nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2022‒01‒10
twenty-one papers chosen by
Joseph Marchand
University of Alberta

  1. Inequality and occupational change in times of Revolution: The Tunisian perspective By Mohamed Ali Marouani; Phuong Le Minh
  2. Technology-Skill Complementarity and Labor Displacement: Evidence from Linking Two Centuries of Patents with Occupations By Leonid Kogan; Dimitris Papanikolaou; Lawrence D. W. Schmidt; Bryan Seegmiller
  3. Productivity and Pay in the US and Canada By Jacob Greenspon; Anna M. Stansbury; Lawrence H. Summers
  4. Does relative age affect speed and quality of transition from school to work? By Fumarco, Luca; Vandromme, Alessandro; Halewyck, Levi; Moens, Eline; Baert, Stijn
  5. Firm pay dynamics By Engbom, Niklas; Moser, Christian; Sauermann, Jan
  6. The dynamics of wage dispersion between firms: The role of firm entry and exit By Schröpf, Benedikt
  7. Worker Stress and Performance Pay: German Survey Evidence By Baktash, Mehrzad B.; Heywood, John S.; Jirjahn, Uwe
  8. The Short-Run Effects of the Covid-19 Pandemic on Vocational Education in Germany By Dummert, Sandra; Umkehrer, Matthias
  9. The supply of foreign talent: How skill-biased technology drives the location choice and skills of new immigrants By Beerli, Andreas; Indergand, Ronald; Kunz, Johannes S.
  10. Minimum Wages in Concentrated Labor Markets By Martin Popp
  11. School value-added and longterm student outcomes By Lars J. Kirkebøen
  12. Labour-saving automation and occupational exposure: a text-similarity measure By Fabio Montobbio; Jacopo Staccioli; Maria Enrica Virgillito; Marco Vivarelli
  13. Income loss among the self-employed: Implications for individual wellbeing and pandemic policy measures By Schneck, Stefan
  14. Alternatives to paying child benefit to the rich. means testing or higher tax? By Patricia Apps; Ray Rees; Thor O. Thoresen; Trine E. Vattø
  15. Is There Job Polarization in Developing Economies? A Review and Outlook By Antonio Martins-Neto; Nanditha Mathew; Pierre Mohnen; Tania Treibich
  16. When (and Why) Providers Do Not Respond to Changes in Reimbursement Rates By Marcus Dillender; Lu G. Jinks; Anthony T. Lo Sasso
  17. Productivity shocks, long-term contracts and earnings dynamics By Balke, Neele; Lamadon, Thibaut
  18. Covid-19 and Technology By Caselli, Mauro; Fracasso, Andrea
  19. Allocation and Employment Effect of the Paycheck Protection Program By Gustavo Joaquim
  20. Jealousy and Wealth Inequality: The Cases of Heterogeneous Preferences and Elastic Labor Supply By Sanou Issa
  21. The Effects of Fiscal Decentralization on Publicly Provided Services and Labor Markets By Nicola Bianchi; Michela Giorcelli; Enrica Maria Martino

  1. By: Mohamed Ali Marouani (UMR Développement et Sociétés, IRD/Université Paris 1 Panthéon-Sorbonne and DIAL); Phuong Le Minh (UMR Développement et Sociétés, Université Paris 1 Panthéon-Sorbonne and IRD ; The Centre for Analysis and Forecast, Vietnam Academy of Social Sciences)
    Abstract: In this paper, we investigate the evolution of employment and earnings distributions before and after the Tunisian Revolution, focusing on the impact of public wage and employment policy changes. A recentered-influence function (RIF) decomposition is performed to decompose the change in earnings in wage structure and composition effects and to assess the contribution of various determinants of inequality. We find that earnings inequality decreases significantly during the period of investigation in Tunisia, mainly due to the decreases in public–private wage gap and sector wage gap on the demand side and the decreasing education premia on the supply side. The increase in marginal returns to low wage and average routine-task intensity jobs, the falling return to experience, and the decreasing regional wage gap were partly responsible for the decline in overall earnings inequality.
    Keywords: wage inequality, Revolution, occupational change, education premium, public wage policy
    JEL: J21 J23 J24 J32 J45
    Date: 2021–11
  2. By: Leonid Kogan; Dimitris Papanikolaou; Lawrence D. W. Schmidt; Bryan Seegmiller
    Abstract: We construct new technology indicators using textual analysis of patent documents and occupation task descriptions that span almost two centuries (1850–2010). At the industry level, improvements in technology are associated with higher labor productivity but a decline in the labor share. Exploiting variation in the extent certain technologies are related to specific occupations, we show that technological innovation has been largely associated with worse labor market outcomes—wages and employment—for incumbent workers in related occupations using a combination of public-use and confidential administrative data. Panel data on individual worker earnings reveal that less educated, older, and more highly-paid workers experience significantly greater declines in average earnings and earnings risk following related technological advances. We reconcile these facts with the standard view of technology-skill complementarity using a model that allows for skill displacement.
    JEL: J01 J24 J3 N3 N6 O3 O4
    Date: 2021–12
  3. By: Jacob Greenspon; Anna M. Stansbury; Lawrence H. Summers
    Abstract: We study the productivity-pay relationship in the United States and Canada along two dimensions. The first is divergence: the degree to which the levels of productivity and pay have diverged. The second is delinkage: the degree to which incremental increases in the rate of productivity growth translate into incremental increases in the rate of growth of pay, holding all else equal. We show that in both countries the pay of typical workers has diverged substantially from average labor productivity over recent decades, driven by both rising labor income inequality and a declining labor share of income. Even as the levels of productivity and pay have grown further apart, we find evidence for some linkage between productivity and pay in both countries: a one percentage point increase in the rate of productivity growth is associated with a positive increase in the rate of pay growth, holding all else equal. This linkage appears stronger in the US than in Canada. Overall, our findings lead us to tentatively conclude that policies or trends which lead to incremental increases in productivity growth, particularly in large relatively closed economies like the USA, will tend to raise middle class incomes. At the same time, other factors orthogonal to productivity growth have been driving productivity and typical pay further apart, emphasizing that much of the evolution in middle class living standards will depend on measures bearing on relative incomes.
    JEL: E24 J24 J3
    Date: 2021–12
  4. By: Fumarco, Luca; Vandromme, Alessandro; Halewyck, Levi; Moens, Eline; Baert, Stijn
    Abstract: We are the first to estimate the impact of relative age (i.e., the difference in classmates' ages) on both speed and quality of individuals' transition from education to the labour market. Moreover, we are the first to explore whether and how this impact passes through characteristics of students' educational career. We use rich data pertaining to schooling and to labour market outcomes one year after graduation to conduct instrumental variables analyses. We find that a one-year increase in relative age increases the likelihood of (i) being employed then by 3.5 percentage points, (ii) having a permanent contract by 5.1 percentage points, and (iii) having full-time employment by 6.5 percentage points. These relative age effects are partly mediated by intermediate outcomes such as having had a schooling delay at the age of sixteen or taking on student jobs. The final mediator is particularly notable as no earlier studies examined relative age effects on student employment.We are the first to estimate the impact of relative age (i.e., the difference in classmates' ages) on both speed and quality of individuals' transition from education to the labour market. Moreover, we are the first to explore whether and how this impact passes through characteristics of students' educational career. We use rich data pertaining to schooling and to labour market outcomes one year after graduation to conduct instrumental variables analyses. We find that a one-year increase in relative age increases the likelihood of (i) being employed then by 3.5 percentage points, (ii) having a permanent contract by 5.1 percentage points, and (iii) having full-time employment by 6.5 percentage points. These relative age effects are partly mediated by intermediate outcomes such as having had a schooling delay at the age of sixteen or taking on student jobs. The final mediator is particularly notable as no earlier studies examined relative age effects on student employment.
    Keywords: relative age,school starting age,labour market transition
    JEL: I21 J23 J24 J6
    Date: 2022
  5. By: Engbom, Niklas (New York University); Moser, Christian (Columbia University); Sauermann, Jan (IFAU - Institute for Evaluation of Labour Market and Education Policy)
    Abstract: We study the nature of firm pay dynamics. To this end, we propose a statistical model that extends the seminal framework by Abowd, Kramarz, and Margolis (1999a) to allow for idiosyncratically time-varying firm pay policies. We estimate the model using linked employer-employee data for Sweden from 1985 to 2015. By drawing on detailed firm financials data, we show that firms that become more productive and accumulate capital raise pay, whereas firms lower pay as they add workers. A secular increase in firm-year pay dispersion in Sweden since 1985 is accounted for by greater persistence of firm pay among incumbent firms as well as greater dispersion in firm pay among entrant firms, as opposed to more volatile firm pay.
    Keywords: Earnings Inequality; Worker and Firm Heterogeneity; Linked Employer-Employee Data; AKM; Two-Way Fixed Effects Model; Firm Dynamics
    JEL: D22 D31 E24 J31 M13
    Date: 2021–12–17
  6. By: Schröpf, Benedikt
    Abstract: Although wage inequality is a prominent and widely studied issue, the literature is vastly silent on the relationship between firm entry and exit and the wage dispersion between firms. Using a 50% random administrative sample of West German establishments over the period 1976-2017, I study wage dispersion dynamics between and within the groups of entering, exiting and incumbent establishments by examining the distribution of average wages across establishments. The results show that entering establishments became increasingly unequal over time, thereby contributing to the rise in the wage dispersion between establishments. However, stronger exit dynamism of young and low-wage establishments has dampened this effect. These findings suggest taking the consequences for wage inequality into consideration when designing and assessing policy instruments for firm entry and exit.
    Keywords: Firm entry,Firm exit,Wage dispersion,Firm Dynamics,Germany
    JEL: L26 M13 J31
    Date: 2021
  7. By: Baktash, Mehrzad B. (University of Trier); Heywood, John S. (University of Wisconsin, Milwaukee); Jirjahn, Uwe (University of Trier)
    Abstract: While performance pay can benefit firms and workers by increasing productivity and wages, it has also been associated with a deterioration of worker health. The transmission mechanisms for this deterioration remain in doubt. We examine the hypothesis that increased stress is one transmission mechanism. Using unique survey data from the German Socio-Economic Panel, we find performance pay consistently and importantly associates with greater stress even controlling for a long list of economic, social and personality characteristics. It also holds in instrumental variable estimations accounting for the potential endogeneity of performance pay. Moreover, we show that risk tolerance moderates the relationship between performance pay and stress. The risk tolerant receiving performance pay suffer less stress than the risk averse.
    Keywords: performance pay, worker health, stress, risk tolerance
    JEL: J33 I31 J32
    Date: 2021–12
  8. By: Dummert, Sandra (Institute for Employment Research (IAB), Nuremberg, Germany); Umkehrer, Matthias (Institute for Employment Research (IAB), Nuremberg, Germany)
    Abstract: "In this paper, we investigate the short-run effects of the Covid-19 pandemic on vocational education and training after the first lockdown in the year 2020 in Germany. We exploit rich establishment-level survey data to estimate the causal effects of the pandemic by applying difference-in-differences estimation, contrasting trends in outcomes between establishments more and less negatively affected by the pandemic. We find that, due to the pandemic, establishments not only trained less but also retained less of their recent graduates. Our findings foster concerns of the pandemic to increase future skills shortage in the labour market and dampen young peoples’ career prospects." (Author's abstract, IAB-Doku) ((en))
    JEL: J17 J21 J24
    Date: 2021–12–30
  9. By: Beerli, Andreas; Indergand, Ronald; Kunz, Johannes S.
    Abstract: An important goal of immigration policy is to facilitate the entry of foreignborn workers whose skills are in short supply in national labor markets. In recent decades, information and communication technology [ICT] has fueled the demand for highly educated workers at the expense of lower educated groups. Exploiting the fact that different regions in Switzerland have been differentially exposed to ICT due to their pre-ICT industrial composition, we present evidence suggesting that more exposed regions experienced stronger ICT adoption, accompanied by considerably stronger growth in relative employment and wage-premia for college-educated workers. Following this change in the landscape of relative economic opportunities, we find robust evidence that these regions experienced a much stronger in ux of highly educated immigrants in absolute terms as well as relative to lower educated groups. Our results suggest that immigrants' location decisions respond strongly to these long-run, technology-driven changes in their economic opportunities.
    Keywords: immigrant sorting,international migration,skill-biased technical change,information and communication technology,skill supply
    JEL: F22 J61 J24 J31 J23
    Date: 2021
  10. By: Martin Popp
    Abstract: Economists increasingly refer to monopsony power to reconcile the absence of negative employment effects of minimum wages with theory. However, systematic evidence for the monopsony argument is scarce. In this paper, I perform a comprehensive test of monopsony theory by using labor market concentration as a proxy for monopsony power. Labor market concentration turns out substantial in Germany. Absent wage floors, a 10 percent increase in labor market concentration makes firms reduce wages by 0.5 percent and employment by 1.6 percent, reflecting monopsonistic exploitation. In line with perfect competition, sectoral minimum wages lead to negative employment e ects in slightly concentrated labor markets. This effect weakens with increasing concentration and, ultimately, becomes positive in highly concentrated or monopsonistic markets. Overall, the results lend empirical support to the monopsony argument, implying that conventional minimum wage e ects on employment conceal heterogeneity across market forms.
    Keywords: minimum wage, labor market concentration, monopsony, labor demand
    JEL: J42 J38 D41 J23
    Date: 2021–12
  11. By: Lars J. Kirkebøen (Statistics Norway)
    Abstract: Several recent studies find that interventions in schools can have important lasting consequences for students, and that schools differ in their contribution to students' learning. However, there is less research investigating how these differences between schools influence longer-term outcomes, especially outside the US. In this paper I study school value-added (VA) in Norwegian compulsory school, where between-school differences are smaller than in the US. I find that VA indicators are able to predict in-school performance without bias. Furthermore, VA is strongly related to long-term outcomes, and differences between schools in VA correspond to meaningful differences in long-term outcomes. For example, a one standard deviation higher VA correspond to 1.5 percent higher earnings around age 32. Three quasi-experiments using variation from student mobility and changes in neighborhood school assignments indicate that the differences captured by the VA indicators do indeed reflect differences in school quality, rather than unobserved student characteristics. Analysis of teacher grades and exam scores suggest that the former is heavily influenced by relative grading, and that the effect of exam score VA on long-term outcomes reflects the effects of skills acquired in school. In addition to shedding lights on the differences in and mechanisms of school quality, the findings help connect learning outcomes with later labor market outcomes, e.g. for cost-benefit analysis of interventions in schools.
    Keywords: School quality; value-added; VAM; earnings
    JEL: J24 I2
    Date: 2021–11
  12. By: Fabio Montobbio (Dipartimento di Politica Economica, DISCE, Università Cattolica del Sacro Cuore – BRICK, Collegio Carlo Alberto, Torino – ICRIOS, Bocconi University, Milano); Jacopo Staccioli (Dipartimento di Politica Economica, DISCE, Università Cattolica del Sacro Cuore – Institute of Economics, Scuola Superiore Sant’Anna, Pisa); Maria Enrica Virgillito (Institute of Economics, Scuola Superiore Sant’Anna, Pisa – Dipartimento di Politica Economica, DISCE, Università Cattolica del Sacro Cuore); Marco Vivarelli (Dipartimento di Politica Economica, DISCE, Università Cattolica del Sacro Cuore – UNU-MERIT, Maastricht, The Netherlands – IZA, Bonn, Germany)
    Abstract: This paper represents one of the first attempts at building a direct measure of occupational exposure to robotic labour-saving technologies. After identifying robotic and labour-saving robotic patents retrieved by Montobbio et al., (2022), the underlying 4-digit CPC definitions are employed in order to detect functions and operations performed by technological artefacts which are more directed to substitute the labour input. This measure allows to obtain fine-grained information on tasks and occupations according to their similarity ranking. Occupational exposure by wage and employment dynamics in the United States is then studied, complemented by investigating industry and geographical penetration rates.
    Keywords: Labour-Saving Technology, Natural Language Processes, Labour Markets, Technological Unemployment
    JEL: O33 J24
    Date: 2021–11
  13. By: Schneck, Stefan
    Abstract: Due to the pandemic-induced economic crisis, self-employed individuals are currently suering considerable income losses. The self-employed and the members in their households usually form an economic unit. As a consequence, the income cuts not only aect the self-employed themselves but also the rest of their household. We used the German Socio-Economic Panel (SOEP) to calculate how much income the selfemployed are able to sacrice to achieve a subjective barely sucient household income, which we interpret as the minimum level to maintain the standard of living. Our results suggest that full-time self-employed are typically the bread-earners in their households and that, as a consequence, even moderate income losses of the self-employed often lead to problems in maintaining the living standards of their households. Conditional on individual and household characteristics, the self-employed with employees are found to live in households that are less resilient to income losses. Furthermore, a negative correlation between falling short of the barely adequate household income and wellbeing was discovered. Self-employed in households with less than adequate incomes also reported higher concerns about social cohesion. These results have implications for policy - especially in light of the economic crisis induced by the pandemic.
    Keywords: entrepreneurial households,income,income cuts,self-employment
    JEL: L26
    Date: 2021
  14. By: Patricia Apps; Ray Rees; Thor O. Thoresen; Trine E. Vattø (Statistics Norway)
    Abstract: The American Rescue Plan Act of 2021 implies that the US is effectively moving towards a general child benefit. However, the amount paid out is dependent on income, similar to schemes in several other countries. In the present paper, we argue that instead of suppressing the labour supply of middle income parents through withdrawing the transfer as a function of income, one should consider the obvious alternative of financing a generous universal child benefit by changing the overall income tax system. Implications of means testing relative to a tax financed universal alternative are discussed analytically in a piece-wise linear schedule. Moreover, we provide empirical illustrations of effects of child benefit design by combining information from behavioral and non-behavioral microsimulation models, representing the universe of Norwegian households. Results from both the analytical discussion and the simulations question the case for letting the child benefit be means tested.
    Keywords: Child benefit design; Labour supply; Income distribution; piecewise linear tax schedule
    JEL: C25 J13 J22
    Date: 2021–11
  15. By: Antonio Martins-Neto; Nanditha Mathew; Pierre Mohnen; Tania Treibich
    Abstract: This paper analyses the evidence of job polarization in developing countries. We carry out an extensive review of the existing empirical literature and examine the primary data sources and measures of routine intensity. The synthesis of results suggests that job polarization in emerging economies is only incipient compared to other advanced economies. We then examine the possible moderating aspects preventing job polarization, discussing the main theoretical channels and the existing empirical literature. Overall, the literature relates the lack of polarization as a natural consequence of limited technology adoption and the offshoring of routine, middle-earning jobs to some host developing economies. In turn, the limited technology adoption results from suboptimal capabilities in those economies, including the insufficient supply of educated workers. Finally, we present the main gaps in the literature in developing economies and point to the need for more micro-level studies focusing on the impacts of technology adoption on workers’ careers and studies exploring the adoption and use of technologies at the firm level.
    Keywords: job polarization, routine intensity, skills, developing countries
    JEL: J24 J63 O33 E24
    Date: 2021
  16. By: Marcus Dillender; Lu G. Jinks; Anthony T. Lo Sasso
    Abstract: High health care prices contribute to the United States spending more on health care than any other country, but policies that reduce health care payments have the potential to lead to health care access issues if providers reduce their supply in response to reimbursement rate reductions. In this paper, we examine the impact of reimbursement rates on health care supply by studying a policy that reduced reimbursement rates by 30% in one of the highest-reimbursing workers' compensation insurance systems in the nation. Despite the large decrease in reimbursement rates, we find no evidence that the policy affected the amount of health care that injured workers receive or recoveries after injuries. Our estimates suggest that the policy reduced annual workers' compensation medical costs by over $400 million and indicate that providers may be operating on the inelastic portion of the supply curve for care paid for by high-reimbursing payers.
    JEL: H75 I11 J22
    Date: 2021–12
  17. By: Balke, Neele (University of Chicago); Lamadon, Thibaut (University of Chicago)
    Abstract: This paper examines how employer- and worker-specific productivity shocks transmit to earnings and employment in an economy with search frictions and firm commitment. We develop an equilibrium search model with worker and firm shocks and characterize the optimal contract offered by competing firms to attract and retain workers. In equilibrium, riskneutral firms provide only partial insurance against shocks to risk-averse workers and offer contingent contracts, where payments are backloaded in good times and frontloaded in bad times. We prove that there exists a unique spot target wage, which serves as an attraction point for smooth wage adjustments. The structural model is estimated on matched employer-employee data from Sweden. The estimates indicate that firms absorb persistent worker and firm shocks, with respective passthrough values of 27 and 11%, but price permanent worker differences, a large contributor (32%) to variations in wages. A large share of the earnings growth variance can be attributed to job mobility, which interacts with productivity shocks. We evaluate the effects of redistributive policies and find that almost 40% of government-provided insurance is undone by crowding out firm-provided insurance.
    Keywords: wages; salary;
    JEL: J31
    Date: 2021–12–17
  18. By: Caselli, Mauro; Fracasso, Andrea
    Abstract: This contribution reviews the rich interdisciplinary literature covering the relationship between the diffusion of COVID-19 and the adoption of technologies in various sectors of the economy, ranging from health care facilities to manufacturing companies. Besides covering the technical and technological progress achieved to enhance contact tracing, tracking and mapping with the intent of stopping the diffusion of the disease, this chapter also discusses the wide range of innovations introduced to detect the disease and treat the affected people. Finally, the analysis addresses how companies and institutions adopted various technologies (from advanced robotics to artificial intelligence) to mitigate the adverse effects of the virus on their employees, customers, and suppliers, as well as to preserve uncontaminated environments and enforce personal distancing in the workplace. In most cases, modern technologies played a key role to transform workplaces, human resource management, production and sale networks. This contribution points out that, notwithstanding its beneficial effects, the rapid and widespread diffusion of new technologies poses serious challenges as to their appropriate use once the pandemic will be over (i.e., privacy data protection and fundamental rights) and their long-lasting and transformative effects on both social and industrial relations.
    Keywords: COVID-19,technology,health,labor,firms
    JEL: O14 I10 J24
    Date: 2021
  19. By: Gustavo Joaquim
    Abstract: The Paycheck Protection Program (PPP) was a large and unprecedented small-business support program enacted as a response to the COVID-19 crisis in the United States. The PPP administered almost $800 billion in loans and grants to small businesses through the banking system. However, there is still limited consensus on its overall effect on employment. This paper explores why it is challenging to estimate the effect of the PPP. To do so, we first focus on the timing of the allocation of PPP funds across regions and firms. Counties less affected by COVID-19 and with a larger presence of community banks, as well as larger firms, received loans earlier in the program. This differential timing observed in the data suggests that the current estimates of the effect of the PPP are not representative of the overall effect of the program. We qualitatively reconcile some of the conflicting results in the empirical literature and point to key questions surrounding the program.
    Keywords: Paycheck Protection Program; COVID-19; small business lending; financial frictions
    JEL: E24 G28 H81 J21
    Date: 2021–12–21
  20. By: Sanou Issa (UP2 - Université Panthéon-Assas)
    Abstract: This paper examines wealth and income inequalities in a simple neoclassical growth model with consumption externality. Unlike the conventional setups, we assume endogenous labor supply, heterogeneous preferences and heterogeneity of households' initial asset holdings. We highlight that in presence of heterogeneous preferences, when labor supply is elastic, wealth inequality is not deterministic and an initially wealthy and more jealous household could be caught up by an initially less wealthy and less jealous household. Our study also reveals the existence of an additional condition to the reduction of wealth inequality and shows that there is reduction in wealth inequality if wealth is highly unevenly distributed. These results are supported by our numerical simulations.
    Keywords: Consumption externality,Income Inequality,Heterogeneous preferences,Labour supply,Status-seeking JEL classification D31,D62,D91,E13,J22,O41
    Date: 2021–10–28
  21. By: Nicola Bianchi; Michela Giorcelli; Enrica Maria Martino
    Abstract: This paper studies how fiscal decentralization affects local services. It explores a 1993 reform that increased the fiscal autonomy of Italian municipalities by replacing government transfers with revenues from a local property tax. Our identifica- tion leverages cross-municipal variation in the degree of decentralization that stems from differences in the average age of buildings caused by bombings during WWII. Decentralization reduced local spending but expanded municipal services, such as nursery schools. These effects are larger in areas with greater political competition. The paper also investigates how the reform affected labor markets. Decentralization increased female labor supply—probably through expanded availability of nursery schools—thereby reducing the gender gap in employment.
    JEL: H71 H75 I21 J20
    Date: 2021–12

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