nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2019‒12‒16
23 papers chosen by
Joseph Marchand
University of Alberta

  1. Work Flexibility and Firm Growth By A. Arrighetti; L. Cattani; F. Landini; A. Lasagni
  2. Did Soviet Elderly Employment Respond to Financial Incentives? Evidence from Pension Reforms By Malkova, Olga
  3. People versus Machines in the UK: Minimum Wages, Labor Reallocation and Automatable Jobs By Lordan, Grace
  4. The Impact of Mass Migration of Syrians on the Turkish Labor Market By Ege Aksu; Refik Erzan; Murat Güray Kırdar
  5. Profit vs morality: how unfair is labor market discrimination? Results from a survey experiment By Élisabeth Tovar; Matthieu Bunel
  6. Leaning In or Not Leaning Out? Opt-Out Choice Framing Attenuates Gender Differences in the Decision to Compete By Joyce He; Sonia Kang; Nicola Lacetera
  7. Harnessing the Power of Social Incentives to Curb Shirking in Teams By Brice Corgnet; Brian Gunia; Roberto Hernán González
  8. Ultra-fast broadband, skill complementarities, gender and wages By David C. Maré; Arthur Grimes; Richard Fabling
  9. Feminist Firms By Bennett, Benjamin; Erel, Isil; Stern, Lea; Wang, Zexi
  10. Endogenous Hours and the Wealth of Entrepreneurs By Wellschmied, Felix; Yurdagul, Emircan
  11. The Costs of Job Loss and Task Usage By Kauhanen, Antti; Riukula, Krista
  12. The Economic Benefits of Volunteering and Social Class By Sauer, Robert M.; Wilson, John; Mantovan, Noemi
  13. High-Skilled Services and Development in China By Fang, Lei; Herrendorf, Berthold
  14. Firm-level employment, labour market reforms, and bank distress By Setzer, Ralph; Stieglitz, Moritz
  15. Revisiting Union Wage and Job Loss Effects Using the Displaced Worker Surveys By Kulkarni, Abhir; Hirsch, Barry
  16. Working Conditions, Transparency, and Compliance in Global Value Chains: Evidence from Better Work Jordan By Robertson, Raymond
  17. Labor mobility from R&D-intensive multinational companies: Implications for knowledge and technology By Jacob Rubak Holm; Bram Timmermans; Christian Richter Ostergaard; Alexander Coad; Nicola Grassano; Antonio Vezzani
  18. The Mental Health Effects of Retirement By Picchio, Matteo; van Ours, Jan C.
  19. Measuring job openings: evidence from Swedish plant level data By Harbo hansen, Niels-Jakob
  20. Teacher Effects on Student Achievement and Height: A Cautionary Tale By Marianne Bitler; Sean Corcoran; Thurston Domina; Emily Penner
  21. Does Electricity Drive Structural Transformation? Evidence from the United States By Paul Gaggl; Rowena Gray; Ioana Marinescu; Miguel Morin
  22. Consumption response to minimum wages: evidence from Chinese households By Dautović, Ernest; Hau, Harald; Huang, Yi
  23. The economic cost of air pollution: Evidence from Europe By Antoine Dechezleprêtre; Nicholas Rivers; Balazs Stadler

  1. By: A. Arrighetti; L. Cattani; F. Landini; A. Lasagni
    Abstract: In the last decades, work flexibility emerged as a key requirement firms must meet to face volatile markets and highly differentiated product demand. This paper compares two alternative approaches to strengthen work flexibility: internal flexibility, i.e. practices that focus on the employees’ ability to perform a variety of highly qualified tasks in a context of stable employment relationships; and external flexibility, i.e. practices that align employment and labour costs to demand fluctuations using a buffer of non-standard employees involved in routine tasks. We empirically verify whether both practices are able to boost sales growth using a linked employer-employee panel of manufacturing firms from the Emilia-Romagna region (Italy). While internal flexibility positively affects firm growth, external flexibility appears to hamper it. Such a negative effect, however, decreases when we limit the analysis to industries with high demand volatility and cost-based competition. The related managerial and policy implications are discussed.
    Keywords: internal flexibility; external flexibility; firm growth; industrial relations
    JEL: D22 L23 M51 M54 J41 J24
    Date: 2019
  2. By: Malkova, Olga (University of Kentucky)
    Abstract: This study answers the open question of whether workers respond to financial incentives in a command economy. To do this, I evaluate pension reforms in Soviet Russia in 1964 and 1969 that allowed pensioners to receive a greater share of their pensions if they worked, resulting in a progressive elimination of benefit reduction rates. Variation in group eligibility and variation in benefit reduction rates in eastern and western regions allow for the use of several difference-in-differences frameworks. I collect and digitize novel data from the Soviet archives on pensioner employment, constructing the first database of the Soviet old-age labor market. I find that Soviet pensioners are responsive to financial incentives. By 1969, after the benefit reduction rate fell from an average of 47.8 to 24.1 percent, pensioner employment rates rose by 5.7 percentage points, representing a 47 percent increase. Finally, I provide illustrative estimates of the employment elasticity with respect to the average net-of-tax rate that range from 0.6 to 1.4.
    Keywords: pension, retirement, employment, Soviet economy
    JEL: J18 J26 H55
    Date: 2019–11
  3. By: Lordan, Grace (London School of Economics)
    Abstract: This study follows the Lordan and Neumark (2018) analysis for the US, and examines whether minimum wage increases affect employment opportunities in automatable jobs in the UK for low-skilled low-wage workers. Overall, I find that increasing the minimum wage decreases the share of automatable employment held by low-skilled low-wage workers, and increases the likelihood that workers in automatable jobs become disemployed. On aggregate the effect size is modest, but I also provide evidence that these effects are larger in more recent years. The study also highlights significant heterogeneity by industry and demographic group, including more substantive adverse effects for older low-skilled workers in manufacturing, as well as effects at the intensive margin.
    Keywords: technology, robotics, automation, unemployment, employment, minimum wage
    JEL: J23 J38
    Date: 2019–10
  4. By: Ege Aksu (The Graduate Center, CUNY); Refik Erzan (Department of Economics Bogazici University); Murat Güray Kırdar (Department of Economics Bogazici University)
    Abstract: We estimate the effects of the arrival of 2.5 million Syrian migrants in Turkey by the end of 2015 on the labor market outcomes of natives, using a difference-in-differences IV methodology. We show that relaxing the common-trend assumption of this methodology—unlike recent papers in the same setting—makes a substantial difference in several key outcomes. Despite the massive size of the migrant influx, no adverse effects on the average wages of men or women or on total employment of men are observed. For women, however, total employment falls—which results mainly from the elimination of part-time jobs. While the migrant influx has adverse effects on competing native workers in the informal sector, it has favorable effects on complementary workers in the formal sector. We estimate about one-to-one replacement in employment for native men in the informal sector, whereas both wage employment and wages of men in the formal sector increase. Increases in prices in the product market and in capital flow to the treatm nt regions contribute to the rise in labor demand in the formal sector.
    Keywords: Labor Force and Employment, Wages, Immigrant Workers, Formal and Informal Sectors, Syrian Refugees, Turkey, Difference-in-differences, Instrumental Variables
    JEL: J21 J31 J61 C26
    Date: 2019–10
  5. By: Élisabeth Tovar; Matthieu Bunel
    Abstract: Using an original survey-experimental protocol, we study the normative acceptability of the trade-off between immoral profit (discrimination) and costly morality (non-discrimination). We test the causal influence of three factors: i) the origin of discrimination, ii) the steepness of the morality/profit trade-off and iii) anti-discriminatory moral injunctions. Contrasting with past experimental and attitudinal studies, we find that a significant minority of respondents believe that labor market discrimination is acceptable when morality results in profit loss. We also find that the three tested factors have significant effects on normative opinions. Respondents are more likely to choose profit over morality when discrimination is taste-based than when it is caused by imperfect information. Discrimination’s acceptability rises with the cost of non discrimination. Anti-discriminatory moral injunctions sharply reduces the acceptability of profitable discrimination.
    Keywords: discrimination, moral suasion, profit/morality trade-off, vignette survey experiment
    JEL: J23 J7 J78 C9
    Date: 2019
  6. By: Joyce He; Sonia Kang; Nicola Lacetera
    Abstract: In most organizations, promotions often require self-nomination and competition among applicants. However, research on gender differences in preferences for competition suggests that this process might result in fewer women choosing to participate. We study whether changing promotion schemes from a default where applicants must opt in (i.e., self-nominate) to a default where applicants must opt out (i.e., they are automatically considered for promotion, but can choose not to be considered) attenuates gender differences. In our first experiment, although women are less likely than men to choose competitive environments under the traditional opt-in framing, in the opt-out system both women and men have the same participation rate as men in the opt-in system. The increase in participation of women into competition is not associated with negative consequences on performance or well-being. In our second experiment, we show that opt-out framing does not entail penalties from evaluators making decisions about whom to hire. These results support the promise of choice architecture to reduce disparities in organizations. More generally, our findings suggest that gender differences in attitudes toward completion may be context-dependent.
    JEL: C91 D03 D91 J16 J24 J82 M5
    Date: 2019–11
  7. By: Brice Corgnet (Emlyon Business School); Brian Gunia (Carey Business School, Johns Hopkins University); Roberto Hernán González (Burgundy School of Business, Université Bourgogne Franche-Comté)
    Abstract: We study several solutions to shirking in teams that trigger social incentives by reshaping the workplace social context. Using an experimental design, we manipulate social pressure at work by varying the type of workplace monitoring and the extent to which employees engage in social interaction. This design allows us to assess the effectiveness as well as the popularity of each solution. Despite similar effectiveness in boosting productivity across solutions, only organizational systems involving social interaction (via chat) were at least as popular as a baseline treatment. This suggests that any solution based on promoting social interaction is more likely to be embraced by workers than monitoring systems alone.
    Keywords: Social Incentives; Social Pressure; Moral Hazard in Teams; Laboratory Experiments
    JEL: C92 D23 D91 M54
    Date: 2019
  8. By: David C. Maré; Arthur Grimes (Motu Economic and Public Policy Research); Richard Fabling (Independent researcher)
    Abstract: We examine whether ultra-fast broadband (UFB) has selective complementarities with certain types of labour. Using longitudinal data on New Zealand firms’ internet connection type (UFB versus other forms of broadband) we find that, following UFB adoption by a firm, the wages of certain skilled incumbent employees rise. This is particularly so for males with STEM qualifications, plus males with university level qualifications (and possibly Masters level female graduates) without STEM qualifications. Wages of male employees without qualifications and of female employees with both lower level and no qualifications tend to fall relative to those in firms that do not adopt UFB. These results are consistent with the existence of skill-biased technical change. More puzzling is why these skill-biased changes have differential effects for incumbent male versus female workers.
    Keywords: Broadband, ultra-fast, wages, skill-biased technical change, gender wage gap
    JEL: D22 H54 J24 O33
    Date: 2019–12
  9. By: Bennett, Benjamin (Tulane University - A.B. Freeman School of Business); Erel, Isil (Ohio State University (OSU) - Department of Finance); Stern, Lea (University of Washington - Michael G. Foster School of Business); Wang, Zexi (Lancaster University)
    Abstract: We examine whether reducing frictions in the labor market affects the performance of private and public firms. Using the staggered adoption of state-level Paid Family Leave acts, we provide causal evidence on the value created by relieving frictions to female talent allocation. The magnitude of firms' improved performance is correlated with their exposure to the laws. We document that reduced turnover, increased productivity, and female leadership are important mechanisms leading to the observed performance gains.
    JEL: J16 J22 J24 J32 J78 M14 M51
    Date: 2019–11
  10. By: Wellschmied, Felix (Universidad Carlos III de Madrid); Yurdagul, Emircan (Universidad Carlos III de Madrid)
    Abstract: US entrepreneurs typically work long hours in their firms and these hours form a large part of the firms' labor input. This paper studies the role of endogenous owner hours in shaping the wealth distribution among entrepreneurs. We introduce owners' endogenous labor supply into a model of entrepreneurial choice and financial frictions. The model fits well the levels and the dispersion of wealth among entrepreneurs. Long owner hours incentivize poor, highly productive individuals to be owners and help the most productive owners to accumulate large quantities of wealth. On net, owners working long hours decreases the median owner wealth and increase wealth dispersion among owners. Differently, the ability to work sufficiently short hours incentivizes owners to run low productivity firms with high wealth to income ratios. Finally, alternative calibrations ignoring the endogenous labor supply of owners lead to owners that are much richer than in the data and overstate the effect of financial frictions in the economy.
    Keywords: entrepreneurship, wealth accumulation, labor supply, firm dynamics
    JEL: E23 J22 J23 L26
    Date: 2019–11
  11. By: Kauhanen, Antti; Riukula, Krista
    Abstract: Abstract This study examines the degree to which the effects of job loss depend on task usage and task distance to other jobs. We use linked employer-employee data and representative survey data on task usage and plant closures to identify individuals who have lost their jobs involuntarily. We find that the heterogeneity in the cost of job loss is linked to task usage. Workers in origin jobs with high levels of social tasks have smaller employment and earnings losses, whereas workers in routine jobs face larger wage losses. Instead, the distance in task usage between the origin job and other jobs does not matter when the usage of manual, abstract, routine and social tasks is taken into account.
    Keywords: Job loss, Wage loss, Linked Employer-Employee Data, Specific Human Capital
    JEL: J62 J65 J31 J24
    Date: 2019–12–09
  12. By: Sauer, Robert M. (Royal Holloway, University of London); Wilson, John (Duke University); Mantovan, Noemi (Bangor University)
    Abstract: A theory that the economic benefits of volunteering are contingent on social class (as defined by similarities in labour market situation) is tested using seven waves of longitudinal data from the British Household Panel Study gathered between 1996 and 2008 and fixed-effects models. Volunteering has a positive effect on earnings, but it is confined to people in professional and managerial occupations. Employees in white and blue collar jobs do not benefit. The study suggests that inconsistent results from previous studies might be due to failure to consider occupational heterogeneity among volunteers.
    Keywords: volunteering, earnings, social class
    JEL: H4 J31
    Date: 2019–10
  13. By: Fang, Lei (Federal Reserve Bank of Atlanta); Herrendorf, Berthold (Arizona State University)
    Abstract: We document that the employment share of high-skill-intensive services is much lower in China than in countries with similar gross domestic product (GDP) per capita. We build a model of structural change with goods and low- and high-skill-intensive services to account for this observation. We find that large distortions limit the size of high-skill-intensive services in China. If they were removed, both high-skill-intensive services and GDP per capita would increase considerably. We document a strong presence of state-owned enterprises in high-skill-intensive services and argue that this presence leads to important distortions.
    Keywords: mortgage default; foreclosure; externality; policy; vacancy
    JEL: O41 O47 O51
    Date: 2019–11–01
  14. By: Setzer, Ralph; Stieglitz, Moritz
    Abstract: We explore the interaction between labour market reforms and financial frictions. Our study combines a new cross-country reform database on labour market reforms with matched firm-bank data for nine euro area countries over the period 1999 to 2013. While we find that labour market reforms are overall effective in increasing employment, restricted access to bank credit can undo up to half of long-term employment gains at the firm-level. Entrepreneurs without sufficient access to credit cannot reap the full benefits of more flexible employment regulation. JEL Classification: G21, J21, J60, K31
    Keywords: bank stress, employment protection, structural reforms, unemployment insurance
    Date: 2019–12
  15. By: Kulkarni, Abhir (Georgia State University); Hirsch, Barry (Georgia State University)
    Abstract: Estimates of union wage effects have been challenged due to concerns over unobserved worker heterogeneity and endogenous job changes. Many believe that union wage premiums lead to business failures and other forms of worker displacement. In this paper, displacement rates and union wage gaps are examined using the 1994-2018 biennial Displaced Worker Survey (DWS) supplements to the monthly Current Population Surveys. For more than two decades, displacement rates among union and nonunion workers have been remarkably similar. We observe changes in earnings resulting from transitions between union and nonunion jobs following exogenous job changes. Consistent with prior evidence from the 1994 and 1996 DWS, we obtain longitudinal estimates of average union wage effects close to 15 percent, similar to standard cross-section estimates and suggestive of minimal ability bias. Wage losses moving from union to nonunion jobs exceed gains from nonunion to union transitions.
    Keywords: union wage gaps, job loss, displaced workers
    JEL: J31 J51 J65
    Date: 2019–11
  16. By: Robertson, Raymond (Texas A&M University)
    Abstract: This paper estimates how compliance with national labor law and international labor standards within Jordan's garment exporting factories changed after the implementation of a transparency program that made compliance assessments publicly available. The estimation employs data from Better Work Jordan that cover all garment-exporting factories over the 2008-2018 period. Using a difference-in-difference approach that is often applied to control for endogeneity, this paper finds that compliance improved following the implementation of transparency. Compliance increased in a group of 28 critical compliance areas that represent fundamental worker rights relative to relevant comparison groups. The results are robust to a number of additional controls, definitions of the transparency period, and estimation approaches.
    Keywords: global value chains, working conditions, transparency
    JEL: J8 J5 J3
    Date: 2019–11
  17. By: Jacob Rubak Holm (Aalborg University); Bram Timmermans (Norwegian School of Economics and Aalborg University); Christian Richter Ostergaard (Aalborg University); Alexander Coad (Pontificia Universidad Católica del Perú); Nicola Grassano (European Commission - JRC); Antonio Vezzani (Roma Tre University)
    Abstract: Private sector R&D is largely concentrated in a few multinational companies (MNCs), which thus play an important role in the creation of knowledge and technology in the economy. The mobility of labor between these firms and the rest of the economy is therefore an important mechanism for the diffusion of knowledge. This paper analyses in great detail the flow of labor between firms with specific emphasis on flows to and from R&D intensive MNCs. Using linked employer-employee data for Denmark, we match employees moving from R&D intensive MNCs to other employees switching jobs. We find that employees are more inclined to move between R&D intensive MNCs and their subsidiaries rather than between these firms and other firms in the economy. This is particularly true for high skill employees. Our results suggest that other domestic firms are to a larger extent kept out of the ‘knowledge spillover’ loop, which provide them with fewer opportunities to learn from the R&D intensive MNCs. In other words, R&D intensive MNCs and their subsidiaries form a kind of sub labor market within the national labor market; employees exhibit higher mobility within this group of firms than between this group and the rest of the labor market.
    Keywords: Labor mobility, Multinational companies, Knowledge flows, R&D
    JEL: J21 F23 O32
    Date: 2019–11
  18. By: Picchio, Matteo (Università Politecnica delle Marche, Ancona); van Ours, Jan C. (Erasmus University Rotterdam)
    Abstract: We study the retirement effects on mental health using a fuzzy regression discontinuity design based on the eligibility age to the state pension in the Netherlands. We find that the mental effects are heterogeneous by gender and marital status. Retirement of partnered men positively affects mental health of both themselves and their partners. Single men retiring experience a drop in mental health. Female retirement has hardly any effect on their own mental health or the mental health of their partners. Part of the effects seem to be driven by loneliness after retirement.
    Keywords: retirement, health, well-being, happiness, regression discontinuity design
    JEL: H55 J14 J26
    Date: 2019–11
  19. By: Harbo hansen, Niels-Jakob (IIES)
    Abstract: In modern macroeconomic models job openings are a key component. Thus, when taking these models to the data we need an empirical counterpart to the theoretical concept of job openings. To achieve this, the literature relies on job vacancies measured either in survey or register data. Insofar as this concept captures the concept of job openings well we should see a tight relationship between vacancies and subsequent hires on the micro level. To investigate this, I analyze a new data set of Swedish hires and job vacancies on the plant level covering the period 2001-2012. I find that vacancies contain little power in predicting hires above (i) whether the number of vacancies is positive and (ii) plant size. Building on this, I propose an alternative measure of job openings in the economy. This measure has the features of (i) better predicting hiring at the plant level and (ii) providing a better fitting aggregate matching function vis-à-vis the traditional vacancy measure.
    Keywords: Job opening; vacancies; labour supply
    JEL: J20
    Date: 2019–12–09
  20. By: Marianne Bitler; Sean Corcoran; Thurston Domina; Emily Penner
    Abstract: Estimates of teacher “value-added” suggest teachers vary substantially in their ability to promote student learning. Prompted by this finding, many states and school districts have adopted value-added measures as indicators of teacher job performance. In this paper, we conduct a new test of the validity of value-added models. Using administrative student data from New York City, we apply commonly estimated value-added models to an outcome teachers cannot plausibly affect: student height. We find the standard deviation of teacher effects on height is nearly as large as that for math and reading achievement, raising obvious questions about validity. Subsequent analysis finds these “effects” are largely spurious variation (noise), rather than bias resulting from sorting on unobserved factors related to achievement. Given the difficulty of differentiating signal from noise in real-world teacher effect estimates, this paper serves as a cautionary tale for their use in practice.
    JEL: I2 J24
    Date: 2019–11
  21. By: Paul Gaggl; Rowena Gray; Ioana Marinescu; Miguel Morin
    Abstract: Electricity is a general purpose technology and the catalyst for the second industrial revolution. Developing countries are currently making huge investments in electrification, with a view to achieving structural change. What does history say about its impact on the structure of employment? We use U.S. Census data from 1910 to 1940 and measure electrification with the length of higher-voltage electricity lines. Instrumenting for electrification using hydroelectric potential, we find that the average expansion of high-voltage transmission lines between 1910 and 1940 increased the share of operatives in a county by 3.3 percentage points and decreased the share of farmers by 2.1 percentage points. Electrification can explain 50.5% of the total increase in operatives, and 18.1% of the total decrease in farmers between 1910 and 1940. At the industry level, electrification drove 15.7% of the decline in the share of agricultural employment and 28.4% of the increase in the share of manufacturing employment between 1910 and 1940. Electrification was thus a key driver of structural transformation in the U.S. economy.
    JEL: E24 J24 N32 N72 O33
    Date: 2019–11
  22. By: Dautović, Ernest; Hau, Harald; Huang, Yi
    Abstract: The paper evaluates the impact of the Chinese minimum wage policy on consumption of low-wage households for the period 2002-2009. Using a representative household panel, we find that the consumption response to minimum wage income shock is increasing in the minimum wage share of household income and that poorer households fully consume their additional income. The large marginal propensity to consume is driven by households with at least one child, while childless poor households save two thirds of a minimum wage hike. The expenditure increase is concentrated in health care and education with potentially long-lasting benefits to household welfare. JEL Classification: E24, J38, C26
    Keywords: household consumption, labor income, minimum wages, transfer income
    Date: 2019–12
  23. By: Antoine Dechezleprêtre; Nicholas Rivers; Balazs Stadler
    Abstract: This study provides the first evidence that air pollution causes economy-wide reductions in market economic activity based on data for Europe. The analysis combines satellite-based measures of air pollution with statistics on regional economic activity at the NUTS-3 level throughout the European Union over the period 2000-15. An instrumental variables approach based on thermal inversions is used to identify the causal impact of air pollution on economic activity. The estimates show that a 1μg/m3 increase in PM2.5 concentration (or a 10% increase at the sample mean) causes a 0.8% reduction in real GDP that same year. Ninety-five per cent of this impact is due to reductions in output per worker, which can occur through greater absenteeism at work or reduced labour productivity. Therefore, the results suggest that public policies to reduce air pollution may contribute positively to economic growth. Indeed, the large economic benefits from pollution reduction uncovered in the study compare with relatively small abatement costs. Thus, more stringent air quality regulations could be warranted based solely on economic grounds, even ignoring the large benefits in terms of avoided mortality.
    Keywords: air pollution, economic output, instrumental variables, thermal inversions
    JEL: J24 O13 Q53 Q51 R11
    Date: 2019–12–12

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