nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2019‒09‒23
eighteen papers chosen by
Joseph Marchand
University of Alberta

  1. Exposure to More Female Peers Widens the Gender Gap in STEM Participation By Brenøe, Anne Ardila; Zölitz, Ulf
  2. Does automation lead to de-industrialization in emerging economies? Evidence from Brazil By Stemmler, Henry
  3. Gender Differences in Political Career Progression: Evidence from U.S. Elections By Ryan Brown; Hani Mansour; Stephen O'Connell; James Reeves
  4. A Structural Model of a Multitasking Salesforce: Job Task Allocation and Incentive Plan Design By Minkyung Kim; K. Sudhir; Kosuke Uetake
  5. Two and a Half Million Syrian Refugees, Tasks and Capital Intensity By Yusuf Emre Akgunduz; Huzeyfe Torun
  6. Is There Asymmetry between GDP and Labor Market Variables in Turkey under Okun’s Law? By Evren Erdogan Cosar; Ayse Arzu Yavuz
  7. Macroeconomic effects of gender discrimination By Neyer, Ulrike; Stempel, Daniel
  8. Performance Pay and Productivity in Health Care: Evidence from Community Health Centers By Cadena, Brian C.; Smith, Austin C.
  9. Deregulating Teacher Labor Markets By Burgess, Simon; Greaves, Ellen; Murphy, Richard J.
  10. Going the extra mile: Effort by workers and job-seekers By Hertweck, Matthias S.; Lewis, Vivien; Villa, Stefania
  11. The decline in entrepreneurship in the West: Is complexity ossifying the economy? By Naudé, Wim
  12. Climate Change, Inequality, and Human Migration By Michal Burzynski; Christoph Deuster; Frederic Docquier; Jaime de Melo
  13. The dynamics of working hours and wages under implicit contracts By Guerrazzi, Marco; Giribone, Pier Giuseppe
  14. The long run wage-employment elasticity: Evidence from Colombia By Jhon James Mora; Juan Muro
  15. Wage determination and fixed capital investment in an imperfect financial market: the case of China By Gu, Tao
  16. Heterogeneity in marginal returns to language training of immigrants By Giesecke, Matthias; Schuss, Eric
  17. Corruption, mortality rates, and development:Policies for escaping from the poverty trap By Kiyoka Akimoto
  18. Why Join a Team? By Cooper, David J.; Saral, Krista; Villeval, Marie Claire

  1. By: Brenøe, Anne Ardila (University of Zurich); Zölitz, Ulf (University of Zurich)
    Abstract: This paper investigates how high school gender composition affects students' participation in STEM at college. Using Danish administrative data, we exploit idiosyncratic within-school variation in gender composition. We find that having a larger proportion of female peers reduces women's probability of enrolling in and graduating from STEM programs. Men's STEM participation increases with more female peers present. In the long run, women exposed to more female peers are less likely to work in STEM occupations, earn less, and have more children. Our findings show that the school peer environment has lasting effects on occupational sorting, the gender wage gap, and fertility.
    Keywords: gender, peer effects, STEM studies
    JEL: I21 J16 J31
    Date: 2019–08
  2. By: Stemmler, Henry
    Abstract: This paper investigates several channels through which automation affects an emerging economy. Building on a Ricardian model of trade with sectoral linkages and a two-stage production technology, in which robots replace labor in certain tasks, it is shown that domestic and foreign automation have differential effects on labor markets. Based on this model, the impact of automation on local labor markets in Brazil are estimated using a shift-share approach. Local labor market exposures to industry-level stocks of robots are derived from their initial industry-employment composition. Foreign automation is found to decrease manufacturing employment through the channel of final goods exports, while it increases employment in the mining sector through the channel of input exports. This may stimulate what has been called "premature deindustrialization" in emerging economies. To account for possible endogeneity in adopting robots domestically, robot uptake in other emerging economies is used as an instrumental variable. Domestic automation is found to directly decrease the ratio of unskilled industry workers and increase the ratio of skilled workers. Also, the wage gap between the two groups widens as a consequence of domestic automation, reinforcing income inequality.
    Keywords: automation,trade,deindustrialization,employment,wages
    JEL: J23 J24 F16 O33
    Date: 2019
  3. By: Ryan Brown; Hani Mansour; Stephen O'Connell; James Reeves
    Abstract: This paper establishes the presence of a substantial gender gap in the relationship between state legislature service and the subsequent pursuit of a Congressional career. The empirical approach uses a sample of mixed-gender elections to compare the differential political career progression of women who closely win versus closely lose a state legislature election relative to an analogous impact for men who closely win or lose a state legislature election. We find that the effect of serving a state legislative term on the likelihood of running for a Congressional seat is twice as large for men as women, and its effect on winning a Congressional race is five times larger for men than women. These gaps emerge early in legislators’ careers, widen over time, and are seen alongside a higher propensity for female state legislators to recontest state legislature seats. This gender gap in advancing to Congress among state legislators is not generated by gender differences in previously accumulated political experience, political party affiliation, or constituency characteristics. After investigating several explanations, we conclude that the gender gap in political career progression is consistent with the existence of a glass ceiling in politics.
    Keywords: gender gap, politicians, discrimination
    JEL: D72 J16 J24 J71
    Date: 2019
  4. By: Minkyung Kim (School of Management, Yale University); K. Sudhir (Cowles Foundation & School of Management, Yale University); Kosuke Uetake (School of Management, Yale University)
    Abstract: We develop the first structural model of a multitasking salesforce to address questions of job design and incentive compensation design. The model incorporates three novel features: (i) multitasking effort choice given a multidimensional incentive plan; (ii) salesperson’s private information about customers and (iii) dynamic intertemporal tradeoffs in effort choice across the tasks. The empirical application uses data from a micro nance bank where loan officers are jointly responsible and incentivized for both loan acquisition repayment but has broad relevance for salesforce management in CRM settings involving customer acquisition and retention. We extend two-step estimation methods used for unidimensional compensation plans for the multitasking model with private information and intertemporal incentives by combining flexible machine learning (random forest) for the inference of private information and the first-stage multitasking policy function estimation. Estimates reveal two latent segments of salespeople-a “hunter” segment that is more efficient in loan acquisition and a “farmer” segment that is more efficient in loan collection. We use counterfactuals to assess how (1) multi-tasking versus specialization in job design; (ii) performance combination across tasks (multiplicative versus additive); and (iii) job transfers that impact private information impact firm profits and specific segment behaviors.
    Keywords: Salesforce compensation, Multitasking, Multi-dimensional incentives, Private information, Adverse selection, Moral hazard
    JEL: C61 J33 L11 L23 L14 M31 M52 M55
    Date: 2019–09
  5. By: Yusuf Emre Akgunduz; Huzeyfe Torun
    Abstract: We investigate how the rapid increase in the low-skilled labor supply induced by the inflow of 2.5 million Syrian refugees changed the tasks performed by native workers and the capital intensity of firms in Turkey. We use both survey and administrative data to estimate the effects. The results based on the Labor Force Survey suggest that the inflow of refugees increased natives’ task complexity, reducing the intensity of manual tasks, and raising the intensity of abstract tasks. This effect is driven by highly educated and young natives. Exploiting the administrative firm data that contains the entirety of firms in the country, we find that manufacturing firms reduced their capital intensity and investments. Reduction in capital intensity and investment is largely driven by smaller sized firms. We conclude that tasks provided by Syrian refugees are substitutes for manual tasks and capital inputs in production, and complements to more complex tasks.
    Keywords: Migration, Refugees, Labor-capital substitution, Skills, Tasks
    JEL: F22 J24 J21 D24
    Date: 2019
  6. By: Evren Erdogan Cosar; Ayse Arzu Yavuz
    Abstract: This study examines the long-term relationship in Turkey between Gross Domestic Product (GDP) and two labor market variables, employment and unemployment rate. Markov switching (MS) models are estimated to capture non-linear effects under Okun’s law, using quarterly data for 1989 to 2018. The aim is to determine whether these labor market variables exhibit asymmetric behavior in response to GDP changes. Asymmetric effects determine the course of the recovery in GDP and employment after a crisis, so it is important to determine elasticities among these variables to implement active labor market policies. This study is novel in that we investigate the existence of these asymmetric relationships in the Turkish economy while taking into consideration the expansion and recession phases of both variables. In a MS model with two states being expansion and recession, we find asymmetric relationships between labor market variables and GDP both within and between phases. In addition, labor market variables in Turkey respond more strongly to GDP changes during recessions.
    Keywords: Okun’s law, Markov-switching models, Asymmetry, Turkey
    JEL: C22 E24 E32
    Date: 2019
  7. By: Neyer, Ulrike; Stempel, Daniel
    Abstract: This paper theoretically analyzes the macroeconomic effects of gender discrimination against women in the labor market in a New Keynesian model. We extend standard frameworks by including unpaid household production in addition to paid labor market work, by assuming that the representative household consists of two agents, and by introducing discriminatory behavior on the firms' side. We find that, in steady state, this discrimination implies that women work inefficiently more in the household and less in the paid labor market than men. This inefficient working time allocation between women and men leads to a discrimination-induced gender wage gap, lower wages for women and men, lower aggregate output, and lower welfare. The analysis of dynamic effects reveals that households benefit less from positive technology shocks. Moreover, the transmission of expansionary monetary policy shocks on output and in ation is lower in the discriminatory environment.
    Keywords: New Keynesian Models,Gender Discrimination,Household Production,Monetary Policy Transmission
    JEL: D13 D31 E32 E52 J71
    Date: 2019
  8. By: Cadena, Brian C. (University of Colorado, Boulder); Smith, Austin C. (Miami University)
    Abstract: Nearly half of high earning workers receive performance pay as part of their compensation, but we know strikingly little about the incentive effects of piece rate compensation on high-skilled workers. In this paper, we examine changes in medical providers' output in response to a piece rate compensation scheme. We use data from a Federally Qualified Health Center that changed from a salary-based plan to one that rewarded providers for seeing more patients on a monthly basis. Two key facts guide our empirical approach. First, the timing of the switch from salary to piece rates varied at the individual level depending on the provider's hire date, which allows us to control for other changes over time in patient demand for services. Second, most providers worked under both compensation schemes, which allows us to make within-person comparisons. We further address incomplete compliance by using providers' expected monthly compensation plan status as an instrument for their actual status. We find that providers working under the piece rate scheme see roughly 18 percent more patients monthly. Only a small portion of this difference is due to within-provider changes in output, and we find no evidence that the incentive scheme causes providers to become more productive. Instead, most of this difference derives from compositional changes in the workforce, likely due to increased retention of more productive providers.
    Keywords: piece rates, performance pay, medical providers, fee for service
    JEL: J22 J33
    Date: 2019–08
  9. By: Burgess, Simon (University of Bristol); Greaves, Ellen (University of Bristol); Murphy, Richard J. (University of Texas at Austin)
    Abstract: A common feature of public sector labor markets is the use of pay scales. This paper examines how the removal of pay scales impacts productivity, by exploiting a reform that compelled all schools in England to replace pay scales with school-designed performance related pay schemes. We find that schools in labor markets with better outside options for teachers saw relatively higher increases in teacher pay. Schools in these areas relatively increase their spending on teachers, have higher teacher retention and larger improvements in student tests scores. These effects are largest in schools with the high proportions of disadvantaged students. We conclude that the pay rigidities in the form of centralized pay schedules result in a misallocation of resources, by preventing such schools from retaining their teachers.
    Keywords: pay scales, teachers, performance related pay, productivity
    JEL: J33 I28
    Date: 2019–09
  10. By: Hertweck, Matthias S.; Lewis, Vivien; Villa, Stefania
    Abstract: We introduce two types of effort into an otherwise standard labor search model to examine indeterminacy and sunspot equilibria. Variable labor effort gives rise to increasing returns to hours in production. This makes workers more valuable and contributes to self-fulfilling profit expectations, raising the likelihood of indeterminacy. Variable search effort makes workers search more intensively in a tighter labor market, which alleviates congestion and reduces the likelihood of indeterminacy. Indeterminacy disappears completely when vacancy posting costs are replaced with hiring costs.
    Keywords: determinacy,effort,hours,labor market frictions,search intensity
    JEL: E23 E24 E32 E64
    Date: 2019
  11. By: Naudé, Wim (UNU-MERIT, Maastricht University, RWTH Aachen, and IZa, Bonn.)
    Abstract: Entrepreneurship in most advanced economies is in decline. This comes as a surprise: many scholars have expected an upsurge in entrepreneurship. What are the reasons for the decline? In this paper I first document the extent of the decline in terms of entrepreneurial entry rates; the share of young and small firms; and in terms of labor market mobility and in innovativeness. I then critically discuss the explanations that have been offered in the literature: slow population growth, market concentration, zombie-firm congestion, slower diffusion of knowledge, and burdensome business regulations. While having merit, these explanations are largely supply-side oriented and moreover fail to explain why the decline in entrepreneurship is associated with high levels of economic complexity. I argue that we need to consider the potential of negative scale effects and evolutionary pressures from rising complexity, as well as long-run changes in aggregate demand and energy costs. Whether the decline in entrepreneurship and the ossification of the economy is undesirable, is a point for debate, calling for more research and more attention to entrepreneurship in growth theories.
    Keywords: Entrepreneurship, start-ups, development, economic complexity, growth theory
    JEL: O47 O33 J24 E21 E25
    Date: 2019–09–11
  12. By: Michal Burzynski (LISER, Luxembourg Institute of Socio-Economic Research (Luxembourg)); Christoph Deuster (IRES, UCLouvain (Belgium), and Universidade Nova de Lisboa (Portugal)); Frederic Docquier (LISER (Luxembourg), FNRS and IRES, UCLouvain (Belgium), and FERDI (France)); Jaime de Melo (Universite de Geneve (Switzerland), CEPR (United Kingdom) and FERDI (France))
    Abstract: This paper investigates the long-term implications of climate change on local, interregional, and international migration of workers. For nearly all of the world's countries, our micro-founded model jointly endogenizes the effects of changing temperature and sea level on income distribution and individual decisions about fertility, education, and mobility. Climate change intensifies poverty and income inequality creating favorable conditions for urbanization and migration from low- to highlatitude countries. Encompassing slow- and fast-onset mechanisms, our projections suggest that climate change will induce the voluntary and forced displacement of 100 to 160 million workers (200 to 300 million climate migrants of all ages) over the course of the 21st century. However, under current migration laws and policies, forcibly displaced people predominantly relocate within their country and merely 20 % of climate migrants opt for long-haul migration to OECD countries. If climate change induces generalized and persistent conflicts over resources in regions at risk, we project significantly larger cross-border flows in the future.
    Keywords: Climate change, Migration, Inequality, Urbanization, Conflicts
    JEL: E24 F22 J24 J61 Q54
    Date: 2019–09–14
  13. By: Guerrazzi, Marco; Giribone, Pier Giuseppe
    Abstract: In this paper, we explore the out-of-equilibrium dynamics of working hours and wages in a model economy where workers and firms have agreed upon an implicit contract that smooths long-run consumption. Specifically, we analyse a deterministic and a stochastic framework in which a firm inter-temporally sets its level of labour utilization by considering that workers' earnings tend to adjust in the direction of a fixed level that seeks to stabilize their consumption. Without any uncertainty in labour effectiveness, this theoretical setting may have one, two or no stationary solution. The dynamics of the deterministic economy, however, can be assessed only in the two-solution case and it reveals that wages move counter-cyclically towards the allocation preferred by the firm. Adding uncertainty in labour effectiveness does not overturn the counter-cyclical pattern of wages but is helpful in explaining the wage stickiness observed at the macro level.
    Keywords: Implicit contract theory; Consumption smoothing; Out-of-equilibrium dynamics; Optimal Control
    JEL: D86 E24 J41
    Date: 2019–09–11
  14. By: Jhon James Mora (Departamento de Economía. Universidad ICESI); Juan Muro (Departamento de Economía. Universidad de Alcalá)
    Abstract: Several years ago, many articles showed that the relationship between wage increases and unemployment rise is not clear in the USA. This USA evidence was important to determine the recommendation of Stiglitz that a 22% increase of the minimum wage in Spain will not reduce the employment in 2018. To our view, the USA evidence is insufficient to consider that this advice can be extended to all countries. Differences in regulations, institutions and welfare systems –mainly unemployment insurance-, among others, may produce around the world different results to the expected outcome in the USA that an increase of the real wages does not provoke an unemployment rise. Colombia as a developing country, with institutions that differ in design and practice from those of the USA, could be a good testing example. In this paper, we analyse the effect of a rise in wages on the demand for employment using Colombian data. Our meta-analysis shows that a 1% real wage increment causes an 0,11% employment fall in the long run. These results stand despite publication biases.
    Keywords: Wage-employment elasticity, meta-analysis, publication bias
    JEL: J23 J31 C83
    Date: 2019
  15. By: Gu, Tao
    Abstract: The purpose of this paper is to examine how wage decisions and fixed asset investments are determined under China’s imperfect financial market. In addition, we also investigate what kind of interrelationship exists between wage determination and fixed asset investment. To test the hypothesis, we collect aggregate data on wages, the financial market, and fixed asset investment by province, sector, and ownership type from several statistical yearbooks. The main results are (1) while the rise in financial market maturity has led to rising wage levels for state-owned enterprises, this phenomenon is not observed in the private sector, (2) retained earnings are positively correlated with capital investment, indicating that China’s financial market is incomplete. Furthermore, in the private sector, there is a strong reliance on internal reserves that is not observed in the state-owned sector, suggesting that the private sector is differentially treated in the financial market. (3) In the state-owned sector, wage growth has a positive correlation with fixed assets, while in the nonstate-owned sector this relationship is not observed. This implies that in the nonstate-owned sector the underpayment of wages may be used as a survival strategy to conduct business if under financial constraints.
    Keywords: Imperfect financial market, Fixed capital investment, Wage determination
    JEL: G10 G30 J3
    Date: 2019–09–12
  16. By: Giesecke, Matthias; Schuss, Eric
    Abstract: We estimate the effect of language training on subsequent employment and wages of immigrants under essential heterogeneity. The identifying variation is based on regional differences in language training availability that we use to instrument endogenous participation. Estimating marginal treatment effects along the distribution of observables and unobservables that drive individual participation decisions, we find that immigrants with higher gains are more likely to select into language training than immigrants with lower gains. We document up to 15% higher employment rates and 13% wage gains for immigrants with a high desire to participate but the positive returns vanish with increasing resistance to treatment. This pattern of selection on gains correlates with unobserved ability and motivation, promoting investments in education and job-specific skills that yield higher returns when complemented by language capital in the host country.
    Keywords: language training,heterogeneous returns,marginal treatment effects,continuous instrument
    JEL: F22 J24 J61 J68 O15
    Date: 2019
  17. By: Kiyoka Akimoto (Graduate School of Economics, Kobe University)
    Abstract: We construct a three-period overlapping generations model in which corrup- tion, mortality and fertility rates, and economic development are determined endogenously. We consider a less developed economy suffering from a high degree of corruption and high mortality and fertility rates in a poverty trap. We focus on two policies: raising public sector wages as a means of reducing corruption and increasing public health spending as a means of improving the mortality rate. Our theoretical analysis shows that implementing both policies simultaneously is essential for less developed economies to escape from the poverty trap and achieve economic development.
    Keywords: Corruption, Public sector wage, Public health, Economic development
    JEL: D73 I18 J38 O41
    Date: 2019–09
  18. By: Cooper, David J. (Florida State University); Saral, Krista (North Carolina State University); Villeval, Marie Claire (CNRS, GATE)
    Abstract: We present experiments exploring why high ability workers join teams with less able co-workers when there are no short-term financial benefits. We distinguish between two explanations: pro-social preferences and expected long-term financial gains from teaching future teammates. Participants perform a real-effort task and decide whether to work independently or join a two-person team. Treatments vary the payment scheme (piece rate or revenue sharing), whether teammates can communicate, and the role of teaching. High ability workers are more willing to join teams in the absence of revenue sharing and less willing to join teams when they cannot communicate. When communication is possible, the choice of high ability workers to join teams is driven by expected future financial gains from teaching rather than some variety of pro-social preferences. This result has important implications for the role of adverse selection in determining the productivity of teams.
    Keywords: teams, teaching, revenue sharing, social preferences, self-selection, experiment
    JEL: C92 D23 M52 M53 J24
    Date: 2019–09

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