nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2019‒04‒22
nineteen papers chosen by
Joseph Marchand
University of Alberta

  1. Robots and Firms By Michael Koch; Ilya Manuylov; Marcel Smolka
  2. Time use, unemployment, and well-being: an empirical analysis using British time-use data By Thi Truong An Hoang; Andreas Knabe
  3. Subjective Inheritance Expectations and Economic Outcomes By Stefania Basiglio; Mariacristina Rossi; Arthur van Soest
  4. Birds of a Feather: Estimating the Value of Statistical Life from Dual-Earner Families By Aldy, Joseph
  5. Labour mobility and interprovincial trade in Canada By Aziz, Nusrate; Mahar, Gerry
  6. The Return to Hours Worked Within and Across Occupations: Implications for the Gender Wage Gap By Jeffrey T. Denning; Brian Jacob; Lars Lefgren; Christian vom Lehn
  7. A Decline in Labor's Share with Capital Accumulation and Complementary Factor Inputs: An Application of the Morishima Elasticity of Substitution By Paul, Saumik
  8. Taxation and Migration: Evidence and Policy Implications By Henrik Kleven; Camille Landais; Mathilde Muñoz; Stefanie Stantcheva
  9. The Role of Stock Price Informativeness in Compensation Complexity By Bennett, Benjamin; Garvey, Gerald; Milbourn, Todd; Wang, Zexi
  10. Hiring Through Referrals in a Labor Market with Adverse Selection By Dariel, Aurelie; Riedl, Arno; Siegenthaler, Simon
  11. Optimal time allocation in active retirement By Sanchez-Romero, Miguel; Fürnkranz-Prskawetz, Alexia
  12. Youth Labour Markets in Developing and Developed Countries: The Role of the Sectoral Composition of Production By Junankar, Pramod N. (Raja)
  13. Paid Parental Leave: Leaner Might Be Better By Catherine Haeck; Samuel Pare; Pierre Lefebvre; Philip Merrigan
  14. Overhead Labour and Skill-Biased Technological Change: The Role of Product Diversification By Choong Hyun Nam
  15. Should I stay or should I go? Migration and job-skills mismatch among Italian doctoral recipients By Alfano, Vincenzo; D'Uva, Marcella; De Simone, Elina; Gaeta, Giuseppe Lucio
  16. Trade, Technology, and the Great Divergence By O'Rourke, Kevin Hjortshøj; Rahman, Ahmed; Taylor, Alan M.
  17. Does Class Size Matter? How, and at What Cost? By Desire Kedagni; Kala Krishna; Rigissa Megalokonomou; Yingyan Zhao
  18. International trade, non-trading firms and their impact on labour productivity By Millard, Stephen; Nicolae, Anamaria; Nower, Michael
  19. Labour Force Participation and the Business Cycle in Mexico By Puigvert Jonathan; Juárez-Torres Miriam

  1. By: Michael Koch (University of Bayreuth); Ilya Manuylov (Department of Economics and Business Economics, Aarhus University, Denmark); Marcel Smolka (Department of Economics and Business Economics, Aarhus University, Denmark)
    Abstract: We study the implications of robot adoption at the level of individual firms using a rich panel data-set of Spanish manufacturing firms over a 27-year period (1990-2016). We focus on three central questions: (1) Which firms adopt robots? (2) What are the labor market effects of robot adoption at the firm level? (3) How does firm heterogeneity in robot adoption affect the industry equilibrium? To address these questions, we look at our data through the lens of recent attempts in the literature to formalize the implications of robot technology. As for the first question, we establish robust evidence that ex-ante larger and more productive firms are more likely to adopt robots, while ex-ante more skill-intensive firms are less likely to do so. As for the second question, we find that robot adoption generates substantial output gains in the vicinity of 20-25% within four years, reduces the labor cost share by 5-7%-points, and leads to net job creation at a rate of 10%. These results are robust to controlling for non-random selection into robot adoption through a difference-in-differences approach combined with a propensity score reweighting estimator. Finally, we reveal substantial job losses in firms that do not adopt robots, and a productivity-enhancing reallocation of labor across firms, away from non-adopters, and toward adopters.
    Keywords: Automation, Robots, Firms, Productivity, Technology
    JEL: D22 F14 J24 O14
    Date: 2019–04–08
  2. By: Thi Truong An Hoang; Andreas Knabe
    Abstract: We use nationally representative data from the UK Time-Use Survey 2014/2015 to investigate how a person’s employment status is related to time use and cognitive and affective dimensions of subjective well-being. We find that unemployed persons report substantially lower levels of life satisfaction than employed persons. When looking at specific types of activities, the unemployed enjoy most of the activities they engage in less than the employed. However, the employed consider working to be one of the least enjoyable activities. They also spend a large share of their time at work and with work-related activities, while the unemployed spend more time on leisure and more enjoyable activities instead. When looking at duration-weighted average affective well-being over the entire waking time of the day, our results suggest that the benefit of having to spend less time at work outweighs the negative emotional effect of unemployment during leisure episodes, such that the unemployed experience, on average, more enjoyment during the day than the employed.
    Keywords: unemployment, happiness, affective well-being, time use, Day Reconstruction Method
    JEL: I31 D91 J60 J22
    Date: 2019
  3. By: Stefania Basiglio (Faculty of Law, University of Trento, Italy); Mariacristina Rossi (Department of Management, University of Torino, Italy); Arthur van Soest (Tilburg School of Economics and Management, Tilburg University, Nederlands)
    Abstract: In this paper we investigate whether and to what extent inheritance expectations act as a driver of economic choices. We use the DHS dataset merged with a specific module on subjective probabilities on inheritance receiving and its amount foreseen in the next ten years. Hence, we analyze whether the expected inheritance acts as a deterrent to saving. Results suggest that individuals perceive the expected inheritances as a potential increase of personal wealth, which leads to a reduction in savings. Expectations appear to matter also in the enhancement of the intention to bequeath and in future work versus leisure choices.
    Keywords: Subjective expectations, Savings, Inheritance.
    JEL: D14 D84 D91
    Date: 2019–04
  4. By: Aldy, Joseph (Harvard Kennedy School)
    Abstract: Economists have long employed hedonic wage analysis to estimate income-fatality risk trade-offs, but some scholars have raised concerns about systematic measurement error and omitted variable bias in the empirical applications of this model. Recent studies have employed panel methods to remove time-invariant individual-specific characteristics that could induce bias in estimation. In an analogous manner, this paper proposes to exploit assortative matching on risk attitudes within married couples to control for worker characteristics that are unobserved to the econometrician. I develop and implement a modified hedonic wage estimator based on a within-coupled differenced wage equation for full-time working married couples with the Current Population Survey Merged Outgoing Rotation Group over 1996-2002. The key assumption builds on the findings in the assortative matching literature that individuals often marry those who have common traits across many dimensions, including those that may influence worker wages and are correlated with observed occupational fatality risks. This estimator identifies the compensating differential for occupation fatality risk by using within-couple differencing to remove unobserved determinants of risk attitudes and risk-mitigation ability, on which couples match, from the error term. I find that the value of statistical life (VSL) varies from $9 to $13 million (2016$). The within-couple differenced VSL estimates are stable and more robust to variation in specification of the hedonic wage model than conventional, cross-sectional hedonic wage models. I also find that the value of statistical life takes an inverted-U shape with respect to age.
    JEL: J12 J17 J31 Q51
    Date: 2019–04
  5. By: Aziz, Nusrate; Mahar, Gerry
    Abstract: This study estimates the impact of interprovincial and international migration on interprovincial trade using annual data from 1981- 2016 for Canadian provinces. We apply both the gravity and the spatial trade models for estimation using a number of panel estimators. We find that the endogeneity issue should be addressed when estimating the relationship between migration and interprovincial trade. Estimated results show that interprovincial and international net migrations are positive and significant determinants for interprovincial trade of Canada. Interprovincial immigration is more influential than international immigration in explaining interprovincial trade. Interprovincial imports are influenced more by interprovincial and international migration than interprovincial exports. Province-wise estimates indicate that Quebec, British Columbia, Saskatchewan, and New Brunswick are positively affected by interprovincial migration. Among them, all except New Brunswick are also positively affected by international migration. The gravity and the spatial trade models are useful to explain Canadian interprovincial trade. The pooled OLS, fixed effects, 2SLS and SGMM estimators are used in this study. Our results are robust to different estimation methods and alternative measures using both the flow and the stock net migration in Canada’s provinces.
    Keywords: interprovincial migration,international migration,interprovincial trade,gravity model,spatial trade model,endogeneity,IV approach
    JEL: C33 C36 F16 F22
    Date: 2019
  6. By: Jeffrey T. Denning; Brian Jacob; Lars Lefgren; Christian vom Lehn
    Abstract: We document two empirical phenomena. First, the observational wage returns to hours worked within occupation is small, and even negative in some specifications. Second, the wage return to average hours worked across occupations is large. We develop a conceptual framework that reconciles these facts, where the key insight is that workers choose jobs as a bundle of compensation and expected hours worked. As an example, we apply this framework to the gender wage gap and show how it can explain the view expressed in recent work that hours differences between men and women represent a large and growing component of the gender wage gap.
    JEL: J16 J3 J7
    Date: 2019–04
  7. By: Paul, Saumik (Osaka University)
    Abstract: The role of capital accumulation as a driver of the labor income share requires capital and labor to be substitutes, which appears paradoxical in a world predominantly characterized by complementarity between capital and labor. This paper argues that the composition of skills in the labor force and an identification of the elasticity parameters between capital and different skills of labor can reconcile the opposing views. Using a framework with capital-skill complementarity and variable substitution elasticities, the Morishima elasticity of substitution is applied to identify the elasticity parameters at different skill levels and derive the necessary condition for capital accumulation to coexist with a declining labor income share when capital and labor are complements. Empirical evidence supports this proposition.
    Keywords: labor income share, production function, Morishima elasticity of substitution
    JEL: E21 E22 E25
    Date: 2019–03
  8. By: Henrik Kleven; Camille Landais; Mathilde Muñoz; Stefanie Stantcheva
    Abstract: In this article, we review a growing empirical literature on the effects of personal taxation on the geographic mobility of people and discuss its policy implications. We start by laying out the empirical challenges that prevented progress in this area until recently, and then discuss how recent work have made use of new data sources and quasi-experimental approaches to credibly estimate migration responses. This body of work has shown that certain segments of the labor market, especially high-income workers and professions with little location-specific human capital, may be quite responsive to taxes in their location decisions. When considering the implications for tax policy design, we distinguish between uncoordinated and coordinated tax policy. We highlight the importance of recognizing that mobility elasticities are not exogenous, structural parameters. They can vary greatly depending on the population being analyzed, the size of the tax jurisdiction, the extent of tax policy coordination, and a range of non-tax policies. While migration responses add to the efficiency costs of redistributing income, we caution against over-using the recent evidence of (sizeable) mobility responses to taxes as an argument for less redistribution in a globalized world.
    JEL: H2 H21 H24 H26 H71
    Date: 2019–04
  9. By: Bennett, Benjamin (Ohio State University (OSU) - Department of Finance); Garvey, Gerald (Blackrock); Milbourn, Todd (Washington University in Saint Louis - Olin Business School); Wang, Zexi (University of Bern)
    Abstract: We study the effect of stock price informativeness (SPI) on executive compensation complexity. Using textual analysis of SEC proxy statements to construct compensation complexity measures for US public firms, we find strong evidence that higher SPI reduces pay complexity. We then use mutual fund redemption as an exogenous decrease in SPI to address endogeneity concerns. When fund flow pressure is high, pay includes more performance metrics, a greater number of vesting periods, and options with longer vesting periods. When stock prices convey information more effectively, executive pay is simpler.
    JEL: G30 J33
    Date: 2019–03
  10. By: Dariel, Aurelie (new york university abu dhabi); Riedl, Arno (General Economics 1 (Micro)); Siegenthaler, Simon (university of texas at dallas)
    Abstract: Information asymmetries can prevent markets from operating efficiently. An important example is the labor market, where employers face uncertainty about the productivity of job candidates. We examine theoretically and with laboratory experiments three key questions related to hiring via referrals when employees have private information about their productivity. First, do firms use employee referrals when there are social ties between a current employee and a future employee? Second, does the existence of social ties and hiring through employee referrals indeed alleviate adverse selection relative to when social ties do not exist? Third, does the existence of social ties have spill-over effects on wages and hiring in competitive labor markets? The answers to all three questions are affirmative. However, despite the identified positive effect of employment referrals, hiring decisions fall short of the (second-best) efficient outcome. We identify risk aversion as a potential reason for this.
    Keywords: adverse selection, labor market, employee referrals, social networks
    JEL: C92 D82 D85 E20
    Date: 2019–04–11
  11. By: Sanchez-Romero, Miguel; Fürnkranz-Prskawetz, Alexia
    Abstract: We set up a lifecycle model of a retired scholar who chooses optimally the time devoted to different activities including physical activity, continued work and social engagement. While time spent in physical activity increases life expectancy, continued scientific publications increases the knowledge stock. We show the optimal trade off between these activities in retirement and its sensitivity with respect to alternative settings of the preference parameters.
    Keywords: Time allocation,Active retirement,Longevity,Scientific production
    JEL: C60 D91 J22 J26 I12
    Date: 2019
  12. By: Junankar, Pramod N. (Raja) (University of New South Wales)
    Abstract: In this paper we explore the role of the sectoral composition of gross domestic product (GDP) in explaining the behaviour of youth labour markets. We provide a comparison of the behaviour of youth unemployment rates, employment-population rates, and labour force participation rates between developing countries and developed (rich) countries. In developing countries, open unemployment is less of a problem: the major problem faced by young people is employment in the informal sector that is poorly paid, intermittent, and insecure. A major part of employment in developing countries consists of "vulnerable employment". After a brief review of the literature, the paper uses panel data to estimate equations for unemployment rates, employment-population rates, and labour force participation rates for youths. We find that the sectoral composition of production and aggregate demand are important in explaining the behaviour of youth labour markets.
    Keywords: youth labour markets, sectoral composition, informal employment
    JEL: O11 J21 O17
    Date: 2019–03
  13. By: Catherine Haeck (Department of Economics, University of Quebec in Montreal); Samuel Pare; Pierre Lefebvre (Department of Economics, University of Quebec in Montreal); Philip Merrigan (Department of Economics, University of Quebec in Montreal)
    Abstract: This article provides an analysis of the impact of the Quebec Parental Insurance Plan (QPIP). Using a quasi-experimental design with survey data, we find that mothers spent on average 10 additional days with their newborn following the implementation of the insurance plan, and that both mothers and fathers received higher benefits. For children, using both survey data and administrative data, we find that the QPIP had limited positive effects on their health, cognitive and behavioural development. Effects are concentrated among families of mothers with a post-secondary education. These results suggest that while paid benefits increased dramatically, the impacts on maternal time investment and child well-being are modest.
    Keywords: maternity leave, parental leave, child development, family well-being, natural experiment
    JEL: J13 J22 J24
    Date: 2019–03
  14. By: Choong Hyun Nam (Economic Research Institute, Bank of Korea)
    Abstract: This paper tries to explain why a certain type of technology is skill-biased. In contrast with existing literature, this paper regards skilled workers as overhead labour, and presents a model wherein skilled workers constitute a fixed input, required to produce a new product. The demand for skill increases with product variety, and information technology is skill-biased because it raises product variety by lowering the fixed cost of product creation. However, skill-biased change does not necessarily raise measured productivity because product diversification reallocates resources into fixed inputs, which is consistent with the historical fact that skill-biased change did not always accompany productivity growth.
    Keywords: Skill demand, Product innovation, Inequality, Productivity
    JEL: E24 J31 L1 O3 O4
    Date: 2019–04–08
  15. By: Alfano, Vincenzo; D'Uva, Marcella; De Simone, Elina; Gaeta, Giuseppe Lucio
    Abstract: Finding a non-academic job in line with both doctoral graduates’ degree and acquired know-how can be difficult because of insufficient demand for R&D skills in public administration and private enterprise and/or because of the lack of matching between the existing demand and the Ph.D. holders’ specialization. The aim of this paper is to test whether migrating from some regions may improve job-education matching in Italy. The econometric strategy takes into account Ph.D. holders’ selfselection into non-academic employment as well as the endogeneity of the migration choice. Results demonstrate that migration seems to facilitate the possibility of finding better job opportunities. More specifically, only migration within the regions of the centre and north of Italy seems to improve jobeducation matching.
    Keywords: Ph.D. holders,job-education mismatch,migration
    JEL: J61 J24
    Date: 2019
  16. By: O'Rourke, Kevin Hjortshøj; Rahman, Ahmed; Taylor, Alan M.
    Abstract: Why did per capita income divergence occur so dramatically during the 19th Century, rather than at the outset of the Industrial Revolution? How were some countries able to reverse this trend during the globalization of the late 20th Century? To answer these questions, this paper develops a trade-and-growth model that captures the key features of the Industrial Revolution and Great Divergence between a core industrializing region and a peripheral and potentially lagging region. The model includes both endogenous biased technological change and intercontinental trade. An Industrial Revolution begins as a sequence of more unskilled-labor-intensive innovations in both regions. We show that the subsequent co-evolution of trade and directed technologies can create a delayed but inevitable divergence in demographics and living standards-the peripheral region increasingly specializes in production that worsens its terms of trade and spurs even greater fertility increases and educational declines. Allowing for technological diffusion between regions can mitigate and even reverse divergence, spurring a reversal of fortune for peripheral regions.
    Keywords: "North-South" model; "West-East" model; demog- raphy; education; Endogenous Growth; Fertility; industrial revolution; skill premium; Unified growth theory
    JEL: F11 F16 F43 J10 J24 N10 N30 O11 O19 O33 O4 O41
    Date: 2019–04
  17. By: Desire Kedagni; Kala Krishna; Rigissa Megalokonomou; Yingyan Zhao
    Abstract: Using high quality administrative data on Greece we show that class size has a hump shaped effect on achievement. We do so both nonparametrically and parametrically, while controlling for potential endogeneity and allowing for quantile effects. We then embed our estimates for this relationship in a dynamic structural model with costs of hiring and firing. We argue that the linear specification form used in past work may be why it found mixed results. Our work suggests that while discrete reductions in class size may have mixed effects, discrete increases are likely to have very negative effects while marginal changes in class size would have small negative effects. We find optimal class sizes around 27 in the absence of adjustment costs and achievement maximizing ones around 15, and firing costs much larger than hiring costs consistent with the presence of unions. Despite this, reducing firing costs actually reduces achievement. Reducing hiring costs raises achievement and reduces class size. We show that class size caps are costly, and more so for small schools, even when set at levels well above average.
    JEL: C61 I20 I28 J48
    Date: 2019–04
  18. By: Millard, Stephen (Bank of England); Nicolae, Anamaria (Durham University Business School); Nower, Michael (Durham University Business School)
    Abstract: In this paper we examine the impact of non-trading firms on labour productivity and its persistence in response to macroeconomic shocks, through their entry and exit into the domestic market, in a model with monopolistic competition and heterogeneous firms. We quantify the effects of various macroeconomic shocks on labour productivity and we demonstrate that non-trading domestic firms’ entry and exit into the domestic market explains the persistence of labour productivity in response to transitory shocks. We also show that the model successfully replicates the sluggish recovery of labour productivity in the United Kingdom since the Great Recession.
    Keywords: International trade; heterogeneous firms; productivity; endogenous persistence
    JEL: E24 F17 J24 O40
    Date: 2019–04–12
  19. By: Puigvert Jonathan; Juárez-Torres Miriam
    Abstract: This paper studies the labour force participation in Mexico between 2005 and 2018 at the aggregate level. While the ageing of the labour force produced modest reductions in the participation rate, changes in the educational level countervailed these effects for the period of study. In particular, the marked rise in the educational level of the population propelled the participation rate, especially among women. In addition, this paper also explores the effects of the business cycle in the labour force participation rate using a semi-parametric estimation that controls for changes in the profile of the population. The results of this analysis show no conclusive evidence that the participation of females is counter-cyclical, unlike previous studies for Mexico. Instead, our findings suggest that the participation rate is moderately pro-cyclical for males and females, albeit with a stronger effect on the labour participation of males.
    Keywords: labour force;business cycle
    JEL: J21 E32
    Date: 2019–03

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