nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2018‒11‒19
nineteen papers chosen by
Joseph Marchand
University of Alberta

  1. Wages and the Value of Nonemployment By Simon Jäger; Benjamin Schoefer; Samuel G. Young; Josef Zweimüller
  2. Unlucky Cohorts: Estimating the Long-term Effects of Entering the Labor Market in a Recession in Large Cross-sectional Data Sets By Schwandt, Hannes; von Wachter, Till
  3. Hysteresis via Endogenous Rigidity in Wages and Participation By Doniger, Cynthia L; López-Salido, J David
  4. Long-Term Employment Relations When Agents are Present Biased By Englmaier, Florian; Fahn, Matthias; Schwarz, Marco
  5. The Effect of Incentives in Non-Routine Analytical Team Tasks - Evidence from a Field Experiment By Englmaier, Florian; Grimm, Stefan; Schindler, David; Schudy, Simeon
  6. The Italian "employment-rich" recovery: a closer look By Giulia Bovini; Eliana Viviano
  7. Longer-Run Effects of Anti-Poverty Policies on Disadvantaged Neighborhoods By David Neumark; Brian J. Asquith; Brittany Bass
  8. Discrimination against Workers with Visible Tattoos: Experimental Evidence from Germany By Daviti Jibuti
  9. Robots and reshoring: Evidence from Mexican local labor markets By Faber, Marius
  10. Vacancy Durations and Entry Wages: Evidence from Linked Vacancy-Employer-Employee Data By Kettemann, Andreas; Mueller, Andreas; Zweimüller, Josef
  11. Reaching the Top or Falling Behind? The Role of Occupational Segregation in Women's Chances of Finding a High-Paying Job Over the Life-Cycle By Gutierrez, Federico H.
  12. Public versus Private Sector Wage Gap in Egypt: Evidence from Quantile Regression on Panel Data By Tansel, Aysit; Keskin, Halil Ibrahim; Ozdemir, Zeynel Abidin
  13. On the value of time and human life By François Gardes
  14. Optimal Income Taxation with Spillovers from Employer Learning By Ashley Cooper Craig
  15. Arrival of Young Talents: The Send-down Movement and Rural Education in China By Chen, Yi; Fan, Ziying; Gu, Xiaomin; Zhou, Li-An
  16. Labor supply and the business cycle: The “Bandwagon Worker Effect” By Martín Román, Ángel L.; Cuéllar-Martín, Jaime; Moral de Blas, Alfonso
  17. A General Equilibrium Theory of Occupational Choice under Optimistic Beliefs about Entrepreneurial Ability By Dell’Era, Michele; Opromolla, Luca David; Santos-Pinto,
  18. Life cycles with Endogenous Time Allocation and Age-Dependent Mortality By Manuel Guerra; João Pereira; Miguel St. Aubyn
  19. Managing coal sector transition under the ambitious emission reduction scenario in Poland. Focus on labour By Jan Witajewski-Baltvilks; Piotr Lewandowski; Aleksander Szpor; Jan Baran; Marek Antosiewicz

  1. By: Simon Jäger; Benjamin Schoefer; Samuel G. Young; Josef Zweimüller
    Abstract: Nonemployment is often posited as a worker's outside option in wage setting models such as bargaining and wage posting. The value of this state is therefore a fundamental determinant of wages and, in turn, labor supply and job creation. We measure the effect of changes in the value of nonemployment on wages in existing jobs and among job switchers. Our quasi-experimental variation in nonemployment values arises from four large reforms of unemployment insurance (UI) benefit levels in Austria. We document that wages are insensitive to UI benefit levels: point estimates imply a wage response of less than $0.01 per $1.00 UI benefit increase, and we can reject sensitivities larger than 0.03. In contrast, a calibrated Nash bargaining model predicts a sensitivity of 0.39 – more than ten times larger. The empirical insensitivity holds even among workers with a priori low bargaining power, with low labor force attachment, with high predicted unemployment duration, among job switchers and recently unemployed workers, in areas of high unemployment, in firms with flexible pay policies, and when considering firm-level bargaining. The insensitivity of wages to the nonemployment value we document presents a puzzle to widely used wage setting protocols, and implies that nonemployment may not constitute workers' relevant threat point. Our evidence supports wage-setting mechanisms that insulate wages from the value of nonemployment.
    JEL: D43 D83 E0 E2 E24 H0 H22 H55 J0 J2 J3 J30 J31 J41 J42 J5 J6 J64 J65 M5 M52
    Date: 2018–11
  2. By: Schwandt, Hannes; von Wachter, Till
    Abstract: This paper studies the differential persistent effects of initial economic conditions for labor market entrants in the United States from 1976 to 2015 by education, gender, and race using labor force survey data. We find persistent earnings and wage reductions especially for less advantaged entrants that increases in government support only partly offset. We confirm the results are unaffected by selective migration and labor market entry by also using a double-weighted average unemployment rate at labor market entry for each birth cohort and state-of-birth cell based on average state migration rates and average cohort education rates from Census data.
    Keywords: Labor market conditions at graduation; long-term cost of recession; poverty; social programs
    JEL: E32 I14 I23 I32 J22 J31
    Date: 2018–10
  3. By: Doniger, Cynthia L; López-Salido, J David
    Abstract: We document that the past three "jobless" recoveries also featured asymmetries in labor force participation and labor compensation, with each falling to new lows during each cycle. We model these asymmetries as resulting from a strategic complementarity in firms' wage setting and workers' job search strategies. Strategic complementarity results in a continuum of possible equilibria with higher-wage equilibria welfare dominating lower-wage equilibria. Assuming that no economic agent deviates from an existing strategy unless deviation is a unilateral best response, the model exhibits (1) periods of endogenous rigidity in wages and participation, (2) persistent changes in wages, participation, and output in response to transitory movements in labor productivity, (3) sluggish recoveries including both a "jobless" phase, in which productivity recovers while unemployment remains elevated, and a "wageless" phase, in which employment recovers but wages remain depressed. Calibrating the model suggests that the U.S. unemployment rate may need to fall to as low as 2.8 percent before labor compensation recovers to pre-Financial Crisis levels.
    Keywords: hysteresis; Jobless; Kinked Labor Supply; monopsony; Real Rigid- ity; strategic complementarity
    JEL: D83 E24 J42
    Date: 2018–10
  4. By: Englmaier, Florian; Fahn, Matthias; Schwarz, Marco
    Abstract: We analyze how agents' present bias affects optimal contracting in an infinite-horizon employment setting. The principal maximizes profits by offering a menu of contracts to naive agents: a "virtual" contract - which agents plan to choose in the future - and a "real" contract which they end up choosing. This virtual contract motivates the agent and allows the principal to keep the agent below his outside option. Moreover, under limited liability, implemented effort can be inefficiently high. With a finite time horizon, the degree of exploitation of agents decreases over the life-cycle. While the baseline model abstracts from moral hazard, we show that the result persists also when allowing for non-contractible effort.
    Keywords: Dynamic Contracting; employment relations; present bias
    JEL: D03 D21 J31 M52
    Date: 2018–10
  5. By: Englmaier, Florian; Grimm, Stefan; Schindler, David; Schudy, Simeon
    Abstract: Despite the prevalence of non-routine analytical team tasks in modern economies, little is known about how incentives influence performance in these tasks. In a field experiment with more than 3000 participants, we document a positive effect of bonus incentives on the probability of completion of such a task. Bonus incentives increase performance due to the reward rather than the reference point (performance threshold) they provide. The framing of bonuses (as gains or losses) plays a minor role. Incentives improve performance also in an additional sample of presumably less motivated workers. However, incentives reduce these workers' willingness to "explore" original solutions.
    Keywords: bonus; exploration; gain; incentives; loss; non-routine; team work
    JEL: C92 C93 D03 J33 M52
    Date: 2018–10
  6. By: Giulia Bovini (Bank of Italy); Eliana Viviano (Bank of Italy)
    Abstract: We look at changes in employment in Italy after the double-dip recession. We show that since the end of 2014 the responsiveness to GDP of total employment and its payroll components (permanent and fixed-term) has risen significantly; the increase has been broad-based across sectors and it would have been larger if demographic factors had been netted out. These developments are not common to France, Spain and Germany. Therefore, we turn to Italy-specific determinants related to the recent labour market reforms. Using cell-level data drawn from the Comunicazioni Obbligatorie of the Veneto region, we find that gross permanent hires and conversions of fixed-term positions have temporarily, but significantly, benefited from the 2015-2016 hiring subsidies across all types of firms and, more smoothly, from the new regulation of dismissals introduced by the 2015 Jobs Act for medium-large firms. This latter result is clear in 2017, in the absence of subsidies to permanent hiring. Fixed-term employment has increased, likely favoured by the 2014 Poletti Decree, more strongly so when permanent hiring subsidies were lifted or weakened and among smaller firms.
    Keywords: employment responsiveness, job creation, firing costs, hiring subsidies, labour market reforms
    JEL: J6 J21 J23
    Date: 2018–10
  7. By: David Neumark; Brian J. Asquith; Brittany Bass
    Abstract: We estimate the longer-run effects of minimum wages, the Earned Income Tax Credit, and welfare on key economic indicators of economic self-sufficiency in disadvantaged neighborhoods. Our strongest findings are twofold. First, the longer-run effects of the EITC are to increase employment and to reduce poverty and public assistance, as long as we rely on national as well as state variation in EITC policy. Second, tighter welfare time limits also reduce poverty and public assistance in the longer run; while the effect on public assistance result may be mechanically related to loss of benefits, the effect on poverty is more likely behavioral. It is harder to draw firm conclusions about minimum wages and welfare benefits. With some specifications and samples, the evidence suggests that higher minimum wages lead to longer-run declines in poverty and the share of families on public assistance, whereas higher welfare benefits have adverse longer-run effects. However, the evidence on minimum wages and welfare benefits is not robust – and the estimated effects of minimum wages are sometimes in the opposite direction, including when we restrict the analysis to more recent data that is likely of more interest to policymakers.
    JEL: I38 J18 J2
    Date: 2018–11
  8. By: Daviti Jibuti
    Abstract: We use a correspondence testing approach to study discrimination against applicants with visible tattoos in the German labor market. The method has been widely employed in discrimination literature; however, the majority of papers examine objects of discrimination that are exogenously given (gender, race, ethnicity, etc.). The design of our experiment allows us to study the extent of discrimination against choice-based characteristics. We send fictitious applications to online job postings in the banking sector. Otherwise identical applications differ only in the picture attached: in the treatment group the applicants have a visible tattoo. The extent of discrimination is measured by the difference in callback rates. We find that candidates without visible tattoos have, on average, a 13 percentage point higher callback rate, or an increase in the callback rate of 54%. Following Akerlof and Kranton (2000), our results once more highlight the centrality of identity.
    Keywords: labor market discrimination; field experiment; visible tattoo;
    JEL: C93 J71
    Date: 2018–10
  9. By: Faber, Marius (University of Basel)
    Abstract: Robots in advanced economies have the potential to reduce employment in offshoring countries by fueling reshoring. Using robots instead of humans for production may reduce the relative cost of domestic production and, in turn, lower demand for imports from offshoring countries. I analyze the impact of robots on employment in an offshoring country, using data from Mexican local labor markets between 1990 and 2015. A recent literature shows that the effect of robots on local employment can be estimated by regressing the change in employment on exposure to domestic robots in local labor markets. I similarly construct a measure of exposure to foreign robots , assuming that the share of US robots competing with Mexican labor is proportional to that industry's initial reliance on Mexican imports. Using robot penetration in the rest of the world (i.e., neither in Mexico nor in the US) as an instrument for domestic and foreign robotization, I show that the use of robots in the US has a robust and sizable, negative impact on employment in Mexico by reducing exports to the US. The effect is not driven by pre-existing trends, the automotive industry or migration patterns. It is strongest for low-skilled machine operators and technicians in highly robotized manufacturing industries as well as high-skilled managers and professionals in the service industry.
    Keywords: Technology: trade; robots; reshoring; offshoring
    JEL: F16 O14 O33
    Date: 2018–10–30
  10. By: Kettemann, Andreas; Mueller, Andreas; Zweimüller, Josef
    Abstract: This paper explores the relationship between the duration of a vacancy and the starting wage of a new job, using unusually informative data comprising detailed information on vacancies, the establishments posting the vacancies, and the workers eventually filling the vacancies. We find that vacancy durations are negatively correlated with the starting wage and that this negative association is particularly strong with the establishment component of the starting wage. We also confirm previous findings that growing establishments fill their vacancies faster. To understand the relationship between establishment growth, vacancy filling and entry wages, we calibrate a model with directed search and ex-ante heterogeneous workers and firms. We find a strong tension between matching the sharp increase in vacancy filling for growing firms and the response of vacancy filling to firm-level wages. We discuss the implications of this finding as well as potential resolutions.
    Keywords: Recruiting; search; Vacancy Duration; Vacancy Posting; wages
    JEL: E24 J31 J63
    Date: 2018–10
  11. By: Gutierrez, Federico H.
    Abstract: Using a two-stage decomposition technique, this paper analyzes the role of occupational segregation in explaining the probability of women vis-à-vis men of finding high-paying jobs over the life-cycle. Jobs are classified as highly-remunerated if their compensation exceeds a threshold, which is set at different values to span the entire wage distribution. Results obtained from pooled CPS surveys indicate that the importance of occupational segregation remains virtually unchanged over the life-cycle for low- and middle-wage workers. However, women's access to high-paying occupations becomes significantly more restricted as workers age, suggesting a previously undocumented type of `glass ceiling' in the U.S.
    Keywords: Occupational segregation,glass ceiling,life-cycle career,gender wage gap
    JEL: J31 J24 J71
    Date: 2018
  12. By: Tansel, Aysit (Middle East Technical University); Keskin, Halil Ibrahim (Cukurova University); Ozdemir, Zeynel Abidin (Gazi University)
    Abstract: This paper considers the public and private sector wage earners in Egypt and examines their wage distribution during 1998-2012 using Egyptian Labor Market Panel Survey. We estimate the public-private sector wage gap with Mincer wage equations both at the mean and at different quantiles of the wage distribution. In this process we take into account observable and unobservable characteristics of the individuals using the panel feature of the data with a fixed effects model. We address sector of employment selection issue for both males and females. We find that there is very little evidence of sample selection in our data. Therefore, we present both the selection corrected results and the results with no selection correction. We find a persistent public sector wage penalty for males and public sector wage premium for females in the face of extensive sensitivity checks. They are larger when unobserved heterogeneity is taken into account for males but insignificant for females. They are similar across the quantiles for males but, smaller at the top than at the bottom of the conditional wage distribution for females. We further examine the public sector wage gap over time and in different sub-groups according to age and education. The public sector wage penalty for males has decreased recently over time and is larger for the better educated and younger. We also find substantial regional differences in public sector wage gap for males.
    Keywords: public sector, private sector, wage gap, gender, sample selection, quantile regression, panel data, Egypt
    JEL: C21 C23 J16 J31 J45
    Date: 2018–10
  13. By: François Gardes (Université Paris1 Panthéon-Sorbonne - Centre d'Economie de la Sorbonne)
    Abstract: The opportunity cost of time is estimated using a model basef on domestic productions depending on monetary and time expenditures and a direct utility depending on produced commodities. These factors of domestic productions are measured by the matching of a Family Budget survey with a ime Use survey. The new model is estimated on Canadian, French, Polish, U.S. and Burkina-Faso statistics. It allows estimating the economic value of human life based on the integration of the marginal value of each instant during the individual's life cycle. This value is shown to give a different pattern across countries compared to their per capita GDP. Finally, the opportunity cost of time is shown to vary between commodities according to the possibility to substitute money and time in the domestic production. It also increases relatively of the average wage rate at a macro level, between countries, according to the degree of liberalization of the labor market
    Keywords: opportunity cost of time; value of human life
    JEL: D13 D91 J31
    Date: 2018–10
  14. By: Ashley Cooper Craig
    Abstract: I study optimal income taxation when human capital investment is imperfectly observable by employers. In my model, Bayesian employer inference about worker productivity drives a wedge between the private and social returns to human capital investment by compressing the wage distribution. The resulting positive externality from worker investment, all else being equal, calls for lower marginal tax rates. To quantify the significance of this externality for optimal taxation, I calibrate my model to match empirical moments from the United States. To inform my calibration, I provide new evidence on how the speed of employer learning about new labor market entrants varies over the worker productivity distribution. Taking into account the spillover from human capital investment introduced by employer inference reduces optimal marginal tax rates by up to 13 percentage points and produces a welfare gain equivalent to raising every worker's consumption by one percent.
    JEL: D62 D82 H2 I2 J24
    Date: 2018–11–09
  15. By: Chen, Yi; Fan, Ziying; Gu, Xiaomin; Zhou, Li-An
    Abstract: This paper studies human-capital spillovers and its persistence by exploiting a unique event in modern China|the send-down movement. From 1962 to 1979, the Chinese central government mandated the temporary resettlement of roughly 18 million urban youths to rural areas across the country. The movement's coercive features, together with strict restrictions on migration during that period, provide an ideal natural experiment to identify the causal impact of the better-educated sent-down youths (SDYs) on the less-educated local rural residents. Using a county-level dataset compiled from over 3,000 book-length local gazetteers and microlevel population censuses, we find that a greater exposure to SDYs significantly increased local residents' educational achievement. Our estimate shows that the unintended gain of rural education almost compensated the loss in urban China due to the educational disruption during the Cultural Revolution. The positive effect gradually declined as SDYs started to return to their urban homes in the late 1970s, but it never dropped to zero, indicating the persistence of human-capital spillovers. We also find suggestive evidence that the arrival of young talents reshapes the attitudes of local residents toward education.
    Keywords: Send-down Movement,Rural Education,Human-capital Spillovers
    JEL: I25 J24 N35 O15 R23
    Date: 2018
  16. By: Martín Román, Ángel L.; Cuéllar-Martín, Jaime; Moral de Blas, Alfonso
    Abstract: The relationship between the labor force participation and the business cycle has become a topic in the economic literature. However, few studies have considered whether the cyclical sensitivity of the labor force participation is influenced by “social effects”. In this paper, we construct a theoretical model to develop the “Added Worker Effect” and the “Discouraged Worker Effect”, and we integrate the “social effects”, coining a new concept, the Bandwagon Worker Effect (BWE). To estimate the cyclical sensitivity of the labor force participation, we employ a panel dataset of fifty Spanish provinces for the period 1977–2015. Finally, we use spatial econometrics techniques to test the existence of the BWE in the local labor markets in Spain. Our results reveal that there exists a positive spatial dependence in the cyclical sensitivity of the labor force participation that decreases as we fix a laxer neighborhood criterion, which verifies the existence of the BWE. From the perspective of economic policy, our work confirms that “social effects” play a key role at the time of determining the economic dynamics of the territories.
    Keywords: Labor force participation,business cycle,regional labor markets,bandwagon effect,spatial dependence
    JEL: C23 D03 E32 J21 R23
    Date: 2018
  17. By: Dell’Era, Michele; Opromolla, Luca David; Santos-Pinto,
    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 off. 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: entrepreneurship; General Equilibrium; Optimism
    JEL: D50 H21 J24 L26
    Date: 2018–10
  18. By: Manuel Guerra; João Pereira; Miguel St. Aubyn
    Abstract: The negative effect of population aging on the economy can be mitigated by a behavioral effect of people as a reaction to a higher life expectancy. We analyze the optimal life-cycle of individuals that allocate time at the intensive margin between leisure, human capital accumulation, and labor supply while facing an age-dependent mortality. This allows to enhance effects of changes in life expectancy on labor supply and human capital accumulation and to uncover trade-offs between time allocations at different stages of the life-cycle. Our life-cycles are characterized by on the job training throughout all the working life with a possibility of a temporary exit from the labor market. We simulate the model numerically and nd that with a higher life expectancy, labor supply increases at the intensive margin and the individual invests more in human capital. We also nd a willingness to increase labor supply at the extensive margin.
    Keywords: Life-Cycle; Age-Dependent Mortality; Aging; Time Allocation
    JEL: J22 J24 H55
    Date: 2018–11
  19. By: Jan Witajewski-Baltvilks; Piotr Lewandowski; Aleksander Szpor; Jan Baran; Marek Antosiewicz
    Abstract: This report presents the main economic facts on the role of coal in the Polish economy, and analyses the implications of the transition away from coal for coal consumption and coal mining employment in Poland. Poland’s energy mix relies on coal, most of which is domestically produced. We argue that issues related to job creation and the cushioning of negative shocks for workers are key for the phasing out of coal in Poland, especially at the regional and local levels. Our simulations show that achieving the Paris Agreement target is feasible in Poland provided hard coal consumption is cut by 20% between 2015 and 2030, and by 55% between 2015 and 2050. We estimate that this reduction in coal consumption would translate into a decline in mining employment of 47% between 2015 and 2030, and of 77% between 2015 and 2050. On the labour supply side, the reduction in employment can be achieved through natural attrition; i.e., through an outflow of workers to retirement and a moderate inflow of new workers. Training programmes, vocational courses, in-work benefits, and social policy instruments should be used to ease the transition.
    Keywords: coal, mining, low-carbon transition, structural change, labour market
    JEL: J21 L71 Q43
    Date: 2018–10

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