nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2021‒09‒13
twenty papers chosen by
Joseph Marchand
University of Alberta

  1. The Impact of Healthcare IT on Clinical Quality, Productivity and Workers By Ari Bronsoler; Joseph J. Doyle Jr.; John Van Reenen
  2. The Effects of Minimum Wage Increases in the Czech Republic By Jakub Grossmann
  3. Non-routine Tasks and ICT tools in Telework By Toshihiro Okubo
  4. IT and Urban Polarization By Jan Eeckhout; Christoph Hedtrich; Roberto Pinheiro
  5. The Value of Sick Pay By Adams-Prassl, A.; Boneva, T.; Golin, M.; Rauh, C.
  6. Making it public: The effect of (private and public) wage proposals on efficiency and income distribution. By Lara Ezquerra Guerra; Joaquín Gómez Miñambres; Natalia Jimenez; Praveen Kujal
  7. Education, Lack of Complementary Investment and Underemployment In an Open Economy By Sugata Marjit; Rashmi Ahuja; Abhilasha Pandey
  8. Decomposing the Gender Pay Gap in Colombia: Do Industry and Occupation Matter? By Lamprea-Barragan, T. C; García- Suaza, A. F.
  9. Increased trade with China and Eastern Europe hardly affects Dutch workers By Rob Euwals; Harro van Heuvelen; Gerdien Meijerink; Jan Möhlmann; Simon Rabaté
  10. The Impact of Short-Term Employment for Low-Income Youth: Experimental Evidence from the Philippines By Beam, Emily A.; Quimbo, Stella
  11. Minimum Quality Regulations and the Demand for Child Care Labor By Ali, Umair; Herbst, Chris M.; Makridis, Christos A.
  12. Temporary Work Contracts and Female Labor Market Outcomes By ASAI Yukiko; Dmitri K. KOUSTAS
  13. Who Benefits from Tax Incentives? The Heterogeneous Wage Incidence of a Tax Credit By Carbonnier, Clément; Malgouyres, Clément; Py, Loriane; Urvoy, Camille
  14. The contribution of business dynamics to productivity growth in the Netherlands By Daan Freeman; Leon Bettendorf; Harro van Heuvelen; Gerdien Meijerink
  15. The effects of incentives, social norms, and employees' values on work performance By Roos, Michael W. M.; Reale, Jessica; Banning, Frederik
  16. Specialization in Same-Sex and Different-Sex Couples By Hofmarcher, Thomas; Plug, Erik
  17. Should Schools Grade Student Behavior? Quasi-Experimental Evidence from Comportment Grade Reforms By Florian Schoner; Lukas Mergele; Larissa Zierow
  18. Welfare Effects of the Labor Income Tax Changes on Married Couples: A Sufficient Statistics Approach By Egor Malkov
  19. Growing Apart or Moving Together? Synchronization of Informal and Formal Economy Cycles By Ceyhun Elgin; M. Ayhan Kose; Franziska Ohnsorge; Shu Yu
  20. Understanding Informality By Ceyhun Elgin; M. Ayhan Kose; Franziska Ohnsorge; Shu Yu

  1. By: Ari Bronsoler; Joseph J. Doyle Jr.; John Van Reenen
    Abstract: Adoption of health information and communication technologies (“HICT”) has surged over the past two decades. We survey the medical and economic literature on HICT adoption and its impact on clinical outcomes, productivity and labor. We find that HICT improves clinical outcomes and lowers healthcare costs, but (i) the effects are modest so far, (ii) it takes time for these effects to materialize, and (iii) there is much variation in the impact. More evidence on the causal effects of HICT on productivity is needed to guide further adoption. There is little econometric work directly investigating the impact of HICT on labor, but what there is suggests no substantial negative effects on employment and earnings. Overall, while healthcare is “exceptional” in many ways, we are struck by the similarities to the wider findings on ICT and productivity stressing the importance of complementary factors (e.g. management and skills) in determining HICT impacts.
    JEL: I12 I18 J21 J24 O14
    Date: 2021–09
  2. By: Jakub Grossmann
    Abstract: This paper analyzes employment effects of four minimum wage increases implemented in the Czech Republic during 2012–2017, which cumulatively increased the national minimum wage by 37 percent. We analyze outcomes at the level of firm-occupation-county-specific job cells and apply an intensity-treatment estimator similar to that of Machin et al. (2003). Our preferred specifications suggest that minimum wage increases led to higher wages for low-paid workers and did not have significant impacts on their employment.
    Keywords: Czech Republic, job cells, minimum wage, treatment intensity
    JEL: J31 J38 J68
    Date: 2021–08
  3. By: Toshihiro Okubo (Faculty of Economics Keio University)
    Abstract: Telework has spread during the pandemic of coronavirus disease (COVID-19). Using a unique individual-level survey in Japan, we investigate how telework has changed the way people live and work and what impediments hamper telework use. As a result, we find that telework allows workers to spend more time on leisure and their families. Compared to routine task workers, non-routine (abstract) task workers are more suited to telework. However, once engaged in telework, non-routine task workers have fewer opportunities to communicate with coworkers, which is a serious impediment that tends to hamper work performance and compromise mental health.
    Keywords: telework, COVID-19, survey, non-routine tasks, impediments, efficiency
    JEL: J20 J24
    Date: 2021–08–31
  4. By: Jan Eeckhout; Christoph Hedtrich; Roberto Pinheiro
    Abstract: We show that differential IT investment across cities has been a key driver of job and wage polarization since the 1980s. Using a novel data set, we establish two stylized facts: IT investment is highest in firms in large and expensive cities, and the decline in routine cognitive occupations is most prevalent in large and expensive cities. To explain these facts, we propose a model mechanism where the substitution of routine workers by IT leads to higher IT adoption in large cities due to a higher cost of living and higher wages. We estimate the spatial equilibrium model to trace out the effects of IT on the labor market between 1990 and 2015. We find that the fall in IT prices explains 50 percent of the rising wage gap between routine and non-routine cognitive jobs. The decline in IT prices also accounts for 28 percent of the shift in employment away from routine cognitive towards non-routine cognitive jobs. Moreover, our estimates show that the impact of IT is uneven across space. Expensive locations have seen a stronger displacement of routine cognitive jobs and a larger widening of the wage gap between routine and non-routine cognitive jobs.
    Keywords: IT investment; Job Polarization; Spatial Sorting; Urban Wage Premium
    JEL: D21 J24 J31 R23
    Date: 2021–09–08
  5. By: Adams-Prassl, A.; Boneva, T.; Golin, M.; Rauh, C.
    Abstract: Not all countries provide universal access to publicly funded paid sick pay. Amongst countries that do, compensation rates can be low and coverage incomplete. This leaves a significant role for employer-provided paid sick pay in many countries. In this paper, we study who has access to employer-provided sick pay, how access to sick pay relates to labor supply when sick, and how much it is valued by workers for themselves and others. We find that workers in jobs with high contact to others are particularly unlikely to have employer provided sick pay, as are economically insecure workers who are least able to afford unpaid time off work. We find that workers without sick pay are more likely to work when experiencing cold-like symptoms and are less willing to expose themselves to health risks at work during the pandemic. Using vignettes, we reveal that large shares of workers have a very high, but even more have a very low willingness to sacrifice earnings for access to sick pay. Together our findings highlight the unequal distribution of access to sick pay and the potentially strong negative externalities of not providing it publicly. The pandemic may have made these issues more salient as perceived probabilities of having to self-isolate are positively related to support for publicly provided sick pay. Finally, we find that providing information on the health externality of paid sick leave increases support for the public provision of sick pay, suggesting that there might be a public under-provision because individuals do not factor in the externalities.
    Keywords: Inequality, sick pay, sick leave, externalities, public finance, Covid-19, pandemic, coronavirus, market failure, vignette, information treatment
    JEL: J22 J32 J81
    Date: 2021–09–06
  6. By: Lara Ezquerra Guerra (Departamento de Economía de la Empresa, Universidad de las Islas Baleares); Joaquín Gómez Miñambres (Lafayette College & Economic Science Institute, Chapman University); Natalia Jimenez (Department of Economics, Universidad Pablo de Olavide & Middlesex University); Praveen Kujal (Department of Economics, University of Middlesex)
    Abstract: The implications of (public or private) pre-play communication and information revelation in a labour relationship is not well understood. We address these implications theoretically and experimentally. In our baseline experiments, the employer offers a wage to the worker who may then accept or reject it. In the public and private treatment, workers, moving first, make a non-binding private or public wage proposal. Our theoretical model assumes that wage proposals convey information about a worker’s minimum acceptable wage and are misreported with a certain probability. It predicts that, on average, wage proposals lead to higher wage offers and acceptance rates, with the highest wages under private proposals. While both, public and private, proposals increase efficiency over the baseline, private proposals generate higher worker incomes. Broad support for the theoretical predictions is found in the laboratory experiments. Our work has important implications for recent policies promoting public information on wage negotiations. We find that while wage proposals promote higher wages, efficiency, and income equality, public information on wage negotiations is likely to benefit firms more than workers.
    Keywords: wage negotiations, cheap talk, laboratory experiments, ultimatum game, wage proposals.
    JEL: C90 C72 J31 M52
    Date: 2021
  7. By: Sugata Marjit; Rashmi Ahuja; Abhilasha Pandey
    Abstract: In many developing economies rate of unemployment is increasing with skill accumulation and thereby leading to underemployment. Our paper offers to look at skill formation as a demand side problem not as a traditional supply side problem and also how skill formation or education affects unemployment among the remaining uneducated. We have developed a general equilibrium model of a small open developing economy incorporating skill formation, unemployment of unskilled labour in the formal sector and an informal sector which absorbs unemployed workers at a flexible wage rate. In this set up greater education for a group may generate educated unemployment within the group and increase unemployment of the uneducated outside the group leading to underemployment through the expansion of the informal sector. Both effects are due to shortage of complementary investment in production activities. Our theoretical findings are motivated by existing empirical evidence and a fresh empirical exercise undertaken using panel data of 32 countries.
    Keywords: skill formation, informal employment, skilled-unskilled wage inequality, underemployment
    JEL: J24 J31 E26 E24
    Date: 2021
  8. By: Lamprea-Barragan, T. C; García- Suaza, A. F.
    Abstract: This paper aims to quantify at which extent industry and occupation characteristics explain the gender pay gap in Colombia. To quantify the role of these factors we perform counterfactual decomposition methods that allow to split the total gap into the contribution of the gender share of employment at the industry level, the demographic composition and the characteristics pay premia. This is possible by adapting the classical Oaxaca-Blinder decomposition to a two-step procedure, which is illustrated through Monte Carlo simulations. Using Colombian data for 2019 and exploiting the heterogeneity at the industry and the occupation level, findings suggest that the three components shape the gender pay gap. While differences in returns are the main force driver of the existing gap, the gender employment share, and the composition of workers across industries and occupations provide mixed results.
    Keywords: Gender pay gap; decomposition methods, sorting.
    JEL: J16 J31 J24
    Date: 2021–08–04
  9. By: Rob Euwals (CPB Netherlands Bureau for Economic Policy Analysis); Harro van Heuvelen (CPB Netherlands Bureau for Economic Policy Analysis); Gerdien Meijerink (CPB Netherlands Bureau for Economic Policy Analysis); Jan Möhlmann (CPB Netherlands Bureau for Economic Policy Analysis); Simon Rabaté (CPB Netherlands Bureau for Economic Policy Analysis)
    Abstract: Contrary to other studies, we find no robust effect of an increase in trade with China and Central European (CEE) countries on local employment, wages and inequality in the Netherlands. If there is an effect, it is small, with positive effects of increased exports counteracting the negative effects of increased imports. One of the reasons why we find different results for the Netherlands is the fact that the Dutch manufacturing industry was already undergoing changes well before the emergence of China and the CEE countries and became less sensitive to import competition from China or the CEE countries. In addition, the Netherlands has collective wage negotiations, which may help to explain that we do not find any effects on wages. While the effect of increased trade with China and the CEE countries on manufacturing jobs is limited, it can create uncertainty for workers. The negative effect of import competition and the positive impact of export opportunities on manufacturing jobs also point to adjustments across industries and regions. Transitioning workers to new types of work can be difficult for these workers, as they are (temporarily) unemployed and may need to move to other regions.
    JEL: F16 J31 R11
    Date: 2021–07
  10. By: Beam, Emily A. (University of Vermont); Quimbo, Stella (University of the Philippines, Quezon City)
    Abstract: We use a randomized field experiment to test the causal impact of short-term work experience on employment and school enrollment among disadvantaged, in-school youth in the Philippines. This experience leads to a 4.4 percentage point (79-percent) increase in employment 8 to 12 months later. While we find no aggregate increase in enrollment, we also do not find that the employment gains push youth out of school. Our results are most consistent with work experience serving as a signal of unobservable applicant quality, and these findings highlight the role of temporary work as a stepping- stone to employment for low-income youth.
    Keywords: short-term employment, work experience, ALMP, experiment
    JEL: J24 J08 O15
    Date: 2021–08
  11. By: Ali, Umair (Arizona State University); Herbst, Chris M. (Arizona State University); Makridis, Christos A. (Arizona State University)
    Abstract: Minimum quality regulations are often justified in the child care market because of the presence of information frictions between parents and providers. However, regulations can also have unintended consequences for the quantity and quality of services provided. In this paper, we merge new data on states' child care regulations for maximum classroom group sizes and child-to-staff ratios with the universe of online job postings to study the impact of regulations on the demand for and characteristics of child care labor. Our identification strategy exploits the unprecedented variation in regulatory reform during the COVID-19 pandemic, relying on changes both within states over time and across children's age groups. We find robust evidence that these regulations reduce the number of child care job postings and encourage providers to substitute away from higher-skilled postings, thereby increasing the number of positions that are out-of-compliance with state law. Furthermore, we show that regulations adversely affect mothers' labor force participation. In sum, the results imply that child care regulations may reduce the demand for child care labor, while simultaneously altering the composition of the workforce.
    Keywords: child care, COVID-19, employment, state regulation, women
    JEL: H75 J21 I28
    Date: 2021–08
  12. By: ASAI Yukiko; Dmitri K. KOUSTAS
    Abstract: How does initial placement in a temporary work contract affect workers' subsequent labor market outcomes? To provide insight on this question, we study a unique set of natural experiments: In the mid-1990s, the major firms in the Japanese airline industry changed personnel policy so that all newly-hired flight attendants were employed on temporary employment contracts, while incumbent workers remained on permanent employment contracts. Workers who were hired on temporary contracts and remained at the firms were transitioned to permanent contracts after three years; however, their salaries were approximately half of those permanent workers in their first three years, and the policy change made it difficult for workers to take parental leave for the first four years. The reverse policy change occurred in the mid-2010s: the major firms transitioned back to hiring their flight attendants on permanent contracts. The firms also transitioned all incumbent flight attendants on temporary contracts to permanent contracts. These industry-level hiring practices provide natural experiments that can be used to study whether starting on temporary contracts matters for long-run career and family outcomes for young workers. Our research design uses the universe of employment records from one of Japan's major airlines as well as government surveys to compare outcomes for cohorts of flight attendants hired just before to those hired just after these changes in industry policy. The first key outcome we study is job separation: we find that workers starting on temporary contracts were less likely to remain with the firm over time. These separations appear to have been initiated by workers, not by firms. We are also able to study the effects these policies had on family formation. We find that workers starting on temporary contracts are significantly less likely to have children within 10 years after starting the job. These findings do not appear to be the result of selection on observables.
    Date: 2021–08
  13. By: Carbonnier, Clément (Sciences Po, Paris); Malgouyres, Clément (Paris School of Economics); Py, Loriane (Banque de France); Urvoy, Camille (Sciences Po, Paris)
    Abstract: Do workers gain from lower business taxes, and why? We estimate how a large corporate income tax credit in France is passed on to wages and explore the firm- and employee-level underlying mechanisms. The amount of tax credit firms get depends on their payroll share of workers paid less than a wage threshold. Exposure to the policy thus varies both across workers depending on their wage and across firms depending on their wage structure. Using exhaustive employer-employee data, we find that half of the surplus generated by the reform falls onto workers. Wage gains load on incumbents in high-skill occupations. The wage earnings of low-skill workers—nearly all individually eligible—do not change. This heterogeneous wage incidence is unlikely to be driven by scale effects or skill complementarities. We find that the groups of workers benefiting from wage gains are also more likely to continue working for the same firm. Further, we show that firms do not change their wage-setting behavior in response to the individual eligibility status of workers. Overall, our results suggest that the wage incidence of the tax credit operated collectively through rent-sharing and benefited workers most costly to replace.
    Keywords: business taxation, tax incentives, wage incidence, rent sharing
    JEL: D22 H25 H32
    Date: 2021–08
  14. By: Daan Freeman (CPB Netherlands Bureau for Economic Policy Analysis); Leon Bettendorf (CPB Netherlands Bureau for Economic Policy Analysis); Harro van Heuvelen (CPB Netherlands Bureau for Economic Policy Analysis); Gerdien Meijerink (CPB Netherlands Bureau for Economic Policy Analysis)
    Abstract: This paper analyses the declining firm dynamism in the Netherlands, which may explain part of the slowdown in productivity growth. We use a rich microdata set including nearly all corporations in the Netherlands during 2006-2016, which enables us to evaluate the TFP growth contributions of exiting firms, start-ups and new firms resulting from mergers & acquisitions in different industries. We use a Melitz and Polanec (2015) decomposition to assess TFP growth contributions. We find that in service industries, start-ups, new firms created by M&As and exiting firms all contribute to overall TFP growth, in line with the creative destruction hypothesis. In manufacturing industries, TFP growth is driven mostly by incumbent firms. Here, entry and exit dynamics contribute relatively little or even negatively to TFP growth. In addition, young firms in the manufacturing industries tend to have higher TFP growth than older firms, while in service industries this is not the case. Finally, in general, relatively low productivity entrants are more likely to exit in the first five years after entry, which is in line with an `up-or-out' dynamic.
    JEL: F16 J31 R11
    Date: 2021–08
  15. By: Roos, Michael W. M.; Reale, Jessica; Banning, Frederik
    Abstract: This agent-based model contributes to a theory of corporate culture in which company performance and employees' behaviour result from the interaction between financial incentives, motivational factors and endogenous social norms. Employees' personal values are the main drivers of behaviour. They shape agents' decisions about how much of their working time to devote to individual tasks, cooperative, and shirking activities. The model incorporates two aspects of the management style, analysed both in isolation and combination: (i) monitoring efforts affecting intrinsic motivation, i.e. the firm is either trusting or controlling, and (ii) remuneration schemes affecting extrinsic motivation, i.e. individual or group rewards. The simulations show that financial incentives can (i) lead to inefficient levels of cooperation, and (ii) reinforce value-driven behaviours, amplified by emergent social norms. The company achieves the highest output with a flat wage and a trusting management. Employees that value self-direction highly are pivotal, since they are strongly (de-)motivated by the management style.
    Keywords: Values,social norms,remuneration systems,intrinsic motivation,monitoring,agent-based modelling
    JEL: D24 D91 J22 M52 M54 Z13
    Date: 2021
  16. By: Hofmarcher, Thomas (Lund University); Plug, Erik (University of Amsterdam)
    Abstract: We examine time allocation decisions in same-sex and different-sex couples from a Beckerian comparative advantage perspective. In particular, we estimate the comparative advantage relationship between time spent on either market or household activities and a dummy for being the highest earner in a couple on samples of same-sex and different-sex couples. Using the American Time Use Survey (ATUS), we find that same-sex couples specialize not as much as different-sex couples. We argue that these specialization differences are driven by the most traditional different-sex couples. Without married couples with wives at home taking care of children and husbands working outside the home, which represent at most 20 percent of all different-sex couples, we find that the highest earner in a couple spends 80 minutes more per day on market work and 40 minutes less per day on household work, regardless their sexual orientation. We therefore conclude that, from a comparative advantage perspective, most same-sex and different-sex couples specialize equally.
    Keywords: time allocation, household work, market work, same-sex couples, different-sex couples, comparative advantage
    JEL: D13 J15 J22
    Date: 2021–09
  17. By: Florian Schoner; Lukas Mergele; Larissa Zierow
    Abstract: Numerous countries require teachers to assign comportment grades rating students’ social and work behavior in the classroom. However, the impact of such policies on student outcomes remains unknown. We exploit the staggered introduction of comportment grading across German federal states to estimate its causal effect on students’ school-to-work transitions as well as cognitive and non-cognitive abilities. Analyzing census data, household surveys, and nationwide student assessments, we show that comportment grading does not meaningfully affect these outcomes and rule out large effect sizes. Our results are consistent with these grades being insufficiently salient for students to alter actual student behaviors.
    Keywords: school reforms, report cards, labor market transition, student achievement
    JEL: D91 I21 I28 J24
    Date: 2021
  18. By: Egor Malkov (University of Minnesota, Federal Reserve Bank of Minneapolis)
    Abstract: This paper develops a framework for assessing the welfare effects of labor income tax changes on married couples. I build a static model of couples' labor supply that features both intensive and extensive margins and derive a tractable expression that delivers a transparent understanding of how labor supply responses, policy parameters, and income distribution affect the reform-induced welfare gains. Using this formula, I conduct a comparative welfare analysis of four tax reforms implemented in the United States over the last four decades, namely the Tax Reform Act of 1986, the Omnibus Budget Reconciliation Act of 1993, the Economic Growth and Tax Relief Reconciliation Act of 2001, and the Tax Cuts and Jobs Act of 2017. I find that these reforms created welfare gains ranging from -0.16 to 0.62 percent of aggregate labor income. A sizable part of the gains is generated by the labor force participation responses of women. Despite three reforms resulted in aggregate welfare gains, I show that each reform created both winners and losers. Furthermore, I uncover two patterns in the relationship between welfare gains and couples' labor income. In particular, the reforms of 1986 and 2017 display a monotonically increasing relationship, while the other two reforms demonstrate a U-shaped pattern. Finally, I characterize the bias in welfare gains resulting from the assumption about a linear tax function. I consider a reform that changes tax progressivity and show that the linearization bias is given by the ratio between the tax progressivity parameter and the inverse elasticity of taxable income. Quantitatively, it means that linearization overestimates the welfare effects of the U.S. tax reforms by 3.6-18.1%.
    Keywords: Taxation of Couples, Tax Reforms, Welfare Analysis, Labor Supply, Sufficient Statistics, Linearization Bias
    JEL: D60 E62 E65 H31 J22
    Date: 2021–09
  19. By: Ceyhun Elgin (Columbia University and Bogazici University); M. Ayhan Kose (World Bank, Prospects Group; Brookings Institution; CEPR; and CAMA); Franziska Ohnsorge (World Bank, Prospects Group; CEPR; and CAMA); Shu Yu (World Bank)
    Abstract: We study the degree of synchronization between formal- and informal-economy business cycles. Using a comprehensive database of informal activity that covers a wide range of informality measures from almost 160 countries over the 1990-2018 period, we report two major results. First, fluctuations in informal-sector output are strongly positively correlated with those in formal-sector output. In contrast, fluctuations in informal employment are largely uncorrelated with those in formal-sector output. Second, movements in the formal economy tend to spillover to the informal economy. Using a novel set of instrumental variables, we show that fluctuations in formal-sector output “cause” movements in informal-sector output.
    Keywords: Informal economy, self-employment, business cycle.
    JEL: E26 E32 J46 O17
    Date: 2021–09
  20. By: Ceyhun Elgin (Columbia University and Bogazici University); M. Ayhan Kose (World Bank, Prospects Group; Brookings Institution; CEPR; and CAMA); Franziska Ohnsorge (World Bank, Prospects Group; CEPR; and CAMA); Shu Yu (World Bank)
    Abstract: This paper introduces a comprehensive database of informal economic activity. The database focuses on measures that have strong cross-country and over time coverage: it includes both model-based and survey-based measures of informality and covers more than 160 economies for the period 1990-2018. The paper illustrates two applications of the database. First, it distills stylized facts of informal activity, including its declining trend and pervasiveness in emerging market and developing economies (EMDEs). Second, it documents the cyclical features of the informal economy. Overall, informal economy recessions (recoveries) do not differ significantly from those of formal economy. Like formal-economy business cycles, informal-economy business cycles tend to be shallower in advanced economies than in EMDEs. Informal employment in both advanced economies and EMDEs appears to be largely acyclical.
    Keywords: Informal economy, self-employment, employment, output, business cycles.
    JEL: E26 E32 J46 O17
    Date: 2021–09

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