nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2021‒04‒12
seventeen papers chosen by
Joseph Marchand
University of Alberta

  1. Career Spillovers in Internal Labor Markets By Nicola Bianchi; Giulia Bovini; Jin Li; Matteo Paradisi; Michael L. Powell
  2. Accounting for Limited Commitment between Spouses When Estimating Labor-Supply Elasticities By Bredemeier, Christian; Gravert, Jan; Juessen, Falko
  3. Do You Really Want to Share Everything? The Wellbeing of Work-Linked Couples By Hennecke, Juliane; Hetschko, Clemens
  4. Labor Rationing By Emily Breza; Supreet Kaur; Yogita Shamdasani
  5. Work-from-Home Productivity during the COVID-19 Pandemic: Evidence from Surveys of Employees and Employers By Morikawa, Masayuki
  6. From Mancession to Shecession: Women's Employment in Regular and Pandemic Recessions By Titan Alon; Sena Coskun; Matthias Doepke; David Koll; Michèle Tertilt
  7. Educational mismatch and earnings inequality By Tang, Rongsheng; Wang, Gaowang
  8. The Alpha Beta Gamma of the Labor Market By Victoria Gregory; Guido Menzio; David Wiczer
  9. Pay Me Later: Savings Constraints and the Demand for Deferred Payments By Lasse Brune; Eric Chyn; Jason T. Kerwin
  10. Cities and Tasks By Koster, Hans R.A.; Ozgen, Ceren
  11. Filling Big Shoes: CEO and COO Succession Planning in Family Businesses By Patrizia Fanasch; Bernd Frick
  12. High Frequency Income Dynamics By Jeppe Druedahl; Michael Graber; Thomas H. Jørgensen
  13. Changing Returns to Scale in Manufacturing 1880-1930: The Rise of (Skilled) Labor? By Jeanne Lafortune; Ethan G. Lewis; José Pablo Martínez; José Tessada
  14. The effects of private versus public health insurance on health and labor market outcomes By Dauth, Christine
  15. Impact of Changes in Values of Degrees on Wage Inequality: Evidence from Chile By Yoshimichi Murakami; Tomokazu Nomura
  16. The Labor Effects of Pro-labor Bias in Bankruptcy By Aloisio Araujo; Rafael Ferreira; Spyridon Lagaras; Flavio Moraes; Jacopo Ponticelli; Margarita Tsoutsoura
  17. What has driven the delinking of wages from productivity? A political economy-based investigation for high-income economies By Walter Paternesi Meloni; Antonella Stirati

  1. By: Nicola Bianchi; Giulia Bovini; Jin Li; Matteo Paradisi; Michael L. Powell
    Abstract: This paper studies career spillovers across workers, which arise in firms with limited promotion opportunities. We exploit a 2011 Italian pension reform that unexpectedly tightened eligibility criteria for the public pension, leading to sudden, substantial, and heterogeneous retirement delays. Using administrative data on Italian private-sector workers, the analysis leverages cross-firm variation to isolate the effect of retirement delays among soon-to-retire workers on the wage growth and promotions of their colleagues. We find evidence of spillover patterns consistent with older workers blocking the careers of their younger colleagues, but only in firms with limited promotion opportunities.
    JEL: J21 J26 J31 M51 M52
    Date: 2021–03
  2. By: Bredemeier, Christian (University of Wuppertal); Gravert, Jan (University of Wuppertal); Juessen, Falko (University of Wuppertal)
    Abstract: The Frisch elasticity of labor supply can be estimated by regressing hours worked on the hourly wage rate, controlling for consumption of the individual worker. However, most household panel surveys contain consumption information only at the household level. We show that proxying individual consumption by household consumption biases estimated Frisch elasticities downward as limited commitment in the household induces individual consumption to behave differently from household consumption. We develop an improved estimation approach that eliminates this bias by exploiting information on the composition of household consumption to infer its distribution. Using PSID data, we estimate Frisch elasticities of about 0.7.
    Keywords: labor-supply elasticity, limited commitment, intra-household decision making, couple households, consumption
    JEL: D13 D15 J12 J22 E21 E24
    Date: 2021–03
  3. By: Hennecke, Juliane (Auckland University of Technology); Hetschko, Clemens (University of Leeds)
    Abstract: Work as well as family life are crucial sources of human wellbeing, which however often interfere. This is especially so if partners work in the same occupation or industry. At the same time, being work-linked may benefit their career success. Still, surprisingly little is known about the wellbeing of work-linked couples. Our study fills this gap by examining the satisfaction differences between work-linked and non-work-linked partners. Using data from the German Socio-Economic Panel (SOEP, 2019), we estimate the effect of working in the same occupation and/or industry on life satisfaction as well as satisfaction with four areas of life: income, work, family and leisure. In the process, we employ pooled OLS estimations and instrumental variable strategies, for instance based on the gender disparity in industries and occupations. Our results suggest that being work-linked increases satisfaction with life as well as income and job satisfaction. These findings are consistent with positive assortative matching and mutual career support between work-linked partners. Our conclusions concern hiring couples as a means of recruiting exceptional talent.
    Keywords: work-linked couples, wellbeing, assortative matching, relationship quality, work-life balance, copreneurs, occupational gender disparity, dual career support
    JEL: I31 J12 J21 J44 M51
    Date: 2021–03
  4. By: Emily Breza; Supreet Kaur; Yogita Shamdasani
    Abstract: This paper measures excess labor supply in equilibrium. We examine hiring shocks—which employ 24% of the labor force in external month-long jobs—in Indian local labor markets. In peak months, wages increase instantaneously and local aggregate employment declines. In lean months, consistent with severe labor rationing, wages and aggregate employment are unchanged, with positive employment spillovers on remaining workers—indicating that over a quarter of labor supply is rationed. At least 24% of lean self-employment among casual workers occurs because they cannot find jobs. Consequently, traditional survey approaches mismeasure labor market slack. Rationing has broad implications for labor market analysis.
    JEL: E24 J2 J6 O10 O17
    Date: 2021–04
  5. By: Morikawa, Masayuki
    Abstract: Using data from original surveys of employees and employers, this study examines the prevalence, intensity, and productivity of working from home (WFH) practices during the coronavirus disease 2019 (COVID-19) pandemic in Japan. The results reveal that the mean WFH productivity relative to working at the usual workplace was about 60–70 percent, and it was lower for employees and firms that started WFH practice only after the spread of the COVID-19 pandemic. However, there is a large dispersion of WFH productivity, both by individual and firm characteristics. Highly educated and high-wage employees tended to exhibit a relatively small reduction in WFH productivity. The results obtained from the employee and employer surveys were generally consistent with each other.
    Keywords: COVID-19, productivity, social distancing, working from home
    JEL: D24 I12 J22 J24 M12 M54 R41
    Date: 2021–03
  6. By: Titan Alon; Sena Coskun; Matthias Doepke; David Koll; Michèle Tertilt
    Abstract: We examine the impact of the global recession triggered by the Covid-19 pandemic on women's versus men's employment. Whereas recent recessions in advanced economies usually had a disproportionate impact on men's employment, giving rise to the moniker "mancessions," we show that the pandemic recession of 2020 was a "shecession" in most countries with larger employment declines among women. We examine the causes behind this pattern using micro data from several national labor force surveys, and show that both the composition of women's employment across industries and occupations as well as increased childcare needs during closures of schools and daycare centers made important contributions. While many countries exhibit similar patterns, we also emphasize how policy choices such as furloughing policies and the extent of school closures shape the pandemic's impact on the labor market. Another notable finding is the central role of telecommuting: gender gaps in the employment impact of the pandemic arise almost entirely among workers who are unable to work from home. Nevertheless, among telecommuters a different kind of gender gap arises: women working from home during the pandemic spent more work time also doing childcare and experienced greater productivity reductions than men. We discuss what our findings imply for gender equality in a post-pandemic labor market that will likely continue to be characterized by pervasive telecommuting.
    JEL: D13 E32 J16 J20
    Date: 2021–04
  7. By: Tang, Rongsheng; Wang, Gaowang
    Abstract: We build a model to understand educational mismatch and earnings inequality among highly educated workers. Educational mismatch has a negative wage effect and a positive correlation with wage inequality, for occupuations and college majors. To disentangle different reasons or channels that contribute to wage inequality, we identity the three underlying reasons behind the mismatich-preference, promotion, and search friction-and quantify their impacts. Quantitatively, the preference and promotion channel negatively contribute to an inequality increase from 1990 to 2000; the match premium contributes to a 28.4% increase in inequality; and the contribution of search friction is 5.3%. We conclude that educational mismatch affects earnings inequality significantly and that the impact varies based on the underlying reasons. The study has important policy implications in that it shows that wage inequality can be reduced by policies for improving the education match rate and educational signaling and lowering market friction.
    Keywords: educational mismatch; earnings inequality; wage effect; search friction; promotion
    JEL: I24 J24 J31 O15
    Date: 2021–04–02
  8. By: Victoria Gregory; Guido Menzio; David Wiczer
    Abstract: Based on patterns of employment transitions, we identify three different types of workers in the US labor market: α’s β’s and γ’s. Workers of type α make up over half of all workers, are most likely to remain on the same job for more than 2 years and, when they become unemployed, typically find a new job within 1 quarter. Workers of type γ comprise less than one-fifth of workers, have a low probability of staying on the same job for more than 2 years and, when they become unemployed, face a high probability of remaining jobless for more than 1 year. Workers of type β are in between αs and γ’s. The earnings losses caused by displacement are relatively small and transitory for α-workers, while they are large and persistent for γ-workers. During the Great Recession, excess unemployment for α-workers rose by little and was reabsorbed quickly; unemployment for γ-workers rose by 20 percentage points and was not reabsorbed 4 years after its peak. We use a search-theoretic model of the labor market to rationalize the different patterns of employment transitions across types. The model naturally explains both the variation in the consequences of job displacement across types, and the variation in the dynamics of unemployment during the Great Recession. Our view is that several puzzling micro and macro phenomena about the labor market are driven by the behavior of the small group of γ-workers.
    Keywords: Search frictions; Unemployment; Business Cycles
    JEL: E24 O40 R11
    Date: 2021–04–01
  9. By: Lasse Brune; Eric Chyn; Jason T. Kerwin
    Abstract: We study a simple savings scheme that allows workers to defer receipt of part of their wages for three months at zero interest. The scheme significantly increases savings during the deferral period, leading to higher post-disbursement spending on lumpy goods. Two years later, after two additional rounds of the savings scheme, we find that treated workers have made permanent improvements to their homes. The popularity of the scheme implies a lack of good alternative savings options. The results of a follow-up experiment suggest that demand for the scheme is partly due to its ability to address self-control issues.
    JEL: D14 D9 D90 D91 J22 J33 O12 O15
    Date: 2021–03
  10. By: Koster, Hans R.A. (Vrije Universiteit Amsterdam); Ozgen, Ceren (University of Birmingham)
    Abstract: This paper explores the relationship between routine-biased technological change and agglomeration economies. Using administrative data from the Netherlands, we first show that in dense areas, jobs are less routine-task intensive (i.e. less repetitive and automatable), meaning that jobs cover a larger spectrum of tasks. We then explore how the routine intensity of jobs affects the urban wage premium. We find that the urban wage premium is higher for workers performing non-routine tasks, particularly analytic tasks, while it is absent for workers in routine task intensive jobs. These findings also hold within skill groups and suggest that routinisation increases spatial wage and skill inequality within urban areas. We further provide suggestive evidence that a better matching of skills to jobs and increased learning opportunities in cities can explain these findings.
    Keywords: routinisation, tasks, agglomeration economies, employment density, skills mismatch
    JEL: R30 R33
    Date: 2021–03
  11. By: Patrizia Fanasch (University of Paderborn); Bernd Frick (University of Paderborn)
    Abstract: The succession of chief executive officer (CEO) and chief operating officer (COO) is inevitable in the life cycle of a company and especially in family businesses. However, the majority of family businesses fail to survive across multiple generations. Although the relevance of effective succession planning to secure a competitive advantage is undisputed, no attempts have yet been made to assess the impact of family-internal changes on firm performance in general and firm reputation in particular with respect to the positions of CEO and COO. In an attempt to close these gaps, this study uses event study methodology to analyze the impact of multiple managerial changes in a sample of 1,397 German wineries in the period 1994 to 2017. The results indicate that family-internal CEO and COO changes have a significantly positive impact on firm reputation. Relay succession turns out to be a particularly well-suited instrument to increase reputation.
    Keywords: Family firms; Succession planning; Reputation; Wine industry
    JEL: M12 L22 L66 L14 J24
    Date: 2021–04
  12. By: Jeppe Druedahl (CEBI, Department of Economics, University of Copenhagen); Michael Graber (Department of Economics, University of Chicago); Thomas H. Jørgensen (CEBI, Department of Economics, University of Copenhagen)
    Abstract: We generalize the canonical permanent-transitory income process to allow for infrequent shocks. The distribution of income growth rates can then have a discrete mass point at zero and fat tails as observed in income data. We provide analytical formulas for the unconditional and conditional distributions of income growth rates and higher-order moments. We prove a set of identification results and numerically validate that we can simultaneously identify the frequency, variance, and persistence of income shocks. We estimate the income process on monthly panel data of 400,000 Danish males observed over 8 years. When allowing shocks to be infrequent, the proposed income process can closely match the central features of the data.
    Keywords: consumption-saving, income dynamics, panel data models
    JEL: C33 D31 J30
    Date: 2021–03–31
  13. By: Jeanne Lafortune; Ethan G. Lewis; José Pablo Martínez; José Tessada
    Abstract: This paper estimates returns to scale for manufacturing industries around the turn of the twentieth century in the United States by exploiting an industry-city panel data for the years 1880-1930. We estimate decreasing returns to scale on average over the period, contrary to most of the existing literature, because our empirical methodology allows us to separate returns to scale from "agglomeration" effects. We also find that returns to scale grew substantially after 1910, mostly because the return to labor grew. We find that this was more marked in industries that were more intensive in human capital and energy at the beginning of the period and in cells that were less competitive. Overall, results suggest that technological change and lack of initial competition played relevant roles in the rise of larger establishments in manufacturing.
    JEL: J23 N61 N62 R12
    Date: 2021–04
  14. By: Dauth, Christine (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany])
    Abstract: Among health care systems with both public and private elements (such as in the US and Germany), an important question is whether the type of health insurance exerts an impact on workers' careers. We exploit the unique German case of a two-tier health care system to analyze whether opting out of public statutory health insurance and into private health insurance affects the specific health and employment outcomes of employed workers over a period of nine years. We exploit administrative registers and apply a fuzzy regression discontinuity design. We do not find any evidence that the type of health insurance affects employed workers' outcomes in the medium or long run. This suggests that even though private health insurance entails more comfortable healthcare conditions, public health insurance does not come with heavy health impairments or detrimental employment outcomes." (Author's abstract, IAB-Doku) ((en))
    JEL: I13 J21 J30
    Date: 2021–03–30
  15. By: Yoshimichi Murakami (Research Institute for Economics and Business Administration(RIEB), Kobe University, JAPAN); Tomokazu Nomura (Faculty of Information Technology and Social Sciences, Osaka University of Economics, JAPAN)
    Abstract: Using the latest available data from nationally representative household surveys, we analyze the impact of changes in returns to higher education degrees on the evolution of wage inequality in Chile from 2013 to 2017. Employing a recently developed decomposition method using unconditional quantile regression and controlling for parental education levels, we find that a significant decrease in returns to professional degrees from new private universities plays a prominent role in reducing wage inequality. The effect is especially evident among younger graduates, thereby supporting the "degraded tertiary" hypothesis.
    Keywords: Higher education; Returns to degree; Wage inequality; Unconditional quantile regression; Chile
    JEL: I23 I24 I26 J31 O15 O54
    Date: 2021–03
  16. By: Aloisio Araujo; Rafael Ferreira; Spyridon Lagaras; Flavio Moraes; Jacopo Ponticelli; Margarita Tsoutsoura
    Abstract: Judicial decisions in bankruptcy are often influenced by the goal to preserve employment in financially distressed firms. What are the effects of these pro-labor decisions on workers' earnings and employment trajectories? We construct a new court-level measure of pro-labor bias based on the text of judicial decisions and exploit the random assignment of cases to courts within judicial districts in the state of Sao Paulo in Brazil to study the effect of pro-labor bias on labor market outcomes. We find that workers of firms assigned to high-pro-labor courts experience 4.4% lower post-bankruptcy earnings. This negative effect is primarily driven by wage adjustment rather than the probability of employment, and it is persistent in the five-year period after bankruptcy. We discuss several mechanisms that can drive this result.
    JEL: G33 J30 K0 O16
    Date: 2021–04
  17. By: Walter Paternesi Meloni; Antonella Stirati
    Abstract: The drop in the labor share experienced in high-income countries in the last three to four decades testifies to a general divergence in the growth rates of labor productivity and average wages. In this respect, we first quantify the magnitude of this decoupling; second, we inquire into the factors that prevented wage growth from keeping pace with productivity. We endorse a ‘political economy’ approach – a line of inquiry which has been recently fueled and followed by the post-Keynesian literature – focusing on the effects on wage dynamics of some macroeconomic and institutional factors in a panel of 22 OECD economies for the post-1970 period. We find that, on average and over the cycle, only 50% of increased productivity went to workers. Our empirics indicate that labor market slack and the weakening of pro-labor institutions have acted as wage-squeezing factors; a negative effect is also found for globalization, specifically for trade openness and international capital mobility. Other aspects of the process of financialization, such as market capitalization and the dynamics of the real interest rate, seem not to have exerted a substantial impact on real wage growth.
    Keywords: political economy; income distribution; labor market institutions; labor market slack; globalization; financialization
    JEL: E25 J30 P16
    Date: 2021–03

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