nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2021‒02‒15
nineteen papers chosen by
Joseph Marchand
University of Alberta

  1. Informed Choices: Gender Gaps in Career Advice By Gallen, Yana; Wasserman, Melanie
  2. Does the Rise of China Lead to the Fall of European Welfare States? By Barth, Erling; Finseraas, Henning; Kjelsrud, Anders; Moene, Karl Ove
  3. Myth or Measurement: What Does the New Minimum Wage Research Say about Minimum Wages and Job Loss in the United States? By David Neumark; Peter Shirley
  4. Unearned Income and Labor Supply: Evidence from Survivor Pensions in Austria By René Böheim; Michael Topf
  5. Contracting in Peer Networks By Peter M. DeMarzo; Ron Kaniel
  6. The Effects of Youth Employment on Crime: Evidence from New York City Lotteries By Judd B. Kessler; Sarah Tahamont; Alexander M. Gelber; Adam Isen
  7. Who Benefits from Corporate Social Responsibility? Reciprocity in the Presence of Social Incentives and Self-Selection By Briscese, Guglielmo; Feltovich, Nick; Slonim, Robert
  8. Examining Income Expectations in the College and Early Post-College Periods: New Distributional Tests of Rational Expectations. By Thomas F. Crossley; Yifan Gong; Todd Stinebrickner; Ralph Stinebrickner
  9. The Impact of the Non-essential Business Closure Policy on Covid-19 Infection Rates By Hummy Song; Ryan M. McKenna; Angela T. Chen; Guy David; Aaron Smith-McLallen
  10. What Drives Innovation? Lessons from COVID-19 R&D By Agarwal, Ruchir; Gaule, Patrick
  11. Household Preferences and Child Labor in Rural Ethiopia By Basu, Arnab K.; Dimova, Ralitza
  12. Quality of life in a dynamic spatial model By Ahlfeldt, Gabriel M.; Bald, Fabian; Roth, Duncan; Seidel, Tobias
  13. How Does Occupational Licensing Affect Entry into the Medical Field? An Examination of EMTs By Yelowitz, Aaron; Ingram, Samuel J.
  14. Working from Home: Too Much of a Good Thing? By Kristian Behrens; Sergey Kichko; Jacques-Francois Thisse
  15. Daughter vs. Daughter-in-law: Kinship roles and women's time use in India By Tanu Gupta; Digvijay S. Negi
  16. Trade and Informality in the Presence of Labor Market Frictions and Regulations By Rafael Dix-Carneiro; Pinelopi K. Goldberg; Costas Meghir; Gabriel Ulyssea
  17. Statistical discrimination without knowing statistics: blame social interactions? By Emily Tanimura
  18. Targeting Intensive Job Assistance to Ex-Offenders by the Nature of Offense: Results from a Randomized Control Trial By Bollinger, Christopher R.; Yelowitz, Aaron
  19. Labor Market Institutions and the Distribution of Wages: The Role of Spillover Effects By Nicole M. Fortin; Thomas Lemieux; Neil Lloyd

  1. By: Gallen, Yana (Harris School, University of Chicago); Wasserman, Melanie (University of California, Los Angeles)
    Abstract: This paper estimates gender differences in access to informal information regarding the labor market. We conduct a large-scale field experiment in which real college students seek information from 10,000 working professionals about various career paths, and we randomize whether a professional receives a message from a male or a female student. We focus the experimental design and analysis on two career attributes that prior research has shown to differentially affect the labor market choices of women: the extent to which a career accommodates work/life balance and has a competitive culture. When students ask broadly for information about a career, we find that female students receive substantially more information on work/life balance relative to male students. This gender difference persists when students disclose that they are concerned about work/life balance. In contrast, professionals mention workplace culture to male and female students at similar rates. After the study, female students are more dissuaded from their preferred career path than male students, and this difference is in part explained by professionals' greater emphasis on work/life balance when responding to female students. Finally, we elicit students' preferences for professionals and find that gender differences in information provision would remain if students contacted their most preferred professionals.
    Keywords: career information, gender, discrimination, correspondence study
    JEL: C93 J16 J24 J71
    Date: 2021–01
  2. By: Barth, Erling (Institute for Social Research, Oslo); Finseraas, Henning (Norwegian University of Science and Technology (NTNU)); Kjelsrud, Anders (University of Oslo); Moene, Karl Ove (University of Oslo)
    Abstract: Have recent trends in globalization changed the positive link between trade openness and social insurance? The consensus view - that voters want better social insurance against income loss the more open the economy - is seemingly contested by the rise of populism and the China shock. We present a theoretical framework of risk and income effects of globalization that captures the conventional view, but also shows when it will be modified: When the income effect is negative, the political support for social insurance can decline in spite of the risk effect. We construct an empirical measure of welfare state support across European regions and leverage the rapid integration of China into the world economy to show that higher import competition reduces the support for social insurance. Consistent with our framework, we decompose the overall effect of the shock into a (weak) positive risk effect and a (strong) negative income effect.
    Keywords: regional labor demand, welfare state support, social insurance, China shock, trade exposure
    JEL: J21 J23 H55 F16 F6
    Date: 2021–01
  3. By: David Neumark; Peter Shirley
    Abstract: The disagreement among studies of the employment effects of minimum wages in the United States is well known. What is less well known, and more puzzling, is the absence of agreement on what the research literature says – that is, how economists even summarize the body of evidence on the employment effects of minimum wages. Summaries range from “it is now well-established that higher minimum wages do not reduce employment,” to “the evidence is very mixed with effects centered on zero so there is no basis for a strong conclusion one way or the other,” to “most evidence points to adverse employment effects.” We explore the question of what conclusions can be drawn from the literature, focusing on the evidence using subnational minimum wage variation within the United States that has dominated the research landscape since the early 1990s. To accomplish this, we assembled the entire set of published studies in this literature and identified the core estimates that support the conclusions from each study, in most cases relying on responses from the researchers who wrote these papers. Our key conclusions are: (i) there is a clear preponderance of negative estimates in the literature; (ii) this evidence is stronger for teens and young adults as well as the less-educated; (iii) the evidence from studies of directly-affected workers points even more strongly to negative employment effects; and (iv) the evidence from studies of low-wage industries is less one-sided.
    JEL: J23 J38
    Date: 2021–01
  4. 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: 2021
  5. By: Peter M. DeMarzo; Ron Kaniel
    Abstract: We consider multi-agent multi-firm contracting when agents benchmark their wages to a weighted average of their peers, where weights may vary within and across firms. Despite common shocks, compensation benchmarking can undo performance benchmarking, so that wages load positively rather than negatively on peer output. Although contracts appear inefficient, when a single principal commits to a public contract, the optimal contract hedges agents’ relative wage risk without sacrificing efficiency. Moreover, the principal can exploit any asymmetries in peer effects to enhance profits. With multiple principals, or a principal that is unable to commit, a “rat race” emerges in which agents are more productive, but wages increase even more, reducing profits and undermining efficiency. Effort levels are too high rather than too low, and can exceed first best. Wage transparency and disclosure requirements exacerbate these effects.
    JEL: D85 D86 G3 G4 J3
    Date: 2021–01
  6. By: Judd B. Kessler; Sarah Tahamont; Alexander M. Gelber; Adam Isen
    Abstract: Recent policy discussions have proposed government-guaranteed jobs, including for youth. One key potential benefit of youth employment is a reduction in criminal justice contact. Prior work on summer youth employment programs has documented little-to-no effect of the program on crime during the program but has found decreases in violent and other serious crimes among “at-risk” youth in the year or two after the program. We add to this picture by studying randomized lotteries for access to the New York City Summer Youth Employment Program (SYEP), the largest such program in the United States. We link SYEP data to New York State criminal records data to investigate outcomes of 163,447 youth who participated in a SYEP lottery between 2005 and 2008. We find evidence that SYEP participation decreases arrests and convictions during the program summer, effects that are driven by the small fraction (3 percent) of SYEP youth who are at-risk, as defined by having been arrested before the start of the program. We conclude that an important benefit of SYEPs is the contemporaneous effect during the program summer and that the effect is concentrated among individuals with prior contact with the criminal justice system.
    JEL: J13 J21 J38 J45
    Date: 2021–01
  7. By: Briscese, Guglielmo (University of Chicago); Feltovich, Nick (Monash University); Slonim, Robert (University of Sydney)
    Abstract: Firms can donate a share of profits to charity as a form of corporate social responsibility (CSR). Recent experiments have found that such initiatives can induce higher effort by workers, generating benefits for both sides of the labour market. We design a novel version of the gift-exchange game to account for self-selection, and find that wages remain the most effective incentive to attract and motivate workers, with corporate donations playing a smaller role than previously suggested. We also show that firms substitute donations to charity with lower wage offers, keeping their profits constant but reducing workers' earnings. Initiatives of corporate philanthropy can thus be marginally beneficial for firms, but considerably costly for workers.
    Keywords: gift exchange, reciprocity, corporate philanthropy, self-selection
    JEL: D64 C91 M52
    Date: 2021–01
  8. By: Thomas F. Crossley; Yifan Gong; Todd Stinebrickner; Ralph Stinebrickner
    Abstract: Unique longitudinal probabilistic expectations data from the Berea Panel Study, which cover both college and early post-college periods, are used to examine young adults’ beliefs about their future incomes. We introduce a new measure of the ex post accuracy of beliefs, and two new approaches to testing whether, ex ante, agents exhibit Rational Expectations. We show that taking into account the additional information about higher moments of individual belief distributions contained in probabilistic expectations data is important for detecting types of violations of Rational Expectations that are not detectable by existing mean-based tests. Beliefs about future income are found to become more accurate as students progress through school and then enter the post-college period. Tests of Rational Expectations almost always reject for the in-school period, but the evidence against Rational Expectations is much weaker in the post-college period.
    Keywords: subjective expectations, rational expectations, test, income uncertainty
    JEL: D84
    Date: 2021
  9. By: Hummy Song; Ryan M. McKenna; Angela T. Chen; Guy David; Aaron Smith-McLallen
    Abstract: In response to the Covid-19 pandemic, many localities instituted non-essential business closure orders, keeping individuals categorized as essential workers at the frontlines while sending their non-essential counterparts home. We examine the extent to which being designated as an essential or non-essential worker impacts one’s risk of being Covid-positive following the non-essential business closure order in Pennsylvania. We also assess the intrahousehold transmission risk experienced by their cohabiting family members and roommates. Using a difference-in-differences framework, we estimate that workers designated as essential have a 55% higher likelihood of being positive for Covid-19 than those classified as non-essential; in other words, non-essential workers experience a protective effect. While members of the health care and social assistance subsector contribute significantly to this overall effect, it is not completely driven by them. We also find evidence of intrahousehold transmission that differs in intensity by essential status. Dependents cohabiting with an essential worker have a 17% higher likelihood of being Covid-positive compared to those cohabiting with a non-essential worker. Roommates cohabiting with an essential worker experience a 38% increase in likelihood of being Covid-positive. Analysis of households with a Covid-positive member suggests that intrahousehold transmission is an important mechanism
    JEL: H75 I12 I14 I18 J21 J68
    Date: 2021–01
  10. By: Agarwal, Ruchir (International Monetary Fund); Gaule, Patrick (University of Bath)
    Abstract: To examine the drivers of innovation, this paper studies the global R&D effort to fight the deadliest diseases and presents four results. We find: (1) global pharmaceutical R&D activity—measured by clinical trials—typically follows the 'law of diminishing efforts': i.e. the elasticity of R&D effort with respect to market size is about 1/2 in the cross-section of diseases; (2) the R&D response to COVID-19 has been a major exception to this law, with the number of COVID-19 trials being 7 to 20 times greater than that implied by its market size; (3) the aggregate short-term elasticity of science and innovation can be very large, as demonstrated by aggregate flow of clinical trials increasing by 38% in 2020, with limited crowding out of trials for non-COVID diseases; and (4) public institutions and government-led incentives were a key driver of the COVID-19 R&D effort—with public research institutions accounting for 70 percent of all COVID-19 clinical trials globally and being 10 percentage points more likely to conduct a COVID-19 trial relative to private firms. Overall, while economists are naturally in favor of market size as a driving force for innovation (i.e."if the market size is sufficiently large then innovation will happen"), our work suggests that scaling up global innovation may require a broader perspective on the drivers of innovation—including early-stage incentives, non-monetary incentives, and public institutions.
    Keywords: COVID-19, innovation, market size, pharmaceutical industry
    JEL: O31 O38 J24
    Date: 2021–01
  11. By: Basu, Arnab K. (Cornell University); Dimova, Ralitza (University of Manchester)
    Abstract: This paper revisits the causes behind child labor supply by focusing on an aspect that has received little attention: the link between the household head's risk and time preferences and observed child labor supply. We develop a theoretical model and empirically test for this causality using data from the seventh round of the Ethiopian Rural Household Survey. We find child labor to be increasing in both higher adult discount rates and higher degrees of risk aversion, and this finding is robust across alternative empirical approaches. Higher discount rates favor current consumption which is financed in part by child labor income while high risk aversion to future income (due to either low or uncertain returns to education) favor child labor at the expense of schooling.
    Keywords: risk and time preferences, education, child labor, Ethiopia
    JEL: C93 J43 O55
    Date: 2021–01
  12. By: Ahlfeldt, Gabriel M.; Bald, Fabian; Roth, Duncan; Seidel, Tobias
    Abstract: We develop a dynamic spatial model in which heterogeneous workers are imperfectly mobile and forward-looking and yet all structural fundamentals can be inverted without assuming that the economy is in a stationary spatial equilibrium. Exploiting this novel feature of the model, we show that the canonical spatial equilibrium framework understates spatial quality of-life differentials, the urban quality-of-life premium and the value of local non-marketed goods. Unlike the canonical spatial equilibrium framework, the model quantitatively accounts for local welfare effects that motivate many place-based policies seeking to improve quality of life.
    Keywords: Covid-19; dynamic; housing; migration; rents; pollution; productivity; quality of life; wages; welfare; economic geography; well-being
    JEL: J20 J30 R20 R30 R50
    Date: 2020–12
  13. By: Yelowitz, Aaron (University of Kentucky); Ingram, Samuel J. (Federal Housing Finance Agency)
    Abstract: The COVID‐19 pandemic has led to temporary suspensions of many occupational licensing laws, especially for health care professionals, in an effort to manage surges in health care demand. The crisis highlights more general concerns about occupational licensing laws, yet convincing empirical evidence on the degree to which such laws have inhibited entry into health care professions is scarce because most studies must rely on cross‐sectional variation to identify such effects. In this study, we indirectly examine how occupational licensing affects the choice to become an Emergency Medical Technician (EMT) by exploiting the demand‐side shock from the Affordable Care Act (ACA). Although demand‐side shocks should increase the likelihood of becoming an EMT relative to other similar non‐medical professions, this effect should be moderated in states with higher barriers to entry. Using a large number of individuals from the American Community Survey (ACS) who work as either EMTs or in a similar non‐medical field (protective services), we find suggestive evidence that while the demand‐side shock from the ACA increased the likelihood of being an EMT, this effect was substantially moderated by more stringent occupational licensing laws. Although the effect for the full sample is marginally significant, the estimated effects are substantially larger for individuals under age 40, who are presumably more flexible in choosing a career path. Evaluated at the average number of days to complete EMT training and the pre‐treatment uninsured rate, the implied effects for young individuals in the most careful specification suggests virtually complete offset; the ACA demand‐side shock would increase entry by 18 percentage points, while occupational licensing restrictions reduce entry by a similar magnitude.
    Keywords: Occupational Licensing, Occupational Choice, Emergency Medical Technicians, Emergency Services
    JEL: J44 K31 I13
    Date: 2021–01
  14. By: Kristian Behrens; Sergey Kichko; Jacques-Francois Thisse
    Abstract: We develop a general equilibrium model with three primary production factors—land, skilled, and unskilled labor—and three sectors—construction, intermediate inputs, and final consump-tion—to study how different intensities of telecommuting affect the efficiency of firms that embrace home working, as well as its impact on the whole economy. In doing so, we pay particular attention to the effects of increasing working from home (WFH) that go through changes in the production and consumption of buildings: more WFH reduces firms’ demands for office space, but increases workers’ demand for living space since additional room is re-quired to work from home. We find that more WFH is a mixed blessing: the relationship between telecommuting and productivity or GDP is ∩-shaped, whereas telecommuting raises income inequality. Hence, WFH is not a panacea since an excessive downscaling of workspaces may be damaging to all and exacerbate economic inequality.
    Keywords: working from home, alternative work arrangements, telecommuting, housing and office markets, land
    JEL: J20 R13 R14
    Date: 2021
  15. By: Tanu Gupta (Indira Gandhi Institute of Development Research); Digvijay S. Negi (Indira Gandhi Institute of Development Research)
    Abstract: The custom of patrilocal marriage shifts a woman from her natal family to being part of her husband's household. This shift and the associated change in kinship role has implications for her participation and time use in paid and unpaid work. In this paper, we compare the participation decision and time use in different activities of married and unmarried women in India. Our comparison group for married women or the daughters-in-law within the household is the unmarried daughters of comparable age and educational qualification. We hypothesize that conditional on age, educational attainment and other observable characteristics, the differences in time devoted to domestic activities and caregiving of these women are due to differences in their status and hierarchy in the household. We find that compared to daughters, daughters-in-law spend more time in home production and less time in paid employment, learning, socializing, leisure and self-care. Moreover, they also spend more time on religious activities, which suggests that not all women may bear equal responsibility for producing status goods for the household and that this responsibility may invariably fall on the daughters-in-law.
    Keywords: marriage, daughter-in-law, time use, kinship roles, division of labor, India
    JEL: D13 J12 J22 O15 Z13
    Date: 2021–01
  16. By: Rafael Dix-Carneiro; Pinelopi K. Goldberg; Costas Meghir; Gabriel Ulyssea
    Abstract: We build an equilibrium model of a small open economy with labor market frictions and imperfectly enforced regulations. Heterogeneous firms sort into the formal or informal sector. We estimate the model using data from Brazil, and use counterfactual simulations to understand how trade affects economic outcomes in the presence of informality. We show that: (1) Trade openness unambiguously decreases informality in the tradable sector, but has ambiguous effects on aggregate informality. (2) The productivity gains from trade are understated when the informal sector is omitted. (3) Trade openness results in large welfare gains even when informality is repressed. (4) Repressing informality increases productivity, but at the expense of employment and welfare. (5) The effects of trade on wage inequality are reversed when the informal sector is incorporated in the analysis. (6) The informal sector works as an "unemployment," but not a "welfare buffer" in the event of negative economic shocks.
    JEL: F14 F16 J46 O17
    Date: 2021–01
  17. By: Emily Tanimura (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)
    Abstract: We consider a model where decision makers repeatedly receive candidates and assign to them a binary decision that we can interpret as hire/not hire. The decision makers base their decision on the characteristics of the candidate but they are also sensitive to the social influence exerted by the observed past choices of their peers. We characterize the long run frequency of decisions in the model, and show in particular that for candidates belonging to a group with "unfavorable" characteristics, the dynamics increase the rejection rate compared to a scenario with independent decisions, suggesting that influence between decision makers can generate effects very similar to those that result from statistical discrimination. In our model, we then relate the long run outcomes, existence and magnitude of reinforcement to the properties of the characteristics distribution.
    Keywords: JEL Classification: D83 D91 J70 C60 R30 Statistical discrimination,Social influence,Binary choice,Decision dynamics,Invariant measures,Reinforcement effects
    Date: 2021–01–04
  18. By: Bollinger, Christopher R. (University of Kentucky); Yelowitz, Aaron (University of Kentucky)
    Abstract: As many as two-thirds of newly-released inmates will be arrested for a new offense within three years. This study evaluates the impact of job assistance on recidivism rates among ex-offenders. The job assistance program, run though the private company America Works, uses a network of employers to place clients. Ex-offenders were randomly assigned to intensive job assistance (treatment group) or the standard program (control group). The intensive program is meant to improve average work readiness for ex-offenders. It reduces the likelihood of subsequent arrest among non-violent ex-offenders, but has little effect on violent ex-offenders. The re-arrest rate for non-violent ex-offenders in the treatment group was 19 percentage points lower than those in the control group. The re-arrest rate for violent ex-offenders in the treatment group was indistinguishable from those in the control group. We estimate benefits from intensive job assistance from averted crimes and find that they outweigh the $5,000 up-front cost for non-violent ex-offenders.
    Keywords: criminal recidivism, rapid workforce attachment
    JEL: J48
    Date: 2021–01
  19. By: Nicole M. Fortin; Thomas Lemieux; Neil Lloyd
    Abstract: This paper examines the role of spillover effects of minimum wages and threat effects of unionization in changes in wage inequality in the United States between 1979 and 2017. A distribution regression framework is introduced to estimate both types of spillover effects. Threat effects double the contribution of de-unionization to the increase in male wage inequality. Spillover effects magnify the explanatory power of declining minimum wages to two-thirds of the increase in inequality at the bottom end of the female wage distribution.
    JEL: D31 J31 J51 J80
    Date: 2021–01

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