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on Labor Markets - Supply, Demand, and Wages |
| By: | Liwiński, Jacek |
| Abstract: | Purpose: This paper tries to identify the wage gap between informal and formal workers and tests for the two-tier structure of the informal labour market in Poland. Design/methodology/approach: I employ the propensity score matching (PSM) technique and use data from the Polish Labour Force Survey (LFS) for the period 2009-2017 to estimate the wage gap between informal and formal workers, both at the means and along the wage distribution. I use two definitions of informal employment: a) employment without a written agreement and b) employment while officially registered as unemployed at a labour office. In order to reduce the bias resulting from the non-random selection of individuals into informal employment, I use a rich set of control variables representing several individual characteristics. Findings: After controlling for observed heterogeneity, I find that on average informal workers earn less than formal workers, both in terms of monthly earnings and hourly wage. This result is not sensitive to the definition of informal employment used and is stable over the analysed time period (2009-2017). However, the wage penalty to informal employment is substantially higher for individuals at the bottom of the wage distribution, which supports the hypothesis of the two-tier structure of the informal labour market in Poland. Originality/value: The main contribution of this study is that it identifies the two-tier structure of the informal labour market in Poland: informal workers in the first quartile of the wage distribution and those above the first quartile appear to be in two partially different segments of the labour market. |
| Keywords: | informal workers,undeclared employment,wages,wage penalty,PSM |
| JEL: | J24 J31 J46 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:804&r=all |
| By: | Gabriela Galassi |
| Abstract: | This paper analyzes how firms respond to changes in tax benefits for low-earning workers and how, through equilibrium effects, such policies also affect non-targeted, high-earning workers. I explore establishment-level outcomes around Germany’s 2003 Mini-Job Reform, which entailed a significant expansion of tax benefits for low-earning workers. Firms’ responses are decomposed in terms of the scale effects that arise from lower labor costs and the substitution effects that are due to changes in the relative prices of low- and high-earning employment post-reform. Using a differences-in-differences approach, I document that highly exposed establishments—those with a high proportion of low-earning workers pre-reform—expand their number of employees relative to non-exposed establishments–those with a low proportion of such workers. Importantly, this relative expansion is tilted towards high-earning workers, a group that is not the target of the tax benefits. In addition, non-exposed establishments substitute employment towards low-earning workers without expanding at the same pace. My findings are consistent with a model of the labor market that features tax sharing between workers and firms and simultaneous shifts in labor supply and demand after changes in tax benefits for low-earning workers. In this setting I illustrate that the employment growth the policy intended is accompanied by a reallocation of employment and production between highly exposed firms and non-exposed firms, and this may result in an efficiency loss. |
| Keywords: | Economic models; Firm dynamics; Labour markets |
| JEL: | H32 E64 I38 J38 |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:21-15&r=all |
| By: | Engbom, Niklas; Gonzaga, Gustavo; Moser, Christian; Olivieri, Roberta |
| Abstract: | Using a combination of rich administrative and household survey data, we document a series of new facts on earnings inequality and dynamics in a developing country with a large informal sector: Brazil. Since the mid-1990s, both inequality and volatility of earnings have declined significantly in Brazil's formal sector. Higher-order moments of the distribution of earnings innovations show similar cyclical movements in Brazil as in developed countries like the U.S. Earnings mobility is comparatively high, especially at the bottom of the distribution. Compared to the formal sector, earnings are more volatile in the informal sector. Workers who switch between sectors experience earnings innovations that have a positive mean and are positively skewed when moving to the formal sector but have a negative mean and are negatively skewed when moving to the informal sector. A secular shift of employment toward the less volatile formal sector since the early 2000s has contributed to a decline in the economy-wide volatility of earnings. |
| Keywords: | Earnings Inequality, Earnings Volatility, Earnings Mobility, Informality. |
| JEL: | D31 D33 E24 E26 J31 J46 J62 |
| Date: | 2021–02–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:105758&r=all |
| By: | John (Jianqiu) Bai; Erik Brynjolfsson; Wang Jin; Sebastian Steffen; Chi Wan |
| Abstract: | Digital technologies may make some tasks, jobs and firms more resilient to unanticipated shocks. We extract data from over 200 million U.S. job postings to construct an index for firms' resilience to the Covid-19 pandemic by assessing the work-from-home (WFH) feasibility of their labor demand. Using a difference-in-differences framework, we find that public firms with high pre-pandemic WFH index values had significantly higher sales, net incomes, and stock returns than their peers during the pandemic. Our results indicate that firms with higher digital resilience, as measured through our pre-pandemic WFH index, performed significantly better in general, and in non-essential industries in particular, where WFH feasibility was necessary to continue operation. The ability to use digital technologies to work remotely also mattered more in non-high-tech industries than in high-tech ones. Lastly, we find evidence that firms with lower pre-pandemic WFH feasibility attempted to catch up to their more resilient competitors via greater software investment. This is consistent with a complementarity between digital technologies and WFH practices. Our study's results are robust to a variety of empirical specifications and provide a first look at how WFH practices improved resilience to a major, unanticipated social and economic shock. |
| JEL: | D23 J21 L0 L25 O0 O33 |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28588&r=all |
| By: | Owen Thompson (Williams College) |
| Abstract: | This paper estimates the contribution of human capital to the Black-white earnings gap in three separate samples of men spanning from 1966 through 2017, using both educational attainment and performance on standardized tests to measure human capital. There are three main findings. First, the magnitude of reductions in the Black-white earnings gap that occur after controlling for human capital has become much larger over time, suggesting a growing contribution of human capital to Black-white earnings disparities. Second, these increases are almost entirely due to growth in the returns to human capital, which magnify the impact of any racial differences in human capital levels, rather than to increasing racial gaps in the human capital traits themselves. Finally, growth in the explanatory power of human capital has been primarily due to increases in the association between human capital and the likelihood of nonwork, with no clear increases in the extent to which human capital explains Black-white wage differences. These findings highlight how apparently race-neutral structural developments in the U.S. labor market, such as increasing skill prices and falling labor force participation rates among less-skilled men, have had large impacts on racial inequity. |
| Keywords: | human capital, earnings gap, racial gap, black-white, NLS, decomposition |
| JEL: | J15 J24 J31 J71 |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:upj:weupjo:21-343&r=all |
| By: | Joachim Hubmer; Pascual Restrepo |
| Abstract: | The decline in the U.S. labor share is far from uniform across firms. While the aggregate labor share has declined, especially in manufacturing, retail, and wholesale, the labor share of a typical firm in these industries has risen. This paper studies the dynamics of the substitution of capital for labor at the firm level and its implications for market structure and labor shares. We introduce a model of firm dynamics where firms make costly upfront investments to adopt the capital-intensive technologies required to automate additional tasks. Following a decline in the price of capital, large firms automate more of their tasks and become more capital intensive; while the median firm continues to operate a more labor-intensive technology. In line with firm-level data, our model generates transitions in which the labor share of the median firm increases at the same time as the aggregate labor share declines. We use an extension of our model that allows for endogenous markups to study the role of rising competition and reallocation towards more productive and higher-markup firms as another driver of the decline in the labor share during 1982–2012. We provide a quantitative decomposition showing that reallocation played a minor role in explaining the decline in the labor share in U.S. manufacturing but an important role in retail and other sectors. The substitution of labor with cheaper capital in a widening range of tasks played a more dominant role in explaining the decline of the manufacturing labor share. |
| JEL: | E22 E23 E24 E25 |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28579&r=all |
| By: | Valerie Michelman; Joseph Price; Seth D. Zimmerman |
| Abstract: | This paper studies how exclusive social groups shape upward mobility, and whether interactions between low- and high-status peers can integrate the top rungs of the economic and social ladder. Our setting is Harvard in the 1920s and 1930s, where new groups of students arriving on campus encountered a social system centered on exclusive old boys' clubs. We combine archival and Census records of students' college lives and long-run careers with a room-randomization design based on a scaled residential integration policy. We first show that high-status students from prestigious private high schools perform worse academically than other students, but are much more likely to join exclusive campus clubs. The club membership premium is large: members earn 32% more than other students, and are more likely to work in finance and join country clubs, both characteristic of the era's elite. The membership premium persists after conditioning on high school, legacy status, and even family. Random assignment to high-status peers raises the rates at which students join exclusive social groups on campus, but overall effects are driven entirely by large gains for private school students. In the long run, a shift from the 25th percentile of residential peer group status to the 75th percentile raises the rate at which private school students work in finance by 41% and their membership in adult social clubs by 26%. We conclude that social interactions among the educational elite mediate access to top positions in the economy and society, but may not provide a path to these positions for underrepresented groups. Differences in academic and career outcomes by high school type persist through at least the class of 1990, suggesting that this causal channel remains relevant at contemporary elite universities. |
| JEL: | I24 I26 J24 |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28583&r=all |
| By: | Anelí Bongers (Department of Economics, University of Málaga, Spain); Benedetto Molinari (Department of Economics, University of Málaga, Spain; Rimini Centre for Economic Analysis); José L. Torres (Department of Economics, University of Málaga, Spain) |
| Abstract: | This paper analyzes the macroeconomic and distributional effects of declining labor share as observed during the last decades. We use a neoclassical general equilibrium model with two types of households, workers and capitalists, endowed with a CES production function, in which the distributional parameter matches labor share. This implies the existence of a technological nexus between the observed labor share and the distributional parameter of the CES function. We explore that technological nexus and show that both capitalists' and workers' income increase as labor income declines depending on the elasticity of substitution between capital and labor. The effect of labor share changes on income distribution does not depend on the elasticity of substitution, and hence, relative income and relative consumption decrease for workers, increasing inequality. When capital depreciation rate is taken into account, the decline in labor share has a limited impact on the functional distribution of net income. |
| Keywords: | Functional distribution of income, Labor share, Workers, Capitalists |
| JEL: | E25 J30 |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:rim:rimwps:21-06&r=all |
| By: | Jelnov, Pavel; Weiss, Yoram |
| Abstract: | We study the relationship between age and influence in a closed group of leading economists. We consider, as a measure of influence, monthly RePEc rankings and address the dynamics of rankings within the top group as a function of age. We find that the rankings peak at age 60 or 30 years after Ph.D. graduation. Differently from other leaders, current and future Nobel laureates do not experience deterioration of the rankings if their works and citations are discounted by recursive impact factor, and their ranking with respect to the breadth of citations across fields improves at old age. |
| Keywords: | aging,citations,influence,Nobel,research productivity |
| JEL: | J24 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:810&r=all |
| By: | Macchioni Giaquinto, Annarita; Jones, Andrew M.; Rice, Nigel; Zantomio, Francesca |
| Abstract: | Shocks to health have been shown to reduce labour supply for the individual affected. Less is known about household self-insurance through a partner's response to a health shock. Previous studies have presented inconclusive empirical evidence on the existence of a healthrelated 'added worker effect'. We use UK longitudinal data to investigate within households both the labour supply and informal care responses of an individual to the event of an acute health shock to their partner. Relying on the unanticipated timing of shocks, we combine coarsened exact matching and entropy balancing algorithms with parametric analysis and exploit lagged outcomes to remove bias from observed confounders and time-invariant unobservables. We find no evidence of a health-related 'added worker effect'. A significant and sizeable increase in spousal informal care, irrespective of spousal labour market position or household financial status and ability to purchase formal care provision, suggests a substitution to informal care provision, at the expense of time devoted to leisure activities. |
| Keywords: | health shocks,added worker effect,labour supply,informal care,matching methods,panel data |
| JEL: | C14 I10 I13 J14 J22 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:806&r=all |
| By: | Cristiano C. Carvalho; Raphael Corbi, Rodrigo De-Losso |
| Abstract: | This paper provides new evidence of the short and long-run effects of vocational training (VT) on labor market and educational outcomes, with a particular interest in how school quality may confound estimates. VT schools may differ from regular schools not only in terms of type of training, but also in the availability of resources. We take advantage of a particular institutional arrangement in the state of Paraná, Brazil, where a single private institution named FIEP provides both VT and regular education under two separate but closely related entities, while non-FIEP institutions provide regular education. As both VT and regular schools within FIEP have more resources and better inputs than non-FIEP schools, simply comparing outcomes of VT and regular students can be misleading even if students were assigned randomly to schools. Using a unique survey applied to different cohorts of high school graduates, we show that quality plays an important but nuanced role when comparing the effects of general and VT in the short and long run. In particular, our propensity score estimates indicate that FIEP VT graduates have higher short-run employability than both FIEP and non-FIEP non-VT students. However, non-VT graduates from the better-funded FIEP system are more likely to continue to higher education, so that the short-run employment effect all but dissipates as they enter the labor force in the long-run. |
| Keywords: | Vocational education; short and long-run labor market outcomes; higher education |
| JEL: | C21 I25 I26 I31 J24 J31 |
| Date: | 2021–03–23 |
| URL: | http://d.repec.org/n?u=RePEc:spa:wpaper:2021wpecon10&r=all |
| By: | Raviv, Alon; Hilscher, Jens; Peleg Lazar, Sharon |
| Abstract: | Including contingent convertible bonds (coco) in the capital structure of a bank affects the sensitivity to risk of its equity-based compensation. Such risk-shifting incentives can be reduced if the coco bonds are well-designed. Similarly, we show that compensating executives instead with well-designed coco bonds can also reduce risk-shifting incentives. In practice, however, most coco bonds have characteristics that result in both stock and coco compensation having large sensitivities to changes in asset risk -- equity-based compensation encourages executives to increase risk, coco compensation to reduce risk. We show that a pay package combining both stock and coco can practically eliminate risk-shifting incentives and that it can be implemented with a bank's preexisting coco bonds. |
| Keywords: | contingent capital, executive compensation, risk-shifting, banking regulation, coco compensation |
| JEL: | G2 G21 |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:106596&r=all |
| By: | Owen Thompson |
| Abstract: | This paper estimates the contribution of human capital, measured using both educational attainment and test performance, to the Black-white earnings gap in three separate samples of men spanning 1966 through 2017. There are three main findings. First, the magnitude of reductions in the Black-white earnings gap that occur after controlling for human capital have become much larger over time, suggesting a growing contribution of human capital to Black-white earnings disparities. Second, these increases are almost entirely due to growth in the returns to human capital, rather than changing racial gaps in the human capital traits themselves. Finally, growth in the explanatory power of human capital has been primarily due to increases in the association between human capital and the likelihood of non-work, with no clear increases in the extent to which human capital explains Black-white differences in hourly wages or other intensive margins. These findings highlight how apparently race-neutral structural developments in the US labor market, such as increasing skill prices and falling labor force participation rates among less skilled men, have had large impacts on the dynamics of racial inequality. |
| JEL: | I24 I26 J71 |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28586&r=all |
| By: | René Böheim; Sarah Gust |
| Abstract: | In Austria, a gender pay transparency law was introduced in 2011, requiring companies with more than 1,000 employees to publish a pay report every other year. Firms with 500, 250, and 150 employees were subject to this requirement at later years. We estimate the impact of the law on men’s wages, women’s wages, and the gender pay gap using administrative data. The results from a regression discontinuity design suggest that the wage transparency law did not change wages or the gender wage gap. In larger firms, the wage of newly hired women increased more due to the reform than of newly hired men, suggesting that the gender wage gap decreased among newly hired workers. Our estimates of the effect of the law on employment growth or turnover are small, and statistically insignificant. For larger firms, we estimate that the transparency law led to a lower share of women in treated firms. These results are robust to several additional specifications. |
| Keywords: | wage transparency, gender wage gap |
| JEL: | J31 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8960&r=all |
| By: | Slichter, David; Taveras, Elisa; Monge, Daniela |
| Abstract: | We use information on the occupation choices and earnings of immigrants to measure differences in specific skills between workers from rich and poor countries. We have several findings. First, the skills which rich country workers specialize in mirror the skills which high-income individuals specialize in. Second, rich country workers have the greatest advantage in skills related to the ability to generate ideas (like creativity and critical thinking) rather than scientific or technical knowledge. Third, the skills in which rich country workers have the greatest advantage align closely with the skills used in management occupations. Fourth, workers from rich countries are more varied in their skills (e.g., what one Canadian is good at is different from what another Canadian is). These findings do not appear to be accounted for by the non-randomness of immigration or mismeasurement of skills. Overall, our results suggest that rich country workers have skills particularly well-adapted to production processes involving the coordinated efforts of large groups of people. |
| Keywords: | skills, immigration, development |
| JEL: | J24 O15 |
| Date: | 2021–02–11 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:106050&r=all |
| By: | Asaf Bernstein; Peter Koudijs |
| Abstract: | Mortgage amortization schedules are illiquid savings plans comparable in size to pension programs; however, little is known about their effects on wealth accumulation. Using individual administrative data and plausibly exogenous variation in the timing of home purchase (ex. childbirth-driven) around a 2013 Dutch reform, we find a near one-for-one rise in net worth for each dollar of amortization. Households leave other savings and liabilities unchanged, and instead increase labor supply and reduce consumption. Effects hold even for regular savers and older households. This has important macroprudential implications and suggests homeownership financed via amortizing mortgages is instrumental for household wealth building. |
| JEL: | D14 D15 E21 E6 G21 G4 G5 G51 J2 R3 |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28574&r=all |
| By: | Matthew Freedman; Shantanu Khanna; David Neumark |
| Abstract: | Created by the Tax Cuts and Jobs Act in 2017, the Opportunity Zone program was designed to encourage investment in distressed communities across the U.S. We examine the early impacts of the Opportunity Zone program on residents of targeted areas. We leverage restricted-access microdata from the American Community Survey and employ difference-in-differences and matching approaches to estimate causal reduced-form effects of the program. Our results point to modest, if any, positive effects of the Opportunity Zone program on the employment, earnings, or poverty of zone residents. |
| JEL: | H25 H73 J23 R38 |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28573&r=all |
| By: | Blanco, Andrés; Diaz de Astarloa, Bernardo; Drenik, Andres; Moser, Christian; Trupkin, Danilo |
| Abstract: | This paper studies earnings inequality and dynamics in Argentina between 1996 and 2015. Following the 2001--2002 crisis, the Argentine economy transitioned from a low- to a high-inflation regime. At the same time, the number of collective bargaining agreements increased and the minimum wage adjustments became more frequent. We document that this macroeconomic transition was associated with a persistent decrease in the dispersion of real earnings and cyclical movements in higher-order moments of the distribution of earnings innovations. To understand this transition at the micro level, we estimate processes of regular wage adjustments within job spells. As the Argentine economy transitioned from low to high inflation, the monthly frequency of regular wage adjustments almost doubled, while the distribution of changes in regular wages morphed from having a mode close to zero and being positively skewed to having a positive mode and being more symmetric. |
| Keywords: | Income Inequality, Income Volatility, Income Mobility, Wage Rigidity, Inflation |
| JEL: | D31 E24 E31 J31 |
| Date: | 2021–02–04 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:105759&r=all |
| By: | Casey B. Mulligan |
| Abstract: | Based on published estimates of its price elasticity of demand and of tax wedges, as well as the method of revealed preference, I estimate that the annual social value of ESI is about $1.5 trillion beyond what policyholders, their employers, and taxpayers pay for it. The private component of that value, which in some respects is the other side of “job lock,” derives in part from group plans, with the group determined by many characteristics other than the demand for healthcare. With voluntary groups formed this way, adverse risk selection is reduced, the groups can be effective at obtaining substantial discounts and rebates for their members, and division of labor employed in shopping for health providers. ESI is also a mechanism for employers to act on their incentives for a healthy and productive workforce. External effects include tax externalities (in both directions), encouraging work, and easing government expenditure obligations by helping to prevent people from going without health insurance. |
| JEL: | D40 D71 H30 I13 J32 |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28590&r=all |