nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2018‒07‒16
seventeen papers chosen by
Joseph Marchand
University of Alberta

  1. The Origins of the Division of Labor in Pre-Modern Times By Depetris-Chauvin, Emilio; Özak, Ömer
  2. Measuring Physicians' Response to Incentives: Evidence on Hours Worked and Multitasking By Shearer, Bruce S.; Somé, Nibene Habib; Fortin, Bernard
  3. Long-Run Patterns of Labour Market Polarisation: Evidence from German Micro Data By Bachmann, Ronald; Cim, Merve; Green, Colin
  4. Productivity and Wage Effects of Firm-Level Collective Agreements: Evidence from Belgian Linked Panel Data By Garnero, Andrea; Rycx, Francois; Terraz, Isabelle
  5. Skill, Innovation and Wage Inequality: Can Immigrants be the Trump Card? By Gouranga Gopal Das; Sugata Marjit
  6. Structural Labour Supply Models and Microsimulation By Aaberge, Rolf; Colombino, Ugo
  7. The Economics of Language By Ginsburgh, Victor; Weber, Shlomo
  8. The disutility of commuting? The effect of gender and local labour markets By Luke Munford; Nigel Rice; Jennifer Roberts; Nikita Jacob
  9. Meritocracy, Public-Sector Pay and Human Capital Accumulation By Andri Chassamboulli; Pedro Gomes
  10. Health, Longevity and Pension Reform By Laun, Tobias; Markussen, Simen; Vigtel, Trond Christian; Wallenius, Johanna
  11. Structural policies to boost productivity and inclusion in Costa Rica By Lisa Meehan
  12. Child Care, Parental Labor Supply and Tax Revenue By Eckhoff Andresen, Martin; Havnes, Tarjei
  13. Zooming the Ins and Outs of the U.S. Unemployment with a Wavelet Lens By Portugal, Pedro; Rua, António
  14. Vocational High School Graduate Wage Gap: The Role of Cognitive Skills and Firms By Joop Hartog; Pedro S. Raposo; Hugo Reis
  15. Gay Glass Ceilings: Sexual Orientation and Workplace Authority in the UK By Aksoy, Cevat Giray; Carpenter, Christopher S.; Frank, Jeff; Huffman, Matt L.
  16. The regional effects of Germany's national minimum wage By Ahlfeldt, Gabriel; Roth, Duncan; Seidel, Tobias
  17. Adverse Selection, Efficiency and the Structure of Information By Bar-Isaac, Heski; Jewitt, Ian; Leaver, Clare

  1. By: Depetris-Chauvin, Emilio (Pontificia Universidad Catolica de Chile); Özak, Ömer (Southern Methodist University)
    Abstract: This research explores the historical roots of the division of labor in pre-modern societies. It advances the hypothesis and establishes empirically that intra-ethnic diversity had a positive effect on the division of labor across ethnicities in the pre-modern era. Exploiting a variety of identification strategies and a novel ethnic level dataset combining geocoded ethnographic, linguistic and genetic data, it establishes that higher levels of intra-ethnic diversity were conducive to economic specialization in the pre-modern era. The findings are robust to a host of geographical, institutional, cultural and historical confounders, and suggest that variation in intra-ethnic diversity is the main predictor of the division of labor in pre-modern times.
    Keywords: comparative development, division of labor, economic specialization, intra-ethnic diversity, cultural diversity, population diversity, genetic diversity, linguistic diversity
    JEL: D74 F10 F14 J24 N10 O10 O11 O12 O40 O43 O44 Z10 Z13
    Date: 2018–05
  2. By: Shearer, Bruce S. (Université Laval); Somé, Nibene Habib (University of Western Ontario); Fortin, Bernard (Université Laval)
    Abstract: We measure the response of physicians to monetary incentives using matched administrative and time-use data on specialists from Québec (Canada). These physicians were paid fee-for-service contracts and supplied a number of different services. Our sample covers a period during which the Québec government changed the prices paid for clinical services. We apply these data to a multitasking model of physician labour supply, measuring two distinct responses. The first is the labour-supply response of physicians to broad-based fee increases. The second is the response to changes in the relative prices of individual services. Our results confirm that physicians respond to incentives in predictable ways. The own-price substitution effects of a relative price change are both economically and statistically significant. Income effects are present, but are overridden when prices are increased for individual services. They are more prominent in the presence of broad-based fee increases. In such cases, the income effect empirically dominates the substitution effect, which leads physicians to reduce their supply of clinical services.
    Keywords: physician labour supply, multitasking, incentive pay
    JEL: I10 J22 J33 J44
    Date: 2018–05
  3. By: Bachmann, Ronald (RWI); Cim, Merve (RWI); Green, Colin (Norwegian University of Science and Technology (NTNU))
    Abstract: The past four decades have witnessed dramatic changes in the structure of employment. In particular, the rapid increase in computational power has led to large-scale reductions in employment in jobs that can be described as intensive in routine tasks. These jobs have been shown to be concentrated in middle skill occupations. A large literature on labour market polarisation characterises and measures these processes at an aggregate level. However to date there is little information regarding the individual worker adjustment processes related to routine-biased technological change. Using an administrative panel data set for Germany, we follow workers over an extended period of time and provide evidence of both the short-term adjustment process and medium-run effects of routine task intensive job loss at an individual level. We initially demonstrate a marked, and steady, shift in employment away from routine, middle-skill, occupations. In subsequent analysis, we demonstrate how exposure to jobs with higher routine task content is associated with a reduced likelihood of being in employment in both the short term (after one year) and medium term (five years). This employment penalty to routineness of work has increased over the past four decades. More generally, we demonstrate that routine task work is associated with reduced job stability and more likelihood of experiencing periods of unemployment. However, these negative effects of routine work appear to be concentrated in increased employment to employment, and employment to unemployment transitions rather than longer periods of unemployment.
    Keywords: polarization, occupational mobility, worker flows, tasks
    JEL: J23 J24 J62 E24
    Date: 2018–05
  4. By: Garnero, Andrea (OECD); Rycx, Francois (Free University of Brussels); Terraz, Isabelle (Université de Strasbourg)
    Abstract: How do firm-level collective agreements affect firm performance in a multi-level bargaining system? Using detailed Belgian linked employer-employee panel data, our findings show that firm agreements increase both wage costs and productivity (with respect to sector-level agreements). Relying on a recent approach developed by Bartolucci (2014), they also indicate that firm agreements exert a stronger impact on wages than on productivity, so that profitability is hampered. However, this rent-sharing effect only holds in manufacturing. In private sector services, the raw wage premium associated to firm agreements is entirely driven by compositional effects. Furthermore, estimates show that firm agreements lead to significantly more rent-sharing among firms operating in less competitive environments. Firm agreements are thus mainly found to raise wages beyond productivity when the rents to be shared between workers and firms are relatively big. Overall, this suggests that firm-level agreements benefit to both employers and employees – through higher productivity and wages – without being very detrimental to firms' performance.
    Keywords: collective bargaining, productivity, labour costs, linked panel data
    JEL: C33 J24 J31
    Date: 2018–05
  5. By: Gouranga Gopal Das; Sugata Marjit
    Abstract: With the ensuing immigration reform in the US, the paper shows that targeted skilled immigration into the R&D sector that helps low-skilled labor is conducive for controlling inequality and raising wage. Skilled talent-led innovation could have spillover benefits for the unskilled sector while immigration into the production sector will always reduce wage, aggravating wage inequality. In essence, we infer: (i) if R&D inputs contributes only to skilled sector, wage inequality increases in general; (ii) for wage gap to decrease, R&D sector must produce inputs that goes into unskilled manufacturing sector; (iii) even with two types of specific R&D inputs entering into the skilled and unskilled sectors separately, unskilled labor is not always benefited by high skilled migrants into R&D-sector. Rather, it depends on the importance of migrants’ skill in R&D activities and intensity of inputs. Inclusive immigration policy requires inter-sectoral diffusion of ideas embedded in talented immigrants targeted for innovation.
    Keywords: HIB, immigration, innovation, wage gap, skill, R&D, policy, RAISE Act
    JEL: F22 J31 O15
    Date: 2018
  6. By: Aaberge, Rolf (Statistics Norway); Colombino, Ugo (University of Turin)
    Abstract: The purpose of the paper is to provide a discussion of the various approaches for accounting for labour supply responses in microsimulation models. The paper focuses attention on two methodologies for modelling labour supply: the discrete choice model and the random utility – random opportunities model. The paper then describes approaches to utilising these models for policy simulation in terms of producing and interpreting simulation outcomes, outlining an extensive literature of policy analyses utilising these approach. Labour supply models are not only central for analyzing behavioural labour supply responses but also for identifying optimal tax-benefit systems, given some of the challenges of the theoretical approach. Combining labour supply results with individual and social welfare functions enables the social evaluation of policy simulations. Combining welfare functions and labour supply functions, the paper discusses how to model socially optimal income taxation.
    Keywords: behavioural microsimulation, labour supply, discrete choice, tax reforms
    JEL: C50 D10 D31 H21 H24 H31 J20
    Date: 2018–05
  7. By: Ginsburgh, Victor; Weber, Shlomo
    Abstract: The paper brings together methodological, theoretical, and empirical analysis into the single framework of linguistic diversity. It reflects both historical and contemporary research by economists and other social scientists on the impact of language on economic outcomes and public policies. We examine whether and how language influences human thinking (including emotions) and behavior, analyze the effects of linguistic distances on trade, migrations, financial markets, language learning and its returns. The quantitative foundations of linguistic diversity, which rely on group identification, linguistic distances as well as fractionalization, polarization and disenfranchisement indices are discussed in terms of their empirical challenges and uses. We conclude with an analysis of linguistic policies and shifts of languages and examine their welfare effects and the trade-offs between the development of labor markets and the social costs that they generate in various countries.
    Keywords: Diversity Indices. Welfare.; Economic Behavior; Educational Linguistic Policies; Languages; Linguistic Distances
    JEL: F13 F22 G11 H11 J15 J3 O10 Z13 Z18
    Date: 2018–06
  8. By: Luke Munford (Manchester Centre for Health Economics, University of Manchester); Nigel Rice (Centre for Health Economics & Department of Economics and Related Studies, University of York); Jennifer Roberts (Department of Economics, University of Sheffield); Nikita Jacob (Centre for Health Economics, University of York)
    Abstract: Commuting is an extremely important modern phenomenon characterised by the spatial interaction of housing and labour markets. The average commuter in the UK spends nearly an hour a day travelling to and from employment. Standard economic theory postulates that commuting is a choice behaviour undertaken when compensated through either lower rents or greater amenities in the housing market or through greater wages in the labour market. By exploiting exogenous shocks to commuting time, this paper investigates the impact on wellbeing of increased commuting. Ceteris paribus, exogenous increases in commuting time are expected to lower wellbeing. We find this holds for women but not men. This phenomenon can be explained, in part, by the different labour markets in which women operate. Where local labour markets are thin, women report significantly lower wellbeing when faced with an increased commute. This does not hold for tight local labour markets. Further our findings reveal that it is full-time working women in the managerial and professional tier of the occupational hierarchy who are most affected.
    Keywords: commuting; exogenous shocks; well-being; panel data econometrics
    JEL: C1 I1
    Date: 2018–10
  9. By: Andri Chassamboulli; Pedro Gomes
    Abstract: We set up a model with search and matching frictions to understand the effects of employment and wage policies, as well as non-meritocratic hiring in the public sector, on unemployment, rent seeking and education decisions. Wages and employment of skilled and unskilled public-sector workers affect educational attainment; the extent of that effect depends on the structure of the labor market and how non-meritocratic public-sector hiring is. Conditional on inefficiently high public-sector wages, less-meritocratic hiring in the public sector lowers the unemployment rate and might raise welfare because it limits the size of queues for public-sector jobs. Public-sector wage and employment policies impose an endogenous constraint on the number of workers the government can hire through connections.
    Keywords: Public-sector employment; meritocracy; public-sector wages; unemployment; skilled workers; human capital accumulation
    JEL: E24 J31 J45 J64
    Date: 2018–07
  10. By: Laun, Tobias (Department of Economics); Markussen, Simen (Ragnar Frisch Centre for Economic Research); Vigtel, Trond Christian (Ragnar Frisch Centre for Economic Research); Wallenius, Johanna (Department of Economics, Stockholm School of Economics,)
    Abstract: In this paper, we study alternative pension reforms designed to achieve fiscal sustainability in the face of demographic change. We are particularly interested in the heterogeneous effects across demographic groups, as improvements in health and longevity have not been uniform across the population. To this end, we develop a dynamic, structural life cycle model of heterogeneous agents who face health, mortality and income risk. We consider the following policy reform measures: (1) increasing the early access age to pensions, (2) raising income taxes, (3) lowering pension benefits and (4) lowering pension and disability benefits. We find that, of the considered policies, proportionally lowering pension and disability benefits results in the highest average welfare and the lowest degree of inequality. It is also successful at boosting employment, particularly among the less educated.
    Keywords: Life cycle; Retirement; Disability insurance; Health
    JEL: E24 J22 J26
    Date: 2018–05–08
  11. By: Lisa Meehan
    Abstract: Owing to past structural reforms, Costa Rica has enjoyed robust GDP growth and productivity levels are gradually converging towards the OECD average. However, large GDP per capita and productivity gaps persist. In addition, not everyone has benefited from this growth. Inequality has increased and labour market conditions are a concern. Costa Rica has a lower share of employed workers in the population than almost all OECD countries, unemployment remains well above its pre-global-financial-crisis level, labour market participation has decreased and the share of informal jobs is high. Recognising these challenges, Costa Rica has accelerated its structural reform momentum recently, with policy reforms underway or planned in several areas that present win-win opportunities to boost both productivity and inclusion. These include efforts to tackle labour market informality, simplify the minimum wage structure, increase competition and reduce regulatory burdens. In addition to further reforms in these priority areas, structural policy improvements are also needed to increase outcomes and reduce inequalities in education and address significant transport infrastructure gaps.
    Keywords: Costa Rica, inclusive growth, productivity
    JEL: I28 I31 J14 J16 J21 J24 J32 J48 J58 L40 L51 L53 O18 O33 O38 R48
    Date: 2018–07–04
  12. By: Eckhoff Andresen, Martin (Statistics Norway); Havnes, Tarjei (University of Oslo)
    Abstract: We study the impact of child care for toddlers on the labor supply of mothers and fathers in Norway. For identification, we exploit the staggered expansion across municipalities following a large reform from 2002. Our IV-estimates indicate that child care use causes an increase in the labor supply of mothers. Results suggest that cohabiting mothers move towards full time employment, while single mothers move to part time. Meanwhile, we find no impact for fathers or grandparents. We also find an increase in the taxes paid from cohabiting mothers, lending some support to the argument that parts of the cost of child care is offset by increased taxes.
    Keywords: child care, female labor supply, tax revenue, instrumental variables
    JEL: H24 H52 J13 J22
    Date: 2018–05
  13. By: Portugal, Pedro (Banco de Portugal); Rua, António (Banco de Portugal)
    Abstract: To better understand unemployment dynamics it is key to assess the role played by job creation and job destruction. Although the U.S. case has been studied extensively, the importance of job finding and employment exit rates to unemployment variability remains unsettled. The aim of this paper is to contribute to this debate by adopting a novel lens, wavelet analysis. We resort to wavelet analysis to unveil time- and frequency-varying features regarding the contribution of the job finding and job separation rates for the U.S. unemployment rate dynamics. Drawing on this approach, we are able to reconcile some apparently contradictory findings reported in previous literature. We find that the job finding rate is more influential for the overall unemployment behavior but the job separation rate also plays a critical role, especially during recessions.
    Keywords: worker flows, job separation rate, job finding rate, wavelets
    JEL: C10 E24 E32
    Date: 2018–05
  14. By: Joop Hartog; Pedro S. Raposo; Hugo Reis
    Abstract: Comparing cohorts born between 1951 and 1994, we document and interpret changes in the wage differential among graduates from secondary education with a vocational and a general curriculum.. The wage gap initially increased and then decreased. We find that these changes cannot be attributed to simple compositional shifts in the economy, but instead relate to important changes in worker allocation to firms that are heterogeneous in wage policies: the demise of assortative matching between workers and firms that worked out favourably for vocational graduates.
    Keywords: returns to education, vocational wage gap
    JEL: J31
    Date: 2018
  15. By: Aksoy, Cevat Giray (European Bank for Reconstruction and Development); Carpenter, Christopher S. (Vanderbilt University); Frank, Jeff (University of London); Huffman, Matt L. (University of California, Irvine)
    Abstract: A burgeoning literature has examined earnings inequalities associated with a minority sexual orientation, but far less is known about sexual orientation-based differences in access to workplace authority – in contrast to well-documented gender and race-specific differences. We provide the first large-scale evidence on this question using confidential data from the 2009-2014 UK Integrated Household Surveys (IHS) (N = 607,709). We are the first to document that gay men and lesbians are significantly more likely to have objective measures of workplace authority compared to otherwise similar heterosexual men and women. However, we also find clear evidence that gay men face glass ceilings: their higher likelihood of attaining workplace authority is driven entirely by their significantly higher odds of being low-level managers. In fact, gay men are significantly less likely than comparable heterosexual men to be in the highest-level managerial positions that come with higher status and pay. Oaxaca decompositions suggest that this differential access to workplace authority for gay men is due to discrimination as opposed to different skills and characteristics. Moreover, this "gay glass ceiling" is stronger for racial minorities than for whites. Corresponding effects for lesbians exist but are notably weaker. These results provide the first direct evidence of social stratification in the workplace associated with a minority sexual orientation and reveal that differences are exacerbated for individuals with multiple marginalized identities.
    Keywords: sexual orientation, workplace authority, supervisory authority, managerial occupations
    JEL: J15 J71 M54
    Date: 2018–05
  16. By: Ahlfeldt, Gabriel; Roth, Duncan; Seidel, Tobias
    Abstract: We estimate the spatially differential effects of a nationally uniform minimum wage that was introduced in Germany in 2015. To this end, we use a micro data set covering the universe of employed and unemployed individ-uals in Germany from 2011 to 2016 and a difference-in-differences based identification strategy that controls for heterogeneity in pre-treatment outcome trends. We find that the policy led to spatial wage convergence, in par-ticular in the left tail of the distribution, without reducing relative employment in low-wage regions within the first two years.
    Keywords: Difference-in-Differences; employment; Germany; minimum wage; Wage inequality
    JEL: J31 J58 R12
    Date: 2018–06
  17. By: Bar-Isaac, Heski; Jewitt, Ian; Leaver, Clare
    Abstract: This paper explores how the structure of asymmetric information impacts on economic outcomes in Akerlof's (1970) Lemons model applied to the labor market and extended to admit a matching component between worker and firm. For efficiency, only good matches should be retained. We characterize the nature of equilibrium and show that, for any Gaussian information structure, both adverse selection and efficiency depend on the realization of information only through the conditional expectation of match value given public information. We derive a parsimonious parameterization of all Gaussian information structures and establish comparative statics results. Using this framework, we address five natural questions. What is the effect of more public information? Which information structures impose adverse selection efficiently, and inefficiently? What is the effect of more private information? When is there positive selection into outside firms? When is the average wage of released workers higher than the average wage of retained workers?
    Keywords: Adverse Selection; asymmetric information; information design
    JEL: D82 J30
    Date: 2018–06

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