achieve sustainable development in the process of successful economic progress.
    Keywords: Dynamic Panel VAR,Transmission Channel,HCR,GNI and Granger Wavelet Analyses
    JEL: J00 J24
    Date: 2018
  11. By: Bartke, Simon; Gelhaar, Felix
    Abstract: The extent to which individuals cooperate depends on the context. This study analyzes how interactions of workplace context elements affect cooperation when free-riding is possible. Context consists of a novel team building exercise, varying degrees of complementarity in production, and different remuneration schemes. After participation in the team building exercise and when complementarities are high, subjects exert higher efforts under team remuneration than under individual remuneration, despite the possibility to free-ride. Across all contexts, subjects cooperate significantly more than Nash equilibria predict. Compared to contexts in which not all contextual elements are cooperatively aligned, cooperation in a cooperative context relies significantly less on beliefs and personal values. Instead, a cooperative context changes how a subject's achievement motivation influences cooperation. Our findings present insights on how preferences react to context interactions and how these reactions enable organizations to use team incentives.
    Keywords: team building,workplace context,laboratory experiment,stability of preferences,motivation,cooperation
    JEL: D2 D91 L23 M14 M52
    Date: 2018
  12. By: Arulampalam. Wiji; Papini, Andrea
    Abstract: Analysis of the relationship between taxes and self-employment should account for the interplay between responses in self-employment and wage employment. To this end, we estimate a two-state multi-spell duration model which accounts for both observed and unobserved heterogeneity using a large longitudinal administrative dataset for Norway for 1993-2011. Our findings confirm theoretical predictions, and are robust to various changes to de nitions and sample selections. A policy experiment simulating a fl atter tax schedule in the year 2000, is found to encourage both entry into and exit from self-employment, with an increase of about 11.5 percent innet in flow into self-employment.
    Keywords: Tax progressivity ; Income tax ; Self-employment
    JEL: H24 H25 J24 C41
  13. By: Lergetporer, Philipp (University of Munich); Werner, Katharina (University of Munich); Woessmann, Ludger (University of 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, aspiration, information, returns to education, survey experiment JEL Classification: D83, I24, J24, H75
    Date: 2018
  14. By: Ruh, Philippe; Staubli, Stefan
    Abstract: Most countries reduce Disability Insurance (DI) benefits for beneficiaries earning above a specified threshold. Such an earnings threshold generates a discontinuous increase in tax liability-a notch- and creates an incentive to keep earnings below the threshold. Exploiting such a notch in Austria, we provide transparent and credible identification of the effect of financial incentives on DI beneficiaries' earnings. Using rich administrative data, we document large and sharp bunching at the earnings threshold. However, the elasticity driving these responses is small. Our estimate suggests that relaxing the earnings threshold reduces fiscal cost only if program entry is very inelastic.
    Keywords: benefit notch; bunching; Disability insurance; Labor Supply
    JEL: H53 H55 J14 J21
    Date: 2018–06
  15. By: Gabriele Camera (Economic Science Institute, Chapman University and University of Bologna); Jaehong Kim (Xiamen University)
    Abstract: Matching frictions and downward wage rigidity emerge as equilibrium phenomena in a twosided labor market where firms sustain variable wage adjustment costs. Firms post wages to attract workers and matches are endogenous. Reducing the wage relative to the wage previously posted is costly to the firm, where the cost is proportional to the size of the proposed cut. Shocks to the firm’s profitability may yield an equilibrium wage above what the firm would offer absent proportional adjustment costs. Wage cuts can be partial or full, immediate or delayed, and are non-linear in the shock size. Importantly, wages are sticky even if firms have negligible costs for cutting wages.
    Keywords: frictions; matching; sticky wages
    JEL: C70 D40 E30 J30
    Date: 2018
  16. By: Cabrera, José María; Webbink, Dinand
    Abstract: We study the effects of a policy aimed at attracting more experienced and better qualified teachers in primary schools in disadvantaged neighborhoods in Uruguay. Teachers in these schools could earn higher salaries. Estimates from regression discontinuity models show that the policy increased experience by two to three years. The policy was especially successful in ‘hiring experience from other schools’, but also increased tenure. However, the effect on student outcomes appears to be small. The distinction between ‘hiring or keeping’ teachers seems important for explaining this result. Keeping teachers appears to be more beneficial for students than hiring experienced teachers. We also find that the effect of the policy is better for schools that replaced teachers with less than five years of experience.
    Keywords: teacher salaries, teacher experience, student performance, disadvantaged students.
    JEL: I2 J24
    Date: 2018

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