nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2019‒12‒09
twenty papers chosen by
Joseph Marchand
University of Alberta

  1. Access to Formal Credit and Gender Income Gap: The Case of Farmers in Cambodia By SAM, Vichet
  2. The Institutional Adjustment Margin to Import Competition: Evidence from Italian Minimum Wages By Matano, Alessia; Naticchioni, Paolo; Vona, Francesco
  3. Job Satisfaction and Coworker Pay in Canadian Firms By Javdani, Mohsen; Krauth, Brian
  4. Direct and Indirect Effects of Subsidized Dual Apprenticeships By Crépon, Bruno; Premand, Patrick
  5. Urban Wage Premia, Cost of Living, and Collective Bargaining By Belloc, Marianna; Naticchioni, Paolo; Vittori, Claudia
  6. The Impact of Internship Experience during Secondary Education on Schooling and Labour Market Outcomes By Neyt, Brecht; Verhaest, Dieter; Baert, Stijn
  7. Skill based management: evidence from manufacturing firms By Feng, Andy; Valero, Anna
  8. Skills, Tasks, and Complexity By Gersbach, Hans; Schmassmann, Samuel
  9. Employment and Wages over the Business Cycle in Worker-Owned Firms: Evidence from Spain By Jose Garcia-Louzao
  10. Public Employment Services under Decentralization: Evidence from a Natural Experiment By Lukas Mergele; Michael Weber
  11. Learning from Praise: Evidence from a Field Experiment with Teachers By Maria Cotofan
  12. Information Provision and Postgraduate Studies By Berkes, Jan; Peter, Frauke; Spiess, C. Katharina; Weinhardt, Felix
  13. Do Minimum Wages Reduce Employment in Developing Countries? A Survey and Exploration of Conflicting Evidence By David Neumark; Luis Felipe Munguia Corella
  14. Wage Inequality as a Source of Endogenous Macroeconomic Fluctuations By Jaylson Jair da Silveira; Gilberto Tadeu Lima
  15. Gender Differences in the Effect of Employee-Manager Friendships on Salary Dynamics in CPA Firms By Tobol, Yossef; Bar-El, Ronen; Arbel, Yuval; Azar, Ofer H.
  16. Productivity, Wages and Profits: Does Firms' Position in the Value Chain Matter? By Mahy, Benoît; Rycx, Francois; Vermeylen, Guillaume; Volral, Mélanie
  17. Trade in Information Technologies and Changes in the Demand for Occupations By Jerbashian, Vahagn
  18. Having It All, for All: Child-Care Subsidies and Income Distribution Reconciled By Barigozzi, Francesca; Cremer, Helmuth; Roeder, Kerstin
  19. Fostering strong and relevant skills in Iceland By Vassiliki Koutsogeorgopoulou; Laura Brogi
  20. Ethnicity and tax filing behavior By Bastani, Spencer; Giebe, Thomas; Miao, Chizheng

  1. By: SAM, Vichet
    Abstract: This article analyzes the factors that drive the gender income difference among farmers in Cambodia with a focus on the access to formal credit, using the FinScope survey data. First, an Ordinary Least Square regression (OLS) is used to investigate the main determinants of farmers’ income, while an instrumental variable approach (IV) is estimated to check the causal effect of the access to formal credit on earnings. Next, the Blinder-Oaxaca technique is employed to decompose the gender earnings gap. Results from OLS regression show that individual education and health, farm size and other inputs, irrigation system and weather conditions, access to market and formal credit are strongly associated with farmers’ earnings, while the positive impact of access to formal credit is also confirmed by the IV regression at 5% significant level. These results suggest that improving infrastructure and formal credit access in the rural areas play a critical role in increasing farmers’ income. Then, based on the Blinder-Oaxaca decomposition technique, most of gender earnings difference is due to the endowment effect in favor of male farmers such as education, farm size and volume of work hours. Access to formal credit also contributes to the gender earnings gap, yet not in terms of endowment but coefficient effect, as a higher return to credit access for male farmers is observed. This could be due to the levels of education and financial literacy that are higher for men, allowing them to use the formal credit better. Closing the gap in education and financial literacy would therefore reduce their earnings gap. Discrimination against female farmers, not in terms of credit access, but in loan amount should be worth to consider as well, as the median of loan amounts of male farmers is higher than those of female. If such discrimination exists, it could also limit the women’s capacity to manage and invest in their farms effectively, and thus, the return to credit access must be lower for female farmers.
    Keywords: J16, J31, J43, J71
    JEL: J16 J31 J43 J71
    Date: 2019–11–21
  2. By: Matano, Alessia (University of Barcelona); Naticchioni, Paolo (University of Rome 3); Vona, Francesco (Sciences Po, Paris)
    Abstract: A growing body of research has contributed to understanding the labor market and political effects of globalization. This paper explores an overlooked aspect of trade-induced adjustments in the labor market: the institutional aspect. We take advantage of the two-tier collective bargaining structure of the Italian labor market, whereby the first tier entails setting minimum wages at the contract level. Using an instrumental variable strategy and exploiting variations in contract-level exposure to trade, we find for the 1995-2003 period that, on average, the surge in imports decreased contractual minimum wages by 1.5%. This impact increases in the share of unskilled workers employed in the contract. This negative institutional effect contrasts with a nonsignificant effect of trade on total wages, with the latter becoming positive and large only for highly skilled workers.
    Keywords: bargained minimum wages, import competition, labor market institutions, skills
    JEL: J50 F16 J31 J24
    Date: 2019–10
  3. By: Javdani, Mohsen (University of British Columbia, Okanagan); Krauth, Brian (Simon Fraser University)
    Abstract: One reason to be concerned about income inequality is the idea that people not only care about their own absolute income, but also their income relative to various reference groups (e.g. co-workers, friends, neighbors, relatives, etc.). We use Canadian linked employer-employee data to estimate the casual effect of co-worker pay on a worker's reported job and pay satisfaction. Since worker satisfaction can affect the worker's productivity, organizational commitment, turnover, creativity and innovation, as well as the firm's productivity and profitability, this is an issue that requires more attention and careful examination. In models that control for a rich set of workplace characteristics, we find that coworker pay has a large positive and significant effect on both pay and job satisfaction. In our preferred models with establishment-level fixed effects, the effect of coworker pay on pay satisfaction is half as large, and the effect on job satisfaction completely disappears, suggesting that part (all) of what previous studies attribute to the effect of coworker pay on worker pay (job) satisfaction is driven by unobserved heterogeneity across firms or establishments. Our results also suggest that the effect of coworker pay on worker satisfaction is much stronger for workers who leave their job during the following year. Finally, we find that while coworker pay has a positive effect on pay satisfaction among Canadian-born whites, it has a negative effect among immigrants and Canadian-born visible minorities.
    Keywords: income comparison, job satisfaction, pay satisfaction, inequality, coworker pay
    JEL: D31 D63 I30 J28 J31
    Date: 2019–10
  4. By: Crépon, Bruno (CREST); Premand, Patrick (World Bank)
    Abstract: Traditional apprenticeships based on private arrangements are widespread in developing countries. Public interventions have attempted to address failures in the apprenticeship markets to expand access or improve training quality. Subsidized dual apprenticeships have the potential to address financial constraints for youths and firms' inability to commit to provide general skill training. This paper analyzes the impact of subsidized dual apprenticeships combining on-the-job and theoretical training in Côte d'Ivoire. We set up an experiment that simultaneously randomized whether interested youths were assigned to a formal apprenticeship, and whether apprenticeship positions opened by firms were filled with formal apprentices. We document direct effects for youths and indirect effects for firms, such as whether they substitute between traditional and subsidized apprentices. In the short run, youths increase their human capital investments and we observe a net entry of apprentices into firms. Substitution effects are limited: the intervention creates 0.74 to 0.77 new position per subsidized apprentice. The subsidy offsets forgone labor earnings. Four years after the start of the experiment, treated youths perform more complex tasks and their earnings are higher by 15 percent. We conclude that subsidized dual apprenticeships expand access to training, upgrade skills and improve earnings for youths without crowding out traditional apprentices.
    Keywords: employment, apprenticeship, wage subsidy, training, direct and indirect effects, equilibrium effects, micro and small enterprises, field experiment, Africa
    JEL: D22 J23 J24 O12 C93
    Date: 2019–11
  5. By: Belloc, Marianna (Sapienza University of Rome); Naticchioni, Paolo (University of Rome 3); Vittori, Claudia (Sapienza University of Rome)
    Abstract: In this paper, we estimate nominal and real (in temporal and spatial terms) urban wage premia (UWP) in Italy, with its economy characterized by the interplay between collective wage bargaining and spatial heterogeneity in the cost of living. Our dataset for the 2005- 2015 period includes, for workers' characteristics, unique administrative data provided by the Italian Social Security Institute and, for the local CPI computation, housing prices detailed at a fine level of spatial aggregation delivered by the Italian Revenue Agency. For employees covered by collective bargaining, we find a zero UWP in nominal terms and a negative and non-negligible UWP in real terms (-2.6% when all controls are included). To capture the role played by centralized wage settings, we consider various groups of self-employed workers, who are not covered by national labour agreements, while living in the same locations and enjoying the same amenities as employees. We find that, differently from employees, selfemployed workers enjoy a positive UWP in nominal terms, and do not suffer from urban real wage penalties. Results hold under a large array of robustness checks.
    Keywords: urban wage premium, cost of living, wage setting
    JEL: R12 R31 J31
    Date: 2019–11
  6. By: Neyt, Brecht (Ghent University); Verhaest, Dieter (KU Leuven); Baert, Stijn (Ghent University)
    Abstract: The literature on workplace learning in secondary education has mainly focussed on vocational education programmes. In this study, we examine the impact of internship experience in secondary education on a student's schooling and early labour market outcomes, by analysing unique, longitudinal data from Belgium. To control for unobserved heterogeneity, we model sequential outcomes by means of a dynamic discrete choice model. In line with the literature on vocational education programmes, we find that internship experience has a positive effect on labour market outcomes that diminishes over time, although within the time window of our study, we find no evidence for a null or negative effect over time.
    Keywords: internship, transitions in youth, education, labour
    JEL: I21 I26 J21 J24
    Date: 2019–11
  7. By: Feng, Andy; Valero, Anna
    Abstract: This paper investigates the link between management practices and workforce skills in manufacturing firms, exploiting geographical variation in the supply of human capital. Skills measures are constructed using newly compiled data on universities and regional labour markets across 19 countries. Consistent with management practices being complementary with skills, we show that firms further away from universities employ fewer skilled workers and are worse managed, even after controlling for a rich set of observables and fixed effects. Analysis using regional skill premia suggests that variation in the price of skill drives these relationships.
    Keywords: management practices; human capital; universities; complementarities
    JEL: I23 L20 M20 J24
    Date: 2019–10
  8. By: Gersbach, Hans (ETH Zurich); Schmassmann, Samuel (ETH Zurich)
    Abstract: We introduce a new task-based framework to describe production. It focuses on the fact that certain tasks are too complex for many workers to perform. In such an environment, the relationship between wages of workers may significantly differ from their relative productivities. The labor market partitions itself into submarkets, in which wages and productivity are aligned, and high-skilled workers may obtain wage premia above their productivity level. The framework offers a variety of applications. For instance, the automation of low-complexity tasks tends to reinforce labor market segmentation. Moreover, comparatively small changes in a task's complexity, via new products, processes or automation, may have either a negligible or a large impact on wage inequality.
    Keywords: skill, technological change, tasks, complexity
    JEL: O31 O38
    Date: 2019–11
  9. By: Jose Garcia-Louzao (Bank of Lithuania)
    Abstract: This paper compares worker-owned firms and mainstream capital-owned enterprises over the business cycle. Specifically, I study whether conventional employees in worker-owned firms enjoy greater employment stability than similar workers in traditional enterprises over the business cycle, and investigate whether this stability is associated with greater volatility of working-time or wages. Unlike the literature that has compared partners of cooperatives to wage-earners of mainstream firms, I compare wage-earners across both type of organizations along the three margins of adjustment. To perform the econometric analysis, I rely on rich Spanish administrative data and panel data methods to account for composition differences between the two types of organizations. The results show that worker-owned firms offer higher job security because they do not adjust employment levels over the business cycle as much as mainstream enterprises. Wages and working-time, instead, are equally responsive across the two types of firms. The findings can be rationalized by the presence of similar labor regulations and differences in the objectives of the two type of organizations. Namely, both types of firms are constrained by regulations, such as the national Labor Code and collective bargaining, on the adjustments they can impose on wages and working-time. However, the social nature of worker-owned firms mitigates employment volatility in these organizations.
    Keywords: Worker-owned firms, Employment, Wages, Working-time, Cyclicality
    JEL: J21 J31 J54
    Date: 2019–11–29
  10. By: Lukas Mergele; Michael Weber
    Abstract: This paper studies whether the decentralization of public employment services (PES) increases job placements among the unemployed. Decentralizing PES has been a widely applied reform used by governments aiming to enhance their efficacy. However, economic theory is ambiguous about its effects, and empirical evidence has been scarce. Using a difference-in-differences design, we exploit unique within-country variation in decentralization provided by the partial devolution of German job centers in 2012. We find that decentralization reduces job placements by approximately 10%. Decentralized providers expand the use of public job creation schemes which diminish job seekers’ reemployment prospects but shift costs to higher levels of government.
    Keywords: decentralization, public employment services, job placements
    JEL: H11 H75 I38 J48 J64
    Date: 2019
  11. By: Maria Cotofan (Erasmus University Rotterdam)
    Abstract: Non-monetary incentives such as praise are common-place, but their effects on workers performing cognitively-complex tasks remain largely unknown. I expand the teacher incentive literature through a field experiment measuring how repeated public praise for the best teachers impacts teacher performance. Testing different mechanisms, I argue that public praise sends a comparative message, with teachers being motivated when praised and becoming discouraged when not praised. In treated schools, teachers who are unexpectedly praised perform better and teachers who are not perform worse. The positive effect of unexpected praise is persistent and reflects real student learning. The negative effect disappears over time.
    Keywords: public praise, teacher incentives, field experiment
    JEL: M52 C93 I21 J3 J45 J53
    Date: 2019–12–01
  12. By: Berkes, Jan (DIW Berlin); Peter, Frauke (DIW Berlin); Spiess, C. Katharina (DIW Berlin); Weinhardt, Felix (DIW Berlin)
    Abstract: This is the first paper to experimentally examine effects of information provision on beliefs about pecuniary and non-pecuniary returns of postgraduate education, enrollment intentions and realized enrollment. We find that our treatment causally affects beliefs measured six month after treatment. The effects on beliefs differ by gender and academic background, and we find that stated enrollment intentions change accordingly: in particular males significantly adjust their beliefs and intentions to undertake postgraduate studies. We follow the students further and provide evidence on actual enrollment one year after treatment. Taken together, this study highlights the relevance of information provision on pecuniary and non-pecuniary labor market returns for postgraduate study decisions.
    Keywords: postgraduate education, information, RCT, expectations
    JEL: I21 I24 J24
    Date: 2019–10
  13. By: David Neumark; Luis Felipe Munguia Corella
    Abstract: Evidence from studies of the employment effects of minimum wages in developing countries is mixed. One interpretation is that there is simply no clear evidence of disemployment effects in developing countries. Instead, however, we find evidence that the heterogeneity is systematic, with estimated effects more consistently negative when institutional factors or the competitive model predict more negative effects – for vulnerable workers, in the formal sector, and when minimum wage laws are strong and binding. That is, the evidence points to negative employment effects of minimum wages in developing countries when more features of estimates predict negative employment effects.
    JEL: J18 J23 O15
    Date: 2019–11
  14. By: Jaylson Jair da Silveira; Gilberto Tadeu Lima
    Abstract: There is extensive evidence on both the endogeneity of labor productivity to the wage remuneration and the persistence of wage inequality across observationally similar workers and firms. The paper builds an evolutionary micro-dynamic model having these two features of the labor market as interconnected, and explores the ensuing implications for the macro-dynamics of the distribution of income, capacity utilization and output growth. Firms periodically revise (and possibly switch) their choice of remunerating workers with a higher or lower wage, and the resulting labor productivity differential across workers is endogenous to the distribution of wage remuneration strategies across firms. The long run features wage inequality as a persistent outcome. Moreover, plausibly low levels of wage inequality suffice to cause the distribution of wage remuneration strategies across firms, and therefore the distribution of income, capacity utilization and output growth, all to experience self-sustaining cyclical fluctuations.
    Keywords: Wage inequality; evolutionary micro-dynamics; distribution of income; capacity utilization; output growth
    JEL: J31 E25 E32 O41 C62
    Date: 2019–11–29
  15. By: Tobol, Yossef (Jerusalem College of Technology (JTC)); Bar-El, Ronen (Open University of Israel); Arbel, Yuval (School of Business, Carmel Academic Center); Azar, Ofer H. (Ben Gurion University)
    Abstract: We study the effect of employee-manager relations on salary increases. We use data obtained from a longitudinal survey, carried out among auditing team members in leading Israeli CPA firms (which are subsidiaries of American firms). Our main findings suggest that the degree of friendship with the team manager is positively correlated with the rate of the salary increase, particularly among female workers whose team manager is also a female. We also find that upon being hired to the job, male workers gain a higher return to experience compared with female workers.
    Keywords: CPA, friendship, gender salary gap, wage determination
    JEL: C33 D03 J31 J71
    Date: 2019–10
  16. By: Mahy, Benoît (University of Mons); Rycx, Francois (Free University of Brussels); Vermeylen, Guillaume (University of Mons); Volral, Mélanie (University of Mons)
    Abstract: This paper is the first to estimate the impact of a direct measure of firm-level upstreamness on productivity, wage costs and profits (i.e. productivity-wage gaps). To do so, we merged detailed Belgian linked panel data, covering all years from 2002 to 2010, to a unique data set developed by Dhyne et al. (2015), which contains accurate information on the position of (almost) each commercial firm in the value chain at each year. We rely on the methodological framework that has been pioneered by Hellerstein et al. (1999) to estimate dynamic panel data models at the firm level. Our estimates show that if upstreamness increases by one step (that is, by approximately, one standard deviation), productivity rises on average by 5%. They also indicate that productivity gains associated to upstreamness are shared almost equally between wages and profits. However, upstreamness is found to be more beneficial for workers' wages in less competitive environments, where the price-elasticity of demand for firms' products is typically smaller. Overall, these findings are compatible with the assertion that firms should move up the value chain to be more productive and profitable, but also that being higher in the value chain is likely to facilitate firms' control over strategic downstream activities.
    Keywords: global value chains, upstreamness, productivity, rent-sharing, linked employer-employee panel data, product market competition
    JEL: F61 J24 D30 D40 J50
    Date: 2019–11
  17. By: Jerbashian, Vahagn
    Abstract: I use data from the World Input-Output Database and show that trade in information technologies (IT) has a significant contribution to the growth in foreign intermediate goods in 2001-2014 period. China has become one of the major foreign suppliers of IT and has strongly contributed to the rise in trade in IT. The growth in IT imports from China is associated with lower IT prices in sample European countries. The fall in IT prices has increased the demand for high wage occupations and reduced the demand for low wage occupations. From 20 to 95 percent of the variation in the demand for occupations stemming from the fall in IT prices can be attributed to the trade with China.
    Keywords: Trade,Information Technologies,China,Demand for Occupations
    JEL: F16 J23 J24 O33 L63
    Date: 2019
  18. By: Barigozzi, Francesca (University of Bologna); Cremer, Helmuth (Toulouse School of Economics); Roeder, Kerstin (University of Augsburg)
    Abstract: We study the design of child-care policies when redistribution matters. Traditional mothers provide some informal child care, whereas career mothers purchase full time formal care. The sorting of women across career paths is endogenous and shaped by a social norm about gender roles in the family. Via this social norm traditional mothers' informal child care imposes an externality on career mothers, so that the market outcome is inefficient. Informal care is too large and the group of career mothers is too small so that inefficiency and gender inequality go hand in hand. In a first-best world redistribution across couples and efficiency are separable. Redistribution is performed via lump-sum transfers and taxes which are designed to equalize utilities across all couples. The efficient allocation of child care is obtained by subsidizing formal care at a Pigouvian rate. However, in a second-best setting, a trade-off between efficiency and redistribution emerges. The optimal uniform subsidy is lower than the "Pigouvian" level. Conversely, under a non-linear policy the first-best "Pigouvian" rule for the (marginal) subsidy on informal care is reestablished. While the share of high career mothers continues to be distorted downward for incentive reasons, this policy is effective in reconciling the objectives of reducing the child care related inefficiency and achieving a more equal income distribution across couples. Our results continue to hold when the social norm is defined within the mothers' social group, rather than being based on the entire population.
    Keywords: social norms, child-care, women's career choices, child care subsidies, redistribution of income
    JEL: D13 H23 J16 J22
    Date: 2019–10
  19. By: Vassiliki Koutsogeorgopoulou; Laura Brogi
    Abstract: Strong and relevant skills are vital for helping Iceland to adjust to rapidly changing technology and competition in the world economy and safeguard high prosperity and well-being. Many students, especially those with an immigration background, lack solid core skills and competences that weakens the skills-base. Vocational and tertiary education do not always provide skills needed by the labour market. A comprehensive approach is required to strengthen skills, based on systematic assessment and forecasting exercises. This should include measures to improve teaching quality, including through stronger professional development, and ensure its equitable distribution; strengthen the work-based component of vocational training; and ensure that tertiary education provides the right skills. Beyond education, effective re-skilling and up-skilling programmes, including for immigrant workers, and strong work incentives are essential for further skill development and to help make the best use of existing skills.This Working Paper relates to the 2019 OECD Economic Survey of Iceland omic-snapshot/
    Keywords: education, Iceland, immigrants, lifelong learning, mismatch, professional development, skills, vocational education and training, work incentives
    JEL: I20 I24 I28 J15 J24
    Date: 2019–12–04
  20. By: Bastani, Spencer; Giebe, Thomas; Miao, Chizheng
    Abstract: We analyze differences in tax filing between natives and immigrants, focusing on two empirical examples. First, we study deductions for costs associated with traveling between home and work allowed in the Swedish tax code. Using the total population of commuters within Sweden's largest commuting zone, we find that newly arrived immigrants file substantially less than natives, immigrants with a longer stay behave more like natives, and immigrants with the longest stay file the most, even more than natives. Second, we analyze bunching behavior among the self-employed at a large salient kink point of the Swedish income tax schedule. We find much less bunching among immigrants, even after a long time in the host country, and the largest differences relative to natives in residential areas with a high immigrant concentration. Our findings have implications for the equity and efficiency of the tax system and the spatial patterns of residential and occupational choices for different ethnic groups.
    Keywords: deductions, tax filing, bunching, immigrants, natives, integration
    JEL: D31 H21 H24 H26 J22 J61 R23
    Date: 2019–11–06

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