nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2019‒10‒21
twenty-one papers chosen by
Joseph Marchand
University of Alberta

  1. Locational Choice and Spatial Wage Inequality By Schran, Felix
  2. Occupation Growth, Skill Prices, and Wage Inequality By Böhm, Michael Johannes; Gaudecker, Hans-Martin von; Schran, Felix
  3. Imperfect competition, compensating differentials and rent sharing in the U.S. labor market By Thibaut Lamadon; Magne Mogstad; Bradley Setzler
  4. Paying Gig Workers – Evidence from a Field Experiment By Butschek, Sebastian; González Amor, Roberto; Kampkötter, Patrick; Sliwka, Dirk
  5. The Decline of Overtime Working in Britain By Bell, David N.F.; Hart, Robert A.
  6. Local Labor Demand and Participation in Social Insurance Programs By Andersen, Asbjørn Goul; Markussen, Simen; Røed, Knut
  7. Changing Returns to Occupational Skill and Women's Wages By Schran, Felix
  8. Are Women Doing It For Themselves? Gender Segregation and the Gender Wage Gap By Theodoropoulos, Nikolaos; Forth, John; Bryson, Alex
  9. Measuring productivity dispersion: a parametric approach using the Lévy alpha-stable distribution By Yang, Jangho; Heinrich, Torsten; Winkler, Julian; Lafond, François; Koutroumpis, Pantelis; Farmer, J. Doyne
  10. Trends in economic inactivity across the OECD: The importance of the local dimension and a spotlight on the United Kingdom By Jonathan Barr; Elena Magrini; Michela Meghnagi
  11. Task Discretion, Labor Market Frictions and Entrepreneurship By Canidio, Andrea; Legros, Patrick
  12. Macroeconomic Frameworks By Alan J. Auerbach; Yuriy Gorodnichenko; Daniel Murphy
  13. Flexible Wages or Flexible Workers? By Anja Deelen
  14. The Affordable Care Act and the Market for Higher Education By Rajashri Chakrabarti; Maxim Pinkovskiy
  15. Can Female Doctors Cure the Gender STEMM Gap? Evidence from Randomly Assigned General Practitioners By Riise, Julie; Willage, Barton; Willen, Alexander
  16. Under-employment: A crisis hangover, or something more? By Duncan MacDonald
  17. Taxation and the Superrich By Scheuer, Florian; Slemrod, Joel
  18. What Determines Women's Labor Supply? The Role of Home Productivity and Social Norms By Afridi, Farzana; Bishnu, Monisankar; Mahajan, Kanika
  19. Long-Term Consequences of Growing up in a Recession on Risk Preferences By Hitoshi Shigeoka
  20. Intertemporal substitution for consumption and leisure: empirical evidence for Spain By Antonio Cutanda; Juan A. Sanchis Llopis
  21. Are political and economic integration intertwined? By Bratsberg, Bernt; Facchini, Giovanni; Frattini, Tommaso; Rosso, Anna

  1. By: Schran, Felix (University of Bonn and IZA)
    Abstract: During the last few decades, aggregate wage growth has been very unevenly distributed across space in Germany. While wages in Southern German local labor markets rose by up to 28 log points, they increased only modestly or even declined in the north. Similar results apply to employment changes. Overall, this has led to a strong positive correlation between local wage and employment growth. What is driving these differential trends across space? This paper examines to what extent regions with growing employment are increasingly paying workers higher wage premia or, in contrast, to what extent the quality of workers in growing regions has risen. To decouple the demand for skill and supply of skill from each other, I estimate how regional wage premia have changed over time using administrative panel data that allow me to hold constant changes in unobserved worker quality. I find that wage premia in regions with expanding employment did not rise more than in regions with declining employment. Instead, the quality of workers in growing regions went up. I investigate the importance of various possible observables for this relationship including local amenity differences, changes in occupation and industry structure as well as variation in education rates. Last, I explore the impact of changing wage premia and changing worker quality on the recent rise in the density wage premium.
    Keywords: location choice, density premium, Roy model
    JEL: R11 R12 J21 J24 J31
    Date: 2019–09
  2. By: Böhm, Michael Johannes (University of Bonn); Gaudecker, Hans-Martin von (University of Bonn); Schran, Felix (University of Bonn and IZA)
    Abstract: This paper studies the relationship between changes in occupational employment, occupational wages, and rising overall wage inequality. Using long-running administrative panel data with detailed occupation codes, we first document that in all occupations, entrants and leavers earn lower wages than stayers. This empirical fact suggests substantial skill selection effects that are negative for growing occupations and positive for shrinking ones. We develop and estimate a model for prices paid per unit of skill in occupations, which incorporates occupation-specific skill accumulation over the career and endogenous switching across many occupations. Our results shed light on two important puzzles in prior literature. First, consistent with leading explanations for occupational employment changes, price and employment growth are positively related. Strong counteracting skill changes along the lines of our new empirical fact explain why occupational wages are unrelated to employment growth. Second, skill prices establish a long-suspected quantitative connection between occupational changes and the surge in wage inequality.
    Keywords: skill prices, selection effects, multidimensional skill accumulation, occupational employment and wages, administrative panel data, wage inequality
    JEL: J21 J23 J24 J31
    Date: 2019–09
  3. By: Thibaut Lamadon; Magne Mogstad (Statistics Norway); Bradley Setzler
    Abstract: The primary goal of our paper is to quantify the importance of imperfect competition in the U.S. labor market by estimating the size of rents earned by American firms and workers from ongoing employment relationships. To this end, we construct a matched employeremployee panel data set by combining the universe of U.S. business and worker tax records for the period 2001-2015. Using this panel data, we describe several important features of the U.S. labor market, including the size of firm-specific wage premiums, the sorting of workers to firms, the production complementarities between high ability workers and productive firms, and the pass-through of firm and market shocks to workers’ wages. Guided by these empirical results, we develop, identify and estimate an equilibrium model of the labor market with two-sided heterogeneity where workers view firms as imperfect substitutes because of heterogeneous preferences over non-wage job characteristics. The model allows us to draw inference about imperfect competition, compensating differentials and rent sharing. We also use the model to quantify the relevance of non-wage job characteristics and imperfect competition for inequality and tax policy, to assess the economic determinants of worker sorting, and to offer a unifying explanation of key empirical features of the U.S. labor market.
    Keywords: Compensating differentials; firm effects; inequality; imperfect competition; monopsony; rent sharing; wage setting; worker sorting
    JEL: J20 J30 J42
    Date: 2019–10
  4. By: Butschek, Sebastian (University of Cologne); González Amor, Roberto (Zalon by Zalando); Kampkötter, Patrick (University of Tübingen); Sliwka, Dirk (University of Cologne)
    Abstract: We study the performance effects of payment schemes for freelancers offering services on an online platform in an RCT. Under the initial scheme, the firm pays workers a pure sales commission. The intervention reduces the commission rate and adds a fixed payment per processed order to insure workers against earnings risk. Our experiment tests predictions from a formal model on labor supply and performance for individuals with different degrees of risk aversion and intrinsic motivation for the task. The treatment did not affect labor supply and even though the commission rate was reduced by 50% we find no sizeable loss in sales per order. However, there is strong evidence for heterogeneous treatment effects. The treatment reduced performance for less intrinsically motivated workers. For more intrinsically motivated workers, however, we observe the opposite pattern as performance increased even though commission rates were reduced.
    Keywords: incentives, risk aversion, intrinsic motivation, sales compensation, multitasking, field experiment, gig economy, on demand economy, platform economy
    JEL: D23 J33 M52
    Date: 2019–10
  5. By: Bell, David N.F. (University of Stirling); Hart, Robert A. (University of Stirling)
    Abstract: The share of overtime hours within total hours worked in Britain has declined from 4.8% to 2.9% between 1999 and 2018. This is equivalent to 321 thousand full-time jobs. We investigate this decline focussing on full-time and part-time males and females together with overtime pay effects that include the implications for the gender pay gap. We test for economic, structural and cyclical influences via a two-part regression model that allows us to differentiate between the incidence of overtime working and the average weekly hours of overtime workers. This investigation features collective bargaining coverage, job mobility, the minimum wage, industrial composition and the public/private sector dichotomy. The analysis covers the whole economy embracing nineteen 1-digit industries as well as a separate insight into the manufacturing industry where we feature vehicle manufacture.
    Keywords: overtime hours, overtime pay, two-part regression model
    JEL: J21 J22 J31 J52
    Date: 2019–09
  6. By: Andersen, Asbjørn Goul (Ragnar Frisch Centre for Economic Research); Markussen, Simen (Ragnar Frisch Centre for Economic Research); Røed, Knut (Ragnar Frisch Centre for Economic Research)
    Abstract: Based on administrative data from Norway, we explore the "grey area" between the roles of unemployment- and temporary disability-insurances by examining how participation in these two program types is affected by local labor demand conditions. Local labor demand is identified by means of a shift-share instrumental variables strategy, where initial local industry-composition is interacted with sub-sequent national industry-specific employment fluctuations. Our results indicate that local labor demand has a large negative effect on the propensity to claim disability insurance, which, for some groups, is remarkably similar to its effect on the propensity to claim unemployment insurance. Based on this finding, we question whether it is meaningful to maintain a sharp distinction between these two programs.
    Keywords: unemployment, disability insurance, program substitution, shift-share analysis
    JEL: J23 J58 J65 H55
    Date: 2019–10
  7. By: Schran, Felix (University of Bonn and IZA)
    Abstract: This paper investigates to what extent changes in the returns to occupational skill and declining occupational segregation have reduced wage inequality between men and women. As a first pass, I find that roughly 65% of the decline in the gender wage gap between 1985 and 2010 can be explained by a reduction in occupational segregation between the genders. The remaining 35% are explained by shifts in occupational wages which increased within occupations important for female employment, and declined in many occupations important for male employment such as producing occupations. Motivated by the central of Böhm et al. (2019) that average wages do not move as much as skill prices, I reestimate the part of the declining wage gap attributed to changes in (selection corrected) skill prices. The impact of movements in skill prices on the reduction in gender wage inequality was roughly 13 percentage points larger than the impact of changes in average wages alone. Similar findings hold when decomposing the rise in the proportion of women at higher percentiles of the wage distribution and vice versa for lower percentiles. This underscores the importance of accounting for selection effects in decompositions.
    Keywords: gender wage gap, inequality, Roy model, returns to skill, occupational choice
    JEL: J16 J31 J24
    Date: 2019–09
  8. By: Theodoropoulos, Nikolaos (University of Cyprus); Forth, John (Cass Business School); Bryson, Alex (University College London)
    Abstract: Using matched employer-employee data from the 2004 and 2011 Workplace Employment Relations Surveys (WERS) for Britain we find a raw gender wage gap (GWG) in hourly wages of around 0.18-0.21 log points. The regression-adjusted gap is around half that. However, the GWG declines substantially with the increasing share of female managers in the workplace. The gap closes because women's wages rise with the share female managers in the workplace while men's wages fall. Panel and instrumental variables estimates suggest the share of female managers in the workplace has a causal impact in reducing the GWG. The role of female managers in closing the GWG is more pronounced when employees are paid for performance, consistent with the proposition that women are more likely to be paid equitably when managers have discretion in the way they reward performance and those managers are women. These findings suggest a stronger presence of women in managerial positions can help tackle the GWG.
    Keywords: gender wage gap, female managers, performance pay
    JEL: J16 J31 M52 M54
    Date: 2019–09
  9. By: Yang, Jangho; Heinrich, Torsten; Winkler, Julian; Lafond, François; Koutroumpis, Pantelis; Farmer, J. Doyne
    Abstract: Productivity levels and growth are extremely heterogeneous among firms. A vast literature has developed to explain the origins of productivity shocks, their dispersion, evolution and their relation- ship to the business cycle. We examine in detail the distribution of labor productivity levels and growth, and observe that they exhibit heavy tails. We propose to model these distributions using the four parameter Lévy stable distribution, a natural candidate deriving from the generalised Central Limit Theorem. We show that it is a better fit than several standard alternatives, and is remarkably consistent over time, countries and sectors. In all samples considered, the tail parameter is such that the theoretical variance of the distribution is infinite, so that the sample standard deviation increases with sample size. We find a consistent positive skewness, a markedly different behaviour between the left and right tails, and a positive relationship between productivity and size. The distributional approach allows us to test different measures of dispersion and find that productivity dispersion has slightly decreased over the past decade.
    Keywords: productivity, dispersion, distribution, heavy-tail, Lévy stable distribution
    JEL: D2 J24 O3 R12
    Date: 2019–09–30
  10. By: Jonathan Barr; Elena Magrini; Michela Meghnagi
    Abstract: As unemployment rates have reached historical lows across many OECD countries, it is important to focus on the economically inactive – that is people who are neither in a job nor seeking work. This paper reviews recent trends in economic inactivity across the OECD, focusing on places and people. The paper demonstrates the importance of moving beyond national averages to understand which regions and cities have higher levels of economic inactivity. It then looks at regional economic inactivity trends across cities in the United Kingdom (UK).
    Keywords: disadvantaged groups, labour market participation, regional disparities
    JEL: J24 J21 J62 I26
    Date: 2019–10–17
  11. By: Canidio, Andrea; Legros, Patrick
    Abstract: Each job can be performed in several ways, which we call tasks An agent's performance at a task is informative about his productivity at different tasks. But tasks are not contractible: choosing tasks is the prerogative of management within firms, and of the agent if he is an entrepreneur. Firms will invest in the discovery of their workers' productivity at different tasks only if they cannot easily move to other firms. Therefore, labor-market frictions determine whether learning an agent's talent occur within firms, or whether an agent may become an entrepreneur to acquire task discretion.
    Keywords: entrepreneurial failures; entrepreneurship; labor-market frictions; learning; organizational choice; Task discretion
    JEL: D83 J24 J62 J63 L26 M13
    Date: 2019–08
  12. By: Alan J. Auerbach; Yuriy Gorodnichenko; Daniel Murphy
    Abstract: We link detailed data on defense spending, wages, hours, employment, establishments, and GDP across U.S. cities to study the effects of fiscal stimulus. Our small-open-economy empirical setting permits us to estimate key macroeconomic outcomes and elasticities, including the responses of the labor share and the labor wedge to demand shocks and the elasticity of output with respect to labor inputs. We also decompose changes in work hours into different margins (hours per worker, the employment rate, and the labor force) and examine effects on local rental prices, wages, and firm entry. We compare our findings with the predictions of macroeconomic models and propose modifications to existing theory that can accommodate our findings.
    JEL: E32 E62 H5
    Date: 2019–10
  13. By: Anja Deelen (CPB Netherlands Bureau for Economic Policy Analysis)
    Abstract: This paper investigates how fi rms adjust wages and employment in periods of adverse economic circumstances, using extensive, administrative linked employer/employee panel data for the Netherlands. Changes in the contractual wage bills of fi rms are decomposed into wages and job flows, distinguishing stayers and workers entering and exiting the fi rm. This paper investigates how firms adjust wages and employment in periods of adverse economic circumstances, using extensive, administrative linked employer/employee panel data for the Netherlands. Changes in the contractual wage bills of firms are decomposed into wages and job flows, distinguishing stayers and workers entering and exiting the firm. Employment reduction is found to be the major channel for wage-bill contraction by firms, indicating downward wage rigidity. A negative relationship is established between fi rms' degree of downward wage rigidity and their employment growth, suggesting that job losses in response to adverse shocks would be signi cantly lower if wages were more downwardly flexible.
    JEL: J30 J31 J41 J62
    Date: 2019–08
  14. By: Rajashri Chakrabarti; Maxim Pinkovskiy
    Abstract: Through changing the connection between insurance and employment, the Affordable Care Act (ACA) has affected people’s incentives to obtain education. We employ a triple-difference strategy comparing counties with different levels of uninsurance pre-ACA and in states with different Medicaid expansion decisions across time to investigate changes in enrollment in different types of higher education institutions. We find that enrollment in less than 2-year for-profit colleges increased more between high- and low-uninsurance counties in states that expanded Medicaid relative to states that didn’t, with nearly all the increase taking place after the 2012 Supreme Court decision that gave states the right to choose not to expand Medicaid. Differential enrollment is at for all other comparable college types. We find this differential increase in less than 2-year for-profit college enrollment to be remarkably general across various demographic groups, although the effect is statistically and economically more significant for Hispanics. Studying effects on certificates awarded, we find strong evidence that the increase in enrollment led to an increase in certificates awarded, most prominently in vocational fields. This pattern is consistent with the notion that by relaxing job-lock, the ACA encouraged individuals to seek training in vocational fields that would facilitate employment in low-insurance industries. Our results are robust to controlling for confounders such as the differential impact of the Great Recession, changes in state appropriations for higher education, differences in age composition across counties, thus ruling out the role of the young adult provision of the ACA in contributing to our results, and survive a plethora of sensitivity checks.
    Keywords: Affordable Care Act, postsecondary education, for-profits schools, health insurance, medicaid
    JEL: H40 I10 I20
    Date: 2019
  15. By: Riise, Julie (Department of Economics, University of Bergen); Willage, Barton (Department of Economics, Louisiana State University); Willen, Alexander (Dept. of Economics, Norwegian School of Economics and Business Administration)
    Abstract: We use random assignment of general practitioners (GPs) to provide the first evidence on the effects of female role models in childhood on the long-run educational outcomes of girls. We find that girls who are exposed to female GPs in childhood are significantly more likely to sort into traditionally male-dominated education programs in high school, most notably STEMM. These effects persist as females enter college and select majors. We also find strong positive effects on educational performance throughout their academic careers, suggesting that female role models in childhood improve education matches of girls. The effects we identify are significantly larger for high-ability girls with low educated parents, suggesting that female role models may improve intergenerational mobility and narrow the gifted gap for disadvantaged girls.
    Keywords: Role Models; STEMM; Gender Gap
    JEL: I20 I24 J24
    Date: 2019–10–09
  16. By: Duncan MacDonald (OECD)
    Abstract: This paper examines how the increase in under-employment since the financial crisis stems from both cyclical and structural factors, notably the gradual shift of employment toward more demand-driven service sectors. The increase in under-employment has disproportionately affected young, female and low-skilled workers, meaning that they face lower wage growth, particularly at the bottom of the income distribution.
    JEL: E32 J22 J23
    Date: 2019–10–16
  17. By: Scheuer, Florian; Slemrod, Joel
    Abstract: This paper addresses the modern optimal tax progressivity literature, which clarifies the key role of the behavioral response to taxation and accounts for the incomes of the superrich being qualitatively different than others. Some may be "superstars," for whom small differences in talent are magnified into much larger earnings differences, while others may work in winner-take-all markets, such that their effort to climb the ladder of success reduces the returns to others. We stress that pivotal tax-rate elasticities are not structural parameters, and will be smaller the broader and less plastic is the tax base and the more effective is the enforcement of tax evasion. For this reason, normative analysis of tax rates should be accompanied by attention to the tax base, with special attention to capital gains, which comprise a large fraction of the taxable income of the superrich.
    Keywords: Plasticity of Taxable Income; Superrich; Superstars; Tax Systems; Wealth Taxes; Winner-Take-All Markets
    JEL: E6 H2 I3 J3 J6
    Date: 2019–08
  18. By: Afridi, Farzana (Indian Statistical Institute); Bishnu, Monisankar (Indian Statistical Institute); Mahajan, Kanika (Ashoka University)
    Abstract: We highlight the role of home productivity in explaining the gender gap in labor force participation (LFP), and the non-monotonic relationship of women's LFP with their education in developing countries (India) in contrast to the developed economies (United Kingdom, U.K.). We construct a model of couples' time allocation decisions allowing for both market and home productivity to improve with own education. Our theoretical predictions match the data for India at low levels of women's education but over-predict labor supply at higher levels, unlike the U.K.. Incorporating constraints imposed by social norms regarding the gendered division of labor shows that norms can act as a binding constraint, producing much smaller increases in women's labor supply to market work at higher education levels in transition economies. Our analysis suggests that home productivity, along with social norms regarding couples' time allocation, can be critical determinants of women's labor supply in developing countries.
    Keywords: women's labor supply, social norms, home production, education, India, U.K.
    JEL: E24 J22 J16
    Date: 2019–10
  19. By: Hitoshi Shigeoka
    Abstract: Risk preferences play a fundamental role in individuals’ economic decision-making. We examine whether the historical macroeconomic environment shapes individuals’ willingness to take risks. Using nationally representative samples from Japan and exploiting regional variation in economic conditions, we find that men who experienced severe economic conditions in youth are more risk averse in adulthood and the effect is long-lasting. In addition, those men are less likely to be self-employed and they have longer tenure, which are consistent with elevated risk aversion. This study highlights the importance of experience at a critical period of life on the formation of risk preferences.
    JEL: D81 J24 Z13
    Date: 2019–10
  20. By: Antonio Cutanda (Department of Economic Analysis, University of Valencia, Avda. dels Tarongers s/n, 46022 Valencia (Spain).); Juan A. Sanchis Llopis (Department of Economic Structure, University of Valencia, Avda. dels Tarongers s/n, 46022 Valencia (Spain).)
    Abstract: In this paper we test the three first-order conditions of an intertemporal optimization model for a representative individual who chooses simultaneously for her level of consumption and leisure, assuming a separable utility function. We estimate these first order conditions separately and jointly using a Spanish pseudo-panel data set built by combining the Family Expenditure Survey and the Labour Survey for Spain over the period 1987-1997. Our results confirm previous empirical evidence as regards the elasticity of intertemporal substitution for consumption, that we estimate around 0.4/0.5, and provide an estimate for the leisure intertemporal elasticity around 0.2/0.3. Finally, we provide further evidence controlling for human capital. This allows checking that the model ignoring human capital produces biased estimates for the elasticity of intertemporal substitution for leisure.
    Keywords: Euler equation, Instrumental variables, Intertemporal Substitution, Panel data
    JEL: C33 C36 E21 E24 J22
    Date: 2019–10
  21. By: Bratsberg, Bernt; Facchini, Giovanni; Frattini, Tommaso; Rosso, Anna
    Abstract: Economic incentives play a key role in the decision to run for office, 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 office 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: Candidacy Decision; Immigration; labour markets; Local Elections
    JEL: F22 J45 P16
    Date: 2019–10

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