nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2021‒10‒18
fourteen papers chosen by
Joseph Marchand
University of Alberta

  1. Productivity-wage nexus at the firm-level in Portugal: Decoupling and divergences By Alexandre Mergulhão; José Azevedo Pereira
  2. Income Risk Inequality: Evidence from Spanish Administrative Records By Manuel Arellano; Stéphane Bonhomme; Micole De Vera; Laura Hospido; Siqi Wei
  3. A reassessment of the potential for loss-framed incentive contracts to increase productivity: a meta-analysis and a real-effort experiment By Paul J. Ferraro; J. Dustin Tracy
  4. Robots versus labor skills: a complementarity/substitutability analysis By M. Battisti; M. Del Gatto; A. F. Gravina; C. F. Parmeter
  5. Can Non-Cognitive Skills Explain The Gender Wage Gap In Russia? An Unconditional Quantile Regression Approach By Ksenia V. Rozhkova; Natalya Yemelina; Sergey Yu. Roshchin
  6. Household debt and labour supply By Bunn, Philip; Chadha, Jagjit; Lazarowicz, Thomas; Millard, Stephen; Rockall, Emma
  7. Revealing the diversity and complexity behind long-term income inequality in Latin America: a new dataset, 1920-2011 By Astorga Junquera, Pablo
  8. Organization of Knowledge and Taxation By Marek Kapicka; Ctirad Slavik
  9. Career-breaks and Maternal Employment in CEE Countries By Alena Bicakova; Klara Kaliskova
  10. Physicians' incentives, patients' characteristics, and quality of care: A systematic experimental comparison of fee-for-service, capitation, and pay for performance By Brosig-Koch, Jeannette; Groß, Mona; Hennig-Schmidt, Heike; Kairies-Schwarz, Nadja; Wiesen, Daniel
  11. Benefits of internationalisation for acquirers and targets - But unevenly distributed By Frey, Rainer; Goldbach, Stefan
  12. Sticky wages and the Great Depression: evidence from the United Kingdom By Lennard, Jason
  13. Striking a bargain: narrative identification of wage bargaining shocks By Budrys, Žymantas; Porqueddu, Mario; Sokol, Andrej
  14. Transportation and Quality of Life: Evidence from Denmark By Hybel, Jesper; Mulalic, Ismir

  1. By: Alexandre Mergulhão; José Azevedo Pereira
    Abstract: There is a growing international concern about the slowdown in productivity growth, especially as labor productivity enhancements are important drivers of higher general-ised living standards.Using administrative data of firms in Portugal between 2010 and 2016, we analyse the relationships between productivity and wages. At odds with neoclassical theory of mar-ginal productivity of labor, we find that two thirds of firms insufficiently raised wages giv-en observed productivity growth. Employing unconditional quantile regressions, we in-vestigate some quantifiable determinants of the productivity-wage gap at different parts of the distributions. Most of the documented dynamics contributed not only to the diver-gence of productivity and wages but also to the decoupling of productivity and wage growth. We argue that labor market flexibilisation intensified segmentation, providing incentives for non standard contracts. Both dimensions, as well as higher board com-pensations, international trade and on-the-job training weakened the link between productivity and wages.
    Keywords: compensation, income distribution, Productivity, public policy, Quantile regressions, wage share
    JEL: C3 D2 D31 D33 J31 J38
    Date: 2021–10–18
  2. By: Manuel Arellano (CEMFI); Stéphane Bonhomme (University of Chicago); Micole De Vera (CEMFI); Laura Hospido (Banco de EspaÑa and iza); Siqi Wei (CEMFI)
    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
  3. By: Paul J. Ferraro (arey Business School & Whiting School of Engineering, Johns Hopkins University); J. Dustin Tracy (Economic Science Institute, Chapman University)
    Abstract: Behavioral scientists have reported substantial increases in worker productivity when incentives are framed as losses rather than gains. Loss-framed incentive contracts have also been reported to be preferred by workers. These claims are challenged by results from our meta-analysis and real-effort experiment. Whereas the summary effect size from loss-framed contracts in laboratory experiments is a 0.4 SD increase in productivity, the summary effect size from ï¬ eld experiments is 0.0 SD. Although this difference may reflect differing labor environments in the laboratory and ï¬ eld, we detect evidence of publication biases among laboratory experiments. In a new laboratory experiment that addresses prior design weaknesses, we estimate an effect size of 0.1 SD. This result, in combination with evidence from the meta-analysis, suggests that the difference between the effect size estimates in published laboratory and ï¬ eld experiments does not stem from the limited external validity of laboratory experiments, but may instead stem from a mix of underpowered laboratory designs and publication biases. Moreover, in our experiment, most workers preferred the gain-framed contract and the increase in average productivity is only detectable in the subgroup of workers (∼20%) who preferred the loss-framed contracts. This result suggests that employers may ï¬ nd using these contracts in real labor environments challenging. Based on the results from our experiment and meta-analysis, we believe that further research is warranted to assess the robustness and magnitude of the impacts from loss-framed contracts before advocating for their adoption by private and public sector actors.
    Keywords: framing effects, incentive contracts, meta-analysis, real-effort experiment, and behavioral insights
    JEL: C91 J24 J33
    Date: 2021
  4. By: M. Battisti; M. Del Gatto; A. F. Gravina; C. F. Parmeter
    Abstract: The rise of artificial intelligence and automation is fueling anxiety about the replacementof workers with robots and digital technologies. Relying upon a (country-sector-year) constructed measure of robotic capital (RK), we study the extent of complementarity/substitutabilitybetween robots and workers at different skill levels (i.e., high-, medium- and low-skilled workers). The analysis points to a higher elasticity of substitution (EoS) - i.e., higher substitutability - between RK and unskilled labor, compared to skilled labor. Furthermore, we find evidence of polarizing effects, according to which middle-skilled workers, typically employed in intermediate routine and/or codifiable tasks, are the most vulnerable to robotization. Results turn out to be robust to using different - i) definitions of EoS; ii) computations of RK; iii) samples of countries and industries (WIOD vs EU KLEMS data); iv) skill grouping.
    Keywords: Automation;robotization;elasticity of substitution;technology;polarization
    Date: 2021
  5. By: Ksenia V. Rozhkova (National Research University Higher School of Economics); Natalya Yemelina (National Research University Higher School of Economics); Sergey Yu. Roshchin (National Research University Higher School of Economics)
    Abstract: Non-cognitive skills are widely recognized in economics as an important factor that affects various individual outcomes, including wages and employment. Non-cognitive skills can also serve as an additional explanation for the gender wage gap. This paper disentangles the complex relationship between non-cognitive skills and the gender wage gap based on Russian data. Data are collected from a nationally representative Russian survey RLMS-HSE and include detailed information on individuals aged 20–60. We use the Big Five factor model, locus of control, and attitudes towards risk to represent non-cognitive skills. Our findings suggest that non-cognitive skills account for up to 8 per cent of the gender wage gap, although significant variation is observed with different measures of personality and across the wage distribution. We conclude that personality traits are noteworthy but not exhaustive factors in the gender wage gap, and there are other unobserved factors which researchers have yet to identify.
    Keywords: gender wage gap, non-cognitive skills, personality traits, unconditional quantile regression, Russia
    JEL: J16 J24 J31
    Date: 2021
  6. By: Bunn, Philip (Bank of England); Chadha, Jagjit (National Institute of Economic and Social Research); Lazarowicz, Thomas (University College London); Millard, Stephen (Bank of England); Rockall, Emma (Stanford University)
    Abstract: In this paper, we first develop a theoretical framework with three types of household: outright homeowners, mortgagors and renters. We then examine empirically how household debt affects the response of labour supply to shocks to income, mortgage interest rates and house prices for each type of household. In line with our framework, we find that negative income shocks lead to lower participation among outright homeowners while increasing mortgagors’ desired hours; surprise rises in interest rates lead to increases in desired hours that are larger the higher is the household’s debt level; and falls in house prices increase mortgagors’ desired hours.
    Keywords: Household debt; housing; labour supply; participation; hours worked
    JEL: E21 J22
    Date: 2021–09–24
  7. By: Astorga Junquera, Pablo
    Abstract: The period between 1920 and 1980 is of great importance for the study of inequality in Latin America because of the occurrence of state-led, protected industrialisation amid structural, demographic and institutional transformations. Although there are valuable contributions at the country level, the study of income inequality from a broad regional perspective has been hindered by limitations of comparable metrics. To address this gap a new dataset has been assembled including Argentina, Brazil, Chile, Colombia, Mexico, and Venezuela. The approach adopted distinguishes four occupational groups: the top group includes employers, managers and professionals; the remaining three groups are defined according to the workers' skill level, largely receiving wage income. This allows for the calculation of inequality between and within groups, as well as overall Ginis for all income and wage income. The frequency of the series is annual, making it possible to track closely inequality trajectories. Despite being a high-inequality region, this new evidence reveals great diversity of outcomes across the six countries and complexity within the occupational structure. There is no single inequality metric that captures the whole story. Looking forward, this dataset opens the door to undertake econometric analysis to unpick the inequality contribution of key drivers such as the terms of trade and structural change.
    Keywords: Income Inequality; Economic Development; Latin America
    JEL: O54 O15 J31
    Date: 2021–10–05
  8. By: Marek Kapicka; Ctirad Slavik
    Abstract: This paper studies how labor income taxation interacts with the organization of knowledge and production, and ultimately the distribution of wages in the economy. A more progressive tax system reduces the time that managers allocate to work. This makes the organization of production less efficient and reduces wages at both tails of the distribution, which increases lower tail wage inequality and decreases upper tail wage inequality. The optimal tax system is substantially less progressive than the current one in the United States. However, if wages were exogenous, the optimal tax progressivity would be much higher.
    Keywords: inequality; wages; knowledge based hierarchies; income taxation;
    JEL: E6 H2 D8 L23
    Date: 2021–09
  9. By: Alena Bicakova; Klara Kaliskova
    Abstract: Post-birth career breaks and their impact on mothers’ labor market outcomes have received considerable attention in the literature. However, existing evidence comes mostly from Western Europe and the US, where career breaks tend to be short. In contrast, Central and Eastern European (CEE) countries, where post-birth career interruptions by mothers are typically much longer, have rarely been studied. In the first part of this study, we place CEE countries into the EU context by providing key empirical facts related to the labor market outcomes of mothers and the most important factors that may affect them. Besides substantial differences between CEE countries and the rest of the EU, there is also large heterogeneity within CEE itself, which we explore next. In the second part, we review the main family leave and formal childcare policies and reforms that have occurred in CEE countries since the end of Communism and provide a comprehensive survey of the existing scientific evidence of their impact on maternal employment. While research on the causal impacts of these policies is scarce, several important studies have recently been published in high-impact journals. We are the first to provide an overview of these causal studies from CEE countries, which offer an insightful extension to the existing knowledge from Western Europe and the US.
    Keywords: CEE countries; labor market, motherhood;
    Date: 2021–09
  10. By: Brosig-Koch, Jeannette; Groß, Mona; Hennig-Schmidt, Heike; Kairies-Schwarz, Nadja; Wiesen, Daniel
    Abstract: This paper systematically studies how performance pay, complementing either baseline feefor-service or capitation, affects physicians' medical service provision and the quality of care. Using a series of controlled experiments with physicians and students, we test the incentive effect of performance pay at a within-subject level. A discrete bonus is granted if a quality threshold is reached, which varies with the patients' severity of illness. We find that performance pay significantly reduces non-optimal service provision and enhances the quality of care. Effect sizes depend on the patients' severity of illness and whether the baseline is fee-for-service or capitation. Health policy implications, including a cost benefit analysis of introducing performance pay, are discussed.
    Keywords: Fee-for-service,capitation,pay for performance,heterogeneous patients,artefactual field experiment,laboratory experiments
    JEL: C91 I11
    Date: 2021
  11. By: Frey, Rainer; Goldbach, Stefan
    Abstract: In some countries around the world, the advantages of globalisation have been increasingly called into question recently. In particular, takeovers by foreign firms raise suspicions of technology theft and job cuts at the newly acquired local plant. By looking at Germany, as a large open economy, between 1999 and 2018 we first see that both German firms that are acquired by foreign investors and German firms which invest abroad show similar characteristics: they are on average larger, more innovative and productive, but less profitable than purely national firms. With internationalisation, a variety of positive effects emerge. With respect to takeovers of German companies by foreign investors, the productivity and sales of the German affiliate increase while the foreign owners tend to step up expenditure on the labour force in Germany in the aftermath of the acquisition - compared to purely domestically owned firms. In the case of German firms going international, we find positive productivity and sales effects for relatively small companies investing abroad, and this internationalisation is not to the detriment of the domestic labour force. Thus, all in all, this supports a positive view of globalisation. However not all firms benefit: in particular, sector, firm size and time horizon have a bearing on the outcome.
    Keywords: globalisation,firm acquisition,M&A,productivity,sales,innovativeness,know-how,technology,labour costs,employment,wages,firm heterogeneity
    JEL: D22 D24 F23 G34
    Date: 2021
  12. By: Lennard, Jason
    Abstract: How sticky were wages during the Great Depression? Although classic accounts emphasize the importance of nominal rigidity in amplifying deflationary shocks, the evidence is limited. In this paper, I calculate the degree of nominal wage rigidity in the United Kingdom between the wars using new granular data covering millions of wages. I find that nominal wages were more flexible downwards than in most modern economies, but that the frequency and magnitude of wage cuts were too low to fully offset deflation
    Keywords: Great Depression; interwar Britain; nominal rigidity
    JEL: E30 N14
    Date: 2021–10–01
  13. By: Budrys, Žymantas; Porqueddu, Mario; Sokol, Andrej
    Abstract: We quantify the effects of wage bargaining shocks on macroeconomic aggregates using a structural vector auto-regression model for Germany. We identify exogenous variation in bargaining power from episodes of minimum wage introduction and industrial disputes. This narrative information disciplines the impulse responses to a wage bargaining shock of un-employment and output, and sharpens inference on the behaviour of other variables. The implied transmission mechanism is in line with the theoretical predictions of a large class of search and matching models. We also find that wage bargaining shocks explain a sizeable share of aggregate fluctuations in unemployment and inflation, that their pass-through to prices is very close to being full, and that they imply plausible dynamics for the vacancy rate, firms’ profits, and the labour share. JEL Classification: J2, J3, E32, C32
    Keywords: industrial action, minimum wage, narrative restrictions, structural vector autoregression, wage bargaining
    Date: 2021–10
  14. By: Hybel, Jesper (Aalborg University, Department of the Built Environment); Mulalic, Ismir (Department of Economics, Copenhagen Business School)
    Abstract: This paper investigates the importance of transportation for quality of life in Denmark. We first calibrate a simple general equilibrium model to analyse how local wage levels, housing costs, and commuting costs vary across urban areas as well as to construct a quality of life index that measures a representative household's willingness to pay for local amenities. We find that the quality of life is high in large cities. Wages and rents are also substantially higher in the urban areas that are dense. We then regress the quality of life index on observed amenities to infer how much quality of life is associated with transportation. Our empirical results suggest that the quality of the public transport system is particularly important for the quality of life.
    Keywords: Quality of life; Rent gradients; Wage gradients; Commuting costs; Amenities; Transportation
    JEL: H40 J30 O52 R10 R40
    Date: 2021–09–20

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