nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2020‒05‒25
eighteen papers chosen by
Joseph Marchand
University of Alberta

  1. Inequality in the Impact of the Coronavirus Shock: Evidence from Real Time Surveys By Abi Adams-Prassl; Teodora Boneva; Marta Golin; Christopher Rauh
  2. Tournament incentives, age diversity and firm performance By Oleksandr Talavera; Shuxing Yin; Mao Zhang
  3. The short-term Economic Consequences of COVID-19: Occupation Tasks and Mental Health in Canada By Beland, Louis-Philippe; Brodeur, Abel; Mikola, Derek; Wright, Taylor
  4. Dropouts Need Not Apply? The Minimum Wage and Skill Upgrading By Jeffrey Clemens; Lisa B. Kahn; Jonathan Meer
  5. The Value of Time: Evidence From Auctioned Cab Rides By Nicholas Buchholz; Laura Doval; Jakub Kastl; Filip Matějka; Tobias Salz
  6. Do Differences in School Quality Generate Heterogeneity in the Causal Returns to Education? By Philip DeCicca; Harry Krashinsky
  7. Employment composition and labour earnings inequality within EU countries By David Martinez Turegano
  8. Understanding the rising trend in female labour force participation By Hérault, Nicolas; Kalb, Guyonne
  9. Telework and Time Use in the United States By Pabilonia, Sabrina Wulff; Vernon, Victoria
  10. Cash Transfer Programs and Household Labor Supply By Daniela Del Boca; Chiara Pronzato; Giuseppe Sorrenti
  11. Job Search during the COVID-19 Crisis By Hensvik, Lena; Le Barbanchon, Thomas; Rathelot, Roland
  12. Why Are Average Hours Worked Lower in Richer Countries? By Alexander Bick; Nicola Fuchs-Schündeln; David Lagakos; Hitoshi Tsujiyama
  13. The effect of retirement on social relationships: new evidence from SHARE. By Simona Lorena Comi; Elena Cottini; Claudio Lucifora
  14. Does retirement lead to life satisfaction? Causal evidence from fixed effect instrumental variable models By Nguyen, Ha Trong; Mitrou, Francis; Taylor, Catherine L.; Zubrick, Stephen R.
  15. Inequality of Fear and Self-Quarantine: Is There a Trade-off between GDP and Public Health? By Sangmin Aum; Sang Yoon (Tim) Lee; Yongseok Shin
  16. Social Security Wealth, Inequality, and Lifecycle Saving By John Sabelhaus; Alice Henriques Volz
  17. The Effects of Graduating from High School in a Recession: College Investments, Skill Formation, and Labor-Market Outcomes By Franziska Hampf; Marc Piopiunik; Simon Wiederhold
  18. Does Biology Drive Child Penalties? Evidence from Biological and Adoptive Families By Henrik Kleven; Camille Landais; Jakob Egholt Søgaard

  1. By: Abi Adams-Prassl; Teodora Boneva; Marta Golin; Christopher Rauh
    Abstract: We present real time survey evidence from the UK, US and Germany showing that the labor market impacts of COVID-19 differ considerably across countries. Employees in Germany, which has a well-established short-time work scheme, are substantially less likely to be affected by the crisis. Within countries, the impacts are highly unequal and exacerbate existing inequalities. Workers in alternative work arrangements and in occupations in which only a small share of tasks can be done from home are more likely to have reduced their hours, lost their jobs and suffered falls in earnings. Less educated workers and women are more affected by the crisis.
    Keywords: recessions, inequality, labor market, unemployment, coronavirus
    JEL: J21 J22 J24 J33 J63
    Date: 2020
  2. By: Oleksandr Talavera (University of Birmingham); Shuxing Yin (University of Sheffield); Mao Zhang (University of St Andrews)
    Abstract: This study introduces a new dimension, age diversity of non-CEO executives, which moderates the relationship between promotion-based tournament incentives, measured as the pay gap between the CEO and non-CEO executives, and firm performance. For a sample of Chinese listed firms from 2005 to 2015, we find that the tournament incentives for non-CEO executives relate positively to firm performance. This relationship is weaker when non-CEO executives are from different age cohorts, whereas the tournament effect is enhanced when non-CEO executives are from the same age cohort. The negative moderation effect of age diversity is more pronounced in state firms and in the Northern China Plain cultural region. The negative moderation effect disappears in firms with CEOs who have overseas experience. We reason that the peer pressure among the similar-aged non-CEO executives enhances the tournament competition and that age hierarchy reduces incentives for younger executives to compete. Our findings have important implications for firms not only in China, but also in countries and regions where seniority is highly valued when setting executive compensation and optimizing organizational structure.
    Keywords: Executive compensation; Tournament effect; Non-CEO executives; Age diversity; Seniority
    JEL: G30 J10 J33
    Date: 2020–05
  3. By: Beland, Louis-Philippe; Brodeur, Abel; Mikola, Derek; Wright, Taylor
    Abstract: In this paper, we document the short-term impact of COVID-19 on labour mar- ket outcomes in Canada. Following a pre-analysis plan, we investigate the negative impact of the pandemic on unemployment, labour force participation, hours and wages in Canada. We find that COVID-19 had drastic negative effects on labour market outcomes, with the largest effects for younger, not married, and less edu- cated workers. We investigate whether the economic consequences of this pandemic were larger for certain occupations. We then built indices for whether (1) workers are relatively more exposed to disease, (2) work with proximity to coworkers, (3) are essential workers, and (4) can easily work remotely. Our estimates suggest that the impact of the pandemic was significantly more severe for workers more exposed to disease and workers that work in proximity to coworkers, while the effects are significantly less severe for essential workers and workers that can work remotely. Last, we rely on a unique survey, the Canadian Perspective Survey, and show that reported mental health is significantly lower among the most affected workers dur- ing the pandemic. We also find that those who were absent form work because of COVID-19 are more concerned with meeting their financial obligations and with losing their job than those who remain working outside of home, while those who transition from working outside the home to from home are not as concerned with job loss.
    Keywords: COVID-19,unemployment,wages,remote work,essential workers,exposure to disease
    JEL: I15 I18 J21
    Date: 2020
  4. By: Jeffrey Clemens; Lisa B. Kahn; Jonathan Meer
    Abstract: We explore whether minimum wage increases result in substitution from lower-skilled to slightly higher-skilled labor. Using 2011-2016 American Community Survey data (ACS), we show that workers employed in low-wage occupations are older and more likely to have a high school diploma following recent statutory minimum wage increases. To better understand the role of firms, we examine the Burning Glass vacancy data. We find increases in a high school diploma requirement following minimum wage hikes, consistent with our ACS evidence on stocks of employed workers. We see substantial adjustments to requirements both within and across firms.
    JEL: J23 J24 J3 J42
    Date: 2020–05
  5. By: Nicholas Buchholz; Laura Doval; Jakub Kastl; Filip Matějka; Tobias Salz
    Abstract: We estimate valuations of time using detailed consumer choice data from a large European ride hail platform, where drivers bid on trips and consumers choose between a set of potential rides with different prices and waiting times. We estimate consumer demand as a function of prices and waiting times. While demand is responsive to both, price elasticities are on average four times higher than waiting-time elasticities. We show how these estimates can be mapped into values of time that vary by place, person, and time of day. Regarding variation within a day, the value of time during non-work hours is 16% lower than during work hours. Regarding the spatial dimension, our value of time measures are highly correlated both with real estate prices and urban GPS travel flows. A variance decomposition reveals that most of the substantial heterogeneity in the value of time is explained by individual differences as opposed to place or time of day. In contrast with other studies that focus on long run choices we do not find evidence of spatial sorting. We apply our measures to quantify the opportunity cost of traffic congestion in Prague, which we estimate at $483,000 per day.
    JEL: L0
    Date: 2020–05
  6. By: Philip DeCicca; Harry Krashinsky
    Abstract: Estimating the returns to education remains an active area of research amongst applied economists. Most studies that estimate the causal return to education exploit changes in schooling and/or labor laws to generate exogenous differences in education. An implicit assumption is that more time in school may translate into greater earnings potential. None of these studies, however, explicitly consider the quality of schooling to which impacted students are exposed. To extend this literature, we examine the interaction between school quality and policy-induced returns to schooling, using temporally-available school quality measures from Card and Krueger (1992). We find that additional compulsory schooling, via either schooling or labor laws, increases earnings only if educational inputs are of sufficiently high quality. In particular, we find a consistent role for teacher quality, as measured by relative teacher pay across states, in generating consistently positive returns to compulsory schooling.
    JEL: I26 J24 J38
    Date: 2020–05
  7. By: David Martinez Turegano (European Commission - JRC)
    Abstract: This paper presents a novel methodology that combines different datasets to decompose estimated changes in labour earnings inequality into the contributions of a number of employment characteristics. Based on this approach, we provide empirical evidence for recent developments in 18 EU countries starting in 2000. We find that the common upward trend in inequality is related to shifts in the composition of employment within sectors, rather than to sectoral reallocation. In particular, we estimate that the expansion of part-time and fixed-term contracts, as well as the higher share of tertiary educated workers within sectors, have been the main contributors to the rise of earnings inequality. Cross-country differences are exacerbated when taking into account unemployed population due to divergent capacities to create jobs in face of successive economic crises and external competition. In policy terms, a specific concern deals with the possibility that a higher share of flexible contractual arrangements is masking the rise of underemployment. On a broader perspective, we deem that the overall growth and competitiveness strategies are essential within the fairness agenda, while the enhancement of education, social and income-redistribution tools is needed to face economic and technological challenges in the most inclusive way possible.
    Keywords: Inequality, Labour Market, Employment Structure, Economic Crisis, Structural Change.
    JEL: D31 E24 J21
    Date: 2020–04
  8. By: Hérault, Nicolas; Kalb, Guyonne
    Abstract: Female labour force participation has increased tremendously since World War II in developed countries. Prior research provides piecemeal evidence identifying some drivers of change but largely fails to present a consistent story. Using a rare combination of data and modelling capacity available in Australia, we develop a new decomposition approach to explain rising female labour force participation since the mid-1990s. The approach allows us to identify, for the first time, the role of tax and transfer policy reforms as well as three other factors that have been shown to matter by earlier studies. These are (i) changes in real wages, (ii) population composition changes, and (iii) changes in labour supply preference parameters. A key result is that –despite the ongoing emphasis of public policy on improved work incentives for women in Australia and elsewhere– changes in financial incentives due to tax and transfer policy reforms have contributed relatively little to achieve these large increases in participation. Instead, the other three factors drive the increased female labour force participation.
    Keywords: female labour force participation,employment rate,tax-transfer policy,behavioural microsimulation,decomposition
    JEL: H31 J22 J31
    Date: 2020
  9. By: Pabilonia, Sabrina Wulff; Vernon, Victoria
    Abstract: Remote work is rapidly increasing in the United States. Using data on full-time wage and salary workers from the 2017–2018 American Time Use Survey Leave and Job Flexibilities Module, this paper examines the characteristics of teleworkers, the effects of teleworking on wages, and differences in time-use patterns between office and work-at-home workdays. We find that some teleworkers earn a wage premium, but it varies by occupation, gender, parental status, and teleworking intensity. Teleworkers also spend less time on commuting and grooming activities but more time on leisure and household production activities and more time with family on work-at-home days.
    Keywords: working from home,telework,telecommuting,commuting,home-based work,alternative work arrangements,work-life balance,time use,wages
    JEL: J22 J31 D13
    Date: 2020
  10. By: Daniela Del Boca; Chiara Pronzato; Giuseppe Sorrenti
    Abstract: Employment contributes to reduce the risk of poverty. Through a randomized controlled trial, we evaluate the impact of a conditional cash transfer program (CCT) to low-income families with dependent children on household members’ labor supply. The attendance of labor-market-oriented mentoring courses constitutes the condition to obtain the transfer. One year after admission to the program, fathers assigned to the CCT program are more likely to work (+14 percent) than fathers assigned to an unconditional cash transfer program or to a pure control group. No effect arises for mothers. Increased paternal investments in activities enhancing labor market opportunities and improved family networks seem to explain the results.
    Keywords: conditional cash transfers, poverty, household labor supply, mentoring courses
    JEL: I10 I20 J24 I31
    Date: 2020
  11. By: Hensvik, Lena (Uppsala University, IFAU, CEPR); Le Barbanchon, Thomas (Bocconi University, CEPR, IGIER, IZA, J-PAL); Rathelot, Roland (University of Warwick, CAGE, CEPR, J-PAL)
    Abstract: This paper measures the job-search responses to the COVID-19 pandemic using realtime data on vacancy postings and ad views on Sweden’s largest online job board. First, the labour demand shock in Sweden is as large as in the US, and affects industries and occupations heterogeneously. Second, the scope and direction of search change. Job seekers respond to the shock by searching less intensively and by redirecting their search towards less severely hit occupations, beyond what changes in labour demand would predict. The redirection of job search changes relative hiring costs, and has the potential to amplify labour demand shifts
    Keywords: coronavirus ; search intensity ; search direction ; labour demand shock ; job vacancies ; online job board ; JEL codes: J22 ; J23 ; J21 ; J62 ; J63 ; J64; E24
    Date: 2020
  12. By: Alexander Bick; Nicola Fuchs-Schündeln; David Lagakos; Hitoshi Tsujiyama
    Abstract: Why are average hours worked per adult lower in rich countries than in poor countries? We consider two natural explanations: income effects in preferences, in which leisure becomes more valuable when income rises, and distortionary tax systems, which are more prevalent in richer countries. To assess the importance of these two forces, we build a simple model of labor supply by heterogeneous individuals and calibrate it to match international data on labor income taxation, government transfers relative to GDP, and hours worked per adult. The model predicts that income effects are the main driving force behind the decline of average hours worked with GDP per capita. We reach a similar conclusion in an extended model that matches cross-country patterns of labor supply along the extensive and intensive margins and of the prevalence of subsistence self-employment.
    Keywords: hours worked, income effects, taxation
    JEL: E24 J22 O11
    Date: 2020
  13. By: Simona Lorena Comi; Elena Cottini; Claudio Lucifora (Università Cattolica del Sacro Cuore; Dipartimento di Economia e Finanza, Università Cattolica del Sacro Cuore)
    Abstract: We analyze the causal effect of retirement on the size, composition and intensity of social relationships using data from the Survey of Health, Ageing and Retirement in Europe for 11 European countries. Our empirical strategy exploits the different retirement eligibility ages as instruments for the endogenous individuals’ retirement decisions and controls for time invariant individual characteristics. We show that retirement changes the composition of the individual’s social network, increasing the share of family members, and decreasing the share of colleagues and friends, while there is no effect on the network’s absolute size. Changes in the social network’s composition are associated with a higher overall satisfaction and more intense relationships. We argue that retirement induces a substitution between weak (friends or colleagues) and strong ties (family), along with an increase in the intensity of the surviving ties. Interestingly this substitution has a gender dimension: females mainly reduce the share of friends while males that of colleagues.
    Keywords: retirement, social relationships, emotional closeness, ageing.
    JEL: J14 J26 C26
    Date: 2020–05
  14. By: Nguyen, Ha Trong; Mitrou, Francis; Taylor, Catherine L.; Zubrick, Stephen R.
    Abstract: This paper presents robust evidence that retirement causally improves overall life satisfaction which is subsequently explained by improvements in satisfaction with one’s financial situation, free time, health, and participation in local community activities. Furthermore, while the positive wellbeing impact of retirement is sizable initially, it fades after the first 3 years. We find that the improvements in financial satisfaction upon retirement are only observed for low-income individuals. However, the wellbeing impact of retirement does not differ by gender, educational, occupational, economic or marital backgrounds. We also explore several potential explanations for our findings. This paper employs a fixed effect instrumental variable model, which exploits the discontinuity in the eligibility ages for state pension to construct an instrument for retirement, and 18 waves of high-quality Australian panel data. The results also suggest that failing to adequately account for the endogeneity of retirement would result in a downward-biased estimate of a positive wellbeing impact of retirement.
    Keywords: Retirement,Wellbeing,Life Satisfaction,Instrumental Variable,Age Threshold,Australia
    JEL: I31 J14 J26 H55
    Date: 2020
  15. By: Sangmin Aum; Sang Yoon (Tim) Lee; Yongseok Shin
    Abstract: We construct a quantitative model of an economy hit by an epidemic. People differ by age and skill, and choose occupations and whether to commute to work or work from home, to maximize their income and minimize their fear of infection. Occupations differ by wage, infection risk, and the productivity loss when working from home. By setting the model parameters to replicate the progression of COVID-19 in South Korea and the United Kingdom, we obtain three key results. First, government-imposed lock-downs may not present a clear trade-off between GDP and public health, as commonly believed, even though its immediate effect is to reduce GDP and infections by forcing people to work from home. A premature lifting of the lock-down raises GDP temporarily, but infections rise over the next months to a level at which many people choose to work from home, where they are less productive, driven by the fear of infection. A longer lock-down eventually mitigates the GDP loss as well as flattens the infection curve. Second, if the UK had adopted South Korean policies, its GDP loss and infections would have been substantially smaller both in the short and the long run. This is not because Korea implemented policies sooner, but because aggressive testing and tracking more effectively reduce infections and disrupt the economy less than a blanket lock-down. Finally, low-skill workers and self-employed lose the most from the epidemic and also from the government policies. However, the policy of issuing “visas” to those who have antibodies will disproportionately benefit the low-skilled, by relieving them of the fear of infection and also by allowing them to get back to work.
    JEL: I14 I18 J24
    Date: 2020–05
  16. By: John Sabelhaus; Alice Henriques Volz
    Abstract: Wealth inequality in the US is high and rising, but Social Security is generally not considered in those wealth measures. Social Security Wealth (SSW) is the present value of future benefits that an individual will receive less the present value of future taxes they will pay. When an individual enters the labor force, they generally face a lifetime of taxes to pay before they will receive any benefits, and thus their initial SSW is generally low or negative. As an individual works and pays into the system their SSW grows and generally peaks somewhere around typical Social Security benefit claim ages. The accrual of SSW over the working life is most important for lower-income workers because the progressive Social Security benefit formula means that taxes paid while working are associated with proportionally higher benefits in retirement. We estimate SSW for individuals in the Survey of Consumer Finances (SCF) for 1995 through 2016 and use a pseudo-panel approach to empirically demonstrate those lifecycle patterns. We also show that including SSW in a comprehensive wealth measure generally reduces estimated levels of wealth inequality but does not reverse the upward trend in top wealth shares.
    JEL: G11 J26
    Date: 2020–05
  17. By: Franziska Hampf; Marc Piopiunik; Simon Wiederhold
    Abstract: We investigate the short- and long-term effects of economic conditions at high-school graduation as a source of exogenous variation in the labor-market opportunities of potential college entrants. Exploiting business cycle fluctuations across birth cohorts for 28 developed countries, we find that bad economic conditions at high-school graduation increase college enrollment and graduation. They also affect outcomes in later life, increasing cognitive skills and improving labor-market success. Outcomes are affected only by the economic conditions at high-school graduation, but not by those during earlier or later years. Recessions at high-school graduation narrow the gender gaps in numeracy skills and labor-market success.
    Keywords: business cycle, college enrollment, skill formation, labor-market outcomes, PIAAC, gender gap
    JEL: I23 I21 J24 E32
    Date: 2020
  18. By: Henrik Kleven; Camille Landais; Jakob Egholt Søgaard
    Abstract: This paper investigates if the impact of children on the labor market trajectories of women relative to men — child penalties — can be explained by the biological links between mother and child. We estimate child penalties in biological and adoptive families using event studies around the arrival of children and almost forty years of adoption data from Denmark. Long-run child penalties in earnings and its underlying determinants are virtually identical in biological and adoptive families. This implies that biology is not important for child-related gender gaps. Based on additional analyses, we argue that our results speak against the importance of specialization based on comparative advantage more broadly.
    JEL: J13 J16 J22
    Date: 2020–05

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