nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2020‒10‒26
twenty-one papers chosen by
Joseph Marchand
University of Alberta

  1. City Limits: What do Local-Area Minimum Wages Do? By Arindrajit Dube; Attila S. Lindner
  2. Bitter Convergence: Contemporary Crisis of Labour in Rural West Bengal By Nataraj, Manikantha; Bhattacharya, Soham
  3. Ethnic Differences in Long-Term Self-Employment By Aldén, Lina; Bastani, Spencer; Hammarstedt, Mats; Miao, Chizheng
  4. Offshoring and Non-Monotonic Employment Effects across Industries in General Equilibrium By Daniel Baumgarten; Michael Irlacher; Michael Koch
  5. Unwilling to Train? Firm Responses to the Colombian Apprenticeship Regulation By Santiago Caicedo; Miguel Espinosa; Arthur Seibold
  6. Gender Norms and Labor-Supply Expectations: Experimental Evidence from Adolescents By Elisabeth Grewenig; Philipp Lergetporer; Katharina Werner
  7. The Expected (Signaling) Value of Higher Education By Laura Ehrmantraut; Pia Pinger; Renske Stans
  8. Life-cycle living standards of intact and disrupted English working families, 1260-1850 By Horrell, Sara; Humphries, Jane; Weisdorf, Jacob
  9. Preferences over Taxation of High-Income Individuals: Evidence from a Survey Experiment By Dirk Engelmann; Eckhard Janeba; Lydia Mechtenberg; Nils Wehrhöfer
  10. Wind of Change? Cultural Determinants of Maternal Labor Supply By Barbara Boelmann; Anna Raute; Uta Schönberg
  11. Trapped in Inactivity? The Austrian Social Assistance Reform in 2019 and its Impact on Labour Supply By Christl, Michael; Di Poli, Silvia
  12. Firm-Embedded Productivity and Cross-Country Income Differences By Vanessa I. Alviarez; Javier Cravino; Natalia Ramondo
  13. The Consequences of the COVID-19 Job Losses: Who Will Suffer Most and by How Much? By Yasemin Özdemir
  14. Human Capital Depreciation By Michael Dinerstein; Rigissa Megalokonomou; Constantine Yannelis
  15. Labor shortages and wage growth By Frohm, Erik
  16. Financial distress and the role of management in micro and small-sized firms By Fernando Alexandre; Sara Cruz; Miguel Portela
  17. The Geography of Jobs and the Gender Wage Gap By Sitian Liu; Yichen Su
  18. Health of Elderly Parents, their Children's Labor Supply, and the Role of Migrant Care Workers By Wolfgang Frimmel; Martin Halla; Joerg Paetzold; Julia Schmieder
  19. Skill Formation, Temporary Disadvantage and Elite Education By Per Hjertstrand; Pehr-Johan Norbäck; Lars Persson
  20. Time of Day, Cognitive Tasks and Efficiency Gains By Alessio Gaggero; Denni Tommasi
  21. Encouraging Brilliance in the Workplace: The Case of the Petroleum Sector in Egypt By Radi, Sherihan

  1. By: Arindrajit Dube; Attila S. Lindner
    Abstract: Cities are increasingly setting their own minimum wages, and this trend has accelerated sharply in recent years. While in 2010 there were only three cities with their own minimum wages exceeding the state or federal standard, by 2020 there were 42. This new phenomenon begs the question: is it desirable to have city-level variation in minimum wage polices? We discuss the main trade-offs emerging from local variation in minimum wage polices and evaluate their empirical relevance. First, we document what type of cities raise minimum wages and we discuss how these characteristics can potentially impact the effectiveness of city-level minimum wage policies. Second, we summarize the evolving evidence on city-level minimum wage changes and provide some new evidence of our own. Early evidence suggests that the impact of the policy on wages and employment to date has been broadly similar to the evidence on state and federal-level minimum wage changes. Overall, city-level minimum wages seem to be able to tailor the policy to local economic environment without imposing substantial distortions in allocation of labor and businesses across locations.
    JEL: J01 J18 J2 J23 J3 J31 J38 J8 J88
    Date: 2020–10
  2. By: Nataraj, Manikantha; Bhattacharya, Soham
    Abstract: Amidst a rising unemployment crisis in rural India, a pertinent concern have also been raised with respect to the working conditions prevailing in the countryside. Using two nationally representative surveys, between 2011- 2019, the study focuses on a few aspects of rural employment in the country, using the state of West Bengal as an illustration. Characterised by a stunted structural transformation of the rural economy, the conditions of employment in the state reveal two aspects of precarity. First, the predominance of self-employment as a form of employment in both farm and non-farm sectors is diagnosed with small and petty scale of production. The returns from such petty enterprises are meagre. Second, a constant process of informalisation within the formal jobs in the rural non-farm sector have deepened the vulnerability of the workforce. These two crises together indicate a fatal process of convergence, where earnings from both, self-employment and salaried jobs, are eventually converging with the lowly paid rural casual wage work. This process of convergence of earnings is intimately related to the larger processes of immiserisation, and liquidation of entitlements of workers in the current neoliberal regime.
    Keywords: Employment; Rural Labour; Working Condition; West Bengal.
    JEL: J21 J31
    Date: 2020–10–06
  3. By: Aldén, Lina (Department of Economics and Statistics, Linnaeus University); Bastani, Spencer (Institute for Evaluation of Labour Market and Education Policy (IFAU)); Hammarstedt, Mats (Department of Economics and Statistics, Linnaeus University); Miao, Chizheng (Department of Economics and Statistics, Linnaeus University)
    Abstract: We study ethnic differences in long-term self-employment in Sweden combining population-wide register data and a unique survey targeting a large representative sample of the total population of long-term self-employed. Using the registers, we analyze the evolution of labor and capital income during the first ten years following self-employment entry. We find that, while ethnic differences in labor income become smaller over time, ethnic differences in capital income grow stronger during the course of self-employment. These findings are robust to controlling for factors such as organizational form and type of industry. We use the survey data to gain further insights into these differences, and show that immigrant self-employed experience more problems, earn less, but work harder than native self-employed. They also have a less personal relation to their customers, do not enjoy their work as much as natives, and appear to have different perspectives on self-employment in general.
    Keywords: Self-employment; Immigration; Integration; Long-term; survey
    JEL: D31 J15 J24 L26
    Date: 2020–10–06
  4. By: Daniel Baumgarten; Michael Irlacher; Michael Koch
    Abstract: We address the mismatch between existing theoretical models and standard empirical practice in the analysis of the labor market effects of offshoring. While theory focuses on one-sector or two-sector models, empirical studies exploit variation in offshoring across a large number of industries, typically including a linear offshoring term in the analysis. Thereby, these studies implicitly assume a monotonic relationship between offshoring and labor market outcomes and ignore general-equilibrium effects across industries. We analyze the effects of offshoring across a continuum of industries with different shares of offshorable tasks that are linked through labor and capital markets in general oligopolistic equilibrium (GOLE). Our main result is that offshoring generates a hump-shaped pattern of employment changes across industries. While the relocation effect reduces employment in offshoring-intensive industries, labor demand in industries with a high prevalence of domestic production falls because of rising domestic wages and firm exits in general equilibrium. In the empirical part, we test the non-monotonic employment effects across industries in response to an offshoring shock by focusing on Germany after the fall of the Iron Curtain. We find strong empirical support for the hump shape in the changes of employment across industries with different scopes for offshoring, which is almost entirely due to the extensive margin, underscoring the importance of establishment entry and exit. Finally, we discuss important implications for empirical and theoretical research arising from our study.
    Keywords: offshoring and employment, task offshoring industry heterogeneity, general oligopolistic equilibrium
    JEL: F12 F16 F23 J23 L13
    Date: 2020
  5. By: Santiago Caicedo; Miguel Espinosa; Arthur Seibold
    Abstract: We study firm responses to a large-scale change in apprenticeship regulation in Colombia. The reform requires firms to train, setting apprentice quotas that vary discontinuously in firm size. We document strong heterogeneity in responses across sectors, where firms in sectors with high skill requirements tend to avoid training apprentices, while firms in low-skill sectors seek apprentices. Guided by these reduced-form findings, we structurally estimate firms’ training costs. Especially in high-skill sectors, many firms face large training costs, limiting their willingness to train apprentices. Yet, we find substantial overall benefits of expanding apprenticeship training, in particular when the supply of trained workers increases in general equilibrium. Finally, we show that counterfactual policies that take into account heterogeneity across sectors can deliver similar benefits from training while inducing less distortions in the firm-size distribution and in the allocation of resources across sectors.
    JEL: E24 J21 J24 M50
    Date: 2020
  6. By: Elisabeth Grewenig; Philipp Lergetporer; Katharina Werner
    Abstract: Gender gaps in labor-market outcomes often emerge with arrival of the first child. We investigate a causal link between gender norms and labor-supply expectations within a survey experiment among 2,000 German adolescents. Using a hypothetical scenario, we document that most girls expect to work 20 hours or less per week when having a young child, and expect from their partners to work 30 hours or more. Randomized treatments that highlight the existing traditional norm towards mothers, significantly reduce girls’ self-expected labor supply and thereby increase the expected gender difference in labor supply between their partners and themselves (i.e., the expected within-family gender gap). Treatment effects persist in a follow-up survey two weeks later, and extend to incentivized outcomes. In a second experiment conducted in the follow-up survey, we highlight another, more gender-egalitarian, norm towards shared household responsibilities and show that this attenuates the expected within-family gender gap. Together our results suggest that social norms play an important role in shaping gender gaps in labor-market outcomes around child birth.
    Keywords: gender norms, female labor supply, survey experiment
    JEL: J16 J22 C93 D83
    Date: 2020
  7. By: Laura Ehrmantraut; Pia Pinger; Renske Stans
    Abstract: This paper explores students' expectations about the returns to completing higher education and provides first evidence on perceived signaling and human capital effects. We elicit counterfactual labor market expectations for the hypothetical scenarios of leaving university with or without a degree certificate among a large and diverse sample of students at different stages of higher education. Our findings indicate substantial perceived returns to higher education. Moreover, using within-individual fixed effects models, we document substantial expected labor market returns from signaling, whereas perceived productivity-enhancing (human capital) returns seem to be less pronounced. Over the expected course of career, we find lasting education premia as well as evidence consistent with employer learning.
    Keywords: higher education, returns to education, signaling, educational attainment, licensing, employer learning
    JEL: I21 I23 I26 J24 J31 J32 J44
    Date: 2020–09
  8. By: Horrell, Sara; Humphries, Jane; Weisdorf, Jacob
    Abstract: We provide a framework for considering the living standards among intact and disrupted working-class families of various sizes in historical England. We estimate family incomes without resort to the usual male day wages and ahistorical assumptions about men’s labour inputs, instead using approximations of their annual earnings. We incorporate women and children’s wages and labour inputs and use a family life-cycle approach which accommodates consumption smoothing through saving. The analysis extends to families with often overlooked but historically common structures: widows with their children, deserted wives, and families which include husbands/fathers but ones unable or unwilling to work. Our framework suggests living standards varied considerably over time and by family structure and dependency ratio. Small and intact families enjoyed high and rising living standards after 1700. Large, broken, and disrupted families depended on child labour and poor relief up until 1830.
    Keywords: child labour; consumption soothing; costs-of-living; dependency ratio; life cycle; living standards; poor relief; prices; wages
    JEL: J22 N13 O10
    Date: 2020–10
  9. By: Dirk Engelmann; Eckhard Janeba; Lydia Mechtenberg; Nils Wehrhöfer
    Abstract: Mobility of high-income individuals across borders puts pressure on governments to lower taxes. A central tenet of the corresponding textbook argument is that mobile individuals react to tax differentials through migration, and in turn immobile individuals vote for lower taxes. We investigate to which extent this argument is complete. In particular, political ideology may influence voting on taxes. We vary mobility and foreign taxes in a survey experiment within the German Internet Panel (GIP), with more than 3,000 individuals participating. We find that while the treatment effects qualitatively confirm model predictions how voters take mobility of high-income earners into account when choosing domestic taxes, ideology matters: left-leaning high-income individuals choose higher taxes and emigrate less frequently than right-leaning ones. These findings are in line with the comparative-static predictions of a simple model of inequality aversion when the aversion parameters vary with ideology.
    Keywords: taxation, mobility, ideology, survey experiments
    JEL: D72 F22 H21
    Date: 2020
  10. By: Barbara Boelmann (University College London); Anna Raute (Queen Mary University of London); Uta Schönberg (University College London)
    Abstract: Does the culture in which a woman grows up influence her labor market decisions once she has had a child? To what extent might the culture of her present social environment shape maternal labor supply? To address these questions, we exploit the setting of German reunification. A state socialist country, East Germany strongly encouraged mothers to participate in the labor market full-time, whereas West Germany propagated a more traditional male breadwinner-model. After reunification, these two cultures were suddenly thrown together, with consequent increased social interactions between East and West Germans through migration and commuting. A comparison of East and West German mothers on both sides of the former Inner German border within the same commuting zone shows that culture matters. Indeed, East German mothers return to work more quickly and for longer hours than West German mothers even two decades after reunification. Second, in exploiting migration across this old border, we document a strong asymmetry in the persistence of the culture in which women were raised. Whereas East German female migrants return to work earlier and work longer hours than their West German colleagues even after long exposure to the more traditional West German culture, West German migrants adjust their post-birth labour supply behaviour nearly entirely to that of their East German colleagues. Finally, taking advantage of differential inflows of East German migrants across West German firms in the aftermath of reunification, we show that even a partial exposure to East German colleagues induces “native” West German mothers to accelerate their return to work after childbirth, suggesting that migration might be a catalyst for cultural change.
    Keywords: cultural transmission, social norms, maternal labor force participation, German
    JEL: J1 J2 Z1
    Date: 2020–10–05
  11. By: Christl, Michael; Di Poli, Silvia
    Abstract: Financial incentives affect the labour supply decisions of households, but typically the impact of such incentives varies significantly across household types. While there is a substantial literature on the labour supply effects of tax reforms and in-work benefits, the impact of changes in social assistance benefits has received less attention. This paper analyses the impact of the Austrian reform proposal ‘Neue Sozialhilfe’ (“New Socia l Assistance†), which was introduced in 2019 and substantially cut social assistance benefits for migrants and families with children. We show that the labour supply effects of these changes in social assistance differ substantially across household types. While women exhibit higher labour supply elasticities in our estimates, the overall effects of the reform are especially strong for men and migrants. Couples with children and migrants, i.e. the groups which were hit the hardest by the reform’s social assistance reductions , show the strongest labour supply reactions to the ‘New Social Assistance’. Furthermore , we show that overall the reform has a positive, but small, effect on the intensive margin of labour supply.
    Date: 2020–09–30
  12. By: Vanessa I. Alviarez; Javier Cravino; Natalia Ramondo
    Abstract: We measure the contribution of firm-embedded productivity to cross-country income differences. By firm-embedded productivity we refer to the components of productivity that differ across firms and that can be transferred internationally, such as blueprints, management practices, and intangible capital. Our approach relies on microlevel data on the cross-border operations of multinational enterprises (MNEs). We compare the market shares of the exact same MNE in different countries and document that they are about four times larger in developing than in high-income countries. This finding indicates that MNEs face less competition in less-developed countries, suggesting that firm-embedded productivity in those countries is scarce. We propose and implement a new measure of firm-embedded productivity based on this observation. We find a strong positive correlation between our measure and output per-worker across countries. In our sample, differences in firm-embedded productivity account for roughly a third of the cross-country variance in output per-worker.
    JEL: F0 O0
    Date: 2020–10
  13. By: Yasemin Özdemir
    Abstract: This paper investigates whether and how parents adjust their parenting behavior in response to their children's peers. In particular, I analyze whether changes in cognitive and non-cognitive skills of children's friends lead parents to adjust their investment and parenting style such, as monitoring and quality time spend with their children. Data from Add Health allow me to follow five cohorts of teenagers from grades 7 to 12 with repeated information on individual friendship networks. Combining the empirical strategy of overlapping peer groups and first-differencing, I estimate a simultaneous system of skill and investment equations. First, I show that parental monitoring increases as the level of cognitive skills among peers decreases. Also, mothers compensate decreases in cognitive skills of their child's peers by increasing verbal investment, while fathers reinforce higher non-cognitive skills of their child's peers with joint activities. Second, I document gender differences in monitoring, where cognitive skills of sons' peers are compensated but non-cognitive skills of daughters' peers are reinforced. Overall, effects in time investment are driven by parents with high educational expectations of their child, and parents that have no close relationship with peer-parents. Third, parental response to peers is not limited to peer skills, the composition of peers as measured by their characteristics also leads to an adjustment in the parenting behavior.
    Keywords: Child Development, Family Investment, Peers, Skills, Non-Cognitive Skills
    JEL: J13 J24 D13
    Date: 2020–09
  14. By: Michael Dinerstein; Rigissa Megalokonomou; Constantine Yannelis
    Abstract: Human capital can depreciate if skills are unused. But estimating human capital depreciation is challenging, as worker skills are difficult to measure and less productive workers are more likely to spend time in non-employment. We overcome these challenges with new administrative data on teachers’ assignments and their students’ outcomes, and quasi- random variation from the teacher assignment process in Greece. We find significant losses to output, as a one-year increase in time without formal employment lowers students’ test scores by 0.09 standard deviations. Using a simple production model, we estimate a skill depreciation rate of 4.3% and experience returns of 6.8%.
    JEL: H52 I26 J24
    Date: 2020–10
  15. By: Frohm, Erik (Monetary Policy Department, Central Bank of Sweden)
    Abstract: This paper presents a novel measure of labor market conditions based on micro data from a large business survey in Sweden. The indicator, relative labor shortages (RLS), is the ratio of respondents’ quantitative assessment of labor shortages and current employment. Contrary to other surveybased measures of labor market conditions and the vacancy-unemployment ratio, RLS remained relatively subdued during the 2013-2018 recovery from the Great Recession. As the indicator is highly correlated with annual wage growth at the establishment-level, its slow recovery can help explain why wage growth in Sweden has been sluggish since the Great Recession.
    Keywords: Wage inflation; labor shortages; survey data
    JEL: C80 E31 E60 J23 J31
    Date: 2020–09–01
  16. By: Fernando Alexandre (University of Minho and NIPE); Sara Cruz (University of Minho and NIPE); Miguel Portela (University of Minho, NIPE and IZA, Bonn)
    Abstract: In this paper, we focus on managerial characteristics of micro and small-sized firms. Using linked employer-employee data on the Portuguese economy for the 2010-2018 period, we estimate the impact of management teams' human capital on the probability of firms becoming financially distressed and on their subsequent recovery. Our estimates show that the relevance of management teams' formal education on the probability of firms becoming financially distressed depends on firms' size and the type of education. We show that management teams' formal education and tenure reduces the probability of micro and small-sized firms becoming financially distressed and increases the probability of their subsequent recovery. The estimates also suggest that those impacts are stronger for micro and small-sized firms. Additionally, our results show that functional experience previously acquired in other firms, namely in foreign-owned and in exporting firms and in the area of finance, may reduce the probability of micro firms becoming financially distressed. On the other hand, previous functional experience in other firms seems to have a strong and highly significant impact on increasing the odds of recovery of financially distressed firms. We conclude that policies that induce an improvement in the managerial human capital of micro and small-sized firms have significant scope to improve their financial condition, enhancing the resilience of the economy against shocks.
    Keywords: Financial distress; human capital; firm performance
    JEL: G32 J24 L25
    Date: 2020
  17. By: Sitian Liu; Yichen Su
    Abstract: Prior studies have shown that women are more willing to trade off wages for short commutes than men. Given the gender difference in commuting preferences, we show that the wage return to commuting (i.e., the wage penalty for reducing commute time) that stems from the spatial distribution of jobs contributes to the gender wage gap. We propose a simple job choice model, which predicts that differential commuting preferences would lead to a larger gender wage gap for workers who face greater wage returns to commuting based on their locations of residence and occupations. We then show empirical evidence that validates the model's prediction. Moreover, we estimate the model components: (i) the indifference curves between wages and commutes by gender, and (ii) the wage return to commuting faced by each worker. Our model shows that differential commuting choices account for about 16-21% of the gender wage gap on average, but the contribution varies widely across residential locations. The model also shows that policies that increase commute speed or density in the central city neighborhoods could moderately lower the gender wage gap.
    Keywords: Gender wage gap; commuting; spatial distribution of jobs
    JEL: J16 J22 J31 R12 R41
    Date: 2020–10–02
  18. By: Wolfgang Frimmel; Martin Halla; Joerg Paetzold (Universität Salzburg); Julia Schmieder
    Abstract: We estimate the impact of parental health on adult children’s labor market outcomes. We focus on health shocks which increase care dependency abruptly. Our estimation strategy exploits the variation in the timing of shocks across treated families. Empirical results based on Austrian administrative data show a significant negative impact on labor market activities of children. This effect is more pronounced for daughters and for children who live close to their parents. Further analyses suggest informal caregiving as the most likely mechanism. The effect is muted after a liberalization of the formal care market, which sharply increased the supply of foreign care workers.
    Keywords: Informal care, formal care, aging, health, labor supply, labor migration.
    JEL: J14 J22 I11 I18 R23
    Date: 2020–10
  19. By: Per Hjertstrand; Pehr-Johan Norbäck; Lars Persson
    Abstract: Elite skills have become crucial in today’s superstar economy. We develop a multi-period skill-formation model where we show that individuals with temporary disadvantages must exert greater effort to gain access to elite education. This “underdog-incentive effect” implies that “educated underdogs” obtain superior adult skills. We find support for this mechanism in soccer data: players born early in the year dominate youth soccer, but players born late (but not too late) in the year become the superstars. We also show that if young students discount the future “too much”, high requirements to elite education can increase expected life-time welfare for disadvantaged students.
    Keywords: skill formation, temporary disadvantage, elite education, soccer, underdog
    JEL: I20 J24 D90
    Date: 2020
  20. By: Alessio Gaggero; Denni Tommasi
    Abstract: The link between time-of-day and productivity on cognitive tasks is crucial to understand workplace efficiency and welfare. We study the performance of University students taking at most one exam per day in the final two weeks of the semester. Exams are scheduled at different time-of-day in a quasirandom fashion. We find that peak performance occurs around lunchtime (1.30pm), as compared to morning (9am) or late afternoon (4.30pm). This inverse-U shape relationship between time-of-day and performance (i) is not driven by stress or fatigue, (ii) is consistent with the idea that cognitive functioning is an important determinant of productivity and (iii) implies that efficiency gains of up to 0.14 standard deviations can be achieved through simple re-arrangements of the time of exams. While researchers have shown that biological factors influence changes in productivity between day and night shifts, we establish that such relationship is also important within a standard day-light shift. A simple back of the envelope calculation applied to an external context that is likely to benefit from our results, elective surgeries, suggests that a different sorting of the cognitive tasks performed by surgeons may lead to an increase in the number of patients saved.
    Keywords: time-of-day, cognitive tasks, productivity, efficiency gains, circadian rhythm
    JEL: I20 I24 J22 J24
    Date: 2020
  21. By: Radi, Sherihan
    Abstract: This research investigates the impact of five pillars (growth – happiness – abundance- significance - meaning) on encouraging brilliance in the workplace. It used a mixed methods approach to collect information related to the research. The researcher found that the five pillars (growth – happiness – abundance - significance - meaning) have a significant impact on encouraging brilliance in the workplace. Insights from this study can be used to benefit the development of this research line in future.
    Keywords: Brilliance, growth, happiness, abundance, significance, meaning, workplace.
    JEL: J00 J28
    Date: 2020–08–20

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