nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2021‒12‒20
24 papers chosen by
Joseph Marchand
University of Alberta

  1. “Golden Ages”: A Tale of the Labor Markets in China and the United States By Hanming Fang; Xincheng Qiu
  2. Job separation and sick leave in the long-term care sector in England By Vadean, Florin; Saloniki, Eirini
  3. Artificial intelligence and employment: New cross-country evidence By Alexandre Georgieff; Raphaela Hyee
  4. Headstrong Girls and Dependent Boys: Gender Differences in the Labor Market Returns to Child Behavior By Robert Kaestner; Ofer Malamud
  5. International trade and labor reallocation: misclassification errors, mobility, and switching costs By Maximiliano Dvorkin
  6. Did the Minimum Wage Reduce the Gender Wage Gap in Germany? By Marco Caliendo; Linda Wittbrodt
  7. The COVID-19 pandemic, well-being, and transitions to post-secondary education By Sandner, Malte; Patzina, Alexander; Anger, Silke; Bernhard, Sarah; Dietrich, Hans
  8. Heterogeneity in Labor Market Returns to Adult Education By Kauhanen, Antti; Virtanen, Hanna
  9. Attitudes and personality in the Australian gender wage gap By Kamal, Mustafa; Blacklow, Paul
  10. Refugee migration, labor demand, and local employment By Auer, Daniel; Götz, Lilia
  11. EUROLAB: A Multidimensional Labour Supply-Demand Model for EU countries By NARAZANI Edlira; COLOMBINO Ugo; PALMA FERNANDEZ Bianey
  12. General Equilibrium Effects of Insurance Expansions: Evidence from Long-Term Care Labor Markets By Martin Hackmann; Joerg Heining; Roman Klimke; Maria Polyakova; Holger Seibert
  13. The state of hiring discrimination: A meta-analysis of (almost) all recent correspondence experiments By Louis Lippens; Siel Vermeiren; Stijn Baert
  14. Hysteresis in unemployment: evidence from OECD estimates of the natural rate By Ball, Laurence; Onken, Joern
  15. Being your own boss and bossing others: The moderating effect of managing others on work meaning and autonomy for the self-employed and employees By Nikolova, Milena; Nikolaev, Boris; Boudreaux, Christopher
  16. Preparing the tourism workforce in Portugal for the digital future By OECD
  17. Ups and downs in finance, ups without downs in inequality By Godechot, Olivier; Neumann, Nils; Apascaritei, Paula; Boza, István; Hällsten, Martin; Henriksen, Lasse Folke; Hermansen, Are; Hou, Feng; Jung, Jiwook; Kodama, Naomi; Křížková, Alena; Lippényi, Zoltán; Marta, Elvira; Melzer, Silvia Maja; Mun, Eunmi; Sabanci, Halil; Soener, Matthew; Thaning, Max
  18. Gender Biases in Performance Evaluation: The Role of Beliefs versus Outcomes By Nisvan Erkal; Lata Gangadharan; Boon Han Koh
  19. Million Dollar Baby: Should Parental Benefits Depend on Wages When the Payroll Tax Evasion is Present? By Vitalijs Jascisens; Anna Zasova
  20. A Parsimonious Macroeconomic ABM for Labor Market Regulations By Caner Ates; Dietmar Maringer
  21. Local Economic and Political Effects of Trade Deals: Evidence from NAFTA By Jiwon Choi; Ilyana Kuziemko; Ebonya L. Washington; Gavin Wright
  22. Opportunities and drawbacks of using artificial intelligence for training By Annelore Verhagen
  23. The Foreign Direct Investment Job Multiplier During a Resource Boom: Evidence from Mongolia By Sayour, Nagham; Schröder, Marcel
  24. The impact of U.S. employer-sponsored insurance in the 20th century By Vegard M. Nygaard; Gajendran Raveendranathan

  1. By: Hanming Fang; Xincheng Qiu
    Abstract: We study the labor markets in China and the United States, the two largest economies in the world, by examining the evolution of their cross-sectional age-earnings profiles during the past thirty years. We find that, first, the peak age in the cross-sectional age-earnings profiles, which we refer to as the “golden age,” stayed almost constant at around 45-50 in the U.S., but decreased sharply from 55 to around 35 in China; second, the age-specific earnings grew drastically in China, but stayed almost stagnant in the U.S.; third, the cross-sectional and life-cycle age-earnings profiles were remarkably similar in the U.S., but differed substantially in China. We propose and empirically implement a decomposition framework to infer from the repeated cross-sectional earnings data the experience effect (i.e., human capital accumulation over the life cycle), the cohort effect (i.e., inter-cohort human capital growth), and the time effect (i.e., changes in the human capital rental prices over time), under an identifying assumption that the growth of the experience effect stops at the end of one's working career. The decomposition suggests that China has experienced a much larger inter-cohort productivity growth and higher increase in the rental price to human capital, but lower returns to experience, compared to the U.S. We also use the inferred components to revisit several important and classical applications in macroeconomics and labor economics, including growth accounting and the estimation of TFP growth, and the college wage premium and skill-biased technical change.
    JEL: E24 E25 J24 J31 O47
    Date: 2021–11
  2. By: Vadean, Florin; Saloniki, Eirini
    Abstract: Staff turnover in the long-term care (LTC) sector in England is perceived to be relatively high. Most job leavers do not leave the sector, but rather move to other LTC employers. Nevertheless, there are concerns that the high 'churn' has a negative impact on continuity and quality of care, care providers' recruitment and training costs, and the remaining staff workload and motivation. Using a large employer-employee panel dataset, this study aimed to provide quantitative evidence on the drivers of LTC staff retention and sick leave in England, with a focus on job quality. After controlling for observed individual, organisational and local market characteristics as well as unobserved worker and employer heterogeneity, we found that, everything else being equal, wages and employment conditions (i.e. full time contracts and contracts with guaranteed working hours) significantly improve staff retention. The wage effect was significantly underestimated when not controlling for unobserved heterogeneity. Our findings show that improving pay and employment conditions for care staff employed by independent providers would reduce the staff turnover in LTC. We also found that, everything else being equal, the amount of sick leave was strongly associated with employment in publicly owned care establishments, most likely due to the relatively more generous sick leave terms they offer.
    Keywords: job separation,long-term care,job quality,sick leave,England
    JEL: C23 J31 J63 J81
    Date: 2021
  3. By: Alexandre Georgieff; Raphaela Hyee
    Abstract: Recent years have seen impressive advances in artificial intelligence (AI) and this has stoked renewed concern about the impact of technological progress on the labour market, including on worker displacement.This paper looks at the possible links between AI and employment in a cross-country context. It adapts the AI occupational impact measure developed by Felten, Raj and Seamans (2018[1]; 2019[2]) – an indicator measuring the degree to which occupations rely on abilities in which AI has made the most progress – and extends it to 23 OECD countries. The indicator, which allows for variations in AI exposure across occupations, as well as within occupations and across countries, is then matched to Labour Force Surveys, to analyse the relationship with employment.Over the period 2012-2019, employment grew in nearly all occupations analysed. Overall, there appears to be no clear relationship between AI exposure and employment growth. However, in occupations where computer use is high, greater exposure to AI is linked to higher employment growth. The paper also finds suggestive evidence of a negative relationship between AI exposure and growth in average hours worked among occupations where computer use is low.While further research is needed to identify the exact mechanisms driving these results, one possible explanation is that partial automation by AI increases productivity directly as well as by shifting the task composition of occupations towards higher value-added tasks. This increase in labour productivity and output counteracts the direct displacement effect of automation through AI for workers with good digital skills, who may find it easier to use AI effectively and shift to non-automatable, higher-value added tasks within their occupations. The opposite could be true for workers with poor digital skills, who may not be able to interact efficiently with AI and thus reap all potential benefits of the technology.
    Keywords: artificial intelligence, employment
    JEL: J21 J23 J24 O33
    Date: 2021–12–15
  4. By: Robert Kaestner; Ofer Malamud
    Abstract: The authors use data from the Children of the National Longitudinal Survey of Youth (C-NLSY79) to examine gender differences in the associations between child behavioral problems and early adult earnings. They find large and significant earnings penalties for women who exhibited more headstrong behavior and for men who exhibited more dependent behavior as children. In contrast, there are no penalties for men who were headstrong or for women who were dependent. While other child behavioral problems are also associated with labor market earnings, their associations are not significantly different by gender. The gender differences in headstrong and dependent behavior are not explained by education, marriage, depression, self-esteem, health, or adult personality traits. However, one potential explanation is that these gender differences are a consequence of deviations from gender norms and stereotypes in the workplace.
    JEL: J16 J24
    Date: 2021–11
  5. By: Maximiliano Dvorkin
    Abstract: Over the last few decades, international trade has increased at a rapid pace, altering domestic production and labor demand in different sectors of the economy. A growing literature has studied the heterogeneous effects of trade shocks on workers’ industry and occupation employment and on welfare when reallocation decisions are costly. The estimated effects critically depend on data on workers’ reallocation patterns, which is typically plagued with coding errors. In this paper, I study the consequences of misclassification errors for estimates of the labor market effects of international trade and show that structural parameter values and the estimated effects are biased when the analysis uses uncorrected data. I develop an econometric framework to jointly estimate misclassification probabilities, corrected mobility matrices, and structural parameters in a unified way. Under different model specifications, I compare how the estimated effects of a trade shock differ on whether the analysis uses correct mobility measures and parameters. The results show that estimated employment and welfare effects of a trade shock are substantially different, raising an important warning for quantitative exercises using mobility data with coding errors.
    Keywords: International trade; labor markets; classification errors; mobility; worker reallocation; structural estimation
    JEL: F16 F66 J24 J62 C25
    Date: 2021–12–03
  6. By: Marco Caliendo (University of Potsdam, IZA, DIW, IAB); Linda Wittbrodt (University of Potsdam)
    Abstract: In many countries, women are over-represented among low-wage employees, which is why a wage floor could benefit them particularly. Following this notion, we analyse the impact of the German minimum wage introduction in 2015 on the gender wage gap. Germany poses an interesting case study in this context, since it has a rather high gender wage gap and set the minimum wage at a relatively high level, affecting more than four million employees. Based on individual data from the Structure of Earnings Survey, containing information for over one million employees working in 60,000 firms, we use a difference-in- difference framework that exploits regional differences in the bite of the minimum wage. We find a significant negative effect of the minimum wage on the regional gender wage gap. Between 2014 and 2018, the gap at the 10th percentile of the wage distribution was reduced by 4.6 percentage points (or 32%) in regions that were strongly affected by the minimum wage compared to less affected regions. For the gap at the 25th percentile, the effect still amounted to -18%, while for the mean it was smaller (-11%) and not particularly robust. We thus find that the minimum wage can indeed reduce gender wage disparities. While the effect is highest for the low-paid, it also reaches up into higher parts of the wage distribution.
    Keywords: Minimum Wage, Gender Wage Gap, Regional Bite
    JEL: J16 J31 J38 J71
    Date: 2021–12
  7. By: Sandner, Malte (Institute for Employment Research (IAB), Nuremberg, Germany); Patzina, Alexander (Institute for Employment Research (IAB), Nuremberg, Germany); Anger, Silke (Institute for Employment Research (IAB), Nuremberg, Germany ; Univ. Bamberg); Bernhard, Sarah (Institute for Employment Research (IAB), Nuremberg, Germany); Dietrich, Hans (Institute for Employment Research (IAB), Nuremberg, Germany)
    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’ well-being. 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." (Author's abstract, IAB-Doku) ((en))
    JEL: I18 I21 J24
    Date: 2021–12–09
  8. By: Kauhanen, Antti; Virtanen, Hanna
    Abstract: Abstract We study the earnings and employment effects of enrollment in formal adult education in Finland using a combination of matching and panel data methods. We also conduct cost-benefit analyses. The results show that adult education increases earnings and employment both in secondary and higher education, but the magnitude depends on the original level of education. The earnings and employment effects are the largest for the less educated group (those with only compulsory education). For those already having a degree from higher education, the employment and earnings effects are small. There is substantial heterogeneity behind the average effects. The earning gains differ by field and type of education both in secondary and higher education. Cost-benefit analysis shows that at the individual level, the benefits exceed the costs for those with compulsory and secondary education but not for those with higher education. When the societal costs and benefits are considered, we find that the benefits exceed the costs mostly when the individuals upgrade their level of education and are young enough. The results suggest that public investments in adult education should be carefully targeted. This could for example mean targeting individuals who upgrade their qualifications.
    Keywords: Adult education, Employment, Earnings
    JEL: I21 I26 J31
    Date: 2021–12–15
  9. By: Kamal, Mustafa (Tasmanian School of Business & Economics, University of Tasmania); Blacklow, Paul (Tasmanian School of Business & Economics, University of Tasmania)
    Abstract: This paper estimates the effects of gender role attitudes and personality traits on the gender wage gap in Australia. Applying standard decomposition techniques and controlling for a wide range of variables, the paper finds that the overall gender wage gap in our estimates on average stood at 17.2% in 2019. Furthermore, the major portion of this wage gap remains unexplained, which accounts for at least 72.7% of the total gender wage gap. The results establish gender role attitudes as a key predictor of this pay gap both in the explained and unexplained part of the wage decomposition. It also shows that the impact of personality traits depends on whether the big five traits or the sub-traits are used in the analysis. Even some of the sub-traits belonging to the same category can influence the gender pay gap in opposite directions. Overall, the estimates establish the importance of psychological variables as more important than traditional human capital and other work-related characteristics in explaining the remaining gender wage gap in Australia.
    Keywords: gender wage gap, wage decompositions, gender role attitudes, personality
    JEL: J31 J71
    Date: 2021
  10. By: Auer, Daniel; Götz, Lilia
    Abstract: Whether or not immigration negatively affects the labor market outcomes of natives is an ongoing debate. One of the challenges for empirical evidence is the simultaneity of supply- and demand-side effects. To isolate the demand side, we focus on recent refugees in Germany who are exogenously allocated to districts and largely excluded from the labor market. Using panel data of all German districts between 2010 and 2018 and leveraging variation in the local stock of asylum seekers, we find that 1,000 asylum seekers create 267 jobs on average in a district. This growth effect is mainly driven by a demand for additional labor in service, public administration, and social work. As a consequence, we also observe a significant reduction in the local unemployment rate when more refugees arrive. The dynamic panel data estimates are robust to various sensitivity checks and two different instrumental variable approaches. Quantifying the demand side of immigration adds to our understanding of local labor market dynamics in an increasingly mobile world.
    Keywords: labor demand,refugee migration,employment growth,unemployment
    JEL: J21 J23 O15 R11
    Date: 2021
  11. By: NARAZANI Edlira (European Commission - JRC); COLOMBINO Ugo; PALMA FERNANDEZ Bianey (European Commission - JRC)
    Abstract: This paper describes EUROLAB, a labour supply-demand microsimulation model that relies on EUROMOD, the static microsimulation model for the European Union countries. EUROLAB is built on a multidimensional discrete choice model of labour supply and accounts for involuntary unemployment. The model estimates individual changes in supplied hours of work and participation as a reaction to a hypothetical or real tax transfer reform, often referred to in the literature as “second-order” effects. Furthermore, the model allows for the demand-side effects of a labour market that, depending on how elastic it is, would lead to a different labour supply when the market reaches its equilibrium. The model is unique in covering 27 countries under the same specification of preferences, opportunity set representation and the same concept of income and working hours. We illustrate the usefulness of the model by showing several examples of EUROLAB, using both the one-dimensional and multidimensional versions. Potential extensions of the model are also discussed in the paper.
    Keywords: Behavioural Models, Discrete Choice Modelling, Labour supply, Labour market equilibrium
    Date: 2021–12
  12. By: Martin Hackmann (UCLA, NBER, and CESifo); Joerg Heining (Institut für Arbeitsmarkt-und Berufsforschung (IAB)); Roman Klimke (Harvard University); Maria Polyakova (Stanford University, NBER and CESifo); Holger Seibert (Institut für Arbeitsmarkt-und Berufsforschung (IAB))
    Abstract: Arrow (1963) hypothesized that demand-side moral hazard induced by health insurance leads to supply-side expansions in healthcare markets. Capturing these effects empirically has been challenging, as non-marginal insurance expansions are rare and detailed data on healthcare labor and capital is sparse. We combine administrative labor market data with the geographic variation in the rollout of a universal insurance program—the introduction of long-term care (LTC) insurance in Germany in 1995—to document a substantial expansion of the inpatient LTC labor market in response to insurance expansion. A 10 percentage point expansion in the share of insured elderly leads to 0.05 (7%) more inpatient LTC firms and four (13%) more workers per 1,000 elderly in Germany. Wages did not rise, but the quality of newly hired workers declined. We find suggestive evidence of a reduction in old-age mortality. Using a machine learning algorithm, we characterize counterfactual labor market biographies of potential inpatient LTC hires, finding that the reform moved workers into LTC jobs from unemployment and out of the labor force rather than from other sectors of the economy. We estimate that employing these additional workers in LTC is socially efficient if patients value the care provided by these workers at least at 25% of the market price for care. We show conceptually that, in the spirit of Harberger (1971), in a second-best equilibrium in which supply-side labor markets do not clear at perfectly competitive wages, subsidies for healthcare consumption along with the associated demand-side moral hazard can be welfare-enhancing.
    Keywords: long-term care, universal insurance expansion, Germany, LTC labor market, second-best efficiency
    JEL: D61 I11 I13 J21 J23
    Date: 2021–11
  13. By: Louis Lippens; Siel Vermeiren; Stijn Baert (-)
    Abstract: Notwithstanding the improved integration of various minority groups in the workforce, unequal treatment in hiring still hinders many individuals’ access to the labour market. To tackle this inaccessibility, it is essential to know which and to what extent minority groups face hiring discrimination. This meta-analysis synthesises a quasi-exhaustive register of correspondence experiments on hiring discrimination published between 2005 and 2020. Using a random-effects model, we computed pooled discrimination ratios concerning ten discrimination grounds upon which unequal treatment in hiring is forbidden under United States federal or state law. We find that hiring discrimination against candidates with disabilities, older candidates, and less physically attractive candidates is at least equally severe as the unequal treatment of candidates with salient racial or ethnic characteristics. Remarkably, hiring discrimination against older applicants is even higher in Europe than in the United States. Furthermore, unequal treatment in hiring based on sexual orientation seems to be prompted mainly by signalling activism rather than same-sex orientation in itself. Last, aside from a significant decrease in ethnic and racial hiring discrimination in Europe, we find no structural evidence of recent temporal changes in hiring discrimination based on the various other grounds within the scope of this review
    Keywords: hiring discrimination, unequal treatment, meta-analysis, correspondence experiment, audit study
    JEL: J71 J23 J14 J15 J16
    Date: 2021–12
  14. By: Ball, Laurence; Onken, Joern
    Abstract: This paper studies the dynamics of unemployment (u) and its natural rate (u*), with u* measured by real-time estimates for 29 countries from the OECD. We find strong evidence of hysteresis: an innovation in u causes u* to change in the same direction, and therefore has permanent effects. For our baseline specification, a one percentage point deviation of u from u* for one year has a long-run effect of 0.16 points on both variables. When we allow asymmetry, we find, perhaps surprisingly, that decreases in u have larger long-run effects than increases in u. JEL Classification: E24
    Keywords: high-pressure economy, hysteresis, natural rate, unemployment
    Date: 2021–12
  15. By: Nikolova, Milena; Nikolaev, Boris; Boudreaux, Christopher
    Abstract: We examine the moderating role of being a supervisor for meaning and autonomy of self-employed and employed workers. We rely on regression analysis applied after entropy balancing based on a nationally representative dataset of over 80,000 individuals in 30 European countries for 2005, 2010, and 2015. We find that being a self-employed supervisor is correlated with more work meaningfulness and autonomy compared with being a salaried supervisor working for an employer. Wage supervisors and self-employed supervisors experience similar stress levels and have similar earnings, though selfemployed supervisors work longer hours. Moreover, solo entrepreneurs experience slightly less work meaningfulness, but more autonomy compared with self-employed supervisors. This may be explained by the fact that solo entrepreneurs earn less but have less stress and shorter working hours than selfemployed supervisors.
    Keywords: self-employment,supervisors,autonomy,work meaningfulness
    JEL: I31 L26 M10
    Date: 2021
  16. By: OECD
    Abstract: After a decade of steady growth, the tourism sector in Portugal is facing its most acute challenge in modern times, in the wake of the COVID-19 pandemic. As inbound visitors return to Portugal, the tourism workforce will need digital skills to make effective use of new technologies, and exploit the opportunities digitalisation is opening up for marketing, as well as product and destination development. Successful digital uptake by businesses will be a driving force in building recovery and resilience in the longer term. While there has been progress in recent years, especially in response to the pandemic, there remains considerable scope to go further. To support this digital transformation, this report examines and assesses current policy approaches to support digital skills and workforce development in the sector, and presents a selection of policy considerations to: i) address digital transformation gaps, shortages and opportunities for workforce organisation and skills development, and ii) enhance governance mechanisms to support the digital skills transformation of the tourism workforce.
    Keywords: digital future, digital skills, digital transformation, governance, Portugal, tourism, workforce
    JEL: Z38 L83 J24
    Date: 2021–12–14
  17. By: Godechot, Olivier; Neumann, Nils; Apascaritei, Paula; Boza, István; Hällsten, Martin; Henriksen, Lasse Folke; Hermansen, Are; Hou, Feng; Jung, Jiwook; Kodama, Naomi; Křížková, Alena; Lippényi, Zoltán; Marta, Elvira; Melzer, Silvia Maja; Mun, Eunmi; Sabanci, Halil; Soener, Matthew; Thaning, Max
    Abstract: The upswing in finance over the past several decades has led to rising inequality, but do downswings in finance lead to a symmetric decline in inequality? In this paper, we analyze the asymmetry of the effect of ups and downs in financial markets, as well as the effect of increased capital requirements and the bonus cap on national earnings inequality. We use administrative employer-employee linked data on earnings from 1990 to 2017 for twelve countries. Additionally, we use data on earnings from bank reports, from 2009 to 2017 in thirteen European countries. We find a strong asymmetry in the effects of financial ups and downs on earnings inequality, a mitigating effect of rising capital requirements on the contribution of finance to inequality, and a restructuring effect of the bonus cap for the earnings of financiers, while neither policy affects absolute levels of earnings inequality.
    Keywords: inequality,finance,financial crisis,regulation
    JEL: N2 D31 G38
    Date: 2021
  18. By: Nisvan Erkal (University of Melbourne); Lata Gangadharan (Monash University); Boon Han Koh (University of East Anglia)
    Abstract: We investigate whether gender distorts performance evaluation in environments where outcomes are determined by leaders’ unobservable effort choices and luck. Evaluators form beliefs about effort choices and make discretionary payment decisions. We find that while the discretionary payments made to male leaders are determined by both outcomes and evaluators’ beliefs, those made to female leaders are determined by outcomes only. Hence, beliefs are a source of gender biases in our decision-making environment not because they are biased, but because they play differential roles in female and male leaders’ discretionary payments. We label this new source of gender bias as the gender belief-outcome gap. These findings further our understanding of the factors driving gender gaps in leadership and performance pay. They imply that in the labor market, good outcomes are necessary for women to get bonuses, but men can receive bonuses for bad outcomes as long as evaluators hold them in high regard.
    Keywords: Gender gaps; Performance evaluation; Biases in belief updating; Outcome bias; Social preferences; Laboratory experiments
    JEL: C92 D91 J71
    Date: 2021–12–08
  19. By: Vitalijs Jascisens (HSE University); Anna Zasova (Baltic International Centre for Economic Policy Studies (BICEPS))
    Abstract: This paper explores the effect of tying social security benefits to declared wages on firm-worker collusion and strategic income reporting before the benefit entitlement. We use administrative data from Latvia covering the entire working population over a 15-year period from 1996 to 2010 to study generous parental benefits, which depend on the reported wage in the time period before the childbirth. Our analysis delivers three principal results. First, we observe a sharp increase in the wage during the time period taken into account to calculate parental benefits, and interpret the obtained result as a collusive legalization of previously unreported income with an aim to increase the future benefit. Depending on the specification, we conclude that during this period the wage on average increases by 5.4%-7.5%. Second, obtained effects are highly heterogeneous. We find that the wage growth is much higher in small firms, where it is presumably easier to sustain collusion between employees and employers. Finally, we demonstrate that legalization of wages is temporary and lasts only until the end of the period taken into account to calculate parental benefits.
    Date: 2021–11
  20. By: Caner Ates; Dietmar Maringer
    Abstract: The literature on macroeconomic agent-based models (MABMs) has gained growing attention since the early 2000s. Most MABMs dealing with market regulations have been focusing on the financial market. In contrast, only a small number of MABMs investigate the effects of labor market regulations. In this paper, we provide a parsimonious yet extendable agent-based model that focuses on labor market dynamics within a macroeconomic framework, suitable to analyze labor market regulations such as minimum wages and employment protection legislations. The model is stock-flow-consistent and small-scaled, i.e., there are only workers and firms interacting in the goods and in the labor market. There are two different types of workers, namely skilled and unskilled, and firms produce according to a CES production function. This allows for substitutability between the two types of workers. A one-factor-at-a-time (OFAT) sensitivity analysis is performed to gain insights into the mechanisms and patterns produced by the model. Results show that the model is sensitive to the minimum wage parameter and that for reasonable values of the minimum wage, income inequality decreases, while aggregate consumption rises. Overall, the results suggest that the model can be used to further investigate aggregate and distributional effects of labor market regulations.
    Keywords: Labor market; minimum wage; stock-flow consistent; macroeconomic agent-based model; CATS.
    Date: 2021–12–09
  21. By: Jiwon Choi; Ilyana Kuziemko; Ebonya L. Washington; Gavin Wright
    Abstract: Why have white, less educated voters left the Democratic Party over the past few decades? Scholars have proposed ethnocentrism, social issues and deindustrialization as potential answers. We highlight the role played by the 1994 North American Free Trade Agreement (NAFTA). In event-study analysis, we demonstrate that counties whose 1990 employment depended on industries vulnerable to NAFTA suffered large and persistent employment losses relative to other counties. These losses begin in the mid-1990s and are only modestly offset by transfer programs. While exposed counties historically voted Democratic, in the mid-1990s they turn away from the party of the president (Bill Clinton) who ushered in the agreement and by 2000 vote majority Republican in House elections. Employing a variety of micro-data sources, including 1992-1994 respondent-level panel data, we show that protectionist views predict movement toward the GOP in the years that NAFTA is debated and implemented. This shift among protectionist respondents is larger for whites (especially men and those without a college degree) and those with conservative social views, suggesting an interactive effect whereby racial identity and social-issue positions mediate reactions to economic policies.
    JEL: D72 F16 H5 J2
    Date: 2021–11
  22. By: Annelore Verhagen
    Abstract: Technological developments are one of the major forces behind the need for retraining, but they can also be part of the solution. In particular, Artificial Intelligence (AI) has the potential to increase training participation, including among currently underrepresented groups, by lowering some of the barriers to training that people experience and by increasing motivation to train. Moreover, certain AI solutions for training may improve the alignment of training to labour market needs, and reduce bias and discrimination in the workplace. In order to realise the benefits of AI for training and ensure that it yields benefits for all, it will be necessary to address potential drawbacks in terms of changing skills requirements, inequalities in access to data, technology and infrastructure and important ethical issues. Finally, even when these drawbacks can be addressed, the introduction and expansion of AI tools for training is constrained by the supply of AI skills in the workforce and the availability of scientific evidence regarding the benefits of AI tools for training and whether they are cost-effective.
    Keywords: Adult learning, AI, Artificial Intelligence, Skills, Training
    JEL: I20 J24 M53 O15 O33
    Date: 2021–12–13
  23. By: Sayour, Nagham (Zayed University); Schröder, Marcel (Asian Development Bank)
    Abstract: This paper explores the job creation impacts of the large foreign direct investment (FDI) inflows to Mongolia’s non-resource sector following the signing of the investment agreement for the Oyu Tolgoi mine in 2009. Using FDI project and national employment data over 2009–2013, we employ a triple difference methodology on the sector–province (aimag)-year level. The results suggest that each FDI job and every $1 million FDI inflow displace 5.5 and 20 local jobs, respectively. Several factors may explain this result: the majority of FDI was targeted at sectors such as transportation and retail where efficiency gains led to job losses; the low skill-intensity of FDI jobs in those sectors; the low labor supply elasticity in Ulaanbaatar where most of the FDI projects are concentrated; and the limited extent of localized supply chains.
    Keywords: resource boom; foreign direct investment; local job multiplier; Mongolia
    JEL: F21 J21 O11 Q32 Q33
    Date: 2021–12–15
  24. By: Vegard M. Nygaard; Gajendran Raveendranathan
    Abstract: The introduction of employer-sponsored insurance (ESI) in the 1940s led to the largest decline in the uninsurance rate in U.S. history. To study the fiscal and welfare implications of this insurance expansion, we endogenize the selection of workers into jobs with and without ESI in a general equilibrium life-cycle model where consumers face idiosyncratic health shocks. Our model rationalizes non-targeted empirical patterns related to ESI coverage between 1940 and 2010 and in recent cross-sectional data. ESI leads to moderate welfare gains in the short run (0.5 percent of lifetime consumption for the average consumer) but zero gains or even moderate losses in the long run. The reason is that the health insurance benefit provided by ESI dominates in the short run but the tax increase required to offset ESI tax exemptions dominates in the long run. We substantiate these welfare estimates by showing that our model rationalizes both the level and rise in total ESI tax exemptions. Finally, we show that tax-financed universal health insurance — considered among policymakers in the 1930s — would have led to significantly higher welfare gains.
    Keywords: employer-sponsored insurance; general equilibrium life-cycle; heterogeneous agents; universal health-care insurance; welfare.
    JEL: E24 H51 I13 J33
    Date: 2021–12

This nep-lma issue is ©2021 by Joseph Marchand. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.