nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2021‒10‒04
twenty papers chosen by
Joseph Marchand
University of Alberta

  1. Social Labor vs Human Capital: Competing Theories of Skills By Kyle Glenn
  2. How do workers adjust when firms adopt new technologies? By Genz, Sabrina; Gregory, Terry; Janser, Markus; Lehmer, Florian; Matthes, Britta
  3. Internal labor markets. A worker flow approach By Ingrid Huitfeldt; Andreas R. Kostøl; Jan Nimczik; Andrea Weber
  4. Robots For Economic Development By Calì, Massimiliano; Presidente, Giorgio
  5. Women’s work and wages in the sixteenth-century and Sweden’s position in the “Little divergence” By Molinder, Jakob; Pihl, Christopher
  6. Heterogeneous Returns to Medical Innovations By Lazuka, Volha
  7. Minimum wage reform and firms’ performance – evidence from North Macedonia By Biljana Jovanovic; Nikola Naumovski
  8. Task Allocation and On-the-job Training By Mariagiovanna Baccara; SangMok Lee; Leeat Yariv
  9. Automation and labor market polarization in an evolutionary model with heterogeneous workers. By Florent Bordot; André Lorentz
  10. What we pay in the shadow: Labor tax evasion, minimum wage hike and employment By Nicolas Gavoille; Anna Zasova
  11. The Evolution of Skill Use Within and Between Jobs By Costas Cavounidis; Vittoria Dicandia; Kevin Lang; Raghav Malhotra
  12. Post-Compulsory Schooling of Youth in Turkey during the Great Recession: A Case of Pro-cyclical Enrollment By Murat Demirci; Meltem Poyraz
  13. University graduates’ job-education mismatches in the Spanish labour market By Pérez Navarro, Marco Aurelio
  14. The Pro-Trade Bias of Offshoring By Bandyopadhyay, Subhayu; Basu, Arnab K.; Chau, Nancy H.; Mitra, Devashish
  15. Are online platforms killing the offline star? Platform diffusion and the productivity of traditional firms By Hélia Costa; Giuseppe Nicoletti; Mauro Pisu; Christina von Rueden
  16. Welfare effects of tax policy change when there are choice restrictions on labour supply By Zhiyang Jia; Thor O. Thoresen
  17. Making digital transformation work for all in Chile By Paula Garda
  18. Economics of Marriage Bars By Irene Mosca; Robert E. Wright
  19. Fairness Concerns and Job Assignment to Positions with Different Surplus By Danková, Katarína; Morita, Hodaka; Servátka, Maroš; Zhang, Le
  20. Education-occupation mismatch in the context of informality and development By Mariya Aleksynska; Alexandre Kolev

  1. By: Kyle Glenn (Department of Economics, Adams State University)
    Abstract: Wage theory has long relied upon Human Capital theory as an explanation of skilled wages with labor economists attempting to find the appropriate specification for the return to education. Shaikh and Glenn (2018) construct an alternative model of skilled wages called the Social Labor hypothesis. Instead of returns to education, the Social Labor hypothesis posits wages as a function of social costs of education. This paper tests the empirical validity of the Social Labor hypothesis comparing it against the Human Capital model, finding a remarkable fit to empirical data. The paper also provides a theoretical approach to, and empirical evidence of, labor market discrimination.
    Keywords: Skills, wage di erentials, classical theory, human capital theory
    JEL: B51 J24 J31
    Date: 2021–09
  2. By: Genz, Sabrina; Gregory, Terry; Janser, Markus; Lehmer, Florian; Matthes, Britta
    Abstract: We investigate how workers adjust to firms' investments into new digital technologies, including artificial intelligence, augmented reality, or 3D printing. For this, we collected novel data that links survey information on firms' technology adoption to administrative social security data. We then compare individual outcomes between workers employed at technology adopters relative to non-adopters. Depending on the type of technology, we find evidence for improved employment stability, higher wage growth, and increased cumulative earnings in response to digital technology adoption. These beneficial adjustments seem to be driven by technologies used by service providers rather than manufacturers. However, the adjustments do not occur equally across worker groups: IT-related expert jobs with non-routine analytic tasks benefit most from technological upgrading, coinciding with highly complex job requirements, but not necessarily with more academic skills.
    Keywords: technological change,artificial intelligence,employment stability,wages
    JEL: J23 J31 J62
    Date: 2021
  3. By: Ingrid Huitfeldt (Statistics Norway); Andreas R. Kostøl; Jan Nimczik; Andrea Weber
    Abstract: This paper develops a new method to study how workers’ career and wage profiles are shaped by internal labor markets (ILM) and job hierarchies in firms. Our paper tackles the conceptual challenge of organizing jobs within firms into hierarchy levels by proposing a data-driven ranking method based on ob-served worker flows between occupations within firms. We apply our method to linked employer-employee data from Norway that records fine-grained occupational codes and tracks contract changes within firms. Our findings confirm existing evidence that is primarily based on case studies for single firms. We expand on this by documenting substantial heterogeneity in the structure and hierarchy of ILMs across a broad range of large firms. Our findings on wage and promotion dynamics in ILMs are consistent with models of careers in organizations
    Keywords: Internal Labor Markets; Organization of Labor; Wage Setting
    JEL: J31 J62 M5
    Date: 2021–08
  4. By: Calì, Massimiliano; Presidente, Giorgio
    Abstract: Recent evidence suggests that automation technologies entail a trade-off between productivity gains and employment losses for the economies that adopt them. This paper casts doubts on this trade-off in the context of a developing country. It shows significant productivity and employment gains from automation in Indonesian manufacturing during the years 2008-2015, a period of rapid increase in robot imports. Analysis based on manufacturing plant data provides evidence of two plausible reasons for the absence of this trade-off. First, it documents the presence of diminishing productivity returns to robot adoption. As a result, the benefits from automation could be particularly large for countries at early stages of adoption, such as Indonesia. Second, the analysis finds significant positive employment spillovers from automation in downstream plants. Such effects are likely larger in countries such as Indonesia, where the foreign content of manufacturing production is low. Suggestive evidence indicates such results could apply to developing countries more generally.
    Keywords: Robots,Automation,Development,Employment,Productivity,Spillovers
    JEL: O14 J23 J24 L11 F63
    Date: 2021
  5. By: Molinder, Jakob (Department of Economic History, Uppsala University); Pihl, Christopher (Department of History, Uppsala University)
    Abstract: We use a unique source from the Swedish royal demesnes to examine the work and relative wages of women in sixteenth century Sweden, an economic laggard in the Early Modern period. The source pertains to workers hired on yearly contracts, a type more representative for historical labour markets than day-labour on large construction sites, and allows us to observe directly the food consumed by workers. We speak to the debate on the “Little Divergence” within Europe as women’s work and gender differentials in pay is a key indicator of women’s relative autonomy and seen as a cause for the economic ascendency of the North Sea region during the period. We find small gender differentials among both unskilled and skilled workers, indicating that Sweden was a part of the “golden age” for women. We argue that despite superficial equality, women’s economic outlooks were restrained in many other ways – including their access to higher skilled work and jobs in the expanding parts of the economy – adding important nuance to the discussion about the relationship between women’s social position and economic growth in the Early Modern period.
    Keywords: womens work; wages; little divergence; Sweden; gender gap; Early Modern period
    JEL: J21 J31 N00 N33
    Date: 2021–09–14
  6. By: Lazuka, Volha (Department of Business and Economics and Interdisciplinary Centre for Population Dynamics, University of Southern Denmark)
    Abstract: This paper sets up a quasi-experiment to estimate both total and heterogeneous impacts of medical innovations on the individual’s economic outcomes for a comprehensive set of around 90 health conditions. The rich administrative panel data for Sweden covering more than 1 million individuals combined with disease-specific data on new molecular entities and patents granted in healthcare have allowed me to emulate such an experiment. I find that an increase in medical innovations by one standard deviation raises disposable family income by 14.8% [95% CI: 14.4%; 15.1%]. Regarding the sources of income response, medical innovations strongly influence not only own disposable and labour income and sickness and unemployment payments but also a spouse’s income. The effects of medical innovations are especially strong for cancer and circulatory diseases, are moderate for mental and nervous, infectious and respiratory diseases, and are absent or appear as losses for other health shocks. Results also suggest decreasing returns – yet far from reaching zeros – rather than constant returns to scale.
    Keywords: medical innovation; health shock; disposable income; difference-in-differences approach; Sweden
    JEL: I12 I14 I24 J22 J24 O31
    Date: 2021–08–26
  7. By: Biljana Jovanovic (National Bank of the Republic of North Macedonia); Nikola Naumovski (National Bank of the Republic of North Macedonia)
    Abstract: Minimum wage is an important redistributive tool and an important element of the employment strategies and social policies for overcoming poverty and reducing inequality. Even though the social dimension of the minimum wage concept is unquestionable, it also provokes frequent debates and discussions about the likely impact on firms’ financial conditions and consequently, firms’ profitability and performance. This research paper aims to investigate the economic impact of minimum wage increase on firms’ average wages, number of employees, profitability and productivity in the case of North Macedonia. The analysis is conducted by using firm level data set and difference-in-difference (DD) estimation method. Our results showed that the increase in minimum wages didn’t affect firms’ profitability significantly and this result is robust to the changes in the sample and method of estimation. In addition we found that most likely Macedonian firms did absorb higher labour costs by increase in productivity and, in some sectors, with decline in employment.
    Keywords: Inflation, minimum wage, adjustment channels, firms’ performance
    JEL: J31 J38 L25
    Date: 2021
  8. By: Mariagiovanna Baccara; SangMok Lee; Leeat Yariv
    Abstract: We study dynamic task allocation when providers' expertise evolves endogenously through training. We characterize optimal assignment protocols and compare them to discretionary procedures, where it is the clients who select their service providers. Our results indicate that welfare gains from centralization are greater when tasks arrive more rapidly, and when training technologies improve. Monitoring seniors' backlog of clients always increases welfare but may decrease training. Methodologically, we explore a matching setting with endogenous types, and illustrate useful adaptations of queueing theory techniques for such environments.
    JEL: C02 C61 C78 D02 J22 L23
    Date: 2021–09
  9. By: Florent Bordot; André Lorentz
    Abstract: The purpose of this paper is to investigate the mechanisms underlying the relationship between automation and labor market polarization. To do so, we build an agent-based model (ABM) in which workers, heterogeneous in nature and level of skills, interact endogenously on a decentralized labor market with firms producing goods requiring specific set of skills to realize the tasks necessary for the production process. The two scenarios considered, with and without automation, confirm that automation is indeed a key factor in polarizing the structure of skill demand and increasing wage inequality. This result emerges even without reverting to the routine-based technical change (RBTC) hypothesis usually found in the literature, giving some support to the complexity-based technical change (CBTC) hypothesis. Finally, we also highlight that the impact of automation on the distribution of skill demand and wage inequality is correlated with the velocity of technical change.
    Keywords: Automation; Wage Polarization ; Technical Change ; Employment ; Agent-Based Model.
    JEL: C63 E14 J21 J31
    Date: 2021
  10. By: Nicolas Gavoille (Stockholm School of Economics in Riga (SSE Riga)); Anna Zasova (Baltic International Centre for Economic Policy Studies (BICEPS))
    Abstract: The interactions between minimum wage policy and tax evasion remain largely unknown. We study firm-level employment effects of a large and biting minimum wage increase in Latvia conditional on labor tax compliance. The Latvian labor market is characterized by the prevalence of envelope wages, i.e., unreported cash-in-hand complements to the official wage. We apply machine learning to classify firms between compliant and tax-evading using a unique combination of administrative and survey data. We then show that firms engaged in labor tax evasion are insensitive to the minimum wage shock. Our results suggest that these firms use wage underreporting as an adjustment margin, converting (part of ) the envelope into legal wage. Increasing minimum wage contributes to tax rule enforcement, but this comes at the cost of negative employment consequences for compliant firms.
    Date: 2021–08
  11. By: Costas Cavounidis; Vittoria Dicandia; Kevin Lang; Raghav Malhotra
    Abstract: We develop a tractable general equilibrium model for understanding within- and between-occupation changes in skill use over time. We apply the model to skill-use measures from the third, fourth, and revised fourth editions of the Dictionary of Occupational Titles and data from the 1960, 1970, and 1980 Censuses and March Current Population Surveys. We recover changes in skill productivity by exploiting between-occupation movements. Most importantly, finger-dexterity productivity grew rapidly while abstract-skill productivity lagged. We leverage these findings to estimate an inelastic relation between abstract and routine inputs and explain within-occupation shifts in skill use.
    JEL: J01 J24
    Date: 2021–09
  12. By: Murat Demirci (Department of Economics, Koç University); Meltem Poyraz (Department of Economics, Boğaziçi University)
    Abstract: The impact of recessions on school enrollment is ambiguous. On one hand, recessions might increase the likelihood of enrollment due to decreasing opportunity costs of attending school. On the other hand, recessions might discourage enrollment due to reductions households have in funds available for education and deteriorating expectations about returns to education. In this paper, we empirically analyze how local unemployment rates affect enrollment decisions in Turkey during the period covering the Great Recession of 2008-2009. Our estimates show that the likelihood of enrollment in university undergraduate programs decreases during periods of and in regions experiencing higher unemployment, whereas the enrollment in high schools is not affected. This finding contradicts earlier findings of counter-cyclical enrollment in the context of developed countries. This contrast highlights the variations in the relative importance of the effect of income and expectations and in the potential long-term effects of recessions across countries. In particular, recessions might have longer-lasting negative effects in developing countries due to their adverse effect on human capital accumulation.
    Keywords: The Great Recession, School enrollment, Human capital accumulation, Unemployment, Turkey.
    JEL: E24 E32 I20 J24
    Date: 2021–09
  13. By: Pérez Navarro, Marco Aurelio
    Abstract: This paper focuses on educational mismatches in the Spanish labour market for recent university graduates. We analyse both horizontal mismatch and vertical mismatch, more specifically overqualification, considering subjective and objective indicators. The data used is the Labour Insertion Survey for Recent University Graduates, conducted by INE in 2014 and 2019. We analyse the determinants of mismatch at the first job after graduation and at the time of the interview, four years later. We also study the persistence of mismatches and the effect of the economic recession that started in 2008. Our results show the heterogeneity of mismatches across education fields. Individual characteristics, skills, study-related variables and job characteristics also determine the mismatch probability. We also find that graduates in 2014 not only experienced a lower probability of job-education mismatch than those graduated in 2010, but also the persistence was lower, so they had more chances of leaving out the mismatch
    Keywords: job-education mismatch; college education; discrete choice models; sample selection.
    JEL: C25 I21 J24
    Date: 2021–09–23
  14. By: Bandyopadhyay, Subhayu; Basu, Arnab K.; Chau, Nancy H.; Mitra, Devashish
    Abstract: Technological advance and improvements in communication technologies have facilitated the offshoring of jobs worldwide, where a typical scene following the supply chain involves developing countries importing finished products from developed countries that contain developing country labor content. We demonstrate that this pattern of offshoring can harbor a pro-trade bias, but only among countries upstream along the global supply chain. This upstream-downstream asymmetry has important implications on countries’ (i) incentive to violate trade agreements, and (ii) ability to leverage the dispute settlement procedures to punish violators. We then show that a well-enforced set of labor standards in developing countries, such as a binding minimum wage, resolves this conundrum by reviving the ability of the developing countries to use countervailing tariffs to punish trade agreement violators.
    Keywords: Labor and Human Capital
    Date: 2021–09–01
  15. By: Hélia Costa; Giuseppe Nicoletti; Mauro Pisu; Christina von Rueden
    Abstract: Online platform use has grown remarkably in the last decade. Despite this, our understanding of its implications for economic outcomes is scarce and often limited to case studies and advanced countries. Using a newly built harmonised international dataset of online platforms and their use across 43 countries, covering the 2013-18 period and seven areas of activity, we contribute to filling this gap. Specifically, we investigate whether and under which market conditions platform uptake leads to changes in incumbent firms’ productivity. We find that platform use increases labour productivity growth in firms operating in the same sector, and that this takes place through increases in value added growth as opposed to decreases in employment. What is more, productivity gains are greater for small firms and firms in the middle of the productivity distribution, suggesting that online platforms can play an important role in levelling the playing field between SMEs and large companies and in narrowing productivity gaps among firms. Finally, productivity gains are stronger in more dynamic platform markets. Our findings offer insights on factors and policies that can be leveraged to encourage platform development in ways that are beneficial for the economy.
    Keywords: digitalisation, firm behaviour, online platforms, Productivity
    JEL: D22 D24 O33 O47
    Date: 2021–10–05
  16. By: Zhiyang Jia; Thor O. Thoresen (Statistics Norway)
    Abstract: Information about individual choices of heterogeneous agents. Results can for example be used to describe the distributional effects of tax policy change, such as the effects on changes in money metric utility – distributions of equivalent and compensating variation (EV or CV). This type of “revealed preference” methodology relies on using models with sufficient realism. In this paper we argue that the so-called “job choice model” represents a way forward in practical work, as it has a richer representation of choice constraints than conventional labour supply models. This model is also particularly suitable given an increased focus on distinguishing between preferences and constraints in applied welfare analysis. We demonstrate the empirical content of the framework by describing the effects of the Norwegian tax reform 2013–2019 on the distribution of compensating variation (CV).
    Keywords: labour supply; money metric utility; distributional effects; tax reform
    JEL: H31 I31 J22 C25
    Date: 2021–08
  17. By: Paula Garda
    Abstract: The sanitary crisis, created by the outbreak COVID-19, is accelerating Chile’s digital transformation, which has seen a surge in e-learning, streaming, online shopping and marketing and teleworking. The digital transformation has the potential to revamp productivity and inclusiveness, although it comes with adoption barriers and transition costs. Connectivity has increased substantially in the last decades, and the country is ahead of the region. However, fixed high-speed broadband adoption, essential for the digital transformation, lags behind. Firms have started to adopt digital technologies but micro firms and SMEs are well behind. Rural areas have lower connectivity and many workers lack the skills to thrive in the digital world. Lowering the entry barriers in the communication sector and making regulations simpler and clearer would ease infrastructure deployment. Targeted policies for SMEs, such as development of sources of financing or specific programmes for adopting digital tools, would help them access and use digital tools, increasing productivity. Reforms to the innovation ecosystem, competition and the regulatory framework are also needed. To reap the benefits of digitalisation for all, it is necessary to continue investing in quality foundational skills, adult and lifelong learning and in high-skilled ICT specialists. Labour market policies need to be adapted to face the challenges and exploit the benefits posed by the digital transformation. An effective safety net would address possible labour market disruptions.
    Keywords: Chile, connectivity, digital transformation, labour market, productivity, skills
    JEL: D24 J24 J08 I28
    Date: 2021–10–05
  18. By: Irene Mosca (Department of Economics, Maynooth University.); Robert E. Wright (Adam Smith Business School and School of Education, University of Glasgow, Glasgow,UK)
    Abstract: A Marriage Bar is the requirement that women working in certain jobs must leave that job when they marry. In the twentieth century, Marriage Bars were not unusual internationally. In the late 1800s to early 1900s, legislative provisions that required women to resign at marriage were introduced in several countries around the world, including Australia, Canada, Ireland, the Netherlands and the UK. Spill-overs to jobs not strictly covered by the Marriage Bar were also common. This chapter critically reviews, from an economics perspective, the background, the history and the impacts of Marriage Bars. This chapter has four aims. The first is to summarise the arguments provided by government officials and employers to justify both the introduction and the retention of Marriage Bars. The second is to provide a cross-country comparison of Marriage Bars. The third is to investigate the potential impacts of the Marriage Bar on women’s behavior with respect to employment, marriage and education. The fourth is to highlight potential avenues for future research. Although Marriage Bars do not exist anymore, they are still a serious topic of current debate. Much more can be learned about important topics, such as discrimination, from carrying out research focused on Marriage Bars
    Keywords: Marriage Bar: international; women; behavior
    JEL: J2 J4 J7
    Date: 2021
  19. By: Danková, Katarína; Morita, Hodaka; Servátka, Maroš; Zhang, Le
    Abstract: How does job assignment to positions with different surplus affect fairness concerns? We experimentally examine agents’ fairness concerns in a three-person ultimatum game in which all agents are asked to complete a general knowledge quiz before being assigned to a high-stake or low-stake position. We disentangle two possible channels through which job assignment impacts fairness concerns, wage differences and the principal’s intentions, by comparing cases in which the job assignment is determined randomly or by the principal. The knowledge quiz, which mimics performance evaluation, signifies the distinction between the two cases as it provides a basis on which the principal can make the assignment decision. We find that the principal’s intentions significantly impact fairness concerns of the agents assigned to the low-stake position, but wage differences themselves do not. We elaborate on managerial implications of our findings.
    Keywords: job assignment, fairness concerns, experiment, ultimatum game, wage differences, intentions
    JEL: C91 C92 J31 J71
    Date: 2021–09–30
  20. By: Mariya Aleksynska; Alexandre Kolev
    Abstract: Using household data from 15 countries in Latin America and Africa, this paper explores linkages between informality and education-occupation matching. The paper applies a unified methodology to measuring education-occupation mismatches and informality, consistently with the international labour and statistical standards in this area. The results suggest that in the majority of low- and middle-income developing countries with available data, workers in informal jobs have higher odds of being undereducated as compared to workers in formal jobs. Workers in formal jobs, in contrast, have higher chances of being overeducated. These results are consistent for dependent as well as for independent workers. They also hold for men and for women according to the gender-disaggregated analysis. Moreover, in the majority of countries considered in this paper, the matching-informality nexus is also related to the extent of informality in a given area: in labour markets with higher informality, informal workers in particular have a higher chance of being undereducated. The paper discusses policy implications of these findings. Ce document de travail analyse les liens entre l’emploi informel et l’inadéquation entre niveaux de formation et emploi à partir des données d’enquêtes de ménages qui couvrent 15 pays d’Amérique latine et d’Afrique. Il s’appuie sur une méthodologie unifiée pour mesurer l'inadéquation formation-emploi et l'informalité, conformément aux normes internationales du travail et des statistiques dans ce domaine. Les résultats suggèrent que dans la majorité des pays en développement à revenu faible et intermédiaire pour lesquels des données sont disponibles, les travailleurs occupant des emplois informels ont une probabilité plus élevée d'être sous-éduqués que les travailleurs occupant des emplois formels. Ceux-ci ont, a contrario, plus de chances d'être sur-éduqués. Ces résultats sont cohérents tant pour les travailleurs salariés que pour les travailleurs indépendants. Selon l’analyse ventilée par sexe, ils sont également valables pour les hommes comme pour les femmes. De plus, dans la majorité des pays considérés dans ce document, le lien entre l’inadéquation formation-emploi et l'informalité est également lié à l'étendue de l'informalité dans une région donnée : sur les marchés du travail où l'informalité est plus élevée, les travailleurs informels en particulier ont plus de probabilités d'être sous-qualifiés. Le document examine les implications de ces résultats pour les politiques publiques.
    Keywords: developing country, informal employment, occupational mismatch, over-qualification, overeducation
    JEL: E24 E26 I21 J24
    Date: 2021–10–04

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