nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2018‒10‒08
fourteen papers chosen by
Joseph Marchand
University of Alberta

  1. Wage Growth Puzzles and Technology By Geoff Weir
  2. Labor Market Effects of U.S. Sick Pay Mandates. By Stefan Pichler; Nicolas Ziebarth
  3. Patterns of overeducation in Europe: The role of field of study By Boll, Christina; Rossen, Anja; Wolf, André
  4. Inheritance Taxation and Wealth Effects on the Labor Supply of Heirs By Fabian Kindermann; Lukas Mayr; Dominik Sachs
  5. Employment adjustments following rises and reductions in minimum wages: New insights from a survey experiment By Bossler, Mario; Oberfichtner, Michael; Schnabel, Claus
  6. Urban Wage Premia, Cost of Living, and Collective Bargaining By Marianna Belloc; Paolo Naticchioni; Claudia Vittori
  7. Payroll Taxes, Social Security and Informality. The 2012 Tax Reform in Colombia By Pablo Adrian Garlati Bertoldi
  8. Politicians’ Payments in a Proportional Party System By Berg, Helene
  9. Pension Enhancements and Teacher Retirement Behavior By Wei Kong; Shawn Ni; Michael Podgursky; Weiwei Wu
  10. Fiscal and Education Spillovers from Charter School Expansion By Matthew Ridley; Camille Terrier
  11. The Effect of Wage Subsidies on Piece Rate Workers: Evidence from the Penny Per Pound Program in Florida By Hyejin Ku
  12. Increasing Differences Between Firms: Market Power and the Macro-Economy By John Van Reenen
  13. How Common Are Bad Bosses? By Artz, Benjamin; Goodall, Amanda H.; Oswald, Andrew J.
  14. Forward-looking moral hazard in social insurance: evidence from a natural experiment By Eliason, Marcus; Johansson, Per; Nilsson, Martin

  1. By: Geoff Weir (Financial Sector Services)
    Abstract: Economists have been grappling with both a long-run and a shorter-run wage 'puzzle'. The long-run wage puzzle is why real wages have for decades been growing slower than labour productivity: that is, why the labour share of national income has been falling. The shorter-run puzzle is why nominal wages have for some years been growing slower than model-based forecasts have predicted. This paper suggests that an important part of the explanation for both puzzles may lie at the individual firm level, rather than at the macro level. The uneven take-up of new technology is resulting in increasing dispersion in productivity performance across firms in a given industry. High productivity firms would appear to be using most of their higher levels of productivity to reduce prices and increase profit margins rather than passing most of it on to their workforce in higher wages, while the productivity 'laggards' have limited scope to pay higher wages. If employment growth is much less dispersed than productivity growth across firms, as overseas evidence suggests is the case, these observations may help to explain not just declining labour shares of national income but also low average productivity growth and subdued nominal wages growth. The paper sets out some research proposals designed to further explore these linkages. Given the broadening application across industries of new information and communication technology, if the above forces are indeed at play they may prove pervasive and long lasting, with important implications for monetary policy over the cycle.
    Keywords: labour share; wage growth; superstar firm hypothesis; digital technology
    JEL: D33 E24 E25 J3
    Date: 2018–09
  2. By: Stefan Pichler (ETH Zurich); Nicolas Ziebarth (Cornell University)
    Abstract: This paper exploits temporal and spatial variation in the implementation of nine-city- and four state-level U.S. sick pay mandates to assess their labor market consequences. We use the synthetic control group method and traditional difference-in-differences models along with the Quarterly Census of Employment and Wages to estimate the causal effects of mandated sick pay on employment and wages. We do not find much evidence that employment or wages were significantly affected by the mandates that typically allow employees to earn one hour of paid sick leave per work week, up to seven days per year. Employment decreases of 2 percent lie outside the 92 percent confidence interval and wage decreases of 3 percent lie outside the 95 percent confidence interval.
    Keywords: sick pay mandates, sick leave, medical leave, employer mandates, employment, wages, synthetic control group method (SCGM), Quarterly Census of Employment and Wages (QCEW), United States (U.S.)
    JEL: I12 I13 I18 J22 J28 J32
    Date: 2018–09
  3. By: Boll, Christina; Rossen, Anja; Wolf, André
    Abstract: This study investigates the incidence of overeducation among graduate workers in 21 EU countries and its underlying factors based on the European Labor Force Survey 2016 (EU-LFS). Although controlling for a wide range of covariates, the particular interest lies in the role of fields of study for vertical educational mismatch. The study reveals country and gender differences in the impact of these factors. Compared to Social Sciences, male graduates from e.g. Education, Health and Welfare, Engineering, and ICT are less and those from e.g. Services and Natural Sciences are more at risk in a clear majority of countries. These findings hold for the majority of countries and are robust against a change of the standard education. However, countries show different gendered patterns of fieldspecific risks. We suggest that occupational closure, productivity signals and gender stereotypes answer for these cross-field and cross-country differentials. Moreover, country fixed effects point to relevant structural differences between national labour markets and between educational systems.
    Keywords: field of study,college major,overeducation,vertical mismatch,gender,realized matches,household context,EU countries,Labour Force Survey
    JEL: J24 J21 J22
    Date: 2018
  4. By: Fabian Kindermann (Universität Bonn); Lukas Mayr (University of Essex); Dominik Sachs (University of Munich)
    Abstract: The taxation of bequests can have a positive impact on the labor supply of heirs through wealth effects. This leads to an increase in future labor income tax revenue on top of direct bequest tax revenue. We first show in a theoretical model that a simple back-of-the-envelope calculation, based on existing estimates for the reduction in earnings after wealth transfers, fails: the marginal propensity to earn out of unearned income is not a sufficient statistic for the calculation of this effect because (i) heirs anticipate the reduction in net bequests and adjust their labor supply already prior to inheriting, and (ii) when bequest receipt is stochastic, even those who ex post end up not inheriting anything respond ex ante to the implied change in their distribution of net bequests. We quantitatively elaborate the size of the overall revenue effect due to labor supply changes of heirs by using a state of the art life-cycle model that we calibrate to the German economy. Besides the joint distribution of income and inheritances, quasi-experimental evidence regarding the size of wealth effects on labor supply is a key target for this calibration. We find that for each Euro of bequest tax revenue the government mechanically generates, it obtains an additional 9 Cents of labor income tax revenue (in net present value) through higher labor supply of (non-) heirs.
    Keywords: bequests, taxation, life-cycle, Labor Supply, dynamic scoring
    JEL: C68 D91 H22 H31 J22
    Date: 2018–09
  5. By: Bossler, Mario; Oberfichtner, Michael; Schnabel, Claus
    Abstract: The effects of large minimum wage increases, like those planned in the UK and in some US states, are still unknown. We conduct a survey experiment that randomly assigns increases or decreases in minimum wages to about 6,000 plants in Germany and asks the personnel managers about their expectations concerning employment adjustments. We find that employment reacts asymmetrically to positive and negative changes in minimum wages. The larger the increase in the minimum wage is, the larger the expected reduction in employment. Employment adjustments are more pronounced in those industries and plants which are more strongly affected by the current minimum wage and in those plants that have neither collective agreements nor a works council. In contrast, employment is not found to increase if the minimum wage is reduced by about 10 percent. This mainly reflects that plants with works councils and collective agreements would not cut wages.
    Keywords: minimum wage,wage cuts,establishment survey,Germany
    JEL: J31 J23 D22
    Date: 2018
  6. By: Marianna Belloc; Paolo Naticchioni; Claudia Vittori
    Abstract: In this paper, we estimate the urban wage premia (UWP) in Italy, with its economy characterized by the interplay between collective bargaining and spatial heterogeneity in the cost of living. We implement a reduced-form regression analysis using both nominal and real (in temporal and spatial terms) wages. Our dataset for the 2005-2015 period includes, for workers’ characteristics, unique administrative data provided by Italian Social Security Institute and, for the local CPI computation, housing prices collected by Italian Revenue Agency. For employees covered by collective bargaining, we find a zero UWP in nominal terms and a negative and non-negligible UWP in real terms (-5%). To capture the role played by centralized wage settings, we also consider various groups of self-employed workers, who are not covered by national labour agreements, while living in the same locations and enjoying the same amenities as employees. We find that the UWP for self-employed workers are up to 25 times greater than for employees. Moreover, sorting proves more notable in the case of self-employed workers, i.e. the larger UWP provide the higher incentives for high-skilled individuals and better firms to locate in cities. Our findings are confirmed on extending the analysis along the wage distribution.
    Keywords: urban wage premium, cost of living, collective bargaining
    JEL: R12 R31 J31
    Date: 2018
  7. By: Pablo Adrian Garlati Bertoldi
    Abstract: I evaluate how the drastic reduction in payroll taxes in 2012 reduced informality in Colombia. By the end of 2012 the Colombian government implemented a tax reform that, among other things, substantially reduced payroll taxes. I evaluate the effect of this reform on informality both theoretically and empirically. Theoretically, I develop a labor market model incorporating the changes introduced by the reform. As the reduction in payroll taxes was accompanied by a change in social trans-fers' funding, which led to uncertain changes in profits and social benefits, straightforward predictions on informality are not possible. Empirically, I obtain difference-in-difference (DID) estimates from two household surveys- one composed by many repeated cross sections across many years and the other a much shorter panel dataset. Estimates from the repeated cross sections data indicate small, short-term effects and large long-term effects. Industry was the first sector to enjoy a reduction in informality, followed by services and agriculture. For workers earning around one minimum wage, I find large point estimates. Estimates from the household survey panel data are in line with these results.
    Keywords: informality, payroll taxes, social security, Colombia
    JEL: D21 H24 H30 J32 J38
    Date: 2018–09–21
  8. By: Berg, Helene (Dept. of Economics, Stockholm University)
    Abstract: Is politics a lucrative business? The question is approached in this paper, as one of few to quantify the monetary returns to holding political office in a typical developed democracy where parties are the main political actors. By applying a difference-in-difference setting with a carefully chosen control group to rich data on candidates to the Swedish national parliament, both short and long-run effects of being elected on different types of income are estimated. Results show that, yes, mostly thanks to relatively high remuneration while still in office, politics can be a lucrative business. In the long-run however, the effect is instead compositional in the sense that ex-politicians receive more pension income and work less.
    Keywords: Returns to politics; difference-in-difference
    JEL: C23 D72 J44
    Date: 2018–09–24
  9. By: Wei Kong; Shawn Ni (Department of Economics, University of Missouri - Columbia); Michael Podgursky (Department of Economics, University of Missouri - Columbia); Weiwei Wu
    Abstract: We examine how pension rule changes affect teacher retirement by estimating a structural retirement model on a large cohort of late career Missouri public school teachers. In so doing we address several statistical challenges that arise in estimating dynamic retirement models. The resulting estimates produce good in and out-of-sample fit. Counter-factual simulations suggest that Missouri's 1990s pension enhancements led to earlier retirement by about 0.4 years on average for the 1994 cohort and by more than one year in a steady state. Enhancements increased steady state pension liabilities by 16 percent for senior teachers.
    Keywords: teachers' pensions, sample selection bias, expectation of policy rules
    JEL: I21 J26 J38
    Date: 2018–10
  10. By: Matthew Ridley; Camille Terrier
    Abstract: The fiscal and educational consequences of charter expansion for non-charter students are central issues in the debate over charter schools. Do charter schools drain resources and high-achieving peers from non-charter schools? This paper answers these questions using an empirical strategy that exploits a 2011 reform that lifted caps on charter schools for underperforming districts in Massachusetts. We use complementary synthetic control instrumental variables (IV-SC) and differences-in-differences instrumental variables (IV-DiD) estimators. The results suggest greater charter attendance increases per-pupil expenditures in traditional public schools and induces them to shift expenditure from support services to instruction and salaries. At the same time, charter expansion has a small positive effect on non-charter students' achievement.
    Keywords: charter school, competition, fiscal spillover, achievement, synthetic control
    JEL: C10 C36 H23 H39 H75 I21 I22 I28
    Date: 2018–09
  11. By: Hyejin Ku (University College London, Department of Economics and CReAM)
    Abstract: This paper studies a fair trade program in which consumers provide a wage subsidy (bonus) to piece-rate tomato pickers. The total subsidy—determined by sales to participating buyers—is divided among workers based on their relative output: a worker who produces more gets a larger share of the bonus. Although seemingly mimicking the existing piece-rate pay scheme, the mechanism associated with the bonus payment is really a relative performance evaluation, as the size of total bonus is exogenous and invariant to workers’ effort. Therefore, for a given sized subsidy, the combined total (or per worker average) utility gains would become the largest if the workers keep their efforts at the pre-program level. Empirical analysis shows that worker effort (and hence productivity) increases substantially in response to the program, suggesting that currently, workers’ combined gains per dollar of subsidy are not being maximized. Alternative distribution schemes are discussed.
    Keywords: piece rate, subsidy, fairness, tragedy of the commons, natural experiment
    JEL: J24 J31 J38 M52 O12
    Date: 2018–10
  12. By: John Van Reenen
    Abstract: A rich understanding of macro-economic outcomes requires taking into account the large (and increasing) differences between firms. These differences stem in large part from heterogeneous productivity rooted in managerial and technological capabilities that do not transfer easily between firms. In recent decades the differences between firms in terms of their relative sales, productivity and wages appear to have increased in the US and many other industrialized countries. Higher sales concentration and apparent increases in aggregate markups have led to the concern that product market power has risen substantially which is a potential explanation for the falling labor share of GDP, sluggish productivity growth and other indicators of declining business dynamism. I suggest that this conclusion is premature. Many of the patterns are consistent with a more nuanced view where many industries have become "winner take most/all" due to globalization and new technologies rather than a generalized weakening of competition due to relaxed anti-trust rules or rising regulation.
    Keywords: firm differences, concentration, market power, policy
    JEL: L2 M2 O14 O32 O33
    Date: 2018–09
  13. By: Artz, Benjamin (University of Wisconsin, Oshkosh); Goodall, Amanda H. (Cass Business School); Oswald, Andrew J. (University of Warwick)
    Abstract: Bosses play an important role in workplaces. Yet little is currently known about a foundational question. Are the right people promoted to be managers, team leaders, and supervisors? Gallup data and the famous Peter Principle both suggest that incompetent bosses are likely to be all around us. This paper's results uncover a different, and more nuanced, conclusion. By taking data on 35 nations, the paper provides the first statistically representative international estimates of the extent to which employees have 'bad bosses'. Using a simple, and arguably natural, measure, the paper calculates that approximately 13% of Europe's workers have a bad boss. These bosses are most common in the Transport sector and large organizations. The paper discusses its methodology, performs validation checks, and reviews other data and implications.
    Keywords: job satisfaction, leadership, bosses, well-being
    JEL: J28 I31 M54
    Date: 2018–09
  14. By: Eliason, Marcus (IFAU - Institute for Evaluation of Labour Market and Education Policy); Johansson, Per (IFAU - Institute for Evaluation of Labour Market and Education Policy); Nilsson, Martin (IFAU - Institute for Evaluation of Labour Market and Education Policy)
    Abstract: This study tests for forward-looking moral hazard in the social insurance system by exploiting a 1991 reform in Sweden. The replacement rate was reduced for short absences but not for long absences, which introduced a potential future cost of returning to work. Using this exogenous variation in the replacement rate and controlling for dynamic selection, we find that the potential future cost of returning to work decreased the outflow from absence by 10 percent. This finding suggests that long-term sickness absentees are forward-looking, and highlights the importance of taking forward-looking behavior into account when designing and evaluating social insurance programs.
    Keywords: disability Insurance; dynamic Incentives; forward-looking behavior; moral hazard; natural experiment; sickness absence; sickness insurance
    JEL: H55 I12 I13 J22
    Date: 2018–09–05

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