nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2021‒11‒29
nineteen papers chosen by
Joseph Marchand
University of Alberta

  1. The Value of Sick Pay By Adams-Prassl, Abigail; Boneva, Teodora; Golin, Marta; Rauh, Christopher
  2. Dynamic Labor Reallocation with Heterogeneous Skills and Uninsured Idiosyncratic Risk By Faia, Ester; Kudlyak, Marianna; Shabalina, Ekaterina
  3. Remote Working and Mental Health during the First Wave of COVID-19 Pandemic By Bertoni, Marco; Cavapozzi, Danilo; Pasini, Giacomo; Pavese, Caterina
  4. Firm Size and the Task Content of Jobs: Evidence from 47 Countries By De Vera, Micole; Garcia-Brazales, Javier
  5. Reference Points and the Tradeoff Between Risk and Incentives By Thomas Dohmen; Arjan Non; Tom Stolp
  6. Many Rivers to Cross: Social Identity, Cognition and Labour Mobility in Rural India By Michiels, Sébastien; Nordman, Christophe Jalil; Seetahul, Suneha
  7. On the Persistence of the China Shock By Autor, David; Dorn, David; Hanson, Gordon H.
  8. Salary History and Employer Demand: Evidence from a Two-Sided Audit By Amanda Y. Agan; Bo Cowgill; Laura K. Gee
  9. Individualism, Human Capital Formation, and Labor Market Success By Katharina Hartinger; Sven Resnjanskij; Jens Ruhose; Simon Wiederhold
  10. Efficiency versus Insurance: Capital Income Taxation and Privatizing Social Security By Makarski, Krzysztof; Tyrowicz, Joanna; Komada, Oliwia
  11. The Market for CEOs: Building Legacy and Feeling Empowered Matter By Dupuy, Arnaud; Kennes, John; Lyng, Ran Sun
  12. Differing roles of lifelong learning: Hedging against unemployment risks from skill obsolescence or boosting upward career mobility? By Tobias Schultheiss; Uschi Backes-Gellner
  13. Value without Employment By Simcha Barkai; Stavros Panageas
  14. Behavioral Bias in Occupational Fatality Risk: Theory, Evidence, and Implications By Perry Singleton
  15. The COVID-19 Pandemic, Well-Being, and Transitions to Post-secondary Education By Sandner, Malte; Patzina, Alexander; Anger, Silke; Bernhard, Sarah; Dietrich, Hans
  16. The Covid Crisis: Occupational Impacts in EU Economies and Policy Suggestions By Georg Fischer; Michael Landesmann
  17. News from the frontier: Increased productivity dispersion across firms and factor reallocation By Paul Bouche; Gilbert Cette; Rémy Lecat
  18. Spurring growth and closing gaps through digitalisation in a post-COVID world: Policies to LIFT all boats By Mauro Pisu; Christina von Rüden; Hyunjeong Hwang; Giuseppe Nicoletti
  19. Female Entrepreneurship in the U.S. 1982 - 2012: Implications for Welfare and Aggregate Output By Pedro Bento

  1. By: Adams-Prassl, Abigail (University of Oxford); Boneva, Teodora (University of Bonn); Golin, Marta (University of Oxford); Rauh, Christopher (University of Cambridge)
    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: 2021–10
  2. By: Faia, Ester (Goethe University Frankfurt); Kudlyak, Marianna (Federal Reserve Bank of San Francisco); Shabalina, Ekaterina (Goethe University Frankfurt)
    Abstract: Occupational specificity of human capital motivates an important role of occupational reallocation for the economy's response to shocks and for the dynamics of inequality. We introduce occupational mobility, through a random choice model with dynamic value function optimization, into a multi-sector/multi-occupation Bewley (1980)-Aiyagari (1994) model with heterogeneous income risk, liquid and illiquid assets, price adjustment costs, and in which households differ by their occupation-specific skills. Labor income is a combination of endogenous occupational wages and idiosyncratic shock. Occupational reallocation and its impact on the economy depend on the transferability of workers' skills across occupations and occupational specialization of the production function. The model matches well the statistics on income and wealth inequality, and the patterns of occupational mobility. It provides a laboratory for studying the short- and long-run effects of occupational shocks, automation and task encroaching on income and wealth inequality. We apply the model to the pandemic recession by adding an SIR block with occupation-specific infection risk and a ZLB policy and study the impact of occupational and aggregate labor supply shocks. We find that occupational mobility may tame the effect of the shocks but amplifies earnings inequality, as compared to a model without mobility.
    Keywords: occupational mobility, heterogeneous agents, skills, income and wealth inequality, discrete choice optimization
    JEL: J22 J23 J31 J62 E21 D31
    Date: 2021–10
  3. By: Bertoni, Marco (University of Padova); Cavapozzi, Danilo (Università Ca’ Foscari di Venezia); Pasini, Giacomo (Ca' Foscari University of Venice); Pavese, Caterina (University of Padua)
    Abstract: We use longitudinal data from the SHARE survey to estimate the causal effect of remote working during the COVID-19 pandemic on mental health of senior Europeans. We face endogeneity concerns both for the probability of being employed during the pandemic and for the choice of different work arrangements conditional on employment. Our research design overcomes these issues by exploiting variation in the technical feasibility of remote working across occupations and in the legal restrictions to in-presence work across sectors. We estimate heterogeneous effects of remote working on mental health: we find negative effects for respondents with children at home and for those living in countries with low restrictions or low excess death rates due to the pandemic. On the other hand, the effect is positive for men and for respondents with no co-residing children.
    Keywords: mental health, remote working, COVID-19, SHARE
    JEL: I10 J22 J24 J81
    Date: 2021–10
  4. By: De Vera, Micole; Garcia-Brazales, Javier
    Abstract: Using a mix of household- and employer-based survey data from 47 countries, we provide novel evidence that workers in larger firms perform more non-routine analytical and interpersonal tasks, even within narrowly defined occupations. Moreover, workers in larger firms rely more on the use of information and communications technologies (ICT) to perform these tasks. We also document a 17% wage premium that workers in larger firms enjoy relative to their counterparts in smaller firms. We find evidence that the firm size gradient in the task content of jobs accounts for around 10% of the large firm wage premium.
    Keywords: Tasks,Occupations,Firm size,Cross-country evidence,Wage differential
    JEL: J24 J31 L25
    Date: 2021
  5. By: Thomas Dohmen; Arjan Non; Tom Stolp
    Abstract: We conduct laboratory experiments to investigate basic predictions of principal-agent theory about the choice of piece rate contracts in the presence of output risk, and provide novel insights that reference dependent preferences affect the tradeoff between risk and incentives. Subjects in our experiments choose their compensation for performing a real-effort task from a menu of linear piece rate and fixed payment combinations. As classical principal-agent models predict, more risk averse individuals choose lower piece rates. However, in contrast to those predictions, we find that low-productivity risk averse workers choose higher piece rates when the riskiness of the environment increases. We hypothesize that reference points affect piece rate choice in risky environments, such that individuals whose expected earnings would exceed (fall below) the reference point in a risk-free environment behave risk averse (seeking) in risky environments. In a second experiment, we exogenously manipulate reference points and confirm this hypothesis.
    Keywords: Incentive, piece-rate, risk, reference point, laboratory experiment
    JEL: D81 D91 M52
    Date: 2021–10
  6. By: Michiels, Sébastien (CREST); Nordman, Christophe Jalil (IRD, DIAL, Paris-Dauphine); Seetahul, Suneha (World Bank)
    Abstract: By considering the case of rural South India, this study analyses whether individual skills and personality traits are able to facilitate labour market mobility of disadvantaged groups in the presence of constraining social structures. We use an individual panel dataset built on two household surveys carried out in 2010 and 2016-2017 in Tamil Nadu. We explore the relationship between individual cognitive skills (Raven, literacy and numeracy scores), personality traits (Big Five Inventory) and earnings mobility. We first assess the extent of gender and caste-based labour market segmentation using transition matrices. Then, we take advantage of intra-group heterogeneity in terms of cognitive skills and personality traits to explore whether these personal characteristics can enable individuals to overcome rigid social structures. Results show that personality traits are important determinants of labour mobility. Nonetheless, we observe a strong rigidity of the labour market structure in terms of gender and caste, and its relative stillness over time.
    Keywords: occupational transition, income mobility, cognitive skills, personality, Tamil Nadu, India
    JEL: J24 J31 J71 O12
    Date: 2021–10
  7. By: Autor, David (MIT); Dorn, David (University of Zurich); Hanson, Gordon H. (University of California, San Diego)
    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.
    Keywords: import competition, China trade, local labor markets, manufacturing decline, job loss
    JEL: E24 F14 F16 J23 J31 L60 O47 R12 R23
    Date: 2021–10
  8. By: Amanda Y. Agan; Bo Cowgill; Laura K. Gee
    Abstract: We study how salary history disclosures affect employer demand by using a novel, two-sided field experiment featuring hundreds of recruiters reviewing over 2000 job applications. We randomize the presence of salary history questions as well as candidates' disclosures. We find that employers make negative inferences about non-disclosing candidates, and view salary history as a stronger signal about competing options than worker quality. Disclosures by men (and other highly-paid candidates) yield higher salary offers, however they are negative signals of value (net of salary), and thus yield fewer callbacks. Male wage premiums are regarded as a weaker signal of quality than other sources (such as the premiums from working at higher paying firms, or being well-paid compared to peers). Recruiters correctly anticipate that women are less likely to disclose salary history at any level, and punish women less than men for silence. In our simulation of bans, we find no evidence that bans affect the gender ratio of callback choices, but find large reductions in gender inequality in salary offers among candidates called back. However, salary offers are lower overall (especially for men). A theoretical framework shows how these effects may differ by key properties of labor markets.
    JEL: C90 J70 M50
    Date: 2021–11
  9. By: Katharina Hartinger; Sven Resnjanskij; Jens Ruhose; Simon Wiederhold
    Abstract: There is an ongoing debate about the economic effects of individualism. We establish that individualism leads to better educational and labor market outcomes. Using data from the largest international adult skill assessment, we identify the effects of individualism by exploiting variation between migrants at the origin country, origin language, and person level. Migrants from more individualistic cultures have higher cognitive skills and larger skill gains over time. They also invest more in their skills over the life-cycle, as they acquire more years of schooling and are more likely to participate in adult education activities. In fact, individualism is more important in explaining adult skill formation than any other cultural trait that has been emphasized in previous literature. In the labor market, more individualistic migrants earn higher wages and are less often unemployed. We show that our results cannot be explained by selective migration or omitted origin-country variables.
    Keywords: cognitive skills, culture, individualism, labor market, international comparisons
    JEL: D91 J24 I20 Z13
    Date: 2021
  10. By: Makarski, Krzysztof (Warsaw School of Economics); Tyrowicz, Joanna (University of Warsaw); Komada, Oliwia (GRAPE)
    Abstract: We study the interactions between capital income tax and social security privatization in the context of rising longevity. In an economy with idiosyncratic income shocks, redistributive defined benefit social security provides some insurance against income uncertainty. This insurance comes at the expense of efficiency loss due to labor supply distortions. The existing view in the literature states that reducing this distortion by introducing (partially funded) defined contribution social security would reduce welfare because the loss of insurance and the transitory fiscal gap dominate the efficiency gains. However, prior research financed the transitory costs of the reform by taxing consumption. We show that in the context of longevity, capital income taxation provides a superior alternative: welfare gains are sufficient to outweigh the loss of insurance and transitory fiscal gap. We provide explanations for a mechanism behind this result and we reconcile our results with the earlier literature.
    Keywords: longevity, capital income taxation, social security reform, fiscal policy, welfare effects
    JEL: C68 D72 E62 H55 J26
    Date: 2021–10
  11. By: Dupuy, Arnaud (University of Luxembourg); Kennes, John (Aarhus University); Lyng, Ran Sun (University of Toronto)
    Abstract: We develop a two-sided multidimensional matching model of the market for CEOs that allows for both pecuniary and non-pecuniary (amenity) compensation. The model is estimated by maximum likelihood estimation using matched CEO-firm data from Denmark. We show that CEOs have preferences for building legacy and gaining empowerment. The legacy mechanism explains why there is low mobility in the CEO market, even though firms demand general CEO skills. The empowerment mechanism explains why CEOs are willing to sacrifice significant pecuniary income to manage high equity firms. The overall conclusion is that job amenities matter in the market for CEOs.
    Keywords: multidimensional matching, observed transfers, structural estimation, value of job amenities, taxation, CEO compensation, CEO performance
    JEL: G30 M12 C78 C35 D22 D31 J3
    Date: 2021–10
  12. By: Tobias Schultheiss; Uschi Backes-Gellner
    Abstract: This paper examines the role of lifelong learning in counteracting skill depreciation and obsolescence. We build on findings showing that different skill types have structurally different depreciation rates. We differentiate between hard and soft skills and measure the relative importance of these two skill types at the occupational level. As data source we draw on a large sample of job advertisements and a categorization of their skill requirements through a machine-learning algorithm. We analyze lifelong learning effects for "harder" occupations (with relatively more hard than soft skills) versus "softer" occupations. Our results reveal important patterns of skill depreciation and counteracting lifelong learning effects: In harder occupations, the role of lifelong learning is primarily as a hedge against unemployment risks caused by fast-depreciating hard skills; in softer occupations, this role instead lies mostly in acting as a boost to wage gains and upward career mobility as workers build on a value-stable skill foundation.
    JEL: I26 J24
    Date: 2021–11
  13. By: Simcha Barkai; Stavros Panageas
    Abstract: Young firms' contribution to aggregate employment has been underwhelming. However, a similar trend is not apparent in their contribution to aggregate sales or aggregate stock market capitalization. We study the implications of the arrival of “low marginal - high average” revenue-product-of-labor firms in a stylized model of dynamic firm heterogeneity, and show that the model can account for a large number of facts related to the decline in “business dynamism”. We study the long-term implications of the decline in business dynamism on the economy by providing analytical results that connect the decline in dynamism to the eventual decline of consumption.
    JEL: D24 E23 E24 E25 G24
    Date: 2021–10
  14. By: Perry Singleton (Center for Policy Research, Maxwell School, Syracuse University, 426 Eggers Hall, Syracuse, NY 13244)
    Abstract: Behavioral bias in occupational fatality risk is introduced to the theoretical framework of hedonic wages, yielding an endogenous risk ceiling that increases social welfare. Empirically, bias is most evident among workers with no high school diploma, who do not report relatively greater exposure to death in high fatality rate occupations. These findings suggest that extant population estimates of value of statistical life are biased downwards and should be factored by at least 1.35. Under reasonable assumptions, simulations suggest an optimal risk ceiling between 73.0 to 85.9 percentile of the population distribution of occupational fatality risk.
    Keywords: Compensating Wage Differentials, Value of Statistical Life, Workplace Safety, Occupational Safety
    JEL: J31 J81
    Date: 2021–11
  15. By: Sandner, Malte (Institute for Employment Research (IAB), Nuremberg); Patzina, Alexander (Institute for Employment Research (IAB), Nuremberg); Anger, Silke (Institute for Employment Research (IAB), Nuremberg); Bernhard, Sarah (Institute for Employment Research (IAB), Nuremberg); Dietrich, Hans (Institute for Employment Research (IAB), Nuremberg)
    Abstract: This study examines the immediate and intermediate effects of the COVID-19 pandemic on the well-being of two high school graduation cohorts (2020 and 2021). We also investigate how changes in well-being at the transition to post-secondary education affect educational plans and outcomes. Our unique panel data contain prospective survey information on three dimensions of well- being: mental health problems, self-rated health, and life satisfaction for 3,697 students. Data is collected several months before (fall 2019), shortly before and soon after (spring 2020), and several months after (fall/winter 2020/21) the outbreak of the COVID-19 pandemic. Applying difference-in-differences designs, random effect growth curve models, and linear regression models, we find that school closures had a positive immediate effect on students' wellbeing. Over the course of the pandemic, however, well-being strongly declined, mainly concentrated among the 2021 graduation cohort. Finally, we show that a strong decline in mental health is associated with changes in educational and career plans and transition outcomes. As adverse life experiences in adolescence are likely to accumulate over the life course, this study is the first to exhibit potential long-lasting negative effects of the COVID-19 pandemic on education and careers of young individuals.
    Keywords: COVID-19, high school graduates, mental and physical well-being, life satisfaction, school-to-work transition
    JEL: I21 I18 J24
    Date: 2021–10
  16. By: Georg Fischer (The Vienna Institute for International Economic Studies, wiiw); Michael Landesmann (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: This policy note examines sectoral and occupational employment impacts of the Covid-19 crisis. The crisis hit EU economies (and advanced economies in general) as they were already undergoing important structural changes due to technological change (digitisation), a factor affecting most organisations now and in the future. Some of these changes accelerated during the pandemic, along with at times dramatic changes in sectoral demand patterns (due to lock-downs) and shifts in work organisation, all of which had strongly differential impacts on various occupational groups. The policy note studies in-depth occupational employment patterns before and during the pandemic using detailed Labour Force Statistics, including analysis of the differentiated impacts on women and men. The major policy challenge is to avoid lasting gaps in overall employment as economies recover and as temporary support schemes are phased out. Further, policy makers need to focus attention on how to accompany the continuing changes in structural employment patterns. These changes can have significant and lasting impacts on the employment prospects of different segments of the labour force (in terms of age, gender and educational/skill levels). The policy note postulates a number of policy actions which should be embarked upon, both at the national and EU level.
    Keywords: Covid-19 crisis, employment impact, occupational and sectoral impacts; gender impacts
    JEL: J01 J08 J23 J24 O52 O57
    Date: 2021–11
  17. By: Paul Bouche; Gilbert Cette; Rémy Lecat
    Abstract: Analysing French firms over 1991-2016, we find first that since the beginning of the century, one or two downward significant productivity breaks have occurred in all industries, both at the frontier and for laggard firms, suggesting a decline in the contribution of technological progress to productivity growth. Second, the median labour share is always higher for the laggard firms than for the frontier firms, with a sharp decrease from the mid-1990s to 2008, and an increase from 2008 onwards. Third, factor reallocation decreased significantly in the 2000s, at the time when we observed an increase in productivity dispersion, with a growing productivity gap between frontier and laggard firms. It appears also that reallocation has been lower on average over the whole period for sectors with a high import share, which can be related to the impact of global value chains.
    Keywords: Productivity, Frontier Firms, Reallocation
    JEL: D24 E24 J23 L25
    Date: 2021
  18. By: Mauro Pisu; Christina von Rüden; Hyunjeong Hwang; Giuseppe Nicoletti
    Abstract: The full potential of digital technologies remains unrealised and their benefits unequally shared because of insufficient investment in enabling intangible assets and communication networks within and across countries. The COVID-19 shock poses new challenges and opportunities. Drawing on past and ongoing OECD work, the paper proposes a multipronged policy approach to durably accelerate the diffusion and uptake of digital technologies across all layers of society, and share their benefits more widely. The building blocks of the proposed LIFT approach include: Lifelong learning for all to ensure everybody has the opportunity to acquire and upgrade the skills needed to thrive in a digital world; Intangibles finance for the knowledge economy to allow more firms, especially small ones, to increase intangible investment and seize the opportunities offered by the digital transformation; Framework market conditions for the digital age to upgrade policies to the digital age, especially in the areas of taxation, competition law and enforcement, digital security, firms’ entry and exit, and e-government; Technology access via digital infrastructure to facilitate access to communication networks and accelerate the take up of digital technologies and their international diffusion.
    Keywords: Compensation, Competition Policy, Education and Inequality, Firm Growth, Firm Performance, Innovation Policy, Skill Biased, SME, Technology Adoption, Technology and Competitiveness, Wages
    JEL: L25 L4 O32 O33 O38 I24 J3
    Date: 2021–11–26
  19. By: Pedro Bento (Texas A&M University, Department of Economics)
    Abstract: The number of women-owned businesses in the U.S. has soared over the last several decades, even compared to the rise in female labor market participation. In 1982 less than 9 percent of working women owned businesses, compared to over 17 percent of men. By 2012 more than 18 percent of women owned businesses while the analogous rate for men only slightly increased to almost 20 percent. This and other evidence suggests that women have faced significant barriers to starting and running businesses and these barriers have been declining over time. I examine the impact of these trends on aggregate output and the welfare of women and men in the labor force. Interpreted through the lens of a model of entrepreneurship, observed trends imply substantial declines in several barriers facing female entrepreneurs. Together, these changes account for over 12 percent of observed growth in aggregate output and a 2 percent increase in workers' consumption-equivalent welfare since 1982. By 2012, lower barriers increased the welfare of female entrepreneurs by a dramatic 33 percent, while lowering the welfare of male entrepreneurs by 6 percent. These impacts are in addition to any gains to workers from declining labor-market barriers.
    Keywords: women, entrepreneurship, business dynamism, misallocation, aggregate productivity, economic growth.
    JEL: E02 E1 J7 O1 O4
    Date: 2021–11–08

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