nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2019‒10‒07
fourteen papers chosen by
Joseph Marchand
University of Alberta

  1. Should I Care or Should I Work? The Impact of Working in Older Age on Caregiving By Carrino, L.;; Nafilyan, V.;; Avendaño Pabon, M.;
  2. When Income Effects are Large: Labor Supply Responses and the Value of Welfare Transfers By Giulia Giupponi
  3. Trade Liberalization and Labor Market Adjustment in Botswana By Margaret S. McMillan; Brian McCaig
  4. Monopsony in Spatial Equilibrium By Matthew E. Kahn; Joseph Tracy
  5. Are flexible working hours helpful in stabilizing unemployment? By Kolasa, Marcin; Rubaszekz, Michał; Walerych, Małgorzata
  6. Labor Market Trends and the Changing Value of Time By Job Boerma; Loukas Karabarbounis
  7. Management Practises in Finnish Manufacturing Establishments: Evidence from FMOP By Ohlsbom, Roope; Maliranta, Mika
  8. The Impacts of Managerial Autonomy on Firm Outcomes By Namrata Kala
  9. The Real U.S. Unemployment Rate Is Twice the Official Rate, and the Phillips Curve By John Komlos
  10. Linguistic Diversity and Workplace Productivity By Dale-Olsen, Harald; Finseraas, Henning
  11. Social Investment, Employment Outcomes and Policy and Institutional Complementarities: A Comparative Analysis across 26 OECD countries By Bakker, Vincent; Van Vliet, Olaf
  12. Does It Matter When Labor Market Reforms Are Implemented? The Role of the Monetary Policy Environment By Povilas Lastauskas; Julius Stakenas
  13. Which factors are behind Germany's labour market upswing? By Hutter, Christian; Klinger, Sabine; Trenkler, Carsten; Weber, Enzo
  14. Are Political and Economic Integration Intertwined? By Bernt Bratsberg; Giovanni Facchini; Tommaso Frattini; Anna Rosso

  1. By: Carrino, L.;; Nafilyan, V.;; Avendaño Pabon, M.;
    Abstract: This paper examines the impact of an increase in labour supply on women’s informal caregiving, due to changes in pension rules. We exploit a unique reform that increased the female State-Pension-Age (SPA) in the UK for up to 6 years. Using an instrumental variable approach to account for the endogeneity of labour supply, we show that an increase in employment substantially reduces the intensity of informal care: working for 30 hours/week reduces care-intensity by 6.6 hours/week, and reduces the probability of providing intensive care (> 20 hours/week) by 4 percentage points. We show that these effects are concentrated among women working in physically and psychologically demanding jobs. Our results provide evidence that increasing women’s labour supply in older age by raising the statutory age of retirement may decrease the intensity of informal care, which raises concerns about the availability of informal care in ageing populations.
    Keywords: informal care; retirement; labour supply; pension reform;
    JEL: J14 J22 J26 H55
    Date: 2019–10
  2. By: Giulia Giupponi
    Abstract: I estimate the long-run income effect of welfare transfers on individual labor supply. Using Italian administrative data on the universe of survivor insurance recipients, I implement a regression discontinuity design around a change in survivor insurance generosity based on the spouse's death date. I find that survivors fully offset the benefit loss with increases in earnings. Labor force participation and program substitution are the main margins of adjustment. I consider potential explanations for the large income effect. Evidence suggests that the value of additional income in the widowhood state is large, driving large participation responses to survivor benefit cuts.
    Keywords: income effect, labor supply, valuation of welfare transfers
    JEL: H55 I38 J22
    Date: 2019–10
  3. By: Margaret S. McMillan; Brian McCaig
    Abstract: We study the effects of domestic trade liberalization on labor markets in Botswana. South Africa is the dominant member of the Southern Africa Customs Union. As such, when South Africa liberalized trade in the 1990s, this induced large and plausibly exogenous tariff reductions for the other customs union members, including Botswana. Using labor force surveys from Botswana spanning a decade, we find that trade liberalization did not affect the relative size of industries in terms of employment. However, trade liberalization had effects within industries. We find an increase in the prevalence of working in an informal firm and self-employment, but mixed evidence of effects on unemployment. Hours worked decreased in response to trade liberalization, partially driven by the movement of workers to informal firms. Despite large increases in aggregate income, trade liberalization is associated with a reduction in monthly income, but the results are imprecise. Our results also suggest that a positive export demand shock, the 2000 African Growth and Opportunities Act, is associated with a reduction in employment in informal firms in the clothing industry.
    JEL: F1
    Date: 2019–09
  4. By: Matthew E. Kahn; Joseph Tracy
    Abstract: An emerging labor economics literature studies the consequences of firms exercising market power in local labor markets. These monopsony models have implications for trends in earnings inequality. The extent of this market power is likely to vary across local labor markets. In choosing what market to live and work in, workers tradeoff wages, rents and local amenities. Building on the Rosen/Roback spatial equilibrium model, we investigate how the existence of local monopsony power affects the cross-sectional spatial distribution of wages and rents across cities. We find an employment-weighted elasticity of land prices to concentration of –0.034—similar to Rinz (2018) reported elasticity of compensation to concentration. This finding has implications for who bears the economic incidence of labor market power. We present two extensions of the model focusing on the role of migration costs and worker skill heterogeneity.
    JEL: J3 R23
    Date: 2019–09
  5. By: Kolasa, Marcin; Rubaszekz, Michał; Walerych, Małgorzata
    Abstract: In this paper we challenge the conventional view that increasing working time exibility limits the amplitude of unemployment fluctuations. We start by showing that hours per worker in European countries are much less procyclical than in the US, and in some economies even co-move negatively with output. This is confirmed by the results from a structural VAR model for the euro area, in which working hours increase after a contractionary monetary shock, exacerbating the upward pressure on unemployment. To understand these counterintuitive results, we develop a structural search and matching macroeconomic model with endogenous job separation. We show that this feature is key to generate countercyclical adjustments in working hours. When we augment the model with frictions in working hours adjustment and estimate it using euro area time series, we find that increasing flexibility of working time amplifies cyclical movements in unemployment.
    JEL: E24 E32 J22 J64
    Date: 2019–10–02
  6. By: Job Boerma; Loukas Karabarbounis
    Abstract: During the past two decades, households experienced increases in their average wages and expenditures alongside with divergent trends in their wages, expenditures, and time allocation. We develop a model with incomplete asset markets and household heterogeneity in market and home technologies and preferences to account for these labor market trends and assess their welfare consequences. Using micro data on expenditures and time use, we identify the sources of heterogeneity across households, document how these sources have changed over time, and perform counterfactual analyses. Given the observed increase in leisure expenditures relative to leisure time and the complementarity of these inputs in leisure technology, we infer a significant increase in the average productivity of time spent on leisure. The increasing productivity of leisure time generates significant welfare gains for the average household and moderates negative welfare effects from the rising dispersion of expenditures and time allocation across households.
    JEL: D10 E21 J22
    Date: 2019–09
  7. By: Ohlsbom, Roope; Maliranta, Mika
    Abstract: Abstract Data collected by the recently conducted Finnish Management and Organizational Practices Survey (FMOP) by Statistics Finland is used to examine the management practices in Finnish manufacturing establishments. The FMOP project was funded by the Strategic Research Council. This paper presents the descriptive statistics, some indicative international comparisons using poststratification weighted averages and a cross-regional comparison of the large areas of Finland. The management scores appear to be only slightly behind those of the US and approximately on par with those of Germany. This suggests that the management practices in Finnish manufacturing are on a comparatively high international level. We also find evidence of cross-regional differences in management quality in Finland with aggregate (employment weighted) but not unweighted management scores, which suggests that the differences in the allocation of employment between establishments may explain regional disparities in Finland. To analyse the statistical significance of the regional disparities in workforce allocation in greater depth, we utilize a moment-based estimation procedure that allows for statistical inferences using the Olley-Pakes decomposition. We find evidence of regional variations in the policy relevant allocation component.
    Keywords: Management practices, Management survey, FMOP, MOPS, Olley-Pakes decomposition, Competitiveness, Allocation effect, Reallocation
    JEL: D22 L25 L60 M11 M50
    Date: 2019–09–23
  8. By: Namrata Kala
    Abstract: The allocation of decision rights within organizations influences resource allocation, expansion decisions, and ultimately outcomes. Using a newly constructed dataset, I estimate the effects of an earned autonomy program for State Owned Enterprises (SOEs) in India. The program gave managers (the board of directors) of profitable SOEs more autonomy over strategic decisions such as capital expansion and the formation of joint ventures. I find that autonomy allows SOEs to increase their capital stock and form more strategic partnerships which leads to greater sales and profits. I also find that the likelihood that a manager subsequently joins a board of a private firm is greater for managers of those SOEs which were granted autonomy, indicating that career concerns is a consistent explanation for these managerial decisions. Taken together, these results indicate that large gains in SOE performance are possible without privatization (by policies like earned autonomy) and may occur partly through managers' career concerns.
    JEL: D2 D23 D73 D92 M12 M38 M51 O38 O53
    Date: 2019–09
  9. By: John Komlos
    Abstract: The official unemployment rate has become an inadequate measure of labor market conditions. This poses a major challenge for basic research as well as for the formulation of adequate economic policy. We propose a new definition of the unemployment rate by weighing part-time workers with 62.5%, the proportion of the time they work relative to full-time workers. We provide new monthly estimates of the unemployment rate for the period 1994-2019 and find that their average during this 25-year period was 10.1% or 4.4 percentage points above the average of the official rate of 5.7%. The gap between the two rates fluctuated between 3.6 and 5.6 percentage points and rose in wake of the recession of 2008 reaching a peak in 2014 only to decrease slowly thereafter back to its pre-recession level of 4 percentage points. The Phillips curve is investigated with the new unemployment rate as well as with U3 and U6 in seven specifications for the period 2008-2019 confirming the very shallow slope found in other studies. However, in one of the specifications the slope is much steeper, mysteriously reminiscent of the coefficients estimated for the 1970s providing a conundrum for further study.
    Keywords: unemployment, labor market slack, discouraged workers, involuntary part-time workers, Phillips curve
    JEL: J40 J49
    Date: 2019
  10. By: Dale-Olsen, Harald (Institute for Social Research, Oslo); Finseraas, Henning (Institute for Social Research, Oslo)
    Abstract: We study the importance of linguistic diversity in the workplace for workplace productivity. While cultural diversity might improve productivity through new ideas and innovation, linguistic diversity might increase communication costs and thereby reduce productivity. We apply a new measure of languages' linguistic proximity to Norwegian linked employer-employee Manufacturing data from 2003-12, and find that higher workforce linguistic diversity decreases productivity. We find a negative effect also when we take into account the impact of cultural diversity. As expected proficiency in Norwegian of foreign workers improves since their time of arrival in Norway, the detrimental impact disappears.
    Keywords: productivity, diversity, language diversity, GMM
    JEL: J15 D24 J24
    Date: 2019–09
  11. By: Bakker, Vincent; Van Vliet, Olaf
    Abstract: Social investment has become a widely debated topic in the comparative welfare state literature. To date, there are, however, only a couple of systematic comparative empirical analyses that focus on the employment outcomes associated with social investment. This study contributes to the social investment literature by empirically analysing the extent to which variation in employment outcomes across 26 OECD countries over the period 1990-2010 can be explained by effort on five social investment policies using time-series cross-sectional analyses. Apart from focusing on employment rates, we additionally explore associations with qualitative aspects of the employment outcomes relying on novel indicators. The analyses account for theoretically relevant confounding variables that were omitted in existing studies, notably labour market institutions. We find robust evidence for a positive association between effort on active labour market policies and employment rates. For other policies we obtain mixed results, dependent on the employment outcome being studied. Subsequently, we explore the role of policy and institutional complementarities in the assessment of the employment effects of social investment policies. We show how social investment policies interact and how their effect is moderated by effort on other policies. Additionally, our analysis shows that the complementarity of social investment policies varies across welfare state regimes. Finally, explorative analyses suggest that there are positive synergies between more and better jobs, which could in part be attributable to effort on social investment.
    Keywords: Employment, job quality, social investment, policy complementarity, institutional complementarity, diminishing marginal returns, comparative welfare state analysis, social expenditure, social policy
    JEL: H53 I38 J21
    Date: 2019–09
  12. By: Povilas Lastauskas (CEFER, Bank of Lithuania & Vilnius University); Julius Stakenas (Vilnius University)
    Abstract: Do labor market reforms initiated in periods of loose monetary policy yield different outcomes from those that were introduced in periods when monetary tightening prevailed? Since economic theory usually pays attention to the steady state change and ignores business cycle interactions of structural reforms, we connect local projection methodology with the Mallow’s Cp averaging criterion to arrive at an inference that does not require knowledge of the exact functional form, is robust to mis-specification, admits non-linearities, and cross-sectional dependence and addresses uncertainty regarding interactions between labor reforms and macroeconomy. We also develop a test to check the importance of monetary policy for any horizon and the entire impulse response function, taking the multiple testing problem into account. We document that replacement rates deliver substantially different outcomes on real GDP, inflation and real effective exchange rate, whereas labor activation schemes bear different effects on unemployment in low- and high-interest rate environments. There is also evidence of monetary policy trend playing an important role as well as increasing synchronized monetary and labor market policies across European countries.
    Keywords: Labor market reforms, nonlinear responses, Mallow’s Cp criterion for model averaging, error factor structure, low and high interest rate environments
    JEL: C33 C54 E52 E62 J08 J38
    Date: 2019–09–25
  13. By: Hutter, Christian (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]); Klinger, Sabine (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]); Trenkler, Carsten; Weber, Enzo (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany])
    Abstract: "The strong and sustained labour market upswing in Germany is widely recognized. In a developing literature, various relevant studies highlight different specific reasons. The underlying study, instead, simultaneously considers a broad set of factors in a unified methodological framework and systematically weighs the candidate reasons for the labour market upswing against each other on an empirical basis. The candidates are: shocks on (de)regulation of employment or job creation intensity, the efficiency of the matching process, wage determination, the separation propensity, the size of the labour force, technology, business cycle and working time. We develop a structural macroeconometric framework that leaves as manyof the systematic interlinkages as possible for empirical determination while operating with a minimal set of restrictions in order to identify economically meaningful shocks. For this purpose, we combine short- and long-run restrictions based on search-and-matching theory and established assumptions on labour force development and technological change. Matching efficiency, job creation intensity, labour force, and separation propensity yield the largest contributions in explaining the German labour market upswing." (Author's abstract, IAB-Doku) ((en))
    JEL: C32 E24 J21
  14. By: Bernt Bratsberg (Ragnar Frisch Centre for Economic Research and University of Oslo); Giovanni Facchini (University of Nottingham); Tommaso Frattini (Universita' degli Studi di Milano); Anna Rosso (Universita' degli Studi di Milano)
    Abstract: Economic incentives play a key role in the decision to run for oce, but little is known on how they shape immigrants' selection into candidacy. We study this question using a two-period Roy model and show that if returns to labour market experience are higher for migrants than natives, migrants will be less likely to seek oce than natives. We empirically assess this prediction using administrative data from Norway, a country with a very liberal regime for participation in local elections. Our results strongly support our theoretical model and indicate that immigrants' political and economic integration are closely intertwined.
    Keywords: Immigration, Local Elections, Candidacy Decision, Labour Markets
    JEL: F22 J45 P16

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