nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2019‒08‒12
sixteen papers chosen by
Joseph Marchand
University of Alberta

  1. Horizontal and Vertical Polarization: Task-Specific Technological Change in a Multi-Sector Economy By Sang Yoon (Tim) Lee; Yongseok Shin
  2. What Firms Do: Gender Inequality in Linked Employer-Employee Data By Casarico, A.; Lattanzio, S.
  3. Monopsonistic Labor Markets and International Trade By Priyaranjan Jha; Antonio Rodriguez-Lopez
  4. The Role of Locus of Control in Education, Occupation, Income and Healthy Habits: Evidence from Australian Twins By Xue, Sen; Kidd, Michael P.; Le, Anh T.; Kirk, Kathy; Martin, Nicholas G.
  5. The Income Elasticity of Child Labour: Do Cash Transfers Have an Impact on the Poorest Children? By Luca Pellerano; Eleonora Porreca; Furio C. Rosati
  6. Employment Protection and Firm-provided Training: Quasi-experimental Evidence from a Labour Market Reform By Bratti, Massimiliano; Conti, Maurizio; Sulis, Giovanni
  7. Exuberant Proclivity Towards Non-Standard Employment:Evidence from Linked Employer-Employee Data By Alessandro Arrighetti; Eleonora Bartoloni; Fabio Landini; Chiara Pollio
  8. Reformatory Policies and Factor Prices in a Developing Economy with Informal Sector By Mandal, Biswajit; Ghosh, Sujata
  9. Decreasing Wage Returns to Human Capital: Analysis of Wage and Job Experience Using Micro Data of Workers By Taro Kimura; Yoshiyuki Kurachi; Tomohiro Sugo
  10. Deskilling among Manufacturing Production Workers By David Kunst
  11. The Effect of Mental Health on Employment:Accounting for Selection Bias By Bryan, M.;; Roberts, J.;; Sechel, C.;
  12. Employment Uncertainty and Fertility: A Network Meta-Analysis of European Research Findings By Giammarco Alderotti; Daniele Vignoli; Michela Baccini; Anna Matysiak
  13. Long Run Effects of Universal Childcare on Personality Traits By Maximilian Bach; Josefine Koebe; Frauke H. Peter
  14. Managerial Payoff and Gift-Exchange in the Field By Englmaier, Florian; Leider, Steve
  15. Do minimum wages improve self-rated health? : Evidence from a natural experiment By Hafner, Lucas; Lochner, Benjamin
  16. Beauty and Job Accessibility: New Evidence from a Field Experiment By Deng, Weiguang; Li, Dayang; Zhou, Dong

  1. By: Sang Yoon (Tim) Lee (Queen Mary University of London and CEPR); Yongseok Shin (Washington University in St. Louis, Federal Reserve Bank of St. Louis and NBER)
    Abstract: We construct a multi-layer model of skills, occupations, and sectors. Technological progress among middle-skill occupations raises the employment shares and relative wages of lower- and higher-skill occupations (horizontal polarization), and those of managers over workers (vertical polarization). Polarization is faster within sectors that rely more on middle-skill workers, endogenously boosting their TFP. This shrinks their employment and output shares (structural change) if sector outputs are complementary. We empirically validate our theoretical predictions, and show that task-specific technological progress, which was faster for routine-manual tasks and slower for interpersonal tasks, played a major role in transforming the U.S. economy since 1980.
    Keywords: job polarization, structural change, wage inequality
    JEL: J24 J31 L16 O14 O33
    Date: 2019–07–02
  2. By: Casarico, A.; Lattanzio, S.
    Abstract: This paper investigates the contribution of firms to the gender gap in earnings on average, at different quantiles of the earnings distribution, and over time to shed light on the role of firm pay policies in hindering or reinforcing the gender wage gap and to identify how their impact comes about. Using a linked employer-employee dataset for Italy, we show that the gap in firm pay policies explains on average 30% of the gender pay gap in the period 1995-2015. Sorting of women in low pay firms explains a larger fraction of the gender pay gap than differences in bargaining, on average and at the bottom of the distribution, whereas the latter dominates at the top. Moreover, differences in bargaining have increased in importance over the two decades. To explain sorting, we investigate whether women have a lower probability of moving towards firms with higher pay rates, and find that this is indeed the case. This differential mobility penalises, in particular, highly skilled women and can be related to the variability in wages in destination firms, with women not moving to those with high (unexplained) variance in pay. We also find some evidence that the firm environment as captured by exogenous changes in the gender balance in leadership positions influences the bargaining power of women, indicating that the latter is partly institution-driven.
    Keywords: Bargaining, Sorting, Linked Employer-Employee Data, Mobility gap, Gender quotas
    JEL: J16 J31 J71
    Date: 2019–07–09
  3. By: Priyaranjan Jha (Department of Economics, University of California-Irvine); Antonio Rodriguez-Lopez (Department of Economics, University of California-Irvine)
    Abstract: This paper introduces a framework to study the impact of trade liberalization on wage inequality and welfare in the presence of monopsonistic labor markets. The interaction of firm heterogeneity in productivity with idiosyncratic preferences of workers for working at different firms generates between-firm wage inequality for workers with identical skills. The degree of monopsony power is captured by the elasticity of firm-level labor supply, with a lower elasticity implying more wage-setting power by the firm. With more productive firms paying higher wages, monopsony power dampens the impact of firm heterogeneity on the allocation of market shares and allows lower productivity firms to survive. In a closed economy this increases inequality, but in an open economy high levels of monopsony power inhibit exporting, which may reduce inequality by compressing wages on the right side of the distribution. Nevertheless, inequality in the open economy is always higher than in autarky. Monopsony power reduces social welfare (for empirically plausible values of the labor supply elasticity) and the gains from trade.
    Keywords: Monopsonistic labor market; Wage inequality; Trade liberalization
    JEL: F12 F13 F16
    Date: 2019–07
  4. By: Xue, Sen; Kidd, Michael P.; Le, Anh T.; Kirk, Kathy; Martin, Nicholas G.
    Abstract: The role of non-cognitive skills in socio-economic behavior is a burgeoning research area in economics. Much interest is focused on the personality trait, locus of control, a measure of the extent to which individuals believe their fate is self-determined. The existing empirical literature generally estimates the role of locus of control via OLS. The legitimacy of the approach relies upon stability of locus of control as well as the correct specification of the model, i.e. no omitted variable bias. Recent evidence is supportive of treating locus of control as predetermined, particularly for working age individuals. However, the behavioural genetics consensus is that personality traits including locus of control have a significant heritability component. This suggests the potential for omitted variable problems associated with the prior literature’s attempt to identify the impact of locus of control using cross-sectional methods. We address the issue of omitted shared family background and genetic factors using data on both monozygotic and dizygotic twins to examine the role of locus of control. Comparison of results across OLS and twins fixed effect estimators is consistent with substantial upward bias in previous estimates of the locus of the control due to omitted variable problems.
    Keywords: Locus of control,twin studies,socioeconomic outcomes
    JEL: J24 J21 J31
    Date: 2019
  5. By: Luca Pellerano (International Labour Organization and Institute for Fiscal Studies); Eleonora Porreca (Bank of Italy,DG Economics,Statistics and Research,Statistical Analysis Directorate); Furio C. Rosati (CEIS & DEF University of Rome "Tor Vergata")
    Abstract: The possible non linearity of the income elasticity of child labour has been at the centre of the debate regarding both its causes and the policy instruments to address it. We contribute to this debate providing theoretical and empirical novel results. From a theoretical point of view, for any given transfer size, there is a critical level of household income below which an increase in income has no impact on child labour and education. We estimate the causal impact of an increase in income on child labour and education exploiting the random allocation of the Child Grant Programme, an unconditional cash transfer, in Lesotho. We show that the poorest households do not increase investment in children’s human capital, while relatively less poor households reduce child labour and increase education. In policy terms, the results indicate that cash transfers might not be always effective to support the investment in children’s human capital of the poorest households. Beside the integration with other measures, making the amount of transfer depends of the level of deprivation of the household, might improve cash transfer effectiveness.
    Keywords: child labour, education, cash transfer, randomized experiment, Lesotho
    JEL: H C93 I28 J1 J24
    Date: 2019–08–01
  6. By: Bratti, Massimiliano; Conti, Maurizio; Sulis, Giovanni
    Abstract: In 2012 a labour market reform, known as Fornero Law, substantially reduced firing restrictions for firms with more than 15 employees in Italy. The results from a difference in regression discontinuities design that compares firms below versus those above the cut-off before and after the reform demonstrate that, after the Fornero Law, the number of trained workers increased in firms just above the threshold, with an order of magnitude of approximately 1.5 additional workers in our preferred empirical specification. We show that this effect might be partly explained by the reduction in worker turnover and a lower use of temporary contracts at the threshold after the reform. Our study highlights the counter-intuitive and potentially adverse effects of employment protection legislation (EPL) on training in dual labour markets due to larger firms seeking to avoid the higher costs of EPL by means of temporary contracts.
    Keywords: employment protection legislation,training,dual labour markets,temporary contracts,Italy
    JEL: J42 J63 J65 M53
    Date: 2019
  7. By: Alessandro Arrighetti (University of Parma); Eleonora Bartoloni (ISTAT, Regional Office for Lombardy in Milan, University of Parma); Fabio Landini (University of Parma, Bocconi University, ICRIO); Chiara Pollio (University of Ferrara, EmiliaLab – Network of Departments of Economics of the Emilia-Romagna Region)
    Abstract: In most industrialized countries temporary andnon-standard forms of employment (NSFE)have become a pervasive featureof the labor market. However, at the firm level, the diffusion of NSFE is less uniform than expected: while some firms exhibit high propensity to use NSFE, others make no use of it.Most conventional explanationsof NSFE use (market uncertainty, production regimes, competitive pressure)fail to account for such heterogeneity. In this article the authors develop an alternative explanationthat links the use of NSFE to firm-specific availability of managerial resources: whenever the latter are relatively scarce, firms make larger use of NSFE to reduce coordination and operating costs. Using a linked employer-employeepanel of manufacturing firms from the Emilia-Romagna region (Italy), the authors provide empirical support for this hypothesis. The result is robust to different estimation strategies and controlling for alternative drivers of NSFE use. This novel finding suggests that, the use of NSFE has strong managerial roots: it allows firms to compensate for firm-specific managerial weaknesses.
    Keywords: non-standard employment, managerial resources, span of control, firm heterogeneity.
    JEL: D22 L23 M51 M52 J41 J23
    Date: 2019
  8. By: Mandal, Biswajit; Ghosh, Sujata
    Abstract: Effects of different reformatory policies have always been a pulsating concern for the researchers and policy makers. Considering this concern, this paper attempts to check various effects of reformatory policies such as labor market reform, tariff cut, change in subsidy, bureaucratic reform in a typical small open economy comprising of both formal and informal sectors. It has been found that the implications of labor market reform and tariff liberalization for factor prices and wage disparity are distinctly opposite. However, skilled labor of the economy benefits from both labor market reform and export subsidy. Next we extend the basic model to bring in related corruption in the informal sector for its illegal nature. This calls for the existence of a sector which helps hassle free informal production. There we find that unskilled workers lose owing to both bureaucratic reform and labor market reform. Nevertheless, though traditionally labor market reform is supposed to harm workers, wage disparity gets ameliorated whereas tariff reform leads to worsening of it.
    Keywords: International Trade,Wages,General Equilibrium,Economic Policy,Informal Sector,Extortion
    JEL: F1 J31 D5 F11 D73
    Date: 2019
  9. By: Taro Kimura (Bank of Japan); Yoshiyuki Kurachi (Bank of Japan); Tomohiro Sugo (Bank of Japan)
    Abstract: Recent literature reports a decrease in wage returns to skills since the 2000s. This paper contributes additional evidence that this trend is also occurring with skills that accumulate through job experience. We use micro data of Japanese workers to analyze this phenomenon by taking advantage of unique Japanese employment practices that emphasize skills acquired through tenure and on-the-job training as important human capital. We find that (1) wage returns to job experience have decreased from the 2000s to the 2010s and (2) decomposing the human capital into general and firm-specific, the returns to both have decreased. We also examine whether the recent trend of firms extending retirement age contributes to the decrease in returns, and we find that its impact has been marginal.
    Keywords: Wage Returns; Skills; On-The-Job Training; General Human Capital; Firm-Specific Human Capital
    JEL: J20 J24 J26 J30 O33
    Date: 2019–08–02
  10. By: David Kunst (Vrije Universiteit Amsterdam)
    Abstract: Although four out of five manufacturing employees work in production occupations in most countries (as opposed to white collar occupations), there is little international evidence on how the transition to more capital intensive production methods has affected the demand for different groups of manufacturing production workers. In this article, I use new occupational wage and employment data to document a global decline in the relative demand for skilled production workers in manufacturing since the 1950s. They tended to work in craftsman occupations, and commanded wages even rivaling those of some white collar workers. However, the demand for manufacturing craftsmen decreased in countries of all income groups and regions over the following decades, and declining relative craftsmen wages and employment have been associated with increasing capital intensities of production. My findings reconcile conflicting characterizations of technological change throughout the 20th century as either `skill biased' or `deskilling', and suggest that the polarization of labor demand in manufacturing precedes ICT. They also point to a decreasing number of manufacturing jobs in which workers with little formal education can acquire significant marketable skills.
    Keywords: manufacturing, polarization, deskilling, technological change
    JEL: O3 J2 J3 N6
    Date: 2019–07–31
  11. By: Bryan, M.;; Roberts, J.;; Sechel, C.;
    Abstract: This paper estimates the influence of mental health on the probability of being in employment for prime age workers in England and Wales. We use longitudinal data and fixed effects models, and employ techniques generalised by Oster (2013, 2017) to estimate an unbiased effect of changes in mental health in the presence of unobserved confounders. Our results suggest that selection into mental health is almost entirely based on time-invariant characteristics, and hence fixed effects estimates are unbiased in this context. Our preferred specifications indicate that transitioning into poor mental health leads to a reduction of 1.4 percentage points in the probability of employment. The relatively small effect is comparable to estimates from studies around the world that use similar methods. However, it is substantially smaller than the typical instrumental variable estimates, which dominate the literature, and often provide very specific estimates of a local average treatment effect based on an arbitrary exogenous shock that is unlikely to be a policy target. These findings should provide some reassurance to practitioners using fixed effects methods to investigate the impacts of health on work. They should also be useful to policy makers as the average effect of mental health on employment for those whose mental health changes is a highly relevant policy parameter.
    Keywords: mental health; employment; fixed effects; UKHLS;
    JEL: I12 J14 J24
    Date: 2019–07
  12. By: Giammarco Alderotti (Sapienza, Università di Roma); Daniele Vignoli (Dipartimento di Statistica, Informatica, Applicazioni "G. Parenti", Università di Firenze); Michela Baccini (Dipartimento di Statistica, Informatica, Applicazioni "G. Parenti", Università di Firenze); Anna Matysiak (Vienna Institute of Demography)
    Abstract: The relationship between employment uncertainty and fertility is a major topic in demographic research. Since, particularly, the Great Recession , increasing numbers of papers on this matter have been published. Uncertainty is usually deemed to have a negative effect on fertility, but different fertility reactions are hypothesized by sociological theories, and micro-level evidence is fragmentary and contradictory. In this article, we use network meta-analysis to synthesize European research findings and to offer general conclusions about the effects of employment uncertainty on fertility (in terms of direction and size) and to rank different sources of uncertainty. Our results suggest that employment uncertainty is detrimental for fertility. For men, being unemployed is more detrimental for fertility than having time-limited employment; for women, time-limited employment is the worst condition for fertility, while unemployment is often used as an opportunity window for having children. Next, the negative effect of time-limited employment on fertility has become stronger over time, and is more severe in Southern European countries, where social protection for families and the unemployed is least generous. Finally, we demonstrate that failing to account for income and partner’s characteristics leads to an overestimation of the negative effect of employment uncertainty on fertility. We advance the role of these two factors as potential mechanisms by which employment uncertainty affects fertility.
    Keywords: employment uncertainty; fertility; meta-analysis; Europe
    JEL: J13 J21 J81
    Date: 2019–07
  13. By: Maximilian Bach; Josefine Koebe; Frauke H. Peter
    Abstract: Although universal childcare has become an essential tool to support child development, few economic studies analyze its effects on non-cognitive skills and little is known about causal effects on these skills in the long run. In this paper we go beyond short run analyses and examine the long run effects of one additional year of universal childcare on students’ personality traits in adolescence. We focus on personality traits as part of their non-cognitive skills set and as important predictors of later educational achievements. As of 1996, a legal entitlement to universal childcare applied to children of three years and older in Germany. However, severe shortages in the former-West meant that many children could not get a childcare place and had to wait a full year until the next entry date. Using data from the National Educational Panel Study (NEPS) we estimate effects of one additional year of childcare by exploiting geographical variation in the timing of childcare entry arising from local supply constraints. We find that an earlier entry in universal childcare increases extroversion in adolescence, which has been shown to be associated with favorable labor market outcomes.
    Keywords: early childcare, non-cognitive skills, personality traits
    JEL: I21 J13 J18 J24
    Date: 2019
  14. By: Englmaier, Florian (LMU Munich); Leider, Steve (University of Michigan)
    Abstract: We conduct a field experiment where we vary both the presence of a gift-exchange wage and the effect of the worker\'s effort on the manager\'s payoff. Results indicate a strong complementarity between the initial wage-gift and the agent\'s ability to \"repay the gift\". We control for differences in ability and reciprocal inclination and show that gift-exchange is more effective with more reciprocal agents. We present a principal-agent model with reciprocal subjects that motivates our findings. Our results help to reconcile the conflicting evidence on the efficacy of gift-exchange outside the lab.
    Keywords: incentives; field experiments; gift-exchange; reciprocity;
    JEL: C91 J33 M52
    Date: 2019–08–07
  15. By: Hafner, Lucas; Lochner, Benjamin (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany])
    Abstract: "In this paper we analyze whether the introduction of the general minimum wage in Germany in 2015 had an effect on workers' self-rated health. To study this question, we use survey-data linked to administrative employment records and apply difference-in-difference regressions combined with propensity score matching. This approach enables us to control for a vast set of possibly confounding variables. We find on average significant improvements of self-rated health for individuals who are affected by the reform. Our results indicate, that a significant reduction of weekly working hours potentially drives this result." (Author's abstract, IAB-Doku) ((en))
    Keywords: Mindestlohn - Auswirkungen, Gesundheitszustand, Selbsteinschätzung, Geringverdiener, Beschäftigungseffekte, Arbeitszeitverkürzung, Stress, IAB-Haushaltspanel, Integrierte Erwerbsbiografien
    JEL: I10 I18 J38
  16. By: Deng, Weiguang; Li, Dayang; Zhou, Dong
    Abstract: This study uses a field experiment to resolve the difficulties of quantifying personal appearance and identify a direct causal relationship between appearance and employment in China. The experiment reveals that taste-based pure appearance discrimination exists at the pre-interview stage. There are significant gender-specific heterogeneous effects of education on appearance discrimination: having better educational credentials reduces appearance discrimination among men but not among women. Moreover, attributes of the labor market, companies, and vacancies matter. Beauty premiums are larger in big cities with higher concentrations of women and in male-focused research positions. Similarly, the beauty premium is larger for vacancies with higher remuneration.
    Keywords: appearance discrimination,beauty premium,pre-interview stage,field experiment
    JEL: C93 I21 J71
    Date: 2019

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