nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2020‒06‒15
twenty-one papers chosen by
Joseph Marchand
University of Alberta

  1. Imperfect Competition and Rents in Labor and Product Markets: The Case of the Construction Industry By Kory Kroft; Yao Luo; Magne Mogstad; Bradley Setzler
  2. Do Generous Parental Leave Policies Help Top Female Earners? By Kunze, Astrid; Corekcioglu , Gozde; Francesconi , Marco
  3. Exporting behavior and the demand for skills in German establishments By Kölling, Arnd; Mertens, Antje
  4. The U.S. Labor Market during the Beginning of the Pandemic Recession By Tomaz Cajner; Leland D. Crane; Ryan A. Decker; John Grigsby; Adrian Hamins-Puertolas; Erik Hurst; Christopher Kurz; Ahu Yildirmaz
  5. Wage Determination and the Bite of Collective Contracts in Italy and Spain: Evidence from the Metalworking Industry By Effrosyni Adamopoulou; Ernesto Villanueva
  6. Country of Women? Repercussions of the Triple Alliance War in Paraguay By Alix-Garcia, Jennifer; Schechter, Laura; Valencia Caicedo, Felipe; Zhu, Jessica
  7. On the political economy of income taxation By Berliant, Marcus; Gouveia, Miguel
  8. Market power, productivity and distribution of wages: theory and evidence with micro data By Oleksandr Shepotylo; Volodymyr Vakhitov
  9. Is Rising Household Debt Affecting Retirement Decisions? By Butrica, Barbara A.; Karamcheva, Nadia S
  10. The Unintended Consequences of Employer Credit Check Bans for Labor Markets By Kristle Cortés; Andy Glover; Murat Tasci
  11. Revealing Gender-Specific Costs of STEM in an Extended Roy Model of Major Choice By Marc Henry; Romuald Meango; Ismael Mourifié
  12. Marginal Net Taxation of Americans’ Labor Supply By David Altig; Alan J. Auerbach; Laurence J. Kotlikoff; Elias Ilin; Victor Ye
  13. The Gender Gap in Tech & Competitive Work Environments? Field Experimental Evidence from an Internet-of-Things Product Development Platform By Kevin Boudreau; Nilam Kaushik
  14. Election Systems, the “Beauty Premium” in Politics, and the Beauty of Dissent By Niklas Potrafke; Marcus Rösch; Heinrich Ursprung
  15. "No Man is an Island": An Empirical Study on Team Formation and Performance By Alessandra Allocca
  16. The Accumulation of Human and Market Capital in the United States: The Long View, 1948–2013 By Barbara M. Fraumeni; Michael S. Christian; Jon D. Samuels
  17. The Idiosyncratic Impact of an Aggregate Shock The Distributional Consequences of COVID-19 By Hamish Low; Michaela Benzeval; Jon Burton; Thomas F. Crossley; Paul Fisher; Annette Jäckle; Brendan Read
  18. The Contribution of Chinese Diaspora Researchers to Scientific Publications and China's “Great Leap Forward” in Global Science By Qingnan Xie; Richard B. Freeman
  19. Environmental Policy and Heterogeneous Labor Market Effects: Evidence from Europe By Rutzer, Christian; Niggli, Matthias
  20. Minimum Wage Compliance and Household Welfare: An Analysis of over 1500 Minimum Wages By Mansoor, Kashif; O'Neill, Donal
  21. A Dynamic Theory of Regulatory Capture By Alessandro De Chiara; Marco A. Schwarz

  1. By: Kory Kroft; Yao Luo; Magne Mogstad; Bradley Setzler
    Abstract: The primary goal of our paper is to quantify the importance of imperfect competition in the U.S. construction industry by estimating the size of rents earned by American firms and workers. To obtain a comprehensive measure of the total rents and to understand its sources, we take into account that rents may arise both due to markdown of wages and markup of prices. Our analyses combine the universe of U.S. business and worker tax records with newly collected records from U.S. procurement auctions. We first examine how firms respond to a plausibly exogenous shift in product demand through a difference-in-differences design that compares first-time procurement auction winners to the firms that lose, both before and after the auction. Motivated and guided by these estimates, we next develop, identify, and estimate a model where construction firms compete with one another for projects in the product market and for workers in the labor market. The firms may participate both in the private market and in government projects, the latter of which are procured through first-price sealed-bid auctions. We find that American construction firms have significant wage- and price-setting power. This imperfect competition generates a considerable amount of rents, two-thirds of which is captured by the firms. Lastly, we use the estimated model to perform counterfactual analyses which reveal how increases in the market power of firms, in the product market or the labor market, would affect the outcomes and behavior of workers and firms in the construction industry.
    Keywords: imperfect competition; monopsony; market power; rents; rent sharing; auction; procurement
    JEL: J31 J42 D44 L11
    Date: 2020–06–06
  2. By: Kunze, Astrid (Dept. of Economics, Norwegian School of Economics and Business Administration); Corekcioglu , Gozde (Kadir Has University); Francesconi , Marco (University of Essex)
    Abstract: Generous government-mandated parental leave is generally viewed as an effective policy to support women’s careers around childbirth. But does it help women to reach top positions in the upper pay echelon of their firms? Using longitudinal employer-employee matched data for the entire Norwegian population, we address this question exploiting a series of reforms that expanded paid leave from 30 weeks in 1989 to 52 weeks in 1993. The representation of women in top positions has only moderately increased over time, and career profiles of female top earners within firms are significantly different from those of their male counterparts. The reforms did not affect, and possibly decreased, the probability for women to be at the top over their life cycle. We discuss some implications of this result to put into perspective the design of new family-friendly policy interventions.
    Keywords: Top earners; parental leave; women; regression discontinuity
    JEL: J18 J21 J22 J24 M14
    Date: 2020–05–25
  3. By: Kölling, Arnd; Mertens, Antje
    Abstract: The analysis deals with the influence of exporting on the demand for workers with different skill levels. Previous literature suggests that this includes two major topics. First, productivity of exporting firms may increase due to learning facts after entering international markets and/or be higher initially due to selfselection of firms into exporting. Second, exporting potentially leads to a change in the employment structure towards highly skilled workers. We applied a conditional difference-in-difference regression model of labor demand for three different skill levels to investigate this hypothesis. For this purpose, we use German establishment panel data that covers the period from 2000 to 2014. The outcome shows that not only self-selection into exports must be controlled for but also that changes in employment seem to be skill biased in manufacturing firms starting export activities. Nevertheless, there are no corresponding findings for firms that stop exporting or establishments in the service sector respectively.
    Keywords: Export,labor demand,skills,treatment model
    JEL: F14 J23 J24 C31
    Date: 2020
  4. By: Tomaz Cajner; Leland D. Crane; Ryan A. Decker; John Grigsby; Adrian Hamins-Puertolas; Erik Hurst; Christopher Kurz; Ahu Yildirmaz
    Abstract: Using weekly, anonymized administrative payroll data from the largest U.S. payroll processing company, we measure the deterioration of the U.S. labor market during the first two months of the global COVID-19 pandemic. We find that U.S. private-sector employment contracted by about 22 percent between mid-February and mid-April. Businesses suspending operations---perhaps temporarily---account for a significant share of employment losses, particularly among smaller businesses. Hours worked for continuing workers fell by 4.5 percent. We highlight large differences in employment declines by industry, business size, state of residence, and demographic group. Workers in the bottom quintile of the wage distribution experienced a 35 percent employment decline while those in the top quintile experienced only a 9 percent decline. Large differences across the wage distribution persist even after conditioning on worker age, business industry, business size, and worker location. As a result, average base wages increased by over 5 percent, though this increase arose entirely through a composition effect. Overall, we document that the speed and magnitude of labor market deterioration during the early parts of the pandemic were unprecedented in the postwar period, particularly for the bottom of the earnings distribution.
    JEL: E24 E3 J21 L25
    Date: 2020–05
  5. By: Effrosyni Adamopoulou; Ernesto Villanueva
    Abstract: In several OECD countries employer federations and unions fix skill-specific wage floors for all workers in an industry. One view of those "explicit" contracts argues that the prevailing wage structure reflects the labor market conditions back at the time when those contracts were bargained, with little space for renegotiation. An alternative view stresses that only workers close to the minima are affected by wage floors and that the wage structure is shaped by current labor market conditions. We disentangle both models using a novel dataset that combines wage floors set in the metalworking industry with labor market histories of metalworkers drawn from Social Security records in Italy and Spain. An increase in the local unemployment rate of 1 p.p. diminished contemporaneous mean wages by about 0.45 p.p. between 2005 and 2013 in both countries. Instead, a 1 p.p. higher unemployment rate back at the time of contract renewal reduced wages by 0.07 p.p., an impact driven by wages close to the negotiated wage floors. Even though the evidence for earlier periods is mixed in Italy, the results do not support the view that the wage structure reflects labor market conditions at the time of bargaining. The response of wages to local unemployment was driven by reductions in complements and employee churning, although the elasticity falls short of the prediction of an off-the-shelf bargaining model.
    Keywords: minimum wages, collective contracts, Social Security data, spot market, explicit bargaining, wage cyclicality
    JEL: J31 J38 J52
    Date: 2020–05
  6. By: Alix-Garcia, Jennifer; Schechter, Laura; Valencia Caicedo, Felipe; Zhu, Jessica
    Abstract: Skewed sex ratios often result from conflict, disease, and migration, yet their long term impact remains less understood. The War of the Triple Alliance (1864-1870) in South America killed up to 70% of the Paraguayan male population. According to Paraguayan national lore, the skewed sex ratios resulting from the confliict are the cause of present-day low marriage rates, high rates of out-of-wedlock births and a generally male chauvinist culture. We collate historical and modern data to test this conventional wisdom in the short and the long run. We examine both cross-border and within-country variation in child-rearing, education and labor force participation in Paraguay over a 150 year period. We find that more skewed post-war sex ratios are associated with higher out-of-wedlock births, more female-headed households, and better female educational outcomes, even after the first returned to normal. Cross-country comparisons suggest that Paraguayan women are less likely to be employed than those in neighboring districts in Argentina and Brazil, but that within Paraguay, they are more likely to be employed where the sex ratio shock was more severe. The impacts of the war persist into the present, and are seemingly unaffected by variation in economic openness, uncertainty, or traditional norms.
    Keywords: conflict; Education; Female Labor Force Participation; Gender; History; Illegitimacy; Latin America; Paraguay; Persistence
    JEL: D74 I25 J16 J21 N16
    Date: 2020–05
  7. By: Berliant, Marcus; Gouveia, Miguel
    Abstract: The literatures dealing with voting, optimal income taxation, implementation, and pure public goods are integrated here to address the problem of voting over income taxes and public goods. In contrast with previous articles, general nonlinear income taxes that affect the labor-leisure decisions of consumers who work and vote are allowed. Uncertainty plays an important role in that the government does not know the true realizations of the abilities of consumers drawn from a known distribution, but must meet the realization-dependent budget. Even though the space of alternatives is infinite dimensional, conditions on primitives are found to assure existence of a majority rule equilibrium when agents vote over both a public good and income taxes to finance it.
    Keywords: Voting; Income taxation; Public good
    JEL: D72 D82 H21 H41
    Date: 2020–05–31
  8. By: Oleksandr Shepotylo (Aston Universtiy, Birmingham, UK.); Volodymyr Vakhitov
    Abstract: The declining labor share in national income and rising inequality over the last four decades raise questions about causes of these trends. In order to explain these trends, we develop a theoretical model that links intra-industry distribution of wages to variation in market power of firms. The model predicts that wages depend crucially on the demand side characteristics – they decline with market power if and only if demand elasticity is increasing with firm’s output. Trade liberalization leads to expansion of more productive firms, which also increases their bargaining power, resulting in lower share of wage bill in total revenue. The model predictions are tested on a sample of Ukrainian manufacturing firms in 2001– 2007. We document that an increase in firm’s size increases its bargaining power relative to workers. We measure firm level markups, and show that they increase with firm’s output and market size. We find that wage rises with firm’s productivity, but fall with its market power. The results are robust to various model specifications estimated at the firm and industry levels.
    Keywords: wage bargaining; wage inequality; heterogeneous firms; productivity; variable markups; international trade; monopolistic competition
    JEL: D43 F12 J31
    Date: 2020–05
  9. By: Butrica, Barbara A. (Urban Institute); Karamcheva, Nadia S (Congressional Budget Office)
    Abstract: Household debt among older Americans approaching retirement has increased dramatically over the past couple of decades. Older households have become increasingly more indebted and more leveraged. While mortgages remain the predominant type of debt among households in their 50s and 60s, in recent years, student loan debt has also risen among these households. Using household survey data to examine how late life debt affects retirement decisions, we find that more indebted older adults are more likely to work, less likely to be retired, and on average expect to work longer than those with less debt.
    Keywords: older adults, household debt, mortgages, student loan debt, retirement, social security
    JEL: J21 J26
    Date: 2020–04
  10. By: Kristle Cortés (The University of New South Wales); Andy Glover (Federal Reserve Bank of Kansas City); Murat Tasci (Federal Reserve Bank of Cleveland)
    Abstract: Over the last 15 years, 11 states have restricted employers' access to the credit reports of job applicants. We estimate that county-level job vacancies have fallen by 5.5 percent in occupations affected by these laws relative to exempt occupations in the same counties and national-level vacancies for the same occupations. Cross-sectional heterogeneity suggests that employers use credit reports as signals of a worker's ability to perform the job: vacancies fall more in counties with a large share of subprime residents, while they fall less for occupations with other commonly available signals. Vacancies fall most for occupations involving routine tasks, suggesting that credit reports contain information relevant for these types of jobs.
    Keywords: vacancies, credit score, credit check
    JEL: E24 E65 J23 J63
    Date: 2020–05
  11. By: Marc Henry; Romuald Meango; Ismael Mourifié (University of Toronto)
    Abstract: We derive sharp bounds on the non consumption utility component in an extended Roy model of sector selection. We interpret this non consumption utility component as a compensating wage differential. The bounds are derived under the assumption that potential wages in each sector are (jointly) stochastically monotone with respect to an observed selection shifter. The lower bound can also be interpreted as the minimum cost subsidy necessary to change sector choices and make them observationally indistinguishable from choices made under the classical Roy model of sorting on potential wages only. The research is motivated by the analysis of women's choice of university major and their under-representation in mathematics intensive fields. With data from a German graduate survey, and using the proportion of women on the STEM faculty at the time of major choice as our selection shifter, we find high costs of choosing the STEM sector for women from the former West Germany, especially for low realized incomes and low proportion of women on the STEM faculty, interpreted as a scarce presence of role models.
    Keywords: Roy model, partial identification, stochastic monotonicity, women in STEM
    JEL: C31 C34 I21 J24
    Date: 2020–05
  12. By: David Altig; Alan J. Auerbach; Laurence J. Kotlikoff; Elias Ilin; Victor Ye
    Abstract: The U.S. has a plethora of federal and state tax and benefit programs, each with its own work incentives and disincentives. This paper uses the Fiscal Analyzer (TFA) to assess how these policies, in unison, impact work incentives. TFA is a life-cycle, consumption-smoothing program that incorporates household borrowing constraints and all major federal and state fiscal policies. We use TFA in conjunction with the 2016 Federal Reserve Survey of Consumer Finances to calculate Americans’ remaining lifetime marginal net tax rates. Our findings are striking. One in four low-wage workers face marginal net tax rates above 70 percent, effectively locking them into poverty. Over half face remaining lifetime marginal net tax rates above 45 percent. The richest 1 percent also face a high median lifetime marginal tax rate – roughly 50 percent. Double taxation matters. The overall median lifetime marginal net tax rate is 43.2 percent compared with an overall current-year marginal net tax rate of 37.6 percent. We also find remarkable dispersion in both lifetime and current-year marginal net tax rates, particularly among the poor, and major differences in marginal and average net taxation across states, providing typical households a large incentive to relocate to another state.
    JEL: H2 H20 H21 H3 H31
    Date: 2020–05
  13. By: Kevin Boudreau; Nilam Kaushik
    Abstract: Many technology companies struggle to fill all their positions and to achieve gender parity in their ranks. One explanation for gender disparities is the possibility that men and women differ in their willingness to work under competitive organizational environments of tech firms. To investigate this question, this paper reports on a large platform-based field experiment in which 97,696 U.S. university-educated individuals were given the opportunity to join a tech-related product development activity. Individuals were randomly assigned to treatments emphasizing either competitive or collaborative interactions with other participants. We find that (1) in non-STEM fields, the competition treatment leads to a 27% drop in participation for females in comparison to males. However, in our main finding, (2) in STEM fields, we find no statistical differences in men and women’s responses to competition. The patterns are consistent with (3) men in non-STEM fields exhibiting overconfidence in their likelihood of succeeding under competition. We also find that, while participation in highest in STEM fields, (4) the ratio of female to male participation in a field is better predicted by whether the field is male- or female-dominated, than it is by whether it is a STEM field or not. We discuss theoretical interpretations and implications for organizations.
    JEL: C9 D2 J16 J2 J71 O3
    Date: 2020–05
  14. By: Niklas Potrafke; Marcus Rösch; Heinrich Ursprung
    Abstract: We ask three questions. First, do election systems differ in how they translate physical attractiveness of candidates into electoral success? Second, do political parties trategically exploit the “beauty premium” when deciding on which candidates to nominate, and, third, do elected MPs use their beauty premium to reap some independence from their party? Using the German election system that combines first-past-the-post election with party-list proportional representation, our results show that plurality elections provide more scope for translating physical attractiveness into electoral success than proportional representation. Whether political parties strategically use the beauty premium to optimize their electoral objectives is less clear. Physically attractive MPs, however, allow themselves to dissent more often, i.e. they vote more often against the party line than their less attractive peers.
    Keywords: Attractiveness of politicians, safe district, party strategies, electoral success, electoral system
    JEL: D72 J45 J70
    Date: 2020
  15. By: Alessandra Allocca
    Abstract: Many organizations rely on decentralized arrangements where employees choose their projects and teams. Most of the empirical literature on working collaborations instead focuses on teams that are exogenously formed. I develop a structural entry model with heterogeneous strategic interactions where agents decide whether to join a project. The decision depends on who else may potentially join the project, the project quality, as well as other individual and project characteristics. In turn, this decision affects the probability of project completion. I estimate the model using a novel dataset from an important scientific collaboration. I find that agents' decisions to select into projects highly depend on the pool of teammates and the size of the team whereas projects' quality is of lesser importance. Heterogeneity in agents' characteristics explains this selection, which needs to be accounted for to obtain unbiased estimates of teams' performance. With a counterfactual experiment, I show that moving from a decentralized to a centralized arrangement leads to fewer completed projects.
    Keywords: Teamwork, Entry Game, Innovation, Personnel Economics
    JEL: C57 C72 L2 M50 O32
    Date: 2020–05
  16. By: Barbara M. Fraumeni; Michael S. Christian; Jon D. Samuels
    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.
    JEL: E01 E24 I21 J21 J24
    Date: 2020–05
  17. By: Hamish Low; Michaela Benzeval; Jon Burton; Thomas F. Crossley; Paul Fisher; Annette Jäckle; Brendan Read
    Abstract: Using new data from the Understanding Society: COVID 19 survey collected in April 2020, we show how the aggregate shock caused by the pandemic affects individuals across the distribution. The survey collects data from existing members of the Understanding Society panel survey who have been followed for up to 10 years. Understanding society is based on probability samples and the Understanding Society Covid19 Survey is carefully constructed to support valid population inferences. Further the panel allows comparisons with a pre-pandemic baseline. We document how the shock of the pandemic translates into different economic shocks for different types of worker: those with less education and precarious employment face the biggest economic shocks.Some of those affected are able to mitigate the impact of the economic shocks: universal credit protects those in the bottom quintile, for example. We estimate the prevalence of the different measures individuals and households take to mitigate the shocks. We show that the opportunities for mitigation are most limited for those most in need.
    Keywords: COVID-19, job loss, inequality, mitigation, ï¬ nancial distress
    JEL: C83 D31 I31 J31 J63
    Date: 2020–06–02
  18. By: Qingnan Xie; Richard B. Freeman
    Abstract: China-born scientists and engineers who conduct their research outside China, the diaspora researchers of our title, contributed to global science through the exceptional quantity and quality of their scientific work and through distinctive connections to China-based researchers and research. Analysis of the Scopus database of English language scientific journal articles shows that Chinese diaspora research publications are a substantial and growing proportion of global scientific publications, receive an above average number of citations per article, and are published at above average rates in high Scopus CiteScore journals. In addition, diaspora researchers helped China advance to the forefront of science through collaboration on papers with China-based researchers and through the citation network linking China-based research to research outside the country.
    JEL: F1 I2 J2 J3 J5 O3
    Date: 2020–05
  19. By: Rutzer, Christian (University of Basel); Niggli, Matthias (University of Basel)
    Abstract: In this paper, we use a data-driven approach to predict the "green potential" of ISCO occupations based on their corresponding skills. With this information, we can investigate the relationship between environmental regulations and occupation-level employment in the manufacturing sector of 19 European countries for the period 1992-2010. Our empirical results highlight heterogeneous occupational employment changes in response to an increase in environmental policy stringency. More specically, we nd a decrease in labor demand for occupations with relatively low green potential and an increase for occupations with relatively high green potential. Thus, at least in the short term, greening the economy may create winners and losers across occupations and countries.
    Keywords: environmental regulation, green transition, labor market, supervised learning
    JEL: J23 J24 Q52
    Date: 2020–06–01
  20. By: Mansoor, Kashif (Centre for Development Studies); O'Neill, Donal (National University of Ireland, Maynooth)
    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 effective enforcement mechanisms.
    Keywords: minimum wage, compliance
    JEL: J38 O15
    Date: 2020–05
  21. By: Alessandro De Chiara; Marco A. Schwarz
    Abstract: Firms have incentives to influence regulators' decisions. In a dynamic setting, we show that a firm may prefer to capture regulators through the promise of a lucrative future job opportunity (i.e., the revolving-door channel) than through a hidden payment (i.e., a bribe). This is because the revolving door publicly signals the firm's eagerness and commitment to reward friendly regulators, which facilitates collusive equilibria. Moreover, the revolving-door channel need not require an explicit agreement between the firm and the regulator, but may work implicitly giving rise to an industry norm. This renders ineffective standard anti-corruption practices, such as whistle-blowing protection policies. We highlight that closing the revolving door may give rise to other inefficiencies. Moreover, we show that cooling-off periods may make all players worse off if timed wrongly. Opening the revolving door conditional on the regulator's report may increase social welfare.
    Keywords: collusion, corruption, dynamic games, experts, regulation, regulatory capture, revolving door
    JEL: D82 J45 K23 L14 L51
    Date: 2020–12

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