nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2019‒08‒26
eighteen papers chosen by
Joseph Marchand
University of Alberta

  1. Minimum Wage Employment Effects and Labor Market Concentration By José Azar; Emiliano Huet-Vaughn; Ioana Marinescu; Bledi Taska; Till von Wachter
  2. Refugees' and Irregular Migrants' Self-Selection into Europe: Who Migrates Where? By Cevat Giray Aksoy; Panu Poutvaara
  3. Monopsonistic Labor Markets and International Trade By Priyaranjan Jha; Antonio Rodriguez-Lopez
  4. Enterprise Zones, Poverty, and Labor Market Outcomes: Resolving Conflicting Evidence By David Neumark; Timothy Young
  5. Are Professors Worth It? The Value-added and Costs of Tutorial Instructors By Zölitz, Ulf
  6. The Norwegian Pension Reform in 2011: The Long Term Impact on Take-up of Pension and Labor Supply By Erik Hernæs; Steinar Strøm; Tao Zhang
  7. Devotion and Development: Religiosity, Education, and Economic Progress in 19th-Century France By Mara P. Squicciarini
  8. Individual Consequences of Occupational Decline By Per-Anders Edin; Tiernan Evans; Georg Graetz; Sofia Hernnäs; Guy Michaels
  9. Entrepreneurship over the Business Cycle in the United States: A Decomposition By Fossen, Frank M.
  10. Stock Market Wealth and the Real Economy: A Local Labor Market Approach By Chodorow-Reich, Gabriel; Nenov, Plamen T.; Simsek, Alp
  11. What is the Rationale for an Insurance Coverage Mandate? Evidence from Workers’ Compensation Insurance By Marika Cabral; Can Cui; Michael Dworsky
  12. Are Business Start-Ups Liquidity Constrained? Evidence from a Quasi-Experimental Allocation of Housing Wealth in East Germany By Tobias Fuchs; Georg Gebhardt
  13. Adjusting to Globalization in Germany By Wolfgang Dauth; Sebastian Findeisen; Jens Suedekum
  14. Are Marriage-Related Taxes and Social Security Benefits Holding Back Female Labor Supply? By Margherita Borella; Mariacristina De Nardi; Fang Yang
  15. Is There a Gender Wage Gap in Online Labor Markets? Evidence from Over 250,000 Projects and 2.5 Million Wage Bill Proposals By Estrella Gomez-Herrera; Frank Müller-Langer
  16. Students are Almost as Effective as Professors in University Teaching By Feld, Jan; Salamanca, Nicolas; Zölitz, Ulf
  17. Skill Gap, Mismatch, and the Dynamics of Italian Companies’ Productivity By Fanti, Lucrezia; Guarascio, Dario; Tubiana, Matteo
  18. Do Short-Term Incentives Affect Long-Term Productivity? By Almeida, Heitor; Ersahin, Nuri; Fos, Vyacheslav; Irani, Rustom M; Kronlund, Mathias

  1. By: José Azar; Emiliano Huet-Vaughn; Ioana Marinescu; Bledi Taska; Till von Wachter
    Abstract: Why is the employment effect of the minimum wage frequently found to be close to zero? Theory tells us that when wages are below marginal productivity, as with monopsony, employers are able to increase wages without laying off workers, but systematic evidence directly supporting this explanation is lacking. In this paper, we provide empirical support for the monopsony explanation by studying a key low-wage retail sector and using data on labor market concentration that covers the entirety of the United States with fine spatial variation at the occupation-level. We find that more concentrated labor markets – where wages are more likely to be below marginal productivity – experience significantly more positive employment effects from the minimum wage. While increases in the minimum wage are found to significantly decrease employment of workers in low concentration markets, minimum wage-induced employment changes become less negative as labor concentration increases, and are even estimated to be positive in the most highly concentrated markets. Our findings provide direct empirical evidence supporting the monopsony model as an explanation for the near-zero minimum wage employment effect documented in prior work. They suggest the aggregate minimum wage employment effects estimated thus far in the literature may mask heterogeneity across different levels of labor market concentration.
    JEL: J2 J3 J38 J42
    Date: 2019–07
  2. By: Cevat Giray Aksoy; Panu Poutvaara
    Abstract: About 1.4 million refugees and irregular migrants arrived in Europe in 2015 and 2016. We model how refugees and irregular migrants are self-selected. Using unique datasets from the International Organization for Migration and Gallup World Polls, we provide the first large-scale evidence on reasons to emigrate, and the self-selection and sorting of refugees and irregular migrants for multiple origin and destination countries. Refugees and female irregular migrants are positively self-selected with respect to education, while male irregular migrants are not. We also find that both male and female migrants from major conflict countries are positively self-selected in terms of their predicted income. For countries with minor or no conflict, migrant and non-migrant men do not differ in terms of their income distribution, while women who emigrate are positively self-selected. We also analyze how border controls affect destination country choice.
    Keywords: refugees, self-selection, human capital, predicted income
    JEL: J15 J24 O15
    Date: 2019
  3. By: Priyaranjan Jha; Antonio Rodriguez-Lopez
    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
  4. By: David Neumark; Timothy Young
    Abstract: This paper revisits an important analysis of enterprise zones (EZs) by Ham, Swenson, Imrohoroğlu, and Song (2011), who report substantial poverty reductions from state and federal EZs, as well as improvements in other labor market outcomes. In our re-analysis, we find that a data error accounts for a large share of the estimated impact of state EZs in reducing poverty. More generally, we find that both state and federal EZs appear to be endogenously selected based on prior changes in poverty and other labor market outcomes. Once we account for this selection, much of the evidence that state and federal EZs reduce poverty largely evaporates, as does most of the evidence for other beneficial effects of enterprise zones, with the main exception of some limited evidence for federal Empowerment Zones. Thus, we confirm the more widely-prevailing view that EZs – and especially state EZs – have for the most part been ineffective at reducing urban poverty or improving labor market outcomes in the United States.
    Keywords: enterprise zones, poverty, unemployment
    JEL: J23 J38
    Date: 2019
  5. By: Zölitz, Ulf
    Abstract: A substantial share of university instruction happens in tutorial sessions-small group instruction given parallel to lectures. In this paper, we study whether instructors with a higher academic rank teach tutorials more effectively in a setting where students are randomly assigned to tutorial groups. We find this to be largely not the case. Academic rank is unrelated to students' current and future performance and only weakly positively related to students' course evaluations. Building on these results, we discuss different staffing scenarios that show that universities can substantially reduce costs by increasingly relying on lower-ranked instructors for tutorial teaching.
    JEL: I21 I24 J24
    Date: 2019–07
  6. By: Erik Hernæs; Steinar Strøm; Tao Zhang
    Abstract: We investigate the impact on pension take-up and labour supply of a broad Norwegian pension reform. Focussing on the long term impact, we use a structural discrete choice model estimated on data for first groups to become eligible for the new pension, accounting for the opportunity cost of retiring early. A majority of the individuals combine take-up of pension with working. This is particular the case for individuals with lower education. The estimated model explains observed behaviour rather precisely, in particular for those who retire entirely and for all choices made by individuals with higher education. The estimated model is applied in an out of sample prediction for the cohort born in 1950. Again, the model predicts rather accurately the fraction that retires entirely and the choices made by the higher educated. Two policy simulations, an increase in longevity and tax on pension income equal to tax on labour income, implies lower take up of pensions and more people working. The response to the longevity adjustment compensates less than half of the reduction of the annual pension level in the adjustment, which is designed to mimic the increase in the longevity over the next 20 years.
    Keywords: pension reform, labor supply
    JEL: D10 H55 J26
    Date: 2019
  7. By: Mara P. Squicciarini
    Abstract: This paper uses a historical setting to study when religion can be a barrier to the diffusion of knowledge and economic development, and through which mechanism. I focus on 19th-century Catholicism and analyze a crucial phase of modern economic growth, the Second Industrial Revolution (1870-1914) in France. In this period, technology became skill-intensive, leading to the introduction of technical education in primary schools. At the same time, the Catholic Church was promoting a particularly antiscientific program and opposed the adoption of a technical curriculum. Using data collected from primary and secondary sources, I exploit preexisting variation in the intensity of Catholicism (i.e., religiosity) among French districts and cantons. I show that, despite a stable spatial distribution of religiosity over time, more religious locations had lower economic development only during the Second Industrial Revolution, but not before. Schooling appears to be the key mechanism: more religious areas saw a slower introduction of the technical curriculum and instead a push for religious education. Religious education, in turn, was negatively associated with industrial development about 10 to15 years later, when school-aged children entered the labor market, and this negative relationship was more pronounced in skill-intensive industrial sectors.
    Keywords: human capital, religiosity, industrialization
    JEL: J24 N13 Z12
    Date: 2019
  8. By: Per-Anders Edin; Tiernan Evans; Georg Graetz; Sofia Hernnäs; Guy Michaels
    Abstract: What are the earnings and employment losses that workers suffer when demand for their occupations declines? To answer this question we combine forecasts on occupational employment changes, which allow us to identify unanticipated declines; administrative data on the population of Swedish workers, spanning several decades; and a highly detailed occupational classification. We find that, compared to similar workers, those facing occupational decline lost about 2-5 percent of mean cumulative earnings from 1986-2013. But workers at the bottom of their occupations’ initial earnings distributions suffered considerably larger losses. These earnings losses are partly accounted for by reduced employment, and increased unemployment and retraining.
    Keywords: technological change, occupations, inequality
    JEL: O33 J24 J62
    Date: 2019
  9. By: Fossen, Frank M. (University of Nevada, Reno)
    Abstract: Entry rates into self-employment increase during recessions and decrease during economic upswings. I show that this is mostly explained by the higher unemployment rate during a recession, together with the fact that at all times, unemployed persons have a relatively high propensity to become entrepreneurs out of necessity because they do not find paid employment. I use econometric decomposition techniques to quantify these effects based on the monthly matched US Current Population Survey before, during and after the Great Recession. I also document that this counter-cyclical pattern of entrepreneurial entry strongly applies to unincorporated entrepreneurship, but only weakly to incorporated entrepreneurship. This highlights the association of unincorporated and incorporated entrepreneurship with necessity and opportunity entrepreneurship, respectively. The results are useful for policy-makers and practitioners to understand, forecast and act on the different types of entrepreneurial activities that are to be expected over the business cycle.
    Keywords: entrepreneurship, business cycle, Great Recession, unemployment, opportunity, necessity, decomposition
    JEL: L26 J22 J23 M13
    Date: 2019–07
  10. By: Chodorow-Reich, Gabriel; Nenov, Plamen T.; Simsek, Alp
    Abstract: We provide evidence on the stock market consumption wealth effect by using a local labor market analysis and regional heterogeneity in stock market wealth. An increase in local stock wealth driven by aggregate stock prices increases local employment and payroll in nontradable industries and in total, while having no effect on employment in tradable industries. In a model with consumption wealth effects and geographic heterogeneity, these responses imply a marginal propensity to consume out of a dollar of stock wealth of 2.8 cents per year. We also use the model to quantify the aggregate effects of a stock market wealth shock when monetary policy is passive. A 20% increase in stock valuations, unless countered by monetary policy, increases the aggregate labor bill by at least 0.85% and aggregate hours by at least 0.28% two years after the shock.
    Keywords: consumption wealth effect; employment; marginal propensity to consume; monetary policy; nominal rigidities; regional heterogeneity; Stock Prices; Time-varying risk premium; wages
    JEL: E21 E32 E44
    Date: 2019–07
  11. By: Marika Cabral; Can Cui; Michael Dworsky
    Abstract: There is ongoing policy debate about whether government insurance coverage mandates are necessary to effectively address market failures in private insurance markets. This paper analyzes the demand for insurance in the absence of a coverage mandate and the potential market failure rationale for coverage mandates in the context of workers' compensation insurance. Workers' compensation is a state-regulated insurance program that provides employees with income and medical benefits in the event of work-related injuries or illnesses. Nearly all states have mandated workers' compensation insurance coverage; the sole exception is Texas. Using administrative data from the unique voluntary Texas workers' compensation insurance system, we estimate the demand for workers' compensation insurance leveraging idiosyncratic regulatory updates to relative premiums across industry-occupation classifications. The difference-in-differences estimates indicate that the demand for workers' compensation coverage is price-sensitive, with a 10% increase in premiums leading to approximately a 3% decline in coverage. Drawing upon these estimates and additional data on claim costs, we analyze the potential rationale for government intervention to increase coverage through subsidies or a mandate. This analysis suggests that classic market failure justifications for government intervention in insurance markets—such as adverse selection, market power, and externalities—may not be compelling justifications for a mandate in this setting.
    JEL: H0 I1 I13 I18 J38
    Date: 2019–07
  12. By: Tobias Fuchs; Georg Gebhardt
    Abstract: Are entrepreneurs liquidity constraint? Using quasi-random housing wealth variation resulting from communist era decisions, we argue yes, as we find that wealthier East Germans are more likely to become self-employed after reunification. In the literature, no such strong relationship was found using regional house price changes the US and UK. In these economies, our results suggest, the effects of liquidity constraints are masked by anticipatory savings of the would be self-employed, which was impossible for the East Germans in our sample due to communism.
    Keywords: self-employment, financial constraints, wealthy households, starting capital
    JEL: J23 L26 G32
    Date: 2019
  13. By: Wolfgang Dauth; Sebastian Findeisen; Jens Suedekum
    Abstract: We study the impact of trade exposure on the job biographies of 2.4 million manufacturing workers in Germany. Rising export opportunities lead to two equally important sources of earnings gains: on-the-job, and via employer switches within the same industry. Highly skilled workers benefit the most. Import shocks mostly hurt lowskilled workers, especially when they possess lots of industry-specific human capital. They also destroy workers’ rents when separating from high-wage plants, and they leave strongly scarring effects in the event of a mass layoff. We connect our results to the growing theoretical literature on the labor market effects of trade.
    Keywords: Trade Adjustments, Worker Mobility, Frictional Labor Markets
    JEL: F16 J31 R11
    Date: 2019–08
  14. By: Margherita Borella; Mariacristina De Nardi; Fang Yang
    Abstract: In the U.S., both taxes and old age Social Security benefits depend on one's marital status and tend to discourage the labor supply of the secondary earner. To what extent are these provisions holding back female labor supply? We estimate a rich life-cycle model of labor supply and savings for couples and singles using the Method of Simulated Moments (MSM) on the 1945 and 1955 birth-year cohorts and we use it to evaluate what would happen without these provisions. Our model matches well the life cycle profiles of labor market participation, hours, and savings for married and single people and generates plausible elasticities of labor supply. Eliminating marriage-related provisions drastically increases the participation of married women over their entire life cycle, reduces the participation of married men after age 55, and increases the savings of couples in both cohorts, including the later one, which has similar participation to that of more recent generations. If the resulting government surplus were used to lower income taxation, there would be large welfare gains for the vast majority of the population.
    JEL: E21 H2 J22 J31
    Date: 2019–07
  15. By: Estrella Gomez-Herrera; Frank Müller-Langer
    Abstract: We explore whether there is a gender wage gap in one of the largest EU online labor markets, PeoplePerHour. Our unique dataset consists of 257,111 digitally tradeable tasks of 55,824 hiring employers from 188 countries and 65,010 workers from 173 countries that made more than 2.5 million wage bill proposals in the competition for contracts. Our data allows us to track the complete hiring process from the employers' design of proposed contracts to the competition among workers and the final agreement between employers and successful candidates. Using Heckman and OLS estimation methods we provide empirical evidence for a statistically significant 4% gender wage gap among workers, at the project level. We also find that female workers propose lower wage bills and are more likely to win the competition for contracts. Once we include workers’ wage bill proposals in the regressions, the gender wage gap virtually disappears, i.e., it is statistically insignificant and very small in magnitude (0.3%). Our results also suggest that female workers’ higher winning probabilities associated with lower wage bill proposals lead to higher expected revenues overall. We provide empirical evidence for heterogeneity of the gender wage gap in some of the job categories, all job difficulty levels and some of the worker countries. Finally, for some subsamples we find a statistically significant but very small “reverse” gender wage gap.
    Keywords: gender wage gap, online labor markets, digitally performable projects
    JEL: D40 J40
    Date: 2019
  16. By: Feld, Jan (Victoria University of Wellington); Salamanca, Nicolas (Melbourne Institute of Applied Economic and Social Research); Zölitz, Ulf (University of Zurich)
    Abstract: In a previous paper, we have shown that academic rank is largely unrelated to tutorial teaching effectiveness. In this paper, we further explore the effectiveness of the lowest-ranked instructors: students. We confirm that students are almost as effective as senior instructors, and we produce results informative on the effects of expanding the use of student instructors. We conclude that hiring moderately more student instructors would not harm students, but exclusively using them will likely negatively affect student outcomes. Given how inexpensive student instructors are, however, such a policy might still be worth it.
    Keywords: student instructors, university, teacher performance
    JEL: I21 I24 J24
    Date: 2019–07
  17. By: Fanti, Lucrezia; Guarascio, Dario; Tubiana, Matteo
    Abstract: Relying on a unique integrated database, this work explores the relationship between labour productivity, on one side; intensity and characteristics of companies’ skills need and degree of skill mismatch, on the other. The analysis focuses on a representative sample of Italian limited liability companies observed during the years 2012, 2014 and 2017. First, companies acknowledging the need to update their knowledge base display a higher productivity vis-à-vis other firms. Second, when it comes to the skill need distinguished by competence/knowledge domains (management, STEM, social and soft skills, technical operatives and humanities) it emerges that companies looking for technical operative and social skills show lower labour productivity as compared to other firms. On the contrary, companies characterized by a need in managerial, STEM or humanities-related skills show higher productivity. Third, the ability to match the skill need via new hiring is always positively correlated with firms’ productivity. This result is confirmed across all the adopted specifications.
    Keywords: labour productivity,skill mismatch,firm-level heterogeneity,knowledgebase,organizational capabilities
    JEL: D22 D80 J24
    Date: 2019
  18. By: Almeida, Heitor; Ersahin, Nuri; Fos, Vyacheslav; Irani, Rustom M; Kronlund, Mathias
    Abstract: Previous research shows that stock repurchases that are caused by earnings management lead to reductions in firm-level investment and employment. It is natural to expect firms to cut less productive investment and employment first, which could lead to a positive effect on firm-level productivity. However, using Census data, we find that firms make cuts across the board irrespective of plant productivity. This pattern seems to be associated with frictions in the labor market. Specifically, we find evidence that unionization of the labor force may prevent firms from doing efficient downsizing, forcing them to engage in easy or expedient downsizing instead. As a result of this inefficient downsizing, EPS-driven repurchases lead to a reduction in long-term productivity.
    Keywords: employment; investment; Labor Unions; productivity; Share repurchases; Short-termism
    JEL: G32 G35 J23
    Date: 2019–07

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