nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2020‒01‒27
thirteen papers chosen by
Joseph Marchand
University of Alberta

  1. Approaches to Changing Military Compensation By Congressional Budget Office
  2. Inputs, Incentives, and Self-Selection at the Workplace By Amodio, Francesco; Martinez-Carrasco, Miguel A.
  3. Who Pays for and Who Benefits from Minimum Wage Increases? Evidence from Israeli Tax Data on Business Owners and Workers By Lev Drucker; Katya Mazirov; David Neumark
  4. Labor market reforms and allocative efficiency in Italy By Nicolò Gnocato; Chiara Tomasi; Francesca Modena
  5. Why are there more accidents on Mondays? Economic incentives, ergonomics or externalities By Michelle Poland; Isabelle Sin; Steven Stillman
  6. New Evidence on Disability Benefit Claims in the UK: The Role of Health and the Local Labour Market By Roberts, Jennifer; Taylor, Karl
  7. A Human Capital Theory of Structural Transformation By Max Gillman
  8. Health, wealth, and informality over the life cycle By Julien Albertini; Xavier Fairise; Anthony Terriau
  9. Are Employment Effects of Minimum Wage the Same Across the EU? A Meta-Regression Analysis By Tomas Kucera
  10. Menstrual Health, Worker Productivity and Well-being among Female Bangladeshi Garment Workers By Kristina Czura; Andreas Menzel; Martina Miotto
  11. Who Demands Labour (De)Regulation in the Developing World? Insider–Outsider Theory Revisited By Ronconi, Lucas; Kanbur, Ravi; López-Cariboni, Santiago
  12. The Long-Run Impacts of Adolescent Drinking: Evidence from Zero Tolerance Laws By Abboud, Tatiana; Bellou, Andriana; Lewis, Joshua
  13. The Dark Side of Monetary Bonuses : Theory and Experimental Evidence By Gonzalez-Jimenez, Victor; Dalton, Patricio; Noussair, Charles

  1. By: Congressional Budget Office
    Abstract: The Department of Defense (DoD) and the Department of Veterans Affairs together spent about $350 billion in 2019 on compensation and benefits for current and former military personnel. Compensation for military personnel is a mix of cash earnings and noncash benefits received while they are serving, as well as the deferred pay and benefits they may receive after they leave.
    JEL: H51 H52 H55 H56 I13 I22 I28 J26 J31 J32 J33 J38 J45
    Date: 2020–01–14
  2. By: Amodio, Francesco (McGill University); Martinez-Carrasco, Miguel A. (Universidad de los Andes)
    Abstract: This paper studies how asymmetric information over inputs affects workers' response to incentives and self-selection at the workplace. Using daily records from a Peruvian egg production plant, we exploit a sudden change in the worker salary structure and find that workers' effort, firm profits, and worker participation change differentially along the two margins of input quality and worker type. Firm profits increase differentially from high productivity workers, but absenteeism and quits of these workers also differentially increase. Evidence shows that information asymmetries over inputs between workers and managers shape the response to incentives and self-selection at the workplace.
    Keywords: asymmetric information, input heterogeneity, incentives, self-selection
    JEL: D22 D24 J24 J33 M11 M52 M54 O12
    Date: 2019–12
  3. By: Lev Drucker; Katya Mazirov; David Neumark
    Abstract: A key goal of a higher minimum wage is income redistribution towards low-income families. Existing research on the minimum wage focuses on the impact on affected workers, but is silent on the incomes of the owners of businesses who pay for a higher minimum wage. Higher minimum wages will do more to redistribute income if the owners of businesses who pay the higher minimum are at the top of the income distribution, and conversely if minimum wage employers hare relatively low incomes, the redistributional effects are weakened. We study evidence on this question using a unique administrative dataset on the universe of tax records for Israel, in the period surrounding a large minimum wage increase. We find that the minimum wage hike reduced profits of companies, with minimum-wage intensive companies bearing the bulk of the cost and adjusting their workforces more aggressively, and profits declining more for lower-income business owners. Moreover, owners of businesses with higher shares of minimum-wage workers ranked at the bottom of the income distribution of business owners, and their incomes were comparable to those of mid-to-high level workers. In most cases, spouses of business owners earn less than the owners while spouses of minimum-wage workers earn more, further reducing the redistributive effect of the minimum wage increase.
    JEL: H22 H23 J23 J38
    Date: 2019–12
  4. By: Nicolò Gnocato; Chiara Tomasi; Francesca Modena
    Abstract: This paper examines the extent to which labour market reforms of temporary contracts introduced in Italy at the beginning of the century influenced aggregate productivity via their e↵ects on the eciency of resource allocation. Using firm-level data from the Italian manufacturing sector, we measure resource misallocation by computing the covariance between firm size and productivity at the sectoral-regional level. We then implement a di↵erence-in-di↵erences approach to study the impact of the reforms, exploiting the cross-region and sector di↵erences in the timing of adoption. Our results suggest that the e↵ect on allocative eciency depends on the policy considered. While the reform of apprenticeship contracts made the reallocation of resources across heterogeneous firms more eciency enhancing, the deregulation of the use of fixed-term contracts did not have, on average, the intended results. The apprenticeship reform might have induced more productive firms, in particular, to invest in human capital by hiring workers to whom they provided job training, gaining market shares in so doing. In contrast, the uncertainty related to the newly lawful motives under which firms were allowed to temporarily hire workers might have reduced the incentive to use fixed-term contracts.
    Keywords: Allocative efficiency, Resource allocation, Labor market reforms
    JEL: F10 F14 F36 G20 G32 L25
    Date: 2020
  5. By: Michelle Poland (WorkSafe New Zealand); Isabelle Sin (Motu Economic and Public Policy Research); Steven Stillman (Free University of Bozen-Bolzano)
    Abstract: Research consistently finds more workplace injuries occur on Mondays than on other weekdays. One hypothesis is that workers fraudulently claim that off-the-job weekend sprains and strains occurred at work on the Monday in order to receive workers’ compensation. We test this using data from New Zealand, where compensation is virtually identical whether or not an injury occurs at work. We still find that work claims, especially sprains and strains, occur disproportionately on Mondays, although less than in other jurisdictions. This suggests fraudulent claims in other countries are just one part of the story. Furthermore, we find work claims remain high on Tuesdays, and that workers’ sprains and strains that occur off-the-job also disproportionately fall on Mondays. Sprains and strains treated at hospitals, which are not closed over the weekend, are also elevated on Mondays. However, Monday lost-time injuries are less severe than injuries on other days. Our findings are consistent with a physiological mechanism contributing to elevated Monday injury claims in New Zealand, but do not suggest doctors’ offices being closed over the weekend, ergonomic explanations, or work being riskier on Mondays play important roles.
    Keywords: Monday effect, workers' compensation, accidents, incentives
    JEL: I18 I13 J38
    Date: 2020–01
  6. By: Roberts, Jennifer (University of Sheffield); Taylor, Karl (University of Sheffield)
    Abstract: During the 1980s and 1990s there was a steep rise in disability benefit claims in the UK, especially among older male workers, and the debate centred on the relative generosity of these benefits as well as the effects of deindustrialisation and job destruction. Since that time the disability benefit system has been subject to a series of reforms all largely aimed at reducing the number of claims and targeting benefits more closely to those with the greatest health need. At the same time the UK labour market has also evolved and in particular now has an historically low level of unemployment, accompanied by falling real earnings. In this paper we use individual longitudinal data from 2009 to 2018 in a dynamic panel framework to explore the relative importance of health status, benefit generosity and local labour market conditions for disability benefit claims in the modern UK labour market. We focus particularly on spatial variation in claims, and find that, in line with older evidence, while health status is clearly important, geographic variation in labour market conditions and benefit generosity still influence the propensity to claim those disability benefits that are conditional on not working. In addition, local benefit work capability re-assessment rates, which reflect the stringency that new procedures are being implemented locally, are an important factor. The average effects also mask important heterogeneity by sex, age, education level, income and across regions.
    Keywords: health, disability, employment support allowance, local labour markets
    JEL: I12 I38 J23
    Date: 2019–12
  7. By: Max Gillman
    Abstract: The paper presents a human capital based theory of the sectoral transformation along the balanced growth path equilibrium. Allowing a small upward trend in the productivity of the human capital sector, combined with di§erential human capital intensity and constant productivity across sectors, output gradually shifts over time from relatively less human capital intensive sectors towards more human capital intensive sectors. Sectors intensive in the factor that is becoming relatively more plentiful find their relative prices falling, their "effective productivities" rising at di§erential rates inversely to their relative price decline, and their relative outputs expanding. Adding more sectors of greater human capital intensity causes labor time to decrease across existing sectors, and by relatively more in the least human capital sectors. literature.
    Keywords: human capital intensity; sectoral allocation; labor shares; productivity; technological change; neoclassical; optimal growth model
    JEL: E13 J24 O11 O14 O33 O41
    Date: 2019–12
  8. By: Julien Albertini (Univ Lyon, Université Lumière Lyon 2, GATE UMR 5824, F-69130 Ecully, France); Xavier Fairise (GAINS, University of Le Mans); Anthony Terriau (GAINS, University of Le Mans)
    Abstract: How do labor market and health outcomes interact over the life cycle in a country characterized by a large informal sector and strong inequalities? To quantify the effects of bad health on labor market trajectories, wealth, and consumption, we develop a life-cycle heterogeneous agents model with a formal and an informal sector. We estimate our model using data from the National Income Dynamics Study, the first nationally representative panel study in South Africa. We run counterfactual experiments and show that health shocks have an important impact on wealth and consumption. The channel through which these shocks propagate strongly depends on the job status of individuals at the time of the shock. For formal workers, bad health reduces labor efficiency, which translates into lower earnings. For informal workers and the non-employed, the shock lowers the job finding rate and in- creases job separation into non-employment, which results in a surge in non-employment spells. As bad health spells persist more for non-employed than for employed individuals, the interaction between labor market risks and health risks generates a vicious circle.
    Keywords: Health, Wealth, Life cycle, Informality
    JEL: I14 I15 E26 O17 J46 J64
    Date: 2019
  9. By: Tomas Kucera (Czech National Bank, Na prikope 28, 115 03 Prague 1, Czech Republic)
    Abstract: There is still an ongoing debate on employment effects of minimum wage. Not only the magnitude, but also the direction of the effect is a matter of concern. Economic theory on its own cannot unanimously resolve the dispute as it provides concepts within which both negative and positive effects are conceivable. In order to integrate the empirical findings, I deployed a meta-regression analysis (MRA) to systematically review 187 estimates from 18 empirical studies that estimated minimum wage elasticities of employment for countries of the EU. The results show that, overall, there is no practically significant employment effect of minimum wage. Also, no evidence of publication selection bias was found. A more sophisticated, multivariate MRA identified differential effects for specific industries, namely residential home care and retail sector for which the employment effects are significantly negative. The results also indicate that minimum wage negatively affects female employment. Finally, the multiple MRA also investigated whether the employment effects differ across three wider regions of the EU (the West, the South, and the East). The results provide robust evidence of significant differential effects, and show that minimum wage has moderately negative employment effects in the eastern countries of the EU.
    Keywords: Minimum wage, employment effect, meta-regression analysis
    JEL: J38 J68
    Date: 2020–01
  10. By: Kristina Czura; Andreas Menzel; Martina Miotto
    Abstract: We conducted a randomised controlled trial (RCT) on a sample of 1,000 female garment workers in three factories in Bangladesh, offering access to free sanitary pads at work to 500 of the workers. We cross-randomised participation in information sessions for hygienic menstrual health care implemented by an experienced local NGO, and we vary the salience of commonly perceived taboos in the pad collection process. We find effects of the free pads and information sessions on self-reported pad use, but not of the taboo variations. We find effects on absenteeism and adherence to traditional restrictive and health-adverse taboos surrounding menstruation, but not on worker turnover or self-reported well-being at work. PRELIMINARY VERSION: The trial is currently being repeated between September 2019 and April 2020, with an additional 1,000 workers to reach the final targeted sample size.literature.
    Keywords: menstrual health; taboos; productivity; export manufacturing;
    JEL: O14 O15 O35 M54 J32 J81
    Date: 2019–12
  11. By: Ronconi, Lucas (Centro de Investigación y Acción Social (CIAS)); Kanbur, Ravi (Cornell University); López-Cariboni, Santiago (Universidad de la República, Uruguay)
    Abstract: Contrary to the predictions of the insider–outsider model, we show that the large majority of outsiders in developing countries support, rather than oppose, protective labour regulations. This evidence holds across countries in different regions, across different types of protective labour regulations (i.e. severance payment, minimum wages, working time), and for different categories of outsiders (i.e. unemployed workers and employees without access to legally mandated labour benefits). We revise the economic and political assumptions of the insider–outsider model, discussing their empirical relevance in a developing country context.
    Keywords: informal, labour, segmentation, monopsony, fairness
    JEL: J4 J8 O17
    Date: 2019–12
  12. By: Abboud, Tatiana (University of Montreal); Bellou, Andriana (University of Montreal); Lewis, Joshua (University of Montreal)
    Abstract: This paper provides the first long-run assessment of adolescent binge drinking on later- life health and labor market outcomes. Our analysis exploits cross-state variation in the rollout of "Zero Tolerance" (ZT) Laws, which set strict alcohol limits for drivers under age 21 and led to sharp reductions in youth binge drinking. We adopt a difference-in-differences approach that combines information on state and year of birth to identify individuals exposed to the laws during adolescence and tracks the evolving impacts into middle age. We find that ZT Laws led to significant improvements in later-life health. Individuals exposed to the laws during adolescence were substantially less likely to suffer from cognitive and physical limitations in their 40s. The health effects are mirrored by improved labor market outcomes. These patterns cannot be attributed to changes in educational attainment or marriage. Instead, we find that affected cohorts were substantially less likely to drink heavily by middle age, suggesting an important role for adolescent initiation and habit-formation in affecting long-term substance use.
    Keywords: Zero Tolerance Laws, binge drinking, disabilities, substance abuse
    JEL: I18 I12 J20
    Date: 2019–12
  13. By: Gonzalez-Jimenez, Victor; Dalton, Patricio (Tilburg University, Center For Economic Research); Noussair, Charles
    Abstract: To incentivize workers and boost performance, firms often offer monetary bonuses for the achievement of production goals. Such bonuses appeal to two types of motivations of the worker. On the one hand, the existence of a goal, on its own, triggers an intrinsic motivation associated with the desire to not fall short of the goal. On the other hand, the money paid to achieve the goal constitutes an extrinsic motivation. This paper studies the possibility that these two effects are substitutes when workers set their own goals. We develop a theoretical model that predicts that if the worker is sufficiently loss averse and faces uncertainty about reaching a production goal, offering a monetary payment contingent on reaching such a goal is counterproductive. This is because under the presence of monetary bonuses, the loss averse worker prefers setting lower goals, which yield lower but more likely bonus payments. Lower goals, in turn, negatively affect subsequent performance. Results from a laboratory experiment corroborate this prediction. This paper highlights the limits of monetary bonuses as an effective incentive when workers are loss averse.
    Keywords: goal-setting; contracts; loss aversion; bonuses; experiment
    JEL: J41 D90 C91 D81
    Date: 2020

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