nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2020‒03‒09
fourteen papers chosen by
Joseph Marchand
University of Alberta

  1. Parental Leave Reform and Long-Run Earnings of Mothers By Frodermann, Corinna; Wrohlich, Katharina; Zucco, Aline
  2. Does retirement decrease the familiarity with ICT of older individuals? By Danilo Cavapozzi; Chiara Dal Bianco
  3. The Effect of Unfair Chances and Gender Discrimination on Labor Supply By Nickolas Gagnon; Kristof Bosmans; Arno Riedl
  4. College Attainment, Income Inequality, and Economic Security: A Simulation Exercise By Brad Hershbein; Melissa Schettini Kearney; Luke W. Pardue
  5. Superstar cities and left-behind places: disruptive innovation, labor demand, and interregional Inequality By Kemeny, Thomas; Storper, Michael
  6. The Effects of Prize Structures on Innovative Performance By Joshua Graff Zivin; Elizabeth Lyons
  7. Harnessing the Power of Social Incentives to Curb Shirking in Teams By Brice Corgnet; Brian C. Gunia; Roberto Hernán González
  8. How do occupational relatedness and complexity condition employment dynamics in periods of growth and recession? By Emelie Hane-Weijman; Rikard H. Eriksson; David Rigby
  9. The Demand for Interns By David A. Jaeger; John M. Nunley; Alan Seals; Eric J. Wilbrandt
  10. Does employee happiness have an impact on productivity? By Bellet, Clement; De Neve, Jan-Emmanuel; Ward, George
  11. Competing with Robots: Firm-Level Evidence from France By Daron Acemoglu; Claire LeLarge; Pascual Restrepo
  12. Health Insurance as an Income Stabilizer By Michal Grinstein-Weiss; Emily Gallagher; Nathan Blascak; Stephen Roll
  13. Demography and Provisions for Retirement - The Pension Composition, a Behavioral Approach By Bernard M.S. van Praag; J. Peter Hop
  14. Signaling and Employer Learning with Instruments By Gaurab Aryal; Manudeep Bhuller; Fabian Lange

  1. By: Frodermann, Corinna (Institute for Employment Research (IAB), Nuremberg); Wrohlich, Katharina (DIW Berlin); Zucco, Aline (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: Danilo Cavapozzi (Department of Economics, University Of Venice Cà Foscari); Chiara Dal Bianco (University of Padua)
    Abstract: Inability to cope with Information and Communication Technology (ICT) might represent a threat for older individuals’ social inclusion. This paper analyses the effect of retirement on the familiarity with ICT of older individuals. To account for the potential endogeneity of retirement with respect to ICT knowledge we instrument retirement decision with the age-eligibility for early and statutory retirement pension schemes. Using data from the Survey of Health Ageing and Retirement in Europe we show that retirement reduces the computer literacy and the frequency of internet utilization for men and women. This effect is heterogeneous for women with respect to their propensity to opt for early or statutory retirement schemes. The exit from the labour market does not reduce ICT familiarity for the former, but it does for the latter. The negative retirement effect on ICT knowledge is stronger for white-collar workers, whose occupations require a more intense use of these skills as compared with blue-collar jobs.
    Keywords: Computer use, internet, retirement, instrumental variables, compliers
    JEL: J14 J21 J24
    Date: 2020
  3. By: Nickolas Gagnon; Kristof Bosmans; Arno Riedl
    Abstract: Labor market opportunities and wages may be unfair for various reasons, and how workers respond to different types of unfairness can have major economic consequences. Using an online labor platform, where workers engage in an individual task for a piece-rate wage, we investigate the causal effect of neutral and gender-discriminatory unfair chances on labor supply. We randomize workers into treatments where we control relative pay and chances to receive a low or a high wage. Chances can be fair, unfair based on an unspecified source, or unfair based on gender discrimination. Unequal pay reduces labor supply of low-wage workers, irrespective of whether the low wage is the result of fair or unfair chances. Importantly, the source of unfair chances matters. When a low wage is the result of gender-discriminatory chances, workers matched with a high-wage worker substantially reduce their labor supply compared to the case of equal low wages (-22%). This decrease is twice as large as those induced by low wages due to fair chances or unfair chances coming from an unspecified source. In addition, exploratory analysis suggests that in response to unequal pay, low-wage male workers reduce labor supply irrespective of the source of inequality, whereas low-wage female workers reduce labor supply only if unequal pay is due to gender-discriminatory chances. Our results concerning gender discrimination indicate a new reason for the lower labor supply of women, which is a prominent explanation for the gender gap in earnings.
    Keywords: labor supply, wage inequality, procedural fairness, gender discrimination
    JEL: D90 E24 J22 J31 J71 M50
    Date: 2020
  4. By: Brad Hershbein; Melissa Schettini Kearney; Luke W. Pardue
    Abstract: We conduct an empirical simulation exercise that gauges the plausible impact of increased rates of college attainment on a variety of measures of income inequality and economic insecurity. Using two different methodological approaches—a distributional approach and a causal parameter approach—we find that increased rates of bachelor’s and associate degree attainment would meaningfully increase economic security for lower-income individuals, reduce poverty and near-poverty, and shrink gaps between the 90th and lower percentiles of the earnings distribution. However, increases in college attainment would not significantly reduce inequality at the very top of the distribution.
    JEL: I24 I26 I30 J21 J24 J31
    Date: 2020–02
  5. By: Kemeny, Thomas; Storper, Michael
    Abstract: After a long period of convergence, around 1980, inter-place gaps in economic well-being in the United States began to increase. This rising inequality offers a rich terrain to explore causality in regional economics and development theory. This paper presents new, long-run evidence on interregional inequality that highlights the need to situate the current moment in a context of episodic alternations between convergence and divergence. In light of this evidence, the paper revisits the theoretical literature, finding gaps in existing supply- and demand-side models. A demand-led perspective can be strengthened by integrating a primary role for disruptive technological change. We posit a theory of alternating waves, where major technology shocks initially concentrate, and eventually deconcentrate, demand for skilled workers performing complementary tasks. Labor supply responds to these centripetal and centrifugal forces. These reversals yield the observed patterns of rising and falling interregional inequality. We trace out the implications of this theory in both academic and policy terms.
    Keywords: cities; income; inequality; economic geography; regional development; convergence
    JEL: R11 R12 O33 N90
    Date: 2020–02
  6. By: Joshua Graff Zivin; Elizabeth Lyons
    Abstract: Successful innovation is essential for the survival and growth of organizations but how best to incentivize innovation is poorly understood. We compare how two common incentive schemes affect innovative performance in a field experiment run in partnership with a large life sciences company. We find that a winner-takes-all compensation scheme generates significantly more novel innovation relative to a compensation scheme that offers the same total compensation, but shared across the ten best innovations. Moreover, we find that the elasticity of creativity with respect to compensation schemes is much larger for teams than individual innovators.
    JEL: J24 M54 O32
    Date: 2020–02
  7. By: Brice Corgnet (Emlyon Business School and Economic Science Institute, Chapman University); Brian C. Gunia (Carey Business School, Johns Hopkins University); Roberto Hernán González (Burgundy School of Business, Université Bourgogne Franche-Comté and Economic Science Institute, Chapman University)
    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 M5
    Date: 2020
  8. By: Emelie Hane-Weijman; Rikard H. Eriksson; David Rigby
    Abstract: Related diversification has generated considerable interest in policy (smart specialisation) and academic (related branching) circles, linking regional path creation strategies to the capabilities of regions. While previous studies have tended to focus on knowledge- or industry-spaces in regions, we explore the occupation-space. Occupational relatedness and complexity indicators are deployed as independent variables in spatial panel models that account for annual variations in regional employment growth rates in Sweden between 2002 to 2013. Our findings show that in periods of economic expansion, exit from related occupations and entry into complex occupations decreases regional employment growth. These effects are dampened in periods of economic slowdown.
    Keywords: related branching, occupation-space, occupational relatedness, complexity, smart specialization, employment growth
    JEL: R11 J21 J24 J62
    Date: 2020–03
  9. By: David A. Jaeger; John M. Nunley; Alan Seals; Eric J. Wilbrandt
    Abstract: We describe the demand for interns in the U.S. using ads from an internship-specific website. We find that internships are more likely to be paid when more closely associated with a specific occupation, when the local labor market has lower unemployment, and when the local and federal minimum wage are the same. A résumé audit study with more than 11,500 applications reveals that employers are more likely to respond positively when internship applicants have previous internship experience. Employers are also less likely to respond to applicants with black-sounding names and when the applicant is more distant from the firm.
    JEL: I23 J23
    Date: 2020–02
  10. By: Bellet, Clement; De Neve, Jan-Emmanuel; Ward, George
    Abstract: This article provides quasi-experimental evidence on the relationship between employee happiness and productivity in the field. We study the universe of call center sales workers at British Telecom (BT), one of the United Kingdom's largest private employers. We measure their happiness over a 6 month period using a novel weekly survey instrument, and link these reports with highly detailed administrative data on workplace behaviors and various measures of employee performance. Exploiting exogenous variation in employee happiness arising from weather shocks local to each of the 11 call centers, we document a strong causal effect of worker happiness on sales. This is driven by employees working more effectively on the intensive margin by making more calls per hour, adhering more closely to their workflow schedule, and converting more calls into sales when they are happier. In our restrictive setting, we find no effects on the extensive margin of happiness on various measures of high-frequency labor supply such as attendance and break-taking
    Keywords: happiness; productivity
    JEL: J24 M50 I31
    Date: 2020–02
  11. By: Daron Acemoglu; Claire LeLarge; Pascual Restrepo
    Abstract: Using several sources, we construct a data set of robot purchases by French manufacturing firms and study the firm-level implications of robot adoption. Out of 55,390 firms in our sample, 598 have adopted robots between 2010 and 2015, but these firms account for 20% of manufacturing employment and value added. Consistent with theory, robot adopters experience significant declines in labor share and the share of production workers in employment, and increases in value added and productivity. They expand their overall employment as well. However, this expansion comes at the expense of their competitors (as automation reduces their relative costs). We show that the overall impact of robot adoption on industry employment is negative. We further document that the impact of robots on overall labor share is greater than their firm-level effects because robot adopters are larger and grow faster than their competitors.
    JEL: J23 J24 L11
    Date: 2020–02
  12. By: Michal Grinstein-Weiss; Emily Gallagher; Nathan Blascak; Stephen Roll (Washington University in St Louis)
    Abstract: We evaluate the effect of health insurance on the incidence of negative income shocks using the tax data and survey responses of nearly 14,000 low income households. Us-ing a regression discontinuity (RD) design and variation in the cost of nongroup pri-vate health insurance under the Affordable Care Act, we find that eligibility for sub-sidized Marketplace insurance is associated with a 16% and 9% decline in the rates of unexpected job loss and income loss, respectively. Effects are concentrated among households with past health costs and exist only for “unexpected” forms of earnings variation, suggesting a health-productivity link. Calculations based on our fuzzy RD estimate imply a $256 to $476 per year welfare benefit of health insurance in terms of reduced exposure to job loss.
    Keywords: Affordable Care Act; income; regression discontinuity; labor supply; subsidies
    JEL: D10 J22 H51 I13
    Date: 2020–01–29
  13. By: Bernard M.S. van Praag; J. Peter Hop
    Abstract: Pensions may be provided for in a modern society by a mix of several methods, namely by voluntary individual savings, mandatory fully-funded occupational pension systems, mandatory social security financed by pay-as-you-go, and old-fashioned hoarding in cash. Here, we call the specific mixture of the four systems the pension composition. We assume that individual workers decide on their own individual savings, that the fully-funded occupational system is decided upon by the age cohort of the median worker (MW), and that the social security is decided upon by the median voter (MV). In this behavioral approach we distinguish between several social groups, where individuals belong to several groups simultaneously and where the interests of the different groups are only partly coinciding. For a given demography and interest rate, the joint result of the decisions of the different age cohorts is a Pareto equilibrium. For ease of exposition we assume that individual and collective pension savings are the only sources of capital supply. When capital supply equals demand from industry there is equilibrium in the capital market with a corresponding equilibrium interest rate. In this paper we assume a demography with one hundred age brackets and we investigate how changes in the birth rates, survival rates, and the retirement age affect the pension composition and the capital market equilibrium. Our conclusion is that the demographic effects are considerable not only for the resulting pension composition but also for macro-economic variables such as the wage rate, the interest rate, and the capital-income ratio. It follows that the pension composition in general and social security in particular is determined by the demography and cannot be modified at will as a long-term political instrument. We find that this is relevant for the present century, where birth and mortality rates in most western countries are steeply declining.
    Keywords: demography, funded pensions, unfunded pensions, social security, interest rate, overlapping generations, individual savings
    JEL: H55 H75 J10 J26
    Date: 2020
  14. By: Gaurab Aryal; Manudeep Bhuller; Fabian Lange
    Abstract: The social and the private returns to education differ when education can increase productivity, and also be used to signal productivity. We show how instrumental variables can be used to separately identify and estimate the social and private returns to education within the employer learning framework of Farber and Gibbons [1996] and Altonji and Pierret [2001]. What an instrumental variable identifies depends crucially on whether the instrument is hidden from, or observed by, the employers. If the instrument is hidden then it identifies the private returns to education, but if the instrument is observed by employers then it identifies the social returns to education. Interestingly, however, among experienced workers the instrument identifies the social returns to education, regardless of whether or not it is hidden. We operationalize this approach using local variation in compulsory schooling laws across multiple cohorts in Norway. Our preferred estimates indicate that the social return to an additional year of education is 5%, and the private internal rate of return, aggregating the returns over the life-cycle, is 7.2%. Thus, 70% of the private returns to education can be attributed to education raising productivity and 30% to education signaling workers’ ability.
    Keywords: signaling, human capital, employer learning, instruments
    JEL: J24 J31 D83
    Date: 2020

This nep-lma issue is ©2020 by Joseph Marchand. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.