nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2018‒10‒29
nineteen papers chosen by
Joseph Marchand
University of Alberta

  1. Hours risk, wage risk, and life-cycle labor supply By Jessen, Robin; König, Johannes
  2. Understanding Joint Retirement By Pierre-Carl Michaud; Arthur Van Soest; Luc Bissonnette
  3. Long-Term Changes in Married Couples' Labor Supply and Taxes: Evidence from the US and Europe since the 1980s By Bick, Alexander; Brüggemann, Bettina; Fuchs-Schündeln, Nicola; Paule-Paludkiewicz, Hannah
  4. Entrepreneurial beginnings: Transitions to self-employment and the creation of jobs By Richard Fabling
  5. BRATISLAVA and VIENNA: Twin Cities with big Development Potentials By Doris Hanzl-Weiss; Mario Holzner; Roman Römisch
  6. The Effects of Status Concerns on Labor Markets for Different Types of Workers By Schottke, Alessa K.; Siemering, Christian
  7. Guilds and mutual protection in England By Wallis, Patrick
  8. Publishing and Promotion in Economics: The Tyranny of the Top Five By Heckman, James J.; Moktan, Sidharth
  9. Genes, Education, and Labor Market Outcomes: Evidence from the Health and Retirement Study By Nicholas W. Papageorge; Kevin Thom
  10. Unexplained native-immigrant wage gap in Poland in 2015-2016. Insights from the surveys in Warsaw and in Lublin By Pawel Strzelecki
  11. Taxes, benefits and labour force participation: A survey of the quasi-experimental literature By Lundberg, Jacob; Norell, John
  12. Communicating Subjective Evaluations By Lang, Matthias
  13. Labor Market Responses to Partners' Unemployment and Low-Pay Employment By Keldenich, Carina; Knabe, Andreas
  14. (I Can’t Get No) Job Satisfaction? Differences by Sexual Orientation in Sweden By Hammarstedt, Mats; Aldén, Lina; Swahnberg, Hanna
  15. A General Equilibrium Theory of Occupational Choice under Optimistic Beliefs about Entrepreneurial Ability By Michele Dell'Era; Luca David Opromolla; Luis Santos-Pinto
  16. Time Inconsistency and Delayed Retirement Decision: the French Pension Bonus By Steve Briand
  17. Labour Shares and Income Inequality: Insights from Italian Economic History, 1895-2015 By Giacomo Gabbuti
  18. Pension Strategies of Workers in a Country Getting Old before Getting Rich By Buchholtz, Sonia; Gaska, Jan; Góra, Marek
  19. The measurement of labour content: a general approach By Naoki Yoshihara; Roberto Veneziani

  1. By: Jessen, Robin; König, Johannes
    Abstract: We decompose permanent earnings risk into contributions from hours and wage shocks. In order to distinguish between hours shocks and labor supply reactions to wage shocks we use a life-cycle model of consumption and labor supply. Estimating our model with the Panel Study of Income Dynamics (PSID) shows that both permanent wage and hours shocks play an important role in explaining the cross-sectional variance in earnings growth, but wage risk has greater relevance. Allowing for hours shocks improves the model fit considerably. The empirical strategy allows for the estimation of the Marshallian labor supply elasticity without the use of consumption or asset data. We find this elasticity on average to be negative, but small. The degree of consumption insurance implied by our results is in line with recent estimates in the literature.
    Keywords: earnings risk,wage risk,Frisch elasticity,Marshallian elasticity,consumption insurance
    JEL: D31 J22 J31
    Date: 2018
  2. By: Pierre-Carl Michaud; Arthur Van Soest; Luc Bissonnette
    Abstract: Evidence from different sources shows that spouses' retirement decisions are correlated. Retirement policies affecting individuals in couples are therefore also likely to affect behavior of their spouses. It is therefore important to account for joint features in modeling retirement. This paper studies a structural collective model of labor supply and retirement of both partners in a couple with interdependent preferences, imperfect knowledge of preferences of the spouse, and subjective expectations about the future. We propose a novel method to estimate preferences and the intra-household bargaining process, which relies on stated preferences data collected in the Health and Retirement Study. Respondents were asked to choose between hypothetical retirement trajectories describing the retirement ages and replacement rates of both spouses from three perspectives: considering their own preferences only, the preferences of their spouse only, or the most likely decision for the household. With these data, all model parameters are identified and potential sources of joint retirement can be disentangled. We find that males misperceive their wives' preferences, overestimating their disutility of work. Our estimates correct for this bias. They suggest that correlation in unobserved heterogeneity components of the partners' marginal utility of leisure explains a large share of joint retirement decisions. We also find significant positive complementarities in leisure, but this explains a much smaller part of joint retirement.
    Keywords: Collective models, Leisure complementarity, Stated choices, Identification.
    JEL: D13 J26 C81
    Date: 2018
  3. By: Bick, Alexander (Arizona State University); Brüggemann, Bettina (McMaster University); Fuchs-Schündeln, Nicola (Goethe University Frankfurt); Paule-Paludkiewicz, Hannah (Goethe University Frankfurt)
    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.
    Keywords: taxation, two-earner households, hours worked
    JEL: E60 H20 H31 J22
    Date: 2018–09
  4. By: Richard Fabling (Independent Researcher)
    Abstract: Owner-operated firms are an important part of the New Zealand economy. They employ approximately 30% of the private-for-profit workforce, as well as providing jobs and income to the working proprietors themselves. This paper addresses two questions: what characteristics are associated with entrepreneurship (starting a self-employed business); and which sorts of entrepreneurs are more successful (create jobs)? We pay particular attention to differences in start-up and survival rates by business owner sex and ethnicity, but also consider whether other individual characteristics (including age and skill) and prior job characteristics also relate to the decision to start a business or to create jobs. We find substantial negative gaps in entrepreneurship for females and non-European-only ethnicity groups – gaps that arise in large part because of differential rates of entry into self-employment and, in the case of non-European-only ethnicities, higher attrition rates from self-employment after entry. These gaps persist in the presence of controls for skill, prior labour market experience and other individual characteristics.
    Keywords: Entrepreneurship; self-employment; job creation; survival; ethnicity; sex; Integrated Data Infrastructure (IDI)
    JEL: J23 L26 M13
    Date: 2018–10
  5. By: Doris Hanzl-Weiss (The Vienna Institute for International Economic Studies, wiiw); Mario Holzner (The Vienna Institute for International Economic Studies, wiiw); Roman Römisch (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: The German version can be found here. The economies of Vienna and Bratislava have followed quite different development paths over the last decades. While Vienna’s population increased by about 20% within two decades, Bratislava’s population mostly stagnated. However, when measured in GDP per capita at purchasing power parties, average income in Bratislava has surpassed that of Vienna and is now among the top-10 leading regions in Europe. Massive foreign direct investment, particularly in the automotive sector, has created full employment in Bratislava. Nevertheless, Vienna, as one of the world’s most liveable cities, is still attracting more immigration and labour markets are in less favourable conditions. Transport infrastructure between the two close cities has only recently been improving, which has left considerable scope for further reductions in travel time. Regional cooperation is under way and should be reinforced in order to meet the challenges ahead. Mass-emigration of young Slovaks over the last decades will lead to a rapid ageing in Slovakia over the next decades and the working age population is expected to shrink by almost a third by the end of the century, while Austria’s will mostly stagnate. By creating a truly common labour market in the twin-city region, Bratislava could solve the problem of labour shortages and Vienna could solve its youth unemployment problem. Policy recommendations in this respect include inter alia a more substantial improvement of intercity public transport; common educational planning and training programmes; and, commuter allowances during the nominal wage-equalisation-transition. Other major long-run challenges are the ongoing processes of digitalisation and robotisation. Here, policy recommendations include projects of innovation cooperation; coordination of innovation oriented public procurement; and, improvement of transport infrastructure to connect the twin-city region with the rest of the world in order to reap potential future gains from increased economies of scale.
    Keywords: Bratislava, Vienna, urban development, regional labour markets, education, R&D, demographic trends, wage differentials, technological change
    JEL: O18 R23 I23 J11 J31 O33
    Date: 2018–10
  6. By: Schottke, Alessa K.; Siemering, Christian
    Abstract: Based on people's ambition to be viewed as intelligent and the findings on social status and social identity we assume that higher education is associated with high social esteem. We incorporate these findings into people's educational decision and aim to explore the effects of status concerns on labor supply, wages and production. We discover that social status associated with higher education induces more workers to attend the higher educational path. In turn, labor supply of highly educated workers increases, which decreases the respective wage in equilibrium. Moreover, the wage for less educated workers increases in status concerns. There is a unique level of status concerns maximizing the product market's output. Whether production increases or decreases in status concerns depends on whether this level is exceeded or not.
    Keywords: Social Status,Labor Market,Educational Choice
    JEL: J20 J31 A13 J20 J31 A13
    Date: 2018
  7. By: Wallis, Patrick
    Abstract: Guilds made an important contribution to the provision of mutual welfare to their members in the Netherlands and some other parts of Europe, giving their members entitlements to support and assistance during periods of unemployment, sickness or disability. This paper explores the role guilds played in mutual insurance in early modern England. A study of the rules and practices of a range of guilds from London and provincial towns indicates that craft guilds in England had no visible involvement in providing mutual insurance during the sixteenth to the eighteenth centuries. They did, however, provide substantial volumes of charity, much of which was directed to members of the guild who fell into poverty. Mutual insurance emerged on a large scale in England with the Friendly Societies. However, there is no evidence that these Societies had any direct or indirect connection to craft guilds, except in seeking to project a form of conceptual kinship with a medieval fraternal past.
    Keywords: guilds; insurance; friendly societies; charity; London; England; early modern
    JEL: D02 D64 L22 N33 N43
    Date: 2018–10–01
  8. By: Heckman, James J. (University of Chicago); Moktan, Sidharth (University of Chicago)
    Abstract: This paper examines the relationship between placement of publications in Top Five (T5) journals and receipt of tenure in academic economics departments. Analyzing the job histories of tenure-track economists hired by the top 35 U.S. economics departments, we find that T5 publications have a powerful influence on tenure decisions and rates of transition to tenure. A survey of the perceptions of young economists supports the formal statistical analysis. Pursuit of T5 publications has become the obsession of the next generation of economists. However, the T5 screen is far from reliable. A substantial share of influential publications appear in non-T5 outlets. Reliance on the T5 to screen talent incentivizes careerism over creativity.
    Keywords: tenure and promotion practices, career concerns, economics publishing, citations
    JEL: A14 I23 J44 O31
    Date: 2018–10
  9. By: Nicholas W. Papageorge (John Hopkins University); Kevin Thom (New York University)
    Abstract: Recent advances have led to the discovery of specific genetic variants that predict educational attainment. We study how these variants, summarized as a linear index — known as a polygenic score — are associated with human capital accumulation and labor market outcomes in the Health and Retirement Study (HRS). We present two main sets of results. First, we find evidence that the genetic factors measured by this score interact strongly with childhood socioeconomic status in determining educational outcomes. In particular, while the polygenic score predicts higher rates of college graduation on average, this relationship is substantially stronger for individuals who grew up in households with higher socioeconomic status relative to those who grew up in poorer households. Second, the polygenic score predicts labor earnings even after adjusting for completed education, with larger returns in more recent decades. These patterns suggest that the genetic traits that promote education might allow workers to better accommodate ongoing skill biased technological change. Consistent with this interpretation, we find a positive association between the polygenic score and non-routine analytic tasks that have benefited from the introduction of new technologies. Nonetheless, the college premium remains the dominant determinant of earnings differences at all levels of the polygenic score. Given the role of childhood SES in predicting college attainment, this raises concerns about wasted potential arising from limited household resources.
    Keywords: human capital, Inequality, education, genes
    JEL: I24 J24
    Date: 2018–10
  10. By: Pawel Strzelecki
    Abstract: In the modern history, Poland has never experienced large wave of labour immigration comparable to observed since 2014. Massive immigration provoked a public discussion about the consequences of immigration for the Polish labour market. In this paper we shed some light on that problem by analysing the level of the native-immigrant wage gap in two cities in Poland using two popular methods of filtering off the impact of differences between immigrant and native workers in composition of their individual characteristics and their workplaces. These methods are: Blinder-Oaxaca decomposition and non-parametric decomposition proposed by Nopo (2008). In order to compare native and immigrant workers we use the Polish Labour Force Survey (PLFS) data and the special survey of immigrants ordered by National Bank of Poland and conducted using respondent driven sampling (RDS) method. The results of the decompositions show that the difference in average wages of immigrant and native workers until 2016 is explained mostly by the differences in the composition of features of persons and workplaces. Unexplained wage gap concerned only hourly wages in Warsaw (and amounted to between 4-15% depending on method of decomposition and weighting of the results) but was not significant in Lublin. However unexplained wage gap was significant for occupations with higher wages in both cities. In some cases migrants achieved on average higher wages than native workers. Most immigrants lived in Poland for relatively short period of time and in this early stage of immigration process there were also no signs of narrowing the unexplained wage gap for immigrants who stayed longer than others.
    Keywords: wage distribution, wage differentials, immigrants, native workers, wage gap
    JEL: J31 J61 J71
    Date: 2018–10
  11. By: Lundberg, Jacob (Timbro); Norell, John (Timbro)
    Abstract: We review the literature that uses quasi-experimental methods to estimate the elasticity of labour force participation with respect to the financial gain from work. We find a wide range of elasticities, with an average of 0.38. 26 out of 31 papers find elasticities larger than 0.1, providing strong evidence that individuals respond to incentives on the extensive margin of labour supply. Elasticities are larger for women and older workers, and have declined over time.
    Keywords: participation elasticity; quasi-experimental methods; labour supply; extensive margin
    JEL: H24 J22
    Date: 2018–10–19
  12. By: Lang, Matthias (LMU Munich)
    Abstract: Consider managers evaluating their employees\' performances. Should managers justify their subjective evaluations? Suppose a manager\'s evaluation is private information. Justifying her evaluation is costly but limits the principal\'s scope for distorting her evaluation of the employee. I show that the manager justifies her evaluation if and only if the employee\'s performance was poor. The justification assures the employee that the manager has not distorted the evaluation downwards. For good performance, however, the manager pays a constant high wage without justification. The empirical literature demonstrates that subjective evaluations are lenient and discriminate poorly between good performance levels. This pattern was attributed to biased managers. I show that these effects occur in optimal contracts without any biased behavior.
    Keywords: communication; justification; subjective evaluation; centrality; leniency; disclosure;
    JEL: D82 D86 J41 M52
    Date: 2018–10–11
  13. By: Keldenich, Carina; Knabe, Andreas
    Abstract: This paper revisits the added worker effect. Using bivariate random-effects probit estimation on data from the German Socio-Economic Panel we show that women respond to their partners’ unemployment with an increase in labor market participation, which also leads to an increase in their employment probability. Our analysis considers within- and between-effects separately, revealing differences in the relationships between women’s labor market statuses and their partners’ unemployment in the previous period (within effect) and their partners’ overall probability of being unemployed (between-effect). Furthermore, we demonstrate that partners’ employment in low-paid jobs has an effect on women’s labor market choices and outcomes similar to that of his unemployment.
    Keywords: Added Worker Effect,Labor Supply,Family Economics,Unemployment,Low-Pay Employment
    JEL: D12 D13 J22 D12 D13 J22
    Date: 2018
  14. By: Hammarstedt, Mats (Linnaeus University Centre for Discrimination and Integration Studies); Aldén, Lina (Linnaeus University Centre for Discrimination and Integration Studies); Swahnberg, Hanna (Linnaeus University Centre for Discrimination and Integration Studies)
    Abstract: We present results from a unique nationwide survey conducted in Sweden on sexual orientation and job satisfaction. Our results show that gay men, on average, seem more satisfied with their job than heterosexual men; lesbians appear less satisfied with their job than heterosexual women. However, the issue of sexual orientation and job satisfaction is complex since gay men, despite their high degree of job satisfaction, like lesbians find their job more mentally straining than heterosexuals. We conclude that gay men and lesbians are facing other stressers at work than heterosexuals do. We also conclude that discrimination and prejudice may lead gay men to have low expectations about their job; these low expectations may translate into high job satisfaction. In contrast, prejudice and discrimination may hinder lesbians from realizing their career plans, resulting in low job satisfaction.
    Keywords: Job satisfaction; Sexual orientation
    JEL: J15 J28 J71
    Date: 2018–10–12
  15. By: Michele Dell'Era (National Bank of Slovakia); Luca David Opromolla (Banco de Portugal); Luis Santos-Pinto (Banco de Portugal)
    Abstract: This paper studies the impact of optimism on occupational choice using a general equilibrium framework. The model shows that optimism has four main qualitative effects: it leads to a misallocation of talent, drives up input prices, raises the number of entrepreneurs, and makes entrepreneurs worse o . We calibrate the model to match U.S. manufacturing data. This allows us to make quantitative predictions regarding the impact of optimism on occupational choice, input prices, the returns to entrepreneurship,and output. The calibration shows that optimism can explain the empirical puzzle of the low mean returns to entrepreneurship compared to average wages.
    Keywords: General Equilibrium; Entrepreneurship; Optimism
    JEL: D50 H21 J24 L26
    Date: 2018–10
  16. By: Steve Briand (SAF - Laboratoire de Sciences Actuarielle et Financière - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon)
    Abstract: With the increase in life expectancy and demographic shocks, several public policies in the last decades aim to encourage individuals to postpone retirement. One of them, the pension bonus, gives an increased pension if individuals retire beyond their Full Retirement Age. Previous ex post analyses found that the responsiveness to this type of financial incentives, which encourage to postpone retirement, is heterogeneous among agents and that the global effect is rather limited. Deriving from previous research in Behavioural Economics, this article analyses the impact of time inconsistency in the decision to delay retirement to get the bonus. Using public national survey data, short-term and long-term impatience are measured with questions on retiring motivations. After controlling for the endogeneity of the bonus knowledge, econometric results show that time-inconsistent agents are less likely to retire with the bonus. JEL codes: C35, J26.
    Keywords: Time inconsistency,Claiming benefits,Pension Bonus
    Date: 2018–10–09
  17. By: Giacomo Gabbuti
    Abstract: This paper develops theoretical and practical motivations for studying the functional distribution of income in the past. Italy is adopted as a case study, by reason of the availability of long-run estimates on personal income inequality. The historical importance of self-employment and the recent increase in labour’s share make the Italian historical experience of further general interest. New estimates from 1895 show Italian workers accruing a low share of national income until 1945. By the end of the 1950s and the economic miracle, shares had rapidly converged to the European average. Italian history shows that studying the functional distribution of income deepens our understanding of long run distributional trends, as well as of key distributive episodes, and makes a compelling case for approaching income inequality by combining diverse sources and methodologies.
    Keywords: economic inequality, factor shares, functional distribution, Italy, labour share
    JEL: B12 D63 J31 N14 N34
    Date: 2018–10–23
  18. By: Buchholtz, Sonia (Warsaw School of Economics); Gaska, Jan (Warsaw School of Economics); Góra, Marek (Warsaw School of Economics)
    Abstract: The downward trend in replacement rate is going to affect the material wellbeing of Polish future retirees. The aim of this paper is to identify the pension strategies working Poles undertake to counteract future deterioration in material conditions, with particular interest in saving practices and labour market activity. We make use of the Pension awareness of Poles survey data (N=1006) and apply quantitative methods: binary logistic regressions and principal component analysis (PCA). We distinguish between first-best and second-best strategies. The former relates to accumulating pension wealth, while the latter to the range of actions aimed at making ends meet, provided insufficient benefit. The results show that there is a poor relationship between knowledge, plans and behaviour. Moreover, knowledge itself is limited. Even though the awareness of the worsening conditions of retirees-to-be is increasing, little is being done to counteract it. Among various demographic and socio-economic descriptors income and education play an important role in distinguishing patterns, as well as status of self-employed. Three second-best strategies have been distinguished: own responsibility, external support, rebellion. We conclude that information policy on the pension system should be improved, and the incentives for older workers to continue their careers should be strengthened.
    Keywords: pension system, population ageing, supplementary saving, labour force
    JEL: J26 D14 D91
    Date: 2018–09
  19. By: Naoki Yoshihara (School of Economics and Management, Kochi University of Technology); Roberto Veneziani (Queen Mary University of London)
    Abstract: This paper analyses the theoretical issues related to the measurement of the amount of labour used in the production of — or contained in — a bundle of goods for general technologies with heterogeneous labour. A novel axiomatic framework is used in order to formulate the key properties of the notion of labour content and analyse its theoretical foundations. The main measures of labour content used in various strands of the literature are then characterised. Quite surprisingly, a unique axiomatic structure can be identified which underlies measures of labour aggregates used in such diverse fields as neoclassical growth theory, input-output approaches, productivity analysis, and classical political economy.
    Keywords: labour content, labour productivity, technical change, axiomatic analysis
    JEL: D57 J24 O33
    Date: 2018–10

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