nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2019‒03‒11
sixteen papers chosen by
Joseph Marchand
University of Alberta

  1. The Labor Market Impacts of Universal and Permanent Cash Transfers: Evidence from the Alaska Permanent Fund By Damon Jones; Ioana Marinescu
  2. Gender wage gap across the quantiles:What is the role of firm segregation? By Kaya, Ezgi
  3. Horizontal Mismatch and Vocational Education By Juerg Schweri; Annina Eymann; Manuel Aepli
  4. The Impact of Management Practices on Employee Productivity: A Field Experiment with Airline Captains By Greer K. Gosnell; John A. List; Robert D. Metcalfe
  5. Nonhomothetic preferences and rent sharing in an open economy By Hartmut Egger; Simone Habermeyer
  6. On the political economy of income taxation By Berliant, Marcus; Gouveia, Miguel
  7. The value of specific skills in a globalized world - Evidence from international trade shocks By Christian Eggenberger; Simon Janssen; Uschi Backes-Gellner
  8. Optimal Progressivity with Age-Dependent Taxation By Heathcote, Jonathan; Storesletten, Kjetil; Violante, Giovanni L.
  9. The Economic Value of Breaking Bad: Misbehavior, Schooling and the Labor Market By Nicholas W. Papageorge; Victor Ronda; Yu Zheng
  10. Inferring Inequality with Home Production By Boerma, Job; Karabarbounis, Loukas
  11. Language skills and homophilous hiring discrimination: Evidence from gender and racially differentiated applications By Anthony Edo; Nicolas Jacquemet; Constantine Yannelis
  12. Men at work: Real wages from annual and casual labour in southern Sweden 1500–1850 By Gary, Kathryn E.; Olsson, Mats
  13. Works Councils and Workplace Health Promotion in Germany By Stephen Smith; Uwe Jirjahn; Jens Mohrenweiser
  14. Working while studying: Employment premium or penalty for youth in Benin? By Sènakpon Fidèle A. Dedehouanou; Luca Tiberti; Hilaire G. Houeninvo; Djohodo Inès Monwanou
  15. The Effects of Austerity Measures on Gender Gaps in Labor Market Outcomes By Jelena Zarkovic Rakic; Marko Vladisavljevic; Jorge Davalos
  16. Artificial Intelligence: The Ambiguous Labor Market Impact of Automating Prediction By Ajay Agrawal; Joshua S. Gans; Avi Goldfarb

  1. By: Damon Jones (University of Chicago); Ioana Marinescu (University of Chicago Harris School of Public Policy)
    Abstract: What are the effects of universal and permanent cash transfers on the labor market? Since 1982, all Alaskan residents have been entitled to a yearly cash dividend from the Alaska Permanent Fund. Using data from the Current Population Survey and a synthetic control method, we show that the dividend had no effect on employment, and increased part-time work by 1.8 percentage points (17 percent). Although theory and prior empirical research suggests that individual cash transfers decrease household labor supply, we interpret our results as evidence that general equilibrium effects of widespread and permanent transfers tend to offset this effect, at least on the extensive margin. Consistent with this story, we show suggestive evidence that tradable sectors experience employment reductions, while non-tradable sectors do not. Overall, our results suggest that a universal and permanent cash transfer does not significantly decrease aggregate employment.
    Keywords: unconditional cash transfers, universal basic income, Labor Supply, employment
    JEL: H24 I38 J21 J22
    Date: 2019–02
  2. By: Kaya, Ezgi (Cardiff Business School)
    Abstract: In this paper, we explore the role of firm segregation on the gender wage gap. Using linked employee-employer data for Turkey, we investigate whether female segregation into low-paying firms and into low-paying jobs within a firm influence the gender wage gap across the wage distribution. We find that there is a 'glass ceiling' effect in the Turkish labour market, but this effect is more apparent within a firm than between firms. We also find a 'sticky floor' effect, but only among workers employed at the same firm. Our results imply that the allocation of women into lowpaying jobs within each firm accounts for the existence of these effects more than the segregation of women into low-paying firms.
    Keywords: gender wage gap, segregation, within- and between-firms, glass ceiling, sticky floor
    JEL: C21 J31 J71
    Date: 2019–02
  3. By: Juerg Schweri; Annina Eymann; Manuel Aepli
    Abstract: Recent literature suggests that vocational education provides individuals with smoother transitions into the labor market but lower wages over the lifecycle. A possible mechanism explaining lower wages is horizontal mismatch, defined as a mismatch between qualifications acquired by individuals and those required for their current job. Some studies have found higher mismatch wage penalties when individuals' education is more specific. Therefore, we analyze horizontal mismatch in Switzerland, the country with the highest proportion of firm-based vocational education and training in the OECD. We use subjective and objective measures of mismatch from the Swiss Household Panel. While we find sizeable mismatch wage penalties in OLS estimations, effects are small or insignificant in fixed-effects regressions. This holds for workers with vocational and general education background alike. We conclude that vocational education is more transferable than often assumed. We finish with recommendations on concept and methods for future analyses of horizontal mismatch.
    Keywords: Horizontal mismatch, Overeducation, Qualification, Switzerland, Training, Vocational Education, Wages
    JEL: I21 J24 J31 J62
    Date: 2019–02
  4. By: Greer K. Gosnell; John A. List; Robert D. Metcalfe
    Abstract: Increasing evidence indicates the importance of management in determining firms’ productivity. Yet, causal evidence regarding the effectiveness of management practices is scarce, especially for high-skilled workers in the developed world. In an eight-month field experiment measuring the productivity of captains in the commercial aviation sector, we test four distinct management practices: (i) performance monitoring; (ii) performance feedback; (iii) target setting; and (iv) pro-social incentives. We find that these management practices—particularly performance monitoring and target setting—significantly increase captains’ productivity with respect to the targeted fuel-saving dimensions. We identify positive spillovers of the tested management practices on job satisfaction and carbon dioxide emissions, and captains overwhelmingly express desire for deeper managerial engagement. Both the implementation and the results of the study reveal an uncharted opportunity for management researchers to delve into the black box of firms and rigorously examine the determinants of productivity amongst skilled labor.
    JEL: C93 D01 J3 Q5 R4
    Date: 2019–02
  5. By: Hartmut Egger; Simone Habermeyer
    Abstract: We develop a framework for studying how differences in the level and/or dispersion of per-capita income affect trade structure and welfare in a two-country model. Thereby, we embed nonhomothetic preferences into a home-market model with two sectors of production and one input factor. We associate the outside good with a necessity and the differentiated good with a luxury, and we assume that heterogeneity of income arises due to heterogeneity of households in their effective labor supply. We then show that in line with the home-market effect countries have a trade surplus in the good for which they have relatively higher domestic demand, making the country with a higher level and/or dispersion of per-capita income a net-exporter of luxuries. The structure of trade is irrelevant for welfare in the open economy if both sectors pay the same wage. If, however, the sector producing luxuries pays a wage premium due to rent sharing, there are feedback effects of trade on the level and dispersion of per-capita income, which can lead to losses from trade in the country net-exporting necessities. In an extension of our model, we show that our results remain intact when we allow for positive assortative matching of workers featuring high effective labor supply with jobs offering high wages in the sector of luxuries. In a second extension, we show that the assumption of nonhomothetic preferences seems less important when supply-side differences are the main motive for inter-industry trade.
    Keywords: nonhomothetic preferences, rent sharing, trade structure, welfare effects of trade
    JEL: F12 F16 D11
    Date: 2019
  6. By: Berliant, Marcus; Gouveia, Miguel
    Abstract: The literatures dealing with voting, optimal income taxation, implementation, and pure public goods are integrated here to address the problem of voting over income taxes and public goods. In contrast with previous articles, general nonlinear income taxes that affect the labor-leisure decisions of consumers who work and vote are allowed. Uncertainty plays an important role in that the government does not know the true realizations of the abilities of consumers drawn from a known distribution, but must meet the realization-dependent budget. Even though the space of alternatives is infinite dimensional, conditions on primitives are found to assure existence of a majority rule equilibrium when agents vote over both a public good and income taxes to finance it.
    Keywords: Voting; Income taxation; Public good
    JEL: D72 D82 H21 H41
    Date: 2019–03–04
  7. By: Christian Eggenberger (University of Zurich); Simon Janssen (Institute for Employment Research IAB (Nurnberg, Germany)); Uschi Backes-Gellner (University of Zurich)
    Abstract: This paper examines whether and, if so, how workers’ earnings after trade shocks depends on occupational specificity. We construct a measure for occupational specificity reflecting the degree of dissimilarity between the skill bundle in an occupation and the average skill bundle in the labor market. Exploiting cross-regional variation in industry structures, we find that rising import competition from China and Eastern Europe resulted in larger earnings losses for workers with specific skill bundles than for workers with general skill bundles. However, with rising exports to these regions, workers with specific skill bundles had higher earnings than workers with general skill bundles.
    Keywords: import competition, trade shocks, human capital specificity
    JEL: F16 I20 J2
    Date: 2019–02
  8. By: Heathcote, Jonathan; Storesletten, Kjetil; Violante, Giovanni L.
    Abstract: This paper studies optimal taxation of earnings when the degree of tax progressivity is allowed to vary with age. The setting is an overlapping-generations model that incorporates irreversible skill investment, flexible labor supply, ex-ante heterogeneity in the disutility of work and the cost of skill acquisition, partially insurable wage risk, and a life cycle productivity profile. An analytically tractable version of the model without intertemporal trade is used to characterize and quantify the salient trade-offs in tax design. The key results are that progressivity should be U-shaped in age and that the average marginal tax rate should be increasing and concave in age. These findings are confirmed in a version of the model with borrowing and saving that we solve numerically.
    Keywords: income distribution; incomplete markets; Labor Supply; Life Cycle; Skill investment; Tax progressivity
    JEL: D30 E20 H20 H40 J22 J24
    Date: 2019–02
  9. By: Nicholas W. Papageorge; Victor Ronda; Yu Zheng
    Abstract: Prevailing research argues that childhood misbehavior in the classroom is bad for schooling and, presumably, bad for labor market outcomes. In contrast, we argue that some childhood misbehavior represents underlying socio-emotional skills that are valuable in the labor market. We follow work from psychology and categorize observed classroom misbehavior into two underlying latent factors. We then estimate a model of educational attainment and earnings outcomes, allowing the impact of each of the two factors to vary by outcome. We find that one of the factors, labeled in the psychological literature as externalizing behavior (and linked, for example, to aggression), reduces educational attainment yet increases earnings. Unlike most models where socio-emotional skills that increase human capital through education also increase labor market skills, our findings illustrate how some socio-emotional skills can be productive in some economic contexts and counter-productive in others. Policies designed to promote human capital accumulation could therefore have mixed effects or even negative economic consequences, especially in the case of policies that target socio-emotional skill formation for children or adolescents which are aimed solely at improving educational outcomes.
    JEL: I20 J10 J20
    Date: 2019–02
  10. By: Boerma, Job; Karabarbounis, Loukas
    Abstract: We revisit the causes, welfare consequences, and policy implications of the dispersion in households' labor market outcomes using a model with uninsurable risk, incomplete asset markets, and home production. Accounting for home production amplifies welfare-based differences across households meaning that inequality is larger than we thought. Home production does not offset differences that originate in the market sector because productivity differences in the home sector are significant and the time input in home production does not covary with consumption expenditures and wages in the cross section of households. The optimal tax system should feature more progressivity taking into account home production.
    Keywords: Consumption; Home Production; inequality; Labor Supply
    JEL: D10 D60 E21 J22
    Date: 2019–02
  11. By: Anthony Edo (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Nicolas Jacquemet (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Constantine Yannelis (Stanford University - Department of Economics - Department of Economics)
    Abstract: This paper investigates the importance of ethnic homophily in the hiring discrimination process. Our evidence comes from a correspondence test performed in France in which we use three different kinds of ethnic identification: French sounding names, North African sounding names, and "foreign" sounding names with no clear ethnic association. Within the groups of men and women, we show that all non-French applicants are equally discriminated against when compared to French applicants. Moreover, we find direct evidence of ethnic homophily: recruiters with European names are more likely to call back French named applicants. These results show the importance of favoritism for in-group members. To test for the effect of information about applicant's skills, we also add a signal related to language ability in all resumes sent to half the job offers. The design allows to uniquely identify the effect of the language signal by gender. Although the signal inclusion significantly reduces the discrimination against non-French females, it is much weaker for male minorities.
    Keywords: Correspondence testing,Gender discrimination,Racial discrimination,Ethnic homophily,Language skills JEL Classification: J15,J64,J71
    Date: 2019–03
  12. By: Gary, Kathryn E. (Department of Economic History, Lund University); Olsson, Mats (Department of Economic History, Lund University)
    Abstract: In this paper, we use a brand new dataset to estimate and compare wages for casually and annually hired workers in early modern southern Sweden. We ask whether men in either situation could have supported families on the basis of their earnings. Findings indicate that casual earners would have been able to out-earn annual employees for most of the period 1500–1850, but by the eighteenth century when food prices had risen their relative comfort likely reversed. Similarly, while it was possible for long periods of time for men to earn a respectability basket on the basis of approximately 150 days work this was no longer true by the end of the eighteenth century. By that time, both groups would have increasingly struggled and other family members needed to contribute. Not only is this account inconsistent with the standard story of a nineteenth century male breadwinner family but it suggests that industriousness might not have been prompted by a desire to consume new commodities but by the need to maintain basic standards.
    Keywords: wages; casual labour; annually hired; Early Modern; Sweden
    JEL: N33
    Date: 2019–02–28
  13. By: Stephen Smith (George Washington University); Uwe Jirjahn (University of Trier, GLO, and IZA); Jens Mohrenweiser (Bournemouth University)
    Abstract: From a theoretical viewpoint, there can be market failures resulting in an underprovision of occupational health and safety. Works councils may help mitigate these failures. Using establishment data from Germany, our empirical analysis confirms that the incidence of a works council is significantly associated with an increased likelihood that the establishment provides more workplace health promotion than required by law. This result also holds in a recursive bivariate probit regression accounting for the possible endogeneity of works council incidence. Furthermore, analyzing potentially moderating factors such as collective bargaining coverage, industry, type of ownership, multi-establishment status and product market competition, we find a positive association between works councils and workplace health promotion for the various types of establishments examined. Finally, we go beyond the mere incidence of workplace health promotion and show that works councils are positively associated with a series of different measures of workplace health promotion.
    Keywords: Non-union employee representation, works council, codetermination, worker voice, occupational health and safety, workplace health promotion
    JEL: I18 J28 J50 J81
    Date: 2019–01
  14. By: Sènakpon Fidèle A. Dedehouanou; Luca Tiberti; Hilaire G. Houeninvo; Djohodo Inès Monwanou
    Abstract: Most youth in developing countries leave school with only a general academic education level, slowing down their transition to the labor market. We analyze whether work experience during school can help youth transition more easily to a first job in Benin. We used data from the 2014 School-to-Work Transition Survey (SWTS) and a multi-equation model to account for endogeneity and sample-selection bias in estimating the effect of work experience during school on the transition to first job. Our findings are that work during summer breaks or holidays makes the transition from school to first job easier, especially when combined with apprenticeships, but these results were significant only for men and youth who left school with at least a secondary education. The important impact of work experience during studies on the ability to pursue job opportunities after school is highlighted.
    Keywords: Working while studying, Youth unemployment, school-to-work transition, Benin
    JEL: I21 J20 J64
    Date: 2019
  15. By: Jelena Zarkovic Rakic; Marko Vladisavljevic; Jorge Davalos
    Abstract: Recent empirical evidence, largely based on descriptive analyses, suggests that women’s wages and employment are more likely to be affected by government austerity measures because women constitute a majority of the public-sector labor force. Employing panel data from the 2014 and 2015 Labour Force Survey as pre- and post-treatment periods, we provide an econometric assessment of the effects of a 10% public-sector wage cut in Serbia that was introduced at the beginning of 2015. Wage cuts mandated by austerity measures increased the likelihood that younger and older women workers would transition into unemployment and inactivity, while no such effect was identified for men. On the other hand, evidence of heterogeneous compliance with the wage cut across public subsectors. State-owned enterprises, a subsector dominated by men, exhibited lower compliance with wage cuts compared to the state-sector, which is dominated by women. The difference in compliance prevented wage cuts from having the positive effect they could have had on the gender wage gap.
    Keywords: gender, labor market transition, wages, austerity, Serbia
    JEL: J16 J21 J31 J45 H61
    Date: 2019
  16. By: Ajay Agrawal; Joshua S. Gans; Avi Goldfarb
    Abstract: Recent advances in artificial intelligence are primarily driven by machine learning, a prediction technology. Prediction is useful because it is an input into decision-making. In order to appreciate the impact of artificial intelligence on jobs, it is important to understand the relative roles of prediction and decision tasks. We describe and provide examples of how artificial intelligence will affect labor, emphasizing differences between when automating prediction leads to automating decisions versus enhancing decision-making by humans.
    JEL: J20 O33
    Date: 2019–02

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