nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2019‒04‒15
eighteen papers chosen by
Joseph Marchand
University of Alberta

  1. Self-Confidence and Reactions to Subjective Performance Evaluations By Bellemare, Charles; Sebald, Alexander
  2. Do Firms Redline Workers? By Ana María Díaz; Luz Magdalena Salas; Luz Magdalena Salas
  3. Adjusting to minimum wage regulation: Evidence from a direct-democracy experiment in Switzerland By Marius Berger; Bruno Lanz
  4. How does for-profit college attendance affect student loans, defaults and labor market outcomes? By Luis Armona; Rajashri Chakrabarti; Michael F. Lovenheim
  5. Working Conditions on Digital Labour Platforms: Evidence from a Leading Labour Supply Economy By Aleksynska, Mariya; Bastrakova, Anastasia; Kharchenko, Natalia Nikolaevna
  6. Responding to Regulation: The Effects of Changes in Mandatory Retirement Laws on Firm-Provided Incentives By Frederiksen, Anders; Flaherty Manchester, Colleen
  7. Firms and Wage Inequality in Central and Eastern Europe By Magda, Iga; Gromadzki, Jan; Moriconi, Simone
  8. From Ghana to America: The Skill Content of Jobs and Economic Development By Lo Bello, Salvatore; Sanchez Puerta, Maria Laura; Winkler, Hernan
  9. Economics and Politics of the Public-Private Wage Gap (The Case of Russia) By Gimpelson, Vladimir; Lukiyanova, Anna; Sharunina, Anna
  10. Do Tax Incentives Affect Business Location and Economic Development? Evidence from State Film Incentives By Button, Patrick
  11. Incentives, Search Engines, and the Elicitation of Subjective Beliefs: Evidence from Representative Online Survey Experiments By Grewenig, Elisabeth; Lergetporer, Philipp; Werner, Katharina; Woessmann, Ludger
  12. Access to Imported Intermediates and Intra-Firm Wage Inequality By Ge, Ying; Fang, Tony; Jiang, Yeheng
  13. The Causal Effects of Adolescent School Bullying Victimisation on Later Life Outcomes By Gorman, Emma; Harmon, Colm P.; Mendolia, Silvia; Staneva, Anita; Walker, Ian
  14. Present Bias and Underinvestment in Education? Long-run Effects of Childhood Exposure to Booms in Colombia By Bladimir Carrillo
  15. New Digital Technologies and Heterogeneous Employment and Wage Dynamics in the United States: Evidence from Individual-Level Data By Fossen, Frank M.; Sorgner, Alina
  16. Voluntary Job Separations and Traditional versus Flexible Workplace Saving Plans: Evidence from Canada By Fang, Tony; Messacar, Derek
  17. The price and employment response of firms to the introduction of minimum wages By Sebastian Link
  18. Monetary Policy, Growth and Employment in Developing Areas: A Review of the Literature By Junankar, Pramod N. (Raja)

  1. By: Bellemare, Charles (Université Laval); Sebald, Alexander (University of Copenhagen)
    Abstract: Subjective performance evaluations are commonly used to provide feedback and incentives to workers. However, such evaluations can generate significant disagreements and conflicts, the severity of which may be driven by many factors. In this paper we show that a workers' level of self-confidence plays a central role in shaping reactions to subjective evaluations - overconfident agents engage in costly punishment when they receive evaluations below their own, but provide limited rewards to principals when evaluations exceed their own. In contrast, underconfident agents do not significantly react to evaluations below their own, but reward significantly evaluations exceeding their own. Our analysis exploits data from a principal-agent experiment run with a large sample of the Danish working age population, varying the financial consequences associated with the evaluations workers receive. In contrast to existing economic models of reciprocal behavior, reactions to evaluations are weakly related to the financial consequences of the evaluations. These results point towards a behavioral model of reciprocity that intertwines the desire to protect self-perceptions with over-/underconfidence.
    Keywords: subjective performance evaluations, self-confidence, reciprocity
    JEL: D01 D02 D82 D86 J41
    Date: 2019–03
  2. By: Ana María Díaz; Luz Magdalena Salas; Luz Magdalena Salas
    Abstract: Firms statistically discriminate (redline) against job candidates based on where they live. We conducted a correspondence test by sending three identical fictitious resumes to every non professional job offer posted in two main job vacancy newspapers in Bogota. The only difference between the resumes was the residential address in which the applicants lived. Two of the three resumes sent in each trio were located at the same commuting time (and geographical distance) from the job, but one resided in a low-crime neighborhood and the other in a high-crime neighborhood. The third resume was for a fictitious individual located in a low-crime neighborhood that is further away (longer commuting time and greater distance). Our experimental design allows us to explore whether employers discriminate against potential employees based on where they live, and if they do, which mechanisms are behind their discriminatory preferences. Building on the urban economics literature, we test two potential mechanisms: statistical discrimination due to negative signaling neighborhood effects and statistical discrimination based on commuting time to work. If any of these hold, we would expect employers to offer interviews to job applicants who reside in deprived or distant neighborhoods less often. We find that employers statistically discriminate (redline) based on commuting time to work. In particular, living one hour away from the vacancy reduces the callback rate by 32 percent while holding the attributes of the place of residence constant. We did not find evidence that employers respond to negative signaling effects or engages in taste based-discrimination.
    Keywords: statistical discrimination, productivity, employment, experiment, neighborhoods effects, spatial mismatch, correspondence test.
    JEL: C93 D22 J21 J23 J71 R23
    Date: 2019–02–25
  3. By: Marius Berger; Bruno Lanz
    Abstract: We document firms' adjustment channels to minimum wage regulation, leveraging an unexpected Supreme Court ruling mandating the Swiss canton Neuchâtel to enforce a minimum hourly wage of around USD20 previously accepted via popular ballot. Given policy discontinuity at cantonal borders, we design a simple two-wave survey of restaurants to measure wages, employment, workers characteristics, and prices, and administer it in Neuchâtel as well as in geographically proximate districts of neighboring cantons. Our data covers pre- and post-enforcement outcomes for 113 restaurants, with information on more than 800 employees distributed over two survey waves. Difference-in-differences estimation on restaurant-level outcomes and on the distribution of wages in our sample indicate small and statistically insignificant impacts on employment and prices, although we find evidence of disemployment effects for restaurants with larger workforce and lower pre-treatment subminimum wages. Worker-level data further suggests that labor-labor substitution is at work, with an increase in the share of less-qualified workers and employment spillovers for workers with wages above the regulatory minimum.
    Keywords: Minimum wage regulation, Wage distribution, Workforce composition, Laborlabor substitution, Low-wage jobs, Restaurant industry
    JEL: J21 J23 J38 C83 R23
    Date: 2019–03
  4. By: Luis Armona; Rajashri Chakrabarti; Michael F. Lovenheim
    Abstract: For-profit providers are becoming an increasingly important fixture of US higher education markets. Students who attend for-profit institutions take on more educational debt, have worse labor market outcomes, and are more likely to default than students attending similarly-selective public schools. Because for-profits tend to serve students from more disadvantaged backgrounds, it is important to isolate the causal effect of for-profit enrollment on educational and labor market outcomes. We approach this problem using a novel instrument combined with more comprehensive data on student outcomes than has been employed in prior research. Our instrument leverages the interaction between changes in the demand for college due to labor demand shocks and the local supply of for-profit schools. We compare enrollment and postsecondary outcome changes across areas that experience similar labor demand shocks but that have different latent supply of for-profit institutions. The first-stage estimates show that students are much more likely to enroll in a for-profit institution for a given labor demand change when there is a higher supply of such schools in the base period. Among four-year students, for-profit enrollment leads to more loans, higher loan amounts, an increased likelihood of borrowing, an increased risk of default and worse labor market outcomes. Two-year for-profit students also take out more loans, have higher default rates and lower earnings. But, they are more likely to graduate and to earn over $25,000 per year (the median earnings of high school graduates). Finally, we show that for-profit entry and exit decisions are at most weakly responsive to labor demand shocks. Our results point to low returns to for-profit enrollment that have important implications for public investments in higher education as well as how students make postsecondary choices.
    Keywords: postsecondary education, for-profits schools, student loans, default, returns to education
    JEL: I23 J24
    Date: 2019
  5. By: Aleksynska, Mariya (IZA); Bastrakova, Anastasia (Kiev International Institute of Sociology); Kharchenko, Natalia Nikolaevna (Kiev International Institute of Sociology)
    Abstract: Online labour platforms matching labour supply and demand are profoundly modifying the world of work. Businesses use them to outsource tasks to a world-wide pool of workers; while workers can access work opportunities transcending national boundaries. Increasingly, workers are located in developing and transition economies. This paper is based on survey of online workers of Ukraine, which in 2013-2017 occupied the first place in Europe, and the fourth place in the world in terms of the amount of financial flows and the number of tasks executed by workers through online labour platforms. Focusing on working conditions of digital workers, the paper shows that while the majority of these workers are satisfied with their online work, a sizeable proportion faces risk of being in disguised or dependent employment relationship, works informally, and has a poor social protection. The earnings through the platforms are generally comparable to the earnings in the local labour market, but they do undercut payments for equivalent work that could have been performed in other countries. There is an important gender pay gap in online work. The paper also shows how these working conditions are shaped by both local and international business practices of posting tasks on such platforms. Based on these findings, it presents a set of policy reflections, both for Ukraine and for the future global governance in the world of digital work.
    Keywords: gig-economy, online labour, digital labour platforms, working conditions
    JEL: J2 J3 J4 L2
    Date: 2019–03
  6. By: Frederiksen, Anders (Aarhus University); Flaherty Manchester, Colleen (University of Minnesota)
    Abstract: The Age Discrimination in Employment Act of 1978 expanded employee age protections to age 70, making the widespread practice by U.S. firms of mandating retirement at age 65 illegal. Building on the work of Lazear (1979), we propose that the law change not only weakened the long-term employment contract, but also contributed to the rise in pay-for-performance incentives. We model the firm's choice between offering long-term incentive contracts with low monitoring requirements and pay-for-performance (PFP) contracts with high monitoring requirements, showing how the law change increased the relative attractiveness of PFP contracts. We test the model's predictions using data from the Baker-Gibbs-Holmstrom firm, evaluating the effect of the law change on the slope of the age-pay profile, turnover rates, and the sensitivity of pay to performance. Further, we find direct evidence of strategic response to the law change by the firm, including the introduction of bonus payments, change in performance management system, and increase in the proportion of top managers. The setting also provides an opportunity to empirically investigate how firms navigate career incentives for employees.
    Keywords: incentive pay, pay for performance, long-term incentive contracts, promotions, slot constraints, career incentives
    JEL: M51 M52
    Date: 2019–03
  7. By: Magda, Iga (Warsaw School of Economics); Gromadzki, Jan (Warsaw School of Economics); Moriconi, Simone (IÉSEG School of Management)
    Abstract: Recent studies show that firms are playing an increasingly important role in shaping wage inequality in advanced economies. We contribute to this literature by analysing wage inequality patterns and their firm dimension in Central and Eastern European countries. We use large, linked employer-employee datasets with data from the 2002-2014 period. We find that unlike in many other advanced economies, wage inequality levels have decreased in CEE countries, and particularly in those countries that previously had the highest wage inequality levels. The relative size of the between-firm component varied substantially across countries, and was largest in countries with the highest wage inequality levels. We further estimate the recentered influence function (RIF) regression and the Blinder-Oaxaca decomposition in order to investigate the micro-level determinants of wage inequality. Our findings indicate that the changes in wage inequality levels were mainly attributable to returns to workplace characteristics.
    Keywords: wages, wage inequality, RIF regression, linked employer-employee data
    JEL: D22 J31 J40
    Date: 2019–03
  8. By: Lo Bello, Salvatore (Bank of Italy); Sanchez Puerta, Maria Laura (World Bank); Winkler, Hernan (World Bank)
    Abstract: There is a growing body of literature exploring the skill content of jobs. This paper contributes to this research by using data on the task content of occupations in developing countries, instead of U.S. data, as most existing studies do. The paper finds that indexes based on U.S. data do not provide a fair approximation of the levels, changes, and drivers of the routine cognitive and nonroutine manual skill content of jobs in developing countries. The paper also uncovers three new stylized facts. First, while developed countries tend to have jobs more intensive in nonroutine cognitive skills than developing countries, income (in growth and levels) is not associated with the skill content of jobs once the analysis accounts for other factors. Second, although adoption of information and communications technology is linked to job de-routinization, international trade is an offsetting force. Last, adoption of information and communications technology is correlated with lower employment growth in countries with a high share of occupations that are intensive in routine tasks.
    Keywords: skills, tasks, economic development, O*NET, STEP
    JEL: J24
    Date: 2019–03
  9. By: Gimpelson, Vladimir (CLMS, Higher School of Economics, Moscow); Lukiyanova, Anna (NRU HSE, Moscow); Sharunina, Anna (NRU HSE, Moscow)
    Abstract: The paper explores the public-private wage gap in the Russian economy over time and along the whole wage distribution. Using the RLMS-HSE panel data set, we examine how gaps at various points of wage distribution changed from 2005 to 2015 and present decompositions of the gaps into components explained by differences in characteristics and differences in returns. The results suggest that the gap persists over time and varies along the wage distribution. During the 2000’s, low-skilled public sector workers had smaller pay gaps than higher-skilled workers had. Multiple governmental policy interventions and the economic crisis of 2008-2009 contributed to the narrowing of the gap and its partial equalization along the distribution. A new set of policy changes associated with the May 2012 Presidential Decrees strengthened these tendencies but failed to eliminate the gaps.
    Keywords: public sector, public-private wage gap, quantile regression, RLMS-HSE, Russia
    JEL: J31 J45
    Date: 2019–03
  10. By: Button, Patrick (Tulane University)
    Abstract: I estimate the impacts of recently-popular U.S. state film incentives on filming location, film industry employment, wages, and establishments, and spillover impacts on related industries. I compile a detailed database of incentives, matching this with TV series and feature film data from the Internet Movie Database (IMDb) and Studio System, and establishment and employment data from the Quarterly Census of Employment and Wages and Country Business Patterns. I compare these outcomes in states before and after they adopt incentives, relative to similar states that did not adopt incentives over the same time period (a panel difference-in-differences). I find that TV series filming increases by 6.3 to 55.4% (0.67 to 1.50 additional TV series) after incentive adoption. However, there is no meaningful effect on feature films, and employment, wages, and establishments in the film industry and in related industries. These results show that the ability for tax incentives to affect business location decisions and economic development is mixed, suggesting that even with aggressive incentives, and "footloose" filming, incentives can have little impact.
    Keywords: economic development, tax incentives, state taxation, business location, film industry
    JEL: H25 H71 R38 L82 Z11
    Date: 2019–03
  11. By: Grewenig, Elisabeth (Ifo Institute for Economic Research); Lergetporer, Philipp (Ifo Institute for Economic Research); Werner, Katharina (Ifo Institute for Economic Research); Woessmann, Ludger (Ifo Institute for Economic Research)
    Abstract: A large literature studies subjective beliefs about economic facts using unincentivized survey questions. We devise randomized experiments in a representative online survey to investigate whether incentivizing belief accuracy affects stated beliefs about average earnings by professional degree and average public school spending. Incentive provision does not impact earnings beliefs, but improves school-spending beliefs. Response patterns suggest that the latter effect likely reflects increased online-search activity. Consistently, an experiment that just encourages search-engine usage produces very similar results. Another experiment provides no evidence of experimenter-demand effects. Overall, results suggest that incentive provision does not reduce bias in our survey-based belief measures.
    Keywords: beliefs, incentives, online search, survey experiment
    JEL: D83 C83 C90
    Date: 2019–03
  12. By: Ge, Ying (School of International Trade and Economics, Beijing); Fang, Tony (Memorial University of Newfoundland); Jiang, Yeheng (Chinese Academy of Forestry)
    Abstract: We use Chinese firm-level data from the World Bank Investment Climate Survey to examine the link between importing intermediates and intra-firm wage inequality. Our results show that intermediate input importers not only have a significant wage premium but also have a greater intra-firm wage dispersion than non-importing firms. This pattern is robust when we control for productivity and use trade costs as the instruments. We further investigate the mechanism of how importing intermediates might contribute to both inter-firm and intra-firm wage inequality. Our evidence is consistent with three important channels. First, imported intermediate inputs complement skilled labour. Second, intermediates importers are more likely to use performance pay. Third, imported inputs complement innovation and employee training.
    Keywords: global production sharing, wage inequality, world bank investment climate survey
    JEL: F16
    Date: 2019–03
  13. By: Gorman, Emma (Lancaster University); Harmon, Colm P. (University of Sydney); Mendolia, Silvia (University of Wollongong); Staneva, Anita (University of Sydney); Walker, Ian (Lancaster University)
    Abstract: We use rich data on a cohort of English adolescents to analyse the long-term effects of experiencing bullying victimisation in junior high school. The data contain self-reports of five types of bullying and their frequency, for three waves of the data, when the pupils were aged 13 to 16 years. Using a variety of estimation strategies - least squares, matching, inverse probability weighting, and instrumental variables - we assess the effects of bullying victimisation on short- and long-term outcomes, including educational achievements, earnings, and mental ill-health at age 25 years. We handle potential measurement error in the child self-reports of bullying type and frequency by instrumenting with corresponding parental cross-reports. Using a detailed longitudinal survey linked to administrative data, we control for many of the determinants of bullying victimisation and child outcomes identified in previous literature, paired with comprehensive sensitivity analyses to assess the potential role of unobserved variables. The pattern of results strongly suggests that there are important long run effects on victims - stronger than correlation analysis would otherwise suggest. In particular, we find that both type of bullying and its intensity matters for long run outcomes.
    Keywords: bullying, victimization, long term outcomes
    JEL: I21 I24 J24
    Date: 2019–03
  14. By: Bladimir Carrillo
    Abstract: This paper examines the long-run impacts of income shocks by exploiting variation in coffee cultivation patterns within Colombia and world coffee prices during cohorts’ school-going years in a differences-in-differences framework. The results indicate that cohorts who faced higher returns to coffee-related work during school-going years completed fewer years of schooling and have lower income in adulthood. These findings suggest that leaving school during temporary booms results in a significant loss of long-term income. This is consistent with the possibility that students may ignore or heavily discount the future consequences of dropout decisions when faced with immediate income gains.
    Keywords: Coffee price shocks, transitory income shocks, human capital accumulation, opportunitycost of schooling, long-run impacts, schooling.
    JEL: J24 O12 O13
    Date: 2019–03–28
  15. By: Fossen, Frank M. (University of Nevada, Reno); Sorgner, Alina (John Cabot University)
    Abstract: We investigate heterogeneous effects of new digital technologies on the individual-level employment- and wage dynamics in the U.S. labor market in the period from 2011-2018. We employ three measures that reflect different aspects of impacts of new digital technologies on occupations. The first measure, as developed by Frey and Osborne (2017), assesses the computerization risk of occupations, the second measure, developed by Felten et al. (2018), provides an estimate of recent advances in artificial intelligence (AI), and the third measure assesses the suitability of occupations for machine learning (Brynjolfsson et al., 2018), which is a subfield of AI. Our empirical analysis is based on large representative panel data, the matched monthly Current Population Survey (CPS) and its Annual Social and Economic Supplement (ASEC). The results suggest that the effects of new digital technologies on employment stability and wage growth are already observable at the individual level. High computerization risk is associated with a high likelihood of switching one's occupation or becoming non-employed, as well as a decrease in wage growth. However, advances in AI are likely to improve an individual's job stability and wage growth. We further document that the effects are heterogeneous. In particular, individuals with high levels of formal education and older workers are most affected by new digital technologies.
    Keywords: digitalization, artificial intelligence, machine learning, employment stability, unemployment, wage dynamics
    JEL: J22 J23 O33
    Date: 2019–03
  16. By: Fang, Tony (Memorial University of Newfoundland); Messacar, Derek (Memorial University of Newfoundland)
    Abstract: This paper provides new insights into the longstanding empirical issue of whether the type of workplace saving plan (a "traditional" registered pension plan or RPP, a "flexible" group registered retirement savings plan or group RRSP, and a "hybrid" arrangement of the two) affects employee voluntary job separations. We use a Canadian employer–employee matched dataset that provides information on both job transitions and the types of workplace saving plans being held by employees and offered by employers. This dataset allows us to control for employee self-selection and firm fixed effects. The standard prediction from implicit contract theory suggests that traditional pensions reduce quit rates but flexible plans have little effect due to their portability. The results are partially consistent with this prediction. Implications of these findings for current public policy are discussed.
    Keywords: implicit contract theory, flexible retirement saving plan, traditional pension, voluntary job separation, self-selection, fixed effects
    JEL: J26 J32 J63
    Date: 2019–03
  17. By: Sebastian Link
    Abstract: This paper studies the price and employment response of firms to the introduction of a nation-wide minimum wage in Germany. In line with previous studies, the estimated employment effect is only modestly negative and statistically insignificant. In contrast, affected firms increased prices much more frequently. The price effect is prevalent across different sectors of the economy including manufacturing and is thus not limited to low wage industries. I document that speed and degree of price pass-through were high and firms rolled over the lion’s share of the costs generated by the minimum wage to their customers. Consistent with the role of price pass-through, I find considerable heterogeneity in firms’ responses to the minimum wage depending on their own business expectations, product market competition, and local labor market conditions.
    Keywords: price pass-through, heterogeneity in minimum wage effects, firm data, Germany
    JEL: J38 J08 E31 J31
    Date: 2019
  18. By: Junankar, Pramod N. (Raja) (University of New South Wales)
    Abstract: In this paper we review the literature on the impact that monetary policy has on growth and employment in developing countries. Much of the literature focusses on the impact of monetary policy on inflation levels and inflation volatility, and sometimes on output (GDP) levels and volatility of output. This survey of the literature on Monetary policy and growth shows that money plays a small role in developing countries and that monetary policy is not a very important influence on growth but may have some impact on inflation. Although there is much discussion about the merits of keeping inflation levels and volatility low, there is very little literature on studying the impact of low rates of steady inflation on the levels of private investment and technological change and hence on economic growth and on employment. There is very little research about the direct links between monetary policy and employment. The impact of growth on employment depends on what are the main drivers of economic growth and the initial state of the economy. Although growth may lead to increasing employment (formal and informal) there is little evidence showing that growth leads to an increase in "decent employment".
    Keywords: monetary policy, role of money, growth, employment, development
    JEL: E52 J4 O11 O17 O47
    Date: 2019–03

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