nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2021‒07‒12
twenty-six papers chosen by
Joseph Marchand
University of Alberta

  1. Public Sector Jobs: Working in the Public Sector in Europe and the US By Checchi, Daniele; Fenizia, Alessandra; Lucifora, Claudio
  2. Differences in On-the-Job Learning across Firms By Arellano-Bover, Jaime; Saltiel, Fernando
  3. The Risk of Automation in Latin America By Leonardo Gasparini; Irene Brambilla; Guillermo Falcone; Carlo Lombardo; Andrés César
  4. Skills, Degrees, and Labor Market Inequality By Peter Blair; Papia Debroy; Justin Heck
  5. The Creativity Premium By Gill, David; Prowse, Victoria L.
  6. The Effects of COVID-19 on Employment, Labour Markets and Gender Equality in Central America By Webster, Allan; Khorana, Sangeeta; Pastore, Francesco
  7. Financial distress and the role of management in micro and small-sized firms By Fernando Alexandre; Sara Cruz; Miguel Portela
  8. The consequences of EU eastern enlargement on human capital accumulation and wages in Germany By Bernhard H. Wittek; Samuel Muehlemann
  9. Give it Another Shot: Startup Experience and the Mobilization of Human Resources in New Ventures By Rocha, Vera; Pozzoli, Dario
  10. Entry regulation and competition: Evidence from retail and labormarkets of pharmacists By Rostam-Afschar, Davud; Unsorg, Maximiliane
  11. Motherhood and the Allocation of Talent By Berniell, Maria Ines; Berniell, Lucila; De la Mata, Dolores; Edo, María; Fawaz, Yarine; Machado, Matilde P.; Marchionni, Mariana
  12. Dynamic Labor Reallocation with Heterogeneous Skills and Uninsured Idiosyncratic Risk By Ester Faia; Marianna Kudlyak; Ekaterina Shabalina
  13. Couples' Time-Use and Aggregate Labor Market Outcomes By Balleer, Almut; Merz, Monika; Papp, Tamás K.
  14. Labor Market Signaling and the Value of College: Evidence from Resumes and the Truth By Kreisman, Daniel; Smith, Jonathan; Arifin, Bondi
  15. "It Ain't Where You're from, It's Where You're At": Hiring Origins, Firm Heterogeneity, and Wages By Di Addario, Sabrina; Kline, Patrick; Saggio, Raffaele; Sølvsten, Mikkel
  16. Why Making Promotion after a Burnout Is like Boiling the Ocean By Sterkens, Philippe; Baert, Stijn; Rooman, Claudia; Derous, Eva
  17. Graduating from a Less Selective University during a Recession: Evidence from Mobility Report Cards and Employer Recruiting By Weinstein, Russell
  18. The return on human (STEM) capital in Belgium By Gert Bijnens; Emmanuel Dhyne
  19. Turning a "Blind Eye"? Compliance with Minimum Wage Standards and Employment By Garnero, Andrea; Lucifora, Claudio
  20. Pension Incentives and Labor Supply: Evidence from the Introduction of Universal Old-Age Assistance in the UK By Giesecke, Matthias; Jaeger, Philipp
  21. The effect of higher-achieving peers on major choices and labor market outcomes By Jan Feld; Ulf Zölitz
  22. Keeping Refugee Children in School and Out of Work: Evidence from the World's Largest Humanitarian Cash Transfer Program By Aygün, Aysun Hızıroğlu; Kirdar, Murat G.; Koyuncu, Murat; Stoeffler, Quentin
  23. Productivity and human capital: The Italian case By Camilla Andretta; Irene Brunetti; Anna Rosso
  24. Investigating neighbourhood effects in welfare-to-work transitions By Vincent Dautel; Alessio Fusco
  25. Incentives, Health, and Retirement: Evidence from a Finnish Pension Reform By Ollonqvist, Joonas; Kotakorpi, Kaisa; Laaksonen, Mikko; Martikainen, Pekka; Pirttilä, Jukka; Tarkiainen, Lasse
  26. Do Universities Improve Local Economic Resilience? By Howard, Greg; Weinstein, Russell; Yang, Yuhao

  1. By: Checchi, Daniele (University of Milan); Fenizia, Alessandra (George Washington University); Lucifora, Claudio (Università Cattolica del Sacro Cuore)
    Abstract: This paper reviews recent theoretical and empirical work on public employment management and presents novel stylized facts on public sector jobs. In the first part, we examine the evolution of managerial practices in the public sector and discuss the contractual arrangement of public sector workers and the labor market institutions that are prevalent in this setting. We argue that, for public sector employees, standard incentive schemes have a low power and are generally less effective than in the private sector. In the second part, we use two international surveys (6th European Working Conditions Survey, covering 28 European countries, and 2nd American Working Conditions Survey for the United States) to investigate selection into public sector employment, public-private pay differentials, and differences in working conditions in Europe and the US. While in Europe the public-private earning gap is positive for low-skilled workers and turns negative for skilled individuals, the gap is negative and relatively flat over the skill distribution in the US. We also document a positive public-private earnings differential in healthcare and education services in Europe, and a negative differential, though not statistically significant, in the US. We find that, in the US, two out of three public sector employees are exposed to some performance-related pay scheme, while in Europe is less than one in four. We do not find evidence that the public sector ensures a fairer work environment, as instances of harassment, discrimination, and obnoxious behavior are widespread.
    Keywords: public sector, managerial practices, public-private pay differentials, working conditions
    JEL: J45 J31 H50
    Date: 2021–06
  2. By: Arellano-Bover, Jaime (Yale University); Saltiel, Fernando (McGill University)
    Abstract: We present evidence consistent with large disparities across firms in the on-the-job learning their young employees experience, using administrative datasets from Brazil and Italy. We categorize firms into discrete "classes" using a clustering methodology which groups together firms with similar distributions of unexplained earnings growth. Equipped with this categorization of firms-which our conceptual framework interprets as skill-learning classes-we document three main results. First, Mincerian returns to experience vary substantially across experiences acquired in different firm classes, and the magnitude of this heterogeneity is associated with significant shifts across the distribution of early-career wage growth. Second, past experience at firms with better on-the-job learning is associated with subsequent jobs featuring greater non-routine task content. Third, firms' observable characteristics only mildly predict on-the-job learning opportunities. Our findings hold among involuntarily displaced workers who have no seniority at their new jobs, which is consistent with a portable skills interpretation.
    Keywords: human capital, on-the-job learning, firms
    JEL: J24 J31
    Date: 2021–06
  3. By: Leonardo Gasparini (CEDLAS-IIE-FCE-UNLP & CONICET); Irene Brambilla (CEDLAS-IIE-FCE-UNLP & CONICET); Guillermo Falcone (CEDLAS-IIE-FCE-UNLP & CONICET); Carlo Lombardo (CEDLAS-IIE-FCE-UNLP & CONICET); Andrés César (CEDLAS-IIE-FCE-UNLP)
    Abstract: In this paper we characterize workers’ vulnerability to automation in the near future in the six largest Latin American economies as a function of the exposure to routinization of the tasks that they perform and the potential automation of their occupation. We combine (i) indicators of potential automatability by occupation and (ii) worker’s information on occupation and other labor variables. We find that the ongoing process of automation is likely to significantly affect the structure of employment. In particular, unskilled and semi-skilled workers are likely to bear a disproportionate share of the adjustment costs. Automation will probably be a more dangerous threat for equality than for overall employment.
    JEL: J21 J23 J24 O33
    Date: 2021–06
  4. By: Peter Blair (Harvard Graduate School of Education); Papia Debroy (Opportunity@Work); Justin Heck (University of Michigan, Ann Arbor)
    Abstract: Over the past four decades, income inequality grew significantly between workers with bachelor’s degrees and those with high school diplomas (often called “unskilled”). Rather than being unskilled, we argue that these workers are STARs because they are skilled through alternative routes—namely their work experience. Using the skill requirements of a worker’s current job as a proxy of their actual skill, we find that though both groups of workers make transitions to occupations requiring similar skills to their previous occupations, worke rs with bachelor’s degrees have dramatically better access to higher wage occupations where the skill requirements exceed the workers’ observed skill. This measured opportunity gap offers a fresh explanation of income inequality by degree status and reestablishes the important role of on-the-job training in human capital formation.
    Keywords: occupational training, college education, opportunity gap
    JEL: I21 J24 J62
    Date: 2021–06
  5. By: Gill, David (Purdue University); Prowse, Victoria L. (Purdue University)
    Abstract: Success in life increasingly depends on key skills that allow people to thrive in education, the labor market, and their interactions with others. In this paper, we emphasize creativity as a key skill that is essential to open-ended problem solving and resistant to automation. We use rich longitudinal data to study the relationship between people's creativity measured in childhood and their individual attributes and life outcomes. We find that childhood creativity predicts labor market and educational success: more creative individuals earn more during the course of their careers, work in higher occupational categories, and reach higher levels of educational attainment. Our analysis of attributes further suggests that creative individuals have a package of practical skills that allows them to thrive in work environments where learning from experience is important. We combine insights from our findings with evidence from psychology to propose creativity-improving interventions that could lead to substantial economic benefits.
    Keywords: creativity, skills, life outcomes, children, longitudinal, labor market, wages, earnings, occupational category, educational attainment, practical skills, experience, cognitive ability, human capital
    JEL: D91 J24
    Date: 2021–05
  6. By: Webster, Allan (Bournemouth University); Khorana, Sangeeta (Bournemouth University); Pastore, Francesco (Università della Campania Luigi Vanvitelli)
    Abstract: This study considers the economic impact of Covid-19 on enterprises in four Central American countries – El Salvador, Guatemala, Honduras and Nicaragua. At the time of the analysis neither the pandemic nor its economic consequences had fully run their course. It is not, therefore, a definitive analysis but it is important to try to draw important lessons as soon as possible. The main focus of the study was the initial impact on labour markets. The analysis was based on World Bank enterprise surveys undertaken before the outbreak of Covid-19 and follow-up surveys on the effects of the pandemic, also undertaken by the World Bank. These were combined with data on government containment measures and on morbidity and mortality rates. The use of enterprise data to analyse labour market issues has some limitations but also many strengths. The data is useful for analysing the consequences for gender equality in employment. Since the demand for labour is a derived demand firm level data provides a clear link to labour market effects. The pandemic has caused a significant loss in sales for many firms, This creates a loss of liquidity which, in turn, has caused some firms to reduce employment, working hours and wages. Government containment measures necessary to save lives such as temporary workplace closures have added to the burden for both firms and employees. The study starts by using the surveys to identify the important stylised facts. Although some issues are already well documented anecdotally through media reports this provides a more evidence based approach. It also helps identify several issues, such as the impact on gender equality which have received less journalistic attention. The study is further supported by a regression analysis (OLS and SURE) of several key outcomes (changes in sales, employment, the share of females in employment and firm expectations of survival). A limitation of such analysis with any enterprise level is heterogeneity and, in consequence, a risk of sample selection bias. To provide robustness checks we use a matching approach. The results suggest that a significant proportion of surviving firms are vulnerable to permanent closure. The ability of firms to retain labour depends on sales which are affected by both the pandemic itself and the government containment measures. Only a small proportion of firms have received government support and there is evidence that it could help both firm survival and the retention of labour. There is some doubt whether the four countries have the institutional capacity to provide effective support. If such doubts prove well founded then support may need to be externally driven.
    Keywords: labor demand, temporary closures, furloughs, firm-level data, COVID-19, emergency
    JEL: I18 J23 J28 J65
    Date: 2021–06
  7. By: Fernando Alexandre; Sara Cruz; Miguel Portela
    Abstract: In this paper, we focus on the managerial characteristics of micro and small-sized firms. Using linked employer-employee data on the Portuguese economy for the 2010-2018 period, we estimate the impact of management teams’ human capital on the probability of firms becoming financially distressed and their subsequent recovery. Our estimates show that the relevance of management teams’ formal education on the probability of firms becoming financially distressed depends on firms’ size and the type of education. We show that management teams’ formal education and tenure reduce the probability of micro and small-sized firms becoming financially distressed and increases the probability of their subsequent recovery. The estimates also suggest that those impacts are stronger for micro and small-sized firms. Additionally, our results show that functional experience previously acquired in other firms, namely in foreign-owned and in exporting firms and in the area of finance, may reduce the probability of micro firms becoming financially distressed. On the other hand, previous functional experience in other firms seems to have a strong and highly significant impact on increasing the odds of recovery of financially distressed firms. We conclude that policies that induce an improvement in the managerial human capital of micro and small-sized firms have significant scope to improve their financial condition, enhancing the economy’s resilience against shocks.
    Keywords: Financial distress, firm performance, human capital
    JEL: G32 J24 L25
    Date: 2021–07–08
  8. By: Bernhard H. Wittek; Samuel Muehlemann
    Abstract: The eastward enlargement rounds of the European Union (EU) between 2004 and 2007 represent a broad regulatory expansion of the European labor market that facilitated the recruitment of individuals from new member states. We focus on the effects of EU enlargement on human capital accumulation and wages in Germany. The analysis employs linked employer-employee data from 2004 to 2017 to investigate the association between the immigration of apprentices from new eastern and central European member states and wages in the German labor market. Descriptive statistics reveal a clear and continuous increase in the number of foreign apprentices from new member states in the years following the removal of transitional restrictions. We find strong positive selection effects, as these immigrants were better educated and subsequently employed in higher-paying establishments compared to individuals who entered the German apprenticeship market prior to EU enlargement. Moreover, the study provides the first extensive evidence of apprentice wage developments in the context of immigration. As apprenticeship graduates eventually become skilled workers, we also analyze indirect effects of migration on the labor market, highlighting the temporal dimension of considerations around the substitutability between foreign and domestic workers.
    Keywords: wages, immigration, vocational education and training, apprenticeship, firm-sponsored training
    JEL: J24 J31 J61 M53
    Date: 2021–06
  9. By: Rocha, Vera (Department of Strategy and Innovation, Copenhagen Business School); Pozzoli, Dario (Department of Economics, Copenhagen Business School)
    Abstract: Human resources can provide a competitive advantage to firms, but we still know little about how newly-founded ventures start mobilizing these resources. Given the central role of entrepreneurs’ background in designing the strategy of new firms, we investigate whether and how startup experience, namely past performance as entrepreneurs, influences employee mobilization strategies in new ventures. Integrating behavioral theories of the firm with regulatory focus theory, we postulate that serial entrepreneurs who failed in the past are more likely to be prevention oriented and change their employee mobilization strategies towards a more targeted hiring approach in subsequent ventures. Using Danish register data, we compare the employee sourcing practices of serial entrepreneurs with their former practices as novice entrepreneurs, as well as with a control group of first-time entrepreneurs who engage in serial venturing later on. We find that entrepreneurs who have already failed (i.e. discontinued a former business) select their employees from fewer sources in the labor market. Our tests lend support for learning as a key mechanism driving these differences. Alternative mechanisms such as selection effects, stigma of failure, and demand-side constraints are not empirically supported.
    Keywords: Failure; Hiring; New Ventures; Startup Experience; Human Capital
    JEL: J24 L21 L26 M13
    Date: 2021–06–18
  10. By: Rostam-Afschar, Davud; Unsorg, Maximiliane
    Abstract: We examine a deregulation of German pharmacists to assess its effects on retail and labor markets. From 2004 onward, the reform allowed pharmacists to expand their single-store firms and to open or acquire up to three affliated stores. This partial deregulation of multi-store prohibition reduced the cost of firm expansion substantially and provides the basis for our analysis. We develop a theoretical model that suggests that the general limitation of the total store number per firm to four is excessively restrictive. Firms with high managerial effciency will open more stores per furm and have higher labor demand. Our empirical analysis uses very rich information from the administrative panel data on the universe of pharmacies from 2002 to 2009 and their affiliated stores matched with survey data, which provide additional information on the characteristics of expanding firms before and after the reform. We find a sharp immediate increase in entry rates, which continues to be more than five-fold of its pre-reform level after five years for expanding firms. Expanding firms can double revenues but not profits after three years. We show that the increase of the number of employees by 50% after five years and the higher overall employment in the local markets, which increased by 40%, can be attributed to the deregulation.
    Keywords: regulation,acquisitions,entry,market concentration,wages,employment,pharmacists
    JEL: L4 L5 L2 J44 J23
    Date: 2021
  11. By: Berniell, Maria Ines (University of La Plata); Berniell, Lucila (Development Bank of Latin America); De la Mata, Dolores (Development Bank of Latin America); Edo, María (Universidad de San Andrés); Fawaz, Yarine (CEMFI, Madrid); Machado, Matilde P. (Universidad Carlos III de Madrid); Marchionni, Mariana (Universidad Nacional de la Plata)
    Abstract: In this paper we show that motherhood triggers changes in the allocation of talent in the labor market besides the well-known effects on gender gaps in employment and earnings. We use an event study approach with retrospective data for 29 countries drawn from SHARE to assess the labor market responses to motherhood across groups with different educational attainment, math ability by the age of 10, and personality traits. We find that while even the most talented women— both in absolute terms and relative to their husbands—leave the labor market or uptake part-time jobs after the birth of the first child, all men, including the least talented, stay employed. We also find that motherhood induces a negative selection of talents into self-employment. Overall, our results suggest relevant changes in the allocation of talent caused by gender differences in nonmarket responsibilities that can have sizable impacts on aggregate market productivity. We also show that the size of labor market responses to motherhood are larger in societies with more conservative social-norms or with weaker policies regarding work-life balance.
    Keywords: child penalty, part-time, self-employment, motherhood, allocation of Talent
    JEL: J13 J16 J22 J24
    Date: 2021–06
  12. By: Ester Faia; Marianna Kudlyak; Ekaterina Shabalina
    Abstract: Occupational specificity of human capital motivates an important role of occupational reallocation for the economy’s response to shocks and for the dynamics of inequality. We introduce occupational mobility, through a random choice model with dynamic value function optimization, into a multi-sector/multi-occupation Bewley (1980)- Aiyagari (1994) model with heterogeneous income risk, liquid and illiquid assets, price adjustment costs, and in which households differ by their occupation-specific skills. Labor income is a combination of endogenous occupational wages and idiosyncratic shock. Occupational reallocation and its impact on the economy depend on the transferability of workers’ skills across occupations and occupational specialization of the production function. The model matches well the statistics on income and wealth inequality, and the patterns of occupational mobility. It provides a laboratory for studying the short- and long-run effects of occupational shocks, automation and task encroaching on income and wealth inequality. We apply the model to the pandemic recession by adding an SIR block with occupation-specific infection risk and a ZLB policy and study the impact of occupational and aggregate labor supply shocks. We find that occupational mobility may tame the effect of the shocks but amplifies earnings inequality, as compared to a model without mobility.
    Keywords: Occupational Mobility; Heterogeneous Agents; Skills; Income and Wealth Inequality; Discrete Choice Optimization
    JEL: J22 J23 J31 J62 E21 D31
    Date: 2021–06–10
  13. By: Balleer, Almut (RWTH Aachen University); Merz, Monika (University of Vienna); Papp, Tamás K. (IHS - Institute for Advanced Studies, Vienna)
    Abstract: We present a model of the time-allocation decision of spouses in order to study the role of heterogeneity in preferences and wages for couples' labor supply. Spouses differ in their tastes for market consumption and non-market goods and activities, and also in their offered or earned wages. They interact in their choices of market hours, homework, and leisure. We estimate the model for married or cohabiting couples in the 2001/02 wave of the German Time-Use Survey using Bayesian techniques. We generate gender-specific own- and cross-wage elasticities of market hours in the cross-section. Elasticities are significantly larger if the wage shock is asymmetric across partners, not symmetric. Aggregating preferences and wages by gender and comparing outcomes for a representative couple with those from heterogenous couples yields a discrepancy between alternative aggregate wage-elasticities. Its size varies with the type of wage shock and the distribution of spouses across the preference-wage space.
    Keywords: time-use, spouses' labor supply, aggregation, Bayesian estimation
    JEL: D12 D13 J22
    Date: 2021–06
  14. By: Kreisman, Daniel (Georgia State University); Smith, Jonathan (Georgia State University); Arifin, Bondi (Indonesia Ministry of Finance)
    Abstract: How do college non-completers list schooling on their resumes? The negative signal of not completing might outweigh the positive signal of attending but not persisting. If so, job-seekers might hide non-completed schooling on their resumes. To test this we match resumes from an online jobs board to administrative educational records. We find that fully one in three job-seekers who attended college but did not earn a degree omit their only post-secondary schooling from their resumes. We further show that these are not casual omissions but are strategic decisions systematically related to schooling characteristics, such as selectivity and years of enrollment. We also find evidence of lying, and show which degrees listed on resumes are most likely untrue. Lastly, we discuss implications. We show not only that this implies a commonly held assumption, that employers perfectly observe schooling, does not hold, but also that we can learn about which college experiences students believe are most valued by employers.
    Keywords: signaling, resume, employer learning, statistical discrimination, jobs board
    JEL: J01 J24
    Date: 2021–06
  15. By: Di Addario, Sabrina (Bank of Italy); Kline, Patrick (University of California, Berkeley); Saggio, Raffaele (University of British Columbia); Sølvsten, Mikkel (University of Wisconsin-Madison)
    Abstract: We develop a theoretically grounded extension of the two-way fixed effects model of Abowd et al. (1999) that allows firms to differ both in the wages they offer new hires and the wages required to poach their employees. Expected hiring wages are modeled as the sum of a worker fixed effect, a fixed effect for the "destination" firm hiring the worker, and a fixed effect for the "origin" firm, or labor market state, from which the worker was hired. This specification is shown to nest the reduced form for hiring wages delivered by semi-parametric formulations of the sequential auction model of Postel-Vinay and Robin (2002b) and its generalization in Bagger et al. (2014). Using Italian social security records that distinguish job quits from firings and layoffs, we find that origin effects explain only 0.7% of the variance of hiring wages among job movers, while destination effects explain more than 23% of the variance. Across firms, destination effects are more than 13 times as variable as origin effects. Interpreted through the lens of Bagger et al. (2014)'s model, this finding requires that workers possess implausibly strong bargaining strength. Studying a cohort of workers entering the Italian labor market in 2005, we find that differences in origin effects yield essentially no contribution to the evolution of the gender gap in hiring wages, while differences in destination effects explain the majority of the gap at the time of labor market entry. These results suggest that where a worker is hired from is relatively inconsequential for his or her wages in comparison to where he or she is currently employed.
    Keywords: gender wage gap, sequential auctions, bargaining, firm effects, hiring wages
    JEL: J3 J5
    Date: 2021–06
  16. By: Sterkens, Philippe (Ghent University); Baert, Stijn (Ghent University); Rooman, Claudia (Ghent University); Derous, Eva (Ghent University)
    Abstract: Recent studies have explored hiring discrimination as an obstacle to former burnout patients. Many workers, however, return to the same employer, where they face an even more severe aftermath of burnout syndrome: promotion discrimination. To our knowledge, we are the first to directly address this issue in research. More specifically, we conducted a vignette experiment with 406 genuine managers, testing the potential of the main burnout stigma theoretically described in the literature as potential mediators of promotion discrimination. Estimates reveal that compared to employees without an employment interruption, former burnout patients have no less than a 34.4% lower probability of receiving a promotion. Moreover, these employees are perceived as having low (1) leadership, (2) learning capacity, (3) motivation, (4) autonomy and (5) stress tolerance, as well as being (6) less capable of taking on an exemplary role, (7) having worse current and (8) future health, (9) collaborating with them is regarded more negatively, and (10) managers perceive them as having fewer options to leave the organisation if denied a promotion. Four of these perceptions, namely lower leadership capacities, stress tolerance, abilities to take on an exemplary role and chances of finding another job explain almost half the burnout effect on promotion probabilities.
    Keywords: promotion, burnout, statistical discrimination, taste-based discrimination, invisibility hypothesis
    JEL: J71 I14 C83 C91
    Date: 2021–06
  17. By: Weinstein, Russell (University of Illinois at Urbana-Champaign)
    Abstract: Using mobility report card data, I show graduates of less selective universities experience more adverse impacts of graduating in a recession. I highlight one mechanism: during recessions employers stop recruiting at less selective universities. Using a unique dataset of employer recruiting strategies for 65 prestigious firms, I show they are more likely to stop recruiting at universities that are less selective, smaller, farther, and have less affluent students. Firms also resume recruiting less quickly at less selective and farther campuses. Finally, losing access to prestigious firms while on campus is associated with an additional 13% decline in the 2014 income success rate.
    Keywords: Great Recession, recent college graduates, employer recruiting, university selectivity
    JEL: I26 I23 J23 J31 E32
    Date: 2021–06
  18. By: Gert Bijnens; Emmanuel Dhyne
    Abstract: Whilst overall productivity growth is stalling, firms at the frontier are still able to capture the benefits of the newest technologies and business practices. This paper uses linked employer-employee data covering all Belgian firms over a period of almost 20 years and investigates the differences in human capital between highly productive firms and less productive firms. We find a clear positive correlation between the share of high-skilled and STEM workers in a firm's workforce and its productivity. We obtain elasticities of 0.20 to 0.70 for a firm's productivity as a function of the share of high-skilled workers. For STEM (science, technology, engineering, mathematics) workers, of all skill levels, we find elasticities of 0.20 to 0.45. More importantly, the elasticity of STEM workers is increasing over time, whereas the elasticity of high-skilled workers is decreasing. This is possibly linked with the increasing number of tertiary education graduates and at the same time increased difficulties in filling STEM-related vacancies. Specifically, for high-skilled STEM workers in the manufacturing sector, the productivity gain can be as much as 4 times higher than the gain from hiring additional high-skilled non-STEM workers. To ensure that government efforts to increase the adoption of the latest technologies and business practices within firms lead to sustainable productivity gains, such actions should be accompanied by measures to increase the supply and mobility of human (STEM) capital. Without a proper supply of skills, firms will not be able to reap the full benefits of the digital revolution.
    Keywords: education, human capital, linked employer-employee data, productivity, Skills
    JEL: E24 I26 J24
    Date: 2021–07–08
  19. By: Garnero, Andrea (European Commission, Joint Research Centre); Lucifora, Claudio (Università Cattolica del Sacro Cuore)
    Abstract: Turning a "blind eye" to non-compliance with minimum wage standards is sometimes presented as a pragmatic way to accommodate higher wages while not harming employment opportunities for workers employed in marginal firms. In this paper, we model firms' wage and employment decisions, and show that there may be a trade-off between non-compliance and employment. The main prediction of the model are empirically tested using data from the Italian labour force survey. We find evidence of a positive employment non-compliance effect, though elasticities are smaller than typically thought as employers internalize the expected costs of non-compliance. We also show that employment effects are larger at low levels of non-compliance (when the risk of being referred to court is very low). The implications for policy and the role of regulators in monitoring and sanctioning non-compliance are discussed.
    Keywords: collective bargaining, sectoral minimum wages, compliance
    Date: 2021–06
  20. By: Giesecke, Matthias (RWI); Jaeger, Philipp (RWI)
    Abstract: We study the labor supply implications of the Old-Age Pension Act (OPA) of 1908, which, for the first time, provided pensions to older people in the UK. Using recently released census data covering the entire population, we exploit variation at the newly created age-based eligibility threshold. Our results show a considerable and abrupt decline in labor force participation of 6.0 percentage points (13%) when older workers reach the eligibility age of 70. To mitigate the impact of population aging today, pension reforms aimed at increasing elderly labor supply, however, have to induce much larger behavioral responses than the OPA.
    Keywords: old-age assistance, labor supply, retirement, regression discontinuity design, equity-efficiency trade-off
    JEL: D61 H21 H55 J14 J22 J26
    Date: 2021–06
  21. By: Jan Feld; Ulf Zölitz
    Abstract: This paper investigates how exposure to higher-achieving male and female peers in university affects students’ major choices and labor market outcomes. For identification of causal effects, we exploit the random assignment of students to university sections in first-year compulsory courses. We present two main results. First, studying with higher-achieving peers has no statistically significant or economically meaningful effects on educational choices. Second, we find suggestive evidence that women who have been exposed to higher achieving male peers end up in jobs in which they are more satisfied.
    Keywords: Gender, major choice, peer effects
    JEL: I21 I24 J24
    Date: 2021–06
  22. By: Aygün, Aysun Hızıroğlu (Istanbul Technical University); Kirdar, Murat G. (Bogazici University); Koyuncu, Murat (Bogazici University); Stoeffler, Quentin (Istanbul Technical University)
    Abstract: This paper investigates whether unconditional cash transfers can keep refugee children in school and out of work. We raise this question in the unique context of Turkey, which hosts the world's largest refugee population (including 3.6 million Syrians). Refugees in Turkey are supported by the world's largest cash transfer program for refugees, the Emergency Social Safety Net (ESSN). We exploit a program eligibility criterion to identify the causal impacts of the ESSN program using a regression discontinuity design. The results show a large effect on child labor and school enrollment among both male and female refugee children. Being a beneficiary household reduces the fraction of children working from 14.0 percent to 1.6 percent (a decrease of 88 percent) and the fraction of children aged 6–17 not in school from 36.2 to 13.7 percent (a reduction of 62 percent). By unpacking the mechanisms at play, we show that ESSN cash transfers become a significant part of a household's income, substantially alleviate extreme poverty, and reduce a family's need to resort to harmful coping strategies. Investigating the reasons for children not attending school, we find that the beneficiary households become more likely to send children to school because the cash transfer addresses both the opportunity cost and direct cost of schooling— although the former is more important. The findings have important implications for the design of policies aimed at supporting refugee children at scale.
    Keywords: refugees, cash transfers, education, child labor, regression discontinuity design, program evaluation, Turkey
    JEL: F22 I21 I28 I38 J21 O15 O22
    Date: 2021–06
  23. By: Camilla Andretta; Irene Brunetti; Anna Rosso
    Abstract: This paper investigates whether and how worker composition, ownership and management affect the productivity of firms. To this aim, we use a dataset obtained by integrating the micro-data drawn from Rilevazione su Imprese e Lavoro (RIL), a survey conducted by Inapp in 2010 and 2015 on a representative sample of Italian limited liability and partnership firms, with the AIDA archive containing comprehensive information on the balance sheets of almost all the Italian corporations. We apply different regression models and the findings reveal that a higher share of skilled workers within firms and more experienced managers are associated with higher productivity levels. In addition, firms run by managers with higher education are more likely to introduce innovation. Finally, family ownership and the coincidence of management with ownership are negatively related with firm productivity.
    Keywords: firm, Human capital, productivity
    JEL: J24 D24
    Date: 2021–07–08
  24. By: Vincent Dautel; Alessio Fusco
    Abstract: We analyse the existence and underlying mechanisms of neighbourhood effects in welfare-to-work transitions. The analysis is based on Luxembourg social security longitudinal data, which covers the period 2001-2015 and provides precise information at the postcode level, corresponding mostly to streets. Our identification strategy exploits plausible exogenous variations among neighbours provided by the thinness of the housing market once controlling for residential sorting. We first examine interactions among all neighbours using an individual-level analysis, before focusing on interactions among only welfare recipients using a matched-pair analysis. This second step allows us to deal with the mediating effect of welfare recipients' citizenship. The main findings highlight the existence of neighbourhood effects in welfare-to-work transitions, which are also affected by the characteristics of the neighbours, including their citizenship. These characteristics suggest that social norms and/or stigma prevail in welfare-to-work transitions over the support for welfare recipients to find a job, but not over the in-group support for welfare recipients. The matched-pair analysis provides contrasting results across citizenship for individuals from large-sized citizenship groups (interactions within the own group) and individuals from medium-sized groups (interactions between groups).
    Keywords: welfare-to-work transitions; neighbourhood effects; diversity; block-level data
    JEL: H53 I32 J21 J60 R23
    Date: 2021–06
  25. By: Ollonqvist, Joonas; Kotakorpi, Kaisa; Laaksonen, Mikko; Martikainen, Pekka; Pirttilä, Jukka; Tarkiainen, Lasse
    Abstract: We analyse the effects of changes in retirement incentives on retirement behaviour, and in particular whether individuals' health status modifes the effects of retirement incentives. We study these issues in the context of the Finnish pension reform of 2005, utilising detailed individual-level administrative data on health and retirement behaviour. Our results indicate that changes in economic incentives matter for retirement behaviour. Many types of individuals react to retirement incentives, and the reaction to economic incentives does not appear to vary according to the individuals' health status in a systematic way. Hence there does not seem to be a trade-off between providing incentives to postpone retirement and equal treatment of individuals with different health status.
    Keywords: pension reform, retirement incentives, health, Social security, taxation and inequality, H55, J26,
    Date: 2021
  26. By: Howard, Greg (University of Illinois); Weinstein, Russell (University of Illinois at Urbana-Champaign); Yang, Yuhao (University of Illinois)
    Abstract: We use a novel identification strategy to investigate whether regional universities make their local economies more resilient to adverse economic shocks. Our strategy is based on state governments assigning normal schools (to train teachers) and insane asylums to counties between 1830 and 1930. Normal schools later became much larger regional universities while asylum properties mostly continue as small state-owned psychiatric health facilities. Because site selection criteria were similar for these two types of institutions, comparing counties assigned a normal school versus an insane asylum identifies the effect of a regional university. We find that having a regional university roughly offset the negative effects of exposure to manufacturing declines, and we attribute a significant share of this resilience to the resilience of regional public university spending.
    Keywords: manufacturing decline, universities and economic growth, resilience
    JEL: R10 I23 J20
    Date: 2021–05

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