nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2020‒02‒10
nineteen papers chosen by
Joseph Marchand
University of Alberta

  1. Parental Leave Reform and Long-run Earnings of Mothers By Corinna Frodermann; Katharina Wrohlich; Aline Zucco
  2. Nominal Wage Adjustments and the Composition of Pay: New Evidence from Payroll Data By Daniel Schaefer; Carl Singleton
  3. Locus of Control and Female Labor Force Participation By Juliane Hennecke
  4. Robots, Reshoring, and the Lot of Low-Skilled Workers By Krenz, Astrid; Prettner, Klaus; Strulik, Holger
  5. Rent sharing in China: Magnitude, heterogeneity and drivers By Duan, Wenjing; Martins, Pedro S.
  6. Growth, Automation and the Long Run Share of Labor By Debraj Ray ⓡ; Dilip Mookherjee
  7. Workplace Knowledge Flows By Jason Sandvik; Richard Saouma; Nathan Seegert; Christopher T. Stanton
  8. Unpacking Skill Bias: Automation and New Tasks By Daron Acemoglu; Pascual Restrepo
  9. Coordinated Work Schedules and the Gender Wage Gap By German Cubas; Chinhui Juhn; Pedro Silos
  10. The US labour share of income: What shocks matter? By Ivan Mendieta-Munoz; Codrina Rada; Marcio Santetti; Rudiger von Arnim
  11. Gender pay gap: a route from the North to the South of Italy By Maria Elena Filippin
  12. Taking off into the Wind: Unemployment Risk and State-Dependent Government Spending Multipliers By Julien Albertini; Stéphane Auray; Hafedh Bouakez; Aurélien Eyquem
  13. Bundling Time and Goods: Implications for Hours Dispersion By Lei Fang; Anne Hannusch; Pedro Silos
  14. Employment vs. Homestay and the Happiness of Women in the South Caucasus By Karine Torosyan; Norberto Pignatti
  15. Technology and the future of work in emerging economies: What is different By Daniel Alonso Soto
  16. Automation and labor demand in European countries: A task-based approach to wage bill decomposition By Martin Labaj; Materj Vitalos
  17. Migration and Imitation By Olena Ivus; Alireza Naghavi; Larry D. Qiu
  18. Finance and Children’s Academic Performance By Qing Hu; Ross Levine; Chen Lin; Mingzhu Tai
  19. Development Aid, Remittances Inflows and Wages in the Manufacturing Sector of Recipient-Countries By Gnangnon, Sèna Kimm

  1. By: Corinna Frodermann (Institute for Employment Research, Nuremberg, Germany); Katharina Wrohlich (DIW Berlin); Aline Zucco (DIW Berlin)
    Abstract: Paid parental leave schemes have been shown to increase women’s employment rates but decrease their wages in case of extended leave durations. In view of these potential trade-offs, many countries are discussing the optimal design of parental leave policies. We analyze the impact of a major parental leave reform on mothers’ long-term earnings. The 2007 German parental leave reform replaced a means-tested benefit with a more generous earnings-related benefit that is granted for a shorter period of time. Additionally, a “daddy quota” of two months was introduced. To identify the causal effect of this policy on long-run earnings of mothers, we use a difference-in-difference approach that compares labor market outcomes of mothers who gave birth just before and right after the reform and nets out seasonal effects by including the year before. Using administrative social security data, we confirm previous findings and show that the average duration of employment interruptions increased for high-income mothers. Nevertheless, we find a positive long-run effect on earnings for mothers in this group. This effect cannot be explained by changes in working hours, observed characteristics, changes in employer stability or fertility patterns. Descriptive evidence suggests that the stronger involvement of fathers, incentivized by the “daddy months”, could have facilitated mothers’ re-entry into the labor market and thereby increased earnings. For mothers with low prior-to-birth earnings, however, we do not find any beneficial labor market effects of this parental leave reform.
    Keywords: parental leave, wages, labor supply
    JEL: H31 J13 J22 J24 J31
    Date: 2020–01
  2. By: Daniel Schaefer (Institut für Volkswirtschaftslehre, Johannes-Kepler-Universität Linz); Carl Singleton (Department of Economics, University of Reading)
    Abstract: We use representative employer payroll data from Great Britain and the period 2006-2018 to document novel facts about nominal wage adjustments, focusing on workers who stay in the same firm and job from one year to the next. The richness of these data allows us to analyse separately basic pay and the other components of earnings, such as overtime and incentive pay, while controlling for hours worked. Weekly and hourly basic pay show signs of downward nominal rigidity, but non-basic pay components adjust more commonly. Unusually, these payroll-based data also report the pay rates of hourly-paid employees. A quarter of these workers, who stay in the same job between years, typically see no change in their rate of pay, and very few experience wage cuts. Finally, we exploit the employer-employee link in our data and find some evidence that wage setting is state-dependent rather than time-dependent.
    Keywords: downward nominal wage rigidity, payroll records, components of pay, hourly pay
    JEL: E24 J31 J33
    Date: 2020–01–28
  3. By: Juliane Hennecke (NZ Work Research Institute, Auckland University of Technology)
    Abstract: Research on female labor force participation has a long tradition in economic research. While many open questions have been answered on the gender gap in labor participation, the prevalent heterogeneity between women still keeps economists busy. While traditional economic theory attributed unexplained differences in decison-making to idiosyncratic shocks, modern empirical approaches are more and more intersted in investigating this psychological black box behind participation decisions. This paper contributes to the research by discussing the role of the presonality trait locus of control (LOC), a measure of an individual's belief about the causal relationship between behavior and live outcomes, for for differences in participation probabilities between women. In line with the existing literature, an important role of LOC for independence preferences as well as subjective beliefs about returns to investments are proposed. The connection between LOC and participation decisions is tested using German survey data, finding that internal women are on average more likely to be available for market production and this higher availability aso translates into higher employment probabilities. Addisitonal analyses identify a strong heterogeneity of the relationship with respect to underlying monetary constraints and social working norms.
    Keywords: locus of control, labor supply, female labor force participation, social norms, personality, preferences
    JEL: D91 D13 J21 J22 J16
    Date: 2019–12
  4. By: Krenz, Astrid; Prettner, Klaus; Strulik, Holger
    Abstract: We propose a theoretical framework to analyze the offshoring and reshoring decisions of firms in the age of automation. Our theory suggests that increasing productivity in automation leads to a relocation of previously offshored production back to the home economy but without improving low-skilled wages and without creating jobs for low-skilled workers. Since it leads also to increasing wages for high-skilled workers, automation-induced reshoring is associated with an increasing skill premium and increasing inequality. We develop a measure for reshoring activity at the macro-level and, using data from the world input output table, we provide evidence for automation-driven reshoring. On average, within manufacturing sectors, an increase by one robot per 1000 workers is associated with a 3.5% increase of reshoring activity. Using robots in countries with similar sectoral structure as an instrument, we find that an increase by one robot per 1000 workers causes a 2.5% increase of reshoring activity. We also provide the first cross-country evidence that reshoring is positively associated with wages and employment for high-skilled labor but not for low-skilled labor and that tariffs increase the degree of reshoring.
    Keywords: Automation,Reshoring,Employment,Wages,Inequality,Tariffs
    JEL: F13 F62 J31 O33
    Date: 2020
  5. By: Duan, Wenjing; Martins, Pedro S.
    Abstract: Do firms in China share rents with their workers? We address this question by examining firm-level panel data covering virtually all manufacturing firms over the period 2000-2007, representing an average of 52 million workers per year. We find evidence of rent sharing (RS), with wage-profit elasticies of between 4% and 6%. These results are based on multiple instrumental variables, including firm-specific international trade shocks. We also present a number of complementary findings to understand better the nature of RS in the country: it involves an element of risk sharing, as wages also decrease when profits fall; RS is lower in regions with more latent competition from rural workers; higher minimum wages tend to reduce RS; and, while employer labour market power reduces wages, it increases RS. Overall, despite its importance, RS in China is smaller and more symmetric than in developed economies, which re ects the weaker bargaining power of its workers and the different nature of its labour market institutions.
    Keywords: Wages,Bargaining,Monopsony
    JEL: J31 J41 J50
    Date: 2020
  6. By: Debraj Ray ⓡ; Dilip Mookherjee
    Abstract: We provide an argument for long-term automation and decline in the labor income share, driven by capital accumulation rather than technical progress or rising markups. We emphasize a fundamental asymmetry across physical and human capital. An individual can indefinitely replicate her claims on the former, but — after a point — her human endowment cannot be cloned and rescaled in the same way. Then ongoing capital accumulation gives rise to progressive automation, and the share of labor income converges to zero. The displacement of human labor is gradual, and real wages could rise indefinitely. The results extend to endogenous technical change.
    JEL: D33 E25 J24 J31 O33
    Date: 2020–01
  7. By: Jason Sandvik; Richard Saouma; Nathan Seegert; Christopher T. Stanton
    Abstract: What prevents the spread of information among coworkers, and which management practices facilitate workplace knowledge flows? We conducted a field experiment in a sales company, addressing these questions with three active treatments. (1) Encouraging workers to talk about their sales techniques with a randomly chosen partner during short meetings substantially lifted average sales revenue during and after the experiment. The largest gains occurred for those matched with high-performing coworkers. (2) Worker-pairs given incentives to increase joint output increased sales during the experiment but not afterward. (3) Worker-pairs given both treatments had little improvement above the meetings treatment alone. Managerial interventions providing structured opportunities for workers to initiate conversations with peers resulted in knowledge exchange; incentives based on joint output gains were neither necessary nor sufficient for knowledge transmission.
    JEL: J24 L23 M12 M5 M52 M53 M54
    Date: 2020–01
  8. By: Daron Acemoglu; Pascual Restrepo
    Abstract: The standard approach to modeling inequality, building on Tinbergen's seminal work, assumes factor-augmenting technologies and technological change biased in favor of skilled workers. Though this approach has been successful in conceptualizing and documenting the race between technology and education, it is restrictive in a number of crucial respects. First, it predicts that technological improvements should increase the real wages of all workers. Second, it requires sizable productivity growth to account for realistic changes in relative wages. Third, it is silent on changes in job and task composition. We extend this framework by modeling the allocation of tasks to factors and allowing richer forms of technological changes in particular, automation that displaces workers from tasks they used to perform, and the creation of new tasks that reinstate workers into the production process. We show that factor prices depend on the set of tasks that factors perform, and that automation: (i) powerfully impacts inequality; (ii) can reduce real wages; and (iii) can generate realistic changes in inequality with small changes in productivity. New tasks, on the other hand, can increase or reduce inequality depending on whether it is skilled or unskilled workers that have a comparative advantage in these new activities. Using industry-level estimates of displacement driven by automation and reinstatement due to new tasks, we show that displacement is associated with significant increases in industry demand for skills both before 1987 and after 1987, while reinstatement reduced the demand for skills before 1987, but generated higher demand for skills after 1987. The combined effects of displacement and reinstatement after 1987 explain a significant part of the shift towards greater demand for skills in the US economy.
    JEL: J23 J24 J31 O33
    Date: 2020–01
  9. By: German Cubas (Department of Economics, University of Houston); Chinhui Juhn (Department of Economics, University of Houston); Pedro Silos (Department of Economics, Temple University)
    Abstract: Using U.S. time diary data we construct occupation-level measures of coordinated work schedules based on the concentration of hours worked during peak hours of the day. A higher degree of coordination is associated with higher wages but also a larger gender wage gap. In the data women with children allocate more time to household care and are penalized by missing work during peak hours. An equilibrium model with these key elements generates a gender wage gap of 6.6 percent or approximately 30 percent of the wage gap observed among married men and women with children. If the need for coordination is equalized across occupations and set to a relatively low value (i.e. Health care support), the gender gap would fall by more than half to 2.7 percent.
    Keywords: Labor Supply, Occupations, Coordination, Work Schedules, Time Use, Gender Wage Gap
    JEL: J2 J3 E2
    Date: 2020–01
  10. By: Ivan Mendieta-Munoz; Codrina Rada; Marcio Santetti; Rudiger von Arnim
    Abstract: We propose a novel methodological approach to disentangle the main structural shocks affecting the US labour share of income during the immediate post-war era (1948Q!-1984Q4) and the Great Moderation (1985Q1-2018Q3). We motivate a SVAR model in aggregate demand, unemployment rate, real wage and labour productivity, which captures key components of the labour share. The paper then (i) demonstrates statistical support for separating the sample into two periods; (ii) employs the model to identify four structural innovations: aggregate demand, labour supply, wage bargaining, and productivity; (iii) quantifies the dynamic responses of the labour share to each structural shock; (iv) compares these results across the two periods; and (v) indicates their robustness to estimation of the impulse responses with stationary variables or in levels, and via local projections. The results show that the two periods differ substantially. First, in order of magnitude, the labour share responded mainly to productivity, aggregated demand, and wage bargaining shocks during the immediate post-war era; whereas wage bargaining, productivity, and aggregate demand shocks mattered most during the Great Moderation. Second, these impulse responses are statistically significantly different across the two periods for wage bargaining and productivity shocks. Increased (decreased) sensitivity to wage bargaining (productivity) shocks during the Great Moderation suggests that the decline in the labour share is driven by the factors that govern wage setting.
    Keywords: US labour share of income, wage bargaining shocks, productivity shocks, aggregate demand shocks, labour supply shocks.
    JEL: E25 E24 E32
    Date: 2020
  11. By: Maria Elena Filippin (University of Pavia)
    Abstract: This paper analyzes the gender pay gap across different regions in Italy, using the Oaxaca-Blinder decomposition method. We expect regional heterogeneity, both in terms of the gender pay gap and in its determinants. Our results show that, on a regional basis, the retribution gap widely varies, as its percentages of the explained and unexplained parts. Workers’ observable characteristics, related to both labor and personal features, that justify the explained part at a national level are confirmed by the regional data. Furthermore, data on the activity rate show that both at a national and regional level, female participation to the labor market, although it has been improving in recent years, is still profoundly lower than the male one. Therefore, we implement the Heckman correction, which reveals that women’s model coefficients are overestimated, at a national level and in half of the Italian regions. This result suggests that, although female participation in the labor market is lower than the male one, the fewer women participating in the labor market, on average, have higher productivity than men.
    Keywords: Gender Pay Gap, Oaxaca-Blinder, Italian regions
    JEL: J16 J21 J31 O15 R1
    Date: 2019–12
  12. By: Julien Albertini (Univ Lyon, Université Lumière Lyon 2, GATE UMR 5824, F-69130 Ecully, France); Stéphane Auray (CREST-Ensai and ULCO); Hafedh Bouakez (Department of Applied Economics and CIREQ, HEC Montréal, 3000 chemin de la Côte-Sainte-Catherine, Montréal, Québec, Canada H3T 2A7); Aurélien Eyquem (Univ Lyon, Université Lumière Lyon 2, GATE UMR 5824, F-69130 Ecully, France, and Institut Universitaire de France)
    Abstract: We propose a model with involuntary unemployment, incomplete markets, and nominal rigidity, in which the effects of government spending are state-dependent. An increase in government purchases raises aggregate demand, tightens the labor market and reduces unemployment. This in turn lowers unemployment risk and thus precautionary saving, leading to a larger response of private consumption than in a model with perfect insurance. The output multiplier is further amplified through a composition effect, as the fraction of high-consumption households in total population increases in response to the spending shock. These features, along with the matching frictions in the labor market, generate significantly larger multipliers in recessions than in expansions. As the pool of job seekers is larger during downturns than during expansions, the concavity of the job-finding probability with respect to market tightness implies that an increase in government spending reduces unemployment risk more in the former case than in the latter, giving rise to countercyclical multipliers.
    Keywords: Government spending, Multipliers, Precautionary saving, State dependence, Unemployment risk
    JEL: D52 E21 E62
    Date: 2020
  13. By: Lei Fang (Federal Reserve Bank of Atlanta); Anne Hannusch (Department of Economics, University of Mannheim); Pedro Silos (Department of Economics, Temple University)
    Abstract: We document the large dispersion in hours worked in the cross-section. We account for this fact using a model in which households combine market inputs and time to produce a set of non-market activities. To estimate the model, we create a novel data set that pairs expenditures and time use for each activity. The estimated model can account for a large fraction of the dispersion in hours worked. The substitutability between market inputs and time within an activity and across a sizable number of activities is key. Models missing these features can only generate one-third of the observed hours dispersion.
    Keywords: Time Allocation, Consumption Expenditures, Hours Dispersion, Elasticity of Substitution
    JEL: J22 E21 D11
    Date: 2020–01
  14. By: Karine Torosyan (International School of Economics at TSU); Norberto Pignatti (International School of Economics - Tbilisi)
    Abstract: Modern women often face an uneasy choice: dedicating their time to reproductive household work, or joining the workforce and spending time away from home and household duties. Both choices are associated with benefits, as well as non-trivial costs, and necessarily involve some trade-offs, influencing the general feeling of happiness women experience given their decision. The trade-offs are especially pronounced in traditional developing countries, where both the pressure for women to stay at home and the need to earn additional income are strong, making the choice even more controversial. To understand the implications of this choice on the happiness of women in these types of countries we compare housewives and working women of the South Caucasus region. The rich data collected annually by the Caucasus Research Resource Center allows us to match working women with their housewife counterparts and to compare the level of happiness across the two groups – separately for each country as well as for Armenian and Azerbaijani minorities residing in Georgia. We find a significant negative happiness gap for working women in Armenia and in Azerbaijan, but not in Georgia. The absence of such a gap among the Armenian and Azerbaijani minorities of Georgia indicates that the gap is mostly a country- rather than an ethnicity-specific effect.
    Keywords: female employment, reproductive housework, life satisfaction, happiness, propensity score matching
    JEL: I31 J16 J21 J24
    Date: 2020–01
  15. By: Daniel Alonso Soto
    Abstract: Technological developments are likely to bring many new opportunities, which may be even larger in emerging economies and may allow them to “leapfrog” certain stages of development. Notwithstanding these opportunities, emerging economies face significant challenges associated with rapid technological progress. Many of these challenges are the same as in advanced economies, but differences in starting conditions may result in a greater threat for the emerging world. This study explores the benefits and risks brought by this new technological wave from the perspective of thirteen key emerging economies: Argentina, Brazil, Colombia, Costa Rica, Chile, China, India, Indonesia, Mexico, Russia, Saudi Arabia, South Africa and Turkey. In particular, it examines: the risk of automation; whether labour markets are polarising; and the potential benefits (but also challenges) of the platform economy.
    JEL: J24 J21 J23 J30 O33
    Date: 2020–01–30
  16. By: Martin Labaj; Materj Vitalos
    Abstract: To understand the effects of automation and other types of technological changes on European labor demand, we use an empirical decomposition of observed changes in the total wage bill in the economy developed by Acemoglu and Restrepo (2019). The decomposition is derived from a task-based model that allows us to study the effects of different technologies on labor demand. At the center of this framework is the task content of production|measuring the allocation of tasks to factors of production. Automation, by creating a displacement effect, shifts the task content of production against labor, while the introduction of new tasks in which labor has a comparative advantage improves it via the reinstatement effect. Overall effects are country- and time-specific and call for an empirical exploration. We apply the decomposition to 15 European countries with good data coverage in the EU KLEMS database.
    Keywords: automation, displacement effect, labor demand, productivity, reinstatement effect, technology, wage share
    JEL: J23 J24
    Date: 2019–12–28
  17. By: Olena Ivus (Queen's University); Alireza Naghavi (University of Bologna); Larry D. Qiu (University of Hong-Kong)
    Abstract: This paper develops a North-South trade model with heterogeneous labour and horizontally differentiated products and compares the implications of two policies: Southern intellectual property rights (IPRs) and Northern immigration policy that aims to attract Southern talent as means of preempting imitation. Individuals self-select into becoming entrepreneurs and innovate (imitate) in the North (South). The likelihood of imitation depends on product quality, imitator’s ability, and strength of IPRs. Several interrelated channels of competition are identified. Allowing high-ability migration when IPRs protection in the South is weak shifts imitation to low-quality and innovation to high-quality products. The outcome is in stark contrast to the policy of strengthening IPRs, which limits low-quality imitation and encourages low-quality innovation. High-ability migration also increases the income of lowability entrepreneurs, as well as the average quality of products in the high-ability imitation sector in the South.
    Keywords: Intellectual propert yrights; High-skilled migration; Imitation; Innovation; Product quality; Entrepreneurability
    JEL: F22 O31 O34 J24 K37 O38
    Date: 2019–12–20
  18. By: Qing Hu; Ross Levine; Chen Lin; Mingzhu Tai
    Abstract: What is the impact of regulatory reforms that enhance credit market efficiency on children’s human capital? Using a parent-child panel dataset, we find that such reforms reduced children’s academic performance in low-income families. Consistent with the view that financial development entices low-income parents to substitute out of childrearing and into employment with adverse effects on children’s education, we find that among low-income families, regulatory reforms: increased mother’s employment hours, reduced parental supervision and parent-child discussions about school and college, and had bigger adverse effects when mothers were not already working full-time and grandparents were not living with the child.
    JEL: G28 I2 J2
    Date: 2020–01
  19. By: Gnangnon, Sèna Kimm
    Abstract: This article has considered the effect of development aid and remittances inflows on wages in the manufacturing sector of the recipient-economies. The empirical analysis has used a sample of 95 countries over the period 1963-2016, and on the two-step system Generalized Methods of Moments (GMM). Results show for the full sample that while remittances influence positively wages, development aid exerts a negative effect on wages, although LDCs enjoy a positive effect of development aid on wages. Additionally, the effects of development aid and remittances on wages depend on the prevailing real exchange rate as well as the values of manufacturing exports.
    Keywords: Development aid,Remittances inflows,Wages in the manufacturing sector,Real Exchange Rate,Manufactured exports
    JEL: F35 J30 O14
    Date: 2020

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