nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2018‒11‒26
twenty-two papers chosen by
Joseph Marchand
University of Alberta

  1. The Effects of Trade Exposure on Marriage and Fertility Choices: Evidence from Brazil By Braga, Breno
  2. Regional Divergence and Import Competition By Javier Quintana González
  3. Labor Specialization as a Source of Market Frictions By Maria Molina-Domene
  4. The Role of Institutions and Immigrant Networks in Firms' Offshoring Decisions By Moriconi, Simone; Peri, Giovanni; Pozzoli, Dario
  5. Long-Term Changes in Married Couples' Labor Supply and Taxes: Evidence from the US and Europe Since the 1980s By Alexander Bick; Bettina Brüggemann; Nicola Fuchs-Schündeln; Hannah Paule-Paludkiewicz
  6. Inheritance Taxation and Wealth Effects on the Labor Supply of Heirs By Fabian Kindermann; Lukas Mayr; Dominik Sachs
  7. Which Ladder to Climb? Wages of workers by job, plant, and education By Bayer, Christian; Kuhn, Moritz
  8. The Subminimum Wage Reform in Greece and the Labour-Labour Substitution Hypothesis By Theano Kakoulidou; Panagiotis Konstantinou; Thomas Moutos
  9. The Effect of Physical and Cognitive Decline at Older Ages on Job Mismatch and Retirement By Péter Hudomiet; Michael D. Hurd; Susann Rohwedder; Robert J. Willis
  10. Human Capital Inequality: Empirical Evidence By Brant Abbott; Giovanni Gallipoli
  11. Diverging Trends in National and Local Concentration By Rossi-Hansberg, Esteban; Sarte, Pierre-Daniel; Trachter, Nicholas
  12. Industrial relations reform, firm-level bargaining and nominal wage floors By Giannakopoulosa, Nicholas; Laliotis, Ioannis
  13. Suddenly Married: Joint Taxation And The Labor Supply Of Same-Sex Married Couples After U.S. v. Windsor By Elliott Isaac
  14. An Horizontal Innovation Growth Model with Endogenous Time Allocation and Non-Stable Demography By Manuel Guerra; João Pereira; Miguel St. Aubyn
  15. Works Councils, Training and Employee Satisfaction By Bellmann, Lutz; Hübler, Olaf; Leber, Ute
  16. Job Quality, Health and Productivity: An evidence-based framework for analysis By Anne Saint-Martin; Hande Inanc; Christopher Prinz
  17. Globalization and the Jobs Ladder By Davidson, Carl; Heyman, Fredrik; Matusz, Steven; Sjöholm, Fredrik; Zhu, Susan Chun
  18. Wage Income Distribution and Mobility in Malta By Clemens Knoppe
  19. The introduction of serfdom and labour markets By Peter Sandholt Jensen; Cristina Victoria Radu; Battista Severgnini; Paul Sharp
  20. Impacts of Green Growth Policies on Labour Markets and Wage Income Distribution: A General Equilibrium Application to Climate and Energy Policies By Jean Chateau; Ruben Bibas; Elisa Lanzi
  21. The role of technical and vocational education and training (TVET) in fostering inclusive growth at the local level in Southeast Asia By OECD
  22. Minimum Wage Competition between Local Governments in China By Li, Yanan; Kanbur, Ravi; Lin, Carl

  1. By: Braga, Breno (Urban Institute)
    Abstract: This paper investigates the effect of a large economic shock on marriage and fertility choices. I exploit the 1990's trade liberalization in Brazil, which created exogenous negative labor market shocks to regions most exposed to foreign competition. While trade liberalization had a positive impact on reducing the price of consumer goods in Brazil, it also negatively impacted employment in previously protected industries, affecting men more than women. I find that young women living in regions more exposed to international competition are less likely to have children. Most effects persist for 20 years after trade liberalization. I use causal mediation analysis to show that declines in the employment rate of young men is an important driver of changes in fertility outcomes of young women. Changes in women's employment opportunities are not a mediator for the effect of trade exposure on fertility. There is no evidence of changes in marriage rates across regions exposed to trade liberalization.
    Keywords: marriage rates, fertility, trade liberalization
    JEL: F16 J12 J13 J21 J23
    Date: 2018–10
  2. By: Javier Quintana González (Bocconi University)
    Abstract: For the last decades, regions in the United States have been diverging. More skill-intensive regions have experienced a higher wage and skill premium growth and have become even more skill-intensive. In this paper, I show that this may be driven in part by trade with China. One of the main findings of this paper is that the consequences on local labor markets of higher income competition are highly heterogeneous. In particular, I focus on how consequences of imports from Chinese manufacturers are different depending on the share of college-educated workforce in the regions. Conditional to be exposed to the same level of import competition, effects in terms of wages and growth of college-educated population growth are especially negative for less educated regions. However, this finding does not mean just an attenuation of negative effects for some educated areas. Instead, I find that import competition has net positive effects among more college-educated regions. Indeed, among more skill-intensive regions, a greater exposure to import competition attracts college-educated workers and increases college-wages and skill premium; whereas it has opposite effect among less skill-intensive regions.
    Keywords: international trade; import competition; regional inequality; college premium; internal migration; skill sorting; factor mobility
    JEL: F14 F16 I24 J24 J31 R12
    Date: 2018–11
  3. By: Maria Molina-Domene
    Abstract: This paper investigates why labor specialization brings additional frictions to the labor market. The intuition is that labor specialized firms rely on complementarity and firm-specific human capital, assigning high value to the worker-employer match. Consistent with employees' importance, the findings show that specialized firms preserve their workforce: these firms labor hoard and increase wages during slow-downs. Additionally, when specialized firms unexpectedly face a labor supply shock | albeit managing to decrease the wages of the remaining co-workers, they become less productive. Overall, the empirical evidence suggests that frictions introduce bilateral monopoly rents.
    Keywords: labor specialization, market frictions, division of labor, human capital
    JEL: J24 J42 J63
    Date: 2018–10
  4. By: Moriconi, Simone (Università Cattolica del Sacro Cuore); Peri, Giovanni (University of California, Davis); Pozzoli, Dario (Copenhagen Business School)
    Abstract: The offshoring of production by multinational firms has expanded dramatically in recent decades, increasing these firms' potential for economic growth and technological transfers across countries. What determines the location of offshore production? How do countries' policies and characteristics affect the firm's decision about where to offshore? Do firms choose specific countries because of their policies or because they know them better? In this paper, we use a very rich dataset on Danish firms to analyze how decisions to offshore production depend on the institutional characteristics of the country and firm-specific bilateral connections. We find that institutions that enhance investor protection and reduce corruption increase the probability that firms offshore there, while those that increase regulation in the labor market decrease such probability. We also show that a firm's probability of offshoring increases with the share of its employees who are immigrants from that country of origin.
    Keywords: offshoring, product market, labor regulations, networks, fixed start-up costs
    JEL: F16 J38 J24
    Date: 2018–10
  5. By: Alexander Bick; Bettina Brüggemann; Nicola Fuchs-Schündeln; Hannah Paule-Paludkiewicz
    Abstract: We document the time-series of employment rates and hours worked per employed by married couples in the US and seven European countries (Belgium, France, Germany, Italy, the Netherlands, Portugal, and the UK) from the early 1980s through 2016. Relying on a model of joint household labor supply decisions, we quantitatively analyze the role of non-linear labor income taxes for explaining the evolution of hours worked of married couples over time, using as inputs the full country- and year-specific statutory labor income tax codes. We further evaluate the role of consumption taxes, gender and educational wage premia, and the educational composition. The model is quite successful in replicating the time series behavior of hours worked per employed married woman, with labor income taxes being the key driving force. It does however capture only part of the secular increase in married women’s employment rates in the 1980s and early 1990s, suggesting an important role for factors not considered in this paper. We will make the non-linear tax codes used as an input into the analysis available as a user-friendly and easily integrable set of Matlab codes.
    Keywords: taxation, two-earner households, hours worked
    JEL: E60 H20 H31 J22
    Date: 2018
  6. By: Fabian Kindermann; Lukas Mayr; Dominik Sachs
    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: bequest, taxation, life-cycle, labor-supply, dynamic scoring
    JEL: C68 D91 H22 H31 J22
    Date: 2018
  7. By: Bayer, Christian; Kuhn, Moritz
    Abstract: Wages grow but also become more unequal as workers age. Using German administrative data, we largely attribute both life-cycle facts to one driving force: some workers progress in hierarchy to jobs with more responsibility, complexity, and independence. In short, they climb the career ladder. Climbing the career ladder explains 50% of wage growth and virtually all of rising wage dispersion. The increasing gender wage gap by age parallels a rising hierarchy gap. Our findings suggest that wage dynamics are shaped by the organization of production, which itself likely depends on technology, the skill set of the workforce, and labor market institutions.
    Keywords: careers; Human Capital; life-cycle wage growth; Wage inequality
    JEL: D33 E24 J31
    Date: 2018–09
  8. By: Theano Kakoulidou; Panagiotis Konstantinou; Thomas Moutos
    Abstract: The paper examines the effects of the age-differentiated decreases in the minimum wage which Greece implemented in 2012, and which involved the introduction of a subminimum wage as a result of the reduction of the minimum wage by 22% for workers aged 25 and above, and by 32% for those aged less than 25. Using data from the Greek Labor Force Survey, we estimate probit models and find that after the reform there was no statistically significant change in the differential employment probability advantage for private sector employees aged 25-27 over those aged 22-24. We also find that the probability of labour force participation for individuals in the 25-27 group becomes significantly higher (relative to the 22-24 group), which is reflected in a (statistically) significant improvement in the relative job finding rate for non-agricultural, private-sector employees of this group after the reform. Moreover, the reform had no significant differential impact on employment terminations; i.e. it had no differential impact on either dismissals or quits. These findings remain unaltered to a series of robustness checks.
    Keywords: minimum wages, sub-minimum reform, employment, Greece
    JEL: J21 J23 J30
    Date: 2018
  9. By: Péter Hudomiet; Michael D. Hurd; Susann Rohwedder; Robert J. Willis
    Abstract: Physical and cognitive abilities of older workers decline with age, which can cause a mismatch between abilities and job demands, potentially leading to early retirement. We link longitudinal Health and Retirement Study data to O*NET occupational characteristics to estimate to what extent changes in workers’ physical and cognitive resources change their work-limiting health problems, mental health, subjective probabilities of retirement, and labor market status. While we find that physical and cognitive decline strongly predict all outcomes, only the interaction between large-muscle resources and job demands is statistically significant, implying a strong mismatch at older ages in jobs requiring large-muscle strength. The effects of declines in fine motor skills and cognition are not statistically different across differing occupational job demands.
    JEL: J26 J81
    Date: 2018–11
  10. By: Brant Abbott (University of British Columbia); Giovanni Gallipoli (University of British Columbia)
    Abstract: Wealth inequality has received considerable attention, with mounting evidence of steady and economically meaningful changes in the concentration of wealth ownership. By definition, wealth inequality captures disparity in the ownership of productive capital and other non-labor factors of production. In contrast, in this article we focus on the distribution of human capital and its implications for the accrual of economic resources to individuals and households. Human capital inequality can be thought of as measuring disparity in the ownership of labor factors of production, which are usually compensated in the form of wage income.
    Keywords: Inequality, wealth distribution, human capital
    JEL: J24 D31 I24
    Date: 2018–11
  11. By: Rossi-Hansberg, Esteban; Sarte, Pierre-Daniel; Trachter, Nicholas
    Abstract: Using U.S. NETS data, we present evidence that the positive trend observed in national product-market concentration between 1990 and 2014 becomes a negative trend when we focus on measures of local concentration. We document diverging trends for several geographic definitions of local markets. SIC 8 industries with diverging trends are pervasive across sectors. In these industries, top firms have contributed to the amplification of both trends. When a top firm opens a plant, local concentration declines and remains lower for at least 7 years. Our findings, therefore, reconcile the increasing national role of large firms with falling local concentration, and a likely more competitive local environment.
    JEL: E23 L11 R12
    Date: 2018–09
  12. By: Giannakopoulosa, Nicholas; Laliotis, Ioannis
    Abstract: Decentralised bargaining is an important wage setting mechanism that promotes wage flexibility which in turn determines how earnings and employment are affected by economic shocks. We investigate the impact of the 2011 industrial relations reform in Greece that allowed firms with less than 50 employees to participate in firm-level bargaining. Matching administrative contractual data with longitudinal firm-level data we identify treated and non-treated firms. We find that during the first post-reform year, treated firms with less than 50 employees experienced a 4.8 percent increase in firm-level bargaining and a 12 percent drop in wage floors relative to non-treated firms. We also document a positive employment impact.
    Keywords: Firm-level bargaining,Wages,Reform,Greece
    JEL: J31 J41 J52
    Date: 2018
  13. By: Elliott Isaac (Tulane University)
    Abstract: Joint taxation can exacerbate the deadweight loss of taxation due to labor supply responses, but evidence is scarce. I estimate the efficiency costs and labor supply effects of joint taxation in the United States by leveraging tax variation created by federal same-sex marriage recognition following the 2013 United States v. Windsor Supreme Court ruling. I find moderate hours responses among primary earners and larger labor force participation responses among secondary earners. My findings suggest that joint taxation is less efficient and generates less tax revenue than individual taxation, and that lowering tax rates for secondary earners could improve efficiency.
    Keywords: taxation, labor supply, same-sex marriage, sufficient statistics
    JEL: J22 H24 H21 D10
    Date: 2018–11
  14. By: Manuel Guerra; João Pereira; Miguel St. Aubyn
    Abstract: We propose a decentralized endogenous growth model in order to study the transitional dynamics associated with the process of population aging in a small open economy, that has endogenous time allocation and two growth engines: R&D and human capital accumulation. Growth of per capita output is affected negatively by the difference in the rates of growth of labor force and of the total population in the period where the weight of the labor force decreases to a new and lower level. The biggest impact on per capita output growth should be during the period where labor force grows at a lower rate than the popu- lation unless it is compensated by some other effect. Under some assumptions, a decrease in the corporate tax improves growth.
    Keywords: Endogenous Growth; Demographic Changes; Time Allocation; Human Capital; R&D
    JEL: O41 O33 J11 J22 J24
    Date: 2018–11
  15. By: Bellmann, Lutz (Institute for Employment Research (IAB), Nuremberg); Hübler, Olaf (Leibniz University of Hannover); Leber, Ute (Leibniz University of Hannover)
    Abstract: This paper investigates the role of works councils in job satisfaction. Using the recently developed Linked Personnel Panel, we consider both the direct and indirect impact via further training. Basic estimates on an individual level do not reveal clearly direct effects, but on an establishment level, the existence of a works council increases the average job satisfaction in a company. In more extended approaches, we also find a positive, weakly significant link on an individual level accompanied by positive training with regard to job satisfaction if we control for personal characteristics, working conditions, firm size, collegiality variables and industry dummies. Firms with industry-wide bargaining agreements drive this result. The effects are stronger if the firm carries the training costs and if the share of trained workers within the firm measures training. The direct impact of works councils remains positive but becomes insignificant if Lewbel's instrumental variables estimator is applied.
    Keywords: job satisfaction, training, works councils
    JEL: J24 J28 J53
    Date: 2018–10
  16. By: Anne Saint-Martin (OECD); Hande Inanc (Mathematica Policy Research); Christopher Prinz (OECD)
    Abstract: The nature, content and milieu of work – i.e. the quality of the working environment – matter in many ways for people, firms and society as a whole. There is a great deal of evidence to show clear associations between job quality and the health of workers, their ability to successfully combine work and life while fully mobilising their skills and abilities to build a career, and their productivity. Investments in quality working environments can be welfare enhancing and economically efficient. Policies and practices reflect these findings insufficiently, an apparent paradox that finds its roots in various market failures. There is scope for public intervention to raise awareness, to ensure better coordination of key stakeholders (employers, workers’ representatives and various public entities) and to put in place the right financial incentives for firms to invest in better working conditions. Action in this field is also important in view of ongoing considerable changes in the labour market. The future of work is very uncertain at this stage; the digitalisation and uberisation of work have the potential for improvements in working conditions but also bear the risk of de-skilling, lower pay, lower job security and poor working conditions for parts of the labour force.
    JEL: I31 J24 J28 J81 J88 M14 M54
    Date: 2018–11–21
  17. By: Davidson, Carl (Department of Economics, Michigan State University); Heyman, Fredrik (Research Institute of Industrial Economics, Stockholm); Matusz, Steven (Department of Economics, Michigan State University); Sjöholm, Fredrik (Department of Economics, Lund University); Zhu, Susan Chun (Department of Economics, Michigan State University)
    Abstract: Globalization might affect the mix of jobs available in an economy and the rate at which workers gain skills. We develop a model in which firms differ in terms of productivity and skills and use the model to examine how globalization affects the wage distribution and the career path of workers as they move up the jobs ladder. There are two types of skills that determine a worker’s productivity in the model: the ability to work with the appropriate technology and the ability to facilitate international commerce. Workers imperfectly acquire these skills on the job. Firms cannot costlessly observe the skills embodied in a worker but can observe each potential recruit’s employment history. In equilibrium, firms self-select into groups that use different networks to fill vacancies. Our results indicate that although falling trade costs may result in greater wage inequality, if trade costs are initially high, it can also lead to a wider path up the jobs ladders and less time spent in entry level jobs. The key assumptions and predictions are confirmed in data on recruitments and job mobility in Sweden.
    Keywords: Job Ladders; Globalization; Wages; Inequality; Export
    JEL: F10 F20 J30
    Date: 2018–11–12
  18. By: Clemens Knoppe (Central Bank of Malta)
    Abstract: This paper uses information from a detailed administrative database on reported full-time employment incomes to study the distribution of wage incomes and mobility between 2000 and 2015 in Malta. Developments in wage distributions and mobility are discussed within the context of the structural changes that took place in the Maltese economy over the last decade. The main finding is that while inequality in Malta remains subdued by international standards, there has been an increase in recent years as low wages have remained stable in real terms, while those in the middle and at the top of the distribution have seen significant rises. Due to the rising demand for certain types of skills, wage mobility appears to have declined, particularly for older workers. This points to an importance of increased investment in education and retraining.
    JEL: D31 D63 J31 J62 J69
    Date: 2018
  19. By: Peter Sandholt Jensen (University of Southern Denmark); Cristina Victoria Radu (University of Southern Denmark); Battista Severgnini (Copenhagen Business School); Paul Sharp (University of Southern Denmark, CAGE, CEPR)
    Abstract: We provide evidence of how restrictions on labor mobility, such as serfdom and other types of labor coercion, impact labor market outcomes. To do so, we estimate the impact of a large negative shock to labor mobility in the form of the reintroduction of serfdom in Denmark in 1733, which was targeted at limiting the mobility of farmhands. Using a unique data source based on the archives of estates from the eighteenth century, we test whether serfdom affected the wages of farmhands more strongly than other groups in the labor market, and results based on a differences-in-differences approach reveal evidence consistent with a strong negative effect following its introduction. We also investigate whether one mechanism was that boys with rural backgrounds were prevented from taking up apprenticeships in towns, and find suggestive evidence that this was indeed the case. Thus, our results suggest that serfdom was effectively reducing mobility.
    Keywords: Serfdom, labor mobility, coercion
    JEL: J3 N33 P4
    Date: 2018–11
  20. By: Jean Chateau (OECD); Ruben Bibas (OECD); Elisa Lanzi (OECD)
    Abstract: This paper explores the consequences on the labour markets of structural changes induced by decarbonisation policies. These policies are likely going to have consequences on labour-income distribution given i) existing rigidities in the labour markets, and ii) their different impacts on sectors and on job categories. These policies are analysed in a general equilibrium modelling framework, which includes interlinkages between different sectors and regions as well as five different categories of workers.
    Keywords: Climate change mitigation policies, Computable general equilibrium model, Employment & Redistributive Effects, Energy efficiency, Labour markets by occupation
    JEL: D58 J4 Q43 Q52 Q54
    Date: 2018–11–21
  21. By: OECD
    Abstract: The purpose of this paper is to explore the potential of technical and vocational education and training (TVET) for fostering inclusive growth at the local level in the Association of Southeast Asian Nations (ASEAN ) region. The first section provides a brief overview of the main developmental challenges in the ASEAN region that have resulted in growing inequalities in wealth distribution. The second and third sections review evidence from developed as well as developing countries regarding TVET’s impact on employment and wages (Section 2), as well as on poverty, inequality and social exclusion (Section 3). Section 4 summarises the key findings and highlights lessons learned for the ASEAN region. Good practice examples from the region are presented to illustrate how countries have used TVET to improve economic and social outcomes at the local level.
    Keywords: local, skills, training
    JEL: I25 J24
    Date: 2018–11–21
  22. By: Li, Yanan (Beijing Normal University); Kanbur, Ravi (Cornell University); Lin, Carl (Bucknell University)
    Abstract: The theory of fiscal and regulatory competition between jurisdictions is more advanced than its empirical testing. This is particularly true of labor regulation in general, and minimum wage regulation in particular, and especially so for developing countries. This paper utilizes the spatial lag methodology to study city-level strategic interactions in setting and enforcing minimum wage standards during 2004-2012 in China. We manually collect a panel data set of city-level minimum wage standards from China's government websites. This analysis finds strong evidence of spatial interdependence in minimum wage standards and enforcement among main cities in China. If other cities decrease minimum wage standards by 1 RMB, the host city will decrease its standard by about 0.7-3.2 RMB. If the violation rate in other cities increases by 1 percent, the host city will respond by an increase of roughly 0.4-1.0 percentage points. The results are robust to using three estimation methods, Maximum Likelihood, IV/GMM and a dynamic panel data model. Our findings of strategic interactions suggest the need for policy coordination in labor regulation in China.
    Keywords: minimum wage, enforcement, race to the bottom, strategic interactions, China
    JEL: J38
    Date: 2018–10

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