nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2020‒09‒14
39 papers chosen by
Joseph Marchand
University of Alberta

  1. Are Estimates of Non-Standard Employment Wage Penalties Robust to Different Wage Measures? The Case of Zero Hours Contracts in the UK By Farina, Egidio; Green, Colin P.; McVicar, Duncan
  2. Competition and Career Advancement: The Hidden Costs of Paid Leave By Johnsen, Julian; Ku, Hyejin
  3. Training, Wages and a Missing School Graduation Cohort By Dorner, Matthias; Görlitz, Katja
  4. Collateral Damage? Labour Market Effects of Competing with China – at Home and Abroad By Cabral, Sónia; Martins, Pedro S.; Pereira dos Santos, João; Tavares, Mariana
  5. Sorting and Wage Premiums in Immoral Work By Florian H. Schneider; Fanny Brun; Roberto A. Weber
  6. Does bonus cap curb risk taking? An experimental study of relative performance pay and bonus regulation By Harris, Qun; Tanaka, Misa; Soane, Emma
  7. Canadian Small Businesses’ Employees and Owners during COVID-19 By Beland, Louis-Philippe; Fakorede, Oluwatobi; Mikola, Derek
  8. Robots and the Gender Pay Gap in Europe By Aksoy, Cevat Giray; Ozcan, Berkay; Philipp, Julia
  9. Blame it on the Rain: The Effects of Weather Shocks on Formal Rural Employment in Colombia By Camilo Bohorquez-Penuela; Andrea Otero-Cortes
  10. Long-Run Returns to Field Study in Secondary School By Gordon B. Dahl; Dan-Olof Rooth; Anders Stenberg
  11. Explicit and implicit belief-based gender discrimination: A hiring experiment By Barron, Kai; Ditlmann, Ruth; Gehrig, Stefan; Schweighofer-Kodritsch, Sebastian
  12. Wage Determination and the Bite of Collective Contracts in Italy and Spain: Evidence from the Metalworking Industry By Adamopoulou, Effrosyni; Villanueva, Ernesto
  13. Business in a Time of Spanish Influenza By Howard Bodenhorn
  14. Labour Productivity during the Great Depression and the Great Recession in UK Engineering and Metal Manufacture By Hart, Robert A.
  15. Labor Market Screening and Social Insurance Program Design for the Disabled By Naoki Aizawa; Soojin Kim; Serena Rhee
  16. The Elasticity of Substitution between Skilled and Unskilled Labor: A Meta-Analysis By Havranek, Tomas; Irsova, Zuzana; Laslopova, Lubica; Zeynalova, Olesia
  17. Early Child Development and Parents' Labor Supply By Lafférs, Lukáš; Schmidpeter, Bernhard
  18. Family Spillovers in Field of Study By Gordon B. Dahl; Dan-Olof Rooth; Anders Stenberg
  19. Task Specialization and Cognitive Skills: Evidence from PIAAC and IALS By Martínez Matute, Marta; Villanueva, Ernesto
  20. Services trade and labour market outcomes By Andrea Lassmann
  21. The Iceberg Decomposition: A Parsimonious Way to Map the Health of Labour Markets By Baert, Stijn
  22. The short- and long-run employment impact of Covid-19 through the effects of real and financial shocks on new firms By Christoph Albert; Andrea Caggese; Beatriz González
  23. Biased Beliefs and Entry into Scientific Careers By Ganguli, Ina; Gaule, Patrick; Čugalj, Danijela Vuletić
  24. Prison Work and Convict Rehabilitation By Zanella, Giulio
  25. Labour market power and between-firm wage (in)equality By Mertens, Matthias
  26. A Signal of (Train)Ability? Grade Repetition and Hiring Chances By Baert, Stijn; Picchio, Matteo
  27. Designing Disability Insurance Reforms: Tightening Eligibility Rules or Reducing Benefits? By Haller, Andreas; Staubli, Stefan; Zweimüller, Josef
  28. Short Moves and Long Stays: Homeless Family Responses to Exogenous Shelter Assignments in New York City By Cassidy, Michael T.
  29. Intrahousehold Commitment and Intertemporal Labor Supply By Chiappori, Pierre-André; Gimenez-Nadal, J. Ignacio; Molina, José Alberto; Theloudis, Alexandros; Velilla, Jorge
  30. Effects of the Covid-19 Pandemic on the Colombian Labor Market: Disentangling the Effect of Sector-Specific Mobility Restrictions By Leonardo Fabio Morales; Leonardo Bonilla-Mejía; Jose Pulido; Luz A. Flórez; Didier Hermida; Karen L. Pulido-Mahecha; Francisco Lasso-Valderrama
  31. Heterogeneous Effects of State Enterprise Zone Programs in the Shorter Run and Longer Run By David Neumark; Timothy Young
  32. Revisiting the effect of statutory pension ages on the participation rate By David Turner; Hermes Morgavi
  33. Employment Impacts of the COVID-19 Pandemic across Metropolitan Status and Size By Cho, Seung Jin; Lee, Jun Yeong; Winters, John V.
  34. The macroeconomic impacts of a universal basic income: an application to Scotland By Kevin Connolly; David Eiser; Ashwin Kumar; Peter G McGregor; Graeme Roy
  35. Education-occupation mismatch and dispersion in returns to education: Evidence from India By Grover, Shweta; Sharma, Ajay
  36. An Efficiency-Wage Model with Habit Concerns about Wages By Goerke, Laszlo
  37. Long-Term Effects of Conditional Cash Transfers on Children: The Brazilian Case By Oliveira, Gabriel; Chagas, André
  38. The Impact of Social Security on Pension Claiming and Retirement: Active vs. Passive Decisions By Lalive, Rafael; Magesan, Arvind; Staubli, Stefan
  39. Automation, globalisation and relative wages: An empirical analysis of winners and losers By Gravina, Antonio Francesco; Foster-McGregor, Neil

  1. By: Farina, Egidio (Queen's University Belfast); Green, Colin P. (Norwegian University of Science and Technology (NTNU)); McVicar, Duncan (Queen's University Belfast)
    Abstract: A range of evidence suggests that non-standard jobs, including fixed-term and other temporary jobs such as casual jobs, pay lower wages than more standard, permanent jobs, even after controlling for differences in worker and job characteristics. A recent literature suggests this is also the case for zero hours contracts (ZHCs), a growing form of non-standard employment in several developed countries, including the UK. These studies typically rely on derived wage variables – derived from survey responses to questions on earnings and hours data – which are prone to various forms of measurement error, some of which may be correlated with employment contract. Many relevant surveys, however, also include stated-rate hourly wage questions which, although also likely measured with error, are not subject to the same measurement issues. This suggests potential for sensitivity in non-standard employment wage penalty estimates depending on the wage measure used. Using the example of ZHCs in the UK, we first use derived wages to replicate the ballpark conditional ZHC wage penalty typical of existing studies. We then show that there is no conditional ZHC wage penalty, on average, when using the stated-rate hourly wage measure. This also holds for other non-standard employment types, including casual and fixed-term employment. Further, whereas the derived wage measure suggests, in line with existing literature, that the ZHC wage penalty is largest at the bottom of the wage distribution, we show the opposite to be the case when using the stated-rate wage measure. We discuss implications for policy, our understanding of labour market behaviour, and also for the wider literature on non-standard work wage penalties.
    Keywords: zero hours contracts, casual jobs, non-standard employment, precarious employment, atypical employment, wages
    JEL: J21 J48 M55
    Date: 2020–07
  2. By: Johnsen, Julian (Centre for Applied Research, Norwegian School of Economics); Ku, Hyejin (University College London)
    Abstract: Does leave-taking matter for young workers’ careers? If so, why? We propose the competition effect—relative leave status of workers affecting their relative standing inside the firm—as a new explanation. Exploiting a policy reform that exogenously assigned four-week paid paternity leave to some new fathers, we find evidence consistent with the competition effect: A worker enjoys a better post-child earnings trajectory when a larger share of his colleagues take leave because of the policy. In contrast, we find no direct earnings effect resulting from the worker’s own leave when controlling for their relative leave eligibility status within the firm.
    Keywords: leave of absence; career interruptions; ranking; tournament; promotion; gender gap
    JEL: J16 J22 J24 J31 M51 M52
    Date: 2020–08–01
  3. By: Dorner, Matthias (Institute for Employment Research (IAB), Nuremberg); Görlitz, Katja (Hochschule der Bundesagentur für Arbeit (HdBA))
    Abstract: This study analyzes the effects of a missing high school graduation cohort on firms' training provision and trainees' wages. An exogenous school reform varying at the state and year level caused the missing cohort to occur. Using administrative social security data on all trainees and training firms, we show that firms provide less training by reducing their overall number of hired apprentices. We also show that the pool of firms that offer training in the year of the missing cohort shifts towards a higher share of low wage firms. After keeping firm characteristics constant, the findings indicate that the missing cohort increases training wages measured at the start of training. Further analyses shed light on the opposite case of dual cohorts, which we find to increase training provision and to decrease training wages. The evidence also shows that high and low wage firms differ in how they adjust training provision in response to a dual cohort.
    Keywords: training wages, training provision, missing high school graduation cohort, high and low wage firms, dual high school graduation cohort
    JEL: J21 J24 J31
    Date: 2020–07
  4. By: Cabral, Sónia; Martins, Pedro S.; Pereira dos Santos, João; Tavares, Mariana
    Abstract: The increasing range and quality of China’s exports is a major development internationally with potentially far-reaching effects. In this paper, on top of the direct labour market effects of imports from China studied in previous research, we also measure the indirect effects stemming from increased export competition in third markets. Our findings, based on matched employeremployee data of Portugal covering the 1991-2008 period, indicate that workers’ earnings and employment are significantly negatively affected by China’s competition, but only through the indirect ’market-stealing’ channel. In contrast to earlier evidence, the direct effects of Chinese imports are mostly non-significant. The results are robust to a number of checks and also highlight particular groups more affected by indirect competition, including women, older and less educated workers, and workers in larger, older and domestic firms.
    Keywords: International trade,Labour market,Matched employer-employee data,China,Import competition
    JEL: F14 F16 F66 J31
    Date: 2020
  5. By: Florian H. Schneider; Fanny Brun; Roberto A. Weber
    Abstract: We use surveys, laboratory experiments and administrative labor-market data to study how heterogeneity in the perceived immorality of work and in workers’ aversion to acting immorally interact to impact labor market outcomes. Specifically, we investigate whether those individuals least concerned with acting morally select into jobs generally perceived as immoral and whether the aversion among many individuals to performing such acts contributes to immorality wage premiums, a form of compensating differential. We show that immoral work is associated with higher wages, both using correlational evidence from administrative labor-market data and causal evidence from a laboratory experiment. We also measure individuals’ aversion to performing immoral acts and show that those who find immoral behavior least aversive are more likely to be employed in immoral work in the lab and have a relative preference for work perceived as immoral outside the laboratory. We note that sorting by “immoral” types into jobs that can cause harm may be detrimental for society. Our study highlights the value of employing complementary research methods.
    Keywords: wage premium, immoral behaviour, sorting, experiments
    JEL: C92 J31 D03
    Date: 2020
  6. By: Harris, Qun (Bank of England); Tanaka, Misa (Bank of England); Soane, Emma (London School of Economics and Political Science)
    Abstract: We conducted a lab experiment with 253 participants to examine how constraints on bonus akin to bonus regulations, such as bonus cap and malus, could affect individuals’ risk-taking in the presence of relative performance pay. Participants took greater risks when bonus was linked to investment performance relative to that of their peers (relative performance pay) than when it depended on their own performance only. In the absence of relative performance pay, bonus cap and malus reduced risk-taking. With relative performance pay, the risk-mitigating effects of bonus cap and malus were significantly weakened; but participants took less risk when bonus was made conditional on their team avoiding a loss.
    Keywords: Bonus cap; malus; bonus regulation; risk choice
    JEL: C91 G28 J31 J33 M52
    Date: 2020–08–14
  7. By: Beland, Louis-Philippe; Fakorede, Oluwatobi; Mikola, Derek
    Abstract: Canadian employers are largely small businesses. Their relevance for job creation and labour demand is integral for policymakers concerned with adverse labour market outcomes resulting from the COVID-19 pandemic. Using the Canadian Labour Force Survey (LFS) we document how the self-employed, which we interpret as small business owners, and employees of small businesses are being affected by COVID-19. We find large decreases in the number of small business owners, the number of employed, and in hours worked, from February to July 2020. We also find large labour market impact on small business employees. Our research confirms increasing employment, hours worked, and small business ownership as provinces began reopening their economies in May to July 2020. Still, these improvements are often below pre-March 2020 trends with some demographic groups, such as female and immigrant small business owners, having considerably worse outcomes than their respective counterparts.
    Keywords: COVID-19,Self-employed workers,Entrepreneurship,Employment
    JEL: L26 J21 J24 I18
    Date: 2020
  8. By: Aksoy, Cevat Giray (European Bank for Reconstruction and Development); Ozcan, Berkay (London School of Economics); Philipp, Julia (London School of Economics)
    Abstract: Could robotization make the gender pay gap worse? We provide the first large-scale evidence on the impact of industrial robots on the gender pay gap using data from 20 European countries. We show that robot adoption increases both male and female earnings but also increases the gender pay gap. Using an instrumental variable strategy, we find that a ten percent increase in robotization leads to a 1.8 percent increase in the gender pay gap. These results are mainly driven by countries with high levels of gender inequality and outsourcing destination countries. We then explore the mechanisms behind this effect and find that our results can be explained by the fact that men at medium- and high-skill occupations disproportionately benefit from robotization (through a productivity effect). We rule out the possibility that our results are driven by mechanical changes in the gender composition of the workforce nor by inflows or outflows from the manufacturing sector.
    Keywords: industrial robots, gender pay gap, automation, Europe
    JEL: J00 J31 J71
    Date: 2020–07
  9. By: Camilo Bohorquez-Penuela (Banco de la República de Colombia); Andrea Otero-Cortes (Banco de la República de Colombia)
    Abstract: Episodes of excessive or low rainfall have not only become more frequent, but also more severe. These events can affect agricultural production and local labor markets. By combining social security records, that allow us to measure formal employment, with administrative data from weather stations, we estimate the effects of municipality-level precipitation shocks on formal rural employment in Colombia, as well as country-wide events like El Niño and La Niña phenomena. Fixed effects estimates show that episodes of excessive rainfall—measured as those that are above the 80th percentile of historical mean precipitation in the last 30 years for each municipality—have a negative impact on formal employment in rural areas for both the agricultural and non-agricultural sector, ranging from -2.2 percent to -3 percent, respectively. Likewise, we find that both El Niño and La Niña phenomena have a negative impact on total formal employment in rural areas. Additionally, we explore if the effect of rain shocks varies depending on the access to irrigation and drainage technologies, finding that municipalities with high prevalence of irrigation systems are less affected by episodes of low rainfall. **** RESUMEN: Los episodios de excesiva o poca precipitación no solo se han vuelto más frecuentes sino que cada vez son más severos. Estos eventos pueden afectar la producción agrícola y las dinámicas de los mercados laborales locales. Combinando registros de seguridad social, que nos permiten identificar empleo formal, con datos administrativos de las estaciones meteorológicas, estimamos los efectos de los choques de lluvia a nivel municipal sobre el empleo formal rural en Colombia, al igual que el impacto de los fenómenos de El Niño y La Niña. Los estimadores de efectos fijos muestran que los episodios de excesiva precipitación, medidos como aquellos que se ubican por encima del percentil 80 de la distribución histórica para cada municipio, tienen un impacto negativo sobre el empleo formal rural tanto para el sector agrícola como para el no agrícola, ubicándose entre -2.2 y -3 por ciento, respectivamente. De igual forma, encontramos que los fenómenos de El Niño y La Niña tienen un impacto negativo sobre el empleo formal rural. Adicionalmente, exploramos si el efecto de los choques de lluvia depende del acceso a sistemas de riego, encontrando que municipios con alta incidencia de estos mecanismos de irrigación son menos propensos a verse afectados por episodios de poca precipitación.
    Keywords: Formal labor market, employment, weather shocks, agriculture, Colombia, Mercado laboral formal, empleo, choques climáticos, agricultura, Colombia
    JEL: J20 J30 J43 J46 Q54 R23
    Date: 2020–09
  10. By: Gordon B. Dahl; Dan-Olof Rooth; Anders Stenberg
    Abstract: This paper studies whether specialized academic fields of study in secondary school, which are common in many countries, affect earnings as an adult. Identification is challenging, because it requires not just quasi-random variation into fields of study, but also an accounting of individuals’ next-best alternatives. Our setting is Sweden, where at the end of ninth grade students rank fields of study and admissions to oversubscribed fields is determined based on a student’s GPA. We use a regression discontinuity design which allows for different labor market returns for each combination of preferred versus next-best choice, together with nationwide register data for school cohorts from 1977-1991 linked to their earnings as adults. Our analysis yields four main findings. First, Engineering, Natural Science, and Business yield higher earnings relative to most second-best choices, while Social Science and Humanities result in sizable drops, even relative to non-academic vocational programs. Second, the return to completing a field varies substantially as a function of a student’s next-best alternative. The magnitudes are often as large as estimates of the return to two years of additional education. Third, the pattern of returns for individuals with different first and second best choices is consistent with comparative advantage for many field choice combinations, while others exhibit either random sorting or comparative disadvantage. Fourth, most of the differences in adult earnings can be attributed to differences in college major and occupation. Taken together, these results highlight that the field choices students make at age 16, when they may have limited information about their skills and the labor market, have effects which last into adulthood.
    Keywords: field of study, secondary education, comparative advantage
    JEL: I26 J24 J31
    Date: 2020
  11. By: Barron, Kai; Ditlmann, Ruth; Gehrig, Stefan; Schweighofer-Kodritsch, Sebastian
    Abstract: Understanding discrimination is key for designing policy interventions that promote equality in society. Economists have studied the topic intensively, typically taxonomizing discrimination as either taste-based or (accurate) statistical discrimination. To enrich this taxonomy, we design a hiring experiment that rules out both of these sources of discrimination along the gender dimension. Yet, we still detect substantial discrimination against women. We provide evidence of two forms of discrimination, explicit and implicit belief-based discrimination. Both rely on statistically inaccurate beliefs but differ in how clearly they reveal the decision-maker's gender bias. Our analysis highlights the central role played by contextual features of the choice environment in determining whether and how discrimination will manifest. We conclude by discussing how policy makers may design effective regulation to address specific forms of discrimination.
    Keywords: Discrimination,Hiring Decisions,Gender,Beliefs,Experiment
    JEL: D90 J71 D83
    Date: 2020
  12. By: Adamopoulou, Effrosyni (University of Mannheim); Villanueva, Ernesto (Bank of Spain)
    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 reacts to current labor market conditions. We disentangle both models using a novel dataset that combines more than 1,000 signature dates and 15,000 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 contemporaneous 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 contracts, wage cyclicality
    JEL: J31 J38 J52
    Date: 2020–07
  13. By: Howard Bodenhorn
    Abstract: Mandated shutdowns of nonessential businesses during the COVID-19 crisis brought into sharp relief the tradeoff between public health and a healthy economy. This paper documents the short-run effects of shutdowns during the Spanish flu pandemic of 1918, which provides a useful counterpoint to choices made in 2020. The 1918 closures were shorter and less sweeping, in part because the US was at war and the Wilson administration was unwilling to let public safety jeopardize the war’s prosecution. The result was widespread sickness, which pushed some businesses to shutdown voluntarily; others operated shorthanded. Using hand-coded, high-frequency data (mostly weekly) this study reports three principal results. First, retail sales declined during the three waves of the pandemic; manufacturing activity slowed, but by less than retail. Second, worker absenteeism due to either sickness or fear of contracting the flu reduced output in several key sectors and industries that were not ordered closed by as much as 10 to 20% in weeks of high excess mortality. Output declines were the result of labor-supply rather than demand shocks. And, third, mandated closures are not associated with increases in the number or aggregate dollar value of business failures, but the number and aggregate dollar value of business failures increased modestly in weeks of high excess mortality. The results highlight that the tradeoff between mandated closures and economic activity is not the only relevant tradeoff facing public health authorities. Economic activity also declines, sometimes sharply, during periods of unusually high influenza-related illness and excess mortality even absent mandated business closures.
    JEL: N11
    Date: 2020–07
  14. By: Hart, Robert A. (University of Stirling)
    Abstract: This paper compares labour productivity during the Great Depression (GD) and the Great Recession (GR) in engineering, metal working and allied industries. Throughout, it distinguishes between output per worker and output per hour. From the peak-to-trough of the GD cycle, hourly labour productivity was countercyclical, remaining above its 1929 starting point. In the GR peak-to-trough period, hourly productivity was procyclical, falling below its 2007/08 starting point. While employment and average weekly hours reductions were much more pronounced in the GD compared to the GR, the GD recovery was both stronger and more sustained. The discussion of the different experiences in the two eras concentrates on employment and hours flexibility, the comparative lengths of weekly hours, the behaviour of real wages, and human capital aspects of labour inputs.
    Keywords: labour productivity, Great Depression, Great Recession
    JEL: E32 J23 J24
    Date: 2020–07
  15. By: Naoki Aizawa; Soojin Kim; Serena Rhee
    Abstract: This paper studies the optimal design of social insurance programs for disabled workers by developing and estimating an equilibrium labor search model with screening contracts. In the model, firms may strategically use employment contracts, consisting of wage and job amenities, to screen out the disabled. The optimal structure of disability policies depends on firms' screening incentives, which may distort employment rates and contracts. By exploiting policy changes on the labor demand side for the disabled in the United States, we identify and estimate our equilibrium model to explore the optimal joint design of disability policies, including disability insurance (DI) and subsidies to firms accommodating disabled workers. We find that firm subsidies mitigate screening distortions; at the same time, they interact with DI by reducing the labor supply disincentives it generates. The optimal policy structure leads to a considerable welfare gain by simultaneously making firm subsidies and DI benefits more generous.
    JEL: E61 H21 H51 I18 J32
    Date: 2020–07
  16. By: Havranek, Tomas; Irsova, Zuzana; Laslopova, Lubica; Zeynalova, Olesia
    Abstract: A key parameter in the analysis of wage inequality is the elasticity of substitution between skilled and unskilled labor. We question the common view that the elasticity exceeds 1. Two biases, publication and attenuation, conspire to pull the mean elasticity reported in the literature to 1.9. After correcting for the biases, the literature is consistent with the elasticity in the US of 0.6--0.9. Our analysis relies on 729 estimates of the elasticity collected from 76 studies as well as 37 controls that reflect the context in which the estimates were obtained. We use recently developed nonlinear techniques to correct for publication bias and employ Bayesian and frequentist model averaging to address model uncertainty. Our results suggest that, first, insignificant estimates of the elasticity are underreported. Second, because researchers typically estimate the elasticity's inverse, measurement error exaggerates the elasticity, and we show the exaggeration is substantial. Third, elasticities are systematically larger for developed countries, translog estimation, and methods that ignore endogeneity.
    Keywords: Elasticity of substitution; skill premium; meta-analysis; model uncertainty; publication bias
    JEL: J2
    Date: 2020–08–25
  17. By: Lafférs, Lukáš (Matej Bel University); Schmidpeter, Bernhard (RWI)
    Abstract: The impact of children's early development status on parental labor market outcomes is not well established in the empirical literature. We combine an instrumental variable approach to account for the endogeneity of the development status with a model of non- random labor force participation to identify its impact. A one unit increase in our poor child development index reduces long-term maternal weekly hours worked by 9 hours and weekly income by 215 Australian Dollars. We provide evidence that mothers substitute working time with childcare to compensate for early disadvantages. We do not find any responds of fathers to early child development.
    Keywords: child development, maternal labor supply, sample selection, instrumental variables estimation, time use
    JEL: C21 I23 J13 J31 J64
    Date: 2020–07
  18. By: Gordon B. Dahl; Dan-Olof Rooth; Anders Stenberg
    Abstract: This paper estimates peer effects both from older to younger siblings and from parents to children in academic fields of study. Our setting is secondary school in Sweden, where admissions to oversubscribed fields is determined based on a student's GPA. Using an RD design, we find strong spillovers in field choices that depend on the gender mix of siblings and whether the field is gender conforming. There are also large intergenerational effects from fathers and mothers to sons, except in female-dominated fields, but little effect for daughters. These spillovers have long-term consequences for occupational segregation and wage gaps by gender.
    JEL: I21 J24
    Date: 2020–07
  19. By: Martínez Matute, Marta (Universidad Autónoma de Madrid); Villanueva, Ernesto (Bank of Spain)
    Abstract: We study how the tasks conducted on the job relate to measures of cognitive skills using data from 18 countries participating in the Programme for the International Assessment of Adult Competences (PIAAC) and from 13 countries that also participate in the International Adult Literacy Study (IALS). We document two main findings. Firstly, individual- fixed effect models suggest that low-educated workers in jobs involving a particular set of basic tasks -say, in numeric rather than reading or ICT tasks- obtain 10% of one standard deviation higher scores in the domain of the PIAAC assessment most related to those tasks than in the rest -say, numeracy relative to literacy or problem-solving scores. The estimates are weaker for workers with a high school or college degree, those with more than 10 years of experience or who are males. Secondly, a synthetic cohort analysis using repeated literacy assessments in IALS and PIAAC indicates that, among the low-educated, long-run increases in the reading task component of jobs correlate positively with increases in cohort-level literacy scores. An interpretation of our findings is that tasks conducted on the job help in building human capital. Under that interpretation, our back-of-the envelope estimates suggest that the contribution of one year of on-the-job learning to skill formation is between a half and a fourth of an extra year of compulsory schooling.
    Keywords: human capital, tasks, education, working experience, cognitive skills
    JEL: J24 J31 I20
    Date: 2020–07
  20. By: Andrea Lassmann (OECD)
    Abstract: This report draws on individual-level and firm-level data to better understand the relationships between services trade and labour market outcomes. It seeks to shed light on how firms benefit from the rise in services trade, which groups of workers are affected the most, how employment and wages adjust to increased services trade, and the impact of policy settings on outcomes in these areas. It relies on new empirical analyses undertaken on the European Union, Brazil, India, Italy, Slovenia, Sweden, the United Kingdom, and Viet Nam together with insights from economic literature and a meta-analysis of the results underlying this report. Findings suggest that firms’ importing, offshoring and exporting activities are generally associated positively with firm employment in advanced and emerging market economies, although the relationship is more uncertain for the latter group of countries. Firm’s overall wage responses to services trade are on average positive as well, but quantitatively small. Looking at the distributional impact, there is mixed evidence for a skill bias in wages related to increased services exports and imports. Women are found to benefit from services export growth, while increased imports are estimated to exert downward pressure on the wages of women compared to the ones of men.
    Keywords: employment, individual and firm-level data, wages
    JEL: C26 F16 F61 J40
    Date: 2020–09–09
  21. By: Baert, Stijn (Ghent University)
    Abstract: This article introduces the metaphor of the iceberg in the labour market. While policy in most OECD countries has historically focussed on reducing unemployment (the tip of the iceberg), the group of inactive people (below the waterline) is much larger. Therefore, we point to the clear limitations of the unemployment rate as the (single) key macro-economic indicator of the health of the labour market. A parsimonious dashboard approach utilising the unemployment-to-population ratio and the inactivity-topopulation ratio as two highly appropriate and complementary measures is defended. We show that the ratio of these two indices varies greatly between countries, which calls for different policies for different countries.
    Keywords: employment, unemployment, inactivity, labour market policy, labour market indicators
    JEL: J64 J08 J23 J24 J68
    Date: 2020–07
  22. By: Christoph Albert; Andrea Caggese; Beatriz González
    Abstract: The aim of this paper is 1) to use empirical evidence to make predictions about the impact of the Covid-19 shock on firm entry, its composition, and its short- and long-run impact on employment; and 2) to provide guidance on which policy tool would be more effective to counteract the negative impact of the shock on this margin. The Covid-19 shock caused a large GDP contraction and our predictions suggest that this would cause a reduction in firm entry that ranges from 60% in Germany to 80% in Spain. Moreover, if this collapse of GDP is also accompanied by an even moderate increase in financial frictions, this shock also reduces the share of high-growth firms among the new startups, implying substantially larger negative long-term consequences for the employment generated by the entering cohort. Our estimates for Spain predict employment losses of the entering cohort of nearly 80,000 jobs for 2021, which increase up to almost 115,000 in 2029. Finally, using a simple partial equilibrium model calibrated to match the empirical evidence, we show that a subsidy to initial financing costs is more effective to increase aggregate employment of the entering cohort in the long run than a wage subsidy, which is more effective in the short run only.
    Keywords: Recessions, Financial Crisis, Entrepreneurship, firm dynamics, Coronavirus, Covid-19
    JEL: E20 E32 D22 J23 M13
    Date: 2020–08
  23. By: Ganguli, Ina (Stockholm School of Economics); Gaule, Patrick (University of Bath); Čugalj, Danijela Vuletić (CERGE-EI)
    Abstract: We investigate whether excessively optimistic beliefs may play a role in the persistent demand for doctoral and post-doctoral training in science. We elicit the beliefs and career preferences of doctoral students through a novel survey and randomize the provision of structured information on the true state of the academic market and information through role models on non-academic careers. One year later, both treatments lead students to update their beliefs about the academic market and impact career preferences. However, we do not find an effect on actual career outcomes 2 years post-intervention.
    Keywords: career preferences, biased beliefs, information, higher education, science
    JEL: I23 D80 D84 J24
    Date: 2020–07
  24. By: Zanella, Giulio (University of Adelaide)
    Abstract: I study the causal pathways that link prison work programs to convict rehabilitation, leveraging administrative data from Italy and combining quasi-experimental and structural econometric methods to achieve both a credible identification and the isolation of mechanisms. Due to competing channels, I find that work in unskilled prison jobs impacts convicts on longer or shorter terms differently. Increasing work time by 16 hours per month reduces by between 3 and 10 percentage points the reincarceration rate, within three years of release, of convicts on terms longer than six months – because prison work counteracts the rapid depreciation of earning ability experienced by these convicts. For those on shorter terms, the analogous increase leads instead to a re-incarceration rate that is up to 9 percentage points higher, because of a liquidity effect that weakens deterrence.
    Keywords: prison labor, prisoner rehabilitation, crime, recidivism, re-incarceration
    JEL: K42 J47
    Date: 2020–07
  25. By: Mertens, Matthias
    Abstract: This study investigates how labour market power shapes between-firm wage differences using German manufacturing sector data from 1995 to 2016. Over time, firm- and employee-side labour market power, defined as the difference between wages and marginal revenue products of labour (MRPL), increasingly moderated rising between-firm wage inequality. This is because small, low-wage, low-MRPL firms possess no labour market power and pay wages equal to or even above their MRPL, whereas large, high-wage, high-MRPL firms possess high labour market power and pay wages below their MRPL. These wage-MRPL differences grow over time and compress the firm wage distribution compared to the counterfactualcompetitive labour market scenario. Particularly for the largest, highest-paying, and highest-MRPL firms, wage-MRPL differences strongly increase over time. This allows these firms to generate increasingly large labour market rents while being active on competitive product markets, providing novel insights on why such "superstar firms' are profitable and successful.
    Keywords: inequality,labour market power,monopsony,rent-sharing,large firms
    JEL: J31 J42 L10 L60
    Date: 2020
  26. By: Baert, Stijn (Ghent University); Picchio, Matteo (Università Politecnica delle Marche, Ancona)
    Abstract: This article contributes to the nascent literature on the effect of grade retention in school on later labour market success. A field experiment is conducted to rule out the endogeneity of both outcomes. More concretely, various treatments of grade retention are randomly assigned to fictitious résumés sent in application to real vacancies. Overall, grade retention does not significantly affect positive call-back by employers. However, when narrowing in on vacancies for occupations where on-the-job training is important, job candidates with a record of grade retention are 16% less likely to receive a positive reaction. This finding is consistent with Queuing theory.
    Keywords: grade retention, hiring youth, training, signalling, queuing
    JEL: I21 J23 J70 C93
    Date: 2020–07
  27. By: Haller, Andreas (University of Zurich); Staubli, Stefan (University of Calgary); Zweimüller, Josef (University of Zurich)
    Abstract: We study the welfare effects of disability insurance (DI) and derive social-optimality conditions for the two main DI policy parameters: (i) DI eligibility rules and (ii) DI benefits. Causal evidence from two DI reforms in Austria generate fiscal multipliers (total over mechanical cost reductions) of 2.0-2.5 for stricter DI eligibility rules and of 1.3-1.4 for lower DI benefits. Stricter DI eligibility rules generate lower income losses (earnings + transfers), particularly at the lower end of the income distribution. Hence, to roll back the Austrian DI program, policy makers should implement tighter DI eligibility rules rather than lower DI benefits. An application of our framework to the DI system of the U.S. suggests that DI eligibility rules are too strict and DI benefits are too low.
    Keywords: disability insurance, screening, benefits, policy reform
    JEL: H53 H55 J14 J21 J65
    Date: 2020–07
  28. By: Cassidy, Michael T. (Princeton University)
    Abstract: Using an original administrative dataset in the context of a scarcity induced-natural experi-ment in New York City, I find that families placed in shelters in their neighborhoods of origin remain there considerably longer than those assigned to distant shelters. Locally-placed families also access more public benefits and are more apt to work. A fixed effects model assessing multi-spell families confirms these main results. Complementary instrumental variable and regression discontinuity designs exploiting policy shocks and rules, respectively, suggest difficult-to-place families – such as those that are large, disconnected from services, or from neighborhoods where homelessness is common – are especially sensitive to proxi-mate placements. Better targeting through improved screening at intake can enhance pro-gram efficiency. The practice of assigning shelter based on chance vacancies ought to be replaced with a system of evidence-based placements tailored to families' resources and constraints.
    Keywords: homelessness, neighborhoods, families, poverty alleviation, housing, public assistance, welfare policy, labor supply, program evaluation, causal inference
    JEL: R28 I38 R20 H53 H75 D91 J22
    Date: 2020–07
  29. By: Chiappori, Pierre-André (Columbia University); Gimenez-Nadal, J. Ignacio (University of Zaragoza); Molina, José Alberto (University of Zaragoza); Theloudis, Alexandros (LISER); Velilla, Jorge (University of Zaragoza)
    Abstract: This paper studies household labor supply, within the context of an intertemporal collective model, and three prominent intrahousehold commitment regimes: full commitment, no commitment, and limited commitment. We propose a test that distinguishes among all three alternatives based on how contemporary and historical changes to the economic environment affect household behavior. We implement the test on recent data from the Panel Study of Income Dynamics in the US (1999-2017). Although couples and singles behave similarly in many aspects, couples' labor supply exhibits distinctive features that are consistent with limited commitment. We then use our results to highlight several issues and caveats that arise when testing for commitment.
    Keywords: intertemporal collective model, household labor supply, commitment, PSID
    JEL: J22
    Date: 2020–07
  30. By: Leonardo Fabio Morales (Banco de la República de Colombia); Leonardo Bonilla-Mejía (Banco de la República de Colombia); Jose Pulido (Banco de la República de Colombia); Luz A. Flórez (Banco de la República de Colombia); Didier Hermida (Banco de la República de Colombia); Karen L. Pulido-Mahecha (Banco de la República de Colombia); Francisco Lasso-Valderrama (Banco de la República de Colombia)
    Abstract: We assess the effect of the Covid-19 pandemic and the lockdown of some economic sectors on the Colombian labor market. We exploit the variation between excluded and non-excluded sectors from the lockdown, as well as the timing of the restriction policies, to identify the effect of sector-specific restriction policies. These restrictions had negative effects on employment, accounting for approximately a quarter of the total job loss between February and April of 2020; the remaining three quarters of the job losses could be attributed to the regional patterns of the disease spread, and other epidemiological and economic factors affecting the whole country during this period. Therefore, we should expect important employment losses even in the absence of such restrictions. In contrast, we find no significant effect of sector-specific restrictions on average worked hours or wages, indicating that most of the adjustment of the labor market took place in the extensive margin. Moreover, sectorspecific restrictions only affect salaried workers, while self-employment is more responsive to the disease spread. **** RESUMEN: En este trabajo evaluamos el efecto de la pandemia de Covid-19 y las restricciones de movilidad sectoriales en el mercado laboral colombiano. Para identificar el efecto de estas políticas, explotamos la variación en el empleo y salarios en los sectores excluidos y no excluidos de las restricciones a la movilidad, así como el momento de su implementación. Las restricciones sectoriales a la movilidad tienen efectos negativos en el empleo, representando aproximadamente una cuarta parte de la pérdida total de empleo entre febrero y abril de 2020. Los patrones regionales de propagación de la enfermedad y otros componentes epidemiológicos y económicos, que afectaron al país durante este período, representan las tres cuartas partes restantes de la pérdida de empleos. Por lo tanto, debemos esperar importantes pérdidas de empleo incluso en ausencia de dichas restricciones. No encontramos un efecto significativo en el promedio de horas trabajadas o los salarios, lo que indica que la mayor parte del ajuste del mercado laboral tuvo lugar en el margen extensivo (empleos). Además, las restricciones a la movilidad sectoriales afectan principalmente a los trabajadores asalariados, mientras que el trabajo por cuenta propia responde principalmente a la propagación de la enfermedad.
    Keywords: Covid-19, mobility restrictions, labor market, employment, Covid-19, mobility restrictions, labor market, employment.
    JEL: I14 I18 J21
    Date: 2020–09
  31. By: David Neumark; Timothy Young
    Abstract: We take up two questions that have not been explored in research on enterprise zones. First, does a considerably longer-run perspective on the effects of state enterprise zones lead to different answers? And second, are there heterogeneous effects of enterprise zones that depend on the set of incentives these programs offer, which can vary widely? Our results indicate that whether we look at state enterprise zone programs through a longer-term lens, or through the lens of program heterogeneity, we generally do not find any consistent indication of beneficial effects of state enterprise zone programs, and if anything the longer-run effects are negative. The lack of positive effects is consistent with most of the prior evidence that focuses on effects that are short-term and homogeneous.
    JEL: H25 J23
    Date: 2020–07
  32. By: David Turner; Hermes Morgavi
    Abstract: Many OECD governments have enacted, or are contemplating, future increases in statutory pension ages, sometimes provoking vociferous political opposition. Empirical cross-country estimation work consistently finds that coefficients on statutory pension ages are positive and highly statistically significant in explaining labour-force participation at older ages. There is also some consistency in the magnitude of the estimated effects across studies, although this magnitude seems surprisingly modest when translated into the implied effect on average retirement ages: an increase in statutory pension ages by one year is typically estimated to increase the average effective retirement age by only about two months.
    Keywords: labour supply, older workers, participation, statutory retirement ages
    JEL: J26 J21
    Date: 2020–09–14
  33. By: Cho, Seung Jin (Iowa State University); Lee, Jun Yeong (Iowa State University); Winters, John V. (Iowa State University)
    Abstract: We examine effects of the COVID-19 pandemic on employment losses across metropolitan area status and population size. Non-metropolitan and metropolitan areas of all sizes experienced significant employment losses, but the impacts are much larger in large metropolitan areas. Employment losses manifest as increased unemployment, labor force withdrawal, and temporary absence from work. We examine the role of individual and local area characteristics in explaining differing employment losses across metropolitan status and size. The local COVID-19 infection rate is a major driver of differences across MSA size. Industry mix and employment density also matter. The pandemic significantly altered urban economic activity.
    Keywords: COVID-19, pandemic, employment, agglomeration, urbanization, cities, density
    JEL: J2 R2
    Date: 2020–07
  34. By: Kevin Connolly (Department of Economics, University of Strathclyde); David Eiser (Department of Economics, University of Strathclyde); Ashwin Kumar (Department of Economics, University of Strathclyde); Peter G McGregor (Department of Economics, University of Strathclyde); Graeme Roy (Department of Economics, University of Strathclyde)
    Abstract: UBI is defined as a payment made to all citizens in a region/ nation that is unconditional, permanent and substantial. We explore the macroeconomic consequences of such a UBI proposal for a regional economy, introduced on a fiscally neutral basis. We use Scotland, a country where the First Minister has indicated her support for the principle behind the idea, to illustrate the application of our analytical approach. The implementation of such a UBI at scale represents a major societal shift that involves substantial rises in taxation as well as in payments. Much of the existing empirical evidence relates to schemes that are small and in which the beneficiaries bear none of the costs, so its applicability here is questionable. Our approach combines microsimulation, to identify the immediate impact of the UBI on the tax/benefit system and distribution of income, with macroeconomic modelling to identify and analyse the wider economic impact of potential behavioural responses. The macroeconomic impact of the UBI depends critically on workers’ and potential migrants’ behavioural responses to the increase in taxation as well as to increased benefits. However, it seems clear that any positive stimulus to productivity as a consequence, for example, of reduced precarity and increased training would need to be substantial to offset any adverse impact on the scale of economic activity, unless policymakers succeed in securing a social contract that dampens or eliminates workers’ pressure for higher wages in response to a reduction in take home pay
    Keywords: Universal Basic Income; Citizen’s Basic Income; Computable General Equilibrium
    JEL: D58 H24 J30 R11 R13
    Date: 2020–08
  35. By: Grover, Shweta; Sharma, Ajay
    Abstract: Using a national level sample survey on labour market in India, we analyze the role of education-occupation (mis-)match (EOM) in explaining within-group dispersion in returns to education. Applying a double sample selection bias correction and Mincerian quantile wage regression estimation, the analysis reveals interesting findings. First, on average, overeducated workers suffer a wage penalty of seven percent and undereducated workers do not receive a wage reward as compared to their adequately educated counterparts. Second, the inclusion of match status reduces within-education group dispersion in returns. The finding highlights that ignoring EOM and thus, adopting a restrictive view of similarity across workers may lead to overestimation of the within-education group dispersion in returns. This study argues for focusing on EOM to increase both pecuniary and social benefits of education in terms of productivity gains and wages as well as to reduce wage dispersion.
    Keywords: Education-occupation mismatch,Dispersion in returns to education,Wage dispersion,India,Quantile regression
    JEL: I24 J24 J31
    Date: 2020
  36. By: Goerke, Laszlo (IAAEU, University of Trier)
    Abstract: We analyse the implications of habit formation relating to wages in a multi-period efficiency-wage model. If employees have such preferences, their existence provides firms with incentives to raise wages and reduce employment over time. Greater intensity does not necessarily have the same consequences, because wage adjustments counteract the initial level impact. The firm's response additionally depends on the wage-dependency of dismissal costs since such costs make an increasing wage profile more attractive and mitigate the effects of greater intensity of habit formation. We further show that short-lived productivity shocks have long-lasting wage and employment consequences. Moreover, habit concerns by firm owners reduce wages.
    Keywords: efficiency wages, habit formation, wage profile, wage rigidity
    JEL: D90 J31 J41
    Date: 2020–07
  37. By: Oliveira, Gabriel (Departamento de Economia, Universidade de São Paulo); Chagas, André (Departamento de Economia, Universidade de São Paulo)
    Abstract: In this paper, we present some long-term effects of the largest Conditional Cash Transfers program in the world, and one of the pioneers, the Bolsa Fam´ılia Program (BFP). We focus on the effects on Schooling attained in early adulthood and Labor Market outcomes of individuals more or less exposed during their childhood. The estimates were enabled by linking identified data from Formal Labor Market, BFP Payment Records, and the Single Registry (SR). In this Natural Experiment, the main identification strategy relies on a rich set of control variables, and on the fact that the release of BFP resources for registered families is automatized and based on municipality poverty parameters estimated by the government. In an alternative identification strategy, we consider an instrumental variable, the observed proxy for the municipality effort to register vulnerable families. These strategies help to solve the potential selection bias of families to the SR, and consequently to the treatment. Nonetheless, since the program selects the most vulnerable families, the threats to the identification suggest that the estimates are lower bounds. Our main results show positive long-term effects on Schooling, and on the Formal Labor Market participation, while mixed results are observed for Earnings. Heterogeneity tests suggest that the effects are stronger for boys, for smaller cities, and for families with never formally employed parents.
    Keywords: Conditional Cash Transfers; Long-term effects; Human Capital; Labor Market; Bolsa Família
    JEL: I25 I38 J24 O15
    Date: 2020–09–03
  38. By: Lalive, Rafael (University of Lausanne); Magesan, Arvind (University of Calgary); Staubli, Stefan (University of Calgary)
    Abstract: We exploit a unique Swiss reform to identify the importance of passivity, claiming social security benefits at the Full Retirement Age (FRA). Sharp discontinuities generated by the reform reveal that raising the FRA while imposing small early claiming penalties significantly delays pension claiming and retirement, but imposing large penalties and holding the FRA fixed does not. The nature of the reform allows us to identify that between 47 and 69% of individuals are passive, while imposing additional structure point identifies the fraction at 67%. An original survey of Swiss pensioners reveals that reference-dependent preferences is the main source of passivity.
    Keywords: full retirement age, social security, regression discontinuity design, reference dependence
    JEL: H55 J21 J26
    Date: 2020–07
  39. By: Gravina, Antonio Francesco (Department of Law, University of Palermo, Italy and Department of Economics, University of Messina, Italy); Foster-McGregor, Neil (UNU-MERIT, Maastricht University)
    Abstract: In this paper, we study the effects of advances in robotics, tangible and intangible technologies, and trade openness and global value chain participation on relative wages, relying upon the skill-biased technical change and polarisation of the labour force frameworks. The empirical analysis is carried out using a panel dataset comprising 18 mostly advanced European economies and 6 industries, with annual observations spanning the period 2008-2017. Our findings suggest that intangible technologies - especially software & databases - significantly increase the wage premium for high relative to lower-skilled labour. Additionally, the tangible component of ICT primarily benefits lower-skilled workers, whereas R&D and trade openness produce polarising effects. The results are robust to the inclusion of sector-specific labour market regulations variables in the models.
    Keywords: Robots, Intangibles, Automation, ICT, Globalisation, Wage Differentials
    JEL: C01 F16 F63 J31 O11 O33 O43
    Date: 2020–09–03

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