nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2018‒10‒01
sixteen papers chosen by
Joseph Marchand
University of Alberta

  1. Generating employment, raising incomes and addressing poverty in Greece By Tim Bulman; Mauro Pisu
  2. Monopsony and Employer Mis-optimization Explain Why Wages Bunch at Round Numbers By Arindrajit Dube; Alan Manning; Suresh Naidu
  3. Minimum Wages and Retirement By Borgschulte, Mark; Cho, Heepyung
  4. Labor-Market Returns to Higher Vocational Schooling By Böckerman, Petri; Haapanen, Mika; Jepsen, Christopher
  5. Is there a rainbow after the rain? How do agricultural shocks affect non-farm enterprises? Evidence from Thailand By Grabrucker, Katharina; Grimm, Michael
  6. The Right Stuff? Personality and Entrepreneurship By Barton H. Hamilton; Nicholas W. Papageorge; Nidhi Pande
  7. The Long Term Impacts of Grants on Poverty: 9-year Evidence From Uganda's Youth Opportunities Program By Christopher Blattman; Nathan Fiala; Sebastian Martinez
  8. Long-term Changes in Married Couples' Labor Supply and Taxes: Evidence from the US and Europe Since the 1980s By Alexander Bick; Bettina Brüggemann; Nicola Fuchs-Schündeln; Hannah Paule-Paludkiewicz
  9. The growing American health penalty: International trends in the employment of older workers with poor health By Ben Baumberg Geiger; René Böheim; Thomas Leoni
  10. Quasi-Experimental Shift-Share Research Designs By Kirill Borusyak; Peter Hull; Xavier Jaravel
  11. The Wider Benefits of Adult Learning: Work-Related Training and Social Capital By Ruhose, Jens; Thomsen, Stephan L.; Weilage, Insa
  12. Finance and Employment Formalization: Evidence from Mexico's ENIGH, 2000-2016 By Bazdresch Santiago
  13. Returns to Higher Education in China: Evidence from the 1999 Higher Education Expansion Using Fuzzy Regression Discontinuity By Dai, Fengyan; Cai, Fang; Zhu, Yu
  14. Healthcare Utilization at Retirement: The Role of the Opportunity Cost of Time By Lucifora, Claudio; Vigani, Daria
  15. Illuminating Indigenous Economic Development By Donna Feir; Rob Gillezeau; Maggie Jones
  16. Looking for the Bright Side of the China Syndrome: Rising Export Opportunities and Life Satisfaction in China By Matthieu Crozet; Laura Hering; Sandra Poncet

  1. By: Tim Bulman; Mauro Pisu
    Abstract: Employment is pivotal to strengthening Greece’s economic recovery, increasing social welfare and redressing poverty. Jobs are returning, making inroads into high unemployment, but their wages and skill levels are lower than many that were lost during the crisis. Greece’s hiring is benefiting from more flexible arrangements. Legislative amendments can maintain this flexibility, ensure wages align with productivity and better protect individuals from labour market risks. Ensuring that workers possess skills that match employers’ needs will sustain employment and productivity growth. Improving the education system is a long-term mission and involves raising its pedagogical strength and orientation towards professional needs. A social welfare system dominated by pensions has not been able to prevent a steep hike in poverty among children and the young, risking long-term harm to well-being. Pursuing recent steps towards a better targeted social protection, accompanied by support programmes for jobseekers, will provide a reliable safety net and reduce poverty. This Working Paper relates to the 2018 OECD Economic Survey of Greece. ( c-survey-greece.htm).
    Keywords: Childcare, compensation and labour costs, consumption, demand and supply of labour, education, employment, government expenditures and welfare programs, labour markets, poverty, simulation modelling, social security, unemployment, wages, welfare programmes, well-being
    JEL: C63 E21 E24 H52 H53 H55 I2 I3 J13 J2 J3 J63 J68
    Date: 2018–09–17
  2. By: Arindrajit Dube; Alan Manning; Suresh Naidu
    Abstract: We show that wages in administrative data and in online markets exhibit considerable bunching at round numbers that cannot all be explained by rounding of responses in survey data. We consider two hypotheses—worker left-digit bias and employer optimization frictions—and derive tests to distinguish between the two. Symmetry of the missing mass distribution around the round number suggests that optimization frictions are more important. We show that a more monopsonistic market requires less optimization frictions to rationalize the bunching in the data, and use this to derive bounds on employer market power. We provide experimental validation of these results from an online labor market, where rewards are also highly bunched at round numbers. By randomizing wages for an identical task, our online experiment provides an independent estimate of the extent of employer market power, and fails to find evidence of any discontinuity in the labor supply function as predicted by workers’ left-digit bias. Overall, the extent and form of round-number bunching suggests both employer mis-optimization and wage setting power are important features of the labor market.
    JEL: D03 D22 J3 J42
    Date: 2018–09
  3. By: Borgschulte, Mark (University of Illinois at Urbana-Champaign); Cho, Heepyung (University of Illinois at Urbana-Champaign)
    Abstract: We study the effect of the minimum wage on the employment outcomes and Social Security claiming of older US workers from 1983 to 2016. The probability of work at or near the minimum wage increases substantially near retirement, and previous researchers and policies suggest that older workers may be particularly vulnerable to any disemployment effects of the minimum wage. We find no evidence that the minimum wage causes earlier retirements. Instead, our estimates suggest that higher minimum wages increase earnings and may have small positive effects on the labor supply of workers in the key ages of 62 to 70. Consistent with increased earnings and delayed retirement, higher minimum wages decrease the number of Social Security beneficiaries and amount of benefits disbursed. The minimum wage appears to increase financial resources for workers near retirement.
    Keywords: minimum wage, retirement, social security claiming
    JEL: H55 J26 J38 J42
    Date: 2018–08
  4. By: Böckerman, Petri (Labour Institute for Economic Research); Haapanen, Mika (Jyväskylä University School of Business and Economics); Jepsen, Christopher (University College Dublin)
    Abstract: This paper examines the labor-market returns to a new form of postsecondary vocational education, vocational master's degrees. We use individual fixed effects models on the matched sample of students and non-students from Finland to capture any time-invariant differences across individuals. Attendance in vocational master's programs leads to higher earnings of eight percent five years after entry even if selection on unobservables is twice as strong as selection on observables. Earnings gains are similar by gender and age, but they are marginally higher for health than for business or technology and trades.
    Keywords: vocational education, master's degrees, labor-market returns
    JEL: J24
    Date: 2018–08
  5. By: Grabrucker, Katharina; Grimm, Michael
    Abstract: Increasing weather volatility poses a significant threat to the livelihood of rural households in developing countries. While how rainfall shocks affect agricultural households has been well documented, there is not much evidence on the indirect effects on non-agricultural households. Combining household panel data with grid-level precipitation data, we analyze how rainfall shocks affect non-farm enterprises in rural Thailand. We examine the effects of rainfall shocks on labor supply for independent, non-farm activities as well as the indirect effects of rainfall shocks on non-farm enterprises through forward linkages, backward linkages and the consumption levels of farm households. We find that farm households increase their labor participation in non-farm self-employment in response to rainfall shocks. We also observe that rainfall shocks lead to increased input costs by non-farm enterprises in the food processing industry, to higher input costs by farms, to higher sales by agriculture-related non-farm enterprises and to lower expenditure by farm households on food and other consumption items. These effects are significant for surplus rainfall shocks (i.e., more rainfall than usual) but less robust for deficit rainfall shocks (i.e., less rainfall than usual), yet both surplus and deficit rainfall shocks lower agricultural production compared to normal rainfall conditions.
    Keywords: Keywords: Rainfall shocks, Non-farm enterprises, Farm/Non-farm linkages, Thailand
    JEL: D22 J22 Q12 R11
    Date: 2018–09
  6. By: Barton H. Hamilton; Nicholas W. Papageorge; Nidhi Pande
    Abstract: We construct a structural model of entry into self-employment to evaluate the impact of policies supporting entrepreneurship. Previous work has recognized that workers may opt for self-employment due to the non-pecuniary benefits of running a business and not necessarily because they are good at it. Other literature has examined how socio-emotional skills, such as personality traits, affect selection into self-employment. We link these two lines of inquiry. The model we estimate captures three factors that affect selection into self-employment: credit constraints, relative earnings and preferences. We incorporate personality traits by allowing them to affect sector-specific earnings as well as preferences. The estimated model reveals that the personality traits that make entrepreneurship profitable are not always the same traits driving people to open a business. This has important consequences for entrepreneurship policies. For example, subsidies for small businesses do not attract talented-but-reluctant entrepreneurs, but instead attract individuals with personality traits associated with strong preferences for running a business and low-quality business ideas.
    JEL: J23 J24 J31 J32
    Date: 2018–09
  7. By: Christopher Blattman; Nathan Fiala; Sebastian Martinez
    Abstract: In 2008, Uganda granted hundreds of small groups $400/person to help members start individual skilled trades. Four years on, an experimental evaluation found grants raised earnings by 38% (Blattman, Fiala, Martinez 2014). We return after 9 years to find these start-up grants acted more as a kick-start than a lift out of poverty. Grantees' investment leveled off; controls eventually increased their incomes through business and casual labor; and so both groups converged in employment, earnings, and consumption. Grants had lasting impacts on assets, skilled work, and possibly child health, but had little effect on mortality, fertility, health or education.
    JEL: C93 D13 J24 O12
    Date: 2018–09
  8. By: Alexander Bick; Bettina Brüggemann; Nicola Fuchs-Schündeln; Hannah Paule-Paludkiewicz
    Abstract: We document the time-series of employment rates and hours worked per employed by married couples in the US and seven European countries (Belgium, France, Germany, Italy, the Netherlands, Portugal, and the UK) from the early 1980s through 2016. Relying on a model of joint household labor supply decisions, we quantitatively analyze the role of non-linear labor income taxes for explaining the evolution of hours worked of married couples over time, using as inputs the full country- and year-specific statutory labor income tax codes. We further evaluate the role of consumption taxes, gender and educational wage premia, and the educational composition. The model is quite successful in replicating the time series behavior of hours worked per employed married woman, with labor income taxes being the key driving force. It does however capture only part of the secular increase in married women’s employment rates in the 1980s and early 1990s, suggesting an important role for factors not considered in this paper. We will make the non-linear tax codes used as an input into the analysis available as a user-friendly and easily integrable set of Matlab codes.
    JEL: E24 H24 J22
    Date: 2018–09
  9. By: Ben Baumberg Geiger (University of Kent, School of Social Policy, Sociology & Social Research); René Böheim (Department of Economics, Vienna University of Economics and Business); Thomas Leoni (Austrian Institute of Economic Research)
    Abstract: Many countries have reduced the generosity of disability benefits while making them more activating - yet few studies have examined how employment rates have subsequently changed. We present estimates of how the employment rates of older workers with poor health in 13 high-income countries changed between 2004-7 and 2012-15 using HRS/SHARE/ELSA data. We find that those in poor health in the USA have experienced a unique deterioration: they have not only seen a widening gap to the employment rates of those with good health, but their employment rates fell per se. We find only for Sweden (and possibly England) signs that the health employment gap shrank. We then examine possible explanations for the development in the USA: we find no evidence it links to labour market trends, but possible links to the USA´s lack of disability benefit reform - which should be considered alongside the wider challenges of our findings for policymakers.
    Keywords: disability benefits, older workers, poor health, HRS/SHARE/ELSA data
    JEL: H51 I12 I18 J14 J22
    Date: 2018–09
  10. By: Kirill Borusyak; Peter Hull; Xavier Jaravel
    Abstract: Many empirical studies leverage shift-share (or “Bartik”) instruments that combine a set of aggregate shocks with measures of shock exposure. We derive a necessary and sufficient shock-level orthogonality condition for these instruments to identify causal effects. We then show that orthogonality holds when observed shocks are as-good-as-randomly assigned and growing in number, with the average shock exposure sufficiently dispersed. Lastly, we show how to implement quasi-experimental shift-share designs with new shock-level regressions, which help visualize identifying shock variation, correct standard errors, choose appropriate specifications, test identifying assumptions, and optimally combine multiple sets of quasi-random shocks. We illustrate these points by revisiting Autor et al. (2013)'s analysis of the labor market effects of Chinese import competition.
    JEL: C18 C21 C26 F16 J21
    Date: 2018–09
  11. By: Ruhose, Jens; Thomsen, Stephan L.; Weilage, Insa
    Abstract: We propose a regression-adjusted matched difference-in-differences framework to estimate non-pecuniary returns to adult education. This approach combines kernel matching with entropy balancing to account for selection bias and sorting on gains. Using data from the German SOEP, we evaluate the effect of work-related training, which represents the largest portion of adult education in OECD countries, on individual social capital. Training increases participation in civic, political, and cultural activities while not crowding out social participation. Results are robust against a variety of potentially confounding explanations. These findings imply positive externalities from work-related training over and above the well-documented labor market effects.
    Keywords: non-pecuniary returns,social capital,work-related training,matched difference-in-differences approach,entropy balancing
    JEL: J24 I21 M53
    Date: 2018
  12. By: Bazdresch Santiago
    Abstract: We study the relationship between financial constraints and employment formalization by exploiting heterogeneity in the industry-level degree of financial dependence, in the spirit of Rajan and Zingales (1998). This dependence, and variation in aggregate credit, lets us measure industry-level financial slack, and estimate its effects on employment formality. We find formality among young workers increases, which is consistent with a model of informal firms that grow and formalize with financial resources, thus becoming more productive. However, we find that financial slack, apparently, decreases formality among older, experienced workers, which is consistent with a model of capital-constrained formal employees that turn into entrepreneurs when financial conditions improve. Descriptive statistics on formality, as well as regression estimates conditioning by age and schooling provide a detailed map of the differential effects of finance on formality.
    Keywords: Self-Employment;Entrepreneurship;Financial Constraints;Employment Formality;Financial Dependence
    JEL: G2 O11 O12 O16
    Date: 2018–08
  13. By: Dai, Fengyan (Nanjing University of Finance and Economics); Cai, Fang (Chinese Academy of Social Sciences); Zhu, Yu (University of Dundee)
    Abstract: China experienced a 47% expansion in higher education enrolment between 1998 and 1999, and a six-fold expansion in the decade to 2008. In this paper, we explore a fuzzy discontinuity in the months of births induced by the expansion to study the returns to higher education in China. We find that the mean years of education increased by roughly one full year around the cut-off point of the 1999 expansion as defined by months of births. Importantly, each additional year of university education induced by the 1999 higher education expansion increases monthly wage income by 21%, whereas the corresponding OLS estimate is only 8%. Our findings are insensitive to alternative window widths, functional forms, or the exclusion of the self-employed. Moreover, the returns to degrees also appear to vary by gender, with lowers returns to women except when they are the only child in the family.
    Keywords: returns to higher education, higher education expansion, regression discontinuity design, China
    JEL: I23
    Date: 2018–08
  14. By: Lucifora, Claudio (Università Cattolica del Sacro Cuore); Vigani, Daria (Università Cattolica del Sacro Cuore)
    Abstract: We investigate the causal impact of retirement on healthcare utilization using SHARE data for 10 European countries. We show that the number of doctor's visits and the probability of visiting a doctor more than four times a year (our measures of healthcare utilization) increase after retirement. The increase in healthcare utilization is found to depend mainly on the years spent in retirement, suggesting that adjustment may take time. We find evidence of heterogeneous effects by gender and across different patterns of time use prior to retirement (i.e., working long hours, and combined work and out-of-work activities). Overall, the empirical findings suggest that the increase in healthcare utilization is consistent with the decrease in the opportunity cost of time faced by individuals when they retire.
    Keywords: retirement, health, healthcare utilization
    JEL: J26 I10 C26
    Date: 2018–08
  15. By: Donna Feir (Department of Economics, University of Victoria); Rob Gillezeau (Department of Economics, University of Victoria); Maggie Jones (Department of Economics, University of Victoria)
    Abstract: There are over 1,000 First Nations and Inuit communities in Canada. Only 357 of these communities are consistently included in the most comprehensive public data source on economic activity, the Community Well-Being (CWB) Database. We propose using nighttime light density measured by satellites as an alternative indicator of well-being. We show that nighttime light density is an effective proxy for per capita income in the Canadian context and provide evidence that existing publicly available databases on well-being consist of heavily selected samples that systematically exclude many of the least developed communities. We show that sample selection into the publicly available data can lead to incorrect conclusions based on three applications: (i) the comparison of well-being across community types over time; (ii) an analysis of the historical and geographic determinants of economic activity in Indigenous communities; and (iii) a study of the effects of mining intensity close to Indigenous communities. Based on these applications, we suggest that using nighttime light density overcomes the biased selection of communities into the publicly available samples and, thus, may present a more complete picture of economic activity in Canada for Indigenous peoples. JEL Classification: I15, J15,J24
    Keywords: light density,nighttime light density,Indigenous peoples,economic development,community well-being index
    Date: 2018–09–19
  16. By: Matthieu Crozet; Laura Hering; Sandra Poncet
    Abstract: China's increased export capacity in recent decades has disrupted developed-country labor markets and the well-being of workers exposed to foreign competition. We here attempt to complete the assessment of the social and human consequences of globalization by exploring the other side of this "China syndrome". We evaluate the extent to which increased export opportunities have influenced well-being in China using panel data on approximately 25,000 adults across 122 Chinese localities in 2010, 2012 and 2014. The results show that perceived life satisfaction rises significantly as local export markets grow. This effect goes beyond higher local GDP per capita and individual incomes.
    Keywords: Happiness;Well-being;Globalization;China
    JEL: I31 J28
    Date: 2018–09

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