nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2021‒11‒01
eight papers chosen by
Joseph Marchand
University of Alberta

  1. Demographic change, secular stagnation and inequality: automation as a blessing? By Arthur Jacobs; Freddy Heylen
  2. The Human Side of Structural Transformation By Tommaso Porzio; Federico Rossi; Gabriella V. Santangelo
  3. On the Persistence of the China Shock By David Autor; David Dorn; Gordon H. Hanson
  4. Agglomeration and the Italian North-South divide By Luigi Buzzacchi; Antonio De Marco; Marcello Pagnini
  5. The Rise of Pass-Throughs and the Decline of the Labor Share By Matthew Smith; Danny Yagan; Owen M. Zidar; Eric Zwick
  6. Macroeconomic dynamics and the role of market power. The case of Italy By Mondolo, Jasmine
  7. Telemigration and Development: On the Offshorability of Teleworkable Jobs By Richard Baldwin; Jonathan I. Dingel
  8. Do Conditional Cash Transfers Improve Education and Labour Market Outcomes in the Future Generation? By Anqi Zhang; Katsushi S. Imai

  1. By: Arthur Jacobs; Freddy Heylen (-)
    Abstract: We construct and calibrate an overlapping generations model incorporating demographic change and the possibility to automate the production process to test the hypothesis put forward by Acemoglu and Restrepo (2017). In line with their hypothesis, we find that ageing is a powerful force stimulating the adoption of automation technologies in OECD economies. Ageing-induced automation is found to soften the negative effects of labour scarcity and rising old-age dependency rates on per capita growth, but the compensation is incomplete. One important reason is that automated tasks are far from perfect substitutes for tasks executed by human labour. A second reason is that ageing-induced automation reduces the intensity of positive behavioural reactions to ageing in the form of retiring later and investing more in human capital. Moreover, the partial compensation comes at the price of rising wage and welfare inequality between individuals of different innate ability level and a fall in the net labour share of income. Compared to existing literature, we pay special attention to the theoretical and empirical foundations of the modelling of automation. Theoretically, our work is the first one testing this hypothesis that relates the approach to automation rigorously to the state-of the-art conception by Acemoglu and Restrepo (2018a; 2018b). Empirically, we tested and largely confirmed the validity of our approach and calibration by comparing model predictions of (changes in) automation density to actual data on robotization in a cross-country fashion.
    Keywords: Automation, Demographic change, Secular stagnation, Overlapping generations model, Robotics, Factor shares
    JEL: E22 E27 J11 J23 J24 J31
    Date: 2021–10
  2. By: Tommaso Porzio; Federico Rossi; Gabriella V. Santangelo
    Abstract: We document that nearly half of the global decline in agricultural employment during the 20th-century was driven by new cohorts entering the labor market. A newly compiled dataset of policy reforms supports an interpretation of these cohort effects as human capital. Through the lens of a model of frictional labor reallocation, we conclude that human capital growth, both as a mediating factor and as an independent driver, led to a sharp decline in the agricultural labor supply. This decline accounts, at fixed prices, for 40% of the decrease in agricultural employment. This aggregate effect is roughly halved in general equilibrium.
    JEL: J24 J43 J62 L16 O11 O14 O18 R23
    Date: 2021–10
  3. By: David Autor; David Dorn; Gordon H. Hanson
    Abstract: Abstract We evaluate the duration of the China trade shock and its impact on a wide range of outcomes over the period 2000 to 2019. The shock plateaued in 2010, enabling analysis of its effects for nearly a decade past its culmination. Adverse impacts of import competition on manufacturing employment, overall employment-population ratios, and income per capita in more trade-exposed U.S. commuting zones are present out to 2019. Over the full study period, greater import competition implies a reduction in the manufacturing employment-population ratio of 1.54 percentage points, which is 55% of the observed change in the value, and the absorption of 86% of this net job loss via a corresponding decrease in the overall employment rate. Reductions in population headcounts, which indicate net out-migration, register only for foreign-born workers and the native-born 25-39 years old, implying that exit from work is a primary means of adjustment to trade-induced contractions in labor demand. More negatively affected regions see modest increases in the uptake of government transfers, but these transfers primarily take the form of Social Security and Medicare benefits. Adverse outcomes are more acute in regions that initially had fewer college-educated workers and were more industrially specialized. Impacts are qualitatively—but not quantitatively—similar to those caused by the decline of employment in coal production since the 1980s, indicating that the China trade shock holds lessons for other episodes of localized job loss. Import competition from China induced changes in income per capita across local labor markets that are much larger than the spatial heterogeneity of income effects predicted by standard quantitative trade models. Even using higher-end estimates of the consumer benefits of rising trade with China, a substantial fraction of commuting zones appears to have suffered absolute declines in average real incomes.
    JEL: E24 F16 J23 J31 R12 R23
    Date: 2021–10
  4. By: Luigi Buzzacchi (Politecnico di Torino); Antonio De Marco (Politecnico di Torino); Marcello Pagnini (Bank of Italy)
    Abstract: This paper offers novel evidence on agglomeration economies by examining the link between total factor productivity (TFP) and employment density in Italy. TFP is estimated for a large sample of manufacturing firms and then aggregated at the level of Local Labor Market Areas (LLMAs). We tackle the endogeneity issues stemming from the presence of omitted covariates and reverse causation with an instrumental variable (IV) approach that relies on his-torical and geological data. Our estimate of the TFP elasticity with respect to the spatial con-centration of economic activities is about 6%, a magnitude comparable to that measured for other developed countries. We find that the TFP-density nexus contributes to explaining a large share of the substantial productivity gap between the northern and southern regions of Italy. We also show that no significant heterogeneity emerges in the intensity of agglomera-tion economies across the country and that the positive TFP difference in favor of the firms located in the North is not due to the tougher competition taking place in those areas.
    Keywords: agglomeration economies, density, total factor productivity, regional disparities, selection effects
    JEL: R12 R23
    Date: 2021–10
  5. By: Matthew Smith; Danny Yagan; Owen M. Zidar; Eric Zwick
    Abstract: This paper studies the coevolution of the fall in the US corporate sector labor share and the rise of business activity in tax-preferred, pass-through form. Reallocating activity to the form it would have taken prior to the Tax Reform Act of 1986 accounts for one third of the decline in the corporate sector labor share between 1978 and 2017. Our adjustments are concentrated among mid-market firms in services, leaving a larger role for the manufacturing sector and superstar firms in driving the remaining decline in the labor share. Our findings highlight the importance of tax policy when measuring factor shares.
    JEL: E01 E25 H25 J32
    Date: 2021–10
  6. By: Mondolo, Jasmine
    Abstract: In recent years, the US and other advanced countries have experienced macroeconomic dynamics which raise some concerns and which, according to the literature, are at least partly attributable to a rise in product market power. This study mainly aims to understand how Italy performs in terms of five relevant economic variables (i.e., domestic investment rate, labour share, labour force participation, wage inequality and economic dynamism), and whether firms’ markups are on the rise. The picture that emerges is mixed, and the negative performance in terms of business dynamism and wage dispersion may be ascribable to an increase in product market power. The firm-level analysis of the Italian manufacturing sector for the years 2011-2018, which complements previous empirical analysis on product market power in this country and accounts for labour market power as well, reveals an increment in the average markup which, however, is not particularly pronounced and unsettling, and which is preceded by a period of steady decline. Moreover, this trend is accompanied by a more remarkable increase in the workers’ labour market power, which helps explain the modest growth in the revenue-based labour share observed during the same period.
    Keywords: labour share, market power, markup, investment, inequality
    JEL: E25 J42 L11
    Date: 2021–10–13
  7. By: Richard Baldwin; Jonathan I. Dingel
    Abstract: The Covid-19 pandemic has introduced huge numbers of employers and employees to remote work. How many of these newly remote jobs will go overseas? We offer a rough quantification based on two observations: 1) offshore work is trade in services, and 2) the number of telemigrants is the volume of this trade divided by the average wage. Combining these with gravity-model estimates, we can roughly predict the number of new telemigrants that would arise from lower barriers to trade in services. Telemigration seems unlikely to be transformative when it comes to the development paths of most emerging economies. The baseline service trade flows are modest, and the standard gravity model restricts modest changes to have modest impacts. There are no tipping points in structural gravity models. Finally, we propose a simple model of telemigration in which small changes can have large consequences. The key is to assume that latent comparative advantage takes a different shape than typically assumed in quantitative trade models. Given this, small changes in trade costs can generate large and asymmetric increases in the exports of service tasks from low-wage nations.
    JEL: F1 J2
    Date: 2021–10
  8. By: Anqi Zhang; Katsushi S. Imai
    Abstract: This paper estimates the long-term impacts of PROGRESA, the Mexican conditional cash transfer programme, on the educational attainment and the labour market performance of children aged 18 years or younger in 1997. Based on the household panel in 1997-2017, we utilise the initial experimental design where the programmes were allocated randomly at the village level in a phased manner. After controlling for the attrition bias by Inverse Probability Weights and the unobservable time-invariant household characteristics, we estimate the intent to treat (ITT) effect by Propensity Score Matching and weighted OLS and Probit models. After 20 years, children of the poor eligible households in the early treated villages outperformed the matched children in the control villages. Regardless of age groups and gender, early beneficiaries achieved better educational attainments in both durations and levels and were more likely to work and earn a higher salary in the regular and non-regular labour markets. We also find spillover effects on children of non-poor households in the treated villages for education but not for employment. The study provides robust evidence to support Heckman's (2012) conclusion that the education of disadvantaged children should be prioritised by public policies not only for the sake of fairness and social justice but also for the productivity of the economy.
    JEL: I26 I28 I38 J24
    Date: 2021–10

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