nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2018‒07‒23
seventeen papers chosen by
Joseph Marchand
University of Alberta

  1. From Loans to Labor: Access to Credit, Entrepreneurship, and Child Labor By Lakdawala, Leah
  2. Incarceration, Recidivism and Employment. By Bhuller, Manudeep; Dahl, Gordon D.; Løken, Katrine V.; Mogstad, Magne
  3. Specialization matters in the firm size-wage gap By Molina-Domene, Maria
  4. The Signal of Applying for a Job under a Vacancy Referral Scheme By Van Belle, Eva; Caers, Ralf; De Couck, Marijke; Di Stasio, Valentina; Baert, Stijn
  5. Wages and employment: The role of occupational skills By Girsberger, Esther Mirjam; Rinawi, Miriam; Krapf, Matthias
  6. Robots, reshoring, and the lot of low-skilled workers By Krenz, Astrid; Prettner, Klaus; Strulik, Holger
  7. Misperceived Social Norms: Female Labor Force Participation in Saudi Arabia By Leonardo Bursztyn; Alessandra L. González; David Yanagizawa-Drott
  8. Rising tide effect or crowding out - does tertiary education expansion lift the tasks of workers without tertiary degree? By Tobias Schultheiss; Curdin Pfister; Uschi Backes-Gellner
  9. Cognitive and Non-Cognitive Skills, Hiring Channels, and Wages in Bangladesh By Hilger, Anne; Nordman, Christophe Jalil; Sarr, Leopold
  10. Estimating the Impacts of Payroll Taxes: Evidence from Canadian Employer-Employee Tax Data By Deslauriers, Jonathan; Dostie, Benoit; Gagné, Robert; Paré, Jonathan
  11. The effects of mediums of instruction on educational- and labor market outcomes: Evidence from Malaysia By Parinduri, Rasyad; Ong, Kian
  12. Flexible Work Organization and Employer Provided Training: Evidence from German Linked Employer-Employee Data By Annika Campaner; John S. Heywood; Uwe Jirjahn
  13. Macroeconomic Conditions and Child Schooling in Turkey By Gunes, Pinar; Ural Marchand, Beyza
  14. The Supply of Skill and Endogenous Technical Change: Evidence From a College Expansion Reform By Pedro Carneiro; Kai Liu; Kjell Salvanes
  15. Health Shocks, Human Capital, and Labor Market Outcomes By Parro, Francisco; Pohl, R. Vincent
  16. The persistence of the gender earnings gap: cohort trends and the role of education in twelve countries By Eyal Bar-Haim; Louis Chauvel; Janet Gornick; Anne Hartung
  17. Overeducation among graduates in developing countries: What impact on economic growth? By SAM, Vichet

  1. By: Lakdawala, Leah (Michigan State University, Department of Economics)
    Abstract: This paper seeks to understand household business decisions in response to increased credit access in an environment with multiple market failures. A simple model suggests that households at certain wealth thresholds might be able to overcome the fixed costs of entering entrepreneurship when they have increased access to credit. In the presence of labor market imperfections however, these same households may also be more likely to employ child labor. I test these predictions using household- and child-level panel data from Thailand. To isolate the causal impacts of household borrowing, I exploit the exogenous timing and institutional features of the Million Baht Program, one of the largest government initiatives to increase household access to credit in the world. I find that, consistent with the model, expanded access to credit raises entry into entrepreneurship for households in specific wealth groups while simultaneously increasing the use of child labor in these households. The results suggest that through the avenue of encouraging entrepreneurial activity, expanding credit access may have unintended consequences for the supply of child labor.
    Keywords: Credit; Microcredit; Entrepreneurship; Child Labor; Child Work; Schooling
    JEL: D13 J22 O12 O15
    Date: 2018–07–10
  2. By: Bhuller, Manudeep (University of Oslo); Dahl, Gordon D. (University of California San Diego); Løken, Katrine V. (Dept. of Economics, Norwegian School of Economics and Business Administration); Mogstad, Magne (University of Chicago)
    Abstract: Understanding whether, and in what situations, time spent in prison is criminogenic or preventive has proven challenging due to data availability and correlated unobservables. This paper overcomes these challenges in the context of Norway’s criminal justice system, offering new insights into how incarceration affects subsequent crime and employment. We construct a panel dataset containing the criminal behavior and labor market outcomes of the entire population, and exploit the random assignment of criminal cases to judges who differ systematically in their stringency in sentencing defendants to prison. Using judge stringency as an instrumental variable, we find that imprisonment discourages further criminal behavior, and that the reduction extends beyond incapacitation. Incarceration decreases the probability an individual will reoffend within 5 years by 29 percentage points, and reduces the number of offenses over this same period by 11 criminal charges. In comparison, OLS shows positive associations between incarceration and subsequent criminal behavior. This Sharp contrast suggests the high rates of recidivism among ex-convicts is due to selection, and not a consequence of the experience of being in prison. Exploring factors that may explain the preventive effect of incarceration, we find the decline in crime is driven by individuals who were not working prior to incarceration. Among these individuals, imprisonment increases participation in programs directed at improving employability and reducing recidivism, and ultimately, raises employment and earnings while discouraging further criminal behavior. For previously employed individuals, while there is no effect on recidivism, there is a lasting negative effect on employment. Contrary to the widely embraced ‘nothing works’ doctrine, these findings demonstrate that time spent in prison with a focus on rehabilitation can indeed be preventive for a large segment of the criminal population.
    Keywords: Crime; employment; incarceration; recidivism
    JEL: J24 K42
    Date: 2018–06–20
  3. By: Molina-Domene, Maria
    Abstract: This study applies the O-ring theory to explain the firm-size wage premium. It focuses on the joint role of the division of labor and employee characteristics. Including the firm heterogeneity of occupations in a standard wage regression with individual fixed effect shrinks the size coefficient by a third. Labor productivity follows a similar pattern as wages. The intuition is that individuals who work for large firms focus on a limited number of tasks become more efficient and productive, and earn higher wages. Additional predictions originating from the labor specialization hypothesis receive support from the data.
    Keywords: firm size-wage gap; specialization; division of labor
    JEL: J31 L23
    Date: 2018–05–01
  4. By: Van Belle, Eva (Ghent University); Caers, Ralf (KU Leuven); De Couck, Marijke (Free University of Brussels); Di Stasio, Valentina (Utrecht University); Baert, Stijn (Ghent University)
    Abstract: Persistent unemployment across OECD countries has led to increasing investments in activation programmes and, as a consequence, rigorous evaluations of the effectiveness of these programmes. The results of these evaluations have been mixed at best. To improve the effectiveness of the activation programmes, it is important to know why we observe these unsatisfactory results. One possible explanation that has been largely underexplored is the signal these programmes send to prospective employers. We investigate this signalling effect in the context of a job-vacancy referral system. To this end, we conduct a state-of-the-art vignette experiment in which HR professionals make hiring decisions concerning fictitious job candidates who apply either under a job-vacancy referral system or directly (without referral). By analysing the experimental data, we provide first causal evidence for a substantial adverse effect of referral on the probability of being hired. In addition, our experimental design allows us to explore whether this effect is heterogeneous by job candidate and recruiter characteristics and what exactly is signalled by the job-vacancy referral. In particular, we find that employers perceive referred candidates as being less motivated than other candidates.
    Keywords: signalling, activation policies, job referral, policy evaluation, unemployment
    JEL: J68 J23 C91
    Date: 2018–06
  5. By: Girsberger, Esther Mirjam; Rinawi, Miriam; Krapf, Matthias (University of Basel)
    Abstract: How skills acquired in vocational education and training (VET) affect wages and employment is not clear. We develop and estimate a search and matching model for workers with a VET degree. Workers differ in interpersonal, cognitive and manual skills, while firms require and value different combinations of these skills. Assuming that match productivity exhibits worker-job complementarity, we estimate how interpersonal, cognitive and manual skills map into job offers, unemployment and wages. We find that firms value cognitive skills on average almost twice as much as interpersonal and manual skills, and they prize complementarity in cognitive and interpersonal skills. The average return to VET skills in hourly wages is 9%, similar to the returns to schooling. Furthermore, VET appears to improve labour market opportunities through higher job arrival rate and lower job destruction. Workers thus have large benefits from acquiring a VET degree.
    Keywords: Occupational training; vocational education; labor market search; sorting; multidimensional skills
    JEL: E24 J33 J24 J64
    Date: 2018–06–08
  6. By: Krenz, Astrid; Prettner, Klaus; Strulik, Holger
    Abstract: We propose a theoretical framework to analyze the offshoring and reshoring decisions of firms in the age of automation. Our theory suggests that increasing productivity in automation leads to a relocation of previously offshored production back to the home economy but without improving low-skilled wages and without creating jobs for low-skilled workers. Since it leads also to increasing wages for high-skilled workers, automation induced reshoring is associated with an increasing skill premium and increasing inequality. Using a new measure of reshoring activity and data from the world input outputtable, we find evidence for a positive association between reshoring and the degree of automation. On average, within manufacturing sectors, an increase by one robot per 1000 workers is associated with a 3.5% increase of reshoring activity. We also provide evidence that reshoring is positively associated with wages and employment for high-skilled labor but not for low-skilled labor.
    Keywords: Automation,Reshoring,Employment,Wages,Inequality,Tariffs
    JEL: F13 J31 O33
    Date: 2018
  7. By: Leonardo Bursztyn (University of Chicago, Department of Economics); Alessandra L. González (The University of Chicago); David Yanagizawa-Drott (University of Zurich)
    Abstract: Through the custom of guardianship, husbands typically have the final word on their wives’ labor supply decisions in Saudi Arabia, a country with very low female labor force participation (FLFP). We provide incentivized evidence (both from an experimental sample in Riyadh and from a national sample) that the vast majority of young married men in Saudi Arabia privately support FLFP outside of home from a normative perspective, while they substantially underestimate the level of support for FLFP by other similar men – even men from their same social setting, such as their neighbors. We then show that randomly correcting these beliefs about others increases married men’s willingness to let their wives join the labor force (as measured by their costly sign-up for a job-matching service for their wives). Finally, we find that this decision maps onto real outcomes: four months after the main intervention, the wives of men in our original sample whose beliefs about acceptability of FLFP were corrected are more likely to have applied and interviewed for a job outside of home. Together, our evidence indicates a potentially important source of labor market frictions, where job search is underprovided due to misperceived social norms.
    Keywords: social norms, female labor force participation, Saudi Arabia
    JEL: C90 D83 D91 J22 Z10
    Date: 2018–07
  8. By: Tobias Schultheiss (University of Zurich); Curdin Pfister (University of Zurich); Uschi Backes-Gellner (University of Zurich)
    Abstract: An extensive literature examines the effects of tertiary education expansion on wages of workers with and without tertiary degree. However, the question how tertiary education expansion affects the tasks of these workers remains unexplored. We examine whether such an expansion crowds out sophisticated tasks such as R&D in jobs of workers without tertiary degree or elevates the content of their tasks via a rising tide effect. In particular, we analyze the effects of the establishment of Universities of Applied Sciences (UAS), a large tertiary education expansion in Switzerland, on R&D tasks of workers with apprenticeship training. Job ads provide us with information about the demand for R&D tasks. To estimate causal effects, we exploit the quasi-natural variation in time and location of the establishment of UAS campuses and perform difference-in-differences estimations. We find that firms demand more R&D tasks of workers with apprenticeship training after a tertiary education expansion. Our results therefore show that instead of crowding out, tertiary education expansion lifts the tasks of workers with apprenticeship training via a rising tide effect.
    Keywords: higher education expansion, labor demand, job advertisements, crowding out
    JEL: I23 J23 M51
    Date: 2018–07
  9. By: Hilger, Anne (Paris School of Economics); Nordman, Christophe Jalil (IRD, DIAL, Paris-Dauphine); Sarr, Leopold (World Bank)
    Abstract: This paper uses a novel matched employer-employee data set representing the formal sector in Bangladesh to provide descriptive evidence of both the relative importance of cognitive and non-cognitive skills in this part of the labor market and the interplay between skills and hiring channels in determining wages. While cognitive skills (literacy, a learning outcome) affect wages only by enabling workers to use formal hiring channels, they have no additional wage return. Non-cognitive skills, on the other hand, do not affect hiring channels, but they do enjoy a positive wage return. This wage return differs by hiring channel: those hired through formal channels benefit from higher returns to openness to experience, but lower returns to conscientiousness and hostile attribution bias. Those hired through networks enjoy higher wages for higher levels of emotional stability, but they are also punished for higher hostile attribution bias. This is in line with different occupational levels being hired predominantly through one channel or the other. We provide suggestive evidence that employers might use hiring channels differently, depending on what skill they deem important: employers valuing communication skills, a skill that could arguably be observed during selection interviews, are associated with a larger within-firm wage gap between formal and network hires, while the importance of teamwork, a skill that is more difficult to observe at the hiring stage, is associated with a smaller wage gap.
    Keywords: cognitive skills, personality traits, networks, matched worker-firm data, Bangladesh
    JEL: J24 J31 J71 O12
    Date: 2018–06
  10. By: Deslauriers, Jonathan (HEC Montreal); Dostie, Benoit (HEC Montreal); Gagné, Robert (HEC Montreal); Paré, Jonathan (HEC Montreal)
    Abstract: In this paper, we use linked employer-employee administrative tax data from Canada to estimate the impact of payroll taxes on a variety of firms and workers outcomes. At the firm level, we use geographic and time variations in tax rates to identify the effect of payroll taxes on wage growth at the worker level. For one province, we exploit a clean overtime change in the payroll tax rate to estimate its impact on the firm's level of employment, average wage and productivity, with difference-in-differences models, taking into account firm-level unobserved heterogeneity. Additionally, taking advantage of the nature of linked data, we estimate wage equations with both fixed worker and firm fixed effects. We find no impact on employment, productivity and profits, but significant impacts on wages, implying that payroll taxes are passed almost entirely to workers in the form of lower wages.
    Keywords: payroll taxes, wages, productivity, employment, linked employer-employee data
    JEL: E62 J21 L25
    Date: 2018–06
  11. By: Parinduri, Rasyad; Ong, Kian
    Abstract: We examine the effects of having English as a medium of instruction on labor market outcomes later in life. We exploit an exogenous variation in mediums of instruction induced by the government of Malaysia’s decision to discontinue English-medium public schools and phase them out with Malay-medium public schools in 1970, which fits a fuzzy regression discontinuity design. We find some evidence that having English as a medium of instruction improves labor market outcomes. We explore some mechanisms through which mediums of instruction matter: We find having English as a medium of instruction improves English proficiency, especially reading and writing skills, and increases educational attainment, which in turn increase earnings and improve employability. The evidence is, however, rather weak, if we use robust data-driven inferences in the regression discontinuity design.
    Keywords: English, mediums of instruction, regression discontinuity design, labor market outcomes
    JEL: H4 I2 J3 O1
    Date: 2018–05
  12. By: Annika Campaner; John S. Heywood; Uwe Jirjahn
    Abstract: We examine the hypothesis that flexible work organization involves greater skill requirements and, hence, an increased likelihood of receiving employer provided training. Using unique linked employer-employee data from Germany, we confirm that employees are more likely to receive training when their jobs are characterized by greater decision-making autonomy and task variety, two essential elements of flexibility. Critically, the training associated with workplace flexibility does not simply reflect technology. Skill-biased organizational change plays its own role. Moreover, we show that the training associated with workplace flexibility is disproportionately oriented toward employees with a greater formal education. Our results also provide modest evidence of an age bias of workplace flexibility. However, the link between workplace flexibility and training does not appear to differ by gender.
    Keywords: Delegation, Multitasking, Skill-Biased Organizational Change, Training
    JEL: J24 L00 M53
    Date: 2018
  13. By: Gunes, Pinar (University of Alberta, Department of Economics); Ural Marchand, Beyza (University of Alberta, Department of Economics)
    Abstract: This paper examines the effects of macroeconomic shocks on child schooling in Turkey using household labor force surveys from 2005-2013. We use variation in local labor demand as an instrumental variable, particularly regional industry composition and national industry employment growth rates. The results demonstrate that child schooling is pro-cyclical in Turkey, with the most acute effects among children with less educated parents and living in rural areas. Finally, as hypothesized, we find asymmetric effects on child schooling based on skill composition of economic growth. Higher unemployment among unskilled workers increases schooling, whereas higher unemployment among skilled workers decreases schooling.
    Keywords: Schooling; Unemployment; Business Cycles; Turkey
    JEL: J13 J24 O15
    Date: 2018–07–14
  14. By: Pedro Carneiro (University College London); Kai Liu (University of Cambridge); Kjell Salvanes (Norges Handelshøyskole)
    Abstract: We examine the labor market consequences of an exogenous increase in the supply of skilled labor in several cities in Norway, resulting from the construction of new colleges in the 1970s. We find that skilled wages increased as a response, suggesting that along with an increase in the supply there was also an increase in demand for skill. We also show that college openings led to an increase in the productivity of skilled labor and investments in R&D. Our findings are consistent with models of endogenous technical change where an abundance of skilled workers may encourage firms to adopt skill-complementary technologies, leading to an upward-sloping long-run demand for skill.
    Keywords: labor market outcomes, returns to skill, technical change
    JEL: J08 J30 J24 O00
    Date: 2018–07
  15. By: Parro, Francisco; Pohl, R. Vincent
    Abstract: Health, human capital, and labor market outcomes are linked through complex connections that are not fully understood. We explore these links by estimating a flexible yet tractable dynamic model of human capital accumulation in the presence of health shocks using administrative data from Chile. We find that (i) human capital mitigates the negative labor market effects of health events, (ii) these alleviating effects operate through channels involving occupational choice, the frequency of exposure to health events, and access to health care, and (iii) the effect of health shocks on labor market outcomes is heterogeneous across industries and types of diagnoses.
    Keywords: health shocks, hospitalizations, labor market outcomes, earnings, human capital, education
    JEL: I10 J22 J24
    Date: 2018–06–01
  16. By: Eyal Bar-Haim; Louis Chauvel; Janet Gornick; Anne Hartung
    Abstract: Studying twelve countries over 30 years, we examine whether women’s educational expansion has translated into a closing gender earnings gap. As educational attainment is cohort-dependent, an Age-Period-Cohort analysis is most appropriate in our view. Using the Luxembourg Income Study (LIS) data, we show that while in terms of attainment of tertiary education women have caught up and often even outperform men, substantial gender differences in earnings persist in all countries. These results are consistent with the composition of the top earnings decile. Using Blinder-Oaxaca decomposition methods, we demonstrate that the role of education in explaining the gender earnings gap has been limited and even decreased over cohorts. Contrary, employment status as well as occupation explain a more substantial part in all countries. We conclude that earnings differences at levels far from gender equality likely also persist in the future, even if the “rise of women†in terms of education continues.
    Keywords: -gender gap, education, earnings, age-period-cohort analysis, Blinder-Oaxaca decomposition
    JEL: J7 N30
    Date: 2018–05
  17. By: SAM, Vichet
    Abstract: This article analyzes the impact of graduates' overeducation on economic growth in thirty-eight developing countries. A combination of macro data from the World Bank and micro data from the the Integrated Public Use Microdata Series International (IPUMSI) is employed. To deal with unobserved heterogeneity between countries and endogeneity of overeducation, two-stage least squares regression with country �fixed effects is estimated. Results highlight that a high rate of overeducated graduates is estimated to have a negative impact on economic growth at both short and medium terms. The expansion of higher education sector in developing countries should be realized with a deep attention on the education-job matching process among graduates.
    Keywords: Higher education, Overeducation, Economic growth, Two-stage least square and �fixed-effects regressions.
    JEL: I23 I25 J24
    Date: 2018–05

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