nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2022‒01‒31
25 papers chosen by
Joseph Marchand
University of Alberta

  1. Worker Beliefs About Outside Options By Simon Jäger; Christopher Roth; Nina Roussille; Benjamin Schoefer
  2. Minimum Wages and Insurance within the Firm By Adamopoulou, Effrosyni; Manaresi, Francesco; Rachedi, Omar; Yurdagul, Emircan
  3. Trade, Human Capital, and Income Risk By Liuchun Deng; Pravin Krishna; Mine Zeynep Senses; Jens Stegmaier
  4. The impact of robots on labour market transitions in Europe By Piotr Lewandowski; Karol Madoń; Ronald Bachmann; Myrielle Gonschor
  5. Labor Reallocation and Remote Work During COVID-19: Real-time Evidence from GitHub By Grant R. McDermott; Benjamin Hansen
  6. College Majors and Skills: Evidence from the Universe of Online Job Ads By Steven W. Hemelt; Brad Hershbein; Shawn M. Martin; Kevin M. Stange
  7. Willingness to Pay for Workplace Safety By Anelli, Massimo; Koenig, Felix
  8. Labor Market Concentration and Stayers' Wages: Evidence from France By Bassanini, Andrea; Batut, Cyprien; Caroli, Eve
  9. 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
  10. Anatomy of Lifetime Earnings Inequality: Heterogeneity in Job Ladder Risk vs. Human Capital By Fatih Karahan; Serdar Ozkan; Jae Song
  11. The Gender Application Gap: Do Men and Women Apply for the Same Jobs? By Fluchtmann, Jonas; Glenny, Anita Marie; Harmon, Nikolaj; Maibom, Jonas
  12. The Impact of Artificial Intelligence on Labor Markets in Developing Countries: A New Method with an Illustration for Lao PDR and Vietnam By Carbonero, Francesco; Davies, Jeremy; Ernst, Ekkehard; Fossen, Frank M.; Samaan, Daniel; Sorgner, Alina
  13. The Price of Nails since 1695: A Window into Economic Change By Daniel E. Sichel
  14. Identifying literacy and numeracy skill mismatch in OECD countries using the job analysis method By Pérez Rodríguez, Sandra; van der Velden, Rolf; Huijts, Tim; Jacobs, Babs
  15. Information, Perceived Returns and College Major Choices By Nikoloz Kudashvili; Gega Todua
  16. Reforms of an Early Retirement Pathway in Germany and Their Labor Market Effects By Riphahn, Regina T.; Schrader, Rebecca
  17. Sticky wages and the Great Depression: Evidence from the United Kingdom By Lennard, Jason
  18. Labor productivity, real wages, and employment: evidence from a panel of OECD economies over 1960-2019 By Manuel David Cruz
  19. Managing Dual Practice of Health Workers: Evidence from Indonesia By Gonzalez, Paula; Montes-Rojas, Gabriel V.; Pal, Sarmistha
  20. Ethnic Regional Networks and Immigrants' Earnings: A Spatial Autoregressive Network Approach By Wang, Xingang; Maani, Sholeh A.
  21. Peer Learning in Teams and Work Performance: Evidence from a Randomized Field Experiment By Kamei, Kenju; Ashworth, John
  22. Partial De-Annuitization of Public Pensions v.s. Retirement Age Differentiation. Which is Best to Account for Longevity Differences? By Vincent Vandenberghe
  23. Introducing an Austrian Backpack in Spain By Julian Diaz Saavedra; Ramon Marimon; Joao Brogueira de Sousa
  24. Stochastic Contracts and Subjective Evaluations By Matthias Lang
  25. Unbundling the Relationship between Economic Shocks and Crime By Ferraz, Eduardo; Soares, Rodrigo R.; Vargas, Juan

  1. By: Simon Jäger; Christopher Roth; Nina Roussille; Benjamin Schoefer
    Abstract: Workers wrongly anchor their beliefs about outside options on their current wage. In particular, low-paid workers underestimate wages elsewhere. We document this anchoring bias by eliciting workers’ beliefs in a representative survey in Germany and comparing them to measures of actual outside options in linked administrative labor market data. In an equilibrium model, such anchoring can give rise to monopsony and labor market segmentation. In line with the model, misperceptions are particularly pronounced among workers in low-wage firms. If workers had correct beliefs, at least 10% of jobs, concentrated in low-wage firms, would not be viable at current wages.
    JEL: D91 E03 E24 J3 J31 J42 J6
    Date: 2021–12
  2. By: Adamopoulou, Effrosyni (University of Mannheim); Manaresi, Francesco (OECD); Rachedi, Omar (ESADE); Yurdagul, Emircan (Universidad Carlos III de Madrid)
    Abstract: Minimum wages alter the allocation of firm-idiosyncratic risk across workers. To establish this result, we focus on Italy, and leverage employer-employee data matched to firm balance sheets and hand-collected wage floors. We find a relatively larger pass-through of firm-specific labor-demand shocks into wages for the workers whose earnings are far from the floors, but who are employed by establishments intensive in minimum-wage workers. We study the welfare implications of this fact using an incomplete-market model. The asymmetric passthrough uncovers a novel channel which tilts the benefits of removing minimum wages toward high-paid employees at the expense of low-wage workers.
    Keywords: firm-specific shocks, pass-through, minimum wages, linked employer-employee data, general equilibrium, complementarities
    JEL: E24 E25 E64 J31 J38 J52
    Date: 2021–12
  3. By: Liuchun Deng; Pravin Krishna; Mine Zeynep Senses; Jens Stegmaier
    Abstract: In this paper, we empirically assess the causal links between trade and individual income risk and study the role that human capital plays in this relationship using a rich, worker-level, longitudinal data set from Germany spanning 1976 to 2012. Our estimates suggest substantial heterogeneity in labor income risk across workers in different entry cohorts and across workers with different levels of industry- and occupation-specific human capital. Our findings suggest that within-industry changes in imports and exports are causally related to income risk: Imports increase risk and exports decrease risk, and they do so in an economically significant manner. Importantly, we find there to be a complex interplay between human capital and the linkage between trade and risk: While, on average, individuals with higher levels of industry- or occupation-specific human capital experience lower income risk, a given increase in net-imports exposure in an industry increases risk for workers with higher levels of industry tenure more than it does for workers with lower levels of industry tenure. High levels of industry-specific human capital can be costly for workers in highly trade-exposed industries. By contrast, we find no evidence of any interaction between risk, industry trade exposure, and occupation-specific human capital.
    JEL: F1 F11 F16 F6 J24 J63
    Date: 2021–12
  4. By: Piotr Lewandowski; Karol Madoń; Ronald Bachmann; Myrielle Gonschor
    Abstract: We study the effects of robot exposure on worker flows in 16 European countries. Overall, we find small negative effects on job separations and small positive effects on job findings. Labour costs are shown to be a major driver of cross-country differences: in countries with lower labour costs, robot exposure had more positive effects on hirings and more negative effects on separations. These effects were particularly pronounced for workers in occupations intensive in routine manual or routine cognitive tasks, but were insignificant in occupations intensive in non-routine cognitive tasks. For young and old workers in countries with lower labour costs, robot exposure had a beneficial effect on transitions. Our results imply that robot adoption increased employment and reduced unemployment in most European countries, mainly through lower job separation rates.
    Keywords: robots, technological change, tasks, labour market effects, Europe
    JEL: J23 J24 O33
    Date: 2022–01
  5. By: Grant R. McDermott; Benjamin Hansen
    Abstract: We investigate the effect of the COVID-19 pandemic on labor activity using real-time data from millions of GitHub users around the world. We show that the pandemic triggered a sharp pattern of labor reallocation at both the global and regional level. Users were more likely to work on weekends and outside of traditional 9 am to 6 pm hours, especially during the early phase of the pandemic. We also document considerable heterogeneity between different user groups and locations. Some locations show a steady reversion back to historical work patterns, while others have experienced persistent trend deviations in the wake of COVID-19. The pattern of labor reallocation is slightly more pronounced among males in our sample, suggesting that men may have benefited more from the increased flexibility provided by remote work than women. Finally, we show that the pattern of reallocation was accompanied by a simultaneous increase in overall activity, though this effect is more transient. We discuss several potential mechanisms and draw tentative conclusions for broader workplace trends given our study population.
    JEL: J01 J22 J23 J4 O3
    Date: 2021–12
  6. By: Steven W. Hemelt; Brad Hershbein; Shawn M. Martin; Kevin M. Stange
    Abstract: We document the skill content of college majors as perceived by employers and expressed in the near universe of U.S. online job ads. Social and organizational skills are general in that they are sought by employers of almost all college majors, whereas other skills are more specialized. In turn, general majors––Business and General Engineering––have skill profiles similar to all majors; Nursing and Education are specialized. These cross-major differences in skill profiles explain considerable wage variation, with little role for within-major differences in skills across areas. College majors can thus be reasonably conceptualized as portable bundles of skills.
    JEL: I23 I26 J23 J24
    Date: 2021–12
  7. By: Anelli, Massimo (Bocconi University); Koenig, Felix (Carnegie Mellon University)
    Abstract: This paper develops a revealed-preference approach that uses budget constrain discontinuities to price workplace safety. We track hourly workers who face the decision of how many hours to work at varying levels of Covid-19 risk and leverage state-specific discontinuities in unemployment insurance eligibility criteria to identify the labor supply behavior. Results show large baseline responses at the threshold and increasing responses for higher health risks. The observed behavior implies that workers are willing to accept 34% lower incomes to reduce the fatality rate by one standard deviation, or 1% of income for a one in a million chance of dying.
    Keywords: hazard pay, workplace safety, non-wage amenities, partial unemployment insurance, COVID-19, labor supply, value of life
    JEL: J17 J22 J28
    Date: 2021–12
  8. By: Bassanini, Andrea (OECD); Batut, Cyprien (Paris School of Economics); Caroli, Eve (Université Paris-Dauphine)
    Abstract: We investigate the impact of labor market concentration on stayers' wages, where stayers are defined as individuals who were already employed in the same firm the year before. Using administrative data for France, we show that the elasticity of stayers' wages to labor market concentration ranges between -0.0185 and -0.0230, depending on the instrument we use, and controlling for labor productivity and local product market concentration. This represents between about two thirds and three fourth of the elasticity we estimate for new hires. Given the strong wage rigidities characterizing the French labor market, this estimate can be considered a lower bound of the effect of labor market concentration on stayers' wages in an international perspective.
    Keywords: labor market concentration, monopsony, wages, stayers
    JEL: J31 J42 L41
    Date: 2021–12
  9. By: Nikolova, Milena (University of Groningen); Nikolaev, Boris (Emory University); Boudreaux, Christopher (Florida Atlantic University)
    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 self- employed 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 self- employed supervisors.
    Keywords: self-employment, supervisors, autonomy, work meaningfulness
    JEL: I31 L26 M10
    Date: 2021–12
  10. By: Fatih Karahan; Serdar Ozkan; Jae Song
    Abstract: We study the determinants of lifetime earnings (LE) inequality in the U.S. by focusing on job ladder dynamics and on-the-job learning as sources of wage growth. Using administrative data, we document that i) lower LE workers change jobs more often, which is mainly driven by nonemployment; ii) average annual earnings growth for job stayers is similar, around 2% in the bottom two-thirds of the LE distribution, whereas for job switchers it rises with LE; iii) top LE workers enjoy around 10% average earnings growth regardless of job switching. We estimate a job ladder model with on-the-job learning featuring a rich set of worker types and firm heterogeneity. We find that the vast differences across worker types in job ladder risk—job loss, job finding, and contact rates—account for 80% of wage growth differences among workers below median LE. Above the median, almost all lifetime wage growth differences are a result of Pareto-distributed learning ability. We conclude that different economic forces are driving the inequality in different parts of the LE distribution.
    Keywords: Job ladder; human capital; search frictions; life-cycle earnings risk; lifetime income inequality; Pareto tails; heterogeneity
    JEL: E24 J24 J31 J64
    Date: 2022–01–10
  11. By: Fluchtmann, Jonas (Aarhus University); Glenny, Anita Marie (Ministry of Employment, Denmark); Harmon, Nikolaj (University of Copenhagen); Maibom, Jonas (Aarhus University)
    Abstract: Men and women tend to hold different jobs. Are these differences present already in the types of jobs men and women apply for? Using administrative data on job applications made by the universe of Danish UI recipients, we provide evidence on gender differences in applied-for jobs for the broader labor market. Across a range of job characteristics, we find large gender gaps in the share of applications going to different types of jobs even among observationally similar men and women. In a standard decomposition, gender differences in applications can explain more than 70 percent of the residual gender wage gap.
    Keywords: job search, wage decomposition, firm wage premium, gender earnings gap
    JEL: E24 J29 J31 J71
    Date: 2021–12
  12. By: Carbonero, Francesco (University of Turin); Davies, Jeremy (East Village Software Consultants); Ernst, Ekkehard (ILO International Labour Organization); Fossen, Frank M. (University of Nevada, Reno); Samaan, Daniel (ILO International Labour Organization); Sorgner, Alina (John Cabot University)
    Abstract: AI is transforming labor markets around the world. Existing research has focused on advanced economies but has neglected developing economies. Different impacts of AI on labor markets in different countries arise not only from heterogeneous occupational structures, but also from the fact that occupations vary across countries in their composition of tasks. We propose a new methodology to translate existing measures of AI impacts that were developed for the US to countries at various levels of economic development. Our method assesses semantic similarities between textual descriptions of work activities in the US and workers' skills elicited in surveys for other countries. We implement the approach using the measure of suitability of work activities for machine learning provided by Brynjolfsson et al. (2018) for the US and the World Bank's STEP survey for Lao PDR and Viet Nam. Our approach allows characterizing the extent to which workers and occupations in a given country are subject to destructive digitalization, which puts workers at risk of being displaced, in contrast to transformative digitalization, which tends to benefit workers. We find that workers in Lao PDR are less likely than in Viet Nam to be in the "machine terrain", where workers will have to adapt to occupational transformations due to AI and are at risk of being partially displaced. Our method based on semantic textual similarities using SBERT is advantageous compared to approaches transferring AI impact scores across countries using crosswalks of occupational codes.
    Keywords: artificial intelligence, machine learning, digitalization, labor, skills, developing countries
    JEL: J22 J23 O14 O33
    Date: 2021–12
  13. By: Daniel E. Sichel
    Abstract: This paper focuses on the price of nails since 1695 and the proximate source of changes in those prices. Why nails? They are a basic manufactured product whose form and quality have changed relatively little over the last three centuries, yet the process for producing them has changed dramatically. Accordingly, nails provide a useful prism through which to examine a wide range of economic and technological developments that touch on multiple areas of both micro- and macroeconomics. Several conclusions emerge. First, from the late 1700s to the mid 20th century real nail prices fell by a factor of about 10 relative to overall consumer prices. These declines had important effects on downstream industries, most notably construction. Second, while declining materials prices contribute to reductions in nail prices, the largest proximate source of the decline during this period was multifactor productivity growth in nail manufacturing, highlighting the role of the specialization of labor and re-organization of production processes. Third, the share of nails in GDP dropped back from 0.4 percent of GDP in 1810—comparable to today’s share of household purchases of personal computers—to a de minimis share more recently; accordingly, nails played a bigger role in American life in that earlier period. Finally, real nail prices have increased since the mid 20th century, reflecting in part an upturn in materials prices and a shift toward specialty nails in the wake of import competition, though the introduction of nail guns partly offset these increases for the price of installed nails.
    JEL: E01 E30 N11 N12 N61 N62 O14 O33
    Date: 2021–12
  14. By: Pérez Rodríguez, Sandra (ROA / Labour market and training, RS: GSBE other - not theme-related research); van der Velden, Rolf (RS: GSBE Theme Learning and Work, ROA / Education and transition to work); Huijts, Tim (ROA / Health, skills and inequality, RS: GSBE Theme Learning and Work); Jacobs, Babs (ROA / Education and transition to work, RS: GSBE other - not theme-related research)
    Abstract: Skill mismatches have strong negative effects on productivity, job satisfaction, and other outcomes. To reduce skill mismatches, governments need to rely on accurate data on the prevalence of these mismatches. The Programme of the International Assessment of Adult Competences (PIAAC) is currently the most important data source providing excellent and unparalleled information for many countries on two key information-processing skills (i.e., literacy and numeracy skills). However, although these data contain rich information about possessed skills, countries lack directly comparable information on the required skills in those domains. Hence, it has been difficult to use the PIAAC data to identify skill mismatches, other than through proxies of required skills (e.g., the average skill level in occupations) or workers’ self-assessments of skill mismatch. In this paper, we use the Job Analysis Method (JAM) to determine the required skill levels of literacy and numeracy for all 4-digit ISCO08 unit groups of occupations in the same metric and scale as was used in PIAAC. JAM involves the use of occupational experts to rate the skill requirements in the different occupations. JAM has never been used before to identify required skill levels for literacy and numeracy as measured in PIAAC, and the paper thus presents the first results on the prevalence of skill shortages and skill surpluses in these key information-processing skills across different OECD countries and across different occupations and sectors that is based on a more direct estimate of the required skills. We provide estimates for the proportions of well-matched, overskilled and underskilled workers per country, and compare these with estimates based on alternative methods for estimating skill mismatch. We also compare JAM with these other methods in explaining wage differentials, as well as job satisfaction. We conclude that there are large differences in the estimates of the prevalence of skill mismatches depending on the method used. We show several advantages using JAM and discuss some of the limitations as well.
    JEL: J24
    Date: 2022–01–04
  15. By: Nikoloz Kudashvili; Gega Todua
    Abstract: Students may hold inaccurate beliefs about earnings and employment opportunities when making their education decisions. This paper analyzes the effects of information provision on student’s intended and actual college major choices in Georgia. Secondary school students in our experiment systematically overestimated the earnings and unemployment rates of college graduates. We find that 10 percent more students who received information on actual earnings and unemployment changed their actual college major choices than others. The changes in their majors are partly driven by differences in the perceived and actual unemployment rates, whereas the earning differences do not appear to play a role. We also estimate spillover effects on students who do not receive information directly, and show that they matter, but only for older students who are closer to high school graduation. Importantly, we find that the immediate changes in the intended choices are not linked to the final major choices, suggesting that measuring the effects of information on immediately expressed intentions may not be sufficient to understand how information affects actual real-life decisions. We find that both direct and indirect information provision have sizable effects on student college major choices.
    Keywords: college major; perceived unemployment; perceived earnings; information;
    JEL: C93 D84 I26 J24
    Date: 2022–01
  16. By: Riphahn, Regina T. (University of Erlangen-Nuremberg); Schrader, Rebecca (University of Erlangen-Nuremberg)
    Abstract: We investigate the unemployment pathway to retirement in Germany and study the causal effects of two early retirement reforms. Reform 1 (NRA) increased normal retirement age stepwise from 60 to 65. Simultaneously, it became possible to use early retirement with benefit discounts. Reform 2 (ERA) increased the age of early retirement stepwise from 60 to 63. We investigate behavioral responses to the reforms using administrative data and difference-in-differences strategies. We find strong and significant causal effects of both reforms. Individuals postponed retirement, stayed employed longer, postponed unemployment, and shifted to alternative pathways into retirement. The overall use of the retirement system declined by about 1.5 and 2 months per person after each of the two reforms. Individuals with low pension wealth and those who were affected immediately by the reform responded more strongly.
    Keywords: difference-in-differences, causal effects, labor force participation, program substitution, early retirement, effect heterogeneity
    JEL: H55 J26 C21
    Date: 2021–12
  17. By: Lennard, Jason
    Abstract: How sticky were wages during the Great Depression? Although classic accounts emphasize the importance of nominal rigidity in amplifying deflationary shocks, the evidence is limited. In this paper, I calculate the degree of nominal wage rigidity in the United Kingdom between the wars using new granular data covering millions of wages. I find that nominal wages were more flexible downwards than in most modern economies, but that the frequency and magnitude of wage cuts were too low to fully offset deflation.
    Keywords: Great Depression,Interwar Britain,Nominal Rigidity
    JEL: E30 N14
    Date: 2021
  18. By: Manuel David Cruz
    Abstract: This study empirically investigates the relationship between labor productivity (LP), average real wage (RW), and employment (EMP). The paper's main goal is to provide a test of competing theories of growth and income distribution. Standard theory predicts that real wages should increase following increases in labor productivity. Alternative theories and efficiency wage theories suggest that it is the distribution that causes changes in labor productivity. Theory delivers ambiguous predictions regarding the ultimate effects on employment, which can be either negative if factor substitution prevails or positive if higher wages and higher output per worker generate additional aggregate demand and, therefore, employment. I study a panel of 25 OECD economies over 1960-2019, using several approaches: 1) ECM, DOLS, FMOLS, and ARDL regressions with exogenous and endogenous variables, and 2) a VECM exercise as a robustness check. First, there is a long-run relationship between these variables when LP and RW are considered dependent variables. Second, EMP cannot be explained statistically by LP and RW in the long run: it is weakly exogenous, implying that OECD economies as a group have been, on average labor-constrained in the last six decades. Third, I find a positive two-way causality between LP and RW in both the long and short run, supporting the induced technical change, efficiency wages, and bargaining theories over the neoclassical theory. Fourth, concerning the LP-EMP nexus, in the long run, the results show a negative association, statistically significant for the single-equation estimates from EMP to LP in most specifications. Fifth, there is a positive effect running from EMP to RW in most specifications, statistically significant only in the single-equation. Sixth, both LP positively affects EMP, and RW negatively impacts EMP in the short run.
    Keywords: Labor productivity, real wages, employment, OECD
    JEL: E12 E24 O47 O50
    Date: 2022–01
  19. By: Gonzalez, Paula (Universidad Pablo de Olavide); Montes-Rojas, Gabriel V. (University of Buenos Aires); Pal, Sarmistha (University of Surrey)
    Abstract: Managing dual practice of health workers has often proved to be challenging, especially in emerging countries characterized by weak monitoring and low motivation. This paper exploits an exogenous variation in the initiation of private practice among heads of local public facilities (known as puskesmas) providing primary health care after the introduction of a 1997 health regulation in Indonesia. This regulation required health professionals to apply for a license for private practice at least three years after their graduation. Exploiting the exogenous variation in private practice after the 1997 regulation, we provide estimates of causal effects of dual practice on provision of public health services, distinguishing between the effects when private practice is located at or away from the public hospital. The estimates suggest that dual practitioners (relative to those engaged in public service only) work significantly less hours per week while they see significantly more patients in their public facilities. These adverse effects of dual practice are most pronounced when private practice is held away from the puskesmas. These results have important bearings on human resource management of universal health care provision.
    Keywords: dual practice of health professionals, Indonesia, Ministry of Health regulation 916, weak monitoring, difference-in-differences
    JEL: I10 I18 J2 J44 J45 O1
    Date: 2021–11
  20. By: Wang, Xingang (University of Auckland); Maani, Sholeh A. (University of Auckland)
    Abstract: The conventional model of immigrant earnings does not account for the correlation of outcomes across immigrant ethnic networks. We apply a spatial autoregressive network approach to account for the spill-over effects of migrant ethnic group economic resources and labour market outcomes. We employ unit-record data across 10 years for New Zealand, a major immigrant receiving country. By applying generalised method of moment (GMM) estimation, we address endogeneity of the spatial network variable. Results confirm strong positive associations of earnings with both ethnic concentration and networks of resources. The analytically enhanced approach provides opportunities for new research on the determinants of immigrant earnings.
    Keywords: earnings, ethnic network, immigrant, spatial autoregressive model, GMM estimation
    JEL: J30 J31 Z13 Z18
    Date: 2021–11
  21. By: Kamei, Kenju; Ashworth, John
    Abstract: A novel field experiment shows that learning activities in pairs with a greater spread in abilities lead to better individual work performance, relative to those in pairs with similar abilities. The positive effect of the former is not limited to their performance in peer learning material, but it also spills over to their performance in other areas. The underlying improvement comes from the stronger increased performance of those whose achievements were weak prior to peer learning. This implies that exogenously determining learning partners with different abilities helps improve productivity through knowledge sharing and potential peer effects.
    Keywords: peer effects, dilemma, knowledge sharing, field experiment, teamwork
    JEL: C93 I23 J24 M54
    Date: 2021–12–19
  22. By: Vincent Vandenberghe (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))
    Abstract: Extensive research by demographers and economists has shown that longevity differs across socioeconomic status (SES), with low-educated or low-income people living, on average, shorter lives than their better-endowed and wealthier peers. Therefore, a pension system with a unique retirement age is a priori problematic. The usual policy recommendation to address this problem is to differentiate the retirement age by SES. This paper explores the relative merits of partial de-annuitization of public pensions as a way of addressing the (imperfectly assessed) inequality of longevity.
    Keywords: Pension Policy, Longevity Difference, Equity, Annuitization, Retirement Age Differentiation
    JEL: H55 J26 J14
    Date: 2021–12–23
  23. By: Julian Diaz Saavedra (Department of Economic Theory and Economic History, University of Granada.); Ramon Marimon (European University Institute, UPF - Barcelona GSE, CEPR and NBER.); Joao Brogueira de Sousa (Nova School of Business and Economics.)
    Abstract: In an overlapping generations economy with incomplete insurance markets, the introduction of an employment fund – akin to the one introduced in Austria in 2003, also known as ‘Austrian backpack’– can enhance production efficiency and social welfare. It complements the two classical systems of public insurance: pay-as-you-go (PAYG) pensions and unemployment insurance (UI).We show this in a calibrated dynamic general equilibrium model with heterogeneous agents of the Spanish economy in 2018. A ‘backpack’ (BP) employment fund is an individual (across jobs) transferable fund, which earns the economy interest rate as a return and is financed with a payroll tax (a BP tax). The worker can use the fund when becomes unemployed or retires. In Spain, as an open economy, to complement the existing PAYG pension and UI systems with a welfare maximising 6% BP tax would raise welfare by 0.96% of average consumption at the new steady state, and would be preferred to the status quo by most economic and demographic groups. We also analyze, as a reference, Spain as a closed economy. There are important general equilibrium effects and, as a result, the social value of introducing the backpack is substantially greater; 16.14%, with a BP tax of 18%. Our model also provides a framework where to study reforms of existing social protection systems supported by the introduction of the BP.
    Keywords: Computable general equilibrium, welfare state, social security reform, retirement.
    JEL: C68 H55 J26
    Date: 2021–12–04
  24. By: Matthias Lang
    Abstract: Subjective evaluations are widely used, but call for different contracts from traditional moral-hazard settings. Previous literature shows that contracts require payments to third parties, which real-world contracts rarely use. I show that the implicit assumption of deterministic contracts makes payments to third parties necessary. This paper studies stochastic contracts, like uncertain arbitration procedures or payments in stock options. These contracts incentivize employees without the need for payments to third parties. In addition, stochastic contracts can make the principal better off compared to deterministic contracts. My results also address the puzzle about the prevalence of labor contracts with stochastic compensation.
    Keywords: subjective evaluations, stochastic contracts, budget-balanced contracts, moral hazard, subjective performance measures, incentives
    JEL: D80 J41 J70
    Date: 2021
  25. By: Ferraz, Eduardo (Universidad del Rosario); Soares, Rodrigo R. (Insper, São Paulo); Vargas, Juan (Rosario University)
    Abstract: Intuitively, by increasing the opportunity cost of engaging in criminal activities, positive economic shocks should reduce crime. However, the empirical evidence on the relationship between economic shocks and criminal behavior is at best ambiguous. This may be because certain types of shocks make the booty more attractive and thus constitute an incentive to predate. Beyond this basic distinction between an "opportunity cost" and a "rapacity" mechanism that may mediate the effect of economic shocks on crime, this chapter proposes a simple conceptual framework to understand this nuanced relationship. We posit that the way that economic shocks shape criminal behavior depends on three factors: i) whether the shock comes from a legal or an illegal source, ii) the extent to which the shock source is more or less lootable, and iii) the presence of contextual factors that shape the relative importance of the opportunity cost and the rapacity effect, such as the underlying level of economic inequality, the institutional strength and law enforcement capacity of the state, and whether there are instances of accelerated and hazardous economic growth that likely create social disorganization and institutional unbalance. We use this taxonomy to review the seemingly inconclusive empirical evidence, and close by highlighting current persisting puzzles as well as areas where additional research on the relationship between economic shocks and crime would be welcome.
    Keywords: economic shocks, crime, opportunity cost, rapacity, illegal activity, inequality, institutions, social disorganization
    JEL: K42 J30 D74 F16
    Date: 2021–12

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