nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2021‒09‒06
sixteen papers chosen by
Joseph Marchand
University of Alberta

  1. The polarisation of remote work By Braesemann, Fabian; Stephany, Fabian; Teutloff, Ole; Kässi, Otto; Graham, Mark; Lehdonvirta, Vili
  2. Wage Differences According to Workers' Origin: The Role of Working More Upstream in GVCs By Fays, Valentine; Mahy, Benoît; Rycx, François
  3. Wage Inequality, Selection and the Evolution of the Gender Earnings Gap in Sweden By Ahrsjö, Ulrika; Niknami, Susan; Palme, Mårten
  4. Treatment and Selection Effects of Formal Workplace Mentorship Programs By Jason Sandvik; Richard Saouma; Nathan Seegert; Christopher T. Stanton
  5. Risk and the Misallocation of Human Capital By German Cubas; Pedro Silos; Vesa Soini
  6. Intensive and Extensive Margin Labor Supply Responses to Kinks in Disability Insurance Programs By Myhre, Andreas
  7. Labor supply effects of a universal cash transfer By Jan Gromadzki
  8. Labour Taxes and International Trade: The Role of Domestic Labour Value Added By Amat Adarov; Mario Holzner; Branimir Jovanovic; Goran Vukšić
  9. The Gap that Survived the Transition: The Gender Wage Gap over Three Decades in Estonia By Jaanika Meriküll; Maryna Tverdostup
  10. Is ICT Still Polarising Labour Demand after the Crisis? By David Pichler; Robert Stehrer
  11. The Elusive Explanation for the Declining Labor Share By Gene M. Grossman; Ezra Oberfield
  12. The Value of Statistical Life: A Meta-analysis of Meta-analyses By H. Spencer Banzhaf
  13. The Geography of Remote Work By Lukas Althoff; Fabian Eckert; Sharat Ganapati; Conor Walsh
  14. Is the Phillips Curve Still a Curve? Evidence from the Regions By James Bishop; Emma Greenland
  15. The Impact of Hurricane Katrina on Income Inequality: A Synthetic Control Analysis By Niklas Uliczka
  16. Trend Capital when Goods and Capital Market Frictions Exist By Valerie Vandermeulen; Werner Roeger

  1. By: Braesemann, Fabian; Stephany, Fabian; Teutloff, Ole; Kässi, Otto; Graham, Mark; Lehdonvirta, Vili
    Abstract: The Covid-19 pandemic has led to the rise of remote work with consequences for the global division of work. Remote work could connect labour markets, but it could also increase spatial polarisation. However, our understanding of the geographies of remote work is limited. Specifically, does remote work bring jobs to rural areas or is it concentrating in large cities, and how do skill requirements affect competition for jobs and wages? We use data from a fully remote labour market - an online labour platform - to show that remote work is polarised along three dimensions. First, countries are globally divided: North American, European, and South Asian remote workers attract most jobs, while many Global South countries participate only marginally. Secondly, remote jobs are pulled to urban regions; rural areas fall behind. Thirdly, remote work is polarised along the skill axis: workers with in-demand skills attract profitable jobs, while others face intense competition and obtain low wages. The findings suggest that remote work is shaped by agglomerative forces, which are deepening the gap between urban and rural areas. To make remote work an effective tool for rural development, it needs to be embedded in local skill-building and labour market programmes.
    Keywords: Remote work,Online labour,Platform economy,Geography,Polarisation
    JEL: F6 F16 J24 J31 L14 O15
    Date: 2021
  2. By: Fays, Valentine; Mahy, Benoît; Rycx, François
    Abstract: This paper is the first to investigate the role of firm-level upstreamness (i.e. the number of steps before the production of a firm meets final demand) in explaining wage differences according to workers' origin. Using unique linked employer-employee data relative to the Belgian manufacturing industry for the period 2002-2010, our estimates show that firms that are further up in the value chain pay significantly higher wages. However, the wage premium associated with upstreamness is also found to vary substantially depending on the origin of the workers. Unconditional quantile estimates suggest that those who benefit the most from being employed in more upstream firms are high-wage workers born in developed countries. In contrast, workers born in developing countries, irrespective of their earnings, appear to be unfairly rewarded. Quantile decompositions further show that, while differences in average values of upstreamness according to workers' origin play a limited role, differences in wage premia associated with upstreamness account for a substantial part of the wage gap between workers born in developed and developing countries, especially at the top of the earnings distribution. These results are shown to be robust to a number of sensitivity tests, including broader or narrower definitions of workers' wages and different firm environments in terms of technological and knowledge intensity.
    Keywords: Wage Gaps,Workers’ Origin,Global Value Chains,Upstreamness,Unconditional Quantile Estimates and Decompositions
    JEL: J15 J31 F16
    Date: 2021
  3. By: Ahrsjö, Ulrika (Dept. of Economics, Stockholm University); Niknami, Susan (Dept. of Economics, Stockholm University); Palme, Mårten (Dept. of Economics, Stockholm University)
    Abstract: We estimate the change in the gender wage gap between 1968 and 2010 in Sweden accounting for (1) changes in the intensive margin of labour supply; (2) changes in the overall wage inequality; (3) changes in selection into the labor market using parametric and non-parametric selection corrections. Our results show that between 1968 and 1991, about half of the changes in the gender wage gap can be attributed to changes in the overall wage distribution. Conversely, changes in the wage distribution in 1991-2010 masks a larger closure of the gender wage gap. Our corrections for selection into the labor force suggest that uncorrected estimates miss about half of the around 20 percentage points decrease in the gender wage gap over the 1968-2010 period.
    Keywords: Gender pay gap; wage gap; gender inequality; selective samples
    JEL: J16 J22 J31 J51 J71
    Date: 2021–08–25
  4. By: Jason Sandvik; Richard Saouma; Nathan Seegert; Christopher T. Stanton
    Abstract: While formal mentorship programs are ubiquitous, less is known about who gains from receiving mentorship. In this paper, we report the outcome of a Randomized Controlled Trial (RCT) carried out in a US-based inbound sales call center where one branch of the experiment assigned a random subset of new hires to mentors (Broad-Mentoring), whereas a second branch (Selective-Mentoring) gave new hires the opportunity to opt into a mentoring relationship before assigning a random subset to mentors. In the Broad-Mentoring branch, mentored sales agents outperformed non-mentored agents by over 18% in the first six months on the job. Among agents who opt into the program in the Selective-Mentoring branch, those who received mentorship had negligible performance gains. The differences between the two branches indicates that formal mentorship program treatment effects are largest for workers who would otherwise opt out of these programs. Demographic and personality characteristics are relatively weak predictors of selection into the program, suggesting broad-based programs are likely more effective than alternative targeting rules.
    JEL: J24 L23 L84 M5 M53
    Date: 2021–08
  5. By: German Cubas (Department of Economics, University of Houston); Pedro Silos (Department of Economics, Temple University); Vesa Soini (Department of Economics, Hanken School of Economics and Helsinki Graduate School of Economics)
    Abstract: With risk-averse workers and uninsurable earnings shocks, competitive markets allocate too few workers to jobs with high earnings uncertainty. Using an equilibrium Roy model with incomplete markets we show that risky occupations are inefficiently small and hence talent is misallocated. We obtain analytical expressions for the compensation for risk in the labor market, and for the aggregate level of human capital and output. Misallocation is positively related to the correlation between a worker’s abilities in different occupations. Quantitatively we find that market incompleteness can by itself generate permanent output and welfare losses in the order of one percent of GDP.
    Keywords: Misallocation, Human Capital, Occupations, Risk, Incomplete Markets, Frèchet, Roy Model.
    JEL: E21 D91 J31
    Date: 2021–08
  6. By: Myhre, Andreas
    Abstract: While kinks are prevalent in tax and transfer systems, the fiscal revenue and behavioral responses are not fully understood. In disability insurance (DI) programs, for instance, kinks help balance the moral hazard effects from the induced entry with the provision of work incentives for recipients who regain their ability to work. Using quasi-random variation in kink points in the benefit schedule for Norwegian DI recipients, I identify intensive and extensive margin earnings responses to the implicit tax on earnings as DI benefits are phased out above the kink. To identify the intensive margin responses, I implement a non-parametric bunching design that does not require functional form assumptions or deciding an excluded region around the kink. Responses correspond to an earnings elasticity with respect to the implicit net-of-tax rate of about 0.18. Using a regression discontinuity design, I further show that the kink in the benefit schedule induces significant responses at the extensive margin. I use the estimated earnings responses to evaluate how the benefit offset affects program costs, and find that relaxing the benefit offset reduces public expenditures only if program entry is very inelastic. My findings speak to recent policy-proposals aiming to improve work incentives of DI recipients.
    Keywords: labor supply, disability insurance, policy evaluation, bunching
    JEL: H53 H55 I38 J21
    Date: 2021–06–09
  7. By: Jan Gromadzki
    Abstract: Unconditional cash transfers in the form of a universal basic income, a universal basic pension or a universal child benefit are increasingly being discussed in many countries. In this article, I investigate the labor supply effects of the introduction of a large unconditional cash benefit. I exploit the unique design of the child benefit program in Poland to identify the pure income effect of the monthly transfer. I find very small labor supply effects on both the intensive and extensive margin. Additional evidence shows that instead of extending their free time, households receiving the benefit substantially increased their consumption and savings.
    Keywords: coal transition, mining, labour market
    JEL: J21 J65 L71 Q43
    Date: 2021–08
  8. By: Amat Adarov (The Vienna Institute for International Economic Studies, wiiw); Mario Holzner (The Vienna Institute for International Economic Studies, wiiw); Branimir Jovanovic (The Vienna Institute for International Economic Studies, wiiw); Goran Vukšić
    Abstract: This paper revisits the relationship between labour taxation and international trade, focusing on the role of domestic labour value added. Using sectoral data from 41 EU and OECD economies over the period 2005-2014, we assess how labour taxes affect exports and imports and how domestic labour value added shapes this relationship. We find that higher labour taxes reduce exports but that the effect depends to a large extent on the share of domestic labour value added, which differs by industries, countries and time periods. Imports do not seem to be affected. This implies that changes in labour taxes will not affect all sectors and countries in the same way and that policy makers should be aware of this when deciding on labour taxes. We also calculate the contribution of labour tax changes to the export dynamics in the analysed period and sample of countries, finding that in general the contribution is small.
    Keywords: taxation, labour, international trade, exports, imports, labour share
    JEL: F14 F16 H24 J32
    Date: 2021–08
  9. By: Jaanika Meriküll; Maryna Tverdostup (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: This paper looks at the gender wage gap throughout the transition from communism to capitalism and throughout a time of rapid economic convergence. The case of Estonia is used, and micro data from the Labour Force Survey from 1989 to 2020 are employed. The communist regimes had highly regulated wage setting and high levels of educational attainment and labour market participation for women. Although the regime was formally egalitarian, the gender attitudes were conservative and the raw gender wage gap was as large as 41% at the end of the communist period in Estonia. The large gender wage gap under communist rule narrowed quickly during the first years of economic transition, but the further decline in the gap has been slow. The paper has two main messages. The first is that there is strong inertia in the gender wage gap persisting through the communist period and economic convergence. None of the known long-run cultural drivers of gender attitudes can explain this. The second is that the decline in the gap is related to the overall decline in wage inequality, the rise in minimum wages, and more egalitarian gender attitudes. The gender attitudes are responsible for a smaller effect than wage inequality is.
    Keywords: gender wage gap, wage distribution, decomposition, post-communist economies, wage inequality, minimum wages, gender attitudes
    JEL: J31 J71 P23
    Date: 2021–08
  10. By: David Pichler; Robert Stehrer (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: The impact of ICT capital accumulation and digitisation on labour demand and wage structures has changed in recent years, according to some of the literature on the subject. We analyse the impact of ICT capital accumulation based on recent data differentiating between the period before and after the global financial crisis. Methodologically, we draw on Michaels, Natraj and van Reenen (2014) and are able to corroborate their findings for the period 1980-2004, whereas we find distinctly different patterns since 2011. Results suggest a negative relationship between changes in ICT intensity and the wage share for high-skilled workers, whereas medium-skilled workers were the main beneficiaries in sectors that experienced a more intensive digitisation process. These results are chiefly driven by the dynamics in the Central and Eastern European economies and the service industries. The effect of digitisation on low-skilled workers does not reveal any robust significant impact.
    Keywords: ICT capital, skill polarisation, wage patterns
    JEL: J31 O33
    Date: 2021–09
  11. By: Gene M. Grossman; Ezra Oberfield
    Abstract: A vast literature seeks to measure and explain the apparent decline in the labor share in national income that has occurred in recent times in the United States and elsewhere. The culprits include technological change, increased globalization and the rise of China, the enhanced exercise of market power by large firms in concentrated product markets, the decline in unionization rates and the erosion in the bargaining power of workers in labor markets, and the changing composition of the workforce due to a slowdown in population growth and a rise in educational attainment. We review this literature, with special emphasis on the pitfalls associated with using cross-sectional data to assess this phenomenon and the reasons why the body of papers collectively explains the phenomenon many times over.
    JEL: E25
    Date: 2021–08
  12. By: H. Spencer Banzhaf
    Abstract: The Value of Statistical Life (VSL) is arguably the most important number in benefit-cost analyses of environmental, health, and transportation policies. However, agencies have used a wide range of VSL values. One reason may be the embarrassment of riches when it comes to VSL studies. While meta-analysis is a standard way to synthesize information across studies, we now have multiple competing meta-analyses and reviews. Thus, to analysts, picking one such meta-analysis may feel as hard as picking a single "best study." This paper responds by taking the meta-analysis another step, estimating a meta-analysis (or mixture distribution) of six meta-analyses. The baseline model yields a central VSL of $7.0m, with a 90% confidence interval of $2.4m to $11.2m. The provided code allows users to easily change subjective weights on the studies, add new studies, or change adjustments for income, inflation, and latency.
    JEL: I12 I18 J17 J31 K32 Q51
    Date: 2021–08
  13. By: Lukas Althoff; Fabian Eckert; Sharat Ganapati; Conor Walsh
    Abstract: We show that cities with higher population density specialize in high-skill service jobs that can be done remotely. The urban and industry bias of remote work potential shaped the COVID-19 pandemic’s economic impact. Many high-skill service workers started to work remotely, withdrawing spending from big-city consumer service industries dependent on their demand. As a result, low-skill service workers in big cities bore most of the recent pandemic’s economic impact. Our findings have broader implications for the distributional consequences of the U.S. economy’s transition to more remote work.
    JEL: O33 R11 R12
    Date: 2021–08
  14. By: James Bishop (Reserve Bank of Australia); Emma Greenland (Reserve Bank of Australia)
    Abstract: The way in which wages respond to very low rates of unemployment remains a key source of uncertainty in Australia, partly due to the lack of historical evidence to draw upon. To help fill this gap, we study data on unemployment rates and wages growth across local labour markets over the past 20 years. The considerable variation in economic conditions across local labour markets allows us to infer the strength of the relationship between unemployment and wages growth (i.e. the wage Phillips curve) at very low unemployment rates that are rarely seen at the national level. We find strong evidence that the wage Phillips curve is indeed a curve, rather than a straight line. When the unemployment rate exceeds 7½ per cent, the Phillips curve is flat and wages growth is unresponsive to changes in unemployment. Wages growth then becomes increasingly responsive to changes in the unemployment rate as the unemployment rate falls to lower and lower levels, most notably below 4 per cent. These findings have implications for monetary policy, particularly at the current juncture given the Reserve Bank of Australia's central forecast for the unemployment rate to fall to multi-decade lows in the next few years.
    Keywords: Phillips curve; unemployment; inflation; wages growth
    JEL: E24 E31 E52
    Date: 2021–08
  15. By: Niklas Uliczka
    Abstract: Hurricane Katrina devastated the state of Louisiana in 2005. Using the syn- thetic control method, we evaluate the effect of this disaster on income inequality in Louisiana. The findings suggest that the disaster has an inequality-increasing impact on the income shares of the top 0.1% and top 1% of income earners in the immediate year following its occurrence. We find evidence of heterogeneous effects of the disaster among income earners on the top decile. The effect of the disaster is positive and statistically signficant for the top 1% income share, but it is negative and insignificant for the income shares of the next 9%. Our empirical exercise also indicates that the effect from the first year is not persistent and evolves into a highly volatile pattern in the medium-term. We also find that Hurricane Katrina has a negligible effect on inequality in the long-term. Our results are robust to various specification checks and to the inclusion of a rich set of inequality measures.
    Date: 2021–08
  16. By: Valerie Vandermeulen; Werner Roeger
    Abstract: In the aftermath of the financial crisis, it had become clear the Euro Area was suffering from insufficient investment. Actual capital stock was below benchmark capital, the amount of capital you need to support trend labour and total factor productivity (TFP) growth rates. The current COVID-19 pandemic might enlarge the gap between benchmark and actual capital, since both the private and public sector are facing limitations to invest. In the current paper, benchmark capital is estimated based on trend supply side conditions and trend in capital and goods market frictions, to investigate whether such a gap exists in the Euro Area and the US and how it has evolved over time. The paper is based on the European Commission’s production function method and uses trend labour supply and TFP as basis for trend supply side conditions. The first order condition of the Cobb-Douglas production function are used to calculate goods market and capital market frictions. Capital costs are estimated using world interest rate as a rental price of capital, adjusted for depreciation, taxes and relative investment prices. In the past, benchmark capital was driven by strong growth in supply side factors, but since trend labour and TFP growth rates have declined, capital and goods market frictions are becoming more important in explaining benchmark capital growth. The paper shows that after the 2008 crisis, a gap occurred between benchmark capital and actual capital. As of 2012, the gap started to close, but benchmark capital growth was very low in the Euro Area, much below that of the US. Just before the current 2020 crisis, the capital gap was closed in the Euro Area and was positive in the US, but it is expected that actual capital growth might stop again due to the limitations to private and public investment.
    JEL: D1 D2 D3 E6 H2 H21 J08 J2
    Date: 2021–07

This nep-lma issue is ©2021 by Joseph Marchand. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.