nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2019‒10‒14
twenty-one papers chosen by
Joseph Marchand
University of Alberta

  1. Heterogeneity and Wage Inequalities over the Life Cycle By Magnac, Thierry; Roux, Sébastien
  2. Improving educational pathways to social mobility. Evidence from Norway’s “Reform 94” By Marianne Bertrand; Magne Mogstad; Jack Mountjoy
  3. The Labor Market Effects of the China Syndrome: Evidence from South Korean Manufacturing By Jaerim Choi; Mingzhi Xu
  4. International knowledge flows between industry inventors and universities: The role of multinational companies By Fassio, Claudio; Geuna, Aldo; Rossi, Federica
  5. Marriage, Children, and Labor Supply: Beliefs and Outcomes By Yifan Gong; Ralph Stinebrickner; Todd R. Stinebrickner
  6. The Origins of Creativity: The Case of the Arts in the United States since 1850 By Borowiecki, Karol Jan
  7. Credit Smoothing By Sean Hundtofte; Arna Olafsson; Michaela Pagel
  8. A Cross-Cohort Analysis of Human Capital Specialization and the College Gender Wage Gap By Carolyn Sloane; Erik Hurst; Dan Black
  10. Facts on Business Dynamism in Turkey By Akcigit, Ufuk; Akgunduz, Yusuf Emre; Cilasun, Seyit Mumin; Ozcan Tok, Elif; Yilmaz, Fatih
  11. The Effects of Job Characteristics on Retirement By Péter Hudomiet; Michael D. Hurd; Andrew Parker; Susann Rohwedder
  12. Poverty Alleviation Strategies Under Informality: Evidence for Latin America By Martín Caruso; Sebastian Galiani; Federico Weinschelbaum
  13. Sickness absence and unemployment revisited (title of the paper) By Stefanie Thönnes (first name last name); Stefan Pichler (first name last name of second author)
  14. Redistributive Growth By Döttling, Robin; Perotti, Enrico C
  15. Does Mobility across Universities Raise Scientific Productivity? By Ejermo, Olof; Fassio, Claudio; Källström, John
  16. Climate Change, Inequality, and Human Migration By Burzynski, Michal; de Melo, Jaime; Deuster, Christoph; Docquier, Frédéric
  17. Household Labor Search, Spousal Insurance, and Health Care Reform By Hanming Fang; Andrew J. Shephard
  18. The urban wage premium in imperfect labour markets By Hirsch, Boris; Jahn, Elke; Manning, Alan; Oberfichtner, Michael
  19. When Correspondence Studies Fail to Detect Hiring Discrimination By Cahuc, Pierre; Carcillo, Stéphane; Minea, Andreea; Valfort, Marie-Anne
  20. Behavioral Responses to State Income Taxation of High Earners: Evidence from California By Joshua Rauh; Ryan J. Shyu
  21. The Tall and the Short of the Returns to Height By Michael Baker; Kirsten Cornelson

  1. By: Magnac, Thierry; Roux, Sébastien
    Abstract: Using panel data from a single cohort of French male wage earners observed over a long span of 30 years starting at their entry in the labor market, we estimate parameters of a human capital investment model by random and fixed effect methods. Individual wage proles are described by their individual-specific level, slope and curvature. This allows a fine decomposition of the variance of (log-)wages at different times of the life-cycle and in the long run. Among salient results, short run time-varying inequalities are shown to be larger that long run inequality by a factor of 20% to 80%. Individual permanent heterogeneity explain between 60 to 90% of the variance of wages. Single dimensional heterogeneity explains well those variances at a point in time but not over the whole period or in the long run. Multidimensional heterogeneity is needed and in particular under the form of a horizon individual effect.
    JEL: C33 D91 I24 J24 J31
    Date: 2019–10
  2. By: Marianne Bertrand; Magne Mogstad (Statistics Norway); Jack Mountjoy
    Abstract: High school vocational education has a controversial history in the United States, largely due to a perceived tradeoff between teaching readily deployable occupational skills versus shunting mostly disadvantaged students away from the educational and career flexibility afforded by general academic courses. We study the effects of a nationwide high school reform in Norway that aimed to move beyond this tradeoff. Reform 94, implemented in one step in the fall of 1994, integrated more general education into the vocational track, offered vocational students a pathway to college through a supplementary semester of academic courses, and sought to improve the quality of the vocational track through greater access to apprenticeships. We identify the impacts of the reform through a difference-indiscontinuity research design, comparing students born just before and after the reform’s birthdate eligibility cutoff to students born around the same cutoff in placebo years. Linking multiple administrative registries covering the entire Norwegian population, we find that the reform substantially increased initial enrollment in the vocational track, but with different subsequent outcomes for different groups. More men complete the vocational track at the expense of academic diplomas, but this has no detectable impact on college-going and leads to reduced criminal activity and higher earnings in adulthood, especially among disadvantaged men. For disadvantaged women, the initial surge in vocational enrollment leads to fewer high school dropouts and more vocational degrees with the college-prep supplement, and hence an increase in the share of college-eligible women; however, this translates into only small and insignificant increases in college completion and adult earnings. We show that men overwhelmingly pursue vocational education in higher-paying skilled trade fields, while women almost exclusively pursue vocational education in lower-paying service-based fields, which helps in interpreting some of these results. Overall, the reform succeeded at improving social mobility, particularly among men, but it somewhat exacerbated the gender gap in adult earnings.
    Keywords: Social mobility; vocational education; Reform 94
    JEL: I24 I28 J24 J62
    Date: 2019–09
  3. By: Jaerim Choi (University of Hawaii at Manoa); Mingzhi Xu (University of Hawaii at Manoa)
    Abstract: We evaluate the direct impact of China trade shock on the Korean labor market following the approach of Acemoglu et al. (2016). Using firm- and industry-level data for the period 1993–2013, our direct estimates imply that the net employment effect of the China shock in the manufacturing sector is the creation of 0.52 million jobs. The positive impact is mostly driven by China’s rising demand for intermediate inputs and capital goods from Korea to support its export expansion to the global economy. The import-competition channel plays a negligible role in manufacturing employment because it creates temporary jobs that merely compensate for the loss in permanent jobs. By contrast, over the same period, the average wage declined by 2.4 percent, and income inequality, measured as the gap between the high- and low-income quantile, grew substantially in manufacturing. In addition, we find that the direct effect of China shock lowers labor market concentration by shifting workers from big firms to small and medium-sized firms.
    Keywords: China Trade Shock, Labor Adjustment, Income Inequality, Temporary Jobs, Labor Market Concentration
    JEL: F14 F16 J23 J31 L60
    Date: 2019–08
  4. By: Fassio, Claudio (Lund University); Geuna, Aldo (University of Torino); Rossi, Federica (University of London)
    Abstract: We investigate the determinants of industry researchers’ interactions with universities in different localities, distinguishing between local and international universities. We analyze the extent to which local and international interactions are enabled by different types of individual personal networks (education, career based), and by their access to different business networks through their employer companies (local vs. domestic or international multinational company networks). We control for selection bias and numerous other individual and firm-level factors identified in the literature as important determinants of interaction with universities. Our findings suggest that industry researchers’ personal networks play a greater role in promoting interactions with local universities (i.e. in the same region, and other regions in the same country) while researcher employment in a multinational is especially important for establishing interaction with universities abroad.
    Keywords: University-industry interaction; international knowledge flows; MNEs; social network; education network; career network
    JEL: F23 I23 L24 O31
    Date: 2019–10–04
  5. By: Yifan Gong; Ralph Stinebrickner; Todd R. Stinebrickner
    Abstract: While a large literature is interested in the relationship between family and labor supply outcomes, little is known about the expectations of these objects at earlier stages. We examine these expectations, taking advantage of unique data from the Berea Panel Study. In addition to characterizing expectations, starting during college, the data details outcomes for ten years after graduation. On average, both male and female college students are well-informed about the future gender gap in labor supply. Gender differences in beliefs about this future gap are primarily explained by gender differences in beliefs about how future family outcomes are related to future labor supply. Methodological contributions come from an approach for addressing measurement error in survey questions and the recognition that expectations data, along with longitudinal data, can potentially help address endogeneity issues arising in the estimation of the causal effect of family on labor supply.
    JEL: J12 J13 J2
    Date: 2019–10
  6. By: Borowiecki, Karol Jan (Department of Business and Economics)
    Abstract: This research illuminates the historical development of creative activity in the United States. Census data is used to identify creative occupations (i.e., artists, musicians, authors, actors) and data on prominent creatives, as listed in a comprehensive biographical compendium. The analysis first sheds light on the socio-economic background of creative people and how it has changed since 1850. The results indicate that the proportion of female creatives is relatively high, time constraints can be a hindrance for taking up a creative occupation, racial inequality is present and tends to change only slowly, and access to financial resources within a family facilitates the uptake of an artistic occupation. Second, the study systematically documents and quantifies the geography of creative clusters in the United States and explains how these have evolved over time and across creative domains. Third, it investigates the importance of outstanding talent in a discipline for the local growth of an artistic cluster.
    Keywords: Creativity; artists; geographic clustering; agglomeration economies; urban history
    JEL: N33 R10 Z11
    Date: 2019–10–07
  7. By: Sean Hundtofte; Arna Olafsson; Michaela Pagel
    Abstract: Standard economic theory says that unsecured, high-interest, short-term debt — such as borrowing via credit cards and bank overdraft facilities — helps individuals smooth consumption in the event of transitory income shocks. This paper shows that — on average — individuals do not use such borrowing to smooth consumption when they experience a typical transitory income shock of unemployment. Instead, individuals smooth their credit card debt and overdrafts by adjusting consumption. We first use detailed longitudinal information on debit and credit card transactions, account balances, and credit lines from a financial aggregator in Iceland to document that unemployment does not induce a borrowing response at the individual level. We then replicate this finding in a representative sample of U.S. credit card holders, instrumenting local changes in employment using a Bartik (1991)-style instrument. The absence of a borrowing response occurs even when credit supply is ample and liquidity constraints, captured by credit limits, do not bind. Standard economic models predict a strictly countercyclical demand for credit; in contrast, the demand for credit appears to be procyclical which may deepen business cycle fluctuations.
    JEL: D14 D90
    Date: 2019–10
  8. By: Carolyn Sloane; Erik Hurst; Dan Black
    Abstract: This paper explores the importance of pre-market human capital specialization in explaining gender differences in labor market outcomes among the highly skilled. Using new data with detailed undergraduate major information for several cohorts of American college graduates, we establish many novel facts. First, we show evidence of a gender convergence in college major choice over the last 40 years. Second, we highlight that women today still choose college majors associated with lower potential wages than men. Third, we report gender differences in the mapping from major to occupation. Even conditional on major, women systematically choose lower potential wage and lower potential hours-worked occupations than men. Fourth, we document a modest gender convergence between the 1950 and 1990 birth cohorts in the mapping of major to occupation. Finally, we show that college major choice has strong predictive power in explaining gender wage gaps independent of occupation choice. Collectively, our results suggest the importance of further understanding gender differences in pre-labor market specialization including college major choice.
    JEL: J16 J24
    Date: 2019–10
  9. By: Daunfeldt, Sven-Olov (Institute of Retail Economics (Handelns Forskningsinstitut)); Gidehag, Anton (Institute of Retail Economics (Handelns Forskningsinstitut)); Rudholm, Niklas (Institute of Retail Economics (Handelns Forskningsinstitut))
    Abstract: One way for policymakers to reduce labor costs and stimulate the recruitment of marginalized groups of labor in a highly unionized economy is to lower payroll taxes. However, the efficiency of this policy instrument has been questioned, and previous evaluations have mostly found small employment effects for such reforms. We investigate the effects of a payroll tax cut in Sweden that decreased firms’ labor costs in relation to the number of young employees that they had employed when the reform was implemented in 2007. We find that most firms received small labor cost savings as a result of the reform, but those that received larger cost savings increased their number of employees significantly more than firms that received no, or minor, labor cost savings. Our findings also suggest that the payroll tax cut increased the total wages paid to incumbent workers, but the wage effect was too small to offset the positive extensive-margin employment effect of the reform. In total, we find that the Swedish payroll tax reform created 18,100 jobs over the period 2006-2008; most of these jobs were within the targeted group of young employees.
    Keywords: Payroll tax reform; labor demand; employment; wages
    JEL: H25 H32 J23 J32 L20
    Date: 2019–10–08
  10. By: Akcigit, Ufuk; Akgunduz, Yusuf Emre; Cilasun, Seyit Mumin; Ozcan Tok, Elif; Yilmaz, Fatih
    Abstract: In this paper, we investigate various trends on competition and business dynamism in the Turkish manufacturing sector. More specifically, using micro level administrative data sets of firm balance sheets, credit registry and social security records, we focus on moments such as firm entry, exit, profitability, worker reallocation, labor share, labor productivity and credit distributions, among several others. Our results indicate that business dynamism in the Turkish manufacturing sector was relatively stable and even improving until 2012 but has been declining since then. We find that market concentration and exit rates have started to rise, yet new business creation, labor share of output and economic activities of young firms have declined. Using a model with endogenous market competition, we show that a adverse shock to cost of R&D investment can explain these empirical trends. We identify increases in financing costs after 2012 of followers as a potential mechanism for our findings in Turkey. We next perform a policy analysis with our model which suggests that providing support (e.g., R&D subsidy) to immediate followers can undo the adverse effects of the negative shock to financing costs and therefore foster competition and faster growth.
    Keywords: business dynamism; Competition; Market concentration; Turkish economy
    JEL: E22 E25 L12 O31 O33 O34
    Date: 2019–09
  11. By: Péter Hudomiet; Michael D. Hurd; Andrew Parker; Susann Rohwedder
    Abstract: This paper presents results based on a survey fielded in the RAND American Life Panel that queried older workers about their current, desired, and expected job characteristics, and about how certain job characteristics would affect their retirement. Having access to flexible work hours was found to be the most consistent predictor of retirement expectations. For example, we estimated that the fraction of individuals working after age 70 would be 32.2% if all workers had flexible hours, while the fraction working would be 17.2% if none had the option of flexible hours. We further found that job stress, physical and cognitive job demands, the option to telecommute, and commuting times were also strong predictors of retirement expectations. By comparing workers’ current job characteristics with those that individuals desire, we show that people would like preretirement jobs to be less cognitively and physically demanding and more sociable compared to their current jobs. We also find that most workers worry about their health and the demands of their jobs when they think about their future work trajectory, but relatively few were worried that their employers would retain them. Having access to part-time jobs, and expected longevity were less important predictors of retirement.
    JEL: J14 J24 J26
    Date: 2019–10
  12. By: Martín Caruso; Sebastian Galiani; Federico Weinschelbaum
    Abstract: Strategies based on growth and inequality reduction require a long-run horizon, and this paper therefore argues that those strategies need to be complemented by poverty alleviation programs. With regards to such programs, informality in Latin America and the Caribbean is a primary obstacle to carry out means testing income-support programs, and countries in the region have therefore mostly relied on proxy means testing mechanisms. This paper studies the relative effectiveness of these and other mechanisms by way of a formal model in which workers choose between job opportunities in the formal and informal sectors. Although the means testing mechanism allows for a more pro-poor design of transfers, it distorts labor decisions made by workers. On the other hand, (exogenous) proxy means testing does not cause distortions, but its pro-poor quality is constrained by the power of observable characteristics to infer income levels. However, since taxation is necessary to fund programs, redistribution becomes less effective, especially for programs other than means testing. The paper concludes by discussing the implications of these results for the design of more efficient targeting programs.
    JEL: I38 J38 O54
    Date: 2019–10
  13. By: Stefanie Thönnes (first name last name) (University of Paderborn); Stefan Pichler (first name last name of second author) (ETH Zürich (workplace of second author))
    Abstract: In this paper we use administrative data from a sickness fund to estimate the relationship between sickness absence and unemployment. Previous research suggests that sickness absence is procyclical. However, we show that this largely depends on disease and employee characteristics. In line with our theoretical analysis employee characteristics affect incentives faced by individuals. In particular, we find large differences depending on whether workers change jobs. While workers who stay with the same employer reduce sickness absence during recessions, while workers switching employers reduce sickness absence during booms. Finally, contagious diseases appear to be the driver of procyclical sickness absence. (abstract of the paper)
    Keywords: Sickness Absence, Unemployment, Infections (keywords)
    JEL: J21 J64 J32 I12
  14. By: Döttling, Robin; Perotti, Enrico C
    Abstract: We study long term effects of the technological shift to intangible capital, whose creation relies on the commitment of skilled human capital in firm production. Humancapital cannot be owned, so firms need less financing. Human capital cannot be credibly committed so firms need to reward it by deferred compensation, diluting future profits. As human capital income is not tradeable, total investable assets fall. The general equilibrium effect is a gradual fall in interest rates and a re-allocation of excess savings into rising valuations of existing assets such as real estate. The concomitant rise in house prices and wage inequality leads to higher household leverage.
    Keywords: excess savings; Human Capital; Intangible Capital; knowledge based technological change; mortgage credit; skill premium
    JEL: D33 E22 G32 J24
    Date: 2019–09
  15. By: Ejermo, Olof (Lund University); Fassio, Claudio (Lund University); Källström, John (Lund University)
    Abstract: Using a highly comprehensive new dataset on Swedish researchers, we investigate the effects of interuniversity mobility on researcher productivity. Our study suggests substantial gains from mobility on scientific output. We find that mobility induces a long-lasting increase in a researcher’s publications by 29% and citations by 50%. Moreover, we analyze the factors that are likely to have an impact on the overall effect of mobility: the interaction of mobility and promotion, the importance of the status of the destination university, as well as the role of the specific disciplinary field of mobile researchers. The empirical analysis addresses selection using inverse probability treatment censoring weights.
    Keywords: Economics of science; mobility; scientific productivity; university
    JEL: I23 J24 O31
    Date: 2019–10–04
  16. By: Burzynski, Michal; de Melo, Jaime; Deuster, Christoph; Docquier, Frédéric
    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 high-latitude 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; Conflicts; inequality; migration; Urbanization
    JEL: E24 F22 J24 J61 Q15 Q54
    Date: 2019–09
  17. By: Hanming Fang; Andrew J. Shephard
    Abstract: Health insurance in the United States for the working age population has traditionally been provided in the form of employer-sponsored health insurance (ESHI). If employers offered ESHI to their employees, they also typically extended coverage to their spouse and dependents. Provisions in the Affordable Care Act (ACA) significantly alter the incentive for firms to offer insurance to the spouses of employees. We evaluate the long-run impact of ACA on firms’ insurance offerings and on household outcomes by developing and estimating an equilibrium job search model in which multiple household members are searching for jobs. The distribution of job offers is determined endogenously, with compensation packages consisting of a wage and menu of insurance offerings (premiums and coverage) that workers select from. Using our estimated model we find that households’ valuation of employer-sponsored spousal health insurance is significantly reduced under ACA, and with an “employee-only” health insurance contract emerging among low productivity firms. We relate these outcomes to the specific provisions in the ACA.
    JEL: G22 I11 I13 J32
    Date: 2019–10
  18. By: Hirsch, Boris; Jahn, Elke (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]); Manning, Alan; Oberfichtner, Michael (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany])
    Abstract: "Using administrative data for West Germany, this paper investigates whether part of the urban wage premium stems from fierce competition in thick labour markets. We first establish that employers possess less wage-setting power in denser markets. Local differences in wage-setting power predict 1.8 - 2.1% higher wages from a 100 log points increase in population density. We further document that the observed urban wage premium from such an increase drops by 1.5 - 1.9pp once conditioning on local search frictions. Our results therefore suggest that a substantial part of the urban wage premium roots in differential imperfections across local labour markets." (Author's abstract, IAB-Doku) ((en))
    Keywords: Marktunvollkommenheit, Stadt, Lohnunterschied, Monopson, friktionelle Arbeitslosigkeit, Bevölkerungsdichte, Einkommenseffekte, regionaler Arbeitsmarkt, Lohnelastizität, Integrierte Erwerbsbiografien, IAB-Betriebs-Historik-Panel, erwerbstätige Männer, Lohnhöhe, Westdeutschland, Bundesrepublik Deutschland
    JEL: R23 J42 J31
  19. By: Cahuc, Pierre; Carcillo, Stéphane; Minea, Andreea; Valfort, Marie-Anne
    Abstract: Based on a correspondence study conducted in France, we show that fictitious low-skilled applicants in the private sector are half as likely to be called back by the employers when they are of North African rather than French origin. By contrast, the origin of the fictitious applicants does not impact their callback rate in the public sector. We run a survey revealing that recruiters display similarly strong negative discriminatory attitudes towards North Africans in both sectors. We set out a model explaining why differences in discrimination at the stage of invitation for interviews can arise when recruiters display identical discriminatory attitudes in both sectors. The estimation of this model shows that discrimination at the invitation stage is a poor predictor of discrimination at the hiring stage. This suggests that many correspondence studies may fail to detect hiring discrimination and its extent.
    Keywords: correspondence studies; discrimination; Public sector
    JEL: J45 J70 J71
    Date: 2019–09
  20. By: Joshua Rauh; Ryan J. Shyu
    Abstract: Drawing on the universe of California income tax filings and the variation imposed by a 2012 tax increase of up to 3 percentage points for high-income households, we present new findings about the effects of personal income taxation on household location choice and pre-tax income. First, over and above baseline rates of taxpayer departure from California, an additional 0.8% of the California residential tax filing base whose 2012 income would have been in the new top tax bracket moved out from full-year residency of California in 2013, mostly to states with zero income tax. Second, to identify the impact of the California tax policy shift on the pre-tax earnings of high-income California residents, we use as a control group high-earning out-of-state taxpayers who persistently file as California non-residents. Using a differences-in-differences strategy paired with propensity score matching, we estimate an intensive margin elasticity of 2013 income with respect to the marginal net-of-tax rate of 2.5 to 3.3. Among top-bracket California taxpayers, outward migration and behavioral responses by stayers together eroded 45.2% of the windfall tax revenues from the reform.
    JEL: H24 H31 H71 H73 J22 J61 R23
    Date: 2019–10
  21. By: Michael Baker; Kirsten Cornelson
    Abstract: We present new evidence of the correlation of height with important socioeconomic outcomes, finding the height profile is significantly non linear at mean height, especially for males. We trace this non linearity back to the adult height profiles of cognitive scores from the teenage and childhood years. Measures of birthweight and parental height have independent, mediating impacts on the adult height profiles of age 7 cognitive scores. However, the majority of the significant variation of male scores at heights below the average remains within birthweight/parental height cells.
    JEL: I3 J24
    Date: 2019–09

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