nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2019‒05‒13
eighteen papers chosen by
Joseph Marchand
University of Alberta

  1. Incentivized Resume Rating: Eliciting Employer Preferences without Deception By Judd B. Kessler; Corinne Low; Colin Sullivan
  2. Second Chance: Life without Student Debt By Marco Di Maggio; Ankit Kalda; Vincent Yao
  3. The geography of Italian income inequality: recent trends and the role of employment By Emanuele Ciani; Roberto Torrini
  4. Shocks and labour cost adjustment: Evidence from a survey of European firms By Thomas Y. Mathä; Stephen Millard; Tairi Rõõm; Ladislav Wintr; Robert Wyszynski
  5. Anything new in town? The local effects of Urban Regeneration Policies in Italy By Giuseppe Albanese; Emanuele Ciani; Guido de Blasio
  6. Working from home: Heterogeneous effects on hours worked and wages By Arntz, Melanie; Ben Yahmed, Sarra; Berlingieri, Francesco
  7. Incentivizing Learning-By-Doing: The Role of Compensation Schemes By Joshua S. Graff Zivin; Lisa B. Kahn; Matthew J. Neidell
  8. Human capital consequences of missing out on a grammar school education By Pastore, C.; Jones, A.M.;
  9. Clawback Provisions and Firm Risk By Babenko, Ilona; Bennett, Benjamin; Bizjak, John M.; Coles, Jeffrey L.; Sandvik, Jason J.
  10. Survival of the Fittest: The Impact of the Minimum Wage on Firm Exit By Dara Lee Luca; Michael Luca
  11. Assets and Job Choice: Student Debt, Wages and Amenities By Mi Luo; Simon Mongey
  12. The Role of Weather on Schooling and Work of Young Adults in Madagascar By Francesca Marchetta; David Sahn; Luca Tiberti
  13. Prospects for Inflation in a High Pressure Economy: Is the Phillips Curve Dead or is It Just Hibernating? By Peter Hooper; Frederic S. Mishkin; Amir Sufi
  14. Why Do Firms Use Equity-Based Pay? Managerial Compensation and Stock Price Informativeness By Bennett, Benjamin; Garvey, Gerald; Milbourn, Todd; Wang, Zexi
  15. Twin instrument, fertility and women’s labor force participation: evidence from Colombian low-income families By Erika Raquel Badillo; Lina Cardona-Sosa; Carlos Medina; Leonardo Fabio Morales; Christian Posso
  16. Ethnic Identity and the Employment Outcomes of Immigrants: Evidence from France By Delaporte, Isaure
  17. Regulated occupations in Italy: extent and labor market effects By Sauro Mocetti; Lucia Rizzica; Giacomo Roma
  18. Going national: Implementing the OECD jobs strategy By Elena Crivellaro; Alexander Hijzen; Cyrille Schwellnus

  1. By: Judd B. Kessler; Corinne Low; Colin Sullivan
    Abstract: We introduce a new experimental paradigm to evaluate employer preferences, called Incentivized Resume Rating (IRR). Employers evaluate resumes they know to be hypothetical in order to be matched with real job seekers, preserving incentives while avoiding the deception necessary in audit studies. We deploy IRR with employers recruiting college seniors from a prestigious school, randomizing human capital characteristics and demographics of hypothetical candidates. We measure both employer preferences for candidates and employer beliefs about the likelihood candidates will accept job offers, avoiding a typical confound in audit studies. We discuss the costs, benefits, and future applications of this new methodology.
    JEL: C90 J24 J71
    Date: 2019–05
  2. By: Marco Di Maggio; Ankit Kalda; Vincent Yao
    Abstract: Rising student debt is considered one of the creeping threats of our time. This paper examines the effect of student debt relief on individual credit and labor market out- comes. We exploit the plausibly-random debt discharge due to the inability of National Collegiate, the largest owner of private student loan debt, to prove chain of title for thousands of loans across the US. Using hand-collected lawsuits filings matched with individual credit bureau information, we find that borrowers experiencing the debt relief shock reduce their indebtedness by 26%, by both reducing their demand for credit and limiting the use of existing credit accounts, and are 12% less likely to default on other accounts. After the discharge, the borrowers' geographical mobility increases, as well as, their probability to change jobs and ultimately their income increases by more than $4000 over a three year period, which is equivalent to about two months' average salary. These findings speak to the benefits of intervening in the student loan market to reduce the consequences of debt overhang problems by forgiving student debts.
    JEL: D14 H52 H81 I23 J24
    Date: 2019–05
  3. By: Emanuele Ciani (Bank of Italy); Roberto Torrini (Bank of Italy)
    Abstract: We reassess the role of regional imbalances in explaining the high household income inequality in Italy. In the first part of the work we use the Survey of Household Income and Wealth (SHIW) to describe the trends in income inequality between and within areas since the early 2000s. We illustrate that the between-area inequality has been relatively stable, while the within-area component increased significantly after the recession and during the recovery. In 2016, the large geographical divide and the higher inequality within the South contributed to almost one fifth of national inequality. In the second part we show that the distribution of employment is key in explaining the regional differences in both average income and its dispersion. By means of simulations based on matching and reweighting, we estimate that national inequality would be reduced by 15 per cent if the distribution of work hours across southern households was similar to the one in the more developed Centre-North. Regional employment differentials are so important in determining overall inequality that income dispersion would decline substantially even if this increase in employment was associated with a drop in southern regions’ average wages.
    Keywords: inequality, North-South divide, work intensity
    JEL: D63 R10 J21
    Date: 2019–04
  4. By: Thomas Y. Mathä; Stephen Millard; Tairi Rõõm; Ladislav Wintr; Robert Wyszynski
    Abstract: We use firm-level survey data from 25 EU countries to analyse how firms adjust their labour costs (employment, wages and hours) in response to shocks. We develop a theoretical model to understand how firms choose between different ways to adjust their labour costs. The basic intuition is that firms choose the cheapest way to adjust labour costs. Our empirical findings are in line with the theoretical model and show that the pattern of adjustment is not much affected by the type of the shock (demand shock, access-to-finance shock, ‘availability of supplies’ shock), but differs according to the direction of the shock (positive or negative), its size and persistence. In 2010-13, firms responding to negative shocks were most likely to reduce employment, then hourly wages and then hours worked, regardless of the source of the shock. Results for the 2008-09 period indicate that the ranking might change during deep recession as the likelihood of wage cuts increases. In response to positive shocks in 2010-13, firms were more likely to increase wages, followed by increases in employment and then hours worked suggesting an asymmetric reaction to positive and negative shocks. Finally, we show that strict employment protection legislation and high centralisation or coordination of wage bargaining make it less likely that firms reduce wages when facing negative shocks.Classification-JEL: D21, D22, D24
    Keywords: Shocks, firms, labour cost adjustment, wages, employment, hours, survey
    Date: 2019–04
  5. By: Giuseppe Albanese (Bank of Italy); Emanuele Ciani (Bank of Italy); Guido de Blasio (Bank of Italy)
    Abstract: The paper estimates the local effects of urban regeneration policies by using evidence from interventions that took place in small and medium-sized cities in the Centre and North of Italy over the period 2008-12. By using an Oaxaca-Blinder reweighting estimator, we find little support for the idea that urban regeneration projects could stimulate local economic growth in the short to medium term. Only the largest scale interventions that focused on improving the public realm seem to have led to an increase in house prices, but they have had no impact on other economic outcomes.
    Keywords: urban regeneration, house prices, reweighting
    JEL: R58 R11 O18
    Date: 2019–04
  6. By: Arntz, Melanie; Ben Yahmed, Sarra; Berlingieri, Francesco
    Abstract: Working from home (WfH) has become much more common since the early 2000s. We exploit the German Socio-Economic Panel between 1997 and 2014 to investigate how such a work arrangement affects labour market outcomes and life satisfaction. We find that childless employees work an extra hour per week of unpaid overtime and report higher satisfaction after taking up WfH. Among parents, WfH reduces the gender gap in working hours and monthly earnings, as contractual hours increase more among mothers. Hourly wages, however, increase with WfH take-up among fathers, but not among mothers unless they change employer. This points to poorer bargaining outcomes for women compared to men when staying with the same employer. Controlling for selection into paid employment due to changes in unobserved characteristics or preferences does not affect the magnitude of the effects.
    Keywords: working from home,working hours,wages,gender,flexible work arrangements.
    JEL: J2 J31 O33
    Date: 2019
  7. By: Joshua S. Graff Zivin; Lisa B. Kahn; Matthew J. Neidell
    Abstract: In this paper, we examine the impact of pay-for-performance incentives on learning-by-doing. We exploit personnel data on fruit pickers paid under two distinct compensation contracts: a standard piece rate plan and a piece rate plan with an extra one-time bonus tied to output. Under the bonus contract, we observe bunching of performance just above the bonus threshold, suggesting workers distort their behavior in response to the discrete bonus. Such bunching behavior increases as workers gain experience. At the same time, the bonus contract induces considerable learning-by-doing for workers throughout the productivity distribution, and these improvements significantly outweigh the losses to the firm from the distortionary bunching. In contrast, under the standard piece rate contract, we find minimal evidence of bunching and only small performance improvements at the bottom of the productivity distribution. Our results suggest that contract design can help foster learning on the job. This underscores the importance of dynamic considerations in principal-agent models.
    JEL: J33 J43
    Date: 2019–05
  8. By: Pastore, C.; Jones, A.M.;
    Abstract: What is the value added of grammar schools? This paper disentangles the effect of selection into an academic rather than a vocational track from that of individual background on long-term human capital. Identification relies on a fuzzy regression discontinuity design, using entry test scores for grammar schools, selective secondary schools in England, and estimating discontinuities in school assignment directly from the data. We find that for the marginal admitted student, grammar attendance positively affects educational attainment, likely due to higher-ability peers, while adult labour market outcomes and health are not affected. Observed differences in human capital by school type can largely be traced back to background.
    Keywords: selective schooling; human capital; health; fuzzy regression discontinuity design;
    JEL: I1 I28 C21
    Date: 2019–04
  9. By: Babenko, Ilona (Arizona State University); Bennett, Benjamin (Ohio State University (OSU) - Department of Finance); Bizjak, John M. (Texas Christian University); Coles, Jeffrey L. (University of Utah - Department of Finance; Arizona State University (ASU) - Finance Department); Sandvik, Jason J. (University of Utah)
    Abstract: Panel OLS and GMM-IV estimates indicate that executives respond to the adoption of a compensation clawback provision by decreasing firm risk. The mechanisms that transmit incentives to decisions and decisions to risk appear to be more conservative investment and financial policies and preemptive management of ESG, legal, and cyberattack risks. The stock market reaction to the announcement of a clawback adoption, as well as post-adoption stock and accounting performance, are significantly and positively related to the actual and predicted reduction in firm risk. The reduction in firm risk, arising from adoption of a clawback policy, appears to benefit shareholders.
    JEL: G32 G34 J33 M41 M52 M55
    Date: 2019–04
  10. By: Dara Lee Luca; Michael Luca
    Abstract: We study the impact of the minimum wage on firm exit in the restaurant industry, exploiting recent changes in the minimum wage at the city level. We find that the impact of the minimum wage depends on whether a restaurant was already close to the margin of exit. Restaurants with lower ratings are closer to the margin of exit on average, and are disproportionately driven out of business by increases to the minimum wage. Our point estimates suggest that a one dollar increase in the minimum wage leads to a 10 percent increase in the likelihood of exit for a 3.5-star restaurant (which is the median rating on Yelp), but has no discernible impact for a 5-star restaurant (on a 1 to 5 star scale). We expand the analysis to look at prices using data from delivery orders, and find that lower rated restaurants also increase prices in response to minimum wage increases. Our analysis also highlights how digital data can be used to shed new light on labor policy and the economy.
    JEL: C81 J31 J38 L25
    Date: 2019–05
  11. By: Mi Luo; Simon Mongey
    Abstract: If consumption and non-wage amenities of work enter utility, holding few assets may induce a trade-off between wages and amenities when searching for a job. We establish this in a model of search with asset accumulation, extended to accommodate amenities. We then provide empirical evidence of this trade-off in the context of student debt, finding that higher debt causes graduates to accept jobs with higher wages and lower job satisfaction. In a representative sample of college graduates, we infer causality by exploiting within-college, across cohort changes in financial aid. A quantitative extension of our theoretical framework that explicitly models student debt accounts well for our empirical results. Identifying the utility value of amenities through observed search behavior, we find that high satisfaction jobs are valued at 6 percent of lifetime consumption relative to low satisfaction jobs. This trade-off is economically significant; a policy maker using only wage data to assess the welfare effects of with an income-based repayment policy would mistakenly conclude that graduates prefer a fixed repayment policy.
    JEL: E21 E24 J32 J38
    Date: 2019–05
  12. By: Francesca Marchetta (CERDI - Centre d'Études et de Recherches sur le Développement International - UdA - Université d'Auvergne - Clermont-Ferrand I - CNRS - Centre National de la Recherche Scientifique); David Sahn (Cornell University); Luca Tiberti (Université Laval)
    Abstract: We examine the impact of rainfall variability and cyclones on schooling and work among a cohort of teens and young adults in Madagascar. We estimate a bivariate probit model using a panel survey conducted in 2004 and 2011 in this poor island nation, which is frequently affected by extreme weather events. Our results show that negative rainfall deviations and cyclones reduce the probability of attending school and encourage young men and, to a greater extent, women to enter the work force, and they reduce their French and math test scores. Less wealthy households are most likely to experience this school-to-work transition in the face of rainfall shocks. The finding is consistent with poorer households having less savings and more limited access to credit and insurance, which reduces their ability to cope with rainfall shortages. We also find that there are both contemporaneous and lagged effects of the weather shocks, and that they are of a similar magnitude. Our findings are robust to the use of a linear probability model, as well as a wide range of definitions of rainfall variations.
    Keywords: Africa,agricultural labor,climate shocks,employment
    Date: 2019
  13. By: Peter Hooper; Frederic S. Mishkin; Amir Sufi
    Abstract: This paper reviews a substantial range of empirical evidence on whether the Phillips curve is dead, i.e. that its slope has flattened to zero. National data going back to the 1950s and 60s yield strong evidence of negative slopes and significant nonlinearity in those slopes, with slopes much steeper in tight labor markets than in easy labor markets. This evidence of both slope and nonlinearity weakens dramatically based on macro data since the 1980s for the price Phillips curve, but not the wage Phillips curve. However, the endogeneity of monetary policy and the lack of variation of the unemployment gap, which has few episodes of being substantially below zero in tis sample period, makes the price Phillips curve estimates from this period less reliable. At the same time, state level and MSA level data since the 1980s yield significant evidence of both negative slope and nonlinearity in the Phillips curve. The difference between national and city/state results in recent decades can be explained by the success that monetary policy has had in quelling inflation and anchoring inflation expectations since the 1980s. We also review the experience of the 1960s, the last time inflation expectations became unanchored, and observe both parallels and differences with today. Our analysis suggests that reports of the death of the Phillips curve may be greatly exaggerated.
    JEL: E31 E52 E65
    Date: 2019–05
  14. 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 motive of using equity-based pay in executive compensation: the risk-sharing motive versus the performance-measuring motive. The empirical design goes through the relationship between equity-based pay and stock price informativeness (SPI). We find equity-based pay decreases in SPI, which is consistent with the risk-sharing motive but inconsistent with the performance-measuring motive. The SPI effect on compensation is stronger in financially-constrained firms, more diversified firms, and firms with less product market competition. SPI increases pay efficiency through a larger proportion of option pay, fewer perquisites, and greater pay-for-skill. We address potential endogeneity concerns by investigating the changes in compensation of managers switching between firms with different SPI.
    JEL: G30 J33
    Date: 2019–05
  15. By: Erika Raquel Badillo (Universidad Autónoma Latinoamericana); Lina Cardona-Sosa (Banco de la República de Colombia); Carlos Medina (Banco de la República de Colombia); Leonardo Fabio Morales (Banco de la República de Colombia); Christian Posso (Banco de la República de Colombia)
    Abstract: This paper uses the twin births instrument to estimate the causal effect of fertility on labor market outcomes for first-time mothers in Colombia. The nature of the data used allows us to overcome previous concerns regarding the validity of this instrument. We can control for observed pre-pregnancy characteristics, and by including fixed effects, we can control for time-invariant unobserved heterogeneity. Results coming from the traditional instrumental variables approach suggest a reduction in female labor supply close to 5.2 percentage points (18%) due to a marginal increase in fertility. Additionally, after following Farbmacher, Guber and Vikström (2018) to eliminate the bias of twins resulting from mothers’ characteristics and in vitro fertilizations (e.g., a non-exogenous event), the obtained results are of the same magnitude but less significant than those of the traditional instrument. By making additional assumptions on the correlation of the twin instrument and the error of the structural equation following Nevo and Rosen (2012), we find an upper bound estimate for the reduction in female labor supply close to -5 ppt. **** RESUMEN: En este estudio usamos nacimientos múltiples como instrumento para estimar el efecto causal de la fecundidad en diferentes resultados de mercado laboral para madres primerizas en Colombia. La naturaleza de los datos nos permite superar problemas, sobre la validez de este instrumento, que han sido ampliamente documentados en la literatura. Esto principalmente porque podemos controlar por características observadas de la madre antes del parto, más aún, al incluir efectos fijos por madre podemos controlar por cualquier característica no observada que sea invariante en el tiempo. Nuestras estimaciones de regresiones tradicionales tipo variables instrumentales, sugieren una reducción de 5,2 puntos porcentuales (18%) como resultado de un incremento marginal en la fecundidad. Adicionalmente, después de seguir la metodología de Farbmacher, Guber and Vikström (2018) con el fin de eliminar el sesgo que resulta de diferencias inobservadas de las madres antes del parto y de posibles fertilizaciones in-vitro, las cuales no son un fenómeno exógeno, los resultados obtenidos se mantienen en magnitud. Finalmente, asumiendo la dirección de la correlación entre el instrumento y el error de la ecuación estructural, usando una metodología tipo Nevo and Rosen (2012), encontramos una cota superior del efecto de la fecundidad en la participación laboral femenina de -5 puntos porcentuales.
    Keywords: Usando nacimientos múltiples para identificar el efecto de la fecundidad en la oferta laboral de mujeres de bajos ingresos en Colombia, Fecundidad, oferta laboral femenina, nacimientos múltiples, variables instrumentales.
    JEL: J13 J22 C26
    Date: 2019–04
  16. By: Delaporte, Isaure
    Abstract: The objective of this paper is twofold: first, to determine the immigrants' ethnic identity, i.e. the degree of identification to the culture and society of the country of origin and the host country and second, to investigate the impact of ethnic identity on the immigrants' employment outcomes. Using rich survey data from France and relying on a polychoric principal component analysis, this paper proposes two richer measures of ethnic identity than the ones used in the literature, namely: i) the degree of commitment to the origin country culture and ii) the extent to which the individual holds multiple identities. The paper investigates the impact of the ethnic identity measures on the employment outcomes of immigrants in France. The results show that having multiple identities improves the employment outcomes of the migrants and contribute to help design effective post-immigration policies.
    Keywords: Ethnic Identity,Immigration,Employment,Polychoric Principal Component Analysis
    JEL: J15 J21 J71 Z13
    Date: 2019
  17. By: Sauro Mocetti (Bank of Italy); Lucia Rizzica (Bank of Italy); Giacomo Roma (Bank of Italy)
    Abstract: This work provides a descriptive assessment of regulated occupations in Italy and examines the impact of regulation on the labor market. First, we construct, on the basis of law provisions, a set of novel indicators measuring both the extensive and the intensive margin of regulation. We then show that regulated occupations represent a significant and increasing fraction of total employment (24%), their incidence being significantly larger among workers with a college degree (52%). Moreover, these occupations are characterized by lower mobility and entry rates and by a wage premium of about 9%, which raises to 18% for the professioni ordinistiche. Finally, we provide causal evidence that the reduction of entry requirements and the repeal of tariff restrictions lead to an increase in entry into regulated occupations and to a reduction of the wages of the incumbents.
    Keywords: regulation, occupation mobility, entry rate, wages
    JEL: J44 K20
    Date: 2019–04
  18. By: Elena Crivellaro; Alexander Hijzen; Cyrille Schwellnus
    Abstract: This paper provides guidance for developing country-specific policy recommendations from the broad policy principles of the new OECD Jobs Strategy. To this end, it identifies countries’ main policy challenges and develops broad policy packages to address them. It highlights the importance of considering countries' initial conditions – in terms of the state of the business cycle, fiscal and administrative capacity, past reforms, preferences and demography – for tailoring policy recommendations to country specific challenges, capabilities and needs. It also contains a checklist with key questions for each of the broad dimensions of labour market performance that should be considered when developing country-specific recommendations.
    Keywords: job quality inclusiveness, Job quantity, public policies
    JEL: J38 J58 J68
    Date: 2019–05–10

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