nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2020‒01‒20
eighteen papers chosen by
Joseph Marchand
University of Alberta

  1. Contract Work at Older Ages By Katharine G. Abraham; Brad Hershbein; Susan Houseman
  2. Paying Gig Workers - Evidence from a Field Experiment By Sebastian Butschek; Roberto González Amor; Patrick Kampkötter; Dirk Sliwka
  3. Selection into Employment and the Gender Wage Gap across the Distribution and Over Time By Patricia Gallego Granados; Katharina Wrohlich
  4. Human Capitalists and the Global Division of Labor By Jan Schymik
  5. Reducing skills imbalances to foster productivity growth of Malaysia By Ricardo Espinoza; Marieke Vandeweyer
  6. Does Remote Work Improve or Impair Firm Labour Productivity? Longitudinal Evidence from Portugal By Natália P. Monteiro; Odd Rune Straume; Marieta Valente
  7. The Impact of Bequest Motives on Retirement Behavior in Japan: A Theoretical and Empirical Analysis By Charles Yuji Horioka; Emin Gahramanov; Aziz Hayat; Xueli Tang
  8. Evaluating State and Local Business Tax Incentives By Cailin R. Slattery; Owen M. Zidar
  9. Labor supply and the no-growth trap By Guilherme Strifezzi Leal; David Turchick
  10. Capital Composition and the Declining Labor Share By Maya Eden; Paul Gaggl
  11. Why Firms Offer Paid Parental Leave: An Exploratory Study By Claudia Goldin; Sari Pekkala Kerr; Claudia Olivetti
  12. The Negative Consequences of Loss-Framed Performance Incentives By Lamar Pierce; Alex Rees-Jones; Charlotte Blank
  13. Did Tax Cuts and Jobs Act Create Jobs and Stimulate Growth? Early Evidence Using State-Level Variation in Tax Changes By Anil Kumar
  14. Age Discrimination in Hiring: Evidence from Age-Blind vs. Non-Age-Blind Hiring Procedures By David Neumark
  15. Optimal Taxation under Regional Inequality By Sebastian G. Kessing; Vilen Lipatov; J. Malte Zoubek
  16. Wage Developments in the Central and Eastern European EU Member States By Vasily Astrov; Mario Holzner; Sebastian Leitner; Isilda Mara; Leon Podkaminer; Armon Rezai
  17. First Impression Biases in the Performing Arts: Taste-Based Discrimination and the Value of Blind Auditioning By Jasmin Droege
  18. Cognitive skills, strategic sophistication, and life outcomes By Fe, Eduardo; Gill, David; Prowse, Victoria

  1. By: Katharine G. Abraham; Brad Hershbein; Susan Houseman
    Abstract: The share of workers who are self-employed rises markedly with age. Given policy concerns about inadequate retirement savings, especially among those with lower education, and the resulting interest in encouraging employment at older ages, it is important to understand the role that self-employment arrangements play in facilitating work among seniors. New data from a survey module fielded on a Gallup telephone survey distinguish independent contractor work from other self-employment and provide information on informal and online platform work. The Gallup data show that, especially after accounting for individuals who are miscoded as employees, self-employment is even more prevalent at older ages than suggested by existing data. Work as an independent contractor is the most common type of self-employment. Roughly one-quarter of independent contractors age 50 and older work for a former employer. At older ages, self-employment generally—and work as an independent contractor specifically—is more common among the highly educated, accounting for much of the difference in employment rates across education groups. We provide suggestive evidence that differences in opportunities for independent contractor work play an important role in the lower employment rates of less-educated older adults.
    JEL: J26 J41 J46
    Date: 2020–01
  2. By: Sebastian Butschek; Roberto González Amor; Patrick Kampkötter; Dirk Sliwka
    Abstract: We study the performance effects of payment schemes for freelancers offering services on an online platform in an RCT. Under the initial scheme, the firm pays workers a pure sales commission. The intervention reduces the commission rate and adds a fixed payment per processed order to insure workers against earnings risk. Our experiment tests predictions from a formal model on labor supply and performance for individuals with different degrees of risk aversion and intrinsic motivation for the task. The treatment did not affect labor supply and even though the commission rate was reduced by 50% we find no sizeable loss in sales per order. However, there is strong evidence for heterogeneous treatment effects. The treatment reduced performance for less intrinsically motivated workers. For more intrinsically motivated workers, however, we observe the opposite pattern as performance increased even though commission rates were reduced.
    Keywords: incentives, risk aversion, intrinsic motivation, sales compensation, multitasking, field experiment, gig economy, on demand economy, platform economy
    JEL: D23 J33 M52
    Date: 2019
  3. By: Patricia Gallego Granados (DIW Berlin); Katharina Wrohlich (DIW Berlin)
    Abstract: Using quantile regression methods, this paper analyses the gender wage gap across the wage distribution and over time (1990–2014), while controlling for changing sample selection into full-time employment. Our findings show that the selection-corrected gender wage gap is much larger than the one observed in the data, which is mainly due to large positive selection of women into full-time employment. However, we show that selection-corrected wages of male and female workers at the lower half of the distribution have moderately converged over time. The reason for this development have been changes in the composition of the male full-time employment force over time, which in spite of the rather constant male full-time employment rate, have given place to a small but rising selection bias in male observed wages. In the upper half of the wage distribution, however, neither the observed nor the selection-corrected gender wage gap has narrowed over time.
    Keywords: gender wage gap, quantile regression, selection into employment
    JEL: J31 J21
    Date: 2020–01
  4. By: Jan Schymik
    Abstract: Many corporate top earners are compensated with equity claims on firms’ profits. This paper investigates the consequences of trade-induced economic reallocation on the compensation structure of top earners. I introduce managerial equity ownership into a model of heterogeneous firms to show that reallocation of economic activity towards large, import intensive firms raises the prevalence of equity ownership within these firms. Calibrating the model suggests that equity ownership responds more elastically to globalization than labor incomes such that focusing on the income skill premium fundamentally underestimates the returns to globalization for top earners. I then combine data on equity ownership and income streams for British and U.S. top managers with international I-O tables and firm level data to study this relation empirically. Using a shift-share instrumentation strategy, I find that improved access to global input markets raises the value of equity ownership for managers of large and importing firms altering the compensation structure towards lower labor income shares. This suggests that intra-industry reallocation can raise top inequality and the prevalence of capital incomes for top earners.
    Keywords: Top Inequality, Offshoring, Equity Ownership
    JEL: F14 F16 J33 L22
    Date: 2020–01
  5. By: Ricardo Espinoza; Marieke Vandeweyer
    Abstract: To enjoy the same success in the future as in the past, Malaysia will need to ensure that more people develop the right skills and use them effectively in the workplace. Special attention needs to be devoted to supporting disadvantaged students and adults in developing critical skills and reducing the skills imbalances in the labour market, which can contribute to higher productivity and growth. In light of the importance of skills for fostering labour productivity, this paper examines evidence of skills imbalances in Malaysia and assesses Malaysia’s performance in a number of key policy areas that can help reduce imbalances. The first section provides an overview of skill imbalances in the Malaysian labour market and presents new evidence from the OECD Skills for Jobs database. The subsequent sections discuss how Malaysia performs in four policies areas that are important for minimising imbalances: i) improving teacher quality and practices, ii) strengthening the connection between education institutions and employment, iii) providing training opportunities during working life, and iv) making better use of women’s skills. The final section focuses on demand side policies that can support Malaysia to move towards a high-skill equilibrium and discusses areas of action to improve the conditions that promote the development of a more innovative and dynamic economy.This Working Paper relates to the 2019 OECD Economic Survey of Malaysia ( onomic-snapshot)
    Keywords: adult learning, education, employment, female labour force participation, productivity, skills, skills imbalances, teaching practices
    JEL: J23 J24 J16 I20 O33
    Date: 2019–12–23
  6. By: Natália P. Monteiro; Odd Rune Straume; Marieta Valente
    Abstract: Whether or not the use of remote work increases firm labour productivity is theoretically ambiguous. We use a rich and representative sample of Portuguese firms, and within-firm variation in the policy on remote work, over the period 2011-2016, to empirically assess the causal productivity effect of remote work. Our findings from estimations of models with firm-fixed effects suggest that the average productivity effect of allowing remote work is significantly negative, though relatively small in magnitude. However, we also find a substantial degree of heterogeneity across different categories of firms. In particular, we find evidence of opposite effects of remote work for firms that do not undertake R&D activities and for firms that do, where remote work has a significantly negative (positive) effect on labour productivity for the former (latter) type of firms. Negative effects of remote work are also more likely for small firms that do not export and employ a workforce with a below-average skill level.
    Keywords: remote work, firm labour productivity, panel data
    JEL: D24 L23 M54
    Date: 2019
  7. By: Charles Yuji Horioka; Emin Gahramanov; Aziz Hayat; Xueli Tang
    Abstract: In this paper, we conduct a theoretical and empirical analysis of the impact of bequest motives on the work and retirement behavior of households in Japan using micro data from the Preference Parameters Study of Osaka University. Our empirical findings are consistent with our theoretical model and show that respondents with an altruistic or strategic/exchange bequest motive work more at the intensive margin than those without any bequest motive but that respondents with a strategic or exchange bequest motive work less at the extensive margin (i.e., retire earlier) than those without any bequest motive. Our findings for the strategic or exchange motive suggest that respondents with such a motive tend to work harder than others before they retire so that they can earn more, leave a larger bequest to their children, and elicit more care from them but that they tend to retire earlier than others so that they can start receiving care for themselves and their spouses from their children sooner. A policy implication of our findings is that the exchange of bequests for the care of parents by children may be very sensitive to the inheritance tax framework.
    JEL: D64 J14 J22 J26
    Date: 2020–01
  8. By: Cailin R. Slattery; Owen M. Zidar
    Abstract: This essay describes and evaluates state and local business tax incentives in the United States. In 2014, states spent between $5 and $216 per capita on incentives for firms in the form of firm-specific subsidies and general tax credits, which mostly target investment, job creation, and research and development. Collectively, these incentives amounted to nearly 40% of state corporate tax revenues for the typical state, but some states' incentive spending exceeded their corporate tax revenues. States with higher per capita incentives tend to have higher state corporate tax rates. Recipients of firm-specific incentives are usually large establishments in manufacturing, technology, and high-skilled service industries, and the average discretionary subsidy is $178M for 1,500 promised jobs. Firms tend to accept subsidy deals from places that are richer, larger, and more urban than the average county, and poor places provide larger incentives and spend more per job. Comparing “winning” and runner-up locations for each deal in a bigger and more recent sample than in prior work, we find that average employment within the 3-digit industry of the deal increases by roughly 1,500 jobs. While we find some evidence of direct employment gains from attracting a firm, we do not find strong evidence that firm-specific tax incentives increase broader economic growth at the state and local level. Although these incentives are often intended to attract and retain high-spillover firms, the evidence on spillovers and productivity effects of incentives appears mixed. As subsidy-giving has become more prevalent, subsidies are no longer as closely tied to firm investment. If subsidy deals do not lead to high spillovers, justifying these incentives requires substantial equity gains, which are also unclear empirically.
    JEL: H2 H25 H71 R11 R3 R5
    Date: 2020–01
  9. By: Guilherme Strifezzi Leal; David Turchick
    Abstract: We include elastic labor supply and risk aversion in a standard vertical innovation model in order to address four main questions. First, under what conditions will we find workers in the R&D sector of the economy? Second, under what conditions will these workers actually do any research? Third, can a simple redistributive policy provide an escape route from the so-called no-growth trap? And fourth, to what extent is this policy capable of correcting the inherent inefficiencies of the model?
    Keywords: labor supply; Schumpeterian growth; income redistribution; no-growth trap; research effort
    JEL: H21 O3 O4
    Date: 2019–12–31
  10. By: Maya Eden; Paul Gaggl
    Abstract: To what extent can technological advances in the production of capital account for the recent, worldwide decline in the labor income share? We pose two challenges to the automation narrative: first, estimates of the elasticity of substitution (EOS) between capital and labor tend to fall below or around one, suggesting that a decline in the price of capital should not lead to a decline in the labor income share. Second, we illustrate that, despite technological improvements, the price of capital relative to output has remained roughly constant, worldwide. This poses a challenge to the view that cheaper capital has caused the displacement of workers. We show that a more nuanced approach, which takes seriously the composition of capital, ascribes a prominent role to the automation hypothesis. Though information and communications (ICT) capital is a small fraction of the capital stock, it is highly substitutable with labor, and its user cost declined sharply over the last few decades. A framework that distinguishes between ICT and non-ICT capital is empirically plausible and suggests that automation accounts for more than one quarter of the global decline in the labor share, even if the aggregate EOS is substantially less than unity.
    Keywords: technological change, labor share, ICT
    JEL: E25 E22 J24 J31 O33
    Date: 2019
  11. By: Claudia Goldin; Sari Pekkala Kerr; Claudia Olivetti
    Abstract: Why do competitive firms in the US provide paid parental leave (PPL)? Which firms do and to what extent? We use several firm- and individual-level data sets to answer these questions. These include the BLS-Employee Benefit Survey (EBS) for 2010 to 2018 and an extensive firm-level data collection that we compiled. Our work is undergirded by a two-period model with competitive firms whose workers vary by their optimal firm-specific training and the probability that each will remain on the job after PPL is taken. We find that firm-provided PPL has greatly increased in the last two decades and generally covers new fathers. The levels of provision differ greatly by the industry, firm size, and the degree of firm-specific training. But even the top-of-the-line firm in the US provides fewer fully paid parental weeks than does the median OECD nation.
    JEL: J13 J2 J32
    Date: 2020–01
  12. By: Lamar Pierce; Alex Rees-Jones; Charlotte Blank
    Abstract: Behavioral economists have proposed that loss-averse employees increase productivity when bonuses are "loss framed"—prepaid then clawed back if targets are unmet. We theoretically document that loss framing raises incentives for costly risk mitigation and for inefficient multitasking, potentially leading to large negative performance effects. We empirically document evidence of these concerns in a nationwide field experiment among 294 car dealers. Dealers randomized into loss-framed (but financially identical) contracts sold 5% fewer vehicles than control dealers, generating a revenue loss of $45 million over 4 months. We discuss implications regarding the use of behavioral economics to motivate both employees and firms.
    JEL: D03 D81 J22 J31
    Date: 2020–01
  13. By: Anil Kumar
    Abstract: The Tax Cuts and Jobs Act (TCJA) of 2017 is the most extensive overhaul of the U.S. income tax code since the Tax Reform Act of 1986. Existing estimates of TCJA’s economic impact are based on economic projections using pre-TCJA estimates of tax effects. Following recent pioneering work of Zidar (2019), I exploit plausibly exogenous state-level variation in tax changes and find that an income tax cut equaling 1 percent of GDP led to a 1 percentage point higher nominal GDP growth and about 0.3 percentage point faster job growth in 2018.
    Keywords: Taxes and Economic Growth; Tax Cuts and Jobs Act
    JEL: E62 H30
    Date: 2020–01–03
  14. By: David Neumark
    Abstract: I study age discrimination in hiring, exploiting a difference between age-revealed and partially age-blind hiring procedures. Under the first hiring procedure, age is revealed simultaneously with other applicant information and job offer rates are much lower for older than for younger job applicants. Under the second hiring procedure, interview selections are based on detailed, age-blind on-line applications, while subsequent interviews are not age-blind. Older applicants are not under-selected for interviews, but after in-person interviews when age is revealed, older applicants still face a much lower job offer rate. This evidence is strongly consistent with age discrimination in hiring.
    JEL: J14 J7
    Date: 2020–01
  15. By: Sebastian G. Kessing; Vilen Lipatov; J. Malte Zoubek
    Keywords: Optimal taxation, redistribution, regional inequality, migration, multidimensional screening, delayed optimal control
    JEL: H11 J45 R12
    Date: 2019
  16. By: Vasily Astrov (The Vienna Institute for International Economic Studies, wiiw); Mario Holzner (The Vienna Institute for International Economic Studies, wiiw); Sebastian Leitner (The Vienna Institute for International Economic Studies, wiiw); Isilda Mara (The Vienna Institute for International Economic Studies, wiiw); Leon Podkaminer (The Vienna Institute for International Economic Studies, wiiw); Armon Rezai
    Abstract: Labour markets in the Central and Eastern European member states of the EU (EU-CEE8) have improved significantly since the global economic crisis of 2008-2009. Unemployment rates have declined steadily, primarily due to adverse demographic trends and massive outward migration to the West, which have resulted in a decline in the working-age population. Nevertheless, until recently wage growth in EU-CEE8 was rather restrained, resulting in generally stable wage shares. The so-called ‘Phillips curve’, which represents a negative correlation between unemployment and wage growth, has not held for most of EU CEE8 during this period – unlike, for example, for Austria or Germany. The main reasons for this have been the progressive flexibilisation and liberalisation of the labour markets of EU CEE countries in the years since the economic crisis. In particular, wage negotiation mechanisms have been decentralised and the degree of coverage by collective-bargaining agreements has declined, in some cases dramatically. This has tended to weaken the negotiating position of employees, thereby counteracting the positive effects of the general improvement in the labour market situation. Disclaimer The study was commissioned by the Arbeiterkammer Wien.
    Keywords: wages, wage share, demographic trends, migration, Phillips curve, wage-setting mechanisms
    JEL: J11 J31 J4 J50
    Date: 2019–12
  17. By: Jasmin Droege
    Abstract: I develop a game-theoretic framework to study the repercussions of an evaluator’s bias against a specific group of applicants. The evaluator decides upfront between holding an informed or a blind audition. In the latter, the evaluator learns neither the applicant’s ability nor the gender. I show that, above a threshold bias, the evaluator prefers a blind audition to provide high effort incentives exclusively for high-ability applicants. Consequently, committing to no information can be beneficial for the evaluator. I also show that a highly biased evaluator’s preferences align with those of a highly able female. The introduction of performance uncertainty may lead to market failure or may render informed auditions more profitable, rationalising ability-targeting interventions. My results can explain why blind auditions have increased the probability of women being hired via taste-based discrimination and challenge explanations grounded in sta¬tistical discrimination.
    Keywords: first impression, bias, blind audition, taste-based discrimination, performance un-certainty
    JEL: C70 D81 D86 D91 J16 J71
    Date: 2019–12–13
  18. By: Fe, Eduardo (University of Manchester); Gill, David (Purdue University); Prowse, Victoria (Purdue University)
    Abstract: We investigate how childhood cognitive skills affect strategic sophistication and adult outcomes. In particular, we emphasize the importance of childhood theory-of-mind as a cognitive skill. We collected experimental data from more than seven hundred children in a variety of strategic interactions. First, we find that theory-of-mind ability and cognitive ability both predict level-k behavior. Second, older children respond to information about the cognitive ability of their opponent, which provides support for the emergence of a sophisticated strategic theory-of-mind. Third, theory-of-mind and age strongly predict whether children respond to intentions in a gift-exchange game, while cognitive ability has no influence, suggesting that different measures of cognitive skill correspond to different cognitive processes in strategic situations that involve understanding intentions. Using the ALSPAC birth-cohort study, we find that childhood theory-of-mind and cognitive ability are both associated with enhanced adult social skills, higher educational participation, better educational attainment, and lower fertility in young adulthood. Finally, we provide evidence that school spending improves theory-of-mind in childhood.
    Keywords: Cognitive skills; theory-of-mind; cognitive ability; fluid intelligence; children; experiment; strategic sophistication; level-k; bounded rationality; non-equilibrium thinking; intentions; gift-exchange game; competitive game; strategic game; ALSPAC; social skills; adult outcomes; life outcomes; education; fertility; labor market; wages; employment; school spending; childhood intervention. JEL Classification: C91; D91; J24
    Date: 2019

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