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on Labor Markets - Supply, Demand, and Wages |
| By: | Adams-Prassl, Abi (University of Oxford); Boneva, Teodora (University of Zurich); Golin, Marta (University of Oxford); Rauh, Christopher (University of Montreal) |
| 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, COVID-19 |
| JEL: | J21 J22 J24 J33 J63 |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp13183&r=all |
| By: | Dostie, Benoit (HEC Montreal); Li, Jiang (Statistics Canada); Card, David (University of California, Berkeley); Parent, Daniel (HEC Montreal) |
| Abstract: | We use longitudinal data from the income tax system to study the impacts of firms' employment and wage-setting policies on the level and change in immigrant-native wage differences in Canada. We focus on immigrants who arrived in the early 2000s, distinguishing between those with and without a college degree from two broad groups of countries – the U.S., the U.K. and Northern Europe, and the rest of the world. Consistent with a growing literature based on the two-way fixed effects model of Abowd, Kramarz, and Margolis (1999), we find that firm-specific wage premiums explain a significant share of earnings inequality in Canada and contribute to the average earnings gap between immigrants and natives. In the decade after receiving permanent status, earnings of immigrants rise relative to those of natives. Compositional effects due to selective outmigration and changing participation play no role in this gain. About one-sixth is attributable to movements up the job ladder to employers that offer higher pay premiums for all groups, with particularly large gains for immigrants from the "rest of the world" countries. |
| Keywords: | wage differentials, immigrants, linked employer-employee data, firm effects |
| JEL: | J15 J31 J71 |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp13245&r=all |
| By: | Adamopoulou, Effrosyni (University of Mannheim); De Philippis, Marta (Bank of Italy); Sette, Enrico (Bank of Italy); Viviano, Eliana (Bank of Italy) |
| Abstract: | This paper studies the long term consequences on workers' labour earnings of the credit crunch induced by the 2007-2008 financial crisis. We study the evolution of both employment and wages in a large sample of Italian workers followed for nine years after the start of the crisis. We rely on a unique matched bank-employer-employee administrative dataset to construct a firm-specific shock to credit supply, which identifies firms that, because of the collapse of the interbank market during the financial crisis, were unexpectedly aected by credit restrictions. We find that workers who were employed before the crisis in firms more exposed to the credit crunch experience persistent and sizable earnings losses, mainly due to a permanent drop in days worked. These effects are heterogeneous across workers, with high-type workers being more affected in the long run. Moreover, firms operating in areas with favorable labor market conditions react to the credit shock by hoarding high-type workers and displacing low-type ones. Under unfavorable labor market conditions instead, firms select to displace also high-type (and therefore more expensive) workers, even though wages do react to the slack. All in all, our results document persistent eects on the earnings distribution. |
| Keywords: | credit crunch, employment, wages, long run effects, administrative data, linked bank-employer-employee panel data |
| JEL: | E24 E44 G21 J21 J31 J63 |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp13185&r=all |
| By: | Louis-Philippe Beland (Department of Economics, Carleton University); Abel Brodeur (Department of Economics, University of Ottawa); Derek Mikola (Department of Economics, Carleton University); Taylor Wright (Department of Economics, University of Ottawa) |
| Abstract: | In this paper, we document the short-term impact of COVID-19 on labour market 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 educated 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 during 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: | 2020–05–12 |
| URL: | http://d.repec.org/n?u=RePEc:car:carecp:20-07&r=all |
| By: | Samuel Muehlemann; Harald Pfeifer; Bernhard Wittek |
| Abstract: | A firm's expectation about the future business climate is an important determinant of the decision to train apprentices, because German firms typically train apprentices to either fill future skilled worker positions, or as a substitute for other types of labor. The current coronavirus crisis will have a strong and negative impact on the German economy according to the current estimates of the business climate in Germany (ifo Business Climate Index). To the extent that the training decision of a firm depends on its perception of the business climate, we expect a downward shift in the firm's demand for apprentices and consequently also a decrease in the equilibrium number of apprenticeship contracts. To assess the impact of changes in business climate expectations, we analyze German data on the apprenticeship market at the state-level and at the occupation-level within states from 2007 to 2019. We apply first-differences regressions to account for unobserved heterogeneity across states and occupations, allowing us to identify the association between changes in the ifo Business Climate Index and subsequent changes in the demand for apprentices, the number of new apprenticeship contracts, unfilled vacancies and unsuccessful applicants. We find that the favorable business climate in Germany in recent years led to a substantial increase in the number of unfilled vacancies. Thus, the apprenticeship market prior to the current crisis can be characterized by excess demand for apprentices (although there are matching problems in some states, with both a high share of unfilled vacancies and a high share of unsuccessful applicants). Taking into account the most recent business climate data up to May 2020, we estimate that the coronavirus-related decrease in firms' expectations about the business climate can be associated with a predicted 9.1% decrease in firm demand for apprentices and a 6.8% decrease in the number of new apprenticeship positions in Germany in 2020 (34,700 apprenticeship contracts; 95% confidence interval: +/- 8,800). |
| Keywords: | Apprenticeship market, Covid-19, coronavirus, business cycle |
| JEL: | J23 J24 M53 |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:iso:educat:0171&r=all |
| By: | Criscuolo, Chiara (OECD); Hijzen, Alexander (OECD); Schwellnus, Cyrille (OECD); Chen, Wen-Hao (OECD); Fabling, Richard (Independent Researcher); Fialho, Priscilla (OECD); Grabska, Katarzyna (Maastricht University); Kambayashi, Ryo (Hitotsubashi University); Leidecker, Timo (OECD); Nordström Skans, Oskar (Uppsala University); Riom, Capucine (London School of Economics); Roth, Duncan (Institute for Employment Research (IAB), Nuremberg); Stadler, Balazs (OECD); Upward, Richard (University of Nottingham); Zwysen, Wouter (ISER, University of Essex) |
| 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. Over all, these results suggest that firms play an important role in explaining wage inequality as wages are driven to a significant extent by firm performance rather than being exclusively determined by workers' earnings characteristics. |
| Keywords: | firm wage premium, wage inequality, productivity |
| JEL: | D2 J31 J38 |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp13212&r=all |
| By: | Moser, Christian; Saidi, Farzad; Wirth, Benjamin; Wolter, Stefanie |
| Abstract: | We study the distributional effects of a monetary policy-induced firm-level credit supply shock on individual wages and employment. To this end, we construct a novel dataset that links worker employment histories to firms' bank credit relationships in Germany. We document that firms in relationships with banks that were more exposed to negative monetary policy rates in 2014 see a relative reduction in credit supply. A negative credit supply shock in turn is associated with lower firm-level average wages and employment. These effects are concentrated among distinct worker groups within firms, with initially lower-paid workers more likely to be fired and initially higher-paid workers more likely to receive wage cuts. At the same time, wages decline by more at initially higher-paying firms. Consequently, wage inequality within and between firms decreases. Our results suggest that monetary policy has important distributional effects in the labor market. |
| Keywords: | Credit Supply, Monetary Policy, Negative Interest Rates, Bank Relationships, Worker and Firm Heterogeneity, Employment, Wages, Linked Employer-Employee Data, Earnings Inequality |
| JEL: | D22 G21 G31 G32 J31 |
| Date: | 2020–05–12 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:100371&r=all |
| By: | Diaz-Serrano, Luis (Universitat Rovira i Virgili); Nilsson, William (University of the Balearic Islands) |
| Abstract: | A number of studies have examined the impact of local labor market conditions on school dropout. However, none of them have considered the role of the industry structure. We construct data for a panel of Spanish regions and identify the effect of local labor markets using a variation of the share of employment by industry across regions and over time. In order to control for the huge structural and conjunctural heterogeneity across Spanish regions in the school dropout rate, we use a fixed-effects model with region specific slopes. We run separate regressions for boys and girls. We find a sizable impact of the industry structure and observe that in markets with a higher share low-skill employment the school dropout rate is significantly larger, though the industries affecting boys and girls are different. Our results suggest that the supply of skilled employment in the economy may allow to keep an important share of school dropouts in the school. |
| Keywords: | educational attainment, Spain, labour market, youth employment, skills |
| JEL: | J21 J24 |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp13220&r=all |
| By: | Christopher Busch; David Domeij; Fatih Guvenen; Rocio Madera |
| Abstract: | Recent studies have shown that idiosyncratic labor income risk becomes more left-skewed during recessions. This procyclical skewness arises from a combination of higher downside risk and lower chances of upward surprises during recessions. While this much is known, some important open questions remain. For example, how robust are these patterns across countries that differ in their institutions and policies, as well as across genders, education groups, and occupations, among others? What is the contribution of wages versus hours to procyclical skewness of earnings changes? To what extent can skewness fluctuations in individual earnings be smoothed within households or with government policies? Using panel data from the United States, Germany, Sweden, and France, we find four main results. First, the skewness of individual income growth (before-tax/transfer) is procyclical while its variance is flat and acyclical in all three countries. Second, this result holds even for full-time workers continuously employed in the same establishment, indicating that the hours margin is not the main driver; additional analyses of hours and wages confirm that both margins are important. Third, within-household smoothing does not seem effective at mitigating skewness fluctuations. Fourth, tax-and-transfer policies blunt some of the largest declines in incomes, reducing procyclical fluctuations in skewness. |
| Keywords: | idiosyncratic income risk, skewness, countercyclical risk |
| JEL: | D31 E24 E32 H31 |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:1180&r=all |
| By: | Abigail Wozniak |
| Abstract: | This paper uses a unique large-scale survey administered in April 2020 to assess disparities on several dimensions of wellbeing under rising COVID-19 infections and mitigation restrictions in the US. The survey includes three modules designed to assess different dimensions of well-being in parallel: physical health, mental and social health, and economic and financial security. The survey is unique among early COVID-19 data efforts in that provides insight on diverse dimensions of wellbeing and for subnational geographies. I find dramatic declines in wellbeing from pre-COVID baseline measures across both people and places. Place-level variation is not well explained by local characteristics that either precede or coincide with the pandemic. Analysis by demographic groups also shows large and unequal declines in wellbeing in the COVID era. Hispanic, younger, and lower-earning individuals all faced disproportionately worsening economic conditions, as did those with school-aged children. I conclude that place-based relief policies are unlikely to be efficient relative to support targeted to the neediest individuals. I also find that individual COVID-19 exposure and risk show concerning relationships with employment, protective behavior, and mental health. Those with direct COVID-19 exposure through their households face significantly greater employment loss, but those with recent fever symptoms or elevated risk for COVID complications are not reducing their work hours or taking additional precautions, despite negative mental health status changes indicating concern. These findings suggest that some support policies might be directly targeted to households with confirmed infections. |
| Keywords: | COVID-19; coronavirus |
| JEL: | I1 I15 I18 J10 J15 J38 |
| Date: | 2020–05–13 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedmoi:87962&r=all |
| By: | Marinescu, Ioana E. (University of Pennsylvania); Ouss, Ivan (CREST (ENSAE)); Pape, Louis-Daniel (CREST (ENSAE)) |
| Abstract: | How does employer market power affect workers? We compute the concentration of new hires by occupation and commuting zone in France using linked employer-employee data. Using instrumental variables with worker and firm fixed effects, we find that a 10% increase in labor market concentration decreases hires by 12.4% and the wages of new hires by nearly 0.9%, as hypothesized by monopsony theory. Based on a simple merger simulation, we find that a merger between the top two employers in the retail industry would be most damaging, with about 24 million euros in annual lost wages for new hires, and an 8000 decrease in annual hires. |
| Keywords: | labor market concentration, wages, hires, merger simulation |
| JEL: | J31 J32 J42 L13 J51 L40 L41 L44 |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp13244&r=all |
| By: | Mark L. Bryan (Department of Economics, University of Sheffield, UK); Andrew M. Bryce (Department of Economics, University of Sheffield, UK); Jennifer Roberts (Department of Economics, University of Sheffield, UK) |
| Abstract: | Poor health in the workforce is costly to employers and the economy. This is partly due to health problems causing people to spend less time at work but is also due to people being less productive while at work. In this paper, we investigate the causes of presenteeism, defined as reduced productivity at work due to health problems. This is the first study to estimate the extent of presenteeism in the UK workforce as a whole. We assess the extent to which physical and mental health affect people’s ability to do their job effectively and seek to expose some of the ‘hidden’ costs of ill health on the UK economy. We find that both physical and mental health significantly predict the probability of presenteeism. These effects persist in a longitudinal framework, such that a worsening of health over time significantly increases the probability of presenteeism; and the effects of mental health problems seem to be worse than physical health. In comparison, changes to other characteristics, such as work circumstances, have little or no effect on presenteeism, with the exception of perceived job security. However, being in part time work and having autonomy over work tasks both significantly reduce the effect of mental health on presenteeism, suggesting that conducive working conditions can help to mitigate the negative impact of health on productivity. |
| Keywords: | international migration; migration choice; government ideology; OECD countries |
| JEL: | I14 J24 |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:shf:wpaper:2020005&r=all |
| By: | Paulo M.M. Rodrigues; João Nicolau; Pedro Raposo |
| Abstract: | In this paper we investigate potential changes which may have occurred over the last two decades in the probability mass of the right tail of the wage distribution, through the analysis of the corresponding tail index. In specific, a conditional tail index estimator is introduced which explicitly allows for right tail censoring (top-coding), which is a feature of the widely used current population survey (CPS), as well as of other surveys. Ignoring the top-coding may lead to inconsistent estimates of the tail index and to under or over statements of inequality and of its evolution over time. Thus, having a tail index estimator that explicitly accounts for this sample characteristic is of importance to better understand and compute the tail index dynamics in the censored right tail of the wage distribution. The contribution of this paper is threefold: i) we introduce a conditional tail index estimator that explicitly handles the top-coding problem, and evaluate its finite sample performance and compare it with competing methods; ii) we highlight that the factor values used to adjust the top-coded wage have changed over time and depend on the characteristics of individuals, occupations and industries, and propose suitable values; and iii) we provide an in-depth empirical analysis of the dynamics of the US wage distribution’s right tail using the public-use CPS database from 1992 to 2017. |
| JEL: | C18 C24 E24 J11 J31 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ptu:wpaper:w202008&r=all |
| By: | F Baum, Christopher (Boston College, DIW Berlin & Centre of Excellence for Science and Innovation Studies); Lööf, Hans (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Stephan, Andreas (Jönköping University, DIW Berlin & Centre of Excellence for Science and Innovation Studies); F. Zimmermann, Klaus (UNU-MERIT, Maastricht University, CEPR and GLO) |
| Abstract: | Refugee workers start low and adjust slowly to the wages of comparable natives. The innovative approach in this study using unique Swedish employer employee data shows that the observed wage gap between established refugees and comparable natives is mainly caused by occupational sorting into cognitive and manual tasks. Within occupations, it can be largely explained by differences in work experience. The identification strategy relies on a control group of matched natives with the same characteristics as the refugees, using panel data for 2003–2013 to capture unobserved heterogeneity. |
| Keywords: | refugees; wage earnings gap; Blinder—Oaxaca decomposition; employer-employee data; coarsened exact matching; correlated random effects model |
| JEL: | C23 F22 J24 J60 O15 |
| Date: | 2020–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:cesisp:0485&r=all |
| By: | Pedro Brinca; Joao B. Duarte; Miguel Faria-e-Castro |
| Abstract: | We measure labor demand and supply shocks at the sector level around the COVID-19 outbreak by estimating a Bayesian structural vector autoregression on monthly statistics of hours worked and real wages. Our estimates suggest that two-thirds of the 16.24 percentage point drop in the growth rate of hours worked in April 2020 are attributable to supply. Most sectors were subject to historically large negative labor supply and demand shocks in March and April, but there is substantial heterogeneity in the size of shocks across sectors. We show that our estimates of supply shocks are correlated with sectoral measures of telework. |
| Keywords: | Sign Restrictions; Supply and Demand Shocks; COVID-19; Structural Vector Autoregressions |
| JEL: | E24 E30 J20 |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlwp:87978&r=all |
| By: | Baert, Stijn (Ghent University); Lippens, Louis (Ghent University); Moens, Eline (Ghent University); Weytjens, Johannes (Ghent University); Sterkens, Philippe (Ghent University) |
| 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: | videoconferencing, telework, COVID-19, career |
| JEL: | J22 J28 D24 I10 J15 J24 |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp13229&r=all |
| By: | Hensvik, Lena (IFAU); Le Barbanchon, Thomas (Bocconi University); Rathelot, Roland (University of Warwick) |
| 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: | COVID-19, coronavirus, search intensity, search direction, labour demand shock, job vacancies, online job board |
| JEL: | J22 J23 J21 J62 J63 J64 E24 |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp13237&r=all |
| By: | Chowdhury, Shyamal (University of Sydney); Ooi, Evarn; Slonim, Robert (University of Sydney) |
| Abstract: | We design and implement a correspondence study where we sent fictitious résumés with Chinese names and White names in response to both high-skilled and low-skilled job advertisements. Consistent with similar research elsewhere, we find that there is a large gap in getting interview offers when résumés with first and last Chinese names are used compared to résumés with White first and last names. To tease apart whether the gaps can be better explained by statistical or taste-based discrimination, we also sent out résumés of 'Adopters' with a Chinese last name but White first name. The benefit of having an adopter name was economically meaningful, reducing the gap by about the same amount as would occur if the applicant with a Chinese first and last name had instead received an additional year of honours education. To examine the extent and nature of discrimination, we collected two data sets with administrative population statistics. The administrative information shows that Adopter names signal different characteristics, including educational outcomes and parent background which is consistent with statistical discrimination. In addition, the pool of Chinese applicants is a mixture of international and domestic applicants with the domestic pool being higher achievers whereas the international applicants are much lower achievers. This mixture might be disadvantaging the domestic pool and providing an economic motive for becoming an Adopter. We discuss how our results may help formulate policies for parental investments and employers' education to reduce employment and wage gaps observed between minorities and majorities in labour markets. |
| Keywords: | racial discrimination, correspondence study, labour market, administrative records |
| JEL: | J15 J71 J64 C93 |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp13208&r=all |
| By: | Fossen, Frank M. (University of Nevada, Reno); Neyse, Levent (DIW Berlin); Johannesson, Magnus (Stockholm School of Economics); Dreber Almenberg, Anna (University of Innsbruck) |
| Abstract: | The 2 D:4D digit ratio, the ratio of the length of the 2nd digit to the length of the 4th digit, is often considered a proxy for testosterone exposure in utero. A recent study by Nicolaou et al. (2018) reported an association between the lefthand 2D:4D and self-employment (in a sample of about 1,000 adults). In this preregistered study we replicate these results on a new and larger sample of about 2,600 adults from the German Socioeconomic Panel-Innovation Sample (SOEP-IS). We find no statistically significant associations between 2D:4D and self-employment and thus cannot confirm the findings of Nicolaou et al. (2018) for left-hand 2D:4D. Our estimated 99.5% confidence intervals are within an about 2 percentage points change in self-employment for a one standard deviation change in the 2D:4D when we pool results for men and women (the association does not differ significantly between men and women). Even larger studies are needed to rule out smaller effect sizes. |
| Keywords: | hormones, entrepreneurship, self-employment, testosterone, digit ratio |
| JEL: | J23 L26 |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp13180&r=all |
| By: | Nikolova, Milena (University of Groningen); Nikolaev, Boris (Emory University); Popova, Olga (Leibniz Institute for East and Southeast European Studies (IOS)) |
| 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: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp13187&r=all |
| By: | Fraumeni, Barbara M. (Central University of Finance and Economics); Christian, Michael S. (Education Analytics, Madison); Samuels, Jon D. (U.S. Department of Commerce) |
| Abstract: | Over the 1948–2013 period, many factors significantly impacted on human capital, which in turn affected economic growth in the United States. This chapter analyzes these factors within a complete national income accounting system which integrates Jorgenson-Fraumeni human capital into the accounts. By including human capital, a fresh perspective on economic growth across time and within specific subperiods is revealed, notably regarding the 1995–2000 and 2007–2009 periods. During the 1995–2000 period, the reduction in human capital investment significantly reduced apparent economic growth. In the 2007–2009 period, the increase in human capital investment tempered the negative impact of the Great Recession. Over the longer time period, first the post-World War baby boom and then the substantial increase in education led to higher economic growth than otherwise expected. As the pace of increase in education slowed and the workforce aged toward the end of the period, human capital induced growth was reduced. |
| Keywords: | human capital, integrated economic accounts, U.S. post-war sources of growth, education, labor force participation |
| JEL: | E01 E24 J24 I21 J21 |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp13239&r=all |
| By: | Gaggl, Paul (University of North Carolina at Charlotte); Gray, Rowena (University of California, Merced); Marinescu, Ioana E. (University of Pennsylvania); Morin, Miguel (The Alan Turing Institute) |
| Abstract: | Electricity is a general purpose technology and the catalyst for the second industrial revolution. What was its impact on the structure of employment? We use U.S. Census data from 1910 to 1940 and measure electrification with the length of higher-voltage electricity lines. Instrumenting for electrification using hydro-electric potential, we find that the average expansion of high-voltage transmission lines between 1910 and 1940 increased the share of operatives in a county by 3.3 percentage points and decreased the share of farmers by 2.1 percentage points. Electrification can explain 50.5% of the total increase in operatives, and 18.1% of the total decrease in farmers between 1910 and 1940. At the industry level, electrification drove 15.7% of the decline in the share of agricultural employment and 28.4% of the increase in the share of manufacturing employment between 1910 and 1940. Electrification was thus a key driver of structural transformation in the U.S. economy. |
| Keywords: | technological change, electrification, structural change |
| JEL: | E25 E22 J24 J31 N32 N72 O33 |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp13243&r=all |
| By: | Velilla, Jorge (University of Zaragoza); Molina, José Alberto (University of Zaragoza); Ortega, Raquel (University of Zaragoza) |
| Abstract: | This paper studies the reasons underlying the entrepreneurial decisions of low-, middle-, and high-income workers in South America. Using data from the GEM APS for the period 2005-2017, we apply fuzzy set Qualitative Comparative Analysis, allowing us to find causal links in the form of necessary conditions linked to entrepreneurship in the sample countries. Results show some differences in the conditions that lead individuals to become entrepreneurs, depending on income levels and gender. However, peer effects, the social perception of entrepreneurship, entrepreneurial skills, and formal education seem decisive in different contexts, although they may operate in both complementary and substitutive ways. The same combination of conditions does not appear to work for all the countries, even when taking into account the gender and income level of workers. |
| Keywords: | South America, entrepreneurship, income, fsQCA, GEM data |
| JEL: | L26 J22 |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp13209&r=all |
| By: | Kashif Mansoor (Centre for Development Studies, Thiruvananthapuram); Donal O'Neill (Maynooth University and IZA, Bonn) |
| Abstract: | Minimum wages are increasingly being used in developing countries as a policy to combat exploitation of workers and raise living standards. However, in many developing countries there is a substantial difference between de jure and de facto regulation. We examine the consequences of imperfect compliance by looking at the heterogenous effects of minimum wages across compliance regimes in India from 1999-2011. We find noncompliance rates as high as 90% for some unskilled workers in India. We show that minimum wages have a positive effect on wages, without a corresponding effect on employment. As a result, household consumption increases following increases in the minimum wage; however, compliance matters. The beneficial pass-through of higher minimum wages to wages and consumption is significantly reduced in low compliance regimes. Our findings imply that labour market reforms have the potential to significantly improve workers’ living standards in developing countries but only if accompanied by effect enforcement mechanisms. |
| Keywords: | Minimum Wage, Compliance |
| JEL: | J38 O15 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:may:mayecw:n301-20.pdf&r=all |
| By: | Coibion, Olivier (University of Texas at Austin); Gorodnichenko, Yuriy (University of California, Berkeley); Weber, Michael (University of Chicago) |
| Abstract: | We study how the differential timing of local lockdowns due to COVID-19 causally affects households' spending and macroeconomic expectations at the local level using several waves of a customized survey with more than 10,000 respondents. About 50% of survey participants report income and wealth losses due to the corona virus, with the average losses being $5,293 and $33,482 respectively. Aggregate consumer spending dropped by 31 log percentage points with the largest drops in travel and clothing. We find that households living in counties that went into lockdown earlier expect the unemployment rate over the next twelve months to be 13 percentage points higher and continue to expect higher unemployment at horizons of three to five years. They also expect lower future inflation, report higher uncertainty, expect lower mortgage rates for up to 10 years, and have moved out of foreign stocks into liquid forms of savings. The imposition of lockdowns can account for much of the decline in employment in recent months as well as declines in consumer spending. While lockdowns have pronounced effects on local economic conditions and households' expectations, they have little impact on approval ratings of Congress, the Fed, or the Treasury but lead to declines in the approval of the President. |
| Keywords: | labor market, consumer spending, subjective expectations, employment, COVID-19, surveys |
| JEL: | E31 C83 D84 J26 |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp13224&r=all |
| By: | Lewandowski, Piotr (Institute for Structural Research (IBS)) |
| Abstract: | Social contacts are a key transmission channel of infectious diseases spread by the respiratory or close-contact route, such as COVID-19. There is no evidence, however, on the question of whether the nature and the organisation of work affect the spread of COVID-19 in different countries. I have developed a methodology to measure country-specific levels of occupational exposure to contagion driven by social contacts. I combined six indicators based on Occupation Information Network (O*NET) and the European Working Condition Survey (EWCS) data. I then applied them to 26 European countries, and found substantial cross-country differences in levels of exposure to contagion in comparable occupations. The resulting country-level measures of levels of exposure to contagion (excluding health professions) predict the growth in COVID-19 cases, and the number of deaths from COVID-19 in the early stage of pandemic (up to four weeks after the 100th case). The relationship between levels of occupational exposure to contagion and the spread of COVID-19 is particularly strong for workers aged 45-64. I found that 20-25% of the cross-country variance in numbers of COVID-19 cases and deaths can be attributed to cross-country differences in levels of occupational exposure to contagion in European countries. My findings are robust to controlling for the stringency of containment policies, such as lockdowns and school closures. They are also driven by country-specific patterns of social contacts at work, rather than by occupational structures. Thus, I conclude that measuring workplace interactions may help to predict the next waves of the COVID-19 pandemic. |
| Keywords: | COVID-19, contagion, exposure to disease, occupations, organisation of work |
| JEL: | J01 I10 J44 |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp13227&r=all |
| By: | Kosonen, Tuomas; Matikka, Tuomas |
| Abstract: | We provide novel evidence of discrete labor supply responses to tax incentives and study the broader implications of discrete rather than continuous labor supply. We utilize an income notch and a reform that shifted the location of the notch in order to study the labor supply mechanisms. We find transparent evidence of discrete labor supply responses, revealing that wage earners even in the part-time labor market can face significant restrictions in their available labor supply choices. As an implication of discrete labor supply, we show that the conventional differencesin-differences and bunching elasticity estimates can be downward-biased when labor supply is discrete. |
| Keywords: | labor supply, discrete choices, tax elasticity, Social security, taxation and inequality, Labour markets and education, H21, H24, J22, |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:fer:wpaper:132&r=all |
| By: | Kohei Okada (Graduate School of Economics, Osaka University) |
| Abstract: | Ever since the onset of the Industrial Revolution,automation has had signicant impacts on economic growth,labor,the education decision-making of individuals,and education policy. In this study,we aim to examine the complex relationship between education,automation,and economic growth. We employ an overlapping-generations model with endogenous education decision-making and automation. Our fndings show that an economy converges to a steady state where automation occurs and per capita output is high if productivity is high.On the other hand,we show that an economy converges to a steady state where automation does not occur and per capita output is low if productivity is low. In addition,we examine how education subsidy policy affects the economy when productivity is low. If the efficiency of education is high,the government can steer an economy away from a steady state without automation by investing more resources in education.If the efficiency of education is low,there can exist multiple steady states where automation occurs in one but not in the other. |
| Keywords: | Education,Automation,Economicgrowth |
| JEL: | E22 J24 O10 O30 |
| URL: | http://d.repec.org/n?u=RePEc:osk:wpaper:2009&r=all |