nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2019‒01‒07
seventeen papers chosen by
Joseph Marchand
University of Alberta

  1. Shocking Choice: Trade Shocks, Local Labor Markets and Vocational Occupation Choices By Lisa Simon
  2. Rent sharing in China: Magnitude, heterogeneity and drivers By Wenjing Duan; Pedro S. Martins
  3. Women's Empowerment in Action: Evidence from a Randomized Control Trial in Africa By Bandiera, Oriana; Buehren, Niklas; Burgess, Robin; Goldstein, Markus P; Gulesci, Selim; Rasul, Imran; Sulaiman, Munshi
  4. Women’s Labor Market Responses to their Partners’ Unemployment and Low-Pay Employment By Carina Keldenich; Andreas Knabe
  5. Dynamic Treatment Effects of Job Training By Jorge Rodríguez; Fernando Saltiel; Sergio S. Urzúa
  6. Techies, Trade, and Skill-Biased Productivity By James Harrigan; Ariell Reshef; Farid Toubal
  7. The Econometrics and Economics of the Employment Effects of Minimum Wages: Getting from Known Unknowns to Known Knowns By David Neumark
  8. Making Employment More Inclusive in the Netherlands By Mark Baker; Lindy Gielens
  9. The impact of macroeconomic uncertainty on inequality: An empirical study for the UK By Theophilopoulou, Angeliki
  10. How Large Are the Contributions of Cities to the Development of Rural Communities? A Market Access Approach for a Quarter Century of Evidence from Chile By Juan Soto; Milena Vargas; Julio A. Berdegué
  11. Social Security and Retirement Timing: Evidence from a National Sample of Teachers By Melinda S. Morrill; John Westall
  12. Endogenous skill-biased technology adoption: Evidence from China’s college enrollment expansion program By Shuaizhang Feng; Xiaoyu Xia
  13. Boosting productivity and inclusiveness in Lithuania By Vassiliki Koutsogeorgopoulou; Demetrio Guzzardi
  14. Selection into Entrepreneurship and Self-Employment By Ross Levine; Yona Rubinstein
  15. The Race Between Demand and Supply: Tinbergen's Pioneering Studies of Earnings Inequality By James J. Heckman
  16. Sectoral minimum wages in South Africa: disemployment by firm size and trade exposure By Marlies Piek; Dieter von Fintel
  17. The Sources of the Union Wage Gap: The Role of Worker, Firm, Match, and Jobtitle Heterogeneity By John T. Addison; Pedro Portugal; Hugo Vilares

  1. By: Lisa Simon
    Abstract: Whether individuals choose occupations that teach general or specific skills can have important implications on how protected they are from changing conditions on the labor market. This paper looks at the impact of growing up in a region exposed to structural change caused by import competition on vocational occupation choices using longitudinal social security data for Germany. Results show that individuals enter more skill-specific occupations like manufacturing and less general occupations like services if exposed to higher local import competition. Lifetime earnings are adversely affected, which can be attributed to vocational occupation choices.
    Keywords: Trade shocks, occupational choice, vocational education, occupational skill specificity, local labor markets
    JEL: J24 J21 F14
    Date: 2018
  2. By: Wenjing Duan; Pedro S. Martins
    Abstract: Do firms in China share rents with their workers? We address this question by examining firm-level panel data covering virtually all manufacturing firms over the period 2000-2007, representing an average of 200,000 firms and 54 million workers per year. We find robust evidence of rent sharing (RS): workers that would move from low- to high-profit firms would see their wages increase by about 45%. The results are based on multiple instrumental variables, including firm-specific international trade shocks. We also present a number of complementary findings: RS is weaker in firms with more women and less educated workers; RS involves an element of risk sharing, as wages also decrease when profits fall; RS is lower in regions with more latent competition from rural workers; higher minimum wages tend to reduce RS; and, while employer labour market power reduces wages, it increases RS. Overall, despite its importance, RS in China is smaller than in developed economies, which reflects the weaker bargaining power of its workers and the different scope of its labour market institutions.
    Keywords: Wages, Bargaining, Monopsony
    JEL: J31 J41 J50
    Date: 2018–12
  3. By: Bandiera, Oriana; Buehren, Niklas; Burgess, Robin; Goldstein, Markus P; Gulesci, Selim; Rasul, Imran; Sulaiman, Munshi
    Abstract: Women in developing countries are disempowered: high youth unemployment, early marriage and childbearing interact to limit their investments into human capital and enforce dependence on men. We evaluate a multifaceted policy intervention attempting to jump-start adolescent women's empowerment in Uganda, a context in which 60% of the population are aged below twenty. The intervention aims to relax human capital constraints that adolescent girls face by simultaneously providing them vocational training and information on sex, reproduction and marriage. We find that four years post-intervention, adolescent girls in treated communities are 4.9pp more likely to engage in income generating activities, corresponding to a 48% increase over baseline levels, and an impact almost entirely driven by their greater engagement in self-employment. Teen pregnancy falls by a third, and early entry into marriage/cohabitation also falls rapidly. Strikingly, the share of girls reporting sex against their will drops by close to a third and aspired ages at which to marry and start childbearing move forward. The results highlight the potential of a multifaceted program that provides skills transfers as a viable and cost effective policy intervention to improve the economic and social empowerment of adolescent girls over a four year horizon.
    JEL: I25 J13 J24
    Date: 2018–12
  4. By: Carina Keldenich; Andreas Knabe
    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
    Date: 2018
  5. By: Jorge Rodríguez; Fernando Saltiel; Sergio S. Urzúa
    Abstract: This paper estimates the dynamic returns to job training. We posit a dynamic-discrete choice model of sequential training participation, where choices and earnings depend on observed and unobserved characteristics.We define treatment effects, including policy relevant parameters, and link them to continuation values. The empirical analysis is carried out using data combining job training records, matched employee-employer information, and pre-labor market ability measures from Chile. We document small positive average returns, large unobserved heterogeneity in responses, and dynamic substitutability of training investments. Our policy relevant treatment effects vary across dynamic response types, highlighting the relevance of our framework.
    JEL: C31 C32 J24
    Date: 2018–12
  6. By: James Harrigan; Ariell Reshef; Farid Toubal
    Abstract: We study the impact of firm level choices of ICT, R&D, exporting and importing on the evolution of productivity and its bias towards skilled occupations. We use a novel measure of the propensity of a firm to engage in technology investment and adoption: its employment of workers with STEM (science, technology, engineering and math) skills and experience who we call “techies”. We develop a methodology for estimating firm level productivity that allows us to measure both Hicks-neutral and skill-augmenting technology differences, and apply this to administrative data on French firms in the entire private sector from 2009 to 2013. We find that techies and importing of intermediate inputs raise skill-biased productivity, while imports also raise Hicks-neutral productivity. We also find that higher firm-level skill biased productivity raises low-skill employment even as it raises the ratio of skilled to unskilled workers. This is because of the cost-reducing effect of higher productivity. The techie and trade effects are large, and can account for much of the aggregate increase in skilled employment from 2009 to 2013.
    Keywords: Productivity;Skill Bias;Skill Augmenting;Labor Demand;Outsourcing;Globalization;R&D;ICT
    JEL: D24 F16 J24
    Date: 2018–12
  7. By: David Neumark
    Abstract: I discuss the econometrics and the economics of past research on the effects of minimum wages on employment in the United States. My intent is to try to identify key questions raised in the recent literature, and some from the earlier literature, which I think hold the most promise for understanding the conflicting evidence and arriving at a more definitive answer about the employment effects of minimum wages. My secondary goal is to discuss how we can narrow the range of uncertainty about the likely effects of the large minimum wage increases becoming more prevalent in the United States. I discuss some insights from both theory and past evidence that may be informative about the effects of high minimum wages, and try to emphasize what research can be done now and in the near future to provide useful evidence to policymakers on the results of the coming high minimum wage experiment, whether in the United States or in other countries.
    JEL: J38
    Date: 2018
  8. By: Mark Baker; Lindy Gielens
    Abstract: The Dutch labour market has recovered and the unemployment rate has been converging towards pre-crisis levels. Non-standard forms of work have expanded with a strong trend towards self-employment and an increased reliance on temporary contracts. These developments may reflect a preference of some individuals for a more flexible working relationship, but they could also lower job security and job quality for others. Policies need to protect vulnerable groups in the more dynamic working environment without creating barriers to labour mobility and flexibility of the overall labour market. To improve the fairness of the tax system, policies should ensure a more level playing field between workers on different types of contracts. Regulatory policies should aim at raising labour market mobility to improve the matching of skills to jobs by easing the protection on permanent employment contracts and through a more targeted approach to activation policies for disadvantaged groups. Finally, measures should improve the skills of individuals in vulnerable groups to enhance their opportunities to find better jobs.This Working Paper relates to the 2018 OECD Economic Survey of the Netherlands 2018( netherlands.htm).
    Keywords: labour market policy, non-standard work, skills, tax and benefits, work incentives
    JEL: J08 J21 J24 J32 J68
    Date: 2018–12–19
  9. By: Theophilopoulou, Angeliki
    Abstract: The role of economic uncertainty on macroeconomic fluctuations has been studied extensively in the literature. In the aftermath of the financial crisis and in the process of its exit from the EU, the UK is facing high levels of uncertainty on future economic growth, investment, financial markets etc. In this paper we investigate whether macro economic uncertainty affects income, wage and consumption inequality. Our findings suggest that the measures of inequality increase in the aftermath of an uncertainty shock but decrease in the medium to long run, converging to lower levels. Macroeconomic uncertainty appears to account significantly for the variation of income and consumption inequality. Using detailed micro data we decompose households' income to investigate transmission channels where uncertainty shocks affect differently the percentiles of income and consumption distributions. The financial segmentation and portfolio channels appear to play an important role in this heterogeneous response.
    Keywords: Macroeconomic uncertainty, income inequality, consumption inequality,SVARs
    JEL: C32 D3 D8 E32
    Date: 2018–11–01
  10. By: Juan Soto; Milena Vargas; Julio A. Berdegué
    Abstract: This article estimates the impact of cities on the economic development of rural communities in Chile, following a market access approach. The effect of the proximity to cities on the development of rural communities is analyzed by estimating the impact of market access on the population, and farm and non-farm employment of rural communities. Using population censuses and remote sensing data, we find, in our preferred estimations, that a 10% higher market access induced a 10%–14% increase in the population of rural communities. Additionally, higher positive elasticities are found in the non-farm sector rather than in the agricultural one. These results widely support the hypothesis of structural change and the diversification of the rural economy for rural communities with better access to markets. Notwithstanding, the evidence also suggests that the farm sector took important advantages from market access in places with better agro-ecological conditions.
    Keywords: Rural economic development, market access, farm and non-farm employment, cities.
    JEL: Q13 Q15 Q56 R14
    Date: 2018–12–21
  11. By: Melinda S. Morrill; John Westall
    Abstract: This study documents an important role for Social Security income in workers' retirement timing. About 40 percent of public school teachers are not covered by Social Security. This provides an opportunity to analyze the causal impact of Social Security on retirement timing by comparing covered and non-covered teachers. Using individual-level data from the American Community Survey, we find robust evidence of higher rates of retirement among covered teachers at Social Security eligibility ages. This pattern is confirmed using an alternative regression model of participation in the teacher labor force. These estimates suggest that, should the federal government mandate full inclusion in Social Security for all public sector workers, the retirement timing patterns of newly covered teachers and other public sector workers would likely change.
    JEL: H55 H75 I28 J26
    Date: 2018–12
  12. By: Shuaizhang Feng (Jinan University); Xiaoyu Xia (Chinese University of Hong Kong)
    Abstract: China’s college expansion program, which was implemented in 1999 significantly increased the share of college-educated workers in the urban labor force. We find that returns to education were not responsive to changes in local skill supply be- tween then and 2009. To explain the trend, we develop a model of endogenous technology adoption and predict that increasing the share of college-educated work- ers leads firms to adjust their use of production technology. We construct supply shocks in local labor markets based on policy-driven variations in the changes of college enrollment quotas across cities. Using panel data from over 20,000 large manufacturing firms, we find that an enlarged college-educated labor force causes skill-intensive firms to invest more in capital and R&D as well as employ more workers, evidence that supports the theory of endogenous technology adoption.
    Keywords: human capital, endogenous technology adoption, college education, Chinese economy
    JEL: J24 I28 O32
    Date: 2018–12
  13. By: Vassiliki Koutsogeorgopoulou; Demetrio Guzzardi
    Abstract: Productivity growth in Lithuania has slowed in the aftermath of the global financial crisis,holding back income convergence and making it harder to reduce further the relatively highinequality and poverty. A comprehensive approach is required to address productivity andinclusiveness challenges, building on their synergies. The government has taken measuresto this end, with the New Social Model at the core, but efforts need to continue. Reformsshould focus on additional improvements in the business environment by easing furtherregulations on the employment of non-EU workers and reducing informality. Initiatives toimprove the governance of state-owned enterprises are welcome and need to continue.Improving access to finance and ensuring effective bankruptcy procedures are key toboosting firm dynamism, as are measures to encourage business-research sectorcollaboration on innovation. Addressing large skills mismatch is also a priority. Increasingthe market-relevance of the education system is important. More and better-quality jobs inthe formal sector, especially for the low-skilled, are key to inclusiveness and well-being,while more effective support and active labour market programmes would help combatingpoverty.This Working Paper relates to the 2018 OECD Economic Survey of Lithuania( mic-survey-ireland.htm)
    Keywords: benefits, education, employment protection legistation, financing productivity, inclusiveness, inequality, innovation, Lithuania, poverty, skills mismatch
    JEL: D31 J24 I24 I30 J31 O31
    Date: 2018–12–21
  14. By: Ross Levine; Yona Rubinstein
    Abstract: We study the effects of ability and liquidity constraints on entrepreneurship. We develop a three sector Roy model that differentiates between entrepreneurs and other self-employed to address puzzling gaps that have emerged between theory and evidence on entry into entrepreneurship. The model predicts—and the data confirm—that entrepreneurs are positively selected on highly-remunerated human capital, but other self-employed are negatively selected on those same abilities; entrepreneurs are positively selected on collateral, but other self-employed are not; and entrepreneurship is procyclical, but self-employment is countercyclical.
    JEL: E32 J24 L26
    Date: 2018–12
  15. By: James J. Heckman
    Abstract: Understanding inequality and devising policies to alleviate it was a central focus of Jan Tinbergen's lifetime research. He was far ahead of his time in many aspects of his work. This essay places his work in the perspective of research on inequality in his time and now, focusing on his studies on the pricing of skills and the evolution of skill prices. In his most fundamental contribution, Tinbergen developed the modern framework for hedonic models as part of his agenda for integrating demand and supply for skills to study determination of earnings and its distribution and the design of effective policy. His lifetime emphasis on social planning caused some economists to ignore his fundamental work.
    JEL: B31 D31 D33 D63 I24 J20 P21
    Date: 2018–12
  16. By: Marlies Piek (Department of Economics, Stellenbosch University); Dieter von Fintel (Department of Economics, Stellenbosch University)
    Abstract: This paper measures the impact of South African minimum wages on small and large firm employment in a sector that is exposed to international competition (agriculture) and one that is not (retail). Our results highlight that small firms in a tradable sector are the most vulnerable to minimum wage legislation. In particular, small farms shed jobs, while larger farms employed more unskilled workers as a result of minimum wages. Small firms were more affected by the minimum wage as they employed a higher proportion of low-skilled, low-wage workers. In contrast, large farms employed a lower proportion of low-skilled workers and used a more capital-intensive production process and were thus less affected by the legislation. While this shift represents a short-run response to minimum wages, it intensifies a long-run movement towards fewer, larger, more capital-intensive farms. Retail firms, on the other hand, do not exhibit the same behaviour, with zero employment losses in both small and large firms. This difference in result can be explained by the fact that firms that face international competition cannot easily increase prices when faced with wage increases. Non-tradable sectors, such as retail, can increase prices and shift the burden of higher labour costs onto the consumer as they do not face international competition. The effects of minimum wages in South Africa is, therefore, more complex than what previous research shows. We argue that an undifferentiated national minimum wage can result in intra-industry concentration and inequality could grow. This is true even if the economy-wide impact of a national minimum wage could be potentially benign.
    Keywords: Minimum wages, employment effects, firm size, international trade, concentration
    JEL: F16 J43 J81 K31 L11
    Date: 2018
  17. By: John T. Addison; Pedro Portugal; Hugo Vilares
    Abstract: Using matched employer-employee-contract data for Portugal – a country with near-universal union coverage – we find evidence of a sizable effect of union affiliation on wages. Gelbach's (2016) decomposition procedure is next deployed to ascertain the contributions of worker, firm, match, and job-title heterogeneity to the union wage gap. Of these the most important is the firm fixed effect, followed at some distance by union workers gaining from elevated job titles and/or more generous promotion policies. For its part, unobserved worker quality plays only a very weak role, while there is even less suggestion that improved match quality bolsters the union premium.
    Keywords: union density, union wage gap, worker/form/job-title fixed effects, match quality, Gelbach decomposition, Portugal
    JEL: J31 J33 J41 J51 J52
    Date: 2018

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