nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2018‒07‒30
seventeen papers chosen by
Joseph Marchand
University of Alberta

  1. The Productivity-Wage Premium: Does Size Still Matter in a Service Economy? By Giuseppe Berlingieri; Sara Calligaris; Chiara Criscuolo
  2. Optimal Fiscal Policy with Labor Selection By Chugh, Sanjay K.; Lechthaler, Wolfgang; Merkl, Christian
  3. The Changing Structure of Immigration to the OECD: What Welfare Effects on Member Countries? By Burzy?ski, Micha?; Docquier, Frédéric; Rapoport, Hillel
  4. Rethinking Family Policies: Fertility Choices and the Labor Market in France. By Nelly El-Mallakh
  5. Exploiting the Irish Border to Estimate Minimum Wage Impacts in Northern Ireland By McVicar, Duncan; Park, Andrew; McGuinness, Seamus
  6. A Kink that Makes You Sick: The Effect of Sick Pay on Absence By Petri, Böckerman; Ohto, Kanninen; Ilpo, Suoniemi
  7. Two Stories of Wage Dynamics in Latin America: Different Policies, Different Outcomes By Canavire Bacarreza, Gustavo J; Carvajal-Osorio, Luis C.
  8. Paying for what kind of performance? Performance pay and multitasking in mission-oriented jobs By Daniel Jones; Mirco Tonin; Michael Vlassopoulos
  9. Contract Employment as a Worker Discipline Device By Basu, Arnab K.; Chau, Nancy H.; Soundararajan, Vidhya
  10. Employment Effects of Payroll Tax Subsidies By Matthias Collischon; Kamila Cygan-Rehm; Regina T. Riphahn
  11. Teacher Screening, On the Job Evaluations and Performancee By Asma Benhenda
  12. How do bonus cap and malus affect risk and effort choice Insight from a lab experiment By Harris, Qun; Mercieca, Analise; Soane, Emma; Tanaka, Misa
  13. Workers’ Health and Establishment Size By Tempesti, Tommaso
  14. Efficiency Wages in a Cournot-Oligopoly By Marco de Pinto; Laszlo Goerke
  15. Pay Level Comparisons in Job Satisfaction Research and Mainstream Economic Methodology By Stavros, Drakopoulos
  16. Multitasking and Subjective Performance Evaluations: Theory and Evidence from a Field Experiment in a Bank By Manthei, Kathrin; Sliwka, Dirk
  17. How (Not) to Make Women Work? By Joanna Tyrowicz; Karolina Goraus; Lucas van der Velde

  1. By: Giuseppe Berlingieri; Sara Calligaris; Chiara Criscuolo
    Abstract: Ever since Moore (1911) a large empirical and theoretical literature has established the existence of a firm size-wage premium. At the same time, a second regularity in empirical work, linking size and productivity, has inspired a vast literature in multiple fields. However, the majority of the existing evidence is based on manufacturing data only. With manufacturing nowadays accounting for a very small share of the economy in many countries, whether productivity, size, and wages are closely linked, and how tight this link is across sectors, is still an open question. Using a unique dataset that collects micro-aggregated firm-level information on productivity, size, and wages for the entire economy in 17 countries over the 1994-2012 period, this paper unveils a much more subtle picture. First, while in the manufacturing sector both productivity and wages increase monotonically with firm size, the same is not true in the service sector. Second, a tight and positive link between wages and productivity is instead found in both manufacturing and services. The combination of these results suggests that, when looking at data for a much larger share of the economy, the ``size-wage premium' becomes more a "productivity-wage premium'". Unbundling the relationship between size, wages, and productivity has first-order policy implications for both workers and firms.
    Keywords: productivity, size-premium, wages
    JEL: E2 D2 J3
    Date: 2018–07
  2. By: Chugh, Sanjay K. (Boston College); Lechthaler, Wolfgang (Kiel Institute for the World Economy); Merkl, Christian (University of Erlangen-Nuremberg)
    Abstract: This paper characterizes long-run and short-run optimal fiscal policy in the labor selection framework. In a calibrated non-Ramsey decentralized equilibrium, labor market volatility is inefficient. Keeping fixed the structural parameters, the Ramsey government achieves efficient labor market volatility; doing so requires labor-income tax volatility that is orders of magnitude larger than the "tax-smoothing" results based on Walrasian labor markets, but a few times smaller than the results based on search and matching markets. We analytically characterize selection-model-consistent wedges and inefficiencies in order to understand optimal tax volatility.
    Keywords: labor market frictions, hiring costs, efficiency, optimal taxation, labor wedge, zero intertemporal distortions
    JEL: E24 E32 E50 E62 E63 J20
    Date: 2018–06
  3. By: Burzy?ski, Micha? (University of Luxembourg); Docquier, Frédéric (Université catholique de Louvain); Rapoport, Hillel (Paris School of Economics)
    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
  4. By: Nelly El-Mallakh
    Abstract: This paper examines the impact of the 2014 family policy reforms in France on fertility choices and labor supply for both women and men. Using a unique policy episode that consisted in conditioning the amount of basic allowances of early childhood benefits on household income, I employ a Regression-Discontinuity Design (RDD) to examine the impact of this sharp discontinuity in the provision of child benefits on fertility and the hours of work of women and men. The analysis relies on data from the Statistics on Resources and Living Conditions in France. The dataset has the unique feature of providing administrative information on both income and social benefits. Using a “sharp” RDD specification, the results suggest that not being eligible to any family allowances for children decreases the birth probability at the household level. The results also highlight that receiving half the amount of the family allowances for children or not receiving any allowances leads to an increase in the number of hours of work per week for both women and men, compared to individuals who are eligible to the total amount of child benefits. These results are in line with the literature showing that the elimination of welfare programs is associated with an increase in working hours.
    Keywords: family policy, child allowances, fertility, labor supply.
    JEL: H53 J21 J22
    Date: 2018
  5. By: McVicar, Duncan (Queen's University Belfast); Park, Andrew (University of Ulster); McGuinness, Seamus (Economic and Social Research Institute, Dublin)
    Abstract: This paper examines employment and hours impacts of the 1999 introduction of the UK National Minimum Wage (NMW) and the 2016 introduction of the UK National Living Wage (NLW) in Northern Ireland (NI). NI is the only part of the UK with a land border where the NMW and NLW cover those working on one side of the border (NI) but not those working on the other side of the border (Republic of Ireland). This discontinuity in minimum wage coverage enables a research design that estimates the impacts of the NMW and NLW on employment and hours worked using difference-in-differences. We find a small decrease in the employment rate of 22-59/64 year olds in NI, of up to two percentage points, in the year following the introduction of the NMW, but no impact on hours worked. We find no evidence that the introduction of the NLW impacted either employment or hours worked in NI.
    Keywords: minimum wages, Northern Ireland, employment, hours
    JEL: E24 J31 J38
    Date: 2018–06
  6. By: Petri, Böckerman; Ohto, Kanninen; Ilpo, Suoniemi
    Abstract: We exploit a regression kink design to estimate the elasticity of the duration of sickness absence with respect to replacement rate. Elasticity is a central parameter in defining the optimal social insurance scheme compensating for lost earnings due to sickness. We use comprehensive administrative data and a kink in the policy rule near the median earnings. We find a statistically significant estimate of the elasticity of the order of one.
    Keywords: Sick pay, labor supply, sickness absence, regression kink design, social insurance
    JEL: H55 I13 J22
    Date: 2018–06–20
  7. By: Canavire Bacarreza, Gustavo J (Inter-American Development Bank); Carvajal-Osorio, Luis C. (Universidad EAFIT)
    Abstract: This article explores the variation in the wage distributions of two Latin American countries, Bolivia and Colombia, which have had different political and economic strategies in recent years. Using data from household surveys, a decomposition of the wage distribution in each country using functional principal component analysis is conducted. The results suggest that Bolivia, which has implemented left-wing economic policies, has experienced a general increase in wages, especially benefiting the least skilled workers and the informal sector. On the other hand, the wage distribution in Colombia, whose economic policy has focused on free-market principles, has become more concentrated around the median wage, mainly due to changes in formal sector wages.
    Keywords: wage dynamics, functional principal component analysis, wage distributions, Latin America, Bolivia, Colombia
    JEL: J31 J38 C14
    Date: 2018–06
  8. By: Daniel Jones (University of Pittsburgh, Graduate School of Public and International Affairs); Mirco Tonin (Free University of Bolzano‐Bozen, Faculty of Economics and Management); Michael Vlassopoulos (University of Southampton)
    Abstract: How does pay-for-performance (P4P) impact productivity, multitasking, and the composition of workers in mission-oriented jobs? These are central issues in sectors like education or healthcare. We conduct a laboratory experiment, manipulating compensation and mission, to answer these questions. We find that P4P has positive effects on productivity on the incentivized dimension of effort and negative effects on the non-incentivized dimension for workers in non-mission-oriented treatments. In mission-oriented treatments, P4P generates minimal change on either dimension. Participants in the non-mission sector – but not in the mission-oriented treatments – sort on ability, with lower ability workers opting out of the P4P scheme.
    Keywords: Prosocial motivation, Performance pay, Multitasking, Sorting
    JEL: C91 M52 J45
    Date: 2018–07
  9. By: Basu, Arnab K. (Cornell University); Chau, Nancy H. (Cornell University); Soundararajan, Vidhya (Indian Institute of Management)
    Abstract: Fixed-term contract employment has increasingly replaced regular open-ended employment as the predominant form of employment notably in developing countries. Guided by factory-level evidence showing nuanced patterns of co-movements of regular and contract wages, we propose a two-tiered task based model with self-enforcing contracts in which firms allocate complex tasks to long term employees at incentive compatible wages, and routine tasks to fixed term employees at acceptable wages. We show that the advent of contract employment effectively lowers the cost of maintaining worker discipline, and demonstrate the conditions under which a positive change in labor demand can end up increasing the share of contract employees. We then argue that the contract employment phenomenon sheds light on two margins of hiring distortions – respectively task assignment and total employment distortions – against which the effectiveness of a suite of oft proposed labor market exibility policies should be assessed.
    Keywords: contract employment, two-tiered labor markets, wage polarization
    JEL: J31 J41 O43
    Date: 2018–06
  10. By: Matthias Collischon; Kamila Cygan-Rehm; Regina T. Riphahn
    Abstract: This paper exploits several reforms of wage subsidies in the framework of the German Minijob program to investigate substitution and complementarity relationships between subsidized and non-subsidized labor demand. We apply an instrumental variables approach and use administrative data on German establishments for the period 1999-2014. Particularly in small establishments (0-9 employees), subsidized Minijob employment comprises large shares of the work force, on average over 40 percent. For these establishments, robust evidence shows that increasing the subsidization of Minijob employment crowds out non-subsidized employment. Our results imply that Minijob employment in 2014 may have eliminated more than 0.5 million unsubsidized employment relationships just in small establishments.
    Keywords: wage subsidy, Minijob, labor demand, substitution effect, crowding out effect, displacement effect, employment, payroll tax
    JEL: J21 J23 J38 C26
    Date: 2018
  11. By: Asma Benhenda (University College London, Institute of Education)
    Abstract: I study the relationship between systematic and complementary screening and on-the-job teacher evaluations by their hierarchy, and teacher performance in secondary school. Using comprehensive French administrative data, I exploit within student across topics variations and I find that the classroom observation grade is the only evaluation grade significantly related to teacher performance. I then investigate whether the classroom observation has an impact on teacher performance and behaviour during the year of evaluation and in subsequent years. An event study shows that the classroom observation has no statistically significant impact on student achievement. I find that teachers are more absent during the months following the evaluation, suggesting that this evaluation provokes a temporary change in teacher behaviour.
    JEL: I2 J2 M51
    Date: 2018–07–01
  12. By: Harris, Qun (Bank of England); Mercieca, Analise (Bank of England); Soane, Emma (Bank of England); Tanaka, Misa (Bank of England)
    Abstract: We conducted a lab experiment to examine how bonus caps and malus affect individuals’ choices of risk and effort. We find that a bonus structure that rewards individuals proportionally to realised investment returns, but does not penalise negative returns, encourages risk-taking; while a bonus cap and malus mitigate risk-taking. However, the difference in risk-taking between the bonus cap and malus treatment groups and the proportional bonus group weakened significantly when the participants’ bonus was conditional on hitting an absolute or relative performance target. We also find some evidence that the bonus cap discourages project search effort relative to the proportional bonus, whereas the difference in the levels of effort between the malus treatment group and the proportional bonus group was not statistically significant.
    Keywords: Bonus cap; bonus regulation; incentive pay
    JEL: C91 G28 J33 M52
    Date: 2018–07–06
  13. By: Tempesti, Tommaso
    Abstract: I document the relationship between establishment size and various measures of workers' health. Workers at larger establishments are more likely to have chronic health conditions, have had a bed disability day in the last 12 months and be obese. They are also less likely to be smokers. Results for other health measures depend on the specification. My results may help in more effectively targeting workplace wellness programs. The results may also inform the design of better public interventions aimed at reducing occupational injuries. I discuss the relevance of my results for the establishment size-wage premium.
    Keywords: Establishment size; Health; Wellness Programs; Employer size-wage premium.
    JEL: I12 I18 J31
    Date: 2018–06–29
  14. By: Marco de Pinto (Institute for Labour Law and Industrial Relations in the European Union (IAAEU), Trier University); Laszlo Goerke (Institute for Labour Law and Industrial Relations in the European Union (IAAEU), Trier University)
    Abstract: In a Cournot-oligopoly with free but costly entry and business stealing, output per firm is too low and the number of competitors excessive, assuming labor productivity to depend on the number of employees only or to be constant. However, a firm can raise the productivity of its workforce by paying higher wages. We show that such efficiency wages accentuate the distortions occurring in oligopoly. Specifically, excessive entry is aggravated and the welfare loss due to market power rises
    Keywords: Oligopoly, Efficiency Wages, Excessive Entry, Welfare
    JEL: D43 J31 L13
    Date: 2018–07
  15. By: Stavros, Drakopoulos
    Abstract: Although social scientists have been investigating the nature and impact of job satisfaction for many decades, economists only started to investigate job satisfaction systematically in the late 1980’s. Almost from the first systematic studies of job satisfaction by economists, the research potential of the notion of pay level comparisons was realized. The idea of pay level comparisons in job satisfaction has proven particularly useful also because it has important implications for a number of standard theoretical and economic policy results. However, the inclusion of the variable of comparison wage in job satisfaction and the resulting supporting empirical findings, are in sharp contrast to the orthodox approach, given that in mainstream economic theory an individuals’ utility is assumed to be a function of absolute income only. Despite the important theoretical and policy implications, mainstream economic theory has not paid much heed to the job satisfaction conceptual formulations and empirical findings. The paper argues that there are methodological reasons for this state of affairs which seem to be linked to the subjective well-being research in general, and to the job satisfaction literature in particular. A strong mistrust against the method of stated preferences and the inherent methodological bias against the integration of psychological findings, are suggested as the two prime reasons. Although a few prominent figures in job satisfaction research have realized the mainstream methodological attitude, it is necessary that job satisfaction specialists should consider more seriously the basic components of mainstream economic methodology that relate to their research field.
    Keywords: job satisfaction; pay level comparisons; wages; economic methodology
    JEL: B41 I31 J28 J30
    Date: 2018–07–03
  16. By: Manthei, Kathrin (University of Cologne); Sliwka, Dirk (University of Cologne)
    Abstract: We study the incentive effects of grating supervisors access to objective performance information when agents work on multiple tasks. We first analyze a formal model showing that incentives are lower powered when supervisors have no access to objective measures but assess performance subjectively by gathering information. This incentive loss is more pronounced when the span of control is larger and incentives are distorted towards more profitable tasks. We then investigate a field experiment conducted in a bank. In the treatment group managers obtained access to objective performance measures which raised efforts and profits. We find that the effects are driven by larger branches and lower margin products.
    Keywords: incentives, subjective performance evaluation, multitasking, field experiment, bank
    JEL: M52 J33 D23
    Date: 2018–06
  17. By: Joanna Tyrowicz (Institute for Labour Law and Industrial Relations in the European Union IAAEU), Trier University); Karolina Goraus (University of Warsaw); Lucas van der Velde (Warsaw School of Economics)
    Abstract: Women in developed economies have experienced an unparalleled increase in employment rates, to the point that the gap with respect to men was cut in half. This positive trend has often been attributed to changes in the opportunity costs of working (e.g. access to caring facilities) and the opportunity costs of not-working (notably, relative growth in wages in positions more frequently occupied by women, improved educational attainment). Meanwhile, the gender employment gaps were stagnant in transition economies. Admittedly, employment equality among genders was initially much higher in transition countries. We exploit this unique evidence from transition and advanced countries, to analyze the relationship between the institutional environment and the (adjusted) gender employment gaps. We estimate comparable gender employment gaps on nearly 1500 micro databases from over 40 countries. Changes in both types of the opportunity costs exhibited strong correlation with gender employment equality where the gap was larger, i.e. advanced economies. We provide some evidence that these results are not explained away by transition-related phenomena. We argue that the observed divergence in time trends reflects a level effect: the lower the gender employment gap, the lower the strength of the relationship between gender employment equality and the opportunity costs of working. An implication from our study is that the existing instruments might be insufficient to further reduce the gender employment gap.
    Keywords: employment, gender gaps, opportunity cost of working, transition, non-parametric estimates
    JEL: J2 J7
    Date: 2018–06

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