nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2019‒04‒08
eighteen papers chosen by
Joseph Marchand
University of Alberta

  1. Fraudulent Financial Reporting and the Consequences for Employees By Jung Ho Choi; Brandon Gipper
  2. Labor Market Power By David W. Berger; Kyle F. Herkenhoff; Simon Mongey
  3. The race against the robots and the fallacy of the giant cheesecake: Immediate and imagined impacts of artificial intelligence By Naude, Wim
  4. Personality Traits and Performance in Online Labour Markets By Mourelatos, Evangelos; Giannakopoulos, Nicholas; Tzagarakis, Manolis
  5. How skills and parental valuation of education influence human capital acquisition and early labor market return to human capital in Canada By Steven Lehrer
  6. Local Labor Markets in Canada and the United States By David Albouy; Alex Chernoff; Chandler Lutz; Casey Warman
  7. The German Statutory Minimum Wage and Its Effects on Regional Employment and Unemployment By Bonin, Holger; Isphording, Ingo E.; Krause-Pilatus, Annabelle; Lichter, Andreas; Pestel, Nico; Rinne, Ulf
  8. Different counselors, many options: Career guidance and career plans in secondary schools By Fitzenberger, Bernd; Hillerich-Sigg, Annette; Sprietsma, Maresa
  9. A Tale of Comprehensive Labor Market Reforms: Evidence from the Italian Jobs Act By Tito Boeri; Pietro Garibaldi
  10. What Is the Value Added by Using Causal Machine Learning Methods in a Welfare Experiment Evaluation? By Strittmatter, Anthony
  11. The Pied Piper: Prizes, Incentives, and Motivation Crowding-in By Luigino Bruni; Vittorio Pelligra; Tommaso Reggiani; Matteo Rizzolli
  12. “The Institutional Adjustment Margin to Import Competition: Evidence from Italian Minimum Wages” By Alessia Matano; Paolo Naticchioni; Francesco Vona
  13. Automation and Top Income Inequality By Omer Faruk Koru
  14. Testing the binomial fixed effects logit model; with an application to female labor supply By Rainer Winkelmann; Lin Xu
  15. Engines of Sectoral Labor Productivity Growth By Zsófia L. Bárány; Christian Siegel
  16. Talent Misallocation in Europe By Almarina Gramozi; Theodore Palivos; Marios Zachariadis
  17. Weekend working in 21st century Britain:Does it matter for well-being? By Andrew M. Bryce
  18. Capacity Constraints and the Provision of Public Services: The Case of Workers in Public Health Clinics By Matthew C. Harris; Yinan Liu; Ian McCarthy

  1. By: Jung Ho Choi; Brandon Gipper
    Abstract: We examine employment effects, such as wages and employee turnover, before, during, and after periods of fraudulent financial reporting. To analyze these effects, we combine U.S. Census data with SEC enforcement actions against firms with serious misreporting (“fraud”). We find compared to a matched sample that fraud firms’ employee wages decline by 9% and the separation rate is higher by 12% during and after fraud periods while employment growth at fraud firms is positive during fraud periods and negative afterward. We discuss several reasons that plausibly drive these findings. (i) Frauds cause informational opacity, misleading employees to still join or continue to work at the firm. (ii) During fraud, managers overinvest in labor changing employee mix, and after fraud the overemployment is unwound causing effects from displacement. (iii) Fraud is misconduct; association with misconduct can affect workers in the labor market. We explore the heterogeneous effects of fraudulent financial reporting, including thin and thick labor markets, bankruptcy and non-bankruptcy firms, worker movements, pre-fraud wage levels, and period of hire. Negative wage effects are prevalent across these sample cuts, indicating that fraudulent financial reporting appears to create meaningful and negative consequences for employees possibly through channels such as labor market disruptions, punishment, and stigma.
    Keywords: Wages, Employment Growth, Accounting Fraud, Information Asymmetry, Stigma
    JEL: D83 J23 J31 M48 M51
    Date: 2019–03
  2. By: David W. Berger; Kyle F. Herkenhoff; Simon Mongey
    Abstract: What are the welfare implications of labor market power? We provide an answer to this question in two steps: (1) we develop a tractable quantitative, general equilibrium, oligopsony model of the labor market, (2) we estimate key parameters using within-firm-state, across-market differences in wage and employment responses to state corporate tax changes in U.S. Census data. We validate the model against recent evidence on productivity-wage pass-through, and new measurements of the distribution of local market concentration. The model implies welfare losses from labor market power that range from 2.9 to 8.0 percent of lifetime consumption. However, despite large contemporaneous losses, labor market power has not contributed to the declining labor share. Finally, we show that minimum wages can deliver moderate, and limited, welfare gains by reallocating workers from smaller to larger, more productive firms.
    JEL: E2 J2 J42
    Date: 2019–03
  3. By: Naude, Wim (UNU-MERIT, Maastricht University and MSM, and RWTH Aachen, and IZA Bonn)
    Abstract: After a number of AI-winters, AI is back with a boom. There are concerns that it will disrupt society. The immediate concern is whether labor can win a `race against the robots' and the longer-term concern is whether an artificial general intelligence (super-intelligence) can be controlled. This paper describes the nature and context of these concerns, reviews the current state of the empirical and theoretical literature in economics on the impact of AI on jobs and inequality, and discusses the challenge of AI arms races. It is concluded that despite the media hype neither massive jobs losses nor a `Singularity' are imminent. In part, this is because current AI, based on deep learning, is expensive and dificult for (especially small) businesses to adopt, can create new jobs, and is an unlikely route to the invention of a super-intelligence. Even though AI is unlikely to have either utopian or apocalyptic impacts, it will challenge economists in coming years. The challenges include regulation of data and algorithms; the (mis-) measurement of value added; market failures, anti-competitive behaviour and abuse of market power; surveillance, censorship, cybercrime; labor market discrimination, declining job quality; and AI in emerging economies.
    Keywords: Technology, artificial intelligence, productivity, labor demand, innovation, inequality
    JEL: O47 O33 J24 E21 E25
    Date: 2019–03–07
  4. By: Mourelatos, Evangelos; Giannakopoulos, Nicholas; Tzagarakis, Manolis
    Abstract: In this paper we investigate the impact of non-cognitive skills on the quality of task-specific outcomes by conducting a quasi-experiment on a well-known online crowdsourcing platform. We show that a worker’s performance varies with personality traits, gender, human capital, crowdsourcing experience and work effort. Regarding the effects of non-cognitive skills, we find that workers’ performance in online microtasks is positively related to extraversion and agreeableness. The positive impact of extroverts is also revealed when performance is adjusted for task completion time. These findings provide implications regarding the integration of selection mechanisms in online labour matching platforms aiming in uncovering microworkers soft skills to improve performance and consequently the allocation of resources in online microtasks.
    Keywords: Crowdsourcing,online labour,quality of work,cognitive abilities,personality traits,workers
    JEL: O33 J40 J24
    Date: 2019
  5. By: Steven Lehrer
    Abstract: Using the Youth in Transition Survey we estimate a Roy model with a three dimensional latent factor structure to consider how parental valuation of education, cognitive skills and non-cognitive skills influence endogenous schooling decisions and subsequent labour market outcomes in Canada. We ï¬ nd the effect of cognitive skills on adult incomes arises by increasing the likelihood of obtaining further education. Further, we ï¬ nd that both non-cognitive skills and parental valuation for education play a larger role in determining income at age 25 than cognitive skills. Last, our analysis uncovers striking differences between men and women in several of the estimated relationships. Speciï¬ cally, simulations of the estimated model illustrate that i) among the low skilled, women have much higher college graduation rates, ii) the age 25 earnings gradient by either skill measure is much flatter for women, and iii) parental valuation of education plays a larger role in influencing young women than men.
    Keywords: skills , schooling decisions, early labour market outcomes, gender differences, parental valuation of education
    JEL: J24 C38
    Date: 2019–03
  6. By: David Albouy; Alex Chernoff; Chandler Lutz; Casey Warman
    Abstract: We examine local labor markets in the U.S. and Canada from 1990 to 2011 using comparable household and business data. Wage levels and inequality rise with city population in both countries, albeit less in Canada. Neither country saw wage levels converge despite contrasting migration patterns from/to high-wage areas. Local labor demand shifts raise nominal wages similarly, although in Canada they attract immigrant and highly-skilled workers more, while raising housing costs less. Chinese import competition had a weaker negative impact on manufacturing employment in Canada. These results are consistent with Canada's more redistributive transfer system and larger, more-educated immigrant workforce.
    JEL: J21 J31 J61 N32 R12
    Date: 2019–03
  7. By: Bonin, Holger (IZA); Isphording, Ingo E. (IZA); Krause-Pilatus, Annabelle (IZA); Lichter, Andreas (Heinrich Heine University Düsseldorf); Pestel, Nico (IZA); Rinne, Ulf (IZA)
    Abstract: This paper studies the effects of the introduction of Germany's statutory minimum wage in 2015 on employment and unemployment on the level of regional labor markets. Using variation in the regional exposure to the new wage floor, we employ a difference-in-differences approach that compares the evolution of employment and unemployment between regions with varying minimum wage bites. Overall, we find no statistically significant effect of the introduction of the German minimum wage on regular employment subject to social insurance, but a statistically significant negative effect on marginal employment. The reduction is not accompanied by a proportional increase in unemployment.
    Keywords: minimum wage, employment, unemployment, labor market regions, Germany
    JEL: J21 J31 J38
    Date: 2019–03
  8. By: Fitzenberger, Bernd; Hillerich-Sigg, Annette; Sprietsma, Maresa
    Abstract: Career guidance assists students with the school-to-work transition. Based on a survey in secondary schools in Germany, we analyze career guidance activities and how these affect career plans. The take-up of career guidance depends upon the school track attended and upon the school and class room context, while personal characteristics are hardly relevant. The effects of counseling depend upon the counselor. Counseling by the employment agency reduces plans for educational upgrading and increases the probability of applying for an apprenticeship, while the effects of school counselors work in the opposite direction for lower track students.
    Keywords: educational aspirations,career guidance,counseling,career planning,school-to-work transition,secondary school
    JEL: J24 I28 I21
    Date: 2019
  9. By: Tito Boeri; Pietro Garibaldi
    Abstract: The Italian Jobs Act introduced a subsidy for new hirings as well as a new open ended labor contract based on graded security, with severance payments increasing with tenure, while phasing out the compulsory reinstatement of workers in the case of unfair dismissals applied until March 2015. Simple models of job creation and destruction predict that hiring subsidies and lower _ring costs unambiguously increase hirings. Moreover, lower _ring costs associated with graded security should also increase layoffs. These effects need not to be uniform across the size distribution of firms, especially when firms of different size are treated differently by the policy changes as in the case of the Jobs Act. On the one hand, the hiring subsidy was proportional to wages, but had a cap, hence was more generous for small firms - typically paying lower wages than large firms - making them particularly responsive along the job creation margin. On the other hand, the reduction in _ring costs applied mainly to large firms concentrating on them the adjustment along the job destruction margin. To investigate empirically the effects of the Italian Jobs Act, we draw on a unique dataset covering the universe of private firms in Italy having at least once 10 to 20 employees in the two years prior to the reform of January 2015. We find evidence of a substantial increase in open ended hirings, and in the transformation of fixed-term into open ended contracts, in the aftermath of the Jobs Act. The effects of the Jobs Act on firings- conversely- are much smaller, and are concentrated on large _firms, while small _firms react more intensively- creating new open ended contracts - to the hiring subsidy.
    Keywords: labor mobility, jobs act
    JEL: J10 J23
    Date: 2019–04
  10. By: Strittmatter, Anthony
    Abstract: Recent studies have proposed causal machine learning (CML) methods to estimate conditional average treatment effects (CATEs). In this study, I investigate whether CML methods add value compared to conventional CATE estimators by re-evaluating Connecticut's Jobs First welfare experiment. This experiment entails a mix of positive and negative work incentives. Previous studies show that it is hard to tackle the effect heterogeneity of Jobs First by means of CATEs. I report evidence that CML methods can provide support for the theoretical labor supply predictions. Furthermore, I document reasons why some conventional CATE estimators fail and discuss the limitations of CML methods.
    Keywords: Labor supply, individualized treatment effects, conditional average treatment effects, random forest
    JEL: H75 I38 J22 J31 C21
    Date: 2019
  11. By: Luigino Bruni (LUMSA University); Vittorio Pelligra (University of Cagliari); Tommaso Reggiani (Masaryk University); Matteo Rizzolli (LUMSA University)
    Abstract: In mainstream business and economics, prizes such as the Presidential Medal of Freedom are understood as special types of incentives, with the peculiar features of being awarded in public, and of having largely symbolic value. Informed by both historical considerations and philosophical instances, our study defines fundamental theoretical differences between incentives and prizes. The conceptual factors highlighted by our analytical framework are then tested through a laboratory experiment. The experimental exercise aims to analyze how prizes and incentives impact actual individuals’ behavior differently. Our results show that both incentives (monetary and contingent) and prizes (non-monetary and discretional rewards) boost motivation to perform if awarded publicly, but only prizes crowd-in motivation promoting virtuous attitude.
    Keywords: incentives, prizes, awards, crowding-in, meaning, intrinsic motivation
    JEL: B1 D03 J33
    Date: 2019–03–26
  12. By: Alessia Matano (AQR-IREA, University of Barcelona); Paolo Naticchioni (AQR-IREA, University of Barcelona); Francesco Vona (AQR-IREA, University of Barcelona)
    Abstract: A growing body of research has contributed to understanding the labor market and political effects of globalization. This paper explores an overlooked aspect of trade-induced adjustments in the labor market: the institutional aspect. We take advantage of the two-tier collective bargaining structure of the Italian labor market, whereby the first tier entails setting minimum wages at the contract level. Using an instrumental variable strategy and exploiting variations in contract-level exposure to trade, we find for the 1995-2003 period that on average, the surge in imports decreased contractual minimum wages by 1.5%. This impact increased with the increase in the share of unskilled workers employed under this contract. This negative institutional effect contrasts with a nonsignificant effect of trade on total wages, with the latter becoming positive and large only for highly skilled workers.
    Keywords: bargained minimum wages; import competition; labor market institutions; skills JEL classification: J50, F16, J31, J24
    Date: 2019–04
  13. By: Omer Faruk Koru (Department of Economics, University of Pennsylvania)
    Abstract: For almost 40 years, inequality within the top percentile of the income distribution,measured as the ratio of income share of top 0:1% to the income share of top 1%, has been increasing in the US. The income of super-rich people increased more than the income of rich people. In this paper, we show that improvements in automation technology (the number of tasks for which capital can be used) is an important factor contributing to this inequality. We consider a model in which labor has a convex cost and capital has a linear cost. This leads to a decreasing returns to scale pro t function for entrepreneurs. As capital replaces labor in more and more tasks, the severity of diseconomies of scale diminishes, hence the market share of top-skilled entrepreneurs increases. If entrepreneurial skill is distributed according to a Pareto distribution, then top income distribution can be approximated by a Pareto distribution. We show that the shape parameter of this distribution is inversely related to the level of automation. Finally, we rationalize convex cost of labor using the theory of efficiency wage.
    Keywords: automation, top income inequality, entrepreneurship, efficiency wage
    JEL: E23 J23 J3 O33
    Date: 2019–03–12
  14. By: Rainer Winkelmann; Lin Xu
    Abstract: Regression models for proportions are frequently encountered in applied work. The condi- tional expectation is bound between 0 and 1 and, therefore, must be non-linear which requires non-standard panel data extensions. The quasi-maximum likelihood estimator of Papke and Wooldridge (1996) suffers from the incidental parameters problem when including fixed effects. In this paper, we re-consider the binomial panel logit model with fixed effects (Machado, 2004). We show that the conditional maximum likelihood estimator is very easy to implement using standard software. We investigate the properties of the estimator under misspecification and derive a new test for overdispersion in the binomial fixed effects logit model. Models and test are applied in a study of contracted work-time percentage, measured as proportion of full-time work, for women in Switzerland.
    Keywords: Proportions data, unobserved heterogeneity, conditional maximum likelihood, overdispersion
    JEL: C23 J21
    Date: 2019–04
  15. By: Zsófia L. Bárány; Christian Siegel
    Abstract: We study the origins of labor productivity growth and its differences across sectors. In our model, sectors employ workers of different occupations and various forms of capital, none of which are perfect substitutes, and technology evolves at the sector-factor cell level. Using the model we infer technologies from US data over 1960-2017. We find sector-specific routine labor augmenting technological change to be crucial. It is the most important driver of sectoral differences, and has a large and increasing contribution to aggregate labor productivity growth. Neither capital accumulation nor the occupational employment structure within sectors explains much of the sectoral differences.
    Keywords: biased technological change; structural transformation; labor productivity
    JEL: O41 O33 J24
    Date: 2019–03
  16. By: Almarina Gramozi; Theodore Palivos; Marios Zachariadis
    Abstract: We use microeconomic data on wages and individual characteristics across twenty European economies for the period 2004 to 2015, to detect patterns of misallocation arising in these economies based on individuals’ gender, immigrant status, or private versus public sector affiliation. We develop a theoretical model where being relatively isolated, e.g., due to gender, immigrant status, or private sector affiliation, leads to lower wages and talent misallocation. Our empirical results suggest that being a female or immigrant, and working in the private sector, exert a negative impact on one’s wages beyond that explained by their economic characteristics, suggestive of persistent talent misallocation in Europe during the period under study. Notably, countries such as Cyprus, Greece, Italy and Spain are systematically found at the top of the overall talent misallocation index we construct year-after-year for the period under study. Our work provides new cross-country micro-econometric evidence about the importance of various forms of talent misallocation for aggregate economic outcomes.
    Keywords: economic growth, wage gap, inefficiency
    JEL: E0 J31 O4 O52
    Date: 2019–03
  17. By: Andrew M. Bryce (Department of Economics, University of Sheffield UK)
    Abstract: On any given weekend, over a fifth of the UK labour force is at work, while more than half of working adults report working at the weekend at least some of the time. This is despite the fact that weekends are conventionally set aside as rest days. The question that this paper addresses is: does this matter? This paper adds to the literature by using two large panel datasets to analyse the effects of weekend working on eight different measures of subjective well-being in the UK. Unlike most previous literature on this topic, the analysis in this paper controls for individual fixed effects such that the results should not be confounded by time invariant omitted variables that differ between individuals. I find that weekend working does not affect how satisfied people are with their lives overall but it does have a significant impact on how satisfied they are with the amount of leisure time they have, with the results suggesting that the avoidance of weekend working is equivalent to working six fewer hours per week. Moreover, people working at the weekend report significantly lower happiness yesterday than non-weekend workers. These findings imply that, while weekend working is arguably good for productivity and hence welfare, such benefits come at a cost. Notwithstanding the fact that many people may be freely supplying their labour at weekends, actions aimed at limiting weekend working or mitigating its adverse effects will improve the overall well-being of workers.
    Keywords: subjective well-being; labour market; weekend working
    JEL: I3 J2
    Date: 2019–03
  18. By: Matthew C. Harris; Yinan Liu; Ian McCarthy
    Abstract: Unlike in the production of most goods, changes in capacity for labor-intensive services only affect outcomes of interest insofar as service providers change the way they allocate their time in response to those capacity changes. In this paper, we examine how public sector service providers respond to unexpected capacity constraints in the specific context of public health clinics. We exploit an exogenous reduction in public health clinic capacity to quantify nurses' trade-off between patients treated and time spent with each patient, which we treat as a proxy for a quality v. quantity decision. We provide evidence that these small and generally insignificant effects on nurse time favor public sector employees prioritizing quality of each interaction over clearing the patient queue.
    JEL: D24 I18 J22
    Date: 2019–03

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