nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2019‒07‒29
eleven papers chosen by
Joseph Marchand
University of Alberta

  1. Schooling Investment, Mismatch,and Wage Inequality By Andrew Shephard; Modibo Sidibe
  2. History dependence in wages and cyclical selection: Evidence from Germany By Bauer, Anja; Lochner, Benjamin
  3. Who Is Afraid of Machines? By Sotiris Blanas; Gino Gancia; Sang Yoon (Tim) Lee
  4. Educational and occupational aspirations at the end of secondary school: The importance of regional labour-market conditions By Hartung, Andreas; Wessling, Katarina; Hillmert, Steffen
  5. From Ultima Ratio to Mutual Consent: The Effects of Changing Employment Protection Doctrine By Batut, Cyprien; Maurin, Eric
  6. Self-control: Determinants, life outcomes and intergenerational implications By Cobb-Clark, Deborah A.; Dahmann, Sarah Christina; Kamhöfer, Daniel A.; Schildberg-Hörisch, Hannah
  7. Days Worked and Seasonality Patterns of Work in Eighteenth Century Denmark By Peter Sandholt Jensen; Cristina Victoria Radu; Paul Sharp
  8. From Theory to Practice: Field Experimental Evidence on Early Exposure of Engineering Majors to Professional Work By Kevin J. Boudreau; Matt Marx
  9. Audits as Evidence: Experiments, Ensembles, and Enforcement By Patrick Kline; Christopher Walters
  10. The elasticity of taxable income in Spain: 1999-2014 By Miguel Almunia; David López-Rodríguez
  11. The Effect of the Employer Match and Defaults on Federal Workers’ Savings Behavior in the Thrift Savings Plan: Working Paper 2019-06 By Justin Falk; Nadia Karamcheva

  1. By: Andrew Shephard (Department of Economics, University of Pennsylvania); Modibo Sidibe (Department of Economics, Duke University)
    Abstract: This paper examines how policies, aimed at increasing the supply of education in the economy, affect the matching between workers and firms, and the wages of various skill groups. We build an equilibrium model where workers endogenously invest in education, while firms direct their technology toward skill intensive production activities. Search frictions induce mismatch on both extensive (unemployment) and intensive (over-education) margins, with ensuing wage consequences. We estimate the model using NLSY and O*NET data, and propose an ex-ante evaluation of prominent educational policies. We find that higher education cost subsidies boost college attainment, produce substantial welfare gains in general equilibrium, but increase wage inequality. These changes are associated with a substantial upward shift in the distribution of job complexity, which leads to worse allocations for high-school graduates who end up under-educated in less productive firms, while highly-educated workers match with more productive firms and experience less over-education during their careers.
    Keywords: Human capital, education policy, wage inequality, job search, technology choice, equilibrium
    JEL: I22 I24 J6 J21 J23 J24 J31 J64
    Date: 2019–07–17
  2. By: Bauer, Anja; Lochner, Benjamin
    Abstract: Using administrative employer-employee data from Germany, we investigate the relationship between wages and past and present labor market conditions. Furthermore, we revisit recent findings of greater wage cyclicality of new hires. Overall, we find strong evidence for history dependent wages, manifested in both hiring and retention premiums - which is consistent with a variety of contract models. Taking into account composition effects as well as cyclical variation in unobserved match quality, we find that wages of new hires from unemployment are no more cyclical, but those of job changers are more cyclical than those of existing workers. We argue that much of the excess wage cyclicality of new hires discussed by the literature can be explained by cyclical job ladder movements in match quality of new hires from employment. In a novel empirical approach, where we further take into account occupational selection, we show that if job ladder movements accompany a simultaneous change of employers and occupations, the resulting wages are particularly cyclical sensitive.
    Keywords: Business Cycle,Wage,Wage Rigidity,Implicit Contracts,Match Quality
    JEL: E24 E32 J31 J41
    Date: 2019
  3. By: Sotiris Blanas; Gino Gancia; Sang Yoon (Tim) Lee
    Abstract: We study how various types of machines, namely, information and communication technologies, software, and especially industrial robots, affect the demand for workers of different education, age, and gender. We do so by exploiting differences in the composition of workers across countries, industries and time. Our dataset comprises 10 high-income countries and 30 industries, which span roughly their entire economies, with annual observations over the period 1982–2005. The results suggest that software and robots reduced the demand for low and medium-skill workers, the young, and women — especially in manufacturing industries; but raised the demand for high-skill workers, older workers and men —especially in service industries. These findings are consistent with the hypothesis that automation technologies, contrary to other types of capital, replace humans performing routine tasks. We also find evidence for some types of workers, especially women, having shifted away from such tasks.
    Keywords: automation, robots, employment, Labor demand, labor income share
    JEL: J21 J23 O33
    Date: 2019–07
  4. By: Hartung, Andreas (university of tubingen); Wessling, Katarina (ROA / Education and occupational career); Hillmert, Steffen (institute for housing and environment, darmstadt)
    Abstract: The transition from general schooling to vocational training or to the labour market marks a crucial threshold in the life course of young adults. It has been well documented that successful school-to-work transitions are influenced by (regional) labour-market conditions. However, what has been rather neglected is that before actual transitions take place, adolescents need to make plans and evaluate their wishes and choices against the background of existing constraints. (Regional) labour-market conditions are a part of such constraints. This paper complements previous research by focusing on the impact of the regional labour market on students’ educational and occupational aspirations before school-to-work transitions take place. Regionalised administrative data on unemployment is linked with survey data from the Starting Cohort 4 of the German National Educational Panel Study (NEPS-SC4). Results indicate that a relatively higher level of regional unemployment is associated with aspirations for higher-status occupations. Their status aspiration push students towards continuing general school to obtain higher general qualifications. The effects vary with the attended secondary school track and with parents’ educational aspirations for their children.
    Keywords: educational and occupational aspirations/expectations, regional labour-market conditions, school-to-work transitions
    JEL: I24 R23 R12 D84
    Date: 2019–07–02
  5. By: Batut, Cyprien (Paris School of Economics); Maurin, Eric (Paris School of Economics)
    Abstract: In many countries, the termination of employment contracts has to be either on employer initiative or on employee initiative. Furthermore, the cost of the procedure is borne mainly by the contracting party who takes the initiative and there is little room for sharing costs. The implicit doctrine is that employment termination has to be the last resort, the ultima ratio. In 2008, the French government initiated a change in doctrine: it became possible to terminate employment contracts by mutual consent, at lower costs. Building on firm-level data, we develop an event analysis which reveals that the reform was followed by a decline in dismissals as well as by a significant rise in overall separation rates. By promoting separation by mutual consent, the reform reduced labor litigation risks, boosted workers' flows, but, eventually, we do not detect any effect on firms' employment levels.
    Keywords: employment termination, dismissal, quit, labor litigation, severance payment
    JEL: J23 J52 J63
    Date: 2019–06
  6. By: Cobb-Clark, Deborah A.; Dahmann, Sarah Christina; Kamhöfer, Daniel A.; Schildberg-Hörisch, Hannah
    Abstract: This paper studies self-control in a nationally representative sample. Using the wellestablished Tangney scale to measure trait self-control, we find that people's age as well as the political and economic institutions they are exposed to have an economically meaningful impact on their level of self-control. A higher degree of self-control is, in turn, associated with better health, educational and labor market outcomes as well as greater financial and overall well-being. Parents' self-control is linked to reduced behavioral problems among their children. Importantly, we demonstrate that self-control is a key behavioral economic construct which adds significant explanatory power beyond other more commonly studied personality traits and economic preference parameters. Our results suggest that self-control is potentially a good target for intervention policies.
    Keywords: self-control,Tangney scale,personality traits,intergenerational transmission
    JEL: D91 J24
    Date: 2019
  7. By: Peter Sandholt Jensen (University of Southern Denmark); Cristina Victoria Radu (University of Southern Denmark); Paul Sharp (University of Southern Denmark, CAGE, CEPR)
    Abstract: The calculation of the number of days worked per year is crucial for understanding pre-industrial living standards, and yet has presented considerable obstacles due to data scarcity. We present evidence on days worked and seasonality patterns of work using evidence from a large database of micro-level labor market data for eighteenth century rural Denmark. We estimate that workers worked approximately 5.6 days per week when under full employment. Seasonality of work meant, however, that they were unlikely to find employment during the winter, bringing the estimated number of working days per year to 184. This is lower than often assumed in the literature on real wage calculations, but in line with recent evidence for Malmö and London. We find that days worked increased over the eighteenth century, consistent with the idea of an “industrious revolution”. We suggest however that this was probably mostly due to economic necessity rather than a consumer revolution, since unskilled and low skilled workers needed to work over 300 days per year to afford a subsistence basket.
    Keywords: working year, seasonality patterns, real wages, annual workers, casual workers, Denmark, eighteenth century
    JEL: J22 N33
    Date: 2019–07
  8. By: Kevin J. Boudreau; Matt Marx
    Abstract: Young workers typically enter the professional labor market only after completing higher education. We investigate how earlier professional work experience affects skilled worker development. In a field experiment, 1,787 Engineering majors were randomly assigned to 6-month work terms to begin either in the second or third year of studies. Early exposure caused systematic differences in inclination to take Engineering elective courses, choice of major, and the probability of persisting in Engineering years later—consistent with engagement, retention, and sorting effects. Early exposure notably increased academic and professional outcomes of lower-income students.
    JEL: I21 J2 O3
    Date: 2019–06
  9. By: Patrick Kline; Christopher Walters
    Abstract: We develop tools for utilizing correspondence experiments to detect illegal discrimination by individual employers. Employers violate US employment law if their propensity to contact applicants depends on protected characteristics such as race or sex. We establish identification of higher moments of the causal effects of protected characteristics on callback rates as a function of the number of fictitious applications sent to each job ad. These moments are used to bound the fraction of jobs that illegally discriminate. Applying our results to three experimental datasets, we find evidence of significant employer heterogeneity in discriminatory behavior, with the standard deviation of gaps in job-specific callback probabilities across protected groups averaging roughly twice the mean gap. In a recent experiment manipulating racially distinctive names, we estimate that at least 85% of jobs that contact both of two white applications and neither of two black applications are engaged in illegal discrimination. To assess the tradeoff between type I and II errors presented by these patterns, we consider the performance of a series of decision rules for investigating suspicious callback behavior under a simple two-type model that rationalizes the experimental data. Though, in our preferred specification, only 17% of employers are estimated to discriminate on the basis of race, we find that an experiment sending 10 applications to each job would enable accurate detection of 7-10% of discriminators while falsely accusing fewer than 0.2% of non-discriminators. A minimax decision rule acknowledging partial identification of the joint distribution of callback rates yields higher error rates but more investigations than our baseline two-type model. Our results suggest illegal labor market discrimination can be reliably monitored with relatively small modifications to existing audit designs.
    Date: 2019–07
  10. By: Miguel Almunia (CUNEF); David López-Rodríguez (Banco de España)
    Abstract: We study how taxable income responds to changes in marginal tax rates, using as a main source of identifying variation three large reforms to the Spanish personal income tax implemented in the period 1999-2014. The most reliable estimates of the elasticity of taxable income (ETI) with respect to the net-of-tax rate for this period are between 0.45 and 0.64. The ETI is about three times larger for selfemployed taxpayers than for employees, and larger for business income than for labor and capital income. The elasticity of broad income (EBI) is smaller, between 0.10 and 0.24, while the elasticity of some tax deductions such as the one for private pension contributions exceeds one. Our estimates are similar across a variety of estimation methods and sample restrictions, and also robust to potential biases created by mean reversion and heterogeneous income trends.
    Keywords: elasticity of taxable income, ETI, personal income tax, mean reversion, tax deductions, Spain
    JEL: H24 H31 D63
    Date: 2019–07
  11. By: Justin Falk; Nadia Karamcheva
    Abstract: Policymakers are weighing options that would change the retirement system for federal workers by shifting more of their deferred compensation from the defined benefit plan toward the defined contribution plan, called the Thrift Savings Plan (TSP). We use administrative longitudinal data on federal workers’ demographics, compensation, and TSP behavior to estimate the effects of an employer match and plan default options on workers’ TSP savings behavior and the cost of employer contributions. We rely primarily on two sources of exogenous variation stemming from policy changes
    JEL: E21 E27 J26 J32
    Date: 2019–07–16

This nep-lma issue is ©2019 by Joseph Marchand. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.