nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2020‒04‒06
sixteen papers chosen by
Joseph Marchand
University of Alberta

  1. Why Guarantee Employment? Evidence from a Large Indian Public-Works Program By Zimmermann, Laura
  2. Reasonable Doubt: Experimental Detection of Job-Level Employment Discrimination By Patrick M. Kline; Christopher R. Walters
  3. Does working at a start-up pay off? By Fackler, Daniel; Hölscher, Lisa; Schnabel, Claus; Weyh, Antje
  4. Higher-Order Income Risk over the Business Cycle By Christopher Busch; Alexander Ludwig
  5. Executives' short-term and long-term incentives - a distributional analysis By Haylock, Michael
  6. Public Pensions and Low Income Dynamics in Canada By Mayssun El-Attar; Raquel Fonseca
  7. What Does Someone's Gender Identity Signal to Employers? By Van Borm, Hannah; Dhoop, Marlot; Van Acker, Allien; Baert, Stijn
  8. Do Elite Colleges Matter? The Impact of Elite College Attendance on Entrepreneurship Decisions and Career Dynamics By Naijia Guo; Charles Ka Yui Leung
  9. Smart-Working: Work Flexibility without Constraints By Marta Angelici; Paola Profeta
  10. Short and Long-Run Labor Market Effects of Developing Country Exports: Evidence from Bangladesh By Robertson, Raymond; Kokas, Deeksha; Cardozo, Diego; Lopez-Acevedo, Gladys
  11. Workforce composition, productivity and pay: the role of firms in wage inequality By Chiara Criscuolo; Alexander Hijzen; Cyrille Schwellnus; Erling Barth; Wen-Hao Chen; Richard Fabling; Priscilla Fialho; Balazs Stadler; Richard Upward; Wouter Zwysen; Katarzyna Grabska; Ryo Kambayashi; Timo Leidecker; Oskar Nordström Skans; Capucine Riom; Duncan Roth
  12. The Shadow Margins of Labor Market Slack By R. Jason Faberman; Andreas I. Mueller; Ayşegül Şahin; Giorgio Topa
  13. Measuring Gender Norms in Domestic Work: A Comparison between Homosexual and Heterosexual Couples By Elisabeth Cudeville; Martine Gross; Catherine Sofer
  14. The Micro-Level Anatomy of the Labor Share Decline By Matthias Kehrig; Nicolas Vincent
  15. Intergenerational Occupational Mobility in Latin American Economies: An Empirical Approach By Doruk, Ömer Tuğsal; Pastore, Francesco; Yavuz, Hasan Bilgehan
  16. Robots and the origin of their labour-saving impact. By Montobbio, Fabio; Staccioli, Jacopo; Virgillito, Maria Enrica; Vivarelli, Marco

  1. By: Zimmermann, Laura
    Abstract: Most countries around the world implement some form of a safety net program for poor households. A widespread concern is that such programs crowd out private-sector jobs. But they could also improve workers' welfare by allowing them to take on more risk, for example through self-employment. This paper analyzes the employment impacts of the world's largest public-works program using a novel regression-discontinuity design. The analysis exploits detailed institutional information to describe the allocation formula of the program and to construct a benefit calculator that predicts early and late treatment of districts. The results show that there is little evidence of a crowding out of private-sector jobs. Instead, the scheme functions as a safety net after a bad rainfall shock. Male workers also take on more risk by moving into family employment. This self-revealed preference for a different type of job suggests other potential benefits of safety net programs which so far have received little attention in the literature.
    Keywords: public-works program,anti-poverty program,National Rural Employment Guarantee Scheme,NREGA,NREGS,India,regression discontinuity design,safety net,crowding out,risk coping,risk mitigation,insurance
    JEL: H53 H75 I38 J22 J38
    Date: 2020
  2. By: Patrick M. Kline; Christopher R. Walters
    Abstract: This paper develops methods for detecting discrimination by individual employers using correspondence experiments that send fictitious resumes to real job openings. We establish identification of higher moments of the distribution of job-level callback rates as a function of the number of resumes sent to each job and propose shape-constrained estimators of these moments. Applying our methods to three experimental datasets, we find striking job-level heterogeneity in the extent to which callback probabilities differ by race or sex. Estimates of higher moments reveal that while most jobs barely discriminate, a few discriminate heavily. These moment estimates are then used to bound the share of jobs that discriminate and the posterior probability that each individual job is engaged in discrimination. In a recent experiment manipulating racially distinctive names, we find that at least 85% of jobs that contact both of two white applications and neither of two black applications are engaged in discrimination. To assess the potential value of our methods for regulators, we consider the accuracy of decision rules for investigating suspicious callback behavior in various experimental designs under a simple two-type model that rationalizes the experimental data. Though we estimate that only 17% of employers discriminate on the basis of race, we find that an experiment sending 10 applications to each job would enable detection of 7-10% of discriminatory jobs while yielding Type I error rates below 0.2%. A minimax decision rule acknowledging partial identification of the distribution of callback rates yields only slightly fewer investigations than a Bayes decision rule based on the two-type model. These findings suggest illegal labor market discrimination can be reliably monitored with relatively small modifications to existing correspondence designs.
    JEL: C14 C44 C9 J7 J71 K31 K42
    Date: 2020–03
  3. By: Fackler, Daniel; Hölscher, Lisa; Schnabel, Claus; Weyh, Antje
    Abstract: Using representative linked employer-employee data for Germany, this paper analyzes short- and long-run differences in labor market performance of workers joining start-ups instead of incumbent firms. Applying entropy balancing and following individuals over ten years, we find huge and long-lasting drawbacks from entering a start-up in terms of wages, yearly income, and (un)employment. These disadvantages hold for all groups of workers and types of start-ups analyzed. Although our analysis of different subsequent career paths highlights important heterogeneities, it does not reveal any strategy through which workers joining start-ups can catch up with the income of similar workers entering incumbent firms.
    Keywords: startups,young firms,wages,linked employer-employee data
    JEL: J31 J63 L26 M51
    Date: 2020
  4. By: Christopher Busch; Alexander Ludwig
    Abstract: We extend the canonical income process with persistent and transitory risk to shock distributions with left-skewness and excess kurtosis, to which we refer as higher-order risk. We estimate our extended income process by GMM for household data from the United States. We find countercyclical variance and procyclical skewness of persistent shocks. All shock distributions are highly leptokurtic. The existing tax and transfer system reduces dispersion and left-skewness of shocks. We then show that in a standard incomplete-markets life-cycle model, first, higher-order risk has sizable welfare implications, which depend crucially on risk attitudes of households; second, higher-order risk matters quantitatively for the welfare costs of cyclical idiosyncratic risk; third, higher-order risk has non-trivial implications for the degree of self-insurance against both transitory and persistent shocks.
    Keywords: labor income risk, business cycle, GMM estimation, skewness, persistent and transitory income shocks, risk attitudes, life-cycle model
    JEL: D31 E24 E32 H31 J31
    Date: 2020–03
  5. By: Haylock, Michael
    Abstract: Executives are often paid for short-term changes in shareholder wealth, but rational shareholders want executives to maximize long-term shareholder wealth. Incentives for short-term and long-term oriented behavior may depend on an executive's level of pay in the distribution, holding other factors constant. This paper tests for distributional heterogeneity of short-term and long-term incentives in a 12 year cross-country panel of executives. I use the band-pass filter to separate short-term and long-term shareholder wealth changes (Christiano and Fitzgerald, 2003), and estimate of the shareholder wealth-pay relation using method of moments-quantile regression, developed by Machado and Santos Silva (2019), which accounts for time-constant unobserved heterogeneity of executive-firm pairs across the distribution. When using yearly total compensation to measure pay, executives in the upper tail of the conditional compensation distribution have longer-term oriented incentives. In contrast, when accumulated executive wealth is used to measure pay, executives in the upper tail of the wealth distribution have shorter-term oriented incentives. Since executive wealth encompasses changes to executive utility after pay is granted through accumulated equity-linked pay, it is the preferred measure for evaluating equity-linked pay. Results thus suggest that equity-linked pay should have a longer vesting period for executives in the upper tail than in the lower tail. I find evidence that executives in the upper-tail are evaluated relatively to the industry's short-run and long-run performance.
    Keywords: Executive Compensation,Method of Moments-Quantile Regression,Short-Term Performance,Long-Term Performance,Distribution,Benchmarking
    JEL: J31 M12 M52
    Date: 2020
  6. By: Mayssun El-Attar; Raquel Fonseca
    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
  7. By: Van Borm, Hannah (Ghent University); Dhoop, Marlot (Ghent University); Van Acker, Allien (Ghent University); Baert, Stijn (Ghent University)
    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: signalling, theories of discrimination, fictitious hiring decisions, transgender men, scenario experiment, risk aversion
    JEL: J15 J71 J16 J24 J23
    Date: 2020–03
  8. By: Naijia Guo (Chinese University of Hong Kong); Charles Ka Yui Leung (City University of Hong Kong)
    Abstract: Elite college attendance significantly impact on subsequent entrepreneurship decisions and career dynamics. We find that an elite college degree is positively correlated with entrepreneurship (defined as owning an incorporated business) but not with other forms of self-employment. We develop an overlapping generations model that captures self-selection in education and career choices based on heterogeneous ability and family wealth endowments over the lifecycle. Our estimates show that (1) entrepreneurs and other self-employed individuals require different types of human capital and (2) elite colleges generate considerably more human capital gain than ordinary colleges, particularly for entrepreneurs. Distinguishing between elite and ordinary colleges improves our prediction of entrepreneurship decisions. Our simulation shows that moving elite college graduates to non-elite colleges significantly reduce their likelihood of becoming entrepreneurs, but not other self-employment. Overall, providing subsidies for elite colleges is more efficient than subsidizing their non-elite counterparts in encouraging entrepreneurship, improving intergenerational mobility and welfare.
    Keywords: entrepreneurship, elite college, intergenerational transfer
    JEL: I20 J24
    Date: 2020–03–30
  9. By: Marta Angelici; Paola Profeta
    Abstract: Does removing the constraints of time and place of work increase the utility of workers and firms? We design a randomized experiment on a sample of workers in a large Italian company: workers are randomly divided into a treated group that engages in flexible space and time job (which we call “smart-working”) one day per week for 9 months and a control group that continues to work traditionally. By comparing the treated and control workers, we find causal evidence that the flexibility of smart-working increases the productivity of workers and improves their well-being and work-life balance. We also observe that the effects are stronger for women and that there are no significant spillover effects within workers of a team.
    Keywords: randomized control trial, productivity, work-life balance, well-being
    JEL: J16 J22 J24 L20 M54
    Date: 2020
  10. By: Robertson, Raymond (Texas A&M University); Kokas, Deeksha (World Bank); Cardozo, Diego (University of Chicago); Lopez-Acevedo, Gladys (World Bank)
    Abstract: This paper studies how a positive export shock - the sharp increase in garment-sector exports that began at the end of the Multifibre Arrangement (MFA) - spread through Bangladesh's labor markets. Although the end of the MFA was arguably exogenous to Bangladesh, we instrument export demand with OECD imports to ensure identification. We compare estimates of the local labor market effects (wages and informality) and estimates from wage equations that reflect the predictions from long-run, general-equilibrium neoclassical trade theory. As in other studies, we find that the export shock was localized both in terms of sector and geography. Wages increased and informality decreased in sub-districts more exposed to the export shock. Unlike in other studies, these local labor market effects dissipate quickly. Furthermore, Bangladesh's export shock was sector specific, limited predominantly to the female-intensive garment and textile sector. We show that, following the increase in exports of the female-intensive good, the male-female wage gap closes considerably throughout the country – not just in the apparel sector. In relatively small Bangladesh, the national labor market seems to be more integrated compared to larger countries studied, possibly suggesting that labor adjustment costs are lower in smaller countries.
    Keywords: local labor markets, Bangladesh, apparel, exports, wage inequality, Stolper-Samuelson
    JEL: F13 F14 F15 F16 J23 J31 O15 O19
    Date: 2020–03
  11. By: Chiara Criscuolo; Alexander Hijzen; Cyrille Schwellnus; Erling Barth; Wen-Hao Chen; Richard Fabling; Priscilla Fialho; Balazs Stadler; Richard Upward; Wouter Zwysen; Katarzyna Grabska; Ryo Kambayashi; Timo Leidecker; Oskar Nordström Skans; Capucine Riom; Duncan Roth
    Abstract: In many OECD countries, low productivity growth has coincided with rising inequality. Widening wage and productivity gaps between firms may have contributed to both developments. This paper uses a new harmonised cross-country linked employer-employee dataset for 14 OECD countries to analyse the role of firms in wage inequality. The main finding is that, on average across countries, changes in the dispersion of average wages between firms explain about half of the changes in overall wage inequality. Two thirds of these changes in between-firm wage inequality are accounted for by changes in productivity-related premia that firms pay their workers above common market wages. The remaining third can be attributed to changes in workforce composition, including the sorting of high-skilled workers into high-paying firms.
    Keywords: firm wage premium, productivity, wage inequality
    JEL: D2 J31 J38
    Date: 2020–03–24
  12. By: R. Jason Faberman; Andreas I. Mueller; Ayşegül Şahin; Giorgio Topa
    Abstract: We use a mix of new and existing data to develop the Aggregate Hours Gap (AHG), a novel measure of labor market underutilization. Our measure differentiates individuals by detailed categories of labor market participation and uses data on their desired work hours as a measure of their potential labor supply. We show that desired hours vary widely by demographics and detailed labor force status, and that the gap between desired and actual work hours is strongly positively correlated with reported search effort. The Aggregate Hours Gap suggests a more sluggish labor market recovery since the Great Recession than either the official unemployment rate or alternative measures of labor market underutilization. Modest amounts of underutilization among the part-time employed and a substantial degree of underutilization among those out of the labor force account for the disparity. The Aggregate Hours Gap also does well in accounting for wage movements over our sample period.
    JEL: E24 J21 J60
    Date: 2020–03
  13. By: Elisabeth Cudeville (Centre d'Economie de la Sorbonne - Université Paris 1 Panthéon-Sorbonne); Martine Gross (CéSor EHESS - CNRS); Catherine Sofer (Centre d'Economie de la Sorbonne - Paris School of Economics)
    Abstract: Women throughout the world still do most of the unpaid domestic work. To reveal the impact of social norms beside traditional economic variables on the sharing of household tasks within couples, we choose to compare the sharing of tasks between heterosexual and homosexual couples in France based on econometric estimations. The results show that, other things being equal, heterosexual couples share tasks much more unequally than homosexual couples. Assuming that the behavior of same-sex couples is not affected by gendered social norms, we then propose a measure of the impact of these norms using a Blinder-Oaxaca type decomposition
    Keywords: Household production; Gender inequality; Division of housework; Gender norms; Homosexual couples; Heterosexual couples
    JEL: J16 J22 J15
    Date: 2020–01
  14. By: Matthias Kehrig; Nicolas Vincent
    Abstract: The labor share in U.S. manufacturing declined from 62 percentage points (ppts) in 1967 to 41 ppts in 2012. The labor share of the typical U.S. manufacturing establishment, in contrast, rose by over 3 ppts during the same period. Using micro-level data, we document five salient facts: (1) since the 1980s, there has been a dramatic reallocation of value added toward the lower end of the labor share distribution; (2) this aggregate reallocation is not due to entry/exit, to “superstars" growing faster or to large establishments lowering their labor shares, but is instead due to units whose labor share fell as they grew in size; (3) low labor share (LL) establishments benefit from high revenue labor productivity, not low wages; (4) they also enjoy a product price premium relative to their peers, pointing to a significant role for demand-side forces; and (5) they have only temporarily lower labor shares that rebound after five to eight years. This transient pattern has become more pronounced over time, and the dynamics of value added and employment are increasingly disconnected.
    Keywords: Labor Share, Productivity, Firm Size Distribution, Relative Prices
    JEL: E2 L1 L2 L6 O4
    Date: 2020–03
  15. By: Doruk, Ömer Tuğsal; Pastore, Francesco (Università della Campania Luigi Vanvitelli); Yavuz, Hasan Bilgehan (Adana Alpaslan Türkeş Science and Technology University)
    Abstract: Identifying the determinants of intergenerational mobility is an important aim in the development literature. In this article, intergenerational transmission is examined for 6 neglected Latin American Economies (Brazil, Costa Rica, Ecuador, Mexico, Panama and Puerto Rico). We use a multinomial logit model of the determinants of choosing a white-collar job for a child of a father working in farming as compared to a child whose father had a blue- or a white-collar job. Our findings show that, in the studied countries, intergenerational occupation transmission is mainly linked to low skilled jobs. Our analysis confirms the low degree of social mobility typical of Latin America, contributing, in turn, to explain their low growth rate. Our findings help identifying specific target groups – talented young women coming from the agricultural sector – to develop in them soft skills while at primary or low secondary school and work-related skills while at the high secondary school or at the university.
    Keywords: intergenerational occupational mobility, intergenerational mobility, Latin American countries
    JEL: D60 I30 J24 J6 J62
    Date: 2020–03
  16. By: Montobbio, Fabio (Università Cattolica del Sacro Cuore, BRICK, Collegio Carlo Alberto, and ICRIOS, Bocconi University); Staccioli, Jacopo (Università Cattolica del Sacro Cuore, and Institute of Economics, Scuola Superiore Sant’Anna); Virgillito, Maria Enrica (Università Cattolica del Sacro Cuore, and Institute of Economics, Scuola Superiore Sant’Anna); Vivarelli, Marco (UNU-MERIT, Università Cattolica del Sacro Cuore, and Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA))
    Abstract: This paper investigates the presence of explicit labour-saving heuristics within robotic patents. It analyses innovative actors engaged in robotic technology and their economic environment (identity, location, industry), and identifies the technological fields particularly exposed to labour-saving innovations. It exploits advanced natural language processing and probabilistic topic modelling techniques on the universe of patent applications at the USPTO between 2009 and 2018, matched with ORBIS (Bureau van Dijk) firm-level dataset. The results show that labour-saving patent holders comprise not only robots producers, but also adopters. Consequently, labour-saving robotic patents appear along the entire supply chain. The paper shows that labour-saving innovations challenge manual activities (e.g. in the logistics sector), activities entailing social intelligence (e.g. in the healthcare sector) and cognitive skills (e.g. learning and predicting).
    Keywords: Robotic Patents, Labour-Saving Technology, Search Heuristics, Probabilistic Topic Models
    JEL: O33 J24 C38
    Date: 2020–02–10

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