nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2019‒04‒29
twelve papers chosen by
Joseph Marchand
University of Alberta

  1. The Causal Effects of the Minimum Wage Introduction in Germany - An Overview By Marco Caliendo; Carsten Schröder; Linda Wittbrodt
  2. The long term impacts of grants on poverty: 9-year evidence from Uganda's Youth Opportunities Program By Blattman, Christopher; Fiala, Nathan; Martinez, Sebastian
  3. Measuring Gender Disparities in Unemployment Dynamics during the Recession: Evidence from Portugal By Joana Passinhas; Isabel Proença
  4. Labor Market Power By David Berger; Kyle Herkenhoff; Simon Mongey
  5. Has the Swedish Business Sector Become More Entrepreneurial than the US Business Sector? By Heyman, Fredrik; Norbäck, Pehr-Johan; Persson, Lars
  6. Jumping the Queue: Nepotism and Public-Sector Pay By Andri Chassamboulli; Pedro Gomes
  7. Public-Sector Employment, Wages and Human Capital Accumulation By Andri Chassamboulli; Pedro Gomes
  8. The Influence of Old-age Retirement on Health: Causal Evidence from the Finnish Register Data By Kuusi, Tero; Martikainen, Pekka; Valkonen, Tarmo
  9. Recent changes in British wage inequality: Evidence from firms and occupations By Daniel Schaefer; Carl Singleton
  10. The Local Aggregate Effects of Minimum Wage Increases By Daniel Cooper; María José Luengo-Prado; Jonathan A. Parker
  11. “The Long-term Consequences of the Irish Marriage Bar” By Irene Mosca; Robert E. Wright
  12. Mostly Harmless Simulations? Using Monte Carlo Studies for Estimator Selection By Advani, Arun; Kitagawa, Toru; Słoczyński, Tymon

  1. By: Marco Caliendo (University of Potsdam, IZA Bonn, DIW Berlin, IAB Nuremberg); Carsten Schröder (SOEP at DIW Berlin); Linda Wittbrodt (University of Potsdam)
    Abstract: In 2015, Germany introduced a statutory hourly minimum wage that was not only universally binding but also set at a relatively high level. We discuss the short-run effects of this new minimum wage on a wide set of socio-economic outcomes, such as employment and working hours, earnings and wage inequality, dependent and self-employment, as well as reservation wages and satisfaction. We also discuss difficulties in the implementation of the minimum wage and the measurement of its effects related to non-compliance and suitability of data sources. Two years after the minimum wage introduction, the following conclusions can be drawn: while hourly wages increased for low-wage earners, some small negative employment effects are also identifiable. The effects on aspired goals, such as poverty and inequality reduction, have not materialized in the short run. Instead, a tendency to reduce working hours is found, which alleviates the desired positive impact on monthly income. Additionally, the level of non-compliance was substantial in the short run, thus drawing attention to problems when implementing such a wide-reaching policy.
    Keywords: Minimum Wage, Evaluation, Earnings, Working Hours, Employment
    JEL: J22 J23 J31 J38
    Date: 2019–04
  2. By: Blattman, Christopher; Fiala, Nathan; Martinez, Sebastian
    Abstract: In 2008, Uganda granted hundreds of small groups $400/person to help members start individual skilled trades. Four years on, an experimental evaluation found grants raised earnings by 38% (Blattman, Fiala, Martinez 2014). We return after 9 years to find these start-up grants raised earnings and consumption temporarily only. Grantees' investment leveled off; controls eventually increased their incomes through business and casual labor; and so both groups converged in employment, earnings, and consumption. Grants had lasting impacts on assets, skilled work, and possibly child health, but had little effect on mortality, fertility, health or education.
    Keywords: employment,poverty,entrepreneurship,cash transfers,occupational choice,Uganda,field experiment,labor market programs,health,education
    JEL: J24 O12 D13 C93
    Date: 2019
  3. By: Joana Passinhas; Isabel Proença
    Abstract: We research gender differences in unemployment incidence and persistence during the debt crisis in Portugal. A dynamic random effects probit model is estimated to control for unobserved individual heterogeneity and for the ‘initial conditions’ problem. The estimation uses data from four waves of the Survey on Income and Living Conditions (ICOR) between 2010 and 2013. We find strong evidence of persistence in unemployment, and an indication that men are more prone to endure the negative implications of previous unemployment. Simultaneously, we found evidence of higher probabilities of unemployment for women through a fixed effect that aimed to capture gender discrimination in an unstable labour market. Results suggest that policies to boost employment should accommodate a gender dimension and also have a special focus on the long-term unemployed.
    Keywords: unemployment, persistence, unobserved heterogeneity, dynamic random effects models, gender discrimination
    JEL: C23 C25 J21 J24 J71
    Date: 2019–04
  4. By: David Berger (Northwestern University); Kyle Herkenhoff (University of Minnesota); Simon Mongey (University of Chicago)
    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.
    Keywords: wage setting, market structure, labor markets
    JEL: E20 J20 J42
    Date: 2019–04
  5. By: Heyman, Fredrik; Norbäck, Pehr-Johan; Persson, Lars
    Abstract: Recent studies document a 30-year decline in various measures of entrepreneurship in the U.S. Using detailed Swedish employer-employee data over the period 1990 to 2013, we find young firms to be more prominent in the Swedish business sector than in the U.S. business sector. Young Swedish firms, aged five years or less, account for more than half of all firms during this period. We also observe an increase in Swedish entrepreneurial activity for start-ups. However, increasing job destruction rates for young firms has implied a declining employment share for younger firms from the mid-2000s. Moreover, most of the job creation by young firms occurs in the expanding service sector. We discuss different explanations for why Sweden appears not to have the same strong decline in entrepreneurial activity as the U.S. has had during the last two decades. We argue that one important explanation is economic reforms in Sweden in the 1990s that mitigated several hurdles to entrepreneurship.
    Keywords: entrepreneurship; industrial structure and structural change; job dynamics; Matched employer-employee data
    JEL: J23 K23 L26 L51
    Date: 2019–04
  6. By: Andri Chassamboulli; Pedro Gomes
    Abstract: We set up a model with search and matching frictions to understand the effects of employment and wage policies, as well as nepotism in hiring in the public sector, on unemployment and rent seeking. Conditional on inefficiently high public-sector wages, more nepotism in public sector hiring lowers the unemployment rate because it limits the size of queues for public-sector jobs. Public-sector wage and employment policies impose an endogenous constraint on the number of workers the government can hire through connections.
    Keywords: Public-sector employment; nepotism; public-sector wages; unemployment.
    JEL: E24 J31 J45 J64
    Date: 2019–04
  7. By: Andri Chassamboulli; Pedro Gomes
    Abstract: We set up a search and matching model with a private and a public sector to understand the effects of employment and wage policies in the public sector on unemployment and education decisions. The effects of wages and employment of skilled and unskilled public-sector workers on the educational composition of the labor force depend crucially on the structure of the labor market. An increase of skilled public-sector wages has a small positive impact on educational composition and larger negative impact on the private employment of skilled workers, if the two sectors are segmented. If search across the two sectors is random, it has a large positive impact on education and a large positive impact on skilled private employment. We highlight the usefulness of the model for policymakers by calculating the value of public-sector job security for skilled and unskilled workers.
    Keywords: Public-sector employment; public-sector wages; unemployment; skilled workers; human capital accumulation, education decision, public-sector job security premium
    JEL: E24 J31 J45 J64
    Date: 2019–04
  8. By: Kuusi, Tero; Martikainen, Pekka; Valkonen, Tarmo
    Abstract: Abstract We quantify the impact of old-age retirement on health using longitudinal Finnish register data for the period 2000–2012, which allows for a strict isolation of the effects of transition from work to retirement for both mental and physical health indicators. We use the lowest statutory eligibility age for full old-age pensions, 63 years, as an instrument in FE-IV estimation to ensure causal inference. We find that (1) retirement moderately decreases the use of antidepressants, especially for women; (2) the beneficial effects of retirement on the cardiovascular and musculoskeletal conditions are smaller and more diffused; (3) there is no robust evidence that retirement effects vary systematically among socioeconomic groups, although more robust declines in musculoskeletal diseases were observed among manual-labour men; and (4) the beneficial effects in antidepressant use can be extended to apply to most Finns retiring at ages 62–64 based on our test of external validity.
    Keywords: Health, Health behaviour, Retirement, Retirement policies, Demographic economics
    JEL: I10 I12 J26 J18
    Date: 2019–04–18
  9. By: Daniel Schaefer (School of Economics, University of Edinburgh); Carl Singleton (Department of Economics, University of Reading)
    Abstract: Using a linked employer-employee dataset covering large firms, we present new evidence on British wage inequality trends over the past two decades. Differences between firms in the average wages they paid did not drive these trends. Between 1996 and 2005, greater wage variance within firms accounted for eighty-six percent of the total increase in wage variance among employees. In the following decade, wage inequality between firms continued to increase, whereas overall wage dispersion decreased. Approximately all the contribution to inequality dynamics from estimated firm-specific factors, throughout the employee wage distribution, disappears after accounting for the changing occupational content of wages.
    Keywords: wage inequality, within-firm inequality, occupational wage premiums
    JEL: D22 E24 J31
    Date: 2019–04–03
  10. By: Daniel Cooper; María José Luengo-Prado; Jonathan A. Parker
    Abstract: Using variation in minimum wages across cities and controlling for differences in business-cycle factors and long-run local economic trends, we find that following minimum wage increases, both prices and nominal spending rise modestly. These gains are larger for certain sub-categories of goods such as food away from home and in locations where low-wage workers are a larger share of employment. Further, minimum wage increases are associated with reduced total debt among households with low credit scores, higher auto debt, and increased access to credit.
    JEL: D14 E20 E31 J20 J38
    Date: 2019–04
  11. By: Irene Mosca (Economics, National University of Ireland, Maynooth); Robert E. Wright (University of Glasgow, Scotland, UK)
    Keywords: Marriage Bar, Ireland, discrimination
    JEL: J71 J78 J24
    Date: 2019
  12. By: Advani, Arun (University of Warwick); Kitagawa, Toru (Bern University of Applied Sciences); Słoczyński, Tymon (Johannes Kepler University Linz)
    Abstract: We consider two recent suggestions for how to perform an empirically motivated Monte Carlo study to help select a treatment effect estimator under unconfoundedness. We show theoretically that neither is likely to be informative except under restrictive conditions that are unlikely to be satisfied in many contexts. To test empirical relevance, we also apply the approaches to a real-world setting where estimator performance is known. Both approaches are worse than random at selecting estimators which minimise absolute bias. They are better when selecting estimators that minimise mean squared error. However, using a simple bootstrap is at least as good and often better. For now researchers would be best advised to use a range of estimators and compare estimates for robustness.
    Keywords: Fertility ; Discrimination ; Experimental economics
    JEL: C93 J16 J71
    Date: 2019

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