nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2020‒05‒11
thirteen papers chosen by
Joseph Marchand
University of Alberta

  1. Determinants of Teacher Value-Added in Public Primary Schools: Evidence from Administrative Panel Data By Tanaka, Ryuichi; Bessho, Shun-ichiro; Kawamura, Akira; Noguchi, Haruko; Ushijima, Koichi
  2. Information and the Persistence of the Gender Wage Gap: Early Evidence from California's Salary History Ban By Benjamin Hansen; Drew McNichols
  3. The Ability Gradient in Bunching By Spencer Bastani; Daniel Waldenström
  4. Minimum Wages and Firm-Level Employment in a Developing Country By Sjöholm, Fredrik
  5. Complementarity of Performance Pay and Task Allocation By Bryan Hong; Lorenz Kueng; Mu-Jeung Yang
  6. Costly Commuting and the Job Ladder By Jean Flemming
  7. The Short-Term Economic Consequences of COVID-19: Exposure to Disease, Remote Work and Government Response By Béland, Louis-Philippe; Brodeur, Abel; Wright, Taylor
  8. South Australia’s Employment Relief Program for Assisted Immigrants: Promises and Reality, 1838-1843 By Edwyna Harris; Sumner La Croix
  9. Does the US Tax Code Favor Automation? By Daron Acemoglu; Andrea Manera; Pascual Restrepo
  10. The COVID-19 crisis and telework: A research survey on experiences, expectations and hopes By Stijn Baert; Louis Lippens; Eline Moens; Philippe Sterkens; Johannes Weytjens
  11. The Perceived Well-being and Health Costs of Exiting Self-Employment By Nikolova, Milena; Nikolaev, Boris; Popova, Olga
  12. Foreign acquisitions – A shortcut to higher productivity and expansion in smaller firms? By Eliasson, Kent; Hansson, Pär; Lindvert, Markus
  13. Labor Demand in the Past, Present and Future By Georg Graetz

  1. By: Tanaka, Ryuichi (University of Tokyo); Bessho, Shun-ichiro (University of Tokyo); Kawamura, Akira (Kanagawa University of Human Services); Noguchi, Haruko (Waseda University); Ushijima, Koichi (University of Tsukuba)
    Abstract: This study estimates teacher value-added (TVA) for language arts and mathematics test scores of students in public primary schools to investigate the empirical relationship between testscore TVA and observable traits and promotions of teachers. Our empirical strategy employs Chetty, Friedman, and Rockoff (2014a) with school-year fixed effects as an additional control for potential sorting of students across schools. Using unique administrative panel data of students in public primary schools of a large municipality of Japan, we find TVA distribution to have variance comparable to ones observed in the U.S. schools. Using TVA estimates, we examine their associations with gender, teaching experience, age, and promotions of teachers. We find that these observable characteristics of teachers are statistically significantly associated with TVA estimates. Additionally, we find that TVA estimates are positively associated with teacher promotions.
    Keywords: education, teacher value-added, class size, teaching experience, promotion
    JEL: H75 I21 J24 J45
    Date: 2020–04
  2. By: Benjamin Hansen; Drew McNichols
    Abstract: Aiming to reduce the gender wage gap, several states and cities have recently adopted legislation that prohibits employers from asking about previously earned salaries. The advocates of these salary history bans (SHBs) have suggested pay history perpetuates past discrimination. We study the early net impact of the first state-wide SHBs. Using both difference-in-difference and synthetic control approaches, we find the gender earnings ratio increased by 1 percent in states with SHBs. We find these population wide increases are driven by an increase of the gender earnings ratio for households with all children over 5 years old, by workers over 35, and are principally driven by those who have recently switched jobs.
    JEL: J16 J3 J31 J42 J48 J58 J7 K0
    Date: 2020–04
  3. By: Spencer Bastani; Daniel Waldenström
    Abstract: We analyze the relationship between cognitive ability and bunching in the context of a large and salient kink point of the Swedish income tax schedule. Using population-wide register data from the Swedish military enlistment and administrative tax records, we find that high-ability individuals bunch more than low-ability individuals. This ability gradient is stronger for the self-employed, but is also present among wage earners. We also use high-school GPA and math grades to analyze gender differences, finding a stronger ability gradient among men.
    Keywords: bunching, ability, skills, complexity, optimal taxation
    JEL: H21 H24 J22 J24
    Date: 2020
  4. By: Sjöholm, Fredrik (Department of Economics, Lund University)
    Abstract: The effect of minimum wages on employment is a matter of debate, and the existing empirical literature contains mixed results. One reason for this is the methodological difficulties involved where changes in minimum wages are endogenous to other important economic changes. To overcome this problem, we examine exogenous changes to local minimum wages in Indonesia between 1989 and 1994. Our natural experiment results from a national policy change: from minimum wages being determined by local guidelines and criteria to minimum wages being harmonized and set according to nationwide criteria. We examine how these changes in minimum wages affect employment, considering the effect both on employment within plants and on exit of plants. Our results show no evidence of an effect of minimum wages on employment in Indonesian plants. One explanation found in the data is that higher minimum wages force plants to increase productivity, which in turn enables them to retain their labor force, despite higher wage costs.
    Keywords: Minimum wages; Employment; Plants; Indonesia
    JEL: J21 J23 J38
    Date: 2020–04–07
  5. By: Bryan Hong (New York University (NYU) - Leonard N. Stern School of Business); Lorenz Kueng (University of Lugano - Faculty of Economics; Swiss Finance Institute; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); Northwestern University - Kellogg School of Management); Mu-Jeung Yang (University of Washington - Department of Economics)
    Abstract: Complementarity between performance pay and other organizational design elements has been argued to be one potential explanation for stark differences in the observed productivity gains from performance pay adoption. Using detailed data on internal organization for a nationally representative sample of firms, we empirically test for the existence of complementarity between performance pay incentives and decentralization of decision-making authority for tasks. To address endogeneity concerns, we exploit regional variation in income tax progressivity as an instrument for the adoption of performance pay. We find systematic evidence of complementarity between performance pay and decentralization of decision-making from principals to employees. However, adopting performance pay also leads to centralization of decision-making authority from non-managerial to managerial employees. The findings suggest that performance pay adoption leads to a concentration of decision-making control at the managerial employee level, as opposed to a general movement towards more decentralization throughout the organization.
    Keywords: performance pay, decentralization, management practices
    JEL: D2 G29 H32 J33 L2 M1 M5
    Date: 2020–04
  6. By: Jean Flemming
    Abstract: Even though workers in the UK spent just 1,000 pounds on commuting in 2017, the economic loss may be far higher because of the congestion externality arising from the way in which one worker's commute affects the commuting time of others. I provide empirical evidence that commuting time affects job acceptance, pointing to large indirect costs of congestion. To interpret the empirical facts and quantify the costs of congestion, I build a model featuring a frictional labor market within a metropolitan area. By endogenizing commuting congestion in a labor search model, the model connects labor market responses to urban policies. Workers evaluate job offers based on their productivity and commuting costs, taking congestion as given, but by accepting and commuting to distant jobs, affect other workers' labor market outcomes. Through this mechanism, equilibrium moving decisions, housing rent, and wages are tightly linked to congestion. Calibrating the model to the local labor market around London, I show that the effect of the congestion externality is to significantly decrease welfare and increase wage inequality. I quantify the effects of a congestion tax on labor market outcomes, and show that the welfare-maximizing tax has substantial negative effects on inequality, but comes at a cost of higher unemployment.
    Keywords: Job search; Wage distribution; Congestion externality; Commuting
    JEL: E24 J32 J62 R13 R41
    Date: 2020–03–27
  7. By: Béland, Louis-Philippe; Brodeur, Abel; Wright, Taylor
    Abstract: In this ongoing project, we examine the short-term consequences of COVID- 19 on employment and wages in the United States. Guided by a pre-analysis plan, we document the impact of COVID-19 at the national-level using a simple difference and test whether states with relatively more confirmed cases/deaths were more affected. Our findings suggest that COVID-19 in- creased the unemployment rate, decreased hours of work and labor force participation and had no significant impacts on wages. The negative impacts on labor market outcomes are larger for men, younger workers, Hispanics and less-educated workers. This suggest that COVID-19 increases labor market inequalities. We also investigate whether the economic consequences of this pandemic were larger for certain occupations. We built three indexes using ACS and O*NET data: workers relatively more exposed to disease, work- ers that work with proximity to coworkers and workers who can easily work remotely. Our estimates suggest that individuals in occupations working in proximity to others are more affected while occupations able to work remotely are less affected. We also find that occupations classified as more exposed to disease are less affected, possibly due to the large number of essential workers in these occupations.
    Keywords: COVID-19,unemployment,wages,remote work,exposure to disease
    JEL: I15 I18 J21
    Date: 2020
  8. By: Edwyna Harris (Monash University); Sumner La Croix (University of Hawaii)
    Abstract: Great Britain established the new colony of South Australia (SA) in 1834. The immigration contract signed by assisted migrants required the SA government to provide those who could not find private sector work with employment on public works. We use new data on the compensation of unemployed and private-sector workers to examine how the SA unemployment system functioned before and after the onset of a major economic crisis in August 1840. We conclude that the unemployment system provided highly compensated relief employment to a small number of migrants prior to the crisis but as migrant numbers claiming relief employment soared between August 1840 and October 1841, the government drastically cut compensation for relief employment. The cuts occurred in tandem with the government’s release of newly surveyed rural lands, which together provided incentives and opportunities for workers to move to rural areas to seek work on newly opened farms. A comparison of the SA employment relief program with the 1843 temporary employment relief program established in the neighboring colony of New South Wales (NSW) shows that the NSW program neither established guarantees of jobs for assisted migrants unable to find work nor provided jobs for all assisted migrants without work during the 1843-1845 period.
    Keywords: relief, unemployed, South Australia, migrants, public works
    JEL: J65 N37 J38
    Date: 2020–03
  9. By: Daron Acemoglu; Andrea Manera; Pascual Restrepo
    Abstract: We argue that the US tax system is biased against labor and in favor of capital and has become more so in recent years. As a consequence, it has promoted inefficiently high levels of automation. Moving from the US tax system in the 2010s to optimal taxation of capital and labor would raise employment by 4.02% and the labor share by 0.78 percentage points, and restore the optimal level of automation. If moving to optimal taxes is infeasible, more modest reforms can still increase employment by 1.14–1.96%, but in this case efficiency can be increased by imposing an additional automation tax to reduce the equilibrium level of automation. This is because marginal automated tasks do not bring much productivity gains but displace workers, reducing employment below its socially optimal level. We additionally show that reducing labor taxes or combining lower capital taxes with automation taxes can increase employment much more than the uniform reductions in capital taxes enacted between 2000 and 2018.
    JEL: J23 J24
    Date: 2020–04
  10. By: Stijn Baert; Louis Lippens; Eline Moens; Philippe Sterkens; Johannes Weytjens (-)
    Abstract: While a considerable number of employees across the globe are being forced to work from home due to the COVID-19 crisis, it is a guessing game as to how they are experiencing this current surge in telework. Therefore, we examined employee perceptions of telework on various life and career aspects, distinguishing between typical and extended telework during the COVID-19 crisis. To this end, we conducted a state-of-the-art web survey among Flemish employees. Notwithstanding this exceptional time of sudden, obligatory and high-intensity telework, our respondents mainly attribute positive characteristics to teleworking, such as increased efficiency and a lower risk of burnout. The results also suggest that the overwhelming majority of the surveyed employees believe that teleworking (85%) and digital conferencing (81%) are here to stay. In contrast, some fear that telework diminishes their promotion opportunities and weakens ties with their colleagues and employer.
    Keywords: COVID-19, telework, videoconferencing, career
    JEL: J22 J28 D24 I10 J15 J24
    Date: 2020–05
  11. By: Nikolova, Milena; Nikolaev, Boris; Popova, Olga
    Abstract: We explore how involuntary and voluntary exits from self-employment affect life and health satisfaction. To that end, we use rich longitudinal data from the German Socio-Economic Panel from 1985 to 2017 and a difference-in-differences estimation. Our findings suggest that while transitioning from self-employment to salaried employment (i.e., a voluntary self-employment exit) brings small improvements in health and life satisfaction, the negative psychological costs of business failure (i.e., switching from self-employment to unemployment) are substantial and exceed the costs of involuntarily losing a salaried job (i.e., switching from salaried employment to unemployment). Meanwhile, leaving self-employment has no consequences for selfreported physical health and behaviors such as smoking and drinking, implying that the costs of losing self-employment are largely psychological. Moreover, former business owners fail to adapt to an involuntary self-employment exit even two or more years after this traumatic event. Our findings imply that policies encouraging entrepreneurship should also carefully consider the costs of business failure.
    Keywords: entrepreneurship,self-employment,health,well-being,unemployment,job switches
    JEL: E24 I10 I31 J28 L26
    Date: 2020
  12. By: Eliasson, Kent (Swedish Agency for Growth Policy Analysis); Hansson, Pär (Örebro University School of Business); Lindvert, Markus (Swedish Agency for Growth Policy Analysis)
    Abstract: The purpose of this paper is to analyze the effects of foreign acquisitions on the productivity of acquired Swedish firms. However, because an acquisition is an opportunity to restructure a business and because such changes, in turn, can result in increased productivity, the effects may be observed in other outcome variables. Therefore, we also study the effects after an acquisition on employment, share of skilled labor, and export and import intensities in Swedish firms taken over by foreign multinationals (MNEs). As we examine the effects on both acquired manufacturing and service firms, we also analyze the effects in small firms, e.g., those with one or more employees. To control for the possible endogeneity of foreign direct investment decisions, propensity score matching is combined with a difference-in-difference approach. The positive effects on productivity, the share of skilled labor, employment and the export and import intensities of foreign acquisitions are most pronounced among small service firms. We also find positive productivity effects of foreign acquisitions in large manufacturing firms. A contributing factor is the investment in human capital, i.e., increasing the share of skilled labor. Foreign acquisitions appear to involve expansion in the acquired firms, particularly with respect to employment increases in small firms. Thus, being acquired by a foreign MNE appears to be a conceivable alternative for small firms with strong future growth potential, especially when dealing with the growth barriers that such firms usually encounter.
    Keywords: foreign acquisition; restructuring; cherry-picking; labor productivity; skilled labor; export and import intensities
    JEL: D22 F21 F23 J24
    Date: 2020–04–24
  13. By: Georg Graetz
    Abstract: Since the beginning of the Industrial Revolution, technological change has led to the automation of existing tasks and the creation of new ones, as well as the reallocation of labor across occupations and industries. These processes have been costly to individual workers, but labor demand has remained strong, and real wages have steadily increased in line with productivity growth. I provide evidence suggesting, however, that in recent decades automation has outpaced the creation of new tasks and thus the demand for labor has declined. There is strong disagreement about the future of labor demand, and predictions about technological breakthroughs have a poor track record. Given the importance of overall labor demand for workers’ standard of living as well as their ability to adjust to a changing labor market, obtaining accurate forecasts should be a priority for policy makers.
    Keywords: automation, labor demand, labor share, technology, wages
    JEL: J23 O33
    Date: 2020

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