nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2020‒11‒02
twenty-six papers chosen by
Joseph Marchand
University of Alberta

  1. The Distributional Consequences of Social Distancing on Poverty and Labour Income Inequality in Latin America and the Caribbean By Delaporte, Isaure; Escobar, Julia; Peña, Werner
  2. Long-Term Effects of Individual Placement and Support Services for Disability Benefits Recipients with Severe Mental Illnesses By De Graaf-Zijl, Marloes; Spijkerman, Marcel; Zwinkels, Wim
  3. Money also is sunny in a retiree's world By Lorenz, Svenja; Zwick, Thomas
  4. Tax-Benefit Systems and the Gender Gap in Income By Doorley, Karina; Keane, Claire
  5. The Effects of International Scrutiny on Manufacturing Workers: Evidence from the Rana Plaza Collapse in Bangladesh By Bossavie, Laurent; Cho, Yoon Y.; Heath, Rachel
  6. The Statutory Minimum Wage in Germany and the Labor Demand Elasticities of Low-Skilled Workers: A Regression Discontinuity Approach with Establishment Panel Data By Kölling, Arnd
  7. Wage Distributions in Origin Societies and Occupational Choices of Immigrant Generations in the US By Zhan, Crystal
  8. Occupational Licensing and the Gender Wage Gap By Koumenta, Maria; Pagliero, Mario; Rostam-Afschar, Davud
  9. Are We There? Differences in Search, Preferences and Jobs between Young Highly Educated Male and Female Workers By Ilaria D’Angelis
  10. Did the Bologna Process Challenge the German Apprenticeship System? Evidence from a Natural Experiment By Thomsen, Stephan L.; Trunzer, Johannes
  11. Employment Opportunities and High School Completion during the COVID-19 Recession By Ahn, Kunwon; Lee, Jun Yeong; Winters, John V.
  12. Male Earnings Volatility in LEHD before, during, and after the Great Recession By Kevin L. McKinney; John M. Abowd
  13. The Impact of Child Work on Cognitive Development: Results from Four Low to Middle Income Countries By Michael Keane; Sonya Krutikova; Timothy Neal
  14. Judge Bias in Labor Courts and Firm Performance By Cahuc, Pierre; Carcillo, Stéphane; Patault, Bérengère; Moreau, Flavien
  15. Transitions from lower track secondary schools into vocational training: Does a detour pay off? By Hillerich-Sigg, Annette
  16. Assessing Selection Bias in Non-Experimental Estimates of the Returns to Workplace Training By Sauermann, Jan; Stenberg, Anders
  17. Estimating Sleep and Work Hours from Alternative Data by Segmented Functional Classification Analysis, SFCA By Klaus Ackermann; Simon D Angus; Paul A Raschky
  18. Redistributive Capital Taxation Revisited By Ozlem Kina; Ctirad Slavik; Hakki Yazici
  19. Services imports and labour in Viet Nam By Alexander Jaax; Louise Johannesson; Thi Xuan Thu Nguyen
  20. Do more tourists promote local employment? By Libertad González Luna; Tetyana Surovtseva
  21. Importing inequality : Immigration and the Top 1 percent By Advani, Arun; Koenig, Felix; Pessina, Lorenzo; Summers, Andy
  22. The Life-Cycle Effects of Pension Reforms: A Structural Approach By Claudio Daminato; Mario Padula
  23. Ethnic bias, economic success and trust: Findings from large sample experiments in Germany and the United States through the Trustlab platform By Sophie Cetre; Yann Algan; Gianluca Grimalda; Fabrice Murtin; Louis Putterman; Ulrich Schmidt; Vincent Siegerink
  24. She Could Not Agree More: The Role of Failure Attribution in Shaping the Gender Gap in Competition Persistence By Manar Alnamlah; Christina Gravert
  25. Raising markups to survive: small Spanish firms during the Great Recession By Pilar García-Perea; Aitor Lacuesta; Pau Roldan-Blanco
  26. How protectionism harms workers under oligopoly By Rudsinske, Jonas F.

  1. By: Delaporte, Isaure; Escobar, Julia; Peña, Werner
    Abstract: This paper evaluates the distributional consequences of social distancing due to the COVID-19 pandemic on poverty and labour income inequality in 20 Latin American and Caribbean (LAC) countries. We gather detailed information from national laws and decrees on the strictness and the duration of the lockdown in each country and use rich harmonised household surveys from the IADB. We estimate the share of individuals that are potentially able to remain active under the first phase of the lockdown by constructing the Lockdown Working Ability (LWA) index which takes into account individuals' ability to work from home but also whether their occupation is affected by workplace closures or mobility restrictions. We find that, on average, 1 worker out of 2 is able to work under the lockdown in the LAC region. We document considerable variation in the share of individuals able to work under the lockdown across countries and within countries across occupations, economic activities and specific population groups. Based on the LWA index, we then estimate individual's potential labour income losses and examine changes in poverty and labour income inequality. We find an increase in poverty and labour income inequality in the majority of the LAC countries due to social distancing. At the national level, the highest increase in the headcount poverty index is 1.4 pp and the highest increase in the Gini coefficient is 2 pp. Decomposing overall labour income inequality in the LAC region, we find that social distancing has lead to a small decrease (-0.1 pp) in inequality between countries but to an increase (2 pp) in inequality within countries. Finally, we document that 63% of the dispersion in the labour income loss across countries is explained by the sectoral/occupational structure of the economies, while the rest is explained by the type of lockdown policy that was implemented.
    Keywords: COVID-19,Social Distancing,Teleworking,Employment,Labour Income Inequality,Poverty
    JEL: D33 E24 I14 J31 J21
    Date: 2020
  2. By: De Graaf-Zijl, Marloes (UWV Netherlands Social Security Institute); Spijkerman, Marcel (UWV Netherlands Social Security Institute); Zwinkels, Wim (Epsilon Research)
    Abstract: This paper examines a broad set of short- and long-term impacts of Individual Placement and Support (IPS) for disability benefit recipients with severe mental disabilities. IPS is a specific intervention that first aims to place an individual in employment and subsequently trains the worker on the job. We compare the outcomes for IPS-recipients to a control group that received traditional vocational rehabilitation (TVR) services. We use administrative data to apply difference-in-difference estimation on a matched sample of 513 IPS recipients and almost 23,000 TVR-recipients in the Netherlands. Our results show that from six months after the start of the treatment onwards employment probabilities of IPS participants significantly outperform those of TVR participants. The higher probability to be in competitive employment does not come at the expense of fewer work in sheltered employment or trial periods. Nor do they come at the expense of shorter working hours or lower wages. The share of people on disability benefits declines equally in both group for quite some time after the start of the intervention but there is some indication that the benefit dependency in the long run declines faster for IPS recipients. Effects regarding medical costs are not statistically significant.
    Keywords: program evaluation, treatment effects, vocational rehabilitation, individual placement and support, temporary disability, labor supply, social insurance
    JEL: C21 H51 H55 I38 J22 J24
    Date: 2020–10
  3. By: Lorenz, Svenja; Zwick, Thomas
    Abstract: This paper shows that labor income plays an important positive role for the decision to work after retirement. Especially individuals who have the chance to substantially supplement their pension entitlements have a higher earnings elasticity. Men are more attracted by earnings incentives than women. Also individuals who work until retirement can easier be attracted by financial incentives to work after retirement than those with bridge options. Our analysis is based on a representative and large administrative individual career data set that includes employer information. We use an endogeneity correction model to estimate labor and non-labor financial determinants of labor market participation after retirement.
    Keywords: work after retirement,labor and non-labor financial incentives,empirical study
    JEL: J14 J22 J26
    Date: 2020
  4. By: Doorley, Karina (Economic and Social Research Institute, Dublin); Keane, Claire (ESRI, Dublin)
    Abstract: The gender wage gap and the gender work gap are sizable, persistent and well documented for many countries. The result of the gender wage and gender work gap combined is an income gap between men and women. A small literature has begun to examine how the tax-benefit system contributes to closing gender income gaps by redistributing between men and women. In this paper, we study the effect of tax-benefit policy on gender differences in income. We use microsimulation models linked to survey data to estimate gender gaps in market income (before taxes and transfers) and disposable income (after taxes and transfers) for each country. We develop a method to isolate the relative contributions of the gender wage gap and the gender work gap to the overall gap in income between men and women. We then decompose the difference between the gender gap in market income and the gender gap in disposable income into (i) the relative contribution of taxes and benefits in each country and (ii) the relative cushioning of the gender wage gap and gender work gap. Policy conclusions are drawn about redistribution between men and women.
    Keywords: gender inequality, decomposition, tax-benefit system
    JEL: J16 J31
    Date: 2020–10
  5. By: Bossavie, Laurent (World Bank); Cho, Yoon Y. (World Bank); Heath, Rachel (University of Washington)
    Abstract: After the tragic factory collapse of Rana Plaza in 2013, both the direct reforms and indirect responses of retailers have plausibly affected workers in the Ready Made Garment (RMG) sector in Bangladesh. These responses included a minimum wage increase, high profile but voluntary audits, and an increased reluctance to subcontract to smaller factories. This paper uses six rounds of the Labor Force Survey and adopts a synthetic control approach to evaluate the net effects of these changes on garment workers. While we find that working conditions did improve, we find evidence of adverse effects on several other outcomes for workers. In particular, while the reforms initially increased female workers' wages, their wages had fallen an estimated 20 percent three years after Rana Plaza. We also show suggestive evidence that female workers' contracts displayed a similar short-term increase and ultimate long-term decrease. Male workers, by contrast, if anything experienced only short-term adverse effects.
    Keywords: garment sector, working conditions, gender, minimum wage
    JEL: F16 J16 J31 J32 J81 O12
    Date: 2020–10
  6. By: Kölling, Arnd
    Abstract: This study examines the influence of the statutory minimum wage on labor demand elasticities regarding low-skilled workers. For this, a regression discontinuity analysis is conducted using company panel data from 2013 to 2018. In addition, a possible endogeneity of the remuneration for low-skilled workers was considered using an IV estimation. It is shown that the monopsonistic structures of the labor market may continue to exist after the introduction of the minimum wage. Additionally, the own-wage elasticity for low-skilled workers did not change over the period considered. However, in the short run, stronger substitutive relationships with medium-skilled workers seem to exist, and probably also with highly qualified employees in the long run.
    Keywords: Minimum Wage,Labor Demand,Monopsony,Low-skilled Workers
    JEL: J23 J42 J31 J21
    Date: 2020
  7. By: Zhan, Crystal
    Abstract: This paper studies the occupational selection among generations of immigrants in the United States and links their choices to the occupational wage distribution in their country of origin. The empirical results suggest that individuals are more likely to take up an occupation in the US that was more lucrative in the origin country, conditional on individual demographics, parental human capital, and ethnic networks. However, the importance of the origin wage declines with the length of time that immigrants spend in the US and over generations. Information friction may be an explanation.
    Keywords: immigrants,occupational choices,origin wage,intergenerational transmission,assimilation,human capital,information
    JEL: J15 J24 J31
    Date: 2020
  8. By: Koumenta, Maria; Pagliero, Mario; Rostam-Afschar, Davud
    Abstract: We use a unique survey of the EU labor force to investigate the relationship between occupational licensing and the gender wage gap. We find that the gender wage gap is canceled for licensed self-employed workers. However, this closure of the gender wage gap is not mirrored by significant changes in the gender gap in hours worked. Our results are robust using decomposition methods, quantile regressions, different datasets, and selection correction.
    Keywords: Licensing,Gender gap,Wages,Female Labour Supply,Quantile regression,Selection
    JEL: J16 J31 J44 J71
    Date: 2020
  9. By: Ilaria D’Angelis (Boston College)
    Abstract: Do young highly educated women face higher job search frictions, have stronger preferences for non wage job-specific amenities, and receive job offers entailing lower hourly wages or stronger wage penalties for amenities provision relative to men? I study a recent cohort of young, highly educated American workers, document the existence of a gender pay gap at the beginning of workers’ careers, and provide evidence that its increasing path over years in the labor market can be rationalized by underlying unobservable differences in search frictions, preferences for amenities, and in the characteristics of the job offers that workers receive. Building on the descriptive evidence I collect, I answer the questions above by estimating a model of hedonic job search. I use the estimated parameters to show that young workers’ predicted utility from jobs can be decomposed into components due to wage and wage penalties/gains for amenities provision in the job offers received, preferences for amenities, and workers’ selection into different jobs. The main amenities of interest are flexible schedule, overtime, paid and unpaid parental leave, and child care. I find that young, highly educated male and female employed workers are remarkably similar in terms of both search frictions and preferences for job attributes, while female unemployed workers are less likely to obtain job offers than men, in spite of similar levels of labor market attachment. The job offers that women face, instead, differ from the job offers that men receive. Women tend to be offered low wages, and obtain lower wage gains attached to the provision of amenities relative to men. Wages and amenities-related wage penalties strongly affect the predicted male-to-female gap in utility that young workers obtain from jobs, especially in executive and professional careers. In addition, lower wage gains (or wage losses) that women experience when amenities are provided, tend to expand the gender wage gap in jobs providing benefits like flexibility and parental leave.
    Keywords: gender wage gap, nonwage benefits, job search, early careers
    JEL: J16 J31 J32 J64
    Date: 2020–10–24
  10. By: Thomsen, Stephan L. (Leibniz University of Hannover); Trunzer, Johannes (Leibniz University of Hannover)
    Abstract: Starting in 1999, the Bologna Process reformed the German five-year study system for a first degree into the three-year bachelor's (BA) system to harmonize study lengths in Europe and improve competitiveness. This reform unintentionally challenged the German apprenticeship system that offers three-year professional training for the majority of school leavers. Approximately 29% of new apprentices are university-eligible graduates from academic-track schools. We evaluate the effects of the Bologna reform on new highly educated apprentices using a generalized difference-in-differences design based on detailed administrative student and labor market data. Our estimates show that the average regional expansion in first-year BA students decreased the number of new highly educated apprentices by 3%–5%; average treatment effects on those indecisive at school graduation range between –18% and –29%. We reveal substantial gender and occupational heterogeneity: males in STEM apprenticeships experienced the strongest negative effects. The reform aggravated the skills shortage in the economy.
    Keywords: Bologna Process, post-secondary education decisions, apprenticeships, higher education
    JEL: I23 I28 J24
    Date: 2020–10
  11. By: Ahn, Kunwon (Iowa State University); Lee, Jun Yeong (Iowa State University); Winters, John V. (Iowa State University)
    Abstract: COVID-19 created major disruptions for young people including health concerns, school closures, reduced social opportunities, and a wilting economy. We examine the effect of COVID-19 on high school completion in the United States. We find that high school completion rates increased considerably in 2020 compared to previous years. We investigate various mechanisms and find that worse employment conditions were the driving force. The lower opportunity costs of schooling because of the pandemic recession encouraged more young people to complete high school. The pandemic created extensive problems in education, but fortunately it did not reduce overall high school completion rates.
    Keywords: education, employment, recession, COVID-19, human capital
    JEL: I2 J24
    Date: 2020–10
  12. By: Kevin L. McKinney; John M. Abowd
    Abstract: This paper is part of a coordinated collection of papers on prime-age male earnings volatility. Each paper produces a similar set of statistics for the same reference population using a different primary data source. Our primary data source is the Census Bureau’s Longitudinal Employer-Household Dynamics (LEHD) infrastructure files. Using LEHD data from 1998 to 2016, we create a well-defined population frame to facilitate accurate estimation of temporal changes comparable to designed longitudinal samples of people. We show that earnings volatility, excluding increases during recessions, has declined over the analysis period, a finding robust to various sensitivity analyses. Although we find volatility is declining, the effect is not homogeneous, particularly for workers with tenuous labor force attachment for whom volatility is increasing. These “not stable” workers have earnings volatility approximately 30 times larger than stable workers, but more important for earnings volatility trends we observe a large increase in the share of stable employment from 60% in 1998 to 67% in 2016, which we show to largely be responsible for the decline in overall earnings volatility. To further emphasize the importance of not stable and/or low earning workers we also conduct comparisons with the PSID and show how changes over time in the share of workers at the bottom tail of the cross-sectional earnings distributions can produce either declining or increasing earnings volatility trends.
    Date: 2020–09
  13. By: Michael Keane (School of Economics); Sonya Krutikova (Institute for Fiscal Studies, UK); Timothy Neal (UNSW School of Economics)
    Abstract: We study the impact of child work on cognitive development in four Low- and Middle-Income Countries. We advance the literature by using cognitive test scores collected regardless of school attendance. We also address a key gap in the literature by controlling for children’s complete time allocation budget. This allows us to estimate effects of different types of work, like chores and market/farm work, relative to specific alternative time-uses, like school or study or play/leisure. Our results show child work is more detrimental to child development to the extent that it crowds out school/study time rather than leisure. We also show the adverse effect of time spent on domestic chores is similar to time spent on market and farm work, provided they both crowd out school/study time. Thus, policies to enhance child development should target a shift from all forms of work toward educational activities.
    Keywords: Child labor, Child development, Education, Time use, Item response theory, Value added models
    JEL: I25 J13 J24 O15
    Date: 2020–10
  14. By: Cahuc, Pierre (Sciences Po, Paris); Carcillo, Stéphane (OECD); Patault, Bérengère (CREST (ENSAE)); Moreau, Flavien (International Monetary Fund)
    Abstract: Does labor court uncertainty and judge subjectivity influence firms performance? We study the economic consequences of judge decisions by collecting information on more than 145,000 Appeal court rulings, combined with administrative firm-level records covering the whole universe of French firms. The quasi-random assignment of judges to cases reveals that judge bias has statistically significant effects on the survival, employment, and sales of small low-performing firms. However, we find that the uncertainty associated with the actual dispersion of judge bias is small and has a non-significant impact on their average outcomes.
    Keywords: firm survival, judge bias, dismissal compensation, employment
    JEL: J33 J63 J65
    Date: 2020–10
  15. By: Hillerich-Sigg, Annette
    Abstract: This paper analyzes the effect of alternative transition paths after grade 9 of German lower secondary school on vocational training. Using a selection-on-observables approach I show that a delayed transition into vocational training after lower track secondary school is not a disadvantage conditional on a successful transition into vocational training. Students benefit from continuing general schooling or attending vocational school compared to transitioning directly with regard to wages paid during vocational training as well as average wages, prestige, and socioeconomic status of the training occupation. This comes at the cost of a lower probability to match the training occupation with the reported desired occupation and being less satisfied with the vocational training. Participation in pre-vocational training does not lead to a different type of vocational training position than after a direct transition. However, those participants are less satisfied with their vocational training.
    Keywords: school-to-work transition,secondary school,pre-vocational training,vocational training
    JEL: J24 I28 I26
    Date: 2020
  16. By: Sauermann, Jan (IFAU); Stenberg, Anders (SOFI, Stockholm University)
    Abstract: We assess selection bias in estimated returns to workplace training by exploiting a field experiment with random assignment of workers to a one-week training program. We compare experimental estimates of this program with non-experimental estimates that are estimated by using a sample of agents who were selected by management not to participate in the experiment. Our results show that non-experimental estimates are biased, yielding returns about twice as large as the causal effect. When controlling for pre-treatment performance or individual fixed effects, only about one tenth of this bias remains and is even further reduced when applying common support restrictions.
    Keywords: returns to training, selection bias, field experiment
    JEL: J24 C93 M53
    Date: 2020–10
  17. By: Klaus Ackermann (SoDa Laboratories, Monash University); Simon D Angus (SoDa Laboratories, Monash University); Paul A Raschky (SoDa Laboratories, Monash University)
    Abstract: Alternative data is increasingly adapted to predict human and economic behaviour. This paper introduces a new type of alternative data by re-conceptualising the internet as a data-driven insights platform at global scale. Using data from a unique internet activity and location dataset drawn from over 1.5 trillion observations of end-user internet connections, we construct a functional dataset covering over 1,600 cities during a 7 year period with temporal resolution of just 15min. To predict ac- curate temporal patterns of sleep and work activity from this data-set, we develop a new technique, Segmented Functional Classification Analysis (SFCA), and compare its performance to a wide array of linear, functional, and classification methods. To confirm the wider applicability of SFCA, in a second application we predict sleep and work activity using SFCA from US city-wide electricity demand functional data. Across both problems, SFCA is shown to out-perform current methods.
    Keywords: functional data analysis, time use, electricity demand, big data, alternative data
    JEL: C38 C53 C55 J22
    Date: 2020–10
  18. By: Ozlem Kina; Ctirad Slavik; Hakki Yazici
    Abstract: This paper shows that capital-skill complementarity provides a quantitatively significant rationale to tax capital for redistributive governments. The optimal capital income tax rate is 60%, which is significantly higher than the optimal rate of 48% in an identically calibrated model without capital-skill complementarity. The skill premium falls from 1.9 to 1.67 along the transition following the optimal reform in the capital-skill complementarity model, implying substantial indirect redistribution from skilled to unskilled workers. These results show that a government that cares about redistribution should take into account capital-skill complementarity in production when setting the tax rate on capital income.
    Keywords: capital taxation; capital-skill complementarity; inequality; redistribution;
    JEL: E25 J31
    Date: 2020–10
  19. By: Alexander Jaax (OECD); Louise Johannesson (OECD); Thi Xuan Thu Nguyen (Diplomatic Academy of Viet Nam)
    Abstract: This paper draws on detailed firm-level and worker-level information to explore the link between services imports and employment dynamics in the case of Viet Nam. The econometric analysis consists of two parts. First, data covering formal firms are exploited to investigate the relationship between sector-level services import intensity and firm-level employment and firm-level average wages. The second part is conducted at the level of workers and also covers informal workers. The results show that sector-level services import intensity positively affects firm-level average wages of Vietnamese formal services firms, whereas a small negative effect on firm-level employment is observed. For manufacturing firms, there is no conclusive evidence regarding the association between services import intensity and firm-level employment. The worker-level analysis identifies a positive wage effect of occupation-level exposure to services imports on domestic workers in foreign-owned businesses in all sectors. The results also suggest that higher skilled workers might be more likely to benefit from services imports. This paper provides support for an approach that combines an emphasis on lowering firms’ costs of sourcing foreign services inputs with efforts to strengthen SMEs’ capabilities and improve workers’ skills.
    Keywords: employment, individual and firm-level data, trade, wages, worker heterogeneity
    JEL: F14 F16 F61 J21 J30 C26
    Date: 2020–10–23
  20. By: Libertad González Luna; Tetyana Surovtseva
    Abstract: We analyze the short-term impact of tourist flows on local labour markets. We propose a novel identification strategy that uses shocks to competing international tourist destinations to instrument for tourist inflows across Spanish regions. We show that negative shocks in alternative international destinations have a strong positive effect on tourism flows to Spain. We follow an instrumental variables strategy and find that an exogenous increase in tourist inflows leads to more employment in the tourism industry for prime-age workers in the short term but does not increase total employment in local economies. Total employment actually falls for very young and older workers, as well as for prime-age women. The increase in employment in tourism is compensated by a fall in (low-skilled) employment in other sectors, especially construction and manufacturing.
    Keywords: employment, tourism, local labour markets, shift-share, terrorism, Spain
    JEL: J21
    Date: 2020–10
  21. By: Advani, Arun (Department of Economics and CAGE Research Centre, University of Warwick; Institute for Fiscal Studies); Koenig, Felix (Heinz College, Carnegie Mellon University); Pessina, Lorenzo (Department of Economics, Columbia University); Summers, Andy (Department of Law, London School of Economics)
    Abstract: In this paper we study the contribution of migrants to the rise in UK top incomes. Using administrative data on the universe of UK taxpayers we show migrants are over-represented at the top of the income distribution, with migrants twice as prevalent in the top 0.1% as anywhere in the bottom 97%. These high incomes are predominantly from labour, rather than capital, and migrants are concentrated in only a handful of industries, predominantly finance. Almost all (85%) of the growth in the UK top 1% income share over the past 20 years can be attributed to migration. JEL codes: H2, J3, J6
    Date: 2020
  22. By: Claudio Daminato (Department of Management, Technology and Economics, ETH Zurich); Mario Padula (Università "Ca' Foscari" Venezia and CSEF)
    Abstract: To assess the life-cycle welfare effects of pension reforms, we provide a dynamic stochastic model of saving, portfolio choice and retirement with a pension system that operates according to the notional defined contribution principle. Relying on the exogenous variation from a sequence of Italian pension reforms, we identify and estimate the model, which is then used to draw implications of alternative pension policies. Our results also shed further light on the mechanisms behind the offset between social security and private wealth and show the importance of labor supply at retirement as an insurance mechanism against shocks to pension wealth.
    Keywords: Pension reforms, Life-Cycle, Savings, Portfolio Choice, Retirement.
    JEL: E21 H31 H55 J26
    Date: 2020–10–23
  23. By: Sophie Cetre (Sciences Po, Paris); Yann Algan (Sciences Po, Paris); Gianluca Grimalda (Kiel Institute for the World Economy); Fabrice Murtin (OECD); Louis Putterman (Brown university); Ulrich Schmidt (Kiel Institute for the World Economy); Vincent Siegerink (OECD)
    Abstract: This paper studies ethnic in-group bias in online trust games played by two large representative samples in the United States and Germany through the Trustlab platform, which was launched by the OECD and several research partners in 2017. The ethnic in-group bias, defined as the propensity to favour members of one’s own ethnic group in terms of monetary payoff, is significant in both countries. In the United States, members of the three largest ethnic groups trust people from their own ethnic group more than those from other groups. African Americans have a larger in-group bias than White Americans and Hispanics. Ethnic differentiation is not selective, as each group tends to have lower trust in the two other ethnic groups but at roughly the same rate. In contrast, ethnic differentiation is strongly selective in Germany: subjects of German parentage discriminate twice as much against Turkish descent participants as against Eastern European descent participants. Members of both ethnic minorities in Germany trust each other less than their own ethnic group, but do not discriminate against ones of German parentage. We also examine whether releasing information on the trustee being rich reduces ethnic differentiation, while conjecturing that this is a way to remove the stereotype that ethnic minorities are “undeserving poor”. We show that, in this case, discrimination by the ethnic majority is indeed reduced. People of Turkish descent who are rich tend to be more trusted than lower-income people of Turkish descent. However, releasing information on income can backfire, as it can increase mistrust within minorities. Finally, we show that group loyalty exists not only according to ethnicity but also according to income, as rich German parentage subjects trust other rich in-group members significantly more than do non-rich Germans.
    Keywords: ethnic discrimination, in-group bias, income inequality, online experiment, trust
    JEL: C99 J71
    Date: 2020–10–26
  24. By: Manar Alnamlah (Department of Strategy and Innovation, Copenhagen Business School); Christina Gravert (CEBI, Department of Economics, University of Copenhagen)
    Abstract: In competitive and high-reward domains such as corporate leadership and entrepreneurship, women are not only underrepresented but they are also more likely to drop-out after failure. In this study, we conducted a laboratory experiment to investigate the influence of attributing failure to one of the three causal attributions - luck, effort, and ability - on the gender difference in competition persistence. Participants compete in a real effort task and then their success or failure is attributed to one of three causal attributions. We find significant gender differences in competition persistence when failure is attributed to a lack of ability, with women dropping out more. On the contrary, when suggested that failure was due to lack of luck, women’s competition persistence after failure increases relative to men. We find no gender difference when failure is attributed to a lack of effort. Our findings have important implications for designing feedback mechanisms to reduce the gender gap in competitive domains.
    Keywords: decision analysis, competition, gender gap, performance feedback, laboratory experiment
    JEL: C91 D03 M50 J24
    Date: 2020–10–19
  25. By: Pilar García-Perea (Banco de España); Aitor Lacuesta (Banco de España); Pau Roldan-Blanco (Banco de España)
    Abstract: A recent literature documents a secular increase in the sales-weighted markups in the United States, a phenomenon that was driven by large and productive firms at the top of the profit distribution. Using rich balance-sheet data, this paper documents the behavior of markups in Spain before, during, and in the aftermath of the Great Recession. We document that markups rose during the financial crisis. Unlike in the U.S., these dynamics were led by small firms: in response to a drop in sales, these firms were unable to increase their productive efficiency when average costs increased. As a consequence, and in order to escape a sharp decline in profit rates, they increased their markups. Simultaneously, large firms were able to increase efficiency, and their markups remained relatively constant. We argue that the increase of relative markups by small firms came at the expense of losing market share, which in the very short run proved to be preferred than exiting the market.
    Keywords: markups, market power, average costs, labour market, firm size
    JEL: D2 D4 E2 E3 J3 L1
    Date: 2020–10
  26. By: Rudsinske, Jonas F.
    Abstract: I study welfare and distributional effects of import tariffs in a two-country asymmetric general oligopolistic equilibrium trade model. Tariffs have an anti-competitive effect that reduces labor demand because firms want to shorten supply. Unilaterally increasing the import tariff in absence of foreign retaliation raises domestic welfare at the foreign country's expense, but comes at the cost of favoring profit recipients as compared to workers, whose real wages fall. Only if initial symmetric tariffs are low, the tariff-increasing government could use its rising tariff revenue to neutralize the distributional effect or the negative effect on workers, an action the other country could never take because its tariff revenue declines. If supporting workers is the policy objective, tariffs do not appear to be a suitable tool under oligopoly and need to be accompanied by transfer payments or even profit taxation.
    Keywords: Trade Policy,labor share,general oligopolistic equilibrium,labor demand,strategic trade
    JEL: F13 E25 F12 J23 L13
    Date: 2020

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