nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2022‒02‒28
thirty-six papers chosen by
Joseph Marchand
University of Alberta

  1. Worker Beliefs about Outside Options By Jäger, Simon; Roth, Christopher; Roussille, Nina; Schoefer, Benjamin
  2. Does Relative Age Affect Speed and Quality of Transition from School to Work? By Fumarco, Luca; Vandromme, Alessandro; Halewyck, Levi; Moens, Eline; Baert, Stijn
  3. Firm Pay Dynamics By Engbom, Niklas; Moser, Christian; Sauermann, Jan
  4. Robots and Firm Investment By Efraim Benmelech; Michal Zator
  5. Hours Constraints and Wage Differentials across Firms By Labanca, Claudio; Pozzoli, Dario
  6. Slowing Women's Labor Force Participation: The Role of Income Inequality By Stefania Albanesi; María José Prados
  7. Dynamics of returns to vocational education in China: 2010-2017 By Chen, Jie; Pastore, Francesco
  8. Zero-Hours Contracts in a Frictional Labor Market By Dolado, Juan J.; Lalé, Etienne; Turon, Hélène
  9. Technical Change and Superstar Effects: Evidence from the Rollout of Television By Koenig, Felix
  10. Employment Effects of Restricting Fixed-Term Contracts: Theory and Evidence By Cahuc, Pierre; Carry, Pauline; Malherbet, Franck; Martins, Pedro S.
  11. Earnings Inequality and Dynamics in the Presence of Informality: The Case of Brazil By Niklas Engbom; Gustavo Gonzaga; Christian Moser; Roberta Olivieri
  12. The Transformation of Self Employment By Innessa Colaiacovo; Margaret G. Dalton; Sari Pekkala Kerr; William R. Kerr
  13. College Majors and Skills: Evidence from the Universe of Online Job Ads By Hemelt, Steven W.; Hershbein, Brad J.; Martin, Shawn; Stange, Kevin
  14. Labor Market Fluidity and Human Capital Accumulation By Niklas Engbom
  15. The Old-Age Pension Household Replacement Rate in Belgium By Brown, Alessio J.G.; Fraikin, Anne-Lore
  16. Alumni Job Networks at Elite Universities and the Efficacy of Affirmative Action By Machado, Cecilia; Reyes, Germán; Riehl, Evan
  17. The State of Hiring Discrimination: A Meta-Analysis of (Almost) All Recent Correspondence Experiments By Lippens, Louis; Vermeiren, Siel; Baert, Stijn
  18. Working for Nothing: Personality and Time Allocation in the UK By Della Giusta, Marina; Jewell, Sarah
  19. Who Set Your Wage? By David Card
  20. Young Adults and Labor Markets in Africa By Bandiera, Oriana; Elsayed, Ahmed; Smurra, Andrea; Zipfel, Celine
  21. Understanding Rural Households’ Time Use in a Developing Setting: Validating a Low-Cost Time Use Module By Erica M. Field; Rohini Pande; Natalia Rigol; Simone G. Schaner; Elena M. Stacy; Charity M. Troyer Moore
  22. Skills, Economic Crises and the Labour Market By Kabir Dasgupta; Alexander Plum
  23. The Variability and Volatility of Sleep: An Archetypal Approach By Hamermesh, Daniel S.; Pfann, Gerard A.
  24. Health Insurance for Whom? The ‘Spill-up’ Effects of Children’s Health Insurance on Mothers By Daniel S. Grossman ⓡ; Sebastian Tello-Trillo ⓡ; Barton Willage ⓡ
  25. Adverse Selection in the Group Life Insurance Market By Harris, Timothy F.; Yelowitz, Aaron; Talbert, Jeffery; Davis, Alison
  26. Optimal Labor Income Taxation - The Role of the Skill Distribution By Dingquan Miao
  27. Lifecycle Wages and Human Capital Investments: Selection and Missing Data By Gobillon, Laurent; Magnac, Thierry; Roux, Sébastien
  28. Recall Bias Revisited: Measure Farm Labor Using Mixed-Mode Surveys and Multiple Imputation By Dang, Hai-Anh; Carletto, Calogero
  29. Investment-Specific Technological Change and Universal Basic Income in the U.S. By Vedor, Bernardo
  30. Teacher Labor Market Equilibrium and Student Achievement By Bates, Michael; Dinerstein, Michael; Johnston, Andrew C.; Sorkin, Isaac
  31. Does Group-Based Incentive Pay Lead To Higher Productivity? Evidence from a Complex and Interdependent Industrial Production Process By Frederiksen, Anders; Hansen, Daniel Baltzer Schjødt; Flaherty Manchester, Colleen
  32. Do Changes in Employment and Hours Worked Contribute to a Decreasing in the Mental Health of Single Mothers during a Period of Welfare Reform in the UK? A Longitudinal Analysis (2009-2019) By Simpson, Julija; Bambra, Clare; Brown, Heather
  33. Creditor Control Rights and Executive Bonus Plans By Armstrong, Christopher S.; Kepler, John D.; Kim, Chongho; Tsui, David
  34. The $800 Billion Paycheck Protection Program: Where Did the Money Go and Why Did it Go There? By David Autor; David Cho; Leland D. Crane; Mita Goldar; Byron Lutz; Joshua K. Montes; William B. Peterman; David D. Ratner; Daniel Villar Vallenas; Ahu Yildirmaz
  35. Sicilian Sulphur and Mafia: Resources, Working Conditions and the Practice of Violence By Ciccarelli, Carlo; Dalmazzo, Alberto; Razzolini, Tiziano
  36. Performance-Related Pay and Objective Measures of Health after Correcting for Sample Selection By Andelic, Nicole; Allan, Julia; Bender, Keith A.; Powell, Daniel; Theodossiou, Ioannis

  1. By: Jäger, Simon (Massachusetts Institute of Technology); Roth, Christopher (University of Warwick); Roussille, Nina (University of California, Berkeley); Schoefer, Benjamin (University of California, Berkeley)
    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.
    Keywords: wages, beliefs, bias, monopsony, GSOEP, IAB
    JEL: D91 E03 E24 J3 J31 J42 J6
    Date: 2021–12
  2. By: Fumarco, Luca (Masaryk University); Vandromme, Alessandro (Ghent University); Halewyck, Levi (Ghent University); Moens, Eline (Ghent University); Baert, Stijn (Ghent University)
    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.
    Keywords: school starting age, labour market transition, relative age
    JEL: I21 J23 J24 J6
    Date: 2021–12
  3. By: Engbom, Niklas (New York University); Moser, Christian (Columbia University); Sauermann, Jan (IFAU)
    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 (1999) to allow for idiosyncratically time-varying firm pay policies. We estimate the model using linked employer-employee data for Sweden from 1985 to 2016. 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, firm dynamics, linked employer-employee data, two-way fixed effects model, akm
    JEL: J31 D22 D31 E24 M13
    Date: 2022–01
  4. By: Efraim Benmelech; Michal Zator
    Abstract: Automation technologies, and robots in particular, are thought to be massively displacing workers and transforming the future of work. We study firm investment in automation using cross-country data on robotization as well as administrative data from Germany with information on firm-level automation decisions. Our findings suggest that the impact of robots on firms has been limited. First, investment in robots is small and highly concentrated in a few industries, accounting for less than 0.30% of aggregate expenditures on equipment. Second, recent increases in robotization do not resemble the explosive growth observed for IT technologies in the past, and are driven mostly by catching-up of developing countries. Third, robot adoption by firms endogenously responds to labor scarcity, alleviating potential displacement of existing workers. Fourth, firms that invest in robots increase employment, while total employment effect in exposed industries and regions is negative, but modest in magnitude. We contrast robots with other digital technologies that are more widespread. Their importance in firms’ investment is significantly higher, and their link with labor markets, while sharing some similarities with robots, appears markedly different.
    JEL: E22 E24 E25 G31 J23 J24 J3
    Date: 2022–01
  5. By: Labanca, Claudio (Monash University); Pozzoli, Dario (Copenhagen Business School)
    Abstract: Although constraints on hours worked at the firm-level are viewed as an important determinant of firm wages, little direct evidence exists to support this view. In this paper, we use linked employer-employee data on hours worked in Denmark to measure hours constraints and to investigate how these constraints relate to firm wages. We show that firms with stricter constraints pay higher firm-specific wages and that these premiums are concentrated in more productive firms. Starting from these findings we discuss a framework in which hours constraints are motivated by the productivity gains derived from having a more cooperative production process, leading more productive firms to constrain hours and to pay compensating wage differentials.
    Keywords: wage differentials, hours constraints, cooperation
    JEL: J31 J33
    Date: 2022–01
  6. By: Stefania Albanesi; María José Prados
    Abstract: The entry of married women into the labor force and the rise in women's relative wages are amongst the most notable economic developments of the twentieth century. The growth in these indicators was particularly pronounced in the 1970s and 1980s, but it stalled since the early 1990s, especially for college graduates. In this paper, we argue that the discontinued growth in female labor supply and wages since the 1990s is a consequence of growing inequality. Our hypothesis is that the growth in top incomes for men generated a negative income effect on the labor supply of their spouses, which reduced their participation and wages. We show that the slowdown in participation and wage growth was concentrated among women married to highly educated and high income husbands, whose earnings grew dramatically over this period. We then develop a model of household labor supply with returns to experience that qualitatively reproduces this effect. A calibrated version of the model can account for a large fraction of the decline relative to trend in married women's participation in 1995-2005 particularly for college women. The model can also account for the rise in the gender wage gap for college graduates relative to trend in the same period.
    JEL: E24 J16 J21 J22 J3
    Date: 2022–01
  7. By: Chen, Jie; Pastore, Francesco
    Abstract: In this paper, we use the Chinese General Social Survey data (2010-2017) to analyse the returns to different education qualifications. We additionally compare the returns to vocational education with returns to academic education, at both the upper secondary level and the tertiary level. Compared to those who only complete compulsory education, upper secondary graduates earn about 20% more, vocational college graduates earn 50%, and academic university graduates earn 75% more. At tertiary level, academic education pays better than vocational education, although the difference shrinks over the years. At upper secondary level, the evidence is indeterminate, depending on different econometric techniques (i.e., OLS, IV, Lewbel method, or PSM). These findings add to the limited quantitative evidence on returns to vocational education. The dynamics emerged from the findings echo the discussion on labor market mismatch and overeducation in China, which has important policy implications.
    Keywords: dynamic,vocational education,academic education,upper secondary,tertiary,China
    JEL: I26 I25 J24 J31 C36
    Date: 2022
  8. By: Dolado, Juan J. (Universidad Carlos III de Madrid); Lalé, Etienne (University of Québec at Montréal); Turon, Hélène (University of Bristol)
    Abstract: We propose a model to evaluate the U.K.'s zero-hours contract (ZHC) – a contract that exempts employers from the requirement to provide any minimum working hours, and allows employees to decline any workload. We find quantitatively that ZHCs improve welfare by enabling firms with more volatile business conditions to create additional jobs. While weaker than job creation, substitution effects – some jobs that are otherwise viable under regular contracts are advertised as ZHCs – are sizable and likely explain negative reactions against ZHCs. Our model also assesses increased labor-force participation from ZHCs which appeal to individuals who prefer flexible work schedules.
    Keywords: zero-hours contracts, working hours, gig economy, flexibility
    JEL: E24 J22 J23 J63 L84
    Date: 2021–12
  9. By: Koenig, Felix (Carnegie Mellon University)
    Abstract: Technical change that extends market scale can generate winner-take-all dynamics, with large income growth among top earners. I test this "superstar model" in the entertainer labor market, where the historic rollout of television creates a natural experiment in scale-related technological change. The resulting inequality changes are consistent with superstar theory: the launch of a local TV station skews the entertainer wage distribution sharply to the right, with the biggest impact at the very top of the distribution, while negatively impacting workers below the star level. The findings provide evidence of superstar effects and distinguish such effects from popular alternative models.
    Keywords: superstar effect, inequality, top incomes, technical change
    JEL: J31 J23 O33 D31
    Date: 2021–12
  10. By: Cahuc, Pierre (Sciences Po, Paris); Carry, Pauline (CREST (ENSAE)); Malherbet, Franck (CREST (ENSAE)); Martins, Pedro S. (Nova School of Business and Economics)
    Abstract: This paper examines a labor law reform implemented in Portugal in 2009 which restricted the use of fixed-term contracts to reduce labor market segmentation. The reform targeted establishments created by large firms above a specific size threshold, covering about 15% of total employment. Drawing on linked employer-employee longitudinal data and regression discontinuity methods, we find that, while the reform was successful in reducing the number of fixed-term jobs, it did not increase the number of permanent contracts and decreased employment in large firms. However, we find evidence of positive spillovers to small firms that may bias reduced form estimates. To evaluate general equilibrium effects, we build and estimate a directed search and matching model with endogenous number of establishments and jobs. We find spillover effects that induce small biases on reduced form estimates but that significantly change the evaluation of the overall impact of the reform because they diffuse to the whole economy. We estimate that the reform slightly reduced aggregate employment and had negative effects on the welfare of employees and unemployed workers.
    Keywords: directed search and matching, labor market segmentation, regression discontinuity
    JEL: J23 J41 J63
    Date: 2022–01
  11. By: Niklas Engbom; Gustavo Gonzaga; Christian Moser; Roberta Olivieri
    Abstract: Using rich administrative and household survey data spanning 34 years from 1985 to 2018, we document a series of new facts on earnings inequality and dynamics in a developing country with a large informal sector: Brazil. Since the mid-1990s, both inequality and volatility of earnings have declined significantly in Brazil’s formal sector. Higher-order moments of the distribution of earnings changes show cyclical movements in Brazil that are similar to those in developed countries like the US. Relative to the formal sector, the informal sector is associated with a significant earnings penalty and higher earnings volatility for identical workers. Earnings changes of workers who switch from formal to informal (from informal to formal) employment are relatively negative (positive) and large in magnitude, dispersed, negatively (positively) skewed, and less leptokurtic. Our results suggest that informal employment is an imperfect insurance mechanism.
    JEL: D31 D33 E24 E26 J31 J46 J62
    Date: 2022–01
  12. By: Innessa Colaiacovo; Margaret G. Dalton; Sari Pekkala Kerr; William R. Kerr
    Abstract: Over the past half-century, while self-employment has consistently accounted for around one in ten of the United States workforce, its composition has changed. Since 1970, industries with high startup capital requirements have declined from 53% of self-employment to 23%. This same time period also witnessed declines in "hometown" local entrepreneurship and the probability of the self-employed being among top earners. Using 2016 data, we show that high startup capital requirements are linked with lower profitability at small scales. The transition away from high startup capital industries appears most closely linked to changes in small business production functions and less due to advantageous reallocation to other opportunities, growth in returns-to-scale among large businesses, or a worsening of financing conditions and debt levels.
    JEL: D24 G51 J11 J24 J62 L26 M13 R11 R13
    Date: 2022–02
  13. By: Hemelt, Steven W. (University of North Carolina, Chapel Hill); Hershbein, Brad J. (Upjohn Institute for Employment Research); Martin, Shawn (University of Michigan); Stange, Kevin (University of Michigan)
    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.
    Keywords: college major, skill demand
    JEL: I26 J23 J24
    Date: 2021–12
  14. By: Niklas Engbom
    Abstract: Using panel data from 23 OECD countries, I document that wages grow more over the life-cycle in countries where job-to-job mobility is more common. A life-cycle theory of job shopping and accumulation of skills on the job highlights that a more fluid labor market allows workers to faster relocate to jobs where they can better use their skills, incentivizing accumulation of skills. Lower labor market fluidity reduces life-cycle wage growth by 20 percent and aggregate labor productivity by nine percent across the OECD relative to the US. I derive a set of testable predictions for training and confront them with comparable cross-country training data, finding support for the theory.
    JEL: E24 J24
    Date: 2022–01
  15. By: Brown, Alessio J.G.; Fraikin, Anne-Lore
    Abstract: The objective of the paper is to examine the retirement behaviour of Belgian workers in one-earner households who are automatically granted a more generous old-age pension benefits replacement rate, called the household replacement rate. Following a recommendation of the Belgian Pension Reform Committee, this policy is to be suppressed for new pensioners, except for those receiving the minimum pension. We provide an ex-ante impact evaluation of such reform on both pension sustainability and adequacy measures. Specifically, we test whether the household replacement rate entails a work (dis)incentive mechanism promoting (harming) pension sustainability and furthermore, we analyse the role of the household replacement rate in old-age poverty and inequality measures. To do so, we use the survey dataset SHARE and a discrete time logistic duration model to study the link between retirement and financial retirement incentives created by the social security system. We find that the household replacement rate generates slightly higher retirement incentives through an income effect and we find that the household replacement rate plays an important role in decreasing the elderly poverty rate. Since households with asymmetrical working arrangements are often at the lowest part of the equivalized income distribution, the substantial effect of the household replacement rate on poverty measures is a motive to use such mechanism as a poverty alleviation tool. Nevertheless, we advocate that income redistribution measures should not be tied to a specific household composition and policies such as pensionable earning minima, minimum pension benefits and the inclusion of replacement income periods in the pension benefits calculation effectively serve the income redistribution goal without favouring a certain type of household over another. Overall, despite the positive poverty and distributional aspects of this policy, our analysis supports the reform proposal of removing the household replacement rate.
    Keywords: retirement,pension policy,Belgium,impact assessment
    JEL: J22 H31 H55 J26
    Date: 2022
  16. By: Machado, Cecilia (Fundação Getúlio Vargas); Reyes, Germán (Cornell University); Riehl, Evan (Cornell University)
    Abstract: We examine the efficacy of affirmative action at universities whose value depends on peer and alumni networks. We study an elite Brazilian university that adopted race- and income-based affirmative action at a large scale. Using employer-employee data, we show that a key benefit of attending the university is access to high-paying jobs affiliated with its alumni. Affirmative action increased disadvantaged students' access to these firms and raised their early-career earnings. But these benefits faded over time. Further, the increase in student body diversity lowered the job prospects and earnings of the school's most highly ranked students.
    Keywords: affirmative action, alumni network, higher education
    JEL: I23 I26 J31
    Date: 2022–01
  17. By: Lippens, Louis (Ghent University); Vermeiren, Siel (Ghent University); Baert, Stijn (Ghent University)
    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. Our meta-analysis shows 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 ethnic characteristics. Remarkably, hiring discrimination against older applicants is even more outspoken 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 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
  18. By: Della Giusta, Marina (University of Reading); Jewell, Sarah (University of Reading)
    Abstract: We contribute to the literature on the effects of personality traits on labour market outcomes focusing on time mismanagement as an underlying mechanism. We document differences in time allocation to the labour market by different personality types in the UK and show how they may account for some of the labour market disadvantage experienced by more neurotic types (and the advantage experienced by more conscientious types) focussing in particular on unpaid overtime. We make use of the first ten waves of the Understanding Society Survey and show that particular personality types are more prone to working longer hours and experiencing time pressures. Whilst the effect of most personality traits is consistent with a rational theory of time allocation, we also find that neuroticism is instead associated with inconsistent behaviour (working fewer paid and more unpaid hours) and discuss implications for both labour market discrimination and labour supply theory.
    Keywords: labour supply, overtime, time, time allocation, personality
    JEL: A13 D01 J22 Z1
    Date: 2021–12
  19. By: David Card
    Abstract: I discuss the recent literature that has led to new interest in the idea of monopsonistic wage setting. Building on advances in search theory and in models of differentiated products, researchers have used a number of different strategies to identify the elasticity of firm-specific labor supply. A growing consensus is that firms have some wage-setting power, though many questions remain about the sources of that power.
    JEL: J30 J42
    Date: 2022–01
  20. By: Bandiera, Oriana (London School of Economics); Elsayed, Ahmed (IZA); Smurra, Andrea (IZA); Zipfel, Celine (London School of Economics)
    Abstract: Every year millions of young adults join the labor market in Africa. This paper uses the Jobs of the World Database to compare their job prospects to those of their counterparts in other low-income regions. We show that employment rates are similar at similar levels of development but young adults in Africa are less likely to have a salaried job, especially when the size of their cohort is large. Building on existing evidence on the impacts of interventions targeting both the demand and supply sides of the labor market, we discuss policy priorities for boosting the growth of salaried job creation in the region.
    Keywords: young adults, employment, salaried jobs, Africa
    JEL: J01 J08 J21 J24
    Date: 2021–12
  21. By: Erica M. Field; Rohini Pande; Natalia Rigol; Simone G. Schaner; Elena M. Stacy; Charity M. Troyer Moore
    Abstract: Time use data facilitate deeper understanding of individual labor supply choices, especially for women, who are more likely to engage in unpaid care and home production. However, traditional time use data collection methods are time-consuming, expensive and susceptible to significant attrition. To address these concerns, we develop an abbreviated, low-cost time use survey module designed for low-literacy populations. It captures contextually-determined broad time use categories of interest to researchers - in our case, time allocations across market work, household labor, and leisure. Using survey experiments in the field, we show that, relative to the widely-used assisted diary approach, the new module is lower cost and relatively more accurate in capturing individuals’ average time use. Its primary shortcomings are its limited ability to capture short duration activities and simultaneous activities. Using the example of passive childcare, we show how module design can provide accurate information on multitasking for an identified category of interest.
    JEL: D13 J22 O1
    Date: 2022–01
  22. By: Kabir Dasgupta (NZ Work Research Institute, Faculty of Business, Economics and Law at AUT University); Alexander Plum (NZ Work Research Institute, Faculty of Business, Economics and Law at AUT University)
    Abstract: Do higher skills help mitigate the negative impact of economic crises? We study the effect of two major economic setbacks–the Global Financial Crisis (GFC) in 2007-09 and the COVID-19 lockdown in 2020–on wage progression for New Zealanders with different skill levels. For our analysis, we link the PIAAC survey data on literacy and numeracy skills with the Inland Revenue’s tax records that document the entire workforce’s monthly labor market information. During the GFC, the adverse impact of the economic shock on wage progression appears to be significantly lower for the higher-skilled population. Moreover, the low skilled group experienced the largest wage drop when changing their employer during the GFC crisis. However, during the recent pandemic-induced lockdown period, we cannot detect differences in wage progression across skill levels.
    Keywords: skills, economic crises, wage progression, PIAAC, administrative data
    JEL: J24 J31 O12
    Date: 2022–01
  23. By: Hamermesh, Daniel S. (Barnard College); Pfann, Gerard A. (Maastricht University)
    Abstract: Using Dutch time-diary data from 1975-2005 covering over 10,000 respondents for 7 consecutive days each, we show that individuals' sleep time exhibits both variability and volatility characterized by stationary autoregressive conditional heteroscedasticity: The absolute values of deviations from a person's average sleep on one day are positively correlated with those on the next day. Sleep is more variable on weekends and among people with less education, who are younger and who do not have young children at home. Volatility is greater among parents with young children, slightly greater among men than women, but independent of other demographics. A theory of economic incentives to minimize the dispersion of sleep predicts that higher-wage workers will exhibit less dispersion, a result demonstrated using extraneous estimates of earnings equations to impute wage rates. Volatility in sleep spills over onto volatility in other personal activities, with no reverse causation onto sleep. The results illustrate a novel dimension of economic inequality and could be applied to a wide variety of human behavior and biological processes.
    Keywords: time use, ARCH, economic incentives in biological processes, volatility
    JEL: C22 J22 I14
    Date: 2022–01
  24. By: Daniel S. Grossman ⓡ; Sebastian Tello-Trillo ⓡ; Barton Willage ⓡ
    Abstract: A rich literature documents the benefits of social safety net programs for children. This paper focuses on an unexplored margin: how children’s programs impact parents’ well-being. We explore changes in children’s public health insurance and its effects on parents’ economic and behavioral outcomes. Using a simulated eligibility for Medicaid eligibility expansions in the 1980s and 1990s, we isolate variation in children’s Medicaid eligibility due to changes in government policies. We find that increases in children’s Medicaid eligibility increases the likelihood a mother is married, decreases her labor market participation, and reduces her smoking and alcohol consumption. Our findings suggest improved maternal well-being as measured by the Center for Epidemiological Studies-Depression score, a proxy for mental health. These results uncover a new link that provides an important mechanism, parental well-being, for interpreting the literature’s findings on the long-term, short-term, and intergenerational effects of Medicaid coverage.
    JEL: I1 I13 I14 I18 J10 J12 J18 J20 J21 J22
    Date: 2022–01
  25. By: Harris, Timothy F. (Illinois State University); Yelowitz, Aaron (University of Kentucky); Talbert, Jeffery (University of Kentucky); Davis, Alison (University of Kentucky)
    Abstract: The employer-sponsored life insurance (ESLI) market is particularly susceptible to adverse selection due to community-rated premiums, guaranteed issue coverage, and the existence of a well-functioning individual market as a substitute. Using administrative payroll and healthcare claims data from a large university, we find evidence of adverse selection in the supplemental ESLI market. Employees in worse health, as measured by the Charlson's Comorbidity Index, are more likely to elect coverage than those in better health. Nonetheless, we also find that employees typically do not increase coverage following diagnosis of a severe illness even when they can without providing evidence of insurability. Furthermore, demand estimation shows that employees are not price-sensitive and that the estimated increases in premiums due to adverse selection are unlikely to cause significant welfare loss.
    Keywords: adverse selection, employer-sponsored life insurance
    JEL: D82 G22 J33
    Date: 2022–01
  26. By: Dingquan Miao
    Abstract: I analyze the role of the distribution of skills in shaping optimal nonlin-ear income tax schedules. I use theoretical skill distributions as well as empirical skill distributions for 14 OECD countries. I find that a more dispersed log-normal skill distribution implies a more progres-sive optimal tax schedule. Optimal tax rates should be lower through-out if a greater number of unskilled agents cluster at the bottom, and the scheme is more progressive if a greater number of agents locate at the top. I also highlight how the impact of the skill distribution is affected by the form of the social welfare function and the utility function. The findings using empirical skill distributions suggest that the results are sensitive to the type of statistical estimator used to estimate the skill distribution.
    JEL: H21 J24
    Date: 2022–01
  27. By: Gobillon, Laurent; Magnac, Thierry; Roux, Sébastien
    Abstract: We derive wage equations with individual specic coe¢ cients from a structural model of human capital investments over the life-cycle. This model allows for interruptions in labor market participation, and addresses missing data and attrition issues. We further control for selection in a exible way by using interactive e¤ects. Estimation is based on long administrative panel data of male wages in the private sector in France. A structural function approach shows that interruptions negatively a¤ect average wages. More surprisingly, they also negatively a¤ect the inter-decile range of wages after twenty years, and this is due to interruptions being endogeneous. These results question the popular Missing At Random assumption that is made when assessing the building up of wage inequalities over the life cycle.
    Keywords: Human capital investment; wage inequalities; factor models; missing data
    JEL: C38 D91 I24 J24 J31
    Date: 2022–02
  28. By: Dang, Hai-Anh (World Bank); Carletto, Calogero (World Bank)
    Abstract: Smallholder farming dominates agriculture in poorer countries. Yet, traditional recall-based surveys on smallholder farming in these countries face challenges with seasonal variations, high survey costs, poor record-keeping, and technical capacity constraints resulting in significant recall bias. We offer the first study that employs a less-costly, imputation-based alternative using mixed modes of data collection to obtain estimates on smallholder farm labor. Using data from Tanzania, we find that parsimonious imputation models based on small samples of a benchmark weekly inperson survey can offer reasonably accurate estimates. Furthermore, we also show how less accurate, but also less resource-intensive, imputation-based measures using a weekly phone survey may provide a viable alternative for the more costly weekly in-person survey. If replicated in other contexts, including for other types of variables that suffer from similar recall bias, these results could open up a new and cost-effective way to collect more accurate data at scale.
    Keywords: farm labor, agricultural productivity, multiple imputation, missing data, survey data, Tanzania
    JEL: C8 J2 O12 Q12
    Date: 2022–01
  29. By: Vedor, Bernardo
    Abstract: Since 1980, income and wealth inequality increased gradually in the U.S.. Several solutions have been proposed, namely the introduction of a Universal Basic Income (UBI) system. In order to assess whether a UBI financed by a progressive labor tax is a viable solution to reduce inequality, we develop an overlapping generations model, with multiple sources of technological change and four different occupations. Calibrating the model to the U.S. we find that the welfare-maximizing level of UBI is actually quite low, 0.5% of GDP. Even though a higher UBI would decrease income and wealth inequality, it would negatively affect economic efficiency and make all types of agents worse off. The main mechanism is the distortionary effect of higher labor income taxation on capital accumulation which prevents the economy from incorporating the gains from investment-specific technological progress.
    Keywords: Macroeconomics, Income Inequality, Technological Change, Universal Basic Income
    JEL: E21 H21 J31
    Date: 2022–01–25
  30. By: Bates, Michael (University of California, Riverside); Dinerstein, Michael (University of Chicago); Johnston, Andrew C. (University of California, Merced); Sorkin, Isaac (Stanford University)
    Abstract: We study whether reallocating existing teachers across schools within a district can increase student achievement, and what policies would help achieve these gains. Using a model of multi-dimensional value-added, we find meaningful achievement gains from reallocating teachers within a district. Using an estimated equilibrium model of the teacher labor market, we find that achieving most of these gains requires directly affecting teachers' preferences over schools. In contrast, directly affecting principals' selection of teachers can lower student achievement. Our analysis highlights the importance of equilibrium and second-best reasoning in analyzing teacher labor market policies.
    Keywords: teacher labor markets, teacher and principal preferences, market timing, match effects
    JEL: I28 J45
    Date: 2022–01
  31. By: Frederiksen, Anders (Aarhus University); Hansen, Daniel Baltzer Schjødt (Aarhus University); Flaherty Manchester, Colleen (University of Minnesota)
    Abstract: Group-based incentive pay is attractive in contexts where production is complex and interdependent, yet freeriding is a paramount concern. We assess the introduction of group-based performance pay in a modern industrial production setting using difference-in-difference estimation. Performance increased by 19 percent, with three quarters coming from increased performance of existing workers and the remaining from selection; workers became more efficient and were absent less often. We find little evidence of freeriding; quantile regressions show increased performance throughout the distribution of workers. Features of the design and implementation process created trust, a common goal, and a shared identity, which limited freeriding.
    Keywords: difference-in-differences, performance pay, group-based incentive, freeriding, incentive effects, selection effects, absenteeism, efficiency, performance, productivity, trust
    JEL: M5 J33 L23
    Date: 2022–01
  32. By: Simpson, Julija (Newcastle University); Bambra, Clare (Newcastle University); Brown, Heather (Finnish Institute for Health and Welfare)
    Abstract: We investigate the role of employment in explaining changes in the mental health of single mothers compared to partnered mothers and single childless women during the period of welfare reform in the UK. We employ a time allocation framework to explore if reductions in benefit income led to a sub-optimal consumption bundle, resulting in lower in mental health, higher employment, and longer working hours. We estimate a Heckman selection model for employment and hours worked. A difference-in-difference model is used to explore if reform periods were associated with increased inequalities. Results show that employment was associated with better mental health for all women. Higher job hours were associated with lower mental health for all women but the association was not statistically significant for single mothers. Mental health inequalities potentially have increased post reforms.
    Keywords: welfare reform, employment, low-income, single mothers, mental health
    JEL: D13 I14 I38 J22
    Date: 2021–12
  33. By: Armstrong, Christopher S. (University of Pennsylvania); Kepler, John D. (Stanford University); Kim, Chongho (New York University); Tsui, David (University of Southern California)
    Abstract: We study whether and how creditors exercise their control rights to shape their borrowers’ executive compensation plans. Highly levered borrowers often face incentives to underinvest due to agency conflicts driven by differences in time horizon and risk-taking preferences between managers and creditors. Thus, we expect that creditors exert their control to ensure that their borrowers’ executive compensation plans encourage investments with longer-term payoffs and provide more direct rewards for profitable outcomes. We also argue that executives’ bonus plans become relatively more important in these instances because their flexibility (e.g., potentially non-linear and non-monotonic payoffs) al lows creditors to target specific investment objectives. We find that borrowers’ bonus plans tend to have longer horizons and more convex payouts when their creditors acquire more control following covenant violations. Our evidence suggests that creditors exercise their influence to shape their borrowers’ executive compensation plans in ways that protect their interests.
    JEL: G34 J3 M12
    Date: 2021–12
  34. By: David Autor; David Cho; Leland D. Crane; Mita Goldar; Byron Lutz; Joshua K. Montes; William B. Peterman; David D. Ratner; Daniel Villar Vallenas; Ahu Yildirmaz
    Abstract: The Paycheck Protection Program (PPP) provided small businesses with roughly $800 billion dollars in uncollateralized, low-interest loans during the pandemic, almost all of which will be forgiven. With 93 percent of small businesses ultimately receiving one or more loans, the PPP nearly saturated its market in just two months. We estimate that the program cumulatively preserved between 2 and 3 million job-years of employment over 14 months at a cost of $170K to $257K per job-year retained. These estimates imply that only 23 to 34 percent of PPP dollars went directly to workers who would otherwise have lost jobs; the balance flowed to business owners and shareholders, including creditors and suppliers of PPP-receiving firms. Program incidence was highly regressive, with about three-quarters of PPP funds accruing to the top quintile of households. This compares unfavorably to the other two major pandemic aid programs, enhanced UI benefits and Economic Impact Payments (i.e. stimulus checks). PPP’s breakneck scale-up, its high cost per job saved, and its regressive incidence have a common origin: PPP was essentially untargeted because the United States lacked the administrative infrastructure to do otherwise. The more targeted pandemic business aid programs deployed by other high-income countries exemplify what is feasible with better administrative systems. Building similar capacity in the U.S. would enable greatly improved targeting of either employment subsidies or business liquidity when the next pandemic or other large-scale economic emergency occurs, as it surely will.
    JEL: E65 H2 J38
    Date: 2022–01
  35. By: Ciccarelli, Carlo (University of Rome Tor Vergata); Dalmazzo, Alberto (University of Siena); Razzolini, Tiziano (University of Siena)
    Abstract: This paper reconsiders the nexus between the abundance of resources and the origins of Sicilian mafia by exploiting a new set of historical data on the Sicilian sulphur industry in the late 19th century, obtained from official reports of the Royal Corps of Mining Engineers at the municipal level. We find that the impact of local production on mafia was smaller -or nil- in the areas richest in sulphur. We also find that mechanization in the extraction process was associated with lower incidence of mafia. Taken together, our findings suggest that larger lodes encouraged better and more orderly working conditions for the miners, possibly reducing physical and psychic strain and, consequently, inclination to violence.
    Keywords: Mafia, sulphur, working conditions
    JEL: H75 J28 K42
    Date: 2021–12
  36. By: Andelic, Nicole (University of Aberdeen); Allan, Julia (University of Aberdeen); Bender, Keith A. (University of Aberdeen); Powell, Daniel (University of Aberdeen); Theodossiou, Ioannis (University of Aberdeen)
    Abstract: Much of the literature on performance-related pay (PRP) and poor health relies on self-reported data, and the relationship is particularly difficult to examine due to confounding variables. To address these limitations we examine three groups of health measures using data from the UKHLS: blood pressure (n=5667), inflammation markers in blood (n=4025) and self-reported health (n=6120). Physiological markers of health allow us to circumvent some of the issues associated with self-reported measures and by using size of firm and % share of PRP workers in occupation we also statistically control for some of the endogeneity associated with self-selection bias. Regressions correcting for self-selection bias and socio-demographic covariates find that PRP contracts are associated with poorer self-reported mental health, higher systolic blood pressure and higher levels of fibrinogen. These findings have implications for firms that use PRP as they may need to implement policies to mitigate against stress.
    Keywords: performance-related pay, health, sample selection
    JEL: J33 M52 I1
    Date: 2022–01

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