nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2021‒01‒11
twenty papers chosen by
Joseph Marchand
University of Alberta

  1. The Effect of Fertility on Female Labor Supply in a Labor Market with Extensive Informality By Tumen, Semih; Turan, Belgi
  2. The Effect of Public Work Programme in Hungary on Private Sector Wages By Lajos Tamás Szabó
  3. Later Retirement and the Labor Market Re-Integration of Elderly Unemployed Workers? By René Böheim; Michael Topf
  4. Can disability benefits promote (re)employment?: Considerations for effective disability benefit design By OECD; Duncan MacDonald; Christopher Prinz; Herwig Immervoll
  5. The Effects of Working While in School: Evidence from Uruguayan Lotteries By Le Barbanchon, Thomas; Ubfal, Diego; Araya, Federico
  6. Pension Policies, Retirement and Human Capital Depreciation in Late Adulthood By Nikolov, Plamen; Adelman, Alan
  7. The Speed of Earnings Responses to Taxation and the Role of Firm Labor Demand By Gudgeon, Matthew; Trenkle, Simon
  8. International Sourcing in Portuguese Companies Evidence from Portuguese Micro Data By Ana Martins; Guida Nogueira; Eva Pereira
  9. Technology, Labour Market Institutions and Early Retirement: Evidence from Finland By Yashiro, Naomitsu; Kyyrä, Tomi; Hwang, Hyunjeong; Tuomala, Juha
  10. Gig-jobs: stepping stones or dead ends? By Adermon, Adrian; Hensvik, Lena
  11. Stay-at-Home Orders in a Fiscal Union By Mario J. Crucini; Oscar O'Flaherty
  12. Child Penalty in Russia: Evidence from an Event Study By Lebedinski, Lara; Perugini, Cristiano; Vladisavljević, Marko
  13. The rise of the service sector in the global economy By Owusu, Solomon; Szirmai, Adam; Foster-McGregor, Neil
  14. Risk Sharing Within and Outside the Firm: The Disparate Effects of Wrongful Discharge Laws on Expected Stock Returns By Mahlstedt, Robert; Weber, Rüdiger
  15. Long-term unemployment subsidies and middle-age disadvantaged workers’ health By José Ignacio Garcia-Pérez; Manuel Serrano-Alarcón; Judit Vall Castelló
  16. On the Evolution of Multiple Jobholding in Canada By Olena Kostyshyna; Étienne Lalé
  17. The Effect of Occupational Licensing Stringency on the Teacher Quality Distribution By Bradley Larsen; Ziao Ju; Adam Kapor; Chuan Yu
  18. Did a Successful Fight against the COVID-19 Pandemic Come at a Cost? Impacts of the Outbreak on Employment Outcomes in Vietnam By Dang, Hai-Anh; Nguyen, Cuong Viet
  19. The Distributional Effects of Student Loan Forgiveness By Sylvain Catherine; Constantine Yannelis
  20. Trade Shocks and Firms Hiring Decisions: By He, Chuan; Mau, Karsten; Xu, Mingzhi

  1. By: Tumen, Semih (TED University); Turan, Belgi (University of Houston)
    Abstract: This paper presents new evidence on the causal relationship between fertility and female labor supply. We particularly focus on how informal employment affects post-fertility labor supply behavior of mothers. We employ an instrumental variable strategy based on an unused data source for twin births in Turkey—a large developing economy with extensive labor informality. We find that fertility causally affects female labor supply. After the first twin birth, female labor supply declines significantly and the ones who drop out of the labor force are mostly the informally employed women. Following further increases in family size introduced by multiple second and third births (i.e., unanticipated increase from 1 kid to 3 kids, and from 2 kids to 4 kids), formally employed females start dropping out of the labor force and hours of work decline. Wages and job search intensity also decline for females as fertility increases. We also investigate the impact of fertility on labor supply of fathers. Unlike females, males increase their labor supply, which mostly comes from the increase in informal employment—possibly due to a decline in reservation wages. Accordingly, wages decline, hours of work increase, and job search activity shifts from formal to informal search methods for males. Overall, these results suggest that informally employed women tend to quickly drop out of the labor force after giving birth. Fathers, on the other hand, become more likely to accept inferior, low-pay, and informal job offers as fertility goes up. The results are robust to using alternative IV specifications based on sex composition of children.
    Keywords: fertility, labor supply, twin births, informal employment, job search, instrumental variables
    JEL: J21 J22 J13 J31
    Date: 2020–12
  2. By: Lajos Tamás Szabó (Magyar Nemzeti Bank (the Central Bank of Hungary))
    Abstract: The public work (PW) programmes have been the major active labour market policy tools since 2011 in Hungary. Majority of the public workers were inactive before the programme. Due to this the labour supply considerably increased in those district, which got significantly more subsidy from the central government for PW programmes. Large portion of the public work funds was distributed to those districts, which were below the country average development level. As the programme budget was not evenly distributed among districts, I can use this as variation to identify the indirect effect of the programme on the private sector. I estimate the effect of public work programmes on the private sector wage using regression discontinuity design. According to my estimations the private sector wage level is lower on average by 9% between 2013-2017 among the low-skilled workers in those districts where the number of public workers is higher. In the mean time in these district the private sector employment dynamics is 4% higher. This gives a (-0.43) elasticity of labour demand, which is in-line with the previous estimates for Hungary.
    Keywords: local labour markets, labour supply, wage differentials
    JEL: J21 J31 J38
    Date: 2020
  3. By: René Böheim; Michael Topf
    Abstract: We study the effect of lower unearned income on labor supply. To identify the causal effect of an unexpected reduction in unearned income, we exploit a policy reform that lowered survivor pensions in Austria. Men widowed after the survivor pension reform received an approximately 34% lower survivor pension than men widowed before the reform. We follow the employment history of both groups for 150 months and estimate the reform’s effect on labor supply using a regression discontinuity design. The effect of the lower pension is evident immediately after the death of their spouse, is persistent over time, becomes more pronounced over time, and is robust across model specifications. Our baseline result suggests a 3.5 to 5.4 percentage point higher employment rate for survivors in the low pension regime in the long run. The estimated effect corresponds to a labor supply elasticity at the extensive margin with respect to the changes in total income of about -0.9 to -1.3.
    Keywords: labor supply, unearned income, regression discontinuity design.
    JEL: I38 J22 J48
    Date: 2020–12
  4. By: OECD; Duncan MacDonald; Christopher Prinz; Herwig Immervoll
    Abstract: Previous OECD reports have concluded that disability policy has changed substantially in many OECD countries in recent decades. Nevertheless, large employment gaps remain between people with a disability and those without. This paper builds on earlier OECD analysis and recent extensions to OECD’s tax-benefit model ( for selected countries. The paper aims to assess the adequacy of income support programmes for people with reduced work capacity and their related work incentives. It describes how the system characteristics of these programs shape labour-market behaviour and employment. The paper finds evidence that the broader institutional setup of a disability programme does not necessarily have a major impact on key aspects of social-protection effectiveness. All types of scheme can achieve reasonable levels of benefit adequacy and broad benefit coverage for people with work limitations. However, design specifics matter considerably for people’s likelihood of (re-)employment.
    JEL: I38 J14 J18 J21 J22 J20
    Date: 2020–12–22
  5. By: Le Barbanchon, Thomas (Bocconi University); Ubfal, Diego (World Bank); Araya, Federico (Uruguayan Ministry of Labor and Social Security)
    Abstract: Shall we encourage students to work while in school? We provide evidence by leveraging a one-year work-study program that randomizes job offers among students in Uruguay. Using social security data matched to over 120,000 applicants, we estimate an increase of 9% in earnings and of 2 percentage points in enrollment over the four post-program years for treated youth. Survey data indicate that enrolled participants reduce study time, but this does not translate into lower grades. Students mainly substitute leisure and household chores with work. The earnings effect is related to the work experience and the transferability of skills acquired in program jobs.
    Keywords: student employment, randomized lottery
    JEL: J08 J22 J24 I21 I28
    Date: 2020–12
  6. By: Nikolov, Plamen (State University of New York); Adelman, Alan (State University of New York)
    Abstract: Economists have mainly focused on human capital accumulation and considerably less on the causes and consequences of human capital depreciation in late adulthood. Studying human capital depreciation over the life cycle has powerful economic consequences for decision-making in old age. Using data from China, we examine how a new retirement program affects cognitive performance. We find large negative effects of pension benefits on cognitive functioning among the elderly. We detect the most substantial impact of the program on delayed recall, a significant predictor of the onset of dementia. We show suggestive evidence that the program leads to larger negative impacts among women. We demonstrate that retirement and access to a retirement pension plan plays a significant role in explaining cognitive decline at older ages.
    Keywords: life cycle, cognitive functioning, cognition, aging, health, mental retirement, middle-income countries, LMICs, developing countries, China
    JEL: O12 J24 J26 H55 H75 O15
    Date: 2020–12
  7. By: Gudgeon, Matthew (United States Military Academy); Trenkle, Simon (IZA)
    Abstract: This paper studies the speed at which workers' pre-tax earnings respond to tax changes along the intensive margin. We do so in the context of Germany, where a large discontinuity — or notch — in the tax schedule induces sharp bunching in the earnings distribution. We analyze earnings responses to two policy reforms that shift this notch outward. In a frictionless world, the workers that made up the excess mass at the old notch should all increase their earnings. While some of these workers indeed adjust their earnings rapidly, over 38% do not, and instead take several years to adjust. We propose that heterogeneity in firm labor demand plays a key role in generating the observed differences in the speed of workers' earnings responses and predict that adjustment will be quickest at growing firms. We test and find support for these demand-side effects in our linked employer-employee data.
    Keywords: labor supply responses to taxation, earnings adjustment frictions, labor demand
    JEL: H24 H31 J22 J23
    Date: 2020–12
  8. By: Ana Martins (Research Office of the Portuguese Ministry of the Economy and Digital Transition); Guida Nogueira (Research Office of the Portuguese Ministry of the Economy and Digital Transition); Eva Pereira (Research Office of the Portuguese Ministry of the Economy and Digital Transition)
    Abstract: Outsourcing is one of the main drivers behind economic globalization, especially international outsourcing. In general terms it refers to the process of moving stages of production to external providers, either domestic (usually labelled as domestic outsourcing) or international (commonly labelled as offshoring or simply outsourcing). Over time, technological advances in transportation and ICT developments, led to a substantial rise in this phenomenon, growing in extent and nature, from simple to more complex tasks related to both manufactures and services supply. International outsourcing is usually expected to reduce production costs and to increase efficiency, however it has received substantial attention from policy makers for its potential negative consequences on the labour market. This paper combines Portuguese firm-level data from the International Sourcing surveys and longitudinal administrative business record data, to explore the impacts of the sourcing status on a variety of firms’ performance measures specially focusing on employment, competitiveness and productivity. The results suggest that international sourcing has an ambiguous effect on firm level total employment, but a positive effect on both the subset of workers that receive a salary (a proxy to employees) and on R&D jobs, coupled with an increasing effect on firm level total labour costs. Alongside these results, our findings also show that offshoring has a positive causal effect on both firm-level export intensity and trade balance, however the efficiency gains hypothesis was not confirmed. In fact, the results show that newly offshoring firms experienced lower labour productivity growth with a negative effect on both capital stock and capital per person employed.
    Keywords: Outsourcing, international sourcing, offshoring, internationalization, productivity, employment and firm productivity, Propensity score matching
    JEL: F23 L24 F61 D24 J24 F16
    Date: 2020–12
  9. By: Yashiro, Naomitsu (OECD); Kyyrä, Tomi (VATT, Helsinki); Hwang, Hyunjeong (OECD); Tuomala, Juha (VATT, Helsinki)
    Abstract: There are two major barriers to increasing employment of older workers. First, older workers engaged in codifiable, routine tasks are particularly prone to the risk of being displaced by computers and robots. Second, several countries have in place various labour market institutions that encourage early retirement, such as exceptional entitlements or looser criteria for unemployment and disability benefits applied to older individuals. We present evidence that these two factors reinforce each other to push older workers out of employment. We find that older workers who are more exposed to digital technologies are more likely to leave employment, and that this effect is significantly magnified when they are eligible to an extension of unemployment benefits until the earliest age for drawing old age pension. Furthermore, our findings imply that a policy reform that tightens the eligibility for the benefit extension would increase mostly the employment of older workers that are more exposed to digital technologies.
    Keywords: technological change, disability benefits, unemployment benefits, early retirement
    JEL: H55 J26 J65 O33
    Date: 2020–12
  10. By: Adermon, Adrian (IFAU - Institute for Evaluation of Labour Market and Education Policy); Hensvik, Lena (Uppsala university, Department of Economics)
    Abstract: How useful is work experience from the gig economy for labor market entrants searching for traditional wage jobs? We conducted a correspondence study in Sweden, comparing callback rates for recent high school graduates with (i)gig-experience, (ii) traditional experience, and (iii)unemployment history. We also study heterogeneous responses with respect to perceived foreign background. Our findings suggest that gig-experience is more valuable than unemployment, but less useful than traditional experience for majority applicants. Strikingly however, no form of labor market experience increases the callback rate for minority workers.
    Keywords: Gig-jobs; correspondence study; discriminatio
    JEL: J23 J71
    Date: 2020–12–09
  11. By: Mario J. Crucini; Oscar O'Flaherty
    Abstract: State and local governments throughout the United States attempted to mitigate the spread of Covid-19 using stay-at-home orders to limit social interactions and mobility. We study the economic impact of these orders and their optimal implementation in a fiscal union. Using an event study framework, we find that stay-at-home orders caused a 4 percentage point decrease in consumer spending and hours worked. These estimates suggest a $10 billion decrease in spending and $15 billion in lost earnings. We then develop an economic SIR model with multiple locations to study the optimal implementation of stay-at-home orders. From a national welfare perspective, the model suggests that it is optimal for locations with higher infection rates to set stricter mitigation policies. This occurs as a common, national policy is too restrictive for the economies of mildly infected areas and causes greater declines in consumption and hours worked than are optimal.
    JEL: E3 E47 E62 H12 H23 H7
    Date: 2020–12
  12. By: Lebedinski, Lara (Institute of Economic Sciences, Belgrade); Perugini, Cristiano (University of Perugia); Vladisavljević, Marko (Institute of Economic Sciences, Belgrade)
    Abstract: Despite years of women's progress toward equality, gender disparities in the labour market persist, and parenthood has been identified as one of its key drivers. In this paper we investigate the child penalty in Russia by using longitudinal data from the Russian Longitudinal Monitoring Survey (RLMS) and the methodological framework of event studies. Our findings show that five years after child birth women suffer an earnings penalty, while the same effect is not observed for men. The child penalty for women stems from lower employment after birth. In contrast to similar studies on Western European countries and the US, we do not find child penalties in terms of working hours or hourly wage rates. We further find that mothers' employment penalty is strongly driven by household characteristics and by their spouses' beliefs, while their own beliefs and background play no role.
    Keywords: child penalty, Russia, event study, RLMS
    JEL: J16 J13 J31
    Date: 2020–12
  13. By: Owusu, Solomon (UNU-MERIT, Maastricht University); Szirmai, Adam (UNU-MERIT); Foster-McGregor, Neil (UNU-MERIT)
    Abstract: The paper takes a two-pronged approach to examine the implications of the rapid rise of the service sector in the economies of the world. First, it analyses tertiarization in the global economy touching on key issues such as Baumol's hypothesis of a stagnant service sector, the contribution of the service sector to aggregate productivity growth, and the potentially positive contributions of services to other sectors. The second half of the paper focuses on tertiarization trends in sub-Saharan Africa, representing the role of the service sector in low-income economies. Using a long series of sectoral employment and output data, IO tables and multiple statistical analysis, we find that perceptions of services as stagnant and productivity resistant do not apply to all service sub-sectors. Productivity growth in modern, dynamic, and tradable services is equal to or higher than that in manufacturing and other sectors. These service sectors are innovative and might act as new or alternative engines of growth alongside manufacturing. The manufacturing sector in Africa still generates the strongest multipliers, including to market services. However, much of the manufacturing linkages are captured by foreign countries. While the multipliers in market services are relatively lower than those of manufacturing, they are comparable to those in many other regions of the world economy and more of the gains are captured by domestic firms which could encourage a self-reinforcing pattern of market service development. We also find robust evidence of strong inter-sectoral linkages between the service sector and manufacturing. Given the sector’s mutually reinforcing interaction with the manufacturing sector, the growing service sector could potentially play a significant complementary role in the prospects for industrialization of Africa. But this potential remains to be realized.
    Keywords: Service Sector, Sub-Saharan Africa, Global Economy, Structural Change, Technological Change, Baumol’s Hypothesis
    JEL: O11 O14 O33 O41 O47 C67 N17
    Date: 2020–12–16
  14. By: Mahlstedt, Robert (University of Copenhagen); Weber, Rüdiger (WU Vienna University of Economics and Business)
    Abstract: We study the effect of wrongful-discharge laws (WDL) on firm-level stock returns. We find disparate effects depending on the exact design of the law. Consistent with rational, risk-based pricing, the effect on returns seems to be linked to how firms share systematic risk with their employees under the respective laws. Firms in states with WDLs prohibiting employers from acting in bad faith have more intra-firm risk sharing and lower expected returns. Vaguer legislation that prohibits discharges in retaliation for acting in accordance with public policy is associated with less intra-firm risk sharing and higher expected returns.
    Keywords: labor protection, expected stock returns, risk sharing
    JEL: G12 J38 G38
    Date: 2020–12
  15. By: José Ignacio Garcia-Pérez (Department of Economics, Universidad Pablo de Olavide & FEDEA;); Manuel Serrano-Alarcón (NOVA National School of Public Health, NOVA University of Lisbon Center for Research in Economics and Health, Universitat Pompeu Fabra;); Judit Vall Castelló (Department of Economics, Universitat de Barcelona & Institut D’economia De Barcelona (IEB), Center for Research in Economics and Health, Universitat Pompeu Fabra;)
    Abstract: We estimate the labour market and health effects of a long-term unemployment (LTU) subsidy targeted to middle aged disadvantaged workers. In order to do so, we exploit a Spanish reform introduced in July 2012 that increased the age eligibility threshold to receive the subsidy from 52 to 55. Using a within-cohort identification strategy, we show that men ineligible for the subsidy were more likely to leave the labour force. In terms of health outcomes, although we do not report impacts on hospitalizations when considering the whole sample, we do find significant results when we separate the analysis by main diagnosis and gender. More specifically, we show a reduction by 12.9% in hospitalizations due to injuries as well as a drop by 2 percentage points in the probability of a mental health diagnosis for men who were eligible for the LTU subsidy. Our results highlight the role of long-term unemployment benefits as a protecting device for the health (both physical and mental) of middle aged, low educated men who are in a disadvantaged position in the labour market.
    Keywords: disadvantaged workers, unemployment subsidies, health effects
    JEL: H52 I23 I28 J24
    Date: 2020
  16. By: Olena Kostyshyna; Étienne Lalé
    Abstract: The number of workers who hold more than one job (a.k.a. multiple jobholders) has increased spectacularly in Canada since the mid-1970s – it has been multiplied by almost three. In this paper, we document this historical change and provide a comprehensive account of its dynamics. To this end, we use restricted-access panel micro-data from the Canadian labour force survey to construct transition probabilities in and out of multiple jobholding. We analyze these data through the lens of a trend decomposition that separates out the role of worker inflows and outflows. The upward trend in multiple jobholding is chiefly explained by the increased likelihood of single jobholders to pick up second jobs. While economic reasons remain important among the motives that push workers towards multiple jobholding, a more flexible hours schedule in the main job may explain why taking on a second job has become more frequent.
    Keywords: Multiple Jobholding,Worker Flows,Long-run Trends,Business Cycles,
    JEL: E24 J21 J22 J60
    Date: 2020–12–22
  17. By: Bradley Larsen; Ziao Ju; Adam Kapor; Chuan Yu
    Abstract: Concerned about the low academic ability of public school teachers, in the 1990s and 2000s, some states increased licensing stringency to weed out low-quality candidates, while others decreased restrictions to attract high-quality candidates. We offer a theoretical model justifying both reactions. Using data from 1991–2007 on licensing requirements and teacher quality—as measured by the selectivity of teachers’ undergraduate institutions—we find that stricter licensing requirements, especially those emphasizing academic coursework, increase the left tail of the quality distribution for secondary school teachers without significantly decreasing quality for high-minority or high-poverty districts.
    JEL: I2 J2 J4 J5 K2 K31 L5 L8
    Date: 2020–12
  18. By: Dang, Hai-Anh (World Bank); Nguyen, Cuong Viet (National Economics University Vietnam)
    Abstract: Vietnam is widely praised for its successful fight against the COVID-19 pandemic. The country has had an extremely low mortality rate of 35 deaths to date (out of a population of approximately 100 million) and currently has no community transmission. We offer the first study that examines the effects of the COVID-19-induced lockdown on various employment outcomes for Vietnam. We employ difference-in-differences econometric models to estimate the causal effects of the lockdown, using rich individual-level data from the quarterly Labor Force Surveys. We find that the lockdown increases the unemployment rate, the temporary layoff rate, and decreases the quality of employment. It also reduces workers' numbers of working hours and their monthly incomes and wages. Our estimation results remain robust to different model specifications and estimation samples. Further heterogeneity analysis suggests that the effects vary across education levels and occupation sectors but are similar across regions or provinces with different lockdown durations.
    Keywords: COVID-19, employment, income loss, differences-in-differences, Vietnam
    JEL: E24 I30 J21 O12
    Date: 2020–12
  19. By: Sylvain Catherine; Constantine Yannelis
    Abstract: We study the distributional consequences of student debt forgiveness in present value terms, accounting for differences in repayment behavior across the earnings distribution. Full or partial forgiveness is regressive because high earners took larger loans, but also because, for low earners, balances greatly overstate present values. Consequently, forgiveness would benefit the top decile as much as the bottom three deciles combined. Blacks and Hispanics would also benefit substantially less than balances suggest. Enrolling households who would benefit from income-driven repayment is the least expensive and most progressive policy we consider.
    JEL: D14 G18 G5 G51 H52 H81 J18 J24
    Date: 2020–12
  20. By: He, Chuan; Mau, Karsten (RS: GSBE other - not theme-related research, Macro, International & Labour Economics); Xu, Mingzhi
    Abstract: This paper studies the hiring behavior of firms exposed to the recent China-US trade war. Our analysis leverages information from a Chinese online job board and a firm-level measure of tariff exposure obtained from customs transactions data. Firms that are more exposed to US tariffs on Chinese goods responded by posting fewer job vacancies and offering lower wages. The latter is partly balanced out by increased non-wage compensation. We also find a negative relationship between US-tariff exposure and the educational background required in firms’ job ads. China’s retaliatory tariffs against the US does not appear to have a statistically significant systematic impact on hiring. The paper also reports heterogeneous adjustment patterns across firms of different size, ownership and product mix. Overall, the trade war reveals to have negative impact on firms and job-seekers in China.
    JEL: D22 F13 F14 J23
    Date: 2021–01–05

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