nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2019‒11‒11
28 papers chosen by
Joseph Marchand
University of Alberta

  1. Cyclical Labor Income Risk By Nakajima, Makoto; Smirnyagin, Vladimir
  2. Effort: The Unrecognized Contributor to US Income Inequality By J. Rodrigo Fuentes; Edward E. Leamer
  3. Hours of work polarisation? By Da Silva, António Dias; Petroulakis, Filippos; Laws, Athene
  4. Skilled Tradable Services: The Transformation of U.S. High-Skill Labor Markets By Eckert, Fabian; Ganapati, Sharat; Walsh, Conor
  5. The Role of Labor Demand in the Labor Market Effects of a Pension Reform By Johannes Geyer; Peter Haan; Svenja Lorenz; Mona Pfister; Thomas Zwick
  6. Child Penalties and Financial Incentives: Exploiting Variation along the Wage distribution By Pierre PORA; Lionel WILNER
  7. Monopsony in Spatial Equilibrium By Kahn, Matthew E.; Tracy, Joseph
  8. Productivity and Sectoral Allocation: The Labor Market of School Principals By Muñoz, P; Prem, M
  9. Employment Fluctuations, Job Polarization and Non-Standard Work: Evidence from France and the US By Olivier Charlot; Idriss Fontaine; Thepthida Sopraseuth
  10. Labor Market Trends and the Changing Value of Time By Boerma, Job; Karabarbounis, Loukas
  11. The Distributional Impact of Labour Market Reforms: A Model-Based Assessment By Werner Roeger; Janos Varga; Jan in't Veld; Lukas Vogel
  12. Poverty alleviation strategies under informality: Evidence for Latin America By Martín Caruso Bloeck; Sebastian Galiani; Federico Weinschelbaum
  13. Slavery, corruption, and institutions By Rauscher, Michael; Willert, Bianca
  14. Risk Aversion and the Teaching Profession: An Analysis Including Different Forms of Risk Aversion, Different Control Groups, Selection and Socialization Effects By Adam Ayaita; Kathleen Stürmer
  15. Productivity and Wages: Common Factors and Idiosyncrasies Across Countries and Industries By Edward P. Lazear
  16. Working Time Accounts and Turnover By Andrey Launov
  17. The Dynamics of the Racial Wealth Gap By Aliprantis, Dionissi; Carroll, Daniel R.; Young, Eric R.
  18. Anatomy of the Italian occupational structure: concentrated power and distributed knowledge By Cetrulo, A.; Guarascio, D.; Virgillito, M. E.
  19. Employment Effects of Income Tax Reforms: Lessons from Slovakia By Michal Horvath; Zuzana Siebertova
  20. Unemployment, Partial Insurance, and the Multiplier Effects of Government Spending By Givens, Gregory
  21. Policy drivers of human capital in the OECD’s quantification of structural reforms By Balázs Égert; Jarmila Botev; David Turner
  22. Action economics? working with citizen groups in Revelstoke, BC to evaluate the impact of a living wage By Janmaat, Johannus; Harris, Lindsay; Carlaw, Kenneth; Evans, Mike
  23. Banker Compensation, Relative Performance, and Bank Risk By Prescott, Edward Simpson; Jarque, Arantxa
  24. What Makes an Employer? By Marco Caliendo; Frank M. Fossen; Alexander S. Kritikos
  25. Worker-Plant Matching and Ownership Change By Ragnhild Balsvik; Stefanie Haller
  26. Social norms and gender discrimination in the labor market: An agent-based exercise By Quintero Rojas, Coralia Azucena; Viianto, Lari Artur
  27. Educational outcomes: A literature review of policy drivers from a macroeconomic perspective By Zuzana Smidova
  28. Is regulatory compliance by employers possible without enforcement? Evidence from the Swedish labor market. By Cronert, Axel

  1. By: Nakajima, Makoto (Federal Reserve Bank of Philadelphia); Smirnyagin, Vladimir (University of Minnesota)
    Abstract: We investigate cyclicality of variance and skewness of household labor income risk using PSID data. There are five main findings. First, we find that head’s labor income exhibits countercyclical variance and procyclical skewness. Second, the cyclicality of hourly wages is muted, suggesting that head’s labor income risk is mainly coming from the volatility of hours. Third, younger households face stronger cyclicality of income volatility than older ones, although the level of volatility is lower for the younger ones. Fourth, while a second earner helps lower the level of skewness, it does not mitigate the volatility of household labor income risk. Meanwhile, government taxes and transfers are found to mitigate the level and cyclicality of labor income risk volatility. Finally, among heads with strong labor market attachment, the cyclicality of labor income volatility becomes weaker, while the cyclicality of skewness remains.
    Keywords: Labor income risk; income inequality; business cycles
    JEL: D31 E24 E32 H31 J31
    Date: 2019–09–16
  2. By: J. Rodrigo Fuentes; Edward E. Leamer
    Abstract: This paper provides theory and evidence that worker effort has played an important role in the increase in income inequality in the United States between 1980 and 2016. The theory suggests that a worker needs to exert effort enough to pay the rental value of the physical and human capital, thus high effort and high pay for jobs operating expensive capital. With that as a foundation, we use data from the ACS surveys in 1980 and 2016 to estimate Mincer equations for six different education levels that explain wage incomes as a function of weekly hours worked and other worker features. One finding is a decline in annual income for high school graduates for all hours worked per week. We argue that the sharp decline in manufacturing jobs forces down wages of those with high school degrees who have precious few high-effort opportunities outside of manufacturing. Another finding is that incomes rose only for those with advanced degrees and with weekly hours in excess of 40. We attribute this to the natural talent needed to make a computer deliver exceptional value and to the relative ease with which long hours can be chosen when working over the Internet.
    JEL: J3 J31
    Date: 2019–11
  3. By: Da Silva, António Dias; Petroulakis, Filippos; Laws, Athene
    Abstract: We investigate the relationship between hours per worker and employment polarisation. Our core question is whether hours per worker follow the same polarisation patterns as previously observed for employment, measured by either heads or total hours. Using the occupational task index measures of Acemoglu and Autor (2011), we find large relative declines in hours per worker in routine manual jobs – precisely the occupations most negatively affected by employment polarisation from routine-biased technical change. We also find a lower relative decline in hours per worker for non-routine cognitive analytical jobs, which are growing through polarisation. At the same time, hours per worker declined significantly more than the trend for non-routine manual physical occupations. Instead of a polarisation pattern, we find that hours per worker have been declining more in manual jobs (routine manual and non-routine manual physical). These patterns are observed across age, gender and education groups, with few exceptions and changes in intensity. The decline in hours per worker occurred mostly within sectors. Using a wage ranking of occupations instead of occupational task indices, the decline in hours per worker is monotonically related to wages. The results are specific to the European countries and the same patterns are not found using data for the United States. JEL Classification: J23, J24, O33
    Keywords: hours per worker, job polarisation, routine-biased technical change
    Date: 2019–10
  4. By: Eckert, Fabian (Federal Reserve Bank of Minneapolis); Ganapati, Sharat (Georgetown University); Walsh, Conor (Yale University)
    Abstract: We study a group of service industries that are skill-intensive, widely traded, and have recently seen explosive wage growth. Between 1980 and 2015, these “Skilled Tradable Services” accounted for a sharply increasing share of employment among the highest earning Americans. Unlike any other sector, their wage growth was strongly biased toward the densest local labor markets and the highest paying firms. These services alone explain 30% of the increase in inequality between the 50th and 90th percentiles of the wage distribution. We offer an explanation for these patterns that highlights the complementarity between the non-rivalry of knowledge and changes in communication costs.
    Keywords: Wage inequality; Skill biased; Technological change; Urban growth; Trade and geography
    JEL: J31 O33 R11 R12
    Date: 2019–09–13
  5. By: Johannes Geyer; Peter Haan; Svenja Lorenz; Mona Pfister; Thomas Zwick
    Abstract: This paper shows that labor demand plays an important role in the labor market reactions of older women affected by pension deductions for early retirement. Based on a large representative sample of the German workforce (SIAB), we calculate the consequences of individual financial incentive changes caused by a pension reform in Germany on employment, unemployment, and partial retirement. The reform reduces financial incentives for early retirement. In line with labor demand theory, we show that employers with a high share of older worker inflow compared with the share of younger worker inflow, employers in sectors with a high share of collective bargaining agreements, and employers in sectors with few investments in research and development are more responsive to their employees´ demand to stay longer in the labor market. These employer groups mainly offer their older employees the option of staying longer in partial retirement instead of forcing them into unemployment before retirement.
    Keywords: pension reform, labor demand effects, early retirement, employer heterogeneity
    JEL: J14 J18 J22 J26 H31
    Date: 2019
  6. By: Pierre PORA (Insee-Crest.); Lionel WILNER (Insee-Crest.)
    Abstract: We relate women's labor earnings losses due to motherhood to their prechildbirth rank in the distribution of hourly wages. Using French administrative data, we show that these \child penalties" decrease steeply along the distribution; by contrast, the related hourly wage losses are fairly homogeneous. Low-wage mothers opt out of the labor market or reduce their working hours more frequently; the magnitude of such responses is consistently monotonic along the distribution. This empirical evidence highlights the relevance of financial incentives and suggests that child penalties arise from decisions based on specialization gains rather than on gender differences in preferences or on gender norms.
    Keywords: Gender pay gap, child penalties, labor supply, difference-in-difference, wage distribution.
    JEL: J13 J16 J22 J31
    Date: 2019–09–27
  7. By: Kahn, Matthew E. (Johns Hopkins University); Tracy, Joseph (Federal Reserve Bank of Dallas)
    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 trade off 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)’s 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.
    Keywords: monopsony; wages; housing costs
    JEL: J3 R23
    Date: 2019–10–15
  8. By: Muñoz, P; Prem, M
    Abstract: An important question is whether differences in management can explain variation in productivity and whether different compensation schemes and selection policies can impact the allocation of managerial effectiveness. To investigate this, we measure the value-added of school principals and study their labor market outcomes in Chile, where a large subsidized private sector competes with public sector schools. Using large administrative data sets on student performance and school personnel, we document substantial variation across principals in their ability to improve students’ learning. We show that effective principals increase the retention of young and high value-added teachers, and that principal effectiveness is recognized by the school community. A theoretical model of job offers and acceptances guides our empirical inquiry into the principals’ labor market. Leveraging observational and quasi-experimental variation, we show that: (1) principals’ effectiveness is more strongly associated with wages in private schools, and (2) despite relatively rigid wages, public schools can attract better principals by improving their personnel selection process.
    Keywords: School principal, Productivity, Sectoral allocation
    JEL: J3 J8 M5 I2
    Date: 2019–11–01
  9. By: Olivier Charlot; Idriss Fontaine; Thepthida Sopraseuth (Université de Cergy-Pontoise, THEMA)
    Abstract: Using annual and quarterly labor market data from the US and France, we study the relationship between the extensive and intensive margins of labor adjustment, job polarization and non-standard work along the business cycle. We derive four stylized facts. First, changes in aggregate hours are mainly driven by fluctuations in per-capita employment rather than hours worked per worker. Second, recessionary drops observed in aggregate hours are, to a large extent, due to the disappearance of routine work. In the US, the fall in routine standard employment accounts for most of the decline in aggregate hours, whereas in France, routine jobs losses in both standard and non-standard work matter. Third, the dynamics of routine standard employment are driven by flows from and into unemployment in both countries. Fourth, the dynamics of routine non-standard work differ across countries. In the US, fluctuations in routine non-standard employment is driven by inflows from routine standard work, while, in France, changes in routine non-standard work are accounted for by ins and outs from unemployment. Our findings support the view that within-employment reallocation, through the use of non-standard work, is an alternative margin of adjustment in the US. This is not the case in France and flexibility is achieved by adjusting hiring and separations of standard and non-standard work. In bad times, reduced stepping stones contribute to the fall in routine standard employment.
    Keywords: Employment fluctuations, job polarization, non-standard work.
    JEL: J21 J24 O33
    Date: 2019
  10. By: Boerma, Job (Federal Reserve Bank of Minneapolis); Karabarbounis, Loukas (Federal Reserve Bank of Minneapolis)
    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.
    Keywords: Time use; Consumption; Leisure productivity; Inequality
    JEL: D10 D60 E21 J22
    Date: 2019–09–20
  11. By: Werner Roeger; Janos Varga; Jan in't Veld; Lukas Vogel
    Abstract: This paper studies the effects of labour market reforms on the functional distribution of income in a DSGE model (Roeger et al., 2008) with skill differentiation, in which households supply three types of labour: low-, medium- and high-skilled. The households receive income from labour, tangible capital, intangible capital, financial wealth and transfers. We trace how structural reforms in the labour market affect these different types of income. The quantification of labour market reforms is based on changes in structural indicators that significantly reduce the gap of the EU average income towards the best-performing EU countries. We find a general trade-off between an increase in employment for a particular group and the income of the average group member relative to income per capita. Reforms that increase employment of low- and medium-skilled workers imply a trade-off between employment and wages in the low- and medium-skilled group, due to the increase in the skill-specific supply of labour. Capital owners generally benefit from labour market reforms, with an increasing share in total income. This can be attributed to limited entry into the final goods production sector, underlining the importance of product market reforms in addition to labour market reforms.
    Keywords: labour market reforms, dynamic general equilibrium modelling, income distribution, inequality
    JEL: C33 D58 E25 J20
    Date: 2019
  12. By: Martín Caruso Bloeck; 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.
    Keywords: Poverty, inequality, means testing, proxy means testing, Latin America and the Caribbean
    JEL: J38 I38
    Date: 2019–10–31
  13. By: Rauscher, Michael; Willert, Bianca
    Abstract: We develop a model where firms profit from coercing workers into employment under conditions violating national law and international conventions and where bureaucrats benefit from accepting bribes from detected perpetrators. Firms and bureaucrats are hetero-geneous. Employers differ in their unscrupulousness regarding the use of slave labour whereas bureaucrats have differing intrinsic motivations to behave honestly. Moreover, there is a socially determined warm-glow effect: honest bureaucrats feel better if their colleagues are honest too. The determination of bribes is modelled via Nash bargaining between the firm and the corrupt civil servant. It is shown that multiple equilibria and hysteresis are possible. Depending on history, an economy may be trapped in a locally stable high-corruption, high-slavery equilibrium and major changes in government policies may be necessary to move the economy out of this equilibrium. Moreover, we show that trade bans that are effective in reducing slavery in the export industry tend to raise slavery in the remainder of the economy. It is possible that this leakage effect dominates the reduction of slavery in the export sector.
    Keywords: Coerced Labour,Modern Slavery,Corruption,Social Norms,Trade-Related Process Standards
    JEL: D73 F16 J47
    Date: 2019
  14. By: Adam Ayaita; Kathleen Stürmer
    Abstract: Risk aversion might affect current and potential teachers’ reaction to reforms, in particular payment reforms. However, evidence on teachers’ risk aversion in comparison to other occupations is limited. The present study is based on twelve waves of a representative German data set (N = 18,381) and shows that teaching relates positively to risk aversion, especially to risk aversion with respect to occupational career. Teachers score higher in risk aversion even than other civil servants. Risk-averse individuals are attracted to teaching from career outset; moreover, our results suggest an additional socialization effect during the employment that may reinforce this relationship.
    Keywords: Teachers; teaching; motives; risk aversion
    JEL: H75 I28 J20 J45 M50 O30
    Date: 2019
  15. By: Edward P. Lazear
    Abstract: Average wage growth is closely related to aggregate productivity growth across countries and within countries over time. The commonality of patterns across OECD countries suggests that common factors are at work. Are productivity-based explanations of wage changes consistent with increasing variance in wages as well as increases in mean wages as suggested by skill-biased technological change or other factors? To answer this, it is necessary to observe education-specific productivity growth. Cross-industry comparisons reveal that industries dominated by highly educated workers experienced higher-than-average productivity growth that is more than sufficient to account for increasing skill differentials.
    JEL: J00 J30 M50
    Date: 2019–11
  16. By: Andrey Launov
    Abstract: Working time account is an organization tool that allows firms to smooth their demand for hours employed. Descriptive literature suggests that working time accounts are likely to reduce layoffs and inhibit increases in unemployment during recessions. In a model of optimal labour demand I show that working time account does not necessarily guarantee less layoffs at the firm level. These may be reduced or increased depending on whether the firm meets economic downturn with surplus or deficit of hours and on how productive the firm is. In expected terms, however, working time account reduces net job destruction at almost any level of firm's productivity. Model predictions are consistent with dynamics of aggregate turnover in Germany during the Great Recession.
    Keywords: Labour demand; working hours; working time accounts; turnover; layoff; Great Recession; Germany
    JEL: J23 J63
    Date: 2019–09
  17. By: Aliprantis, Dionissi (Federal Reserve Bank of Cleveland); Carroll, Daniel R. (Federal Reserve Bank of Cleveland); Young, Eric R. (Federal Reserve Bank of Cleveland)
    Abstract: We reconcile the large and persistent racial wealth gap with the smaller racial earnings gap, using a general equilibrium heterogeneous-agents model that matches racial differences in earnings, wealth, bequests, and returns to savings. Given initial racial wealth inequality in 1962, our model attributes the slow convergence of the racial wealth gap primarily to earnings, with much smaller roles for bequests or returns to savings. Cross-sectional regressions of wealth on earnings using simulated data produce the same racial gap documented in the literature. One-time wealth transfers have only transitory effects unless they address the racial earnings gap.
    Keywords: Racial Inequality; Wealth Dynamics;
    JEL: D31 D58 E21 E24 J7
    Date: 2019–10–08
  18. By: Cetrulo, A.; Guarascio, D.; Virgillito, M. E.
    Abstract: Which type of work do Italians perform? In this contribution we aim at detecting the anatomy of the Italian occupational structure by taking stock of a micro-level dataset registering the task content, the execution of procedures, the knowledge embedded in the work itself, called ICP (Indagine Campionaria sulle Professioni), the latter being comparable to the U.S. O*NET dataset. We perform an extensive empirical investigation moving from the micro to the macro level of aggregation. Our results show that the Italian occupational structure is strongly hierarchical, with the locus of power distinct by the locus of knowledge generation. It is also weak in terms of collaborative and worker involvement practices, and possibility to be creative. Our analysis allows to pinpoint the role exerted by hierarchical structures, decision making autonomy, and knowledge as the most relevant attributes characterizing the division of labour.
    Keywords: Occupational structure,power, knowledge,factor analysis
    JEL: J2 D2 C38
    Date: 2019
  19. By: Michal Horvath (University of York); Zuzana Siebertova (Council for Budget Responsibility)
    Abstract: Fundamental income tax reforms are usually justified by or opposed because of large employment implications. The employment gains and losses are supposed to originate from various behavioural and dynamic effects of tax reforms over the medium to long term. To test the limits of such arguments, we study hypothetical radical measures designed to have potentially large employment effects inthe context of Slovakia. A close inspection of the different implications of such tax reforms for adjustment on the extensive margin of the labour market reveals that promises or worries of large employment effects have little empirical support. This is because labour supply responses to ‘making work pay’ are small, the requirement of revenue neutrality limits the extent to which (dis)incentivising work is feasible, and because income effects arising from positive assortative mating within families counteract total individual-level effects. Our framework suggests the focus of tax reformers should be on the variation in effective labour supply coming from intensive margin effects.
    Keywords: microsimulation, dynamic general equilibrium, employment, labour supply elasticity, tax reform
    JEL: E24 H24 H31 J22
    Date: 2019–11
  20. By: Givens, Gregory
    Abstract: I interpret the empirical evidence on government spending multipliers using an equilibrium model of unemployment in which workers are not fully insured against the risk of job loss. Consumption of resources by the government affects aggregate spending along two margins: (i) an intensive margin owing to a fall in household wealth and (ii) an extensive margin that accounts for growth in the working population. At insurance levels below a certain threshold, the positive effects of (ii) dominate the negative effects of (i), leading to multipliers for private consumption and output that exceed zero and one. Similar results appear in a quantitative version of the model scaled to match estimates from micro data on the consumption cost of unemployment.
    Keywords: Government Spending Multipliers, Unemployment Insurance, Shirking Models
    JEL: E13 E24 E32 E62 H50 J41
    Date: 2019–11
  21. By: Balázs Égert; Jarmila Botev; David Turner
    Abstract: This paper uses a new measure of human capital that works much better in explaining productivity in OECD countries compared to earlier measures of human capital to investigate the educational policy drivers of human capital. A novel methodology is utilised by interacting educational policies, for which time series coverage is very poor, with time-varying core drivers of human capital such as public spending on education. In such a framework, policy effects can only be assessed indirectly as they amplify or attenuate the effect of education spending on human capital. The results suggest that higher attendance at pre-primary education, greater autonomy of schools and universities, a lower student-to-teacher ratio, higher age of first tracking in secondary education and lower barriers to funding to students in tertiary education all tend to boost human capital through amplifying the positive effects of greater public spending on education. Benefits from pre-primary education are particularly high for countries with an above-average share of disadvantaged students. School autonomy yields high benefits especially in countries where schools are subject to external accountability.
    Keywords: economic growth, education policies, human capital structural reforms, OECD
    JEL: E24 I20 I28 I25 J24
    Date: 2019–11–13
  22. By: Janmaat, Johannus; Harris, Lindsay; Carlaw, Kenneth; Evans, Mike
    Abstract: Participatory action research has enabled communities to develop knowledge informed solutions to local challenges, challenges often involving difficult trade offs in the face of resource constraints. The challenges are typically defined by the local context, limiting both availability of data and generalizability of insights. We undertook an action economics approach with a group of Revelstoke community members deepen the collective understanding of the business impacts that may result from adoption of a living wage policy. An EXCEL™ workbook with macros enabled community members to explore possible costs and benefits. This tool clearly demonstrated the heterogeneity of business impacts and the form and scale of living wage employer benefits necessary for businesses to be no worse off. There are many context sensitive policy challenges that can benefit from an economic perspective, and therefore significant scope to share effective approaches for doing so.
    Keywords: Action research, living wage, community engaged research, poverty reduction, regional economic development
    JEL: J30 J33 R29
    Date: 2019–10–23
  23. By: Prescott, Edward Simpson (Federal Reserve Bank of Cleveland); Jarque, Arantxa (Federal Reserve Bank of Richmond)
    Abstract: A multi-agent, moral-hazard model of a bank operating under deposit insurance and limited liability is used to analyze the connection between compensation of bank employees (below CEO) and bank risk. Limited liability with deposit insurance is a force that distorts effort down. However, the need to increase compensation to risk-averse employees in order to compensate them for extra bank risk is a force that reduces this effect. Optimal contracts use relative performance and are implementable as a wage with bonuses tied to individual and firm performance. The connection between pay for performance and bank risk depends on correlation of returns. If employee returns are uncorrelated, the form of pay is irrelevant for risk. If returns are perfectly correlated, a low wage can indicate risk. Connections to compensation regulation and characteristics of organizations are discussed.
    Keywords: incentive compensation; relative performance; bank regulation;
    JEL: D82 G21 G28 J33
    Date: 2019–11–05
  24. By: Marco Caliendo; Frank M. Fossen; Alexander S. Kritikos
    Abstract: As the policy debate on entrepreneurship increasingly centers on firm growth in terms of job creation, it is important to better understand which variables influence the first hiring decision and which ones influence the subsequent survival as an employer. Using the German Socioeconomic Panel (SOEP), we analyze what role individual characteristics of entrepreneurs play in sustainable job creation. While human and social capital variables positively influence the hiring decision and the survival as an employer in the same direction, we show that none of the personality traits affect the two outcomes in the same way. Some traits are only relevant for survival as an employer but do not influence the hiring decision, other traits even unfold a revolving door effect, in the sense that employers tend to fail due to the same characteristics that positively influenced their hiring decision.
    Keywords: Employer, entrepreneurship, business venturing, recruitment, firm growth, employment growth, personality
    JEL: J22 J23 L26
    Date: 2019
  25. By: Ragnhild Balsvik; Stefanie Haller
    Abstract: Is ownership change an opportunity for new owners to make systematic changes in the workforce of the acquired plant? We document changes to the workforce along observable and unobservable dimensions of worker quality around ownership change using matched employer-employee data. We observe above average separations of workers around domestic acquisitions. This is associated with a decline in unobserved worker quality in the plant. Foreign acquisitions are not associated with above average worker turnover, instead new foreign owners share rents with the high skilled workers that are already in the plant before the acquisition.
    Keywords: multinational firms, acquisitions, worker reallocation, unobserved fixed effects
    JEL: F66 F23 J20
    Date: 2019
  26. By: Quintero Rojas, Coralia Azucena; Viianto, Lari Artur
    Abstract: The incorporation of women into the labor market remains a challenge for most countries; likewise, gender gaps are observed in indicators such as employment, unemployment and participation. In this paper we study the role of social norms in the labor market performance per gender; that is, how gender gaps arise from conservative gender roles. To this end, we construct an agent-based model where discrimination appears when information on job vacancies is transmitted within a social network with preference to a given gender. Networks are defined by size, closeness and links per family. Our results show that: Social networks enhance the chance of getting a job. Discrimination deepens gender gaps. Discrimination does not favor the employment situation of households, since the share of non-income households (both members unemployed) is not reduced. Rather, discrimination reduces the number of two-income households in favor of the single-income households where only the man is employed.
    Keywords: social networks, social norms, gender inequality, discrimination, labor markets, economic systems.
    JEL: C63 D85 J71
    Date: 2019–10–20
  27. By: Zuzana Smidova
    Abstract: This paper reviews recent empirical literature on policy drivers of two educational outcomes - years of schooling and rates of return - that form the OECD’s aggregate measure of human capital. The paper sets the literature findings into the context of current educational polices in place in OECD countries. While much of the empirical results are mixed, depend on country and time coverage as well as estimation methods, the review identifies the following policies most likely to promote better educational outcomes: quality pre-primary education, quality teaching, accountability and autonomy of teaching institutions, comprehensive lower secondary education and availability of individual financing for the pursuit of higher education.
    Keywords: early childhood education, education, education attainment, education quality, higher education, OECD, primary school, secondary school, teacher
    JEL: E24 I20 I26 I28 I25 J24
    Date: 2019–11–13
  28. By: Cronert, Axel (Uppsala University)
    Abstract: This study shines new light on an ongoing debate about the extent to which discouraging enforcement activities are necessary to make regulated actors comply with government regulations. Specifically, it evaluates a long-standing but essentially unenforced regulation that mandated employers in Sweden to post their vacancies at the Public Employment Service (PES) to improve matching and the labor market prospects of disadvantaged workers. Using comprehensive vacancy data from the PES, it tests whether the regulation despite not being enforced—influenced employers’ vacancy posting behavior in the period prior to its partial repeal in 2007. Exploiting the fact that the repeal did not apply to employers in the central government sector, the difference-indifferences analyses conducted in this study identify a substantial and significant negative effect of repealing the unenforced law on employers’ vacancy posting behavior, under reasonable assumptions. This finding is at odds with standard deterrence models of regulatory compliance and hints at an important role for organizational factors related to cultures and norms. A supplementary analysis of heterogeneous effects among local government employers investigates to what extent some organizational factors are correlated to compliance with the unenforced regulation.
    Keywords: regulatory compliance; cultures and norms;
    JEL: J20 L20
    Date: 2019–10–14

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