nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2021‒10‒11
fourteen papers chosen by
Joseph Marchand
University of Alberta

  1. Make Your Own Luck: The Wage Gains from Starting College in a Bad Economy By Alena Bicakova; Guido Matias Cortes; Jacopo Mazza
  2. The Forest Behind the Tree: Heterogeneity in How US Governor's Party Affects Black Workers By Tchuente, Guy; Kakeu, Johnson; Francois, John Nana
  3. Why Is Workplace Sexual Harassment Underreported? The Value of Outside Options Amid the Threat of Retaliation By Gordon B. Dahl; Matthew Knepper
  4. Income Risk Inequality: Evidence from Spanish Administrative Records By Manuel Arellano; Stéphane Bonhomme; Micole De Vera; Laura Hospido; Siqi Wei
  5. Substitution Effects in College Admissions By Gandil, Mikkel Høst
  6. Sex workers’ everyday security in the Netherlands and the impact of COVID-19 By Cubides Kovacsics, M.I.; Santos, W.; Siegmann, K.A.
  7. Occupational Licensing and Accountant Quality: Evidence from the 150-Hour Rule By John M. Barrios
  8. The Macroeconomic Effects of Universal Basic Income Programs By Andre Luduvice
  9. The Dynamics of the Gender Gap at Retirement in Italy: Evidence from SHARE By ABATEMARCO, Antonio; RUSSOLILLO, Maria
  10. Do Targeted R&D Grants Towards Potential Highgrowth Firms Increase Employment and Demand for High Human Capital Workers? By Daunfeldt, Sven-Olov; Halvarsson, Daniel; Gustavsson Tingvall, Patrik; McKelvie, Alexander
  11. School value-added and long-term student outcomes By Kirkebøen, Lars
  12. The Effects of Biased Labor Market Expectations on Consumption, Wealth Inequality, and Welfare By Almut Balleer; Georg Duernecker; Susanne K. Forstner; Johannes Goensch
  13. Who Profits from Windfalls in Oil Tax Revenue? Inequality, Protests, and the Role of Corruption By Michael Alexeev; Nikita Zakharov
  14. Can there be too much information? Heterogeneous responses to information on benefits from language proficiency By Fabian Koenings

  1. By: Alena Bicakova; Guido Matias Cortes; Jacopo Mazza
    Abstract: Using data for nearly 40 cohorts of American college graduates and exploiting regional variation in economic conditions, we show robust evidence of a positive relationship between the unemployment rate at the time of college enrollment and subsequent annual earnings, particularly for women. This positive relationship cannot be explained by selection into employment or by economic conditions at the time of graduation. Changes in major field of study account for only about 10% of the observed earnings gains. The results are consistent with intensified effort exerted by students who experience bad economic times at the beginning of their studies.
    Keywords: business cycle; higher education; cohort effects;
    JEL: I23 J24 J31 E32
    Date: 2021–08
  2. By: Tchuente, Guy; Kakeu, Johnson; Francois, John Nana
    Abstract: Income inequality is a distributional phenomenon. This paper examines the impact of U.S governor's party allegiance (Republican vs Democrat) on ethnic wage gap. A descriptive analysis of the distribution of yearly earnings of Whites and Blacks reveals a divergence in their respective shapes over time suggesting that aggregate analysis may mask important heterogeneous effects. This motivates a granular estimation of the comparative causal effect of governors' party affiliation on labor market outcomes. We use a regression discontinuity design (RDD) based on marginal electoral victories and samples of quantiles groups by wage and hours worked. Overall, the distributional causal estimations show that the vast majority of subgroups of black workers earnings are not affected by democrat governors' policies, suggesting the possible existence of structural factors in the labor markets that contribute to create and keep a wage trap and/or hour worked trap for most of the subgroups of black workers. Democrat governors increase the number of hours worked of black workers at the highest quartiles of earnings. A bivariate quantiles groups analysis shows that democrats decrease the total hours worked for black workers who have the largest number of hours worked and earn the least. Black workers earning more and working fewer hours than half of the sample see their number of hours worked increase under a democrat governor.
    Keywords: U.S. State Policy,Black Workers,US Labor Market,RDD,Governors' Effects Heterogeneity,Bivariate Quantile Causality
    JEL: D72 J15 J22 J31 R23
    Date: 2021
  3. By: Gordon B. Dahl; Matthew Knepper
    Abstract: Why is workplace sexual harassment chronically underreported? We hypothesize that employers coerce victims into silence through the threat of a retaliatory firing, and test this theory by estimating whether external shocks that reduce the value of a worker’s outside options exacerbate underreporting. Under mild assumptions, a rise in the severity of formal complaints is indicative of increased underreporting. Combining this insight with an objective measure of the quality of charges filed with the Equal Employment Opportunity Commission (EEOC), we perform two analyses. First, we assess whether workers report sexual harassment more selectively during recessions, when outside labor market options are limited. We estimate the fraction of sexual harassment charges deemed to have merit by the EEOC increases by 0.5-0.7% for each one percentage point increase in a state-industry’s monthly unemployment rate. The effect is amplified in industries employing a larger fraction of men and in establishments with a higher share of male managers. Second, we test whether less generous UI benefits create economic incentives for victims of workplace sexual harassment to remain silent. We find the selectivity of sexual harassment charges increases by more than 30% in response to a 50% cut to North Carolina’s Unemployment Insurance (UI) program following the Great Recession.
    Keywords: sexual harassment, unemployment, unemployment insurance
    JEL: J71 J78
    Date: 2021
  4. By: Manuel Arellano (CEMFI, Centro de Estudios Monetarios y Financieros); Stéphane Bonhomme (University of Chicago); Micole De Vera (CEMFI, Centro de Estudios Monetarios y Financieros); Laura Hospido (Banco de España); Siqi Wei (CEMFI, Centro de Estudios Monetarios y Financieros)
    Abstract: In this paper we use administrative data from the social security to study income dynamics and income risk inequality in Spain between 2005 and 2018. We construct individual measures of income risk as functions of past employment history, income, and demographics. Focusing on males, we document that income risk is highly unequal in Spain: more than half of the economy has close to perfect predictability of their income, while some face considerable uncertainty. Income risk is inversely related to income and age, and income risk inequality increases markedly in the recession. These findings are robust to a variety of specifications, including using neural networks for prediction and allowing for individual unobserved heterogeneity.
    Keywords: Spain, income dynamics, administrative data, income risk, inequality.
    JEL: D31 E24 E31 J31
    Date: 2021–09
  5. By: Gandil, Mikkel Høst (Dept. of Economics, University of Oslo)
    Abstract: I show how local supply changes create ripple effects in a national educational market. Admitting an applicant to a program will free up a slot to be filled at her next-best alternative. To investigate such substitution effects I re-engineer the centralized admission system of the Danish tertiary education sector and simulate equilibria under counterfactual supply. I estimate potential earnings with a regression discontinuity design and quantify market clearings in terms of earnings. On average, a change of 10 slots leads to 15 applicants moving and substitution effects explain 40 percent of the variation in earnings. Substitution externalities are generally positive but vary in sign and magnitude. I document a trade-off between earnings and inequality.
    Keywords: Field of study; College admission; Program evaluation; RDD
    JEL: C63 H52 I21 I22 I24 I26 J24
    Date: 2021–09–06
  6. By: Cubides Kovacsics, M.I.; Santos, W.; Siegmann, K.A.
    Abstract: The COVID-19 pandemic has laid bare and exacerbates the existing insecurities of sex workers, a highly stigmatised, often criminalised and economically precarious group of workers. In the Netherlands, sex workers continue to experience different forms of violence despite the occupation’s legalisation, making it a ‘profession in limbo’. This paper therefore seeks to formulate answers to the questions: What are sex workers’ everyday experiences of (in)security? And: How has the COVID-19 pandemic influenced these? Given sex workers’ historical exclusion from policy formulation, we engage with these questions through collaborative research based on semi-structured interviews with sex workers in The Hague. Our analysis reveals a stark mismatch between the insecurities that sex workers’ experience and the concerns enshrined in the regulatory environment. While the municipality’s regulation of the sex industry focuses on sexually transmitted infections (STIs), occupational safety and health issues that sex workers experience also include psychological problems, insufficient hygiene in the workplace and the risk of violent clients. Besides, income insecurity is a key concern for sex workers. The decline in legal workspaces during the past two decades has not translated into higher service rates. Net earnings are further reduced when window operators pass on the risks of illness or damage to sex workers. Furthermore, operators act as powerful gatekeepers of access to remunerative employment. Here, sex workers identify gender-based discrimination with resulting more severe employment and income insecurities for transwomen and male sex workers. This legal liminality is enabled not only by the opaque legal status of sex work in the Netherlands, but also by the gendering of official regulation. Our study mirrors research from the Netherlands and beyond that documents sex workers’ widespread exclusion from COVID-19 support packages. Over and beyond this, we find that immigration status intersects with and mediates these exclusionary processes. We conclude that, firstly, to effectively address the insecurities that sex workers experience and fear, regulation needs to shift from its current criminal law and public health focus to a labour approach. Secondly, over and above such decriminalization, policies and civil society actors alike need to address the gender and sexual hierarchies that underpin sex worker stigma as well as migrants’ discrimination which have come out as powerful mediators of sex workers’ insecurities.
    Keywords: Biopolitics, collaborative research, gender, insecurities, intersectionality, labour approach, legal liminality, the Netherlands, sex work
    Date: 2021–09–29
  7. By: John M. Barrios
    Abstract: I examine the effects of occupational licensing on the quality of Certified Public Accountants (CPAs). I exploit the staggered adoption of the 150-hour rule, which increases the educational requirements for a CPA license. The analysis shows that the rule decreases the number of entrants into the profession, reducing both low- and high-quality candidates. Labor market proxies for quality find no difference between 150-hour rule CPAs and the rest. Moreover, rule CPAs exit public accounting at similar rates and have comparable writing quality to their non-rule counterparts. Overall, these findings are consistent with the theoretical argument that increases in licensing requirements restrict the supply of entrants and do little to improve quality in the labor market.
    JEL: D45 I21 J2 K2 L51 M1 M12 M21 M4 M40 M41 M5
    Date: 2021–10
  8. By: Andre Luduvice
    Abstract: What are the consequences of a nationwide reform of a transfer system based on means-testing toward one of unconditional transfers? I answer this question with a quantitative model to assess the general equilibrium, inequality, and welfare effects of substituting the current US income security system with a universal basic income (UBI) policy. To do so, I develop an overlapping generations model with idiosyncratic income risk that incorporates intensive and extensive margins of the labor supply, on-the-job learning, and child-bearing costs. The tax-transfer system closely mimics the US design. I calibrate the model to the US economy and conduct counterfactual analyses that implement reforms toward a UBI. I find that an expenditure-neutral reform has moderate impacts on agents’ labor supply response but induces aggregate capital and output to grow due to larger precautionary savings. A UBI of $1,000 monthly requires a substantial increase in the tax rate of consumption used to clear the government budget and leads to an overall decrease in the macroeconomic aggregates, stemming from a drop in the labor supply. In both cases, the economy has more equally distributed disposable income and consumption. The UBI economy constitutes a welfare loss at the transition if it is expenditure-neutral and results in a gain in the second scenario.
    Keywords: Universal Basic Income; Social Insurance; Overlapping Generations; Labor Supply
    JEL: E21 H24 J22
    Date: 2021–09–28
  9. By: ABATEMARCO, Antonio (Department of Economics and Statistics and CELPE, University of Salerno - Italy); RUSSOLILLO, Maria (Department of Economics and Statistics, University of Salerno and Bayes Business School - City (formerly CASS), University of London - UK)
    Abstract: We investigate the dynamics of the gender gap at retirement in Italy -- by cohort and year of retirement -- for individuals retiring from 1980 to 2027 using data from SHARELIFE (Wave 7). Most importantly, we disentangle the opposite effects on the gender gap originating respectively from (i) improving labor market conditions for women from the sixties, and (ii) increasing actuarial fairness of the pension plan due to the progressive transition from a defined-benefit to a notional defined-contribution scheme. To capture the impact of these two driving forces, we implement a counterfactual analysis by which the gender gap at retirement -- in terms of gender gap in pension (GGP) and between-group inequality (GE) -- is measured both in the actual and in the virtual distribution of pension benefits, with the latter being obtained under the hypothesis of an actuarially fair pension scheme. We observe a U-shaped pattern since the actual gender gap at retirement is found to be decreasing up to 2020 but increasing after this date. Specifically, the increasing pattern for the gender gap at retirement after 2020 is shown to be driven by (i) the loss of redistributive power of the pension scheme, and (ii) women's penalization in the pro-rata mechanism due to lower contributions paid in the early working life.
    Keywords: gender gap; pension; redistribution; actuarial fairness
    JEL: H55 J16 J26
    Date: 2021–09–30
  10. By: Daunfeldt, Sven-Olov (Institute of Retail Economics (Handelns Forskningsinstitut)); Halvarsson, Daniel (the Ratio Institute); Gustavsson Tingvall, Patrik (Södertörn University Stockholm, Sweden); McKelvie, Alexander
    Abstract: Most previous studies on the employment effects of government R&D grants targeting SMEs are characterized by data-, measurement-, and selection problems, making it difficult to construct a relevant control group of firms that did not receive a R&D grant. We investigate the effects on employment and firm-level demand for high human capital workers of two Swedish programs targeted towards growth-oriented SMEs using Coarsened Exact Matching. Our most striking result is the absence of any statistically significant effects. We find no robust evidence that the targeted R&D grant programs had any positive and statistically significant effects on the number of employees recruited into these SMEs, or that the grants are associated with an increase in the demand for high human capital workers. The lack of statistically significant findings is troublesome considering that government support programs require a positive impact to cover the administrative costs associated with these programs.
    Keywords: Innovation policy; R&D grants; Matching grants; Statistical matching methods; High human capital; Firm growth; Outcome additionality
    JEL: H81 L25 L26 O38
    Date: 2021–10–01
  11. By: Kirkebøen, Lars (Statistics Norway)
    Abstract: This paper studies school quality in the context of Norwegian compulsory schooling. I demonstrate that even when lagged achievement is not observed, it is possible to construct informative value-added (VA) indicators of persistent school quality by adjusting exam scores for students’ background characteristics. These VA indicators show little bias forecasting average exam performance out of sample, and are also predicative of long-term student outcomes, including earnings. Three quasi-experiments using variation from student mobility and changes in neighborhood school assignments indicate that the differences captured by the VA indicators do indeed reflect differences in school quality, rather than unobserved student characteristics. The finding help connect learning outcomes with later labor market outcomes, e.g. for cost-benefit analysis of interventions in schools.
    Keywords: school quality; value-added; VAM; earnings
    JEL: J24
    Date: 2021–09–20
  12. By: Almut Balleer; Georg Duernecker; Susanne K. Forstner; Johannes Goensch
    Abstract: Idiosyncratic labor risk is a prevalent phenomenon with important implications for individual choices. In labor market research it is commonly assumed that agents have rational expectations and therefore correctly assess the risk they face in the labor market. We analyse survey data for the U.S. and document a substantial optimistic bias of households in their subjective expectations about future labor market transitions. Furthermore, we analyze the heterogeneity in the bias across different demographic groups and we find that high-school graduates tend to be strongly over-optimistic about their labor market prospects, whereas college graduates have rather precise beliefs. In the context of a quantitative heterogenous agents life cycle model we show that the optimistic bias has a quantitatively sizable negative effect on the life cycle allocation of income, consumption and wealth and implies a substantial loss in individual welfare compared to the allocation under full information. Moreover, we establish that the heterogeneity in the bias leads to pronounced differences in the accumulation of assets across individuals, and is thereby a quantitatively important driver of inequality in wealth.
    Keywords: subjective expectations, labor markets, consumption, asset accumulation, wealth inequality
    JEL: E21 D84
    Date: 2021
  13. By: Michael Alexeev (Indiana University); Nikita Zakharov (University of Freiburg - Department of Economics)
    Abstract: We investigate the relationship between oil windfalls and income inequality using the subnational data of one of the resource-richest and most unequal countries in the world – Russia. While previous literature has produced contradictory findings due to the use of an aggregate measure of oil rents in mainly cross-national settings, we focus exclusively on the oil rents that accrue to the subnational governments across one country. Our estimation strategy takes advantage of the two unique features of Russian oil taxation: 1) the change in oil-tax policy when sharing oil-extraction taxes with local budgets was discontinued; 2) the oil-tax formula tied directly to the international oil prices allowing to use the oil price shocks as an exogenous change in oil rents. When we look at the period with oil-tax revenues shared with the regional governments, we find that oil windfalls had increased income inequality and benefited the wealthiest quintile of the population in regions with more intense rent-seeking. Further, the positive oil price shocks combined with increased rent-seeking reduced the share of labor income but increased the income share from unidentified sources traditionally attributed to corruption. These effects of oil windfalls disappear after the Russian government discontinued oil-tax revenue sharing with regional governments. Finally, we examine the potential political implications of the rising inequality due to the appropriation of the oil windfalls. We find its positive effect on the frequency of protests associated with grievances among the poor and disadvantaged social groups; this effect, however, exists only in relatively democratic regions.
    Keywords: Oil, Decentralized Revenues, Income Inequality, Corruption, Protest, Russia
    Date: 2021–09
  14. By: Fabian Koenings (Friedrich Schiller University Jena)
    Abstract: Immigrants who have a better command of the host country’s language are more likely to be employed and earn higher wages. Using a survey experiment among international students in Germany, I investigate whether information on the monetary benefits of mastering the language of the host country influences the intention to learn that language. The results show heterogeneous responses conditional on the current level of German language proficiency. The intended participation of international students with high German language skills is not affected, students with medium German language skills are positively affected and those with low or no German language skills are negatively affected. For policy makers, seeking to increase the level of language proficiency, this surprising negative effect suggests that there can be too much information.
    Keywords: language learning, information experiment, migration, international students
    JEL: D01 F22 J24 O15
    Date: 2021–10–05

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