nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2021‒03‒01
twenty-one papers chosen by
Joseph Marchand
University of Alberta

  1. Does Working with a Future Executive Make Junior Employees More Likely to Be Promoted ? By Arai, Natsuki; Nakazawa, Nobuhiko
  2. The COVID-19 Pandemic's Evolving Impacts on the Labor Market: Who's Been Hurt and What We Should Do By Brad J. Hershbein; Harry J. Holzer
  3. The Gender Pay Gap Revisited with Big Data: Do Methodological Choices Matter? By Strittmatter, Anthony; Wunsch, Conny
  4. Skill up or get left behind? Digital skills and labor market outcomes in the Netherlands By Marielle Non; Milena Dinkova; Ben Dahmen
  5. Age-targeted Income Taxation, Labor Supply and Retirement By Gustafsson, Johan
  6. Changes in the employment structure and in job quality in Italy: a national and regional analysis By Luciana Aimone Gigio,; Silvia Camussi; Vincenzo Maccarrone
  7. Recruitment, effort, and retention effects of performance contracts for civil servants: Experimental evidence from Rwandan primary schools By Clare Leaver; Owen Ozier; Pieter Serneels; Andrew Zeitlin
  8. Over-Education and Immigrant Earnings: A Penalized Quantile Panel Regression Analysis By Maani, Sholeh A.; Wen, Le
  9. How do Economies in EU-CEE Cope with Labour Shortages? By Vasily Astrov; Richard Grieveson; Doris Hanzl-Weiss; Sebastian Leitner; Isilda Mara; Hermine Vidovic
  10. Talent poaching and job rotation By Diego Battiston; Miguel Espinosa; Shuo Liu
  11. Robots at Work? Pitfalls of Industry Level Data By Bekhtiar, Karim; Bittschi, Benjamin; Sellner, Richard
  12. Adverse Effects of Monitoring: Evidence from a field experiment By Herz, Holger; Zihlmann, Christian
  13. Promotions and productivity: The role of meritocracy and pay progression in the public sector By Erika Deserranno; Philipp Kastrau; Gianmarco León-Ciliotta
  14. The Impact of Labor Market Reforms on Income Inequality: Evidence from the German Hartz Reforms By Lea Immel
  15. The true returns to the choice of occupation and education By Andrew E. Clark; Maria Cotofan; Richard Layard
  16. The impact of the COVID-19 shock on labour income inequality: evidence from Italy By Francesca Carta; Marta De Philippis
  17. Returns to Schooling in European Emerging Markets: A Meta-Analysis By Horie, Norio; Iwasaki, Ichiro
  18. COVID-19: a crisis of the female self-employed By Graeber, Daniel; Kritikos, Alexander S.; Seebauer, Johannes
  19. Trade and Informality in the Presence of Labor Market Frictions and Regulations By Rafael Dix-Carneiro; Pinelopi K. Goldberg; Costas Meghir; Gabriel Ulyssea
  20. A Nonparametric Method for Estimating Teacher Value-Added By Michael Gilraine; Jiaying Gu; Robert McMillan
  21. Local entrepreneurship ecosystems and emerging industries: Case study of Cambridgeshire and Peterborough, United Kingdom By OECD

  1. By: Arai, Natsuki; Nakazawa, Nobuhiko
    Abstract: We estimate long-term peer effects in the workplace by investigating whether working with a future executive in the early stages of a junior employee's career will make them more likely to be promoted in the future. Using the data for comprehensive career history at the Japanese central administration, from 1946 to 2019, we find that long-term peer effects are substantial and persistent: Junior employees who work with a future executive in the same division during the first few years of their employment are promoted significantly faster, on average, than employees who do not work with a future executive. They are also more likely to be promoted to the executive level in the future. Additional empirical analysis suggests that improved network connections between senior and junior employees are crucial for the promotion of junior employees in the future.
    Keywords: Peer Effect, Coworkers, Promotion, Productivity, Social Connection
    JEL: J01 J24 M12 M51
    Date: 2021–02
  2. By: Brad J. Hershbein (W.E. Upjohn Institute for Employment Research); Harry J. Holzer (Georgetown University)
    Abstract: In this paper, we shed light on the impacts of the COVID-19 pandemic on the labor market, and how they have evolved over most of the year 2020. Relying primarily on microdata from the CPS and state-level data on virus caseloads, mortality, and policy restrictions, we consider a range of employment outcomes—including permanent layoffs, which generate large and lasting costs—and how these outcomes vary across demographic groups, occupations, and industries over time. We also examine how these employment patterns vary across different states, according to the timing and severity of virus caseloads, deaths, and closure measures. We find that the labor market recovery of the summer and early fall stagnated in late fall and early winter. As noted by others, we find low-wage and minority workers are hardest hit initially, but that recoveries have varied, and not always consistently, between Blacks and Hispanics. Statewide business closures and other restrictions on economic activity reduce employment rates concurrently but do not seem to have lingering effects once relaxed. In contrast, virus deaths—but not caseloads—not only depress current employment but produce accumulating harm. We conclude with policy options for states to repair their labor markets.
    Keywords: Local COVID-19, employment rates, inequality, pandemic recession, recovery
    JEL: E62 H12 J15 J21 J68
    Date: 2021–02
  3. By: Strittmatter, Anthony (University of Basel); Wunsch, Conny (University of Basel)
    Abstract: The vast majority of existing studies that estimate the average unexplained gender pay gap use unnecessarily restrictive linear versions of the Blinder-Oaxaca decomposition. Using a notably rich and large data set of 1.7 million employees in Switzerland, we investigate how the methodological improvements made possible by such big data affect estimates of the unexplained gender pay gap. We study the sensitivity of the estimates with regard to i) the availability of observationally comparable men and women, ii) model exibility when controlling for wage determinants, and iii) the choice of different parametric and semiparametric estimators, including variants that make use of machine learning methods. We find that these three factors matter greatly. Blinder-Oaxaca estimates of the unexplained gender pay gap decline by up to 39% when we enforce comparability between men and women and use a more exible specication of the wage equation. Semi-parametric matching yields estimates that when compared with the Blinder-Oaxaca estimates, are up to 50% smaller and also less sensitive to the way wage determinants are included.
    Keywords: Gender Inequality, Gender Pay Gap, Common Support, Model Speci cation, Matching Estimator, Machine Learning
    JEL: J31 C21
    Date: 2021–02–18
  4. By: Marielle Non (CPB Netherlands Bureau for Economic Policy Analysis); Milena Dinkova (CPB Netherlands Bureau for Economic Policy Analysis); Ben Dahmen (CPB Netherlands Bureau for Economic Policy Analysis)
    Abstract: People with low digital skills relatively often do not have a paid job, and if they do, they earn a relatively low hourly wage. Those are the most important findings of CPB research based on a newly constructed dataset combining digital skills with labor market outcomes. About a quarter of Dutch people aged between 16 and 65 does not reach a basic digital skills level. This implies that people find it hard to use email or internet and to process digital information. Based on our analysis, people who do not reach this basic digital skills level have a significantly lower hourly wage than people with good digital skills, even if we correct for background characteristics such as age, gender, educational level, literacy and numeracy. We also find that people with low digital skills relatively often do not have a paid job making them financially dependent on state benefits or a partner with a paid job. In general, people with low digital skills are older, more often female and have a low education level. Relatively often, those people are not born in the Netherlands, and they have low literacy and numeracy skills. Want to know more about people with low digital skills? Then read this ESB article (in Dutch) in which we further discuss the findings of this research.
    JEL: J24 J31 C21 C83
    Date: 2021–02
  5. By: Gustafsson, Johan (Department of Economics, Umeå University)
    Abstract: This paper studies the life-cycle effects of favorable marginal tax treatment of older workers on their optimal life-cycle labor supply, retirement timing, and savings. I develop a structural model in continuous time where the life-cycle of a representative agent is divided into three distinct phases: pre-treatment, post-treatment, and retirement. Solutions for consumption/savings, labor supply/leisure, and retirement timing are then obtained by solving the model as a salvage value problem. I then calibrate the model to Swedish earnings data and find that the increased extensive margin labor supply is partially offset by a reduction of the hours of work in the pre-treatment period. The total effect is however an increase in life-cycle labor supply, and consumption.
    Keywords: Retirement age; life cycle; tax heterogeneity; savings; consumption; leisure
    JEL: D15 J22 J26
    Date: 2021–02–04
  6. By: Luciana Aimone Gigio, (Banca d'Italia); Silvia Camussi (Banca d'Italia); Vincenzo Maccarrone (University College Dublin, School of Business)
    Abstract: This paper contributes to the literature on changes in the employment structure, focusing on the job quality created and destroyed in Italy and in its regions in the years 2011-17. To do so, we apply a ‘jobs-based’ approach methodology similar to the one developed by Eurofound researchers and we use Labour Force Survey data from the Italian National Institute of Statistics (ISTAT). Our findings suggest that in the period, Italy experienced a polarisation pattern skewed towards lower-paid jobs, whereas we observe an upgrading trend at the average EU level. This pattern is the result of diverging trends across Italy: while the central and northern regions are responsible for the growth not only in the share of workers in low quality occupations but also in higher quality ones, southern Italy contributed exclusively to the increase in low-paid jobs. The latter area is the only one experiencing a clear downgrading trend over the years 2011-17. Sectoral trends are partially responsible for these patterns. Furthermore, we find that in recent years, the economic divide between northern-central and southern regions has widened. Within each macro-area, the contribution of different regions to the total trends was heterogeneous, in particular in the South of Italy, where some regions contributed positively to employment growth in higher paid jobs too, although their role was overshadowed by those that performed worse.
    Keywords: job quality, labour market
    JEL: J21 R11
    Date: 2021–02
  7. By: Clare Leaver (Blavatnik School of Government University College); Owen Ozier (Williams College); Pieter Serneels (University of East Anglia); Andrew Zeitlin (Georgetown University)
    Abstract: This paper reports on a two-tiered experiment designed to separately identify the selection and effort margins of pay-for-performance (P4P). At the recruitment stage, teacher labor markets were randomly assigned to a pay-for-percentile or fixed-wage contract. Once recruits were placed, an unexpected, incentive compatible, school-level re-randomization was performed, so that some teachers who applied for a fixed-wage contract ended up being paid by P4P, and vice versa. By the second year of the study, the within-year effort effect of P4P was 0.16 standard deviations of pupil learning, with the total effect rising to 0.20 standard deviations after allowing for selection.
    Keywords: pay-for-performance, selection, incentives, teachers, field experiment
    JEL: C93 I21 J45 M52 O15
    Date: 2021–01–27
  8. By: Maani, Sholeh A. (University of Auckland); Wen, Le (University of Auckland)
    Abstract: Despite evidence that immigrants experience a higher incidence of over-education, relatively few studies have considered the labour market outcomes of over-education for immigrants. Using longitudinal data and penalized quantile panel regression, we inspect the earnings effects of job mismatches for immigrants in Australia. This first application of the method to this question addresses both individual and distributional heterogeneity. Results confirm divergent effects across the earnings distribution. Immigrants from non-English speaking countries experience lower earnings returns and a substantial earnings penalty of up to 25 percent from educational mismatched employment. However, in contrast to conventional findings of a penalty based on regression at the mean, at the highest earnings quantile, both Australian-born and immigrants from non-English speaking countries with a host country qualification receive earnings premiums of 2.7 and 11 percent, respectively, from years of over-education. We discuss the policy implications of this new result.
    Keywords: penalized panel quantile regression, over-education, immigrants, overseas qualifications, language proficiency
    JEL: C23 I21 J24 J31
    Date: 2021–01
  9. By: Vasily Astrov (The Vienna Institute for International Economic Studies, wiiw); Richard Grieveson (The Vienna Institute for International Economic Studies, wiiw); Doris Hanzl-Weiss (The Vienna Institute for International Economic Studies, wiiw); Sebastian Leitner (The Vienna Institute for International Economic Studies, wiiw); Isilda Mara (The Vienna Institute for International Economic Studies, wiiw); Hermine Vidovic (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: The EU member states in Central and Eastern Europe (EU-CEE) were experiencing rising labour shortages prior to the COVID-19 pandemic, and ongoing demographic decline means that the issue is likely to resurface once the pandemic is over. As a result, the bargaining power of labour has increased, wages have been generally rising ahead of labour productivity, and industrial action (strikes) – the level of which has remained low in recent decades – has emerged in some instances. In the face of labour and skill shortages, people have been investing in education. The share of employees with tertiary education has increased and vocational training has gained in importance, although active labour market policies have been used only selectively. Employers have increasingly been investing in fixed assets, especially in manufacturing, and the degree of robotisation has risen strongly. Despite domestic concerns that automation would generate massive job losses, our findings suggest that capital deepening has taken place faster where labour was in higher demand. Thus, labour was not substituted with capital, but rather the complementary effect prevailed. Employment actually increased in EU-CEE over the past two decades. Employers could hire not only the formerly unemployed, but also the formerly inactive, and used the relaxed immigration policies to attract foreign workers, especially from Ukraine and the Western Balkan countries. Czechia, Hungary, Slovenia and Slovakia have become net receivers of migrants, while in Bulgaria and Poland immigration largely compensates for the natives who go abroad. However, immigration from non-European countries as a general solution to the problem of labour shortages in EU-CEE is highly problematic in the current domestic political context. Overall, both our findings for the EU-CEE region over recent years and the experience of Western Europe during the ‘golden age’ (1950-1973) suggest that labour shortages are not in themselves an obstacle to rapid structural change and income growth. However, for such an economic model to be sustainable, more active government policies will be needed, such as greater public investment in education and training, higher minimum wages in order to encourage automation, and more extensive welfare networks in order to deal with the possible negative short-run side-effects of automation.
    Keywords: labour shortages, trade unions, migration policy, active labour market policy, investment, vocational training, ‘golden age’, populism
    JEL: J21 J23 J24 J31 J52 J61 N14 N34
    Date: 2021–02
  10. By: Diego Battiston; Miguel Espinosa; Shuo Liu
    Abstract: Firms allocate workers to clients to provide services. On the job, workers acquire skills that increase their client-specific productivity and therefore raise the probability that clients poach them. In this paper, we advance the understanding of this important, yet understudied feature of service industries. We show, both theoretically and empirically, that in order to mitigate poaching risk firms may forgo potential productivity gains by moving workers from one client to the other. Focusing on a security service-industry firm in Colombia, we find that an increase in client-specific experience increases both workers’ productivity and probability that the workers are poached. After a policy change that forbids talent poaching, the firm sharply decreased the frequency of rotation, especially for workers who were more likely to be poached before the policy change. The theoretical model we propose is consistent with these empirical patterns and substantiates the broad applicability of the studied mechanism.
    Keywords: talent poaching, job rotation, outsourcing
    JEL: D22 J24 L84 M21 M51 M54
    Date: 2021–01
  11. By: Bekhtiar, Karim (Institute for Advanced Studies (IHS), Vienna, Austria); Bittschi, Benjamin (Institute for Advanced Studies (IHS), Vienna, Austria); Sellner, Richard (Institute for Advanced Studies (IHS), Vienna, Austria)
    Abstract: In a seminal paper Graetz and Michaels (2018) find that robots increase labor productivity and TFP, lower output prices and adversely affect the employment share of low-skilled labor. We show that these effects hold only, when comparing hardly-robotizing with highly-robotizing sectors and collapse, when only the latter are analyzed. Controlling for demographic workforce variables reestablishes the productivity effects, but still rejects positive wage effects and skill-biased technological change. Additionally, we find no effects, when the investigation period is extended to the most recent data (2008-2015) and document non-monotonicity in one of the instruments, which calls the respective results into question.
    Keywords: Robots, Productivity, Technological Change
    JEL: E24 J24 J31 L60 O30
    Date: 2021–02
  12. By: Herz, Holger; Zihlmann, Christian
    Abstract: We conduct a field experiment with remote workers to assess potential adverse effects of monitoring. We find that monitoring reduces the average performance of workers, in particular among the intrinsically motivated workforce. Moreover, monitoring cultivates the average worker: There are fewer high performers and the variance in performance is significantly reduced. Importantly, we show that performance reductions primarily occur among challenging tasks. These performance reductions significantly increase unit costs in our setting. This effect is particularly severe when challenging tasks have high marginal value, as in high-performance work systems or when tasks are complementary inputs into the production function.
    Keywords: Monitoring; Hidden Costs of Control; Remote work; Field experiment
    JEL: C93 D21 J24 M5
    Date: 2021–02–26
  13. By: Erika Deserranno; Philipp Kastrau; Gianmarco León-Ciliotta
    Abstract: We study promotion incentives in the public sector by means of a field experiment with the Ministry of Health in Sierra Leone. The experiment creates exogenous variation in meritocracy by linking promotions to performance and variation in perceived pay progression among the lowest tier of health workers. We find that meritocratic promotions lead to higher productivity, and more so when workers expect a steep pay increase. However, when promotions are not meritocratic, increasing the pay gradient reduces productivity through negative morale effects. The findings highlight the importance of taking into account the interactions between different tools of personnel policy.
    Keywords: promotions, meritocracy, pay progression, worker productivity
    JEL: M51 M52 J31 D73
    Date: 2021–02
  14. By: Lea Immel
    Abstract: In this paper, I study the distributional consequences of the German Hartz reforms, a set of four comprehensive labor market reforms implemented in Germany between 2003 and 2005. I exploit regional variation in the intensity German counties were affected by the reforms to estimate the causal effect of the Hartz reforms on income inequality. My results suggest that the Hartz reforms have led to a small increase in income inequality. Testing for potential transmission channels, I find that the increase in inequality is partly due to a direct monetary impact of the last Hartz reform, Hartz IV, on the income of households relying on government transfers. Another part can be explained by a rise in the share of transfer recipients. In contrast, the Hartz reforms did not increase income inequality via a rise in labor supply or part-time work, via an increase in (full-time) wage inequality nor via an increase in the number of income earners per household.
    Keywords: Labor market policy, income inequality, wages, Germany, Hartz reforms
    JEL: D31 J08 J31 J68
    Date: 2021
  15. By: Andrew E. Clark; Maria Cotofan; Richard Layard
    Abstract: Which occupations are best for wellbeing? There is a large literature on earnings differentials, but less attention has been paid to occupational differences in non-pecuniary rewards. However, information on both types of rewards is needed to understand the dispersion of wellbeing across occupations. We analyse subjective wellbeing in a large representative sample of UK workers to construct a measure of "full earnings", the sum of earnings and the value of non-pecuniary rewards, in 90 different occupations. We first find that the dispersion of earnings underestimates the extent of inequality in the labour market: the dispersion of full earnings is one-third larger than the dispersion of earnings. Equally, the gender and ethnic gaps in the labour market are larger than data on earnings alone would suggest, and the true returns to completed secondary education (though not to a degree) are underestimated by earnings differences on their own. Finally, we show that our main results are similar, and stronger, for a representative sample of US workers.
    Keywords: occupation, wages, non-pecuniary benefits, inequality
    JEL: I31 J31
    Date: 2021–02
  16. By: Francesca Carta (Bank of Italy); Marta De Philippis (Bank of Italy)
    Abstract: The spread of the pandemic and the consequent adoption of lockdown measures to prevent infections had severe consequences for business activity and employment. By using data from the Italian Labour Force Survey, this paper simulates the effect of the COVID-19 crisis on the dynamics and distribution of equivalized labour income in the first two quarters of 2020. Moreover, it assesses the effectiveness in smoothing labour income losses of the social insurance benefits that were in place before the crisis and of the temporary measures adopted by the Italian Government to face it. We find that the economic repercussions of the COVID-19 shock impacted low-income households more heavily than higher income families, implying a substantial increase in labour income inequality. However, our results show that the social insurance benefits temporarily introduced by the Italian Government were able, at least in the short term, to compensate for these income losses and for the increased inequality significantly more than the pre-crisis measures.
    Keywords: labour market, inequality, social insurance benefits, recessions, coronavirus, Covid-19
    JEL: H20 J20 D31
    Date: 2021–02
  17. By: Horie, Norio; Iwasaki, Ichiro
    Abstract: In this paper, we perform a meta-analysis of 848 estimates extracted from 43 previous studies to identify time-series changes in returns to schooling in European emerging markets. We also examine possible difference in returns to schooling across the countries. A meta-synthesis of collected estimates suggests a decreasing trend over time in returns to schooling in European emerging markets as a whole. Synthesis results also indicate that countries in the western part of the region tend to have higher returns to schooling than their counterparts in the eastern part. Both the meta-regression analysis of literature heterogeneity and the test for publication selection bias produced findings that are highly consistent with the meta-synthesis results.
    Keywords: return to schooling, wages, meta-analysis, publication selection bias, European emerging markets
    JEL: D31 I26 J31 P23 P36
    Date: 2021–02
  18. By: Graeber, Daniel; Kritikos, Alexander S.; Seebauer, Johannes
    Abstract: We investigate how the economic consequences of the pandemic, and of the governmentmandated measures to contain its spread, affect the self-employed – particularly women – in Germany. For our analysis, we use representative, real-time survey data in which respondents were asked about their situation during the COVID-19 pandemic. Our findings indicate that among the self-employed, who generally face a higher likelihood of income losses due to COVID-19 than employees, women are 35% more likely to experience income losses than their male counterparts. Conversely, we do not find a comparable gender gap among employees. Our results further suggest that the gender gap among the self-employed is largely explained by the fact that women disproportionately work in industries that are more severely affected by the COVID-19 pandemic. Our analysis of potential mechanisms reveals that women are significantly more likely to be impacted by government-imposed restrictions, i.e. the regulation of opening hours. We conclude that future policy measures intending to mitigate the consequences of such shocks should account for this considerable variation in economic hardship.
    Keywords: Self-employed,COVID-19,income,gender,representative real-time survey data,decomposition methods
    JEL: J16 L26 J31 J71 I18
    Date: 2021
  19. By: Rafael Dix-Carneiro (Duke University); Pinelopi K. Goldberg (Cowles Foundation, Yale University); Costas Meghir (Cowles Foundation, Yale University); Gabriel Ulyssea (University College London)
    Abstract: We build an equilibrium model of a small open economy with labor market frictions and imperfectly enforced regulations. Heterogeneous ï¬ rms 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
  20. By: Michael Gilraine; Jiaying Gu; Robert McMillan
    Abstract: This paper proposes a computationally feasible nonparametric methodology for estimating teacher value-added. Our estimator, drawing on Robbins (1956), permits the unobserved teacher value-added distribution to be estimated directly, rather than assuming normality as is standard. Simulations indicate the estimator performs very well regardless of the true distribution, even in moderately-sized samples. Implementing our method in practice using two large-scale administrative datasets, the estimated teacher value-added distributions depart from normality and differ from each other. Further, compared with widely-used parametric estimates, we show our nonparametric estimates can make a significant difference to teacher-related policy calculations, in both short and longer terms.
    Keywords: Teacher Value-Added, Nonparametric Empirical Bayes, Education Policy, Teacher Release Policy
    JEL: C11 H75 I21 J24
    Date: 2021–02–13
  21. By: OECD
    Abstract: This paper examines how local-level policies can strengthen entrepreneurship and innovation in the region of Cambridgeshire and Peterborough in the United Kingdom. It investigates the quality of the local entrepreneurship ecosystem for generating innovative start-ups and scale-ups and the regional conditions for generating positive industry transitions by supporting the strategic sectors of life sciences, information technologies, agri-tech and advanced manufacturing. Key areas of focus are on skills development, entrepreneurship development and knowledge exchange for local economic development. A number of policy recommendations are offered based on the analysis together with international inspiring policy practice examples.
    Keywords: entrepreneurship, industry transition, knowledge exchange, regional policy, skills
    JEL: J24 L52 L53 R58
    Date: 2021–02–02

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