nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2021‒05‒17
twenty-one papers chosen by
Joseph Marchand
University of Alberta

  1. Tax Planning Knowledge Diffusion via the Labor Market By John M. Barrios; John Gallemore
  2. Four Decades of Canadian Earnings Inequality and Dynamics across Workers and Firms By Audra Bowlus; Émilien Gouin-Bonenfant; Huju Liu; Lance Lochner; Youngmin Park
  3. Do International Study Programmes Pay off for Local Students? By Wang, Zhiling; Pastore, Francesco; Karreman, Bas; van Oort, Frank
  4. Human Capital, Female Employment, and Electricity: Evidence from the Early 20th Century United States By Daniela Vidart
  5. Do You Really Want to Share Everything? The Wellbeing of Work-Linked Couples By Juliane Hennecke; Clemens Hetschko
  6. Investing in competences and skills and reforming the labour market to create better jobs in Indonesia By Patrice Ollivaud
  7. "Too Shocked to Search" The Covid-19 Shutdowns' Impact on the Search for Apprenticeships By Daniel Goller; Stefan C. Wolter
  8. Business Cycle Implications of Firm Market Power in Labor and Product Markets By Sami Alpanda; Sarah Zubairy
  9. Labor Market Assimilation of South-South Forced Migrants: Evidence from a Small Open Latin American Economy By Javier Torres; Francisco Galarza
  10. COVID-19 restrictions in the US: wage vulnerability by education, race and gender By Borja Gambau; Juan C. Palomino; Juan G. Rodríguez; Raquel Sebastian
  11. Widows’ Time, Time Stress and Happiness: Adjusting to Loss By Daniel S. Hamermesh; Michał Myck; Monika Oczkowska
  12. Formation of college plans: expected returns, preferences and adjustment process By Ghazala Azmat; Katja Kaufmann
  13. Quantifying Market Power and Business Dynamism in the Macroeconomy By Jan De Loecker; Jan Eeckhout; Simon Mongey
  14. Imperfect Competition and Rents in Labor and Product Markets: The Case of the Construction Industry By Kory Kroft; Yao Luo; Magne Mogstad; Bradley Setzler
  15. Are temporary jobs stepping stones or dead ends? A meta-analytical review of the literature By Filomena, Mattia; Picchio, Matteo
  16. Productivity premia and firm heterogeneity in Eastern Africa By Demena, B.A.; Msami, J.; Mmari, D.E.; van Bergeijk, P.A.G.
  17. Could the COVID-19 Crisis Affect Remittances and Labour Supply in ASEAN Economies? Macroeconomic Conjectures Based on the SARS Epidemic By Alberto Posso
  18. Air Pollution and Adult Cognition: Evidence from Brain Training By Andrea La Nauze; Edson R. Severnini
  19. Precocious inventors: Early patenting success and lifetime inventive performance By Michlbauer, Theresa; Zwick, Thomas
  20. Discrimination, Managers, and Firm Performance: Evidence from “Aryanizations” in Nazi Germany By Kilian Huber; Volker Lindenthal; Fabian Waldinger
  21. Incentive contracts when agents distort probabilities By Víctor González-Jiménez

  1. By: John M. Barrios; John Gallemore
    Abstract: We examine the extent to which the labor market facilitates the diffusion of tax planning knowledge across firms. Using a novel dataset of tax department employee movements between S&P 1500 firms, we find that firms experience an increase in their tax planning after hiring a tax employee from a tax aggressive firm. This finding is robust to various research designs and specifications. Consistent with tax planning knowledge driving this result, we find that the tax planning benefit of hiring an employee from a tax aggressive firm is stronger when the employee has more tax experience and is hired into a senior tax department role, and when the hiring firm likely had less tax planning knowledge prior to the hire. Further tests suggest that tax planning knowledge is highly specific in nature: the increase in tax avoidance is larger when the hiring and former firms are similar (i.e., operating in the same sector or having similar foreign operations), and firms are more likely to hire tax department employees from firms with similar characteristics. Our study documents the first-order role of the labor market in the diffusion of tax planning knowledge across firms, and suggests that tax department human capital is a central determinant of tax planning outcomes.
    JEL: H25 H26 J20 J24 J4 J44 J60
    Date: 2021–05
  2. By: Audra Bowlus; Émilien Gouin-Bonenfant; Huju Liu; Lance Lochner; Youngmin Park
    Abstract: This paper studies the evolution of individual earnings inequality and dynamics in Canada from 1983 to 2016 using tax files and administrative records. Linking these individuals to their employers (and rich administrative records on firms) beginning in 2001, it also documents the relationship between the earnings dynamics of workers and the size and growth of their employers. It highlights three main patterns over this period: First, with a few exceptions (sharp increase in top 1% and declining gender gap), Canada has experienced relatively modest changes in overall earnings inequality, volatility, and mobility between 1983 and 2016. Second, there is considerable variability in earnings inequality and volatility over the business cycle. Third, the earnings dynamics of individuals are strongly related to the size and employment growth of their employers.
    JEL: E24 J24 J31 J62 L25
    Date: 2021–05
  3. By: Wang, Zhiling; Pastore, Francesco; Karreman, Bas; van Oort, Frank
    Abstract: International study programmes are increasing in number worldwide, but little is known about the impact on local students' job prospects, especially in a non-English speaking countries. Using rich administrative data from Statistics Netherlands, we analyse labour market outcomes of native graduates in master programmes of Dutch universities between 2006 to 2014 within 5 years after graduation. A coarsened exact matching analysis within cohort-university-detailed field of study group addresses the self-selection issue by generating a matched sample of students with similar characteristics. We find that graduates from international programmmes obtain a wage premium of 2.3% starting from the 1st year after graduation, ceteris paribus. The wage premium keeps increasing by about 1% every year. We investigate the mechanisms through which the wage premium operates. The wage premia can neither be explained by wage increase via cross-firm mobility, nor by faster upward mobility within a firm. Instead, evidence point towards the differential characteristics of the first job upon graduation. Graduates from international programmes are much more likely to choose large firms that have a higher share of foreign-born employees and have business of trade for the first job. They get a head start in wage level and the initial wage advantages persist in the long-run.
    Keywords: international programme,native students,wage premium,coarsened exact matching
    JEL: I23 J24 F22
    Date: 2021
  4. By: Daniela Vidart (University of Connecticut)
    Abstract: This paper revisits the link between electrification and the rise in female labor force participation (LFP), and presents theoretical and empirical evidence showing that elec-trification triggered a rise in female LFP by increasing market opportunities for skilled women. I formalize my theory in an overlapping generations model, and find that my mechanism explains one third of the rise in female LFP during the rollout of electricity in the US (1880-1960), and matches the slow decline in female home-production hours during this period. I then present micro-evidence supporting my theory using newly digitized data on the early electrification of the US.
    Keywords: Female Labor Force Participation, Human Capital Accumulation, Electrification, Skill-biased Technical Change, Home to Market Transition, Brain vs. Brawn
    JEL: O33 J24 E24 O11 J22
    Date: 2021–05
  5. By: Juliane Hennecke; Clemens Hetschko
    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
  6. By: Patrice Ollivaud
    Abstract: Favourable demographics has boosted Indonesia’s economic growth in recent decades, but its contribution will wane over time. Skills and competences will therefore become increasingly important to raise living standards. Educational attainment has improved considerably, but the quality of education remains disappointing. At the same time, technological changes, new organisational business models and evolving worker preferences make upskilling and reskilling increasingly important. This warrants continuous investment in improving education and lifelong training, in terms of both quality and quantity, with an enhanced role for social partners. Tackling existing and rising skill shortages requires more participation from women, older adults, internal migrants, disadvantaged groups, and foreign workers. Expanding access to early childhood education would provide all children with better opportunities and bring significant benefits. Reducing informality is key to encouraging investment in skills. The COVID-19 crisis has highlighted workers’ insufficient protection against shocks, underlining the need for unemployment insurance. It is also an opportunity to boost digitalisation and innovate with smart practices. School closures are already penalising learning outcomes and will reduce future earnings.
    Keywords: education, Indonesia, informal jobs, labour market, skills
    JEL: I25 J21 J24 J30 J46
    Date: 2021–05–18
  7. By: Daniel Goller; Stefan C. Wolter
    Abstract: This study is, to the best of our knowledge, the first analysis of apprenticeship supply that allows us to analyse the effects of the shutdowns triggered by the COVID-19 pandemic before, during and after these shutdowns by means of daily searches for vacant apprenticeships. Analysing over 10 million search queries on the national administrative platform for apprenticeship offers from February 2020 until April 2021 we find a sharp reduction of up to 40% in the daily number of search queries associated to the first shutdown in March 2020, followed by some catch-up effect thereafter. Although we find a strong relationship between the intensity of the politically imposed restrictions due to the COVID-19 pandemic and daily search queries, this relationship weakens over time as the pandemic progresses. Finally, we find a large heterogeneity of effects, but all regions and occupational groups studied show a statistically significant negative effect of the measures on the search intensity for apprenticeships.
    Keywords: Covid-19, Switzerland, stringency index, apprenticeship
    JEL: I20 J22
    Date: 2021
  8. By: Sami Alpanda (University of Central Florida, Department of Economics); Sarah Zubairy (Texas A&M University, Department of Economics)
    Abstract: In this paper, we analyze the business cycle implications of firms having oligopsony power in labor markets, as well as oligopoly power in product markets, within the context of a New Keynesian dynamic stochastic general equilibrium model with firm entry and exit. Relative to the standard setup with monopolistic competition in both goods and labor markets, the strategic interaction between intermediate goods firms in the current setup results in larger price markups as well as wage markdowns, while the slopes of the aggregate price and wage Phillips curves become flatter. These effects are strengthened in a strongly non-linear fashion as the number of firms in each sector decline. Oligopsonistic labor markets also render wage shocks expansionary, unlike in the standard setup. Results indicate that a secular increase in industry concentration would not only reduce the labor share of income, but also weaken the pass-through from firms' marginal costs to prices and from productivity increases to real wages.
    Keywords: Market power, oligopoly, oligopsony, New Keynesian DSGE model, entry-exit.
    JEL: E25 E32 L13
    Date: 2021–04–29
  9. By: Javier Torres (Universidad del Pacífico); Francisco Galarza (Universidad del Pacífico)
    Abstract: We study the negative wage premium Venezuelan immigrants face in the Peruvian labor market in 2018, by merging two national household surveys. Consistent with an imperfect transfer of skills, we find that Venezuelans face, on average, a 40% discount on their hourly wage compared to Peruvians. Interestingly, there is heterogeneity in wage premiums across education levels and broad groups of fields of study. The higher the education level, the larger the negative wage premium. Venezuelans with low levels of education could earn a higher hourly wage than Peruvian. Further, Immigrants with careers related to Economics, Administration and Commerce face the least wage discount. Finally, we find that foreign work experience has negligible value in the host country.
    Keywords: Immigration, Economic Assimilation, Wage Gap.
    JEL: J15 J24 J31 J70
    Date: 2021–04
  10. By: Borja Gambau (Universidad Complutense de Madrid (Spain).); Juan C. Palomino (University of Oxford (UK), INET and Department of Social Policy and Intervention.); Juan G. Rodríguez (Universidad Complutense de Madrid (Spain), ICAE, EQUALITAS and CEDESOG.); Raquel Sebastian (Universidad Complutense de Madrid (Spain), ICAE and EQUALITAS.)
    Abstract: We study the wage vulnerability to the stay-at-home orders and social distancing measures imposed to prevent COVID-19 contagion in the US by education, race, gender, and state. Under 2 months of lockdown plus 10 months of partial functioning we find that both wage inequality and poverty increase in the US for all social groups and states. For the whole country, we estimate an increase in inequality of 4.1 Gini points and of 9.7 percentage points for poverty, with uneven increases by race, gender, and education. The restrictions imposed to curb the spread of the pandemic produce a double process of divergence: both inequality within and between social groups increase, with education accounting for the largest part of the rise in inequality between groups. We also find that education level differences impact wage poverty risk more than differences by race or gender, making lower-educated groups the most vulnerable while graduates of any race and gender are similarly less exposed. When measuring mobility as the percentile rank change, most women with secondary education or higher move up, while most men without higher education suffer downward mobility. Our findings can inform public policy aiming to address the disparities in vulnerability to pandemic-related shocks across different socioeconomic groups.
    Keywords: COVID-19; inequality; poverty; mobility; United States.
    JEL: D33 I32 J31 O51
    Date: 2021–04
  11. By: Daniel S. Hamermesh; Michał Myck; Monika Oczkowska
    Abstract: By age 77 a plurality of women in wealthy Western societies are widows. Comparing older (aged 70+) married women to widows in the American Time Use Survey 2003-18 and linking the data to the Current Population Survey allow inferring the short- and longer-term effects of an arguably exogenous shock—husband’s death—and measuring the paths of adjustment of time use to it. Widows differ from otherwise similar married women, especially from married women with working husbands, by cutting back on home production, mainly food preparation and housework, mostly by engaging in less of it each day, not doing it less frequently. French, Italian, German, and Dutch widows behave similarly. Widows are alone for 2/3 of the time they had spent with their spouses, with a small increase in time with friends and relatives shortly after becoming widowed. Evidence from the European countries shows that widows feel less time stress than married women but are also less satisfied with their lives. Following older women in 18 European countries before and after a partner’s death shows that widowhood reduces their feelings of time pressure. U.S. longitudinal data demonstrate that it increases feelings of depression. Most of the adjustment of time use in response to widowhood occurs within one year of the husband’s death; but feelings of reduced time pressure and of depression persist much longer.
    JEL: I31 J14 J22
    Date: 2021–05
  12. By: Ghazala Azmat; Katja Kaufmann
    Abstract: We exploit a large exogenous shock to study the determinants of college attendance and the role played by one's environment. We analyze whether, and how quickly, adolescents' college plans are adapted, explore factors leading to the adjustment, and examine how these factors ultimately impact later educational attainment. Using differences across East German cohorts induced by the timing of the German Reunification (a change for the East from state socialism to capitalist democracy), we show that shortly after relative to before that time, college plans among high-school students increased substantially, which was followed by sizable increases in the completion of the college entrance certificate five years later. Our analysis sheds light on the elasticity of beliefs and preferences of different cohorts of youths in the case of a large shock. Perceived educational returns, economic preferences ("consumerism") and sociopolitical attitudes ("individualism") adapt quickly in response to the shock and are directly linked to changes in plans and outcomes. Cohorts closer to critical educational junctions at the time of Reunification, however, adjusted their plans to a much lesser extent. While they similarly updated the expected returns to education, they exhibited a slower adjustment in their preferences relative to younger cohorts.
    Keywords: college plans, perceived returns, economic, social and political preferences
    JEL: I21 D91 Z1
    Date: 2021–05
  13. By: Jan De Loecker; Jan Eeckhout; Simon Mongey
    Abstract: We propose a general equilibrium economy with oligopolistic output markets in which two channels can cause a change in market power: (i) technology, via changes to productivity shocks and the cost of entry, (ii) market structure, via changes to the number of potential competitors. First, we disentangle these narratives by matching time-series on markups, labor reallocation and costs between 1980 and 2016, finding that both channels are necessary to account for the data. Second, we show that changes in technology and market structure over this period yielded positive welfare effects from reallocation and selection, but off-setting negative effects from deadweight loss and overhead. Overall, welfare is 9 percent lower in 2016 than in 1980. Third, the changes we identify replicate cross-sectional patterns in declining business dynamism, declining equilibrium wages and labor force participation, and sales reallocation toward larger, more productive firms.
    JEL: E0 L1
    Date: 2021–05
  14. By: Kory Kroft; Yao Luo; Magne Mogstad; Bradley Setzler
    Abstract: We quantify the importance of imperfect competition in the US construction industry by estimating the size of rents earned by American firms and workers. To obtain a comprehensive measure of the total rents and to understand its sources, we take into account that rents may arise due to markdown of wages in the labor market, or markup of prices in the product market, or both. Our analyses combine the universe of US business and worker tax records with newly collected records from US procurement auctions. We use this data to identify and estimate a model where construction firms compete with one another for projects in the product market and for workers in the labor market. The firms may participate both in the private market and in government projects procured through auctions. We find evidence of considerable wage- and price-setting power. This imperfect competition creates sizable rents, three-fourths of which is captured by the firms. The incentives of firms to mark down wages and reduce employment due to wage-setting power are attenuated by their price-setting power in the product market.
    Keywords: imperfect competition; monopsony; market power; rents; rent sharing; auction; procurement
    JEL: J31 J42 D44 L11
    Date: 2021–05–07
  15. By: Filomena, Mattia; Picchio, Matteo
    Abstract: We present a meta-analysis on the debate about the "stepping stone vs. dead end" hypothesis related to the causal effect of temporary jobs on future labour market performances. We select academic papers published on international peer-reviewed journals from 1990 until 2021. Among 78 observations from 64 articles, 32% support the hypothesis according to which temporary contracts are a port of entry into stable employment positions, 23% report ambiguous or mixed findings, and the remaining 45% provide evidence in favour of the dead end hypothesis. The results from meta-regressions suggest that the stepping stone effect is more likely to emerge when self-selectivity issues are dealt with, especially when using the timing-of-events approach. The studies focusing on temporary work agency jobs and casual/seasonal jobs detect more easily results in favour of the dead end hypothesis. Finally, in more recent years and when the unemployment rate is larger, the dead end hypothesis is more likely to prevail.
    Keywords: Meta-analysis,labour market,temporary jobs,stepping stones,dead ends
    JEL: J08 J41 J42 J81
    Date: 2021
  16. By: Demena, B.A.; Msami, J.; Mmari, D.E.; van Bergeijk, P.A.G.
    Abstract: Productivity development is a key issue for export-driven growth and development. We use East African Community (EAC) firm-level data. Instead of focusing on single EAC partners, using the World Bank Enterprise Surveys, investigate firm-level productivity difference for seven countries that are part of the COMESA-EAC-SADC tripartite free trade area (TFTA). Using export and ownership dimensions, we identify four types of firms: National Domestic, National Exporters, Foreign Domestic and Foreign Exporters. We find a clear export productivity premium for national manufacturing firms and service sectors, but not for foreign owned firms. We also find clear foreign-ownership productivity premium for both domestic and exporting firms in manufacturing sectors but less clear in services sectors. The gap between national export premium and foreign-ownership premium is stronger in manufacturing firms as opposed to service sectors. Moreover, we find clear and strong productivity premia in size, training programmes and level of development in the manufacturing firms. In the services sector, these premia are always smaller and only significant for medium-sized firms. There is no difference in experience premium between sectors in terms of both significance and magnitude of the estimated coefficients.
    Keywords: Productivity, exports, firm heterogeneity, FDI, sub-Saharan Africa, EAC.
    JEL: O12 J24 F23 D20 O55
    Date: 2021–05–06
  17. By: Alberto Posso (Centre for International Development, RMIT University)
    Abstract: Debates on resilience to economic shocks in the ASEAN region focus on what policymakers can do to mitigate negative impacts associated with financial-economic crises. The COVID-19 pandemic has made it clear that the region is also vulnerable to health-economic crises. This study applies a difference-in-difference strategy to data from the 2003 SARS epidemic to shed light on how a global pandemic can affect labour supply and remittances in ASEAN economies. Findings suggest that even a relatively short-lived epidemic can have long-lasting effects on labour supply.
    Keywords: SARS, ASEAN, labour supply; remittances
    JEL: O11 J21 F24
    Date: 2021–04–28
  18. By: Andrea La Nauze; Edson R. Severnini
    Abstract: We exploit novel data from brain-training games to examine the impacts of air pollution on a comprehensive set of cognitive skills of adults. We find that exposure to particulate matter (PM2.5) impairs adult cognitive function, and that these effects are largest for those in prime working age. These results confirm a hypothesized mechanism for the impacts of air pollution on productivity. We also find that the cognitive effects are largest for new tasks and for those with low ability, suggesting that air pollution increases inequality in workforce productivity.
    JEL: I14 I24 J24 Q53
    Date: 2021–05
  19. By: Michlbauer, Theresa; Zwick, Thomas
    Abstract: This paper shows that inventors with an early patenting success have a higher inventive productivity during their remaining career. We use European patent data for a period of 32 years for 1240 German inventors. The patent data are linked with survey data that provide information on an extensive list of individual inventor characteristics and time variant information on work environment characteristics for the same period. We define an early success as being in the fastest quartile of inventors applying for the first patent after completing education or being in the highest quartile of citations received for the first patent. The higher career productivity seems to be a consequence of higher individual ability rather than cumulative advantage. Inventors with high productivity early in their career cannot increase their productivity further but instead experience a regression to the mean. Inventors with a fast or high-quality first patent also experience this regression, albeit at a lower rate. In addition, these inventors do not obtain better resources, such as a higher share of research and development time, larger employers, more voluntary job moves, or more co-inventors, during their remaining career than inventors without early success.
    Keywords: Inventive Productivity,Early Patenting Success,Ability,Cumulative Advantage
    JEL: J24 M54 O31 O32
    Date: 2021
  20. By: Kilian Huber; Volker Lindenthal; Fabian Waldinger
    Abstract: Large-scale increases in discrimination can lead to dismissals of highly qualified managers. We investigate how expulsions of senior Jewish managers, due to rising discrimination in Nazi Germany, affected large corporations. Firms that lost Jewish managers experienced persistent reductions in stock prices, dividends, and returns on assets. Aggregate market value fell by roughly 1.8 percent of German GNP because of the expulsions. Managers who served as key connectors to other firms and managers who were highly educated were particularly important for firm performance. The findings imply that individual managers drive firm performance. Discrimination against qualified business leaders causes first-order economic losses.
    JEL: D22 E60 G30 J7 J71 M12 N24 N34 N8
    Date: 2021–05
  21. By: Víctor González-Jiménez
    Abstract: I show that stochastic contracts are powerful motivational devices when agents distort probabilities. Stochastic contracts allow the principal to target probabilities that, when distorted by the agent, enhance the agent's motivation to exert effort on the delegated task. This novel source of incentives is absent in traditional contracts. A theoretical framework and an experiment demonstrate that stochastic contracts targeting small probabilities, and thus exposing the agent to a large degree of risk, generate higher performance levels than traditional contracting modalities. A result that contradicts the standard rationale that optimal contracts should feature a tradeoff between insurance and efficiency. This unintuitive finding is attributed to probability distortions caused by likelihood insensitivity - cognitive limitations that restrict the accurate evaluation of probabilities.
    JEL: C91 C92 J16 J24
    Date: 2101–05

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