nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2018‒11‒12
twenty-one papers chosen by
Joseph Marchand
University of Alberta

  1. Incarceration, Recidivism and Employment By Bhuller, Manudeep; Dahl, Gordon; Løken, Katrine; Mogstad, Magne
  2. Entry Barriers and the Labor Market Outcomes of Incumbent Workers: Evidence from a Deregulation Reform in the German Crafts Sector By Lergetporer, Philipp; Ruhose, Jens; Simon, Lisa
  3. Grandparents, Moms, or Dads? Why Children of Teen Mothers Do Worse in Life By Anna Aizer; Paul J. Devereux; Kjell G. Salvanes
  4. Inequality in the Joint Distribution of Consumption and Time Use By Jeehoon Han; Bruce D. Meyer; James X. Sullivan
  5. The Wider Benefits of Adult Learning: Work-Related Training and Social Capital By Ruhose, Jens; Thomsen, Stephan L.; Weilage, Insa
  6. Early Determinants of Work Disability in an International Perspective By Axel Börsch-Supan; Tabea Bucher-Koenen; Felizia Hanemann
  7. CEO Performance in Severe Crises: The Role of Newcomers By Amador, José; Sazedj, Sharmin; Tavares, José
  8. The Salary Taboo: Privacy Norms and the Diffusion of Information By Zoë B. Cullen; Ricardo Perez-Truglia
  9. Connecting to Power: Political Connections, Innovation, and Firm Dynamics By Akcigit, Ufuk; Baslandze, Salomé; Lotti, Francesca
  10. The Value of Working Conditions in the United States and Implications for the Structure of Wages By Nicole Maestas; Kathleen J. Mullen; David Powell; Till von Wachter; Jeffrey B. Wenger
  11. Performance Pay and Prior Learning: Evidence from a Retail Chain By Manthei, Kathrin; Sliwka, Dirk; Vogelsang, Timo
  12. The Timing of Childbearing and Female Labor Supply in China By Ma, Xinxin; Zhang, Jingwen
  13. Unequal Use of Social Insurance Benefits: The Role of Employers By Sarah Bana; Kelly Bedard; Maya Rossin-Slater; Jenna Stearns
  14. The German minimum wage: Effects on business expectations, profitability, and investments By Bossler, Mario; Gürtzgen, Nicole; Lochner, Benjamin; Betzl, Ute; Feist, Lisa
  15. Production and Learning in Teams By Kyle Herkenhoff; Jeremy Lise; Guido Menzio; Gordon M. Phillips
  16. Structural Analysis of Influences on Workplace Productivity Loss By Martin Stepanek; Kaveh Jahanshahi
  17. Top Incomes in Germany, 1871-2014 By Bartels, Charlotte
  18. Clawback Provisions, Executive Pay, and Accounting Manipulation By Alvaro Remesal
  19. The impact of anti-congestion policies and the role of labor-supply margins By Hirte, Georg; Tscharaktschiew, Stefan
  20. Upworkers in Finland: Survey Results By Pajarinen, Mika; Rouvinen, Petri; Claussen, Jörg; Hakanen, Jari; Kovalainen, Anne; Kretschmer, Tobias; Poutanen, Seppo; Seifried, Mareike; Seppänen, Laura
  21. The characteristics of energy employment in a system-wide context By Grant Allan; Andrew G Ross

  1. By: Bhuller, Manudeep; Dahl, Gordon; Løken, Katrine; Mogstad, Magne
    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: 2018–10
  2. By: Lergetporer, Philipp (Ifo Institute for Economic Research); Ruhose, Jens (Leibniz University of Hannover); Simon, Lisa (CESifo)
    Abstract: We study the labor market outcomes of a deregulation reform in Germany that removed licensing requirements to become self-employed in some occupations. Using longitudinal social security data, we implement a matched difference-in-differences design with entropy balancing to account for observable characteristics and unobserved individual heterogeneity. The reform tripled the number of businesses within ten years and led to slower earnings growth and higher unemployment for incumbent workers in deregulated occupations. However, the reform effect seems rather small, which we attribute to the relatively low competitiveness of new businesses. Supporting this view, the reform did not lead to overall employment growth.
    Keywords: deregulation, entry barriers, self-employment, labor market outcomes, entropy balancing, matched difference-in-differences
    JEL: J31 J24 L11
    Date: 2018–09
  3. By: Anna Aizer; Paul J. Devereux; Kjell G. Salvanes
    Abstract: Women who give birth as teens have worse subsequent educational and labor market outcomes than women who have first births at older ages. However, previous research has attributed much of these effects to selection rather than a causal effect of teen childbearing. Despite this, there are still reasons to believe that children of teen mothers may do worse as their mothers may be less mature, have fewer financial resources when the child is young, and may partner with fathers of lower quality. Using Norwegian register data, we compare outcomes of children of sisters who have first births at different ages. Our evidence suggests that the causal effect of being a child of a teen mother is much smaller than that implied by the cross-sectional differences but that there are still significant long-term, adverse consequences, especially for children born to the youngest teen mothers. Unlike previous research, we have information on fathers and find that negative selection of fathers of children born to teen mothers plays an important role in producing inferior child outcomes. These effects are particularly large for mothers from higher socio-economic groups.
    JEL: I3 J13 J24
    Date: 2018–10
  4. By: Jeehoon Han; Bruce D. Meyer; James X. Sullivan
    Abstract: This paper examines inequality in both leisure and consumption over the past four decades using time use surveys stretching from 1975 to 2016. We show that individual and family characteristics, especially when including work hours, explain most of the long run variation in leisure. We then use these characteristics to predict the distribution of leisure in the Consumer Expenditure Survey, a survey that also provides detailed information on consumption. The advantage of this approach is that it gives us measures of consumption and leisure at the family level within a single data source. We find that leisure time is highest for families at the bottom of the consumption distribution, and typically declines monotonically as consumption rises. However, the consumption-leisure gradient is small. We find noticeable differences across family types, with the gradient being largest for single parent families and single individuals and smallest for families with a head age 65 or older. Overall, these results indicate that including both leisure and consumption, as opposed to just consumption, in a measure of economic well-being will result in less inequality. However, because the consumption-leisure gradient is not very steep, the dampening effect of leisure on overall inequality is small.
    JEL: D63 I3 J22
    Date: 2018–10
  5. By: Ruhose, Jens (Leibniz University of Hannover); Thomsen, Stephan L. (Leibniz University of Hannover); Weilage, Insa (Leibniz University of Hannover)
    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: 2018–09
  6. By: Axel Börsch-Supan; Tabea Bucher-Koenen; Felizia Hanemann
    Abstract: This paper studies the interrelated roles of health and welfare state policies in the decision to take up disability insurance (DI) benefits due to work disability (WD), defined as the (partial) inability to engage in gainful employment due to physical or mental illness. We exploit the large international variation of health, self-reported WD and the uptake of DI benefits in the US and Europe using a harmonized data set with life history information assembled from the Survey of Health Ageing and Retirement in Europe (SHARE), the English Longitudinal Study on Ageing (ELSA) and the Health and Retirement Study (HRS). Particular attention is given to the role of life-time health and other life-time experiences in explaining WD and DI uptake later in life. We find that while our large set of health measures explains a substantial share of the within-country variation in WD and DI, this is not the case for the variation across countries. Rather, most of the variation between countries is explained by differences in DI policies.
    JEL: H55 J21 J26
    Date: 2018–10
  7. By: Amador, José; Sazedj, Sharmin; Tavares, José
    Abstract: A firm's optimal choice of a CEO involves a trade-off between hiring newcomers - who take time to profit from learning by doing - and avoiding CEO turnover or opting for internal successions - risking that the old guard fall prey to an experience trap, repeating the same old business practices. When firms are hit by an aggregate economic shock, exogenous, unexpected, and unprecedented in nature, reach, magnitude and persistence, conducting 'business as usual' no longer applies and having in office a newcomer - a CEO hired recently from another firm - may turn out to be particularly valuable to efficiently abandon old management practices. We use a unique matched firm-employee dataset for Portuguese firms in the wake of the last economic crisis, to estimate the value of a newcomer CEO, who is by nature prone to avoid the experience trap. During the crisis, firms run by newcomer CEOs outperform those run by high tenured and/or internally promoted CEOs in terms of both value added (GVA) and sales. We estimate a performance gap of approximately 18%, and confirm that no such gap exists prior to the crisis. Firms managed by newcomers are also less likely to fail during the crisis. Propensity core matching confirms our difference-in-differences results. Our findings are robust to different measures of firm performance, across different samples and specifications, and to the inclusion of several CEO and firm controls, including fixed effects. Finally, we show that newcomer CEOs make different decisions in terms of personnel, expenditure, investment and international trade, attaining higher productivity levels.
    Keywords: CEO tenure; firm performance; great recession
    JEL: G34 J24 L25
    Date: 2018–11
  8. By: Zoë B. Cullen; Ricardo Perez-Truglia
    Abstract: The diffusion of salary information has important implications for labor markets, such as for wage discrimination policies and collective bargaining. Despite the widespread view that transmission of salary information is imperfect and unequal, there is little direct evidence on the magnitude and sources of these frictions. We conduct a field experiment with 752 employees at a multibillion-dollar corporation to address these questions. We provide evidence of significant frictions in how employees search for and share salary information and suggestive evidence that these frictions are due to privacy norms. We do not find any significant differences in information frictions between female and male employees.
    JEL: C93 D83 D91 J3 J71 M5 Z1
    Date: 2018–10
  9. By: Akcigit, Ufuk; Baslandze, Salomé; Lotti, Francesca
    Abstract: Do political connections affect firm dynamics, innovation, and creative destruction? We study Italian firms and their workers to answer this question. Our analysis uses a brand-new dataset, spanning the period from 1993 to 2014, where we merge: (i) firm-level balance sheet data; (ii) social security data on the universe of workers; (iii) patent data from the European Patent Office; (iv) the national registry of local politicians; and (v) detailed data on local elections in Italy. We find that firm-level political connections are widespread, especially among large firms, and that industries with a larger share of politically connected firms feature worse firm dynamics. We identify a leadership paradox: When compared to their competitors, market leaders are much more likely to be politically connected, but much less likely to innovate. In addition, political connections relate to a higher rate of survival, as well as growth in employment and revenue, but not in productivity - a result that we also confirm using a regression discontinuity design. We build a firm dynamics model, where we allow firms to invest in innovation and/or political connection to advance their productivity and to overcome certain market frictions. Our model highlights a new interaction between static gains and dynamic losses from rent-seeking in aggregate productivity.
    Keywords: creative destruction; Firm Dynamics; Innovation; Political Connections; productivity
    JEL: D7 O3 O4
    Date: 2018–10
  10. By: Nicole Maestas; Kathleen J. Mullen; David Powell; Till von Wachter; Jeffrey B. Wenger
    Abstract: This paper documents variation in working conditions among workers in the United States, presents new estimates of how workers value these conditions, and assesses the impact of working conditions on estimates of the wage structure and inequality. We use evidence from a series of stated-preference experiments to estimate workers’ willingness-to-pay for a broad set of job characteristics, which we validate with actual job choices. We find that working conditions vary substantially across workers, play a significant role in job choice decisions, and are central components of the compensation received by workers. Preferences vary by demographic groups and throughout the wage distribution. We find that accounting for differences in preferences for working conditions often exacerbates wage differentials by race, age, and education, and intensifies measures of wage inequality.
    JEL: J31 J32
    Date: 2018–10
  11. By: Manthei, Kathrin (University of Cologne); Sliwka, Dirk (University of Cologne); Vogelsang, Timo (University of Cologne)
    Abstract: We run two field experiments within a large retail chain showing that the effectiveness of performance pay crucially hinges on prior job experience. Introducing sales-based performance pay for district- and later for store-managers, we find negligible average treatment effects. Based on surveys and interviews, we develop a formal model demonstrating that the effect of performance pay decreases with experience and may even vanish in the limit. We provide empirical evidence in line with this hypothesis, for instance, finding positive treatment effects (only) in stores with low job experience.
    Keywords: performance pay, incentives, learning, experience, insider econometrics, field experiment, randomized control trial (RCT)
    JEL: J33 M52 C93
    Date: 2018–09
  12. By: Ma, Xinxin; Zhang, Jingwen
    Abstract: For decades Chinese married women have delayed conceiving their first child influenced by government birth limitation policies, the improvement of women’s educational attainment and the changes in childbearing preferences. Even though it can be thought that the delayed childbearing may affect female labor supply in China, there are few empirical studies on the issue. Long-term longitudinal survey data from the China Health and Nutrition Survey (CHNS) from 1989 to 2015 is used to conduct an empirical study to investigate the impact of the timing of childbearing on the labor supply (labor participation and irregular work) of Chinese married women. This study employs the random-effects model and the instrumental variables (IV) method to address the heterogeneity and endogeneity problems. The results indicate that the decision to delay childbearing may increase the female labor supply and decrease the probability of women becoming irregular workers. Robustness checks confirm these results.
    Keywords: Timing of childbearing, female labor supply, irregular work, work-family conflict, China
    JEL: J13 J16 J22
    Date: 2018–10
  13. By: Sarah Bana; Kelly Bedard; Maya Rossin-Slater; Jenna Stearns
    Abstract: California's Disability Insurance (DI) and Paid Family Leave (PFL) programs have become important sources of social insurance, with benefit payments now exceeding those of the state's Unemployment Insurance program. However, there is considerable inequality in program take-up. While existing research shows that firm-specific factors explain a significant part of the growing earnings inequality in the U.S., little is known about the role of firms in determining the use of public leave-taking benefits. Using administrative data from California, we find strong evidence that DI and PFL program take-up is substantially higher in firms with high earnings premiums. A one standard deviation increase in the firm premium is associated with a 57 percent higher claim rate incidence. Our results suggest that changes in firm behavior have the potential to impact social insurance use and thus reduce an important dimension of inequality in America.
    JEL: J31 J32 J38
    Date: 2018–10
  14. By: Bossler, Mario; Gürtzgen, Nicole; Lochner, Benjamin; Betzl, Ute; Feist, Lisa
    Abstract: In this article, we analyze the effects of the introduction of the German minimum wage using difference-in-differences estimations applied to the IAB Establishment Panel. The treatment effects on the treated establishments show a slight reduction in the employers' expected development of business volume. When we analyze the effects of the minimum wage on the net sales of intermediates and wages costs, we observe a reduction, which is fully explained by the increase in wage costs induced by the minimum wage. The results do not point to effects on establishment-level productivity or capital investments. Looking at investments in human capital, we do not observe any effects on apprenticeship offers or the placement of apprentices. If anything, the results point at a slight reduction in the provision of further training.
    Keywords: Minimum Wage,Business Expectations,Profitability,Training
    JEL: C23 J38
    Date: 2018
  15. By: Kyle Herkenhoff; Jeremy Lise; Guido Menzio; Gordon M. Phillips
    Abstract: The effect of coworkers on the learning and the productivity of an individual is measured combining theory and data. The theory is a frictional equilibrium model of the labor market in which production and the accumulation of human capital of an individual are allowed to depend on the human capital of coworkers. The data is a matched employer-employee dataset of US firms and workers. The measured production function is supermodular. The measured human capital function is non-linear: Workers catch-up to more knowledgeable coworkers, but are not dragged-down by less knowledgeable ones. The market equilibrium features a pattern of sorting of coworkers across teams that is inefficiently positive. This inefficiency results in low human capital individuals having too few chances to learn from more knowledgeable coworkers and, in turn, in a stock of human capital and a flow of output that are inefficiently low.
    JEL: E24 J24
    Date: 2018–10
  16. By: Martin Stepanek (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nabrezi 6, 111 01 Prague 1, Czech Republic; RAND Europe, Cambridge, UK); Kaveh Jahanshahi (University of Cambridge, Cambridge, UK)
    Abstract: This study investigates systematically and simultaneously a wide range of influences on workplace productivity loss. Workplace productivity has been widely discussed in literature for many years, yet most of the existing studies focus on a narrow pathway of effects; this can potentially result in overestimating the examined influences due to capturing unobserved effects of omitted variables. In this study we examine various productivity determinants (workers' characteristics, lifestyle, commuting, health and wellbeing, and job and workplace environment) in a single combined model, after investigating their interrelations, to re-assess some of the previous findings and provide new insights into the subject. This is made possible through utilising a unique and extensive dataset of nearly 30,000 employees in the UK collected in 2017 and developing a comprehensive Structural Equation Model (SEM). Our results generally confirm the previous findings but also highlight the necessity to consider a broad range of factors as some of the initially strong influences (e.g. of work engagement) become statistically insignificant once additional variables are introduced into the model. Overall, personal characteristics, particularly physical and mental health, as well as job characteristics such as stress at work explain most of the variance in productivity loss, while lifestyle or working patterns are less important.
    Keywords: SEM, productivity, absenteeism, presenteeism
    JEL: C38 J24
    Date: 2018–10
  17. By: Bartels, Charlotte (DIW Berlin)
    Abstract: This study provides new evidence on top income shares in Germany from the period of industrialization to the present. Income concentration was high in the nineteenth century, dropped sharply after World War I and during the hyperinflation years of the 1920s, and increased rapidly throughout the Nazi period beginning in the 1930s. Following the end of World War II, German top income shares returned to 1920s levels. The German pattern stands in sharp contrast to developments in France, the UK, and the US, where World War II brought a sizeable and lasting reduction in top income shares. Since the turn of the millennium, income concentration in Germany has been on the rise and is today among the highest in Europe. Regression analysis reveals that rising top income shares are positively associated with the capital share, trade and technological change.
    Keywords: welfare state, income inequality, income distribution, top incomes, Germany
    JEL: D31 D63 J31 N30
    Date: 2018–09
  18. By: Alvaro Remesal (CUNEF)
    Abstract: Clawback provisions allow shareholders to recover previously-awarded compensation from managers involved in accounting manipulation or misconduct. I assess theoretically and empirically the effects of clawback provisions on the structure of managerial compensation and the frequency of accounting manipulation. In a principal-agent model I show how, in the presence of clawback enforcement frictions, clawback adoption can tilt the optimal compensation schedule towards the long-term. I test the empirical relevance of the theoretical implication using data from U.S. public firms in the 2002-2016 period. The identification deals with the endogenous timing of adoption and measurement error by exploiting variation in clawback adoption across a firm's board interlock. I find that, in those firms with fewer pre-adoption independent directors, clawback adoption increases the wealthperformance sensitivity of unvested (long-term) compensation, while reduces the frequency of earnings manipulation. The results suggest that enforcement frictions are relevant, particularly for firms where managers face weak monitoring by shareholders.
    Keywords: Clawback, executives, governance, compensation, accounting manipulation.
    JEL: D86 G34 J33
    Date: 2018–09
  19. By: Hirte, Georg; Tscharaktschiew, Stefan
    Abstract: Transportation economists apply different labor supply models when studying anti-congestion policy: (i) endogenous working hours; (ii) endogenous workdays but given daily working hours; (iii) labor supply as a residual. We study whether the outcome of anti-congestion policies that change the relative cost of labor supply margins, and, thus, may affect decisions on working hours and working days, is robust against the model applied. In particular, we focus on welfare implications in the presence of other taxes when there is a congestion externality. We find surprisingly strong differences in quantity and sign. Further, we develop a clear recommendation for future research on issues that include decisions on commuting trips. Researchers shall apply both a model of endogenous working hours that provides an upper limit and a model of endogenous workdays that provide a lower limit of results for welfare changes, optimal policies and two optimal tax components (Pigouvian and Ramsey terms).
    Keywords: Public Economics,Tax Design,Time Allocation,Labor Supply,Pigouvian Tax,Urban Economics,CGE,Spatial Modeling,Transportation,Transportation Economics,Transport Policy,Congestion
    JEL: H2 H3 J2 R1 R4
    Date: 2018
  20. By: Pajarinen, Mika; Rouvinen, Petri; Claussen, Jörg; Hakanen, Jari; Kovalainen, Anne; Kretschmer, Tobias; Poutanen, Seppo; Seifried, Mareike; Seppänen, Laura
    Abstract: Abstract Upwork is the world’s largest online labor market platform connecting clients with freelance professionals from various disciplines ranging from administrative support to web development. This study documents the main findings of the Upworkers in Finland survey conducted in December 2017. The survey targeted all freelancers listed on the platform who (a) claimed to reside in Finland and (b) had earned at least $1 since signing up. Of the 207 such freelancers found publicly listed on Upwork on 8 December 2017, 58.9% responded to our online questionnaire. Most Upworkers in Finland are translators, followed by designers and coders. They are typically less than 30 years old, involved in higher education or training (or already have at least a college-level degree), and live in the capital region or another urban area. Approximately one-third are immigrants or other nonnative speakers. They have a strong preference for entrepreneurship/self-employment over paid/salaried employment. Independence, flexibility, and extra earnings are particularly motivators for online work engagement. The respondents are both quite fond of the platform and satisfied with their current online work arrangement.
    Keywords: Platform economy, Future of work, Online labor markets, Upwork, Finland
    JEL: J22 M55 O33
    Date: 2018–10–30
  21. By: Grant Allan (Department of Economics, University of Strathclyde); Andrew G Ross (Department of Economics, University of Strathclyde)
    Abstract: Anticipated changes in energy provision over the next decades will likely have major implications on employment within energy activities. To understand the possible consequences, many studies have considered the level and types of employment in existing energy technologies. Using the hypothetical extraction approach for the UK, we explore the employment in and supported by energy activities - including across occupations and skills categories. We show that the impact on occupation and skills across the whole economy is more evenly spread than the employment in individual sectors. From the empirical results presented here, it is evident that the system-wide demands for skills including not only the direct, but also knock-on effects across the economy can change the pattern of labour market needs, which have implications for labour market planning in the low carbon transition.
    Keywords: C67, J21, Q43
    Date: 2018–09

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