nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2020‒11‒09
seventeen papers chosen by
Joseph Marchand
University of Alberta

  1. Training for Jobs of the Future: Improving Access, Certifying Skills, and Expanding Apprenticeship By Lerman, Robert I.; Loprest, Pamela J.; Kuehn, Daniel
  2. Schooling and child labor: Evidence from Mexico's full-time school program By Kozhaya, Mireille; Martinez Flores, Fernanda
  3. How Should Tax Progressivity Respond to Rising Income Inequality? By Jonathan Heathcote; Kjetil Storesletten; Giovanni L. Violante
  4. Uncertainty, Wages, and the Business Cycle By Matteo Cacciatore; Federico Ravenna
  5. Children and the Remaining Gender Gaps in the Labor Market By Patricia Cortés; Jessica Pan
  6. Local, Complementarity and Similarity Relatedness in Different Regional and Sectoral Contexts By Galetti, Jefferson Ricardo Bretas; Tessarin, Milene Simone; Morceiro, Paulo César
  7. The Long-Run Effects of the Affordable Care Act: A Pre-Committed Research Design Over the COVID-19 Recession and Recovery By Jeffrey Clemens; Drew McNichols; Joseph J. Sabia
  8. Did the Bologna Process Challenge the German Apprenticeship System? Evidence from a Natural Experiment By Thomsen, Stephan L.; Trunzer, Johannes
  9. Financial risk-taking and the gender wage gap By Edin, Per-Anders; Selin, Håkan
  10. How Do CEOs Make Strategy? By Mu-Jeung Yang; Michael Christensen; Nicholas Bloom; Raffaella Sadun; Jan Rivkin
  11. Redistributive Capital Taxation Revisited By Özlem Kina; Ctirad Slavik; Hakki Yazici
  12. Intrapreneurship: Productive, Unproductive, and Destructive By Elert, Niklas; Stenkula, Mikael
  13. Productivity Versus Motivation in Adolescent Human Capital Production: Evidence from a Structurally-Motivated Field Experiment By Christopher Cotton; Brent R. Hickman; John List; Joseph P. Price; Sutanuka Roy
  14. The Pandemic Economic Crisis, Precautionary Behavior, and Mobility Constraints: An Application of the Dynamic Disequilibrium Model with Randomness By Joseph E. Stiglitz
  15. How rankings disguise gender inequality: a comparative analysis of cross-country gender equality rankings based on adjusted wage gaps By Karolina Goraus; Joanna Tyrowicz; Lucas van der Velde
  16. The wage-price pass-through in the euro area: does the growth regime matter? By Hahn, Elke
  17. Female labor force participation in five selected MENA countries: An age-period-cohort analysis By Moundir Lassassi; Aysit Tansel

  1. By: Lerman, Robert I. (Urban Institute); Loprest, Pamela J. (Urban Institute); Kuehn, Daniel (Urban Institute)
    Abstract: Long run labor market trends in the American economy pose significant challenges. The employment-to-population ratio has steadily fallen. Growth in real money wages has been slow, with the most rapid gains taking place among workers at the top of the earnings distribution. One source of these trends is low starting wages, which suggests weak transitions from school to the labor market. Limited skills relative to the demands of employers also play a role. This paper proposes three major policy initiatives for upgrading and expanding worker training to bolster productivity and wages: 1) Improve access to in-demand training through better information, technology, and targeted funding; 2) Strengthen connections between career and technical education and training and employer needs through competency-based training, career pathways, and improved certification and verification of skills. 3) Build a robust apprenticeship system that emphasizes learning by doing in a context that involves apprentice contributions to production and culminates in a respected occupational credential. The strategies go beyond the "academic-only" approach commonly pursued in the US. They widen routes for young workers to rewarding careers, and help experienced workers adapt to changing labor markets with improved options over the life course for learning and documenting skills. By upgrading information and using approaches that recognize differences in learning styles, we believe the proposed policies will build, sustain, and recognize a diverse set of skills that will make the majority of American workers more productive and more resilient, strengthen the economy, the budget, and substantially raise living standards for tens of millions of Americans.
    Keywords: apprenticeship, training, skills, job matching, certification
    JEL: J08 J24 M53
    Date: 2020–10
  2. By: Kozhaya, Mireille; Martinez Flores, Fernanda
    Abstract: Child labor is a matter of international concern. This paper examines the effect of a program that extended the length of a school day from four to six or eight hours in Mexico, on school enrollment, time spent on schooling activities, and child labor of children aged 7 to 14. To identify the effect, we take advantage of the staggered implementation of the FTS program across municipalities. The results show that extending the school day has no effect on the probability of being enrolled in school, but a positive effect on the weekly hours allocated to schooling activities. When focusing on child labor, we find a reduction of 1.6 hours worked, mainly driven by a decrease in the probability of engaging in work by 6.3 percentage points. For boys, we observe a decrease in the probability of engaging in market work and for girls a decrease in the probability of engaging in domestic work.
    Keywords: child labor,all-day schools,schooling,after-school programs
    JEL: J13 J21 J22 O12
    Date: 2020
  3. By: Jonathan Heathcote; Kjetil Storesletten; Giovanni L. Violante
    Abstract: We address this question in a heterogeneous-agent incomplete-markets model featuring exogenous idiosyncratic risk, endogenous skill investment, and flexible labor supply. The tax and transfer schedule is restricted to be log-linear in income, a good description of the US system. Rising inequality is modeled as a combination of skill-biased technical change and growth in residual wage dispersion. When facing shifts in the income distribution like those observed in the US, a utilitarian planner chooses higher progressivity in response to larger residual inequality but lower progressivity in response to widening skill price dispersion reflecting technical change. Overall, optimal progressivity is approximately unchanged between 1980 and 2016. We document that the progressivity of the actual US tax and transfer system has similarly changed little since 1980, in line with the model prescription.
    JEL: E24 H21 J24 J3 J31
    Date: 2020–10
  4. By: Matteo Cacciatore; Federico Ravenna
    Abstract: We show that limited wage flexibility in economic downturns generates strong and state-dependent amplification of uncertainty shocks. It also explains the cyclical behavior of empirical measures of uncertainty. Central to our analysis is the existence of matching frictions in the labor market and an occasionally binding constraint on downward wage adjustment. The wage constraint enhances the concavity of firms' hiring rule, generating an endogenous profit-risk premium. In turn, uncertainty shocks increase the profit-risk premium when the economy operates close to the wage constraint. This implies that higher uncertainty can severely deepen a recession, although its impact is weaker on average. Non-linear local projections and VAR estimates support the model predictions. Additionally, the variance of the unforecastable component of future economic outcomes always increases at times of low economic activity. Thus, measured uncertainty rises in a recession even in the absence of uncertainty shocks.
    JEL: E2 E32
    Date: 2020–10
  5. By: Patricia Cortés; Jessica Pan
    Abstract: The past five decades have seen a remarkable convergence in the economic roles of men and women in society. Yet, persistently large gender gaps in terms of labor supply, earnings, and representation in top jobs remain. Moreover, in countries like the U.S., convergence in labor market outcomes appears to have slowed in recent decades. In this article, we focus on the role of children and show that many potential explanations for the remaining gender disparities in labor market outcomes are related to the fact that children impose significantly larger penalties on the career trajectories of women relative to men. In the U.S., we document that close to two-thirds of the overall gender earnings gap can be accounted for by the differential impacts of children on women and men. We propose a simple model of household decision-making to motivate the link between children and gender gaps in the labor market, and to help rationalize how various factors potentially interact with parenthood to produce differential outcomes for men and women. We discuss several forces that might make the road to gender equity even more challenging for modern cohorts of parents, and offer a critical discussion of public policies in seeking to address the remaining gaps.
    JEL: J12 J13 J16 J22 J31
    Date: 2020–10
  6. By: Galetti, Jefferson Ricardo Bretas; Tessarin, Milene Simone; Morceiro, Paulo César
    Abstract: There is little evidence on the relationship between occupational relatedness and regional specialisation in developing countries with high regional inequality and industrial heterogeneity. We compute local synergy, complementarity and similarity relatedness based on 2 514 occupations to estimate their effects on the occupational structure in 558 Brazilian microregions between 2003 and 2018. We find that the three indexes affect the regional specialisation in distinct magnitudes, and they have different effects in different regional and sectoral contexts. Sectoral complementarities affect structural change and strengthen similarity relatedness. The findings shed light on developing countries’ distinct regional contexts rather than ‘one-size-fits-all’ policies.
    Keywords: Occupational relatedness; Related variety; Regional specialisation; Developing country
    JEL: J21 J24 L23 R12
    Date: 2020–10–24
  7. By: Jeffrey Clemens; Drew McNichols; Joseph J. Sabia
    Abstract: The long-run costs and benefits of social insurance expansions may not be realized until a program has been in place through a cycle of boom, bust, and recovery. In the case of the Affordable Care Act (ACA), the arrival of the program's inaugural bust and recovery have been hastened by the COVID-19 pandemic. In this context, our analysis begins by developing two facts. First, during the pre-pandemic boom, we show that the ACA's effects had largely stabilized by 2016. Second, we develop a new fact involving variations in the ACA's effects across industries. Specifically, we show that the ACA’s effects differed dramatically across industries with lower versus higher levels of pre-ACA insurance coverage, and that this difference cannot be explained by differences in workers’ incomes or other observable characteristics, nor by geographic differences in pre-ACA uninsured rates. Finally, we set the stage for pre-committed analyses of the ACA's effects over the remainder of the current cycle of boom, bust, and recovery. In so doing, we seek to advance the use of pre-committed research designs in observational settings.
    JEL: H51 H53 I13
    Date: 2020–10
  8. By: Thomsen, Stephan L.; Trunzer, Johannes
    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
  9. By: Edin, Per-Anders (Department of Economics at Uppsala University); Selin, Håkan (IFAU - Institute for Evaluation of Labour Market and Education Policy)
    Abstract: Could differences in risk attitudes explain parts of the gender wage gap? We present estimates on the association between labor market outcomes and financial risk-taking using individual level administrative data on individual wealth portfolios and wage rates. The individual’s share of risky to total financial assets i s significantly and positively associated with the wage rate. However, it turns out that our risk measure explains only a small part of the observed gender difference in wages.
    Keywords: Wages; human capital; financial risk
    JEL: D80 J31
    Date: 2020–10–14
  10. By: Mu-Jeung Yang; Michael Christensen; Nicholas Bloom; Raffaella Sadun; Jan Rivkin
    Abstract: We explore the critical question of how executives make strategic decisions. Utilizing a new survey of 262 CEO alumni of Harvard Business School, we gather evidence on four aspects of each executive’s business strategy: its overall structure, its formalization, its development, and its implementation. We report three key results. First, different CEOs use markedly different processes to make strategic decisions; some follow highly formalized, rigorous, and deliberate processes, while others rely heavily on instinct and intuition. Second, more structured strategy processes are associated with larger firm size and faster employment growth. Third, using a regression discontinuity centered around a change in the curriculum of Harvard Business School’s required strategy course, we trace differences in strategic decision making back to differences in managerial education.
    JEL: L2 M1 M2
    Date: 2020–10
  11. By: Özlem 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
  12. By: Elert, Niklas (Research Institute of Industrial Economics (IFN)); Stenkula, Mikael (Research Institute of Industrial Economics (IFN))
    Abstract: Researchers increasingly recognize that entrepreneurial employees, intrapreneurs, play a critical role in innovation. As with regular entrepreneurship, however, the value of intrapreneurial activity depends on the firm-specific and societal reward structures that intrapreneurs face. Ideally, these rules of the game are such that they reward intrapreneurship that is beneficial for the firm and the economy. When this is not the case, intrapreneurship can be beneficial for the firm but not for society, damaging for the firm yet beneficial for society, or downright destructive. We offer a taxonomy describing how society’s rules and firm rules interact to produce different intrapreneurial outcomes.
    Keywords: Intrapreneurship; Entrepreneurship; Entrepreneurial behavior
    JEL: D02 J24 L26 M14 O17 O31
    Date: 2020–10–26
  13. By: Christopher Cotton (Queen's University); Brent R. Hickman (Olin Business School, University of Washington); John List (University of Chicago); Joseph P. Price (Brigham Young University); Sutanuka Roy
    Abstract: We leverage a field experiment across three distinct school districts to identify key pieces of a structural model of adolescent human capital production. Our focus is inspired by the contemporary psychology of education literature, which expresses learning as a function of the ratio of the time spent on learning to the time needed to learn. By capturing two crucial student-level unobservables—which we denote as academic efficiency (turning inputs into outputs) and time preference (motivation)—our field experiment lends insights into the underpinnings of adolescent skill formation and provides a novel view of how to lessen racial and gender achievement gaps. One general insight is that students who are falling behind their peers, whether correlated to race, gender, or school district, are doing so because of academic efficiency rather than time preference. We view this result, and others found in our data, as fundamental to practitioners, academics, and policymakers interested in designing strategies to provide equal opportunities to students.
    Keywords: Human capital, field experiment, structural econometrics, psychology of education, learning, school districts, school quality, demographics, gender gap, racial gap
    JEL: C93 I21 I24 J22 J24 O15
    Date: 2020–10
  14. By: Joseph E. Stiglitz
    Abstract: This paper analyzes the economic impact of the pandemic, providing insights into the consequences of alternative policies. Our framework focuses on three key features: (a) Covid-19 is a sectoral shock of unknown depth and duration affecting some sectors and technologies more than others; (b) there are constraints in shifting resources across sectors; and (c) there is a high level of uncertainty about the disease and its economic aftermath, inducing a high level of precautionary behavior by some agents and leading to others facing more severe credit constraints. Because of macroeconomic externalities, precautionary behavior exacerbates the downturn, and even sectors where Covid-19 does not directly affect consumption or production may face unemployment. Multipliers associated with different government expenditure programs differ markedly. The paper describes policies that can mitigate precautionary behavior, leading to reduced unemployment. Greater wage flexibility may lead to increased unemployment. The precautionary behavior is the antithesis of equilibrium behavior, suggesting that standard equilibrium approaches may not provide the appropriate framework for analyzing the pandemic: individuals know that they don’t know the future, that existing and newly made contracts and plans may be broken, and that they need to be able to respond to these unknowable contingencies.
    JEL: B22 E21 E23 E24 E61 E63 G28 J21 J23
    Date: 2020–10
  15. By: Karolina Goraus (The World Bank; University of Warsaw); Joanna Tyrowicz (Group for Research in Applied Economics (GRAPE); University of Warsaw; Institute of Labor Economics (IZA)); Lucas van der Velde (Group for Research in Applied Economics (GRAPE); Warsaw School Economics)
    Abstract: In the case of gender wage gaps, adjusting adequately for individual characteristics requires prior assessment of several important deficiencies, primarily whether a given labor market is characterized by gendered selection into employment, gendered segmentation and whether these mechanisms differ along the distribution of wages. Whether a country is perceived as more equal than others depends on the interaction between the method of adjusting gender wage gap for individual characteristics and the prevalence of these deficiencies. We make the case that this interaction is empirically relevant by comparing the country rankings for the adjusted gender wage gap among 23 EU countries. In this relatively homogeneous group of countries, the interaction between method and underlying deficiencies leads to substantial variation in the extent of unjustified inequality. A country may change its place in the ranking by as much as ten positions – both towards greater equality and towards greater inequality.
    Keywords: comparative analyses, inequality, rankings
    JEL: J31 J71
    Date: 2020
  16. By: Hahn, Elke
    Abstract: This paper explores whether the transmission mechanism between wages and prices in the euro area is affected by the growth regime. Since the great financial crisis inflation developments have posed major puzzles to economists as inflation declined by less than was widely expected during the past recessions and rose by less during the subsequent recoveries. This paper analyses whether the wage-price pass-through may have contributed to these inflation puzzles. Applying the Threshold VAR model proposed by Alessandri and Mumtaz (2017) to the analysis of the wage-price pass-through, the paper examines whether the transmission mechanim of different types of shocks differs between recessions and expansions. The results point to differences in the wage-price pass-through between growth regimes for demand shocks but not for wage mark-up shocks. They show a much smaller response of prices relative to wages, i.e. a smaller wage-price pass-through, for demand shocks in recessions than in expansions. This is accounted for by a smaller relative response of profit margins. More generally, the results suggest that the slope of the price Phillips curve flattens in recessions on account of the lower wage-price pass-through, while the wage Phillips curve appears to be broadly stable across growth regimes. Overall, the results contribute to solve or diminish the puzzle of the missing disinflation of the past two recessions suggesting that inflation should be expected to recede by less during recessions than indicated by standard linear models. JEL Classification: C32, E31, J30
    Keywords: euro area inflation, growth regimes, threshold VAR, wage-price pass-through
    Date: 2020–10
  17. By: Moundir Lassassi (Center for Research in Applied Economics for Development, Algiers, Algeria); Aysit Tansel (Department of Economics, Middle East Technical University, Ankara, Turkey)
    Abstract: This paper considers the female labor force participation (FLFP) behavior over the past decade in five MENA countries namely, Algeria, Egypt, Jordan, Palestine and Tunisia. Low FLFP rates in these countries, as it is in other MENA countries, are well documented. We conduct synthetic panel analysis using age-period-cohort (APC) methodology and decompose FLFP rates into age, period and cohort effects. We present our results with Hanoch-Honig/Deaton-Paxson normalization and maximum entropy estimation approaches to the APC methodology in order to observe robustness of our results. We first study the aggregate FLFP and note the differentials in age, period and cohort effects across the countries we consider. The analysis is carried also out by rural/urban regional differentiation, marital status and educational attainment. Implications of our results for possible government policies to increase FLFP rates are discussed.
    Keywords: Female labor force participation, synthetic panel analysis, life-cycle profiles, period effects, cohort effects, MENA countries.
    JEL: C23 C25 D1 J21
    Date: 2020–10

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