nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2019‒10‒28
eighteen papers chosen by
Joseph Marchand
University of Alberta

  1. The Pathways to College By Agarwal, Lisha; Brunello, Giorgio; Rocco, Lorenzo
  2. Hysteresis from Employer Subsidies By Emmanuel Saez; Benjamin Schoefer; David Seim
  3. Yours inclusively? Income mobility in Ireland, 10 years of tax record microdata By Seán Kennedy; David Haugh; Brian Stanley
  4. A Welfare Analysis of Occupational Licensing in U.S. States By Morris M. Kleiner; Evan J. Soltas
  5. The Labor Market Effects of Mexican Repatriations: Longitudinal Evidence from the 1930s By Lee, Jongkwan; Peri, Giovanni; Yasenov, Vasil
  6. #EleNão: Economic crisis, the political gender gap, and the election of Bolsonaro By Laura Barros; Manuel Santos Silva
  7. Wages at the Wheel: Were Spinners Part of the High Wage Economy? By Jane Humphries; Benjamin Schneider
  8. Shocks and labour cost adjustment: evidence from a survey of European firms By Thomas Y. Mathä; Stephen Millard; Tairi Room
  9. Wage Discrimination Based on the Country of Birth: Do Tenure and Product Market Competition Matter? By Fays, Valentine; Mahy, Benoît; Rycx, Francois; Volral, Mélanie
  10. How do Older Workers use Nontraditional Jobs? By Alicia H. Munnell; Geoffrey T. Sanzenbacher; Abigail N. Walters
  11. Defining Opportunity versus Necessity Entrepreneurship: Two Components of Business Creation By Robert W. Fairlie; Frank M. Fossen
  12. Valuable experience: How internships affect university graduates’ income By Thomas Bolli; Katherine Caves; Maria Esther Oswald-Egg
  13. The Heterogeneous Effects of Workers' Countries of Birth on Over-Education By Jacobs, Valentine; Mahy, Benoît; Rycx, Francois; Volral, Mélanie
  14. Broadband Internet and the Self-Employment Rate: A Cross-Country Study on the Gig Economy By Piotr Denderski; Florian Sniekers
  15. On Measuring Segregation in a Multigroup Context: Standardized Versus Unstandardized Indices By Coral del Río; Olga Alonso-Villar
  16. Does Employee Happiness Have an Impact on Productivity? By Clément S. Bellet; Jan-Emmanuel De Neve; George Ward
  17. Are Political and Economic Integration Interwinded? By Bernt Bratsberg; Giovanni Facchini; Tommaso Frattini; Anna Cecilia Rosso
  18. Why do the poor vote for low tax rates? A (real-effort task) experiment on income redistribution. By Natalia Jiménez Jiménez; Elena Molis; Ángel Solano García

  1. By: Agarwal, Lisha (University of Padova); Brunello, Giorgio (University of Padova); Rocco, Lorenzo (University of Padova)
    Abstract: We estimate the effect of the high school curriculum (or track) on the returns to college using data from the Italian PLUS (Participation Labour and Unemployment Survey) survey. We find that college graduates with vocational high school are less likely to be employed than graduates with academic high school. When employed, they earn 7.3 percent less per hour but work 3.8 percent more hours per week. They are less likely to fill high ranked occupations and more likely to find their first job quickly after school completion than other graduates. The wage penalty associated to vocational education in high school is larger for females than for males and for those born in the less economically developed Southern regions.
    Keywords: high school curriculum, returns to college, Italy
    JEL: J24
    Date: 2019–10
  2. By: Emmanuel Saez; Benjamin Schoefer; David Seim
    Abstract: This paper uses administrative data to analyze a large and 8-year long employer payroll tax rate cut in Sweden for young workers aged 26 or less. First, we document that while active, the reform raised youth employment among the treated workers. The long-run effects are twice as large as the medium-run effects and likely driven by labor demand (as workers' take-home wages did not respond). Second, we document novel labor-demand-driven "hysteresis" from this policy – i.e. persistent employment effects even after the subsidy no longer applies – along two dimensions. Over the lifecycle, employment effects persist even after workers age out of eligibility. Two years after the repeal, employment remains elevated at the maximal reform level in the formerly subsidized ages. These hysteresis effects triple the direct employment effects of the reform. Discrimination against young workers in job posting fell during the reform and does not bounce back after repeal, potentially explaining our results.
    JEL: H2 J23 J71
    Date: 2019–10
  3. By: Seán Kennedy; David Haugh; Brian Stanley
    Abstract: While policymakers are rightly concerned about evidence of rising income concentration at the top, it is often wrongly assumed that the same rich individuals stay rich. In reality, the membership of this group are in a state of constant flux. This new study, based on more than 20 million tax records over 10 years, examines the highest income earners in Ireland but also who moves up and down the income ladder over time. While income inequality has increased in most OECD countries, in Ireland it has been broadly stable for most of the income distribution. The top 10% of income earners receive 1/3 of total income and pay around 2/3 of all income tax. Unlike other OECD countries, the top 1% has not expanded its gross income share, partly due to long range downward mobility during the recession for those with the highest incomes. Moreover, more progressive taxation has also reduced the top 1 per cent’s share of disposable income. This paper finds that income inequality increases with age and differs dramatically across economic sectors – the difference between the top 1% and the median is greatest in the professional, financial and health sectors. In the professional sector for example, the top 1% threshold is 12 times the median compared to 3 times in the public sector. The share of employment in these sectors has grown contributing to greater income inequality but also higher upward income mobility. Indeed, the analysis in the paper shows upward income mobility is higher for those working in finance, professional and technical occupations and among the young, those living in Dublin, and those changing jobs. Finally, there is also evidence that economic mobility has declined among median income classes over the past 10 years in Ireland – relatively fewer workers are now moving up or down the income ladder than before.
    Keywords: administrative data, growth, income distribution, income mobility, inequality, tax
    JEL: D31 D63 E24 H24
    Date: 2019–10–25
  4. By: Morris M. Kleiner; Evan J. Soltas
    Abstract: We assess the welfare consequences of occupational licensing for workers and consumers. We estimate a model of labor market equilibrium in which licensing restricts labor supply but also affects labor demand via worker quality and selection. On the margin of occupations licensed differently between U.S. states, we find that licensing raises wages and hours but reduces employment. We estimate an average welfare loss of 12 percent of occupational surplus. Workers and consumers respectively bear 70 and 30 percent of the incidence. Higher willingness to pay offsets 80 percent of higher prices for consumers, and higher wages compensate workers for 60 percent of the cost of mandated investment in occupation-specific human capital.
    JEL: H0 J44 J78 K0
    Date: 2019–10
  5. By: Lee, Jongkwan (Korea Development Institute); Peri, Giovanni (University of California, Davis); Yasenov, Vasil (University of California, Berkeley)
    Abstract: We examine the labor market consequences of an extensive campaign repatriating around 400,000 Mexicans in 1929-34. To identify a causal effect, we instrument county level repatriations with the existence of a railway line to Mexico interacted with the size of the Mexican communities in 1910. Using individual linked data we find that Mexican repatriations reduced employment of native incumbent workers and resulted in their occupational downgrading. However, using a repeated cross section of county level data, we find attenuated and non-significant employment effects and amplified wage downgrading. We show that this is due to selective in- and out-migration of natives.
    Keywords: Mexican repatriations, Great Depression, employment, immigration, railway
    JEL: J15 J21 J61 N32
    Date: 2019–10
  6. By: Laura Barros (University of Goettingen / Germany); Manuel Santos Silva (University of Goettingen / Germany)
    Abstract: After more than one decade of sustained economic growth, accompanied by falling poverty and inequality, Brazil has been hit by an economic recession starting in 2014. This paper investigates the consequences of this labor market shock for the victory of far-right Jair Bolsonaro in the 2018 presidential election. Using a shiftshare approach and exploring the differential effects of the recession by gender and race, we show that heterogeneity in exposure to the labor demand shock by the different groups is a key factor explaining the victory of Bolsonaro. Our results show that male-specific labor market shocks increase support for Bolsonaro, while female-specific shocks have the opposite effect. Interestingly, we do not find any effect by race. We hypothesize that, once facing economic insecurities, men feel more compelled to vote for a figure that exacerbates masculine stereotypes, as a way of compensating for the loss in economic status. Women, on the other hand, when confronted with economic shocks and the prospect of Bolsonaro’s election, respond by rejecting his political agenda in favor of a more pro-social platform.
    Keywords: economic shocks, populism, gender, voter participation
    JEL: D72 J16 J23 P16 R23
    Date: 2019–08–15
  7. By: Jane Humphries; Benjamin Schneider
    Abstract: In our earlier paper we used archival and printed primary sources to construct the first long-run series of wages for hand spinning in early modern Britain. Our evidence challenged Robert Allen’s claim that spinners were part of the ‘High Wage Economy’, which he sees as motivating invention, innovation, and mechanisation in the spinning section of the textile industry. Here we respond to Allen’s criticism of our argument, sources and methods, and his presentation of alternative evidence. Allen contends that we have understated both the earnings and associated productivity of hand spinners by focussing on part-time and low-quality workers. His rejoinder is found to rest on an ahistorical account of spinners’ work and similarly weak evidence on wages as did his initial claims. We also present an expanded version of the spinners’ wages dataset, which confirms our original findings: spinners’ wages were low even compared with other women workers and did not follow a trajectory which could explain the invention and spread of the spinning jenny.
    Keywords: hand spinning, women's wages, Industrial Revolution, textiles, Great Divergence, induced innovation, High Wage Economy
    JEL: J24 J31 J42 J46 N13 N33 N63 O14 O31
    Date: 2019–10–24
  8. By: Thomas Y. Mathä; Stephen Millard; Tairi Room
    Abstract: We use firm-level survey data from 25 EU countries to analyse how firms adjust their labour costs (employment, wages and hours) in response to shocks. We develop a theoretical model to understand how firms choose between different ways to adjust their labour costs. The basic intuition is that firms choose the cheapest way to adjust labour costs. Our empirical findings are in line with the theoretical model and show that the pattern of adjustment is not much affected by the type of the shock (demand shock, access-to-finance shock, “availability of supplies†shock), but differs according to the direction of the shock (positive or negative), its size and persistence. In 2010–2013, firms responding to negative shocks were most likely to reduce employment, then hourly wages and then hours worked, regardless of the source of the shock. Results for the 2008–2009 period indicate that the ranking might change during deep recession as the likelihood of wage cuts increases. In response to positive shocks in 2010–2013, firms were more likely to increase wages, followed by increases in employment and then hours worked suggesting an asymmetric reaction to positive and negative shocks. Finally, we show that strict employment protection legislation and high centralisation or coordination of wage bargaining make it less likely that firms reduce wages when facing negative shocks.
    Keywords: shocks, firms, labour cost adjustment, wages, employment, hours, survey
    JEL: D21 D22 D24
    Date: 2019–10–14
  9. By: Fays, Valentine (University of Mons); Mahy, Benoît (University of Mons); Rycx, Francois (Free University of Brussels); Volral, Mélanie (University of Mons)
    Abstract: Using a merged employer-employee panel dataset of 13,000 firms for the 1999-2010 period, this paper aims to quantify wage discrimination against migrant workers based on their countries of birth, with workers' tenure and firm product market competition as moderator variables. To do so, we specify a wage-setting equation à la Bartolucci (2014) that includes a direct measure of worker productivity. We control for a wide range of worker and firm characteristics, as well as time-invariant unobserved heterogeneity in firms and potential endogeneity in the composition of the workforce. Our preferred results estimate that wage discrimination against non-EU15 workers in Belgium is in the order of 6.1%. This figure hides large disparities in wage discrimination against foreign-born migrants depending on their countries of birth, as well as the vanishing of wage discrimination against migrants with tenure. Our results also suggest that wage discrimination disappears in highly competitive product market situations.
    Keywords: product market competition, tenure, workers' countries of birth, wage discrimination, migrants, direct productivity measure
    JEL: J24 J71 D41
    Date: 2019–10
  10. By: Alicia H. Munnell; Geoffrey T. Sanzenbacher; Abigail N. Walters
    Abstract: Working consistently through one’s fifties and early sixties is key to attaining retirement security. However, workers also need access to retirement plans – so they can continue to accumulate resources – and health insurance – so they can avoid withdrawing assets in the event of a health shock. Yet, despite the fact that a large literature focuses on nontraditional jobs that often lack these benefits, it is unclear how older workers use these jobs and what the consequences are. This paper uses the Health and Retirement Study to identify nontraditional jobs and relies on sequence analysis to explore how workers ages 50-62 use them. The results suggest that the majority of nontraditional jobs are used by workers consistently, and that fewer workers use these jobs briefly or as a bridge to retirement. In the end, workers consistently in nontraditional jobs end up with less retirement income and are also worse off by a more holistic measure of well-being – the incidence of depression. Given this situation, expanding benefits to workers in non-traditional jobs could increase their well-being in retirement.
    JEL: J26 J32
    Date: 2019–10
  11. By: Robert W. Fairlie; Frank M. Fossen
    Abstract: A proposed explanation for why business creation is often found to increase in recessions is that there are two components to entrepreneurship – “opportunity” and “necessity” – the latter of which is mostly counter-cyclical. Although there is some agreement on the conceptual distinction between these two factors driving entrepreneurship, there is little consensus in the literature on empirical definitions. The goal of this paper is to propose an operational definition of opportunity versus necessity entrepreneurship based on the entrepreneur’s prior work status (i.e. based on previous unemployment) that is straightforward, based on objective information, and empirically feasible using many large, nationally representative datasets. We then explore the validity of the definitions with theory and empirical evidence. Using datasets from the United States and Germany we find that 80-90 percent of entrepreneurs are opportunity entrepreneurs. Applying our proposed definitions, we document that opportunity entrepreneurship is generally pro-cyclical and necessity entrepreneurship is strongly counter-cyclical both at the national levels and across local economic conditions. We also find that opportunity vs. necessity entrepreneurship is associated with the creation of more growth-oriented businesses. The operational definitions of opportunity and necessity entrepreneurship proposed here may be useful for distinguishing between the two types of entrepreneurship in future research.
    JEL: J23 J64 L26
    Date: 2019–10
  12. By: Thomas Bolli (KOF Swiss Economic Institute, ETH Zurich, Switzerland); Katherine Caves (KOF Swiss Economic Institute, ETH Zurich, Switzerland); Maria Esther Oswald-Egg (KOF Swiss Economic Institute, ETH Zurich, Switzerland)
    Abstract: This paper analyzes whether and how attending an internship during tertiary education affects income. We address endogeneity with an IV approach that exploits information regarding whether the internship was a mandatory component of the study. We further address selection into programs with mandatory internship by using the share of mandatory internships at the closest university, exploiting the low mobility of Swiss students. The results suggest that doing an internship increases income. In contrast to the literature on internships we find that the effect mainly works by increasing human capital rather than through signaling, and mainly works through general rather than firm- or field-specific human capital.
    Keywords: Internship, Income, Human capital, Signaling, Soft skills, Experience
    JEL: I23 J01 J31
    Date: 2019–08
  13. By: Jacobs, Valentine (Free University of Brussels); Mahy, Benoît (University of Mons); Rycx, Francois (Free University of Brussels); Volral, Mélanie (University of Mons)
    Abstract: This paper examines the relationship between immigration and over-education, taking advantage of access to rich matched employer-employee data for the Belgian private sector for the period 1999-2010. Covering more than 1.2 million workers, the data enable the authors to: i) measure over-education with higher precision, ii) examine the heterogeneous effects of detailed countries of birth, and iii) test the role of key moderating factors. More precisely, this paper is not only the first to investigate the effect of citizenship acquisition and workers' tenure on the nexus between immigration and over-education, but also one of the few to study the moderating roles of gender and education for detailed categories of immigrants. With ordered probit estimates, the authors highlight that immigrant workers are much more likely to be over-educated than their native counterparts, especially when the former originate from the Maghreb or Asia. Over-education also appears to be particularly critical among higher-educated immigrants. Gender-based differences in immigrants' penalties, in contrast, are found to be quite modest overall. Results further show that tenure has a strong moderating effect on the likelihood for immigrants born in developing countries to be over-educated and that citizenship acquisition is also associated with substantially improved job matches.
    Keywords: immigrants, over-education, gender, tenure, citizenship acquisition
    JEL: I21 J15 J24 J61 J71
    Date: 2019–10
  14. By: Piotr Denderski; Florian Sniekers
    Abstract: Has the access to broadband Internet changed the composition of employment between payroll and self-employment? We propose a new theory of self-employment based on frictions in the goods and labour market and use variation in broadband access across a panel of OECD countries to test the theory’s empirical predictions. To account for the possible endogeneity of broadband Internet, we instrument broadband adoption by a logistic diffusion model in which the availability of pre-existing technologies predicts broadband penetration. We find that faster Internet prompts more self-employment and lower unemployment. In our theory, this combination implies that the overall improvements in market efficiency stemming from advances in ICT are stronger in the goods than in the labour market.
    Keywords: Self-employment, Internet, Gig economy
    JEL: J23 O33
  15. By: Coral del Río; Olga Alonso-Villar
    Abstract: There has been little discussion in the literature about the consequences of using standardized (versus unstandardized) segregation measures when comparing societies with different demographic compositions. To measure the segregation of a group in a multigroup setting, this paper develops standardized local segregation indices, which show a maximum value of 1 when the group is fully segregated, and links these measures with existing standardized overall segregation measures. Our research not only allows for enhancement of the local segregation approach—offering new measures and evaluating them against basic properties—but also provides a better understanding of existing standardized overall measures. To illustrate its value, this paper offers estimates of the occupational segregation of white women in the largest U.S. metropolitan areas using standardized and unstandardized segregation measures. This permits us to identify metropolitan areas that would have gone unnoticed if only one of these two approaches had been employed.
    Keywords: Multigroup segregation; Standardized segregation indices; Local segregation curves; Local segregation indices
    JEL: D63 J15 J16 J71
    Date: 2019–09
  16. By: Clément S. Bellet; Jan-Emmanuel De Neve; George Ward
    Abstract: This article provides quasi-experimental evidence on the relationship between employee happiness and productivity in the field. We study the universe of call center sales workers at British Telecom (BT), one of the United Kingdom's largest private employers. We measure their happiness over a 6-month period using a novel weekly survey instrument, and link these reports with highly detailed administrative data on workplace behaviors and various measures of employee performance. We show that workers make around 13% more sales in weeks where they report being happy compared to weeks when they are unhappy. Exploiting exogenous variation in employee happiness arising from weather shocks local to each of the 11 call centers, we document a strong causal effect of happiness on labor productivity. These effects are driven by workers making more calls per hour, adhering more closely to their workflow schedule, and converting more calls into sales when they are happier. No effects are found in our setting of happiness on various measures of high-frequency labor supply such as attendance and break taking.
    Keywords: happiness, productivity
    JEL: D03 J24 M5 I31
    Date: 2019–10
  17. By: Bernt Bratsberg (Ragnar Frisch Centre for Economic Research and University of Oslo); Giovanni Facchini (University of Nottingham, CEPR, CES-Ifo, CReAM, GEP and IZA); Tommaso Frattini (Universita’ degli Studi di Milano, CEPR, CReAM, IZA and LdA); Anna Cecilia Rosso (Universita’ degli Studi di Milano, LdA and CEP)
    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: Immigration; Local Elections; Candidacy Decision; Labour Markets
    JEL: F22 J45 P16
  18. By: Natalia Jiménez Jiménez (Departamento de Economía, Métodos Cuantitativos e Historia Económica, University Pablo de Olavide.); Elena Molis (Department of Economic Theory and Economic History, University of Granada.); Ángel Solano García (Department of Economic Theory and Economic History, University of Granada.)
    Abstract: The main purpose of this paper is to shed some light on the voting behavior of low-income voters over income redistribution. To this end, we test a model based on Meltzer and Richard’s (1981) framework through a lab experiment in which individuals vote over two exogenous tax rates and their pre-tax income is determined according to their performance in a real-effort task. We classify individuals into highskilled and low-skilled participants according to their performance in a tournament at the beginning of the experiment. We find that a large proportion of low-skilled workers vote for the lowest tax rate (the one that gives them the lowest payoff), especially when the alternative tax rate is very high. However, this proportion is significantly reduced in treatments in which the subjects are given extra information about how the tax operates in redistributing income. This result suggests that the lack of information about the role of taxes in income redistribution may be an important factor in explaining the counter-intuitive voting behavior of low-income voters over income redistribution. We also find that both the prospect of upward mobility and the belief in the negative effect of taxes on productivity make low-income voters support low tax rates, especially when the alternative tax rate is very high.
    Keywords: income inequality, income redistribution, voting, taxation, real-effort task.
    JEL: C92 D72 H30 J41
    Date: 2019–10–11

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