nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2020‒03‒16
twenty papers chosen by
Joseph Marchand
University of Alberta

  1. Do Cash Windfalls Affect Wages? Evidence from R&D Grants to Small Firms By Howell, Sabrina T.; Brown, J. David
  2. Oligopsonies over the Business Cycle By Roberto Pinheiro; Daniel Monte
  3. Public Pensions and Low Income Dynamics in Canada By Mayssun El-Attar; Raquel Fonseca Benito
  4. What Does Someone’s Gender Identity Signal to Employers? By Hannah Van Borm; Marlot Dhoop; Allien Van Acker; Stijn Baert
  5. Wage Inequality in Germany after the Minimum Wage Introduction By Bossler, Mario; Schank, Thorsten
  6. The Effects of Student Composition on Teacher Turnover: Evidence from an Admission Reform By Karbownik, Krzysztof
  7. WhoÕs Responsible Here? Establishing Legal Responsibility in the Fissured Workplace By Tanya Goldman; David Weil
  8. The Impact of Trade Liberalization on Firms' Product and Labor Market Power By Dobbelaere, Sabien; Wiersma, Quint
  9. The Skill-Specific Impact of Past and Projected Occupational Decline By Hensvik, Lena; Nordström Skans, Oskar
  10. Incentive Pay and Firm Productivity: Evidence from China By Jin, Zhangfeng; Pan, Shiyuan
  11. Between Firm Changes in Earnings Inequality: The Dominant Role of Industry Effects By Haltiwanger, John C.; Spletzer, James R.
  12. Vulnerable Boys: Short-Term and Long-Term Gender Differences in the Impacts of Adolescent Disadvantage By Lei, Ziteng; Lundberg, Shelly
  13. Who Benefits from General Knowledge? By Bellés Obrero, Cristina; Duchini, Emma
  14. Matching the Education System to the Needs of the Economy: Evidence from Burkina Faso By Élisé Wendlassida Miningou
  15. Work Environment and Competition in Swedish Schools, 1999-2011 By Sebhatu, Abiel; Wennberg, Karl; Lakomaa, Erik; Brandén, Maria
  16. Earnings gaps, Segmentation and Competitiveness in the Ghanaian Labour Market By Nimoh, Nana C.; Ali, Abdilahi; Syme, Tony
  17. Agricultural Credits and Agricultural Productivity: Cross-Country Evidence By Seven, Unal; Tumen, Semih
  18. Unintended Consequences: Can the Rise of the Educated Class Explain the Revival of Protectionism? By Giordani, Paolo E.; Mariani, Fabio
  19. Jobs and Intimate Partner Violence - Evidence from a Field Experiment in Ethiopia By Andreas Kotsadam; Espen Villanger;
  20. Signaling and Employer Learning with Instruments By Aryal, Gaurab; Bhuller, Manudeep; Lange, Fabian

  1. By: Howell, Sabrina T. (New York University); Brown, J. David (U.S. Census Bureau)
    Abstract: This paper examines how employee earnings at small firms respond to a cash flow shock in the form of a government R&D grant. We use ranking data on applicant firms, which we link to IRS W2 earnings and other U.S. Census Bureau datasets. In a regression discontinuity design, we find that the grant increases average earnings with a rent-sharing elasticity of 0.07 (0.21) at the employee (firm) level. The beneficiaries are incumbent employees who were present at the firm before the award. Among incumbent employees, the effect increases with worker tenure. The grant also leads to higher employment and revenue, but productivity growth cannot fully explain the immediate effect on earnings. Instead, the data and a grantee survey are consistent with a backloaded wage contract channel, in which employees of financially constrained firms initially accept relatively low wages and are paid more when cash is available.
    Keywords: earnings inequality, rent sharing, R&D grants, regression discontinuity design
    JEL: G32 G35 J31 J41
    Date: 2020–01
  2. By: Roberto Pinheiro; Daniel Monte
    Abstract: With a duopsony model, we show how the degree of labor market slack relates to earnings inequality and firm size distribution across local labor markets and the business cycle. In booms, due to the high aggregate productivity, there is fierce competition with resulting high wages and full employment. During recessions, there is labor market slack and firms enjoy local market power. In periods in which the economy is moving in or out of a recession, there is an “accommodation” phase, with firms shrinking their labor forces and paying lower wages instead of competing for poached workers. We show that the impact of economic shocks on wage dispersion and inequality may vary not only due to the nature of the shock, but also based on which equilibrium the economy may have settled in.
    Keywords: Labor Market Slack; Wage Inequality
    JEL: J21 J23 J42 L13
    Date: 2020–02–27
  3. By: Mayssun El-Attar; Raquel Fonseca Benito
    Abstract: This paper focuses on individuals over 50 and shows that considering persistence and low income dynamics is essential to understanding poverty. We use administrative data for Canada from the Longitudinal and International Study of Adults (LISA). The paper shows that poverty for seniors is highly persistent and strongly depends on lifetime earnings. We show that beginning to receive a public pension implies a higher probability of exit from poverty. Public pensions thereby help to explain the lower overall incidence of poverty among the elderly. These results are confirmed in a dynamic probit model, which allows to control for individuals’ unobserved heterogeneity and state dependence. While public pensions do not eliminate poverty among older adults, they help to alleviate it by reducing persistence and increasing exit for those who are most at risk.
    Keywords: Low-Income,Elderly,Poverty Dynamics,Canadian Public Pensions,
    JEL: H55 J26 I32
    Date: 2020–02–10
  4. By: Hannah Van Borm; Marlot Dhoop; Allien Van Acker; Stijn Baert (-)
    Abstract: Purpose – The purpose of this paper is to explore the mechanisms underlying hiring discrimination against transgender men. Design/methodology/approach – The authors conduct a scenario experiment with final-year business students in which fictitious hiring decisions are made about transgender or cisgender male job candidates. More importantly, these candidates are scored on statements related to theoretical reasons for hiring discrimination given in the literature. The resulting data are analysed using a bivariate analysis. Additionally, a multiple mediation model is run. Findings – Suggestive evidence is found for co-worker and customer taste-based discrimination, but not for employer taste-based discrimination. In addition, results show that transgender men are perceived as being in worse health, being more autonomous and assertive, and have a lower probability to go on parental leave, compared with cisgender men, revealing evidence for (positive and negative) statistical discrimination. Social implications – Targeted policy measures are needed given the substantial labour market discrimination against transgender individuals measured in former studies. However, to combat this discrimination effectively, one needs to understand its underlying mechanisms. This study provides the first comprehensive exploration of these mechanisms. Originality/value – This study innovates in being one of the first to explore the relative empirical importance of dominant (theoretical) explanations for hiring discrimination against transgender men. Thereby, the authors take the logical next step in the literature on labour market discrimination against transgender individuals.
    Keywords: Transgender men, fictitious hiring decisions, theories of discrimination, signalling, scenario experiment, risk aversion
    JEL: J15 J71 J16 J24 J23
    Date: 2020–03
  5. By: Bossler, Mario (Institute for Employment Research (IAB), Nuremberg); Schank, Thorsten (University of Mainz)
    Abstract: We revisit the development of monthly wages in Germany between 2000 and 2017. While wage inequality strongly increased during the first years of this period, it recently returned to its initial level, raising the question what the role of the German minimum wage introduction for this reversal is. We identify effects of the minimum wage from difference-in-differences based on unconditional quantile regressions applied to German administrative employment data. The results show significant wage effects of varying magnitudes along the lower half of the wage distribution. Employment dynamics do not explain effects along the wage distribution, implying strong wage increases among the existing workforce. The increased individual labor income is not offset by decreasing social benefits. Overall, the introduction of the minimum wage can account for about half of the recent decrease in wage inequality.
    Keywords: wages, inequality, minimum wage, Germany
    JEL: J31 J38
    Date: 2020–02
  6. By: Karbownik, Krzysztof (Emory University)
    Abstract: This paper examines the effects of student ability on teacher turnover using data from Stockholm high schools and an admission reform that led to the exogenous reshuffling of pupils. The results indicate that a 10-percentile-point increase in student credentials decreases the probability of a job separation by up to 10 percentage points. These effects vary somewhat across different groups of teachers and are found mainly for mobility between schools rather than out of the profession. Teachers react most strongly to direct measures of student ability, grades from compulsory school, rather than to other correlated characteristics such as immigrant origin or parental income.
    Keywords: teacher mobility, student ability, school choice
    JEL: I2 J2 J63
    Date: 2020–01
  7. By: Tanya Goldman (Center for Law and Social Policy); David Weil (Heller School for Social Policy and Management, Brandeis University)
    Abstract: The nature of work is changing, with workers enduring increasingly precarious working conditions without any safety net. In response, this article proposes a new ÒConcentric Circle frameworkÓ which would improve workersÕ access to civil, labor, and employment rights. Many businesses, including app-based platforms, have restructured toward Òfissured workplaceÓ business models. They treat workers like employees (specifying behaviors and closely monitoring outcomes) but they classify workers as independent contractors (engaging them at an arms-length and cutting them off from rights and benefits tied to employment). These arrangements confound legal classifications of ÒemploymentÓ and expose deficiencies with existing workplace protections, which are based on Òemployment relationships.Ó As a result, a growing number of workers lack both bargaining power and critical workplace rights and benefits. We propose a Concentric Circle framework to better govern workersÕ rights in the modern era. At the core, we maintain that certain rights and protections should not be tethered to an employment relationship, but to work itself. Thus, the right to be compensated for work and paid a minimum wage; freedom from discrimination and retaliation; access to a safe working environment, and the right to associate and engage in concerted activity should belong to all workers, not just employees. Second, as a middle circle, we argue for a rebuttable presumption of employment to address those rights that remain exclusive to employees (and not independent contractors), and we propose an updated legal test of employment. Finally, at the outer ring of the framework, we suggest policies that could enhance workersÕ access to benefits that promote worker mobility and social welfare. Other scholarship has focused exclusively on either independent contractors or employees, or it has proposed a new category of worker altogether. We contend that this comprehensive framework better assigns rights, responsibilities, and protections in the modern workplace than do current legal doctrines or alternative proposals.
    Keywords: Employment, independent contractor; employee classification; fissured workplace
    JEL: J8 J38 J58 J78
    Date: 2020–02
  8. By: Dobbelaere, Sabien (Vrije Universiteit Amsterdam); Wiersma, Quint (Vrije Universiteit Amsterdam)
    Abstract: This paper examines the impact of trade liberalization on firms' product and labor market power. We estimate the prevalence and intensity of firm-level price-cost markups and either wage markups or wage markdowns. We take the dependence between these model-consistent measures of product and labor market power explicitly into account. To identify the effect of trade shocks on product and labor market power, we exploit China's reductions in input and output tariffs upon its accession to the World Trade Organization. We find that trade liberalization has not switched firms away from exercising product and labor market power. Reducing tariffs on intermediate inputs has increased a firm's price-cost markup but decreased the degree of wage-setting power that it possesses, conditional on exercising product/labor market power. Finally, we find heterogeneous effects of trade liberalization on the intensity of firms' product and labor market power, giving insights into the true consequences of trade shocks.
    Keywords: price-cost markups, wage markups, wage markdowns, trade liberalization, tariffs
    JEL: F14 F16 L11 P31
    Date: 2020–01
  9. By: Hensvik, Lena (IFAU); Nordström Skans, Oskar (Uppsala University)
    Abstract: Using population-wide Swedish register data on cognitive abilities and productive personality traits, we show that employment growth has been monotonically skill-biased in terms of these general-purpose intellectual skills, despite a simultaneous (polarizing) decline in middle-wage jobs. Employees in declining mid-wage occupations have comparably little of these general intellectual skills. Conversely, growing low-wage occupations are more (intellectually) skill-intensive than other low-wage jobs. Employment has primarily increased in occupations where workers are endowed with verbal and technical abilities, and social maturity. Existing occupational projections imply that the relationship between employment growth and skills in the projected future will resemble the past.
    Keywords: skills, polarization, future of work
    JEL: J21 J31
    Date: 2020–01
  10. By: Jin, Zhangfeng; Pan, Shiyuan
    Abstract: This study examines the causes and consequences of incentive pay adoption among Chinese manufacturing firms. First, we find that a higher degree of labor scarcity encourages firms to adopt more incentive pay. Second, using an instrumental variables approach, we find that a 10 percentage point increase in the intensity of incentive pay results in 38% higher firm productivity. Third, the average productivity differences between SOEs and non-SOEs decrease by about 65% after controlling differences in incentive pay adoption. Therefore, facilitating incentive pay adoption among firms with better labor endowments (e.g. SOEs) increases productivity while reduces resource misallocation in developing countries.
    Keywords: Incentive Pay,Firm Productivity,Labor Scarcity,China,Instrumental Variables
    JEL: O14 O33 M52 J33 P31
    Date: 2020
  11. By: Haltiwanger, John C. (University of Maryland); Spletzer, James R. (U.S. Census Bureau)
    Abstract: We find that most of the rising between firm earnings inequality that dominates the overall increase in inequality in the U.S. is accounted for by industry effects. These industry effects stem from rising inter-industry earnings differentials and not from changing distribution of employment across industries. We also find the rising inter-industry earnings differentials are almost completely accounted for by occupation effects. These results link together the key findings from separate components of the recent literature: one focuses on firm effects and the other on occupation effects. The link via industry effects challenges conventional wisdom.
    Keywords: inequality, industry, occupation
    JEL: J3
    Date: 2020–02
  12. By: Lei, Ziteng (University of California, Santa Barbara); Lundberg, Shelly (University of California, Santa Barbara)
    Abstract: The growing gender gap in educational attainment between men and women has raised concerns that the skill development of boys may be more sensitive to family disadvantage than that of girls. Using the National Longitudinal Study of Adolescent to Adult Health (Add Health) data we find, as do previous studies, that boys are more likely to experience increased problems in school relative to girls, including suspensions and reduced educational aspirations, when they are in poor quality schools, less-educated neighborhoods, and father-absent households. Following these cohorts into young adulthood, however, we find no evidence that adolescent disadvantage has stronger negative impacts on long-run economic outcomes such as college graduation, employment, or income for men, relative to women. We do find that father absence is more strongly associated with men's marriage and childbearing and weak support for greater male vulnerability to disadvantage in rates of high school graduation. An investigation of adult outcomes for another recent cohort from the National Longitudinal Survey of Youth, 1997 produces a similar pattern of results. We conclude that focusing on gender differences in behavior in school may not lead to valid inferences about the effects of disadvantage on adult skills.
    Keywords: gender, education, employment, earnings, family structure, father absence, school quality, neighborhood effect
    JEL: J24 J12 J16
    Date: 2020–01
  13. By: Bellés Obrero, Cristina (University of Mannheim); Duchini, Emma (University of Warwick)
    Abstract: While vocational education is meant to provide occupational-specific skills that are directly employable, their returns may be limited in fast-changing economies. Conversely, general education should provide learning skills, but these may have little value at low levels of education. This paper sheds light on this debate by exploiting a recent Spanish reform that postpones students' choice between these two educational pathways from age 14 to 16. To identify exogenous changes in its staggered implementation, we instrument this with the pre-reform across-province variation in the share of students in general education. Results indicate that, by shifting educational investment from vocational to general education after age 16, the reform improves occupational outcomes, and results in a significant rise in monthly wages. The effects are larger after the financial crisis, but are concentrated among middle to high-skilled individuals. In contrast, those who acquire only basic general education have worse long-term employment prospects than vocationally-trained individuals.
    Keywords: general versus vocational education, heterogeneous returns, financial crisis
    JEL: I26 I28 J24
    Date: 2020–02
  14. By: Élisé Wendlassida Miningou
    Abstract: In spite of recent advances, in terms of access to, and quality of, education recorded in Burkina Faso, data show a mismatch between the provisions of the education system and the needs of the economic sectors, in terms of skilled labor. In this paper, we investigate how to match the supply of skilled labor provided by the education system to the needs of the economic activities. We identify the branches of economic activity for which an increase in the quantity and/or in the quality of relevant labor supply could lead to productivity gains. We apply a non-parametric technique ( ï ¡ –returns to scale) in order to measure the returns to scale associated with labor in the economic sectors. We also estimate a multinomial logistic model in order to investigate the determinants of these returns to scale. Overall, results show that productivity gains are feasible in the majority of economic sectors. More specifically, improving the education level of farmers and artisans is particularly important for productivity gains. We also find that the education system must focus on ongoing training programs, especially in the area of agriculture and crafts.
    Keywords: Education, Labor market, Productivity.
    JEL: I25 J24 O55
    Date: 2020–04
  15. By: Sebhatu, Abiel (Linköping University); Wennberg, Karl (The Ratio Institute); Lakomaa, Erik (Stockholm School of Economics); Brandén, Maria (Linköping University)
    Abstract: Research on schools’ work environment highlights socioeconomic conditions (SES) as primary drivers of work environment, but evidence to date is primarily limited to cross-sectional samples. Research on school competition has revealed important effects on educational outcomes, but effects on work environment are largely unknown. We bridge these literatures by studying the work environment in all Swedish junior high schools and high schools using detailed data on complaints and incidences of disorder, including violence. Comparing educational levels to gauge differences in degree of choice made possible by competition, we overall find more adverse work environment in junior high schools facing stronger school competition and with many low-SES students in either the school or the region. Conversely, we find better work environment in high schools facing stronger school competition, and in high schools with a large share of students with foreign background. To assess causal effects of competition on work environment we compare regions that introduced competition versus those that have not in a difference-in-difference framework. In such regions only complaints in high schools decrease after competition is introduced. We highlight the importance of including multiple measures of both competition and work environment.
    Keywords: School competition; work environment; independent schools; public schools; voucher
    JEL: H40 I21 J28
    Date: 2020–03–05
  16. By: Nimoh, Nana C.; Ali, Abdilahi; Syme, Tony
    Abstract: This paper examines the labour market dynamics of Ghana by specifically assessing: (1) the informal-formal earnings gaps in the country, and (2) whether informal sector employment is due to labour market segmentation (i.e. last resort) or comparative advantage (voluntary). Our findings indicate that there are significant formal/informal earnings gaps in the Ghanaian labour market which is robust to industry and regional differences. Interestingly, we find that, even though males suffer earnings penalties within the informal sector, the penalty is much higher for females. Additionally, the study identifies the existence of two distinct segments within the informal labour market, each characterised by a different earnings profile. Thus, there is both segmentation and competitiveness within the informal labour market. Our results highlight the importance of designing appropriate policies that can tackle both voluntary and involuntary informal sector employment.
    Keywords: Informal labour market,finite mixture model,segmentation,comparative advantage,Ghana
    JEL: J46 O17 C14 N17
    Date: 2020
  17. By: Seven, Unal (Central Bank of the Republic of Turkey); Tumen, Semih (TED University)
    Abstract: We present cross-country evidence suggesting that agricultural credits have a positive impact on agricultural productivity. In particular, we find that doubling agricultural credits generates around 4-5 percent increase in agricultural productivity. We use two different agricultural production measures: (i) the agricultural component of GDP and (ii) agricultural labor productivity. Employing a combination of panel-data and instrumental- variable methods, we show that agricultural credits operate mostly on the agricultural component of GDP in developing countries and agricultural labor productivity in developed countries. This suggests that the nature of the relationship between agricultural finance and agricultural output changes along the development path. We conjecture that development of the agricultural finance system generates entry into the agricultural labor market, which pushes up the agricultural component of GDP and keeps down agricultural labor productivity in developing countries; while, in developed countries, it leads to labor-augmenting increase in agricultural production. We argue that replacement of the informal credit channel with formal and advanced agricultural credit markets along the development path is the main force driving the labor market response.
    Keywords: agricultural credits, productivity, labor markets, financial development
    JEL: J43 Q14 Q18 O47
    Date: 2020–01
  18. By: Giordani, Paolo E. (LUISS Guido Carli University); Mariani, Fabio (Université catholique de Louvain)
    Abstract: This paper provides a rationale for the revival of protectionism, based on the rise of the educated class. In a trade model with heterogeneous workers and entrepreneurs, globalization generates aggregate gains but has distributional effects, which can be attenuated through taxation. By playing a two-stage political game, citizens decide on trade openness and the extent of redistribution. In this setting, trade liberalization is politically viable as long as the losers from trade are compensated through the redistributive mechanism. When skilled workers account for a large share of the population, however, there may be limited political support for redistribution, and those who are left behind by globalization – namely unskilled workers and importing-sector entrepreneurs – can form a coalition to impose protectionist measures. We then build a dynamic version of the model, where human capital accumulation is driven by public education. Our analysis suggests that globalization – by favoring the ascent of the educated class and thus eroding the political support for redistribution – may ultimately breed its own decline.
    Keywords: trade, redistribution, political economy, human capital accumulation
    JEL: D72 F68 I24 J24 O40
    Date: 2020–01
  19. By: Andreas Kotsadam; Espen Villanger;
    Abstract: We identify the effects of employment on Intimate Partner Violence (IPV) by collaborating with 27 large companies in Ethiopia to randomly assign jobs to equally qualified female applicants. The job offers increase formal employment, earnings, and earnings shares within couples in the short and medium run but we can reject relatively small effects in any direction on our main outcome, physical IPV. In the short run, job offers reduce emotional abuse and there are indications of heterogeneous effects whereby women with low bargaining power at baseline experience increased risks of abuse if offered a job.
    Keywords: employment, gender, RCT, IPV, violence Ethiopia
    JEL: J20 O10 Z10
    Date: 2020
  20. By: Aryal, Gaurab (University of Virginia); Bhuller, Manudeep (University of Oslo); Lange, Fabian (McGill University)
    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: 2020–01

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