nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2022‒06‒27
eighteen papers chosen by
Joseph Marchand
University of Alberta

  1. Work Effort in the UK: Trends and Explanations By Gimenez-Nadal, J. Ignacio; Sevilla, Almudena
  2. "Since You're So Rich, You Must Be Really Smart": Talent, Rent Sharing, and the Finance Wage Premium By Böhm, Michael Johannes; Metzger, Daniel; Strömberg, Per
  3. The Short- And Longer-Term Effects of a Child Labor Ban By Piza, Caio; Souza, André Portela; Emerson, Patrick M.; Amorim, Vivian
  4. The Real Effects of Banking the Poor: Evidence from Brazil By Julia Fonseca; Adrien Matray
  5. The Link between Health and Working Longer: Disparities in Work Capacity By Benjamin Berger; Italo Lopez Garcia; Nicole Maestas; Kathleen J. Mullen
  6. Who Benefits from Firm Success? Heterogenous Rent Sharing in New Zealand By Allan, Corey; Maré, David C.
  7. Heterogeneous Returns of Informality: Evidence From Brazil By Andrea Otero-Cortés
  8. Days of Work over a Half Century: The Rise of the Four-Day Week By Hamermesh, Daniel S.; Biddle, Jeff E.
  9. Job Satisfaction, Structure of Working Environment and Firm Size By Aysit Tansel; Saziye Gazioglu
  10. Bunching and Adjustment Costs: Evidence from Cypriot Tax Reforms By Panos Mavrokonstantis; Arthur Seibold
  11. Are entrepreneurs more upwardly mobile? By Matthew J. Lindquist; Theodor Vladasel
  12. Replacement Rates of Public Pensions in Canada: Heterogeneity across SocioEconomic Status By Nicholas-James Clavet; Mayssun El-Attar; Raquel Fonseca
  13. The Evolution of Inequality in Education Trajectories and Graduation Outcomes in the US By Belzil, Christian; Hansen, Jörgen; Liu, Xingfei
  14. Explaining the Decline in the US Labor Share: Taxation and Automation By Burkhard Heer; Andreas Irmen; Bernd Süssmuth
  15. Do funds for more teachers improve student outcomes? By Nicolai T. Borgen; Lars J. Kirkebøen; Andreas Kotsadam; Oddbjørn Raaum
  16. Math ability, gender stereotypes about math ability, and educational choices. Combining experimental and survey data By Dominique Cappelletti; Maria Vittoria Levati; Matteo Ploner
  17. Are women breaking the glass ceiling? A gendered analysis of the duration of sick leave in Spain By Martín-Román, Ángel L.; Moral, Alfonso; Pinillos-Franco, Sara
  18. Testing the Presence of Implicit Hiring Quotas with Application to German Universities By Lena Janys

  1. By: Gimenez-Nadal, J. Ignacio (University of Zaragoza); Sevilla, Almudena (University College London)
    Abstract: This paper links detailed 24-hour diary surveys in the United Kingdom (UK) over the last four decades to provide evidence on the increase in work effort in three specific dimensions: timing, nature, and composition. We rule out possible explanations behind these trends, finding that the decrease in the frequency of on-the-job leisure is more pronounced for workers in routine task-intensive occupations. Alternative supply- and demand-side explanations, such as changes in the relative preference for leisure, or the increase in offshoring, or competition for jobs, cannot explain our results. Our findings posit the amount and the frequency of on-the-job leisure as a measure of work effort, and the routine-biased technological change experienced during this period lies at the root of the increase in work effort in the UK.
    Keywords: labor supply, time-use, work effort, routine-biased technological change
    JEL: D63 J22 J23 J24 J31 J62
    Date: 2022–05
  2. By: Böhm, Michael Johannes (University of Bonn); Metzger, Daniel (Erasmus University Rotterdam); Strömberg, Per (CEPR)
    Abstract: Financial sector wages have increased extraordinarily over the last decades. We address two potential explanations for this increase: (1) rising demand for talent and (2) firms sharing rents with their employees. Matching administrative data of Swedish workers, which include unique measures of individual talent, with financial information on their employers, we find no evidence that talent in finance improved, neither on average nor at the top. The increase in relative finance wages is present across talent and education levels, which together can explain at most 20% of it. In contrast, rising financial sector profits that are shared with employees account for up to half of the relative wage increase. The limited labor supply response may partly be explained by the importance of early-career entry and social connections in finance. Our findings alleviate concerns about "brain drain" into finance but suggest that finance workers have captured rising rents over time.
    Keywords: industry wage premia, talent allocation, rent sharing, earnings inequality, compensation in financial sector
    JEL: J24 J31 G20
    Date: 2022–05
  3. By: Piza, Caio (World Bank); Souza, André Portela (Fundação Getúlio Vargas); Emerson, Patrick M. (Oregon State University); Amorim, Vivian (World Bank)
    Abstract: Are bans effective at lowering child labor and increasing school attendance and, if so, do these effects lead to positive outcomes later in life? This paper seeks to answer these questions by examining the effect of a 1998 Brazilian law that increased the minimum employment age from 14 to 16. To examine this question we use two different regression discontinuity designs to analyze Brazilian household data. We find that the ban had no overall impact across affected children in Brazil, but that it led to a significant decrease in the labor market participation of urban boys, whose paid labor dropped 35 percent, driven mainly by a decrease in informal work. We also find a concomitant 10 percent increase in the share of urban boys only attending school. Interestingly, we find that by age 18 this cohort was still almost 20 percent less likely to have a paid job and was less likely to be economically active even when they were legally allowed to work. However, we find no evidence that the impact of the ban lasted over time as reflected in measures of educational attainment, employment rates, and wages. Our results suggest that when enforced, bans on child labor can have significant immediate impacts amongst affected populations, leading to a decrease in work and an increase in school attendance. It remains unclear if these impacts translate to improved adult outcomes.
    Keywords: child labor, education, labor laws
    JEL: C21 J08 J22 J24 K31
    Date: 2022–05
  4. By: Julia Fonseca; Adrien Matray
    Abstract: We study how financial development affects economic development and wage inequality. We use a large expansion of government-owned banks into Brazilian cities with low bank branch coverage and combine it with data on the universe of employees from 2000-2014. We find that higher financial development fosters firm growth, higher labor demand, and higher average wages, especially for cities initially in banking deserts. However, these gains are not shared equally. Instead, they increase with workers’ productivity, implying a substantial increase in wage inequality. The changes to inequality are concentrated in cities where the initial supply of skilled workers is low, indicating that talent scarcity can drive how financial development affects inequality. Our results are inconsistent with alternative explanations such as differential exposure to Brazil's economic boom, an overall increase in government lending, and other government or social welfare programs. These results motivate embedding skill heterogeneity into macro-finance development models in order to capture these distributional consequences.
    JEL: G2 H8 J2 J3 O1 O43
    Date: 2022–05
  5. By: Benjamin Berger; Italo Lopez Garcia; Nicole Maestas; Kathleen J. Mullen
    Abstract: Good health is important for employment at older ages. However, little is known about how health-related functional abilities interact with occupational demands to shape work capacity. Using new data, we quantify individuals’ functional abilities, combine that information with occupation-specific ability requirements, and create new measures of individuals’ potential occupations and earnings. We find that average functional abilities, potential occupations, and potential earnings decline only slightly with age, indicating that many Americans maintain work capacity into their late 60s. Gaps in work capacity by race/ethnicity and gender are small, suggesting health is not a major driver of observed earnings disparities. However, gaps in work capacity by education are large and increase with age, suggesting diminished prospects for working longer among those with less education. Although work capacity among Black respondents improves across cohorts, today’s middle-aged white Americans have lower work capacity than those now at retirement age, suggesting rising rates of work disability as these cohorts age.
    JEL: J14 J15 J24
    Date: 2022–05
  6. By: Allan, Corey; Maré, David C. (Motu Economic and Public Policy Research Trust)
    Abstract: We examine heterogeneous rent-sharing in New Zealand using LEED data. Using a refined measures of quasi-rents per worker, we find that 20% to 30% of workers are in zero-excess-rent firms - disproportionately women, Māori or Pacific peoples, low-qualified workers, and those in hospitality, admin services, and retail industries,. The overall rent-sharing elasticity of 0.03 is equivalent to $38 higher earnings per $1,000 of excess rents per worker. Sharing varies by qualification, tenure, and ethnicity, but not by firm size or age. In most industries, workers receive $1,500-$2,000 of rents per year. Sharing is highest in auxiliary finance and professional services sectors and lowest in grocery retailing, food and beverage manufacturing and utilities. There is some evidence of insurance-type behaviour by firms. Differences in bargaining power are also likely to affect rent sharing variation.
    Keywords: wage determination, rent-sharing, imperfect competition
    JEL: J31 J71 J10 D22
    Date: 2022–04
  7. By: Andrea Otero-Cortés
    Abstract: This paper estimates the marginal treatment effect of informality on wages for Brazil at the individual level using regional data on labor inspectors for identification. The results show that there is significant essential heterogeneity among otherwise identical workers that lead them to self-select into the type of jobs, formal or informal, that better reward their skills. The Average Treatment Effect (ATE) is 22%, but not statistically different from zero. But there are individuals with very low non-observed costs of formality that in fact earn premiums of up to 100% of their wage rate from being formal and workers who would be hurt from switching to formality as they experience very high non-observed costs of being formal. Two policy experiments in which we tighten enforcement of the labor law via hiring more labor inspectors increases the likelihood of workers being formal, but it has, on average, a negative effect on wages for the workers who are induced to switch from informality to formality. **** RESUMEN: Este documento estima para Brasil el efecto marginal de la formalidad laboral en los salarios a nivel individual utilizando una combinación de datos regionales sobre inspecciones laborales y actividad económica. Los resultados muestran que existe una heterogeneidad esencial significativa entre trabajadores que son idénticos en sus características observadas, que los lleva a auto-seleccionarse en el tipo de trabajos, formales o informales, que recompensan mejor sus habilidades. El efecto promedio del tratamiento (ATE) es del 22%, pero no es estadísticamente diferente de cero. Sin embargo, hay individuos con costos de formalidad no observados muy bajos que de hecho ganan primas de hasta el 100% de su salario por ser formales y trabajadores que se verían perjudicados por cambiar a la formalidad ya que experimentan costos no observados muy altos de ser formales. Dos experimentos de políticas en los que imponemos una aplicación más estricta de la ley laboral mediante la contratación de más inspectores laborales aumenta la probabilidad de que los trabajadores sean formales, pero tiene, en promedio, un efecto negativo en los salarios de los trabajadores que son inducidos a pasar de la informalidad a la formalidad.
    Keywords: Labor informality, labor regulation, enforcement, marginal treatment effects, Informalidad laboral, regulación laboral, aplicación, efectos marginales de tratamiento
    JEL: H26 J24 J32 J46 K31
    Date: 2022–06
  8. By: Hamermesh, Daniel S. (University of Texas at Austin); Biddle, Jeff E. (Michigan State University)
    Abstract: We examine work patterns in the U.S. from 1973-2018, with the novel focus on days per week, using intermittent CPS samples and one ATUS sample. Among full-time workers the incidence of four-day work tripled, with 8 million additional four-day workers. Similar growth occurred in the Netherlands, Germany, and South Korea. The rise was not due to changes in demographics or industrial structure. Such schedules are more common among less educated, younger, and white non-Hispanic workers, men, natives, and people with young children; police and firefighters, health-care, and restaurant workers. Based on an equilibrium model, we show that they result more from workers’ preferences and/or daily fixed costs of working than production costs. We verify the implication that the wage penalty for four-day work is greater where such work is more prevalent, and we show that the penalty has diminished over time.
    Keywords: days/week, decomposition, labor supply, wage penalties
    JEL: J11 J22
    Date: 2022–05
  9. By: Aysit Tansel (Department of Economics Middle East Technical University, IZA, ERF Cario); Saziye Gazioglu (Department of Economics and Instituted of Applied Mathematics (IAM) Middle East Technical University, Department of Economics University of Aberdeen)
    Abstract: Employees’ wellbeing is important to the firms. Analysis of job satisfaction may give insight into various aspect of labor market behavior, such as worker productivity, absenteeism and job turn over. Little empirical work has been done on the relationship between structure of working environment and job satisfaction. This paper investigates the relationship between working environment, firm size and worker job satisfaction. We use a unique data of 28,240 British employees, Workplace Employee Relations Survey. In this data set the employee questionnaire is matched with the employer questionnaire. Four measures of job satisfaction considered are satisfaction with influence over job, satisfaction with amount of pay, satisfaction with sense of achievement and satisfaction with respect from supervisors. They are all negatively related to the firm size implying lower levels of job satisfaction in larger firms. The firm size in return is negatively related to the degree of flexibility in the working environment. The small firms have more flexible work environments. We further find that, contrary to the previous results lower levels of job satisfaction in larger firms can not necessarily be attributed to the inflexibility in their structure of working environment.
    Keywords: Job Satisfactions, Firm Size, Working Environment, Linked Employer-Employee data, Britain.
    JEL: J21 J28 J29 J81
    Date: 2022–06
  10. By: Panos Mavrokonstantis; Arthur Seibold
    Abstract: We study adjustment costs in behavioral responses to income taxes, exploiting tax reforms that create and subsequently eliminate income tax kinks in Cyprus. Reduced-form evidence reveals substantial adjustment frictions attenuating bunching and de-bunching responses. Combining the empirical bunching moments with a structural model of frictional earnings supply, adjustment costs are estimated between EUR 93 and EUR 238 for wage earners. Moreover, we uncover important asymmetries in adjustment frictions, where bunching at a kink is costlier than de-bunching away from the kink. Finally, we find that self-employed individuals face considerably lower adjustment costs than wage earners.
    Keywords: income taxation, taxable income responses, bunching, adjustment frictions
    JEL: H24 J22
    Date: 2022
  11. By: Matthew J. Lindquist; Theodor Vladasel
    Abstract: Entrepreneurship is often hailed as a path to upward intergenerational mobility, but few studies have explicitly tested this belief. We study intergenerational income rank mobility among entrepreneurs and employees in Sweden using high-quality measures of lifetime income for 215,000 father-son pairs. Incorporated entrepreneurs are more upwardly mobile than wage earners; this result is driven by selection and not by the causal impact of entrepreneurship on upward intergenerational mobility. By contrast, unincorporated entrepreneurs are more downwardly mobile, a result explained by selection, income underreporting, and lower returns to skills and education.
    Keywords: Entrepreneurship, incorporation, intergenerational mobility, lifetime income, upward mobility
    JEL: L26 J24 J62
    Date: 2022–06
  12. By: Nicholas-James Clavet; Mayssun El-Attar; Raquel Fonseca
    Abstract: When individuals decide to retire from the labour force, different sources of income can help to maintain consumption and welfare. One of those is public pensions. Their importance as an income source varies greatly according to socio-economic status (SES). This paper analyzes how replacement rates (RR) of public pensions (OAS and GIS) and mandatory public pension benefits (C/QPP) vary across SES by using the Longitudinal and International Study of Adults dataset (LISA). Using the longitudinal nature of this survey, we compute and compare average RRs by SES. We specifically consider the role of education and health, and we study how living arrangements can explain RRs variations. To give an idea the average RR of public pensions for individuals in bad health is 32%, while it is 21% for those who report being in good health. Including public pensions and C/QPP benefits, these numbers become 54% for those in bad health and 41% for those in good health. When estimating a multivariate regression model and controlling for past income, we find for couples, that past income does not eliminate differences in replacement ratio by individuals’ characteristics. We argue that assortative mating plays a role in explaining the variation of replacement rates across individuals’ characteristics.
    Keywords: Replacement rates, retirement, Canadian public pensions, LISA
    JEL: H55 J26
    Date: 2022
  13. By: Belzil, Christian (Ecole Polytechnique, Paris); Hansen, Jörgen (Concordia University); Liu, Xingfei (University of Alberta)
    Abstract: We model the joint distribution of (i) individual education trajectories, defined by the allocation of time (semesters) between various combinations of school enrollment with different labor supply modalities and periods of school interruption devoted either to employment or home production and (ii) actual graduation outcomes using two cohorts of the National Longitudinal Survey of Youths which we follow from 16 to 28. We discuss the evolution of family income and ability effects where the latter are decomposed into an academic (cognitive) and a practical (technical-mechanical) latent ability factor component correlated with family income and background variables. We find that the individual cognitive-technical ability differential prevailing at 16 was increasing with income in the early 80's but much less so in the early 2000's. We find no evidence of any income-based "trajectory inequality" in either cohort, after conditioning on abilities. Among all graduation and enrollment outcomes, college graduation is the only for which the effect of income has increased between the 1980's and the early 2000's but it reached a level no more important than the high school graduation income effect. In both cohorts, cognitive and technical abilities were the dominant factors but they affect most dimensions of individual trajectories and all graduation outcomes in opposite directions. However, the cognitive ability factor lost half of its effect on college graduation while the impact of the technical-mechanical factor has been more stable across cohorts.
    Keywords: education, inequality, family income, multi-dimensional abilities, labor supply
    JEL: I2 J1 J3
    Date: 2022–05
  14. By: Burkhard Heer; Andreas Irmen; Bernd Süssmuth
    Abstract: This study provides evidence for the US that the secular decline in the labor share is not only explained by technical change or globalization, but also by the dynamics of factor taxation, automation capital (robots), and population growth. First, we empirically find indications of co-integration for the period from the last quarter of the 20th to the first decade of the 21st century. Permanent effects on factor shares emanate from relative factor taxation. The latter also have a lasting effect on the use of robots. Variance decompositions reveal that taxing contributes to changes in the two income shares and in automation capital. Second, we analyse and calibrate a neoclassical growth model extended to include factor taxation, automation capital, and capital adjustment costs. Labor and automation capital are perfect substitutes whereas labor and traditional capital are complements. The model replicates the dynamics of the observed functional income distribution in the US during the 1965-2015 period. Counterfactual experiments suggest that the fall in the labor share would have been significantly smaller if labor and capital income tax rates had remained at their respective level of the 1960s.
    Keywords: functional income distribution, labor income share, income taxes, automation capital, demography, growth
    JEL: D33 E62 O41 J11 J20
    Date: 2022
  15. By: Nicolai T. Borgen; Lars J. Kirkebøen (Statistics Norway); Andreas Kotsadam; Oddbjørn Raaum
    Abstract: We investigate the effects of a large-scale Norwegian reform that provided extra teachers to 166 lower secondary schools with relatively high student-teacher ratios and low average grades. We exploit these two margins using a regression discontinuity setup and find that the reform reduced the student-teacher ratio by around 10% (from a base level of 22 students per teacher), with no crowding out of other school resources or parental support. However, the reform did not improve test scores and longer-term academic outcomes, and we can reject even small positive effects. We do find that the reform improved the school environment from the students’ perspective, but with the largest impact on aspects most weakly associated with better academic outcomes.
    Keywords: Student-teacher-ratio; class size; test scores; non-cognitive skills; RDD
    JEL: J24 I2
    Date: 2022–06
  16. By: Dominique Cappelletti (Department of Economics (University of Verona)); Maria Vittoria Levati (Department of Economics (University of Verona)); Matteo Ploner (CEEL, University of Trento)
    Abstract: The underrepresentation of females in STEM fields negatively affects productivity growth and contributes to labour market inequalities. In countries where children are tracked in educational trajectories from high school (as in Italy, 8th grade), it is crucial to understand what drives gendered pathways before educational segregation starts. Collecting experimental and survey data from Italian 8th graders, we find that perceived comparisons with peers are predictors of the likelihood that girls choose a math-intensive track during high school. Policy initiatives improving girls' expectations about their relative math performance may thus encourage female students to pursue a STEM track.
    Keywords: School choice, Math ability, Gender stereotypes, Beliefs, STEM
    JEL: C93 J16 J24 I24
    Date: 2022–06
  17. By: Martín-Román, Ángel L.; Moral, Alfonso; Pinillos-Franco, Sara
    Abstract: We study the gender gap in the duration of sick leave in Spain by splitting this duration into two types of days – those which are related to biological characteristics and those derived from behavioral reasons. Using the Statistics of Accidents at Work for 2011-2019, we found that women presented longer standard durations (i.e., purely attached to physiological reasons) compared to men. However, when estimating individuals’ efficiency as the ratio between actual and standard durations, we found that women were more inefficient at lower levels of income, whereas in case of men, this occurred at higher levels of income. These results were reinforced when considering that men and women do not recover from the same injury at the same rate. Women were more efficient than men across all the compensation distribution, especially at higher income levels.
    Keywords: Moral hazard, Glass ceiling, Workplace injuries, Gender, Stochastic frontiers
    JEL: I12 I13 I18 J28
    Date: 2022
  18. By: Lena Janys (University of Bonn (Department of Economics), Hausdorff Center of Mathematics and IZA)
    Abstract: Women are underrepresented in academia in general and economics in particular. I introduce a test to detect an under-researched form of hiring bias: implicit quotas. I derive a test under the null hypothesis of gender-blind hiring that requires no additional information about individual hires and can be used to analyze hiring bias in a variety of other hiring settings. I derive its asymptotic distribution and propose a parametric bootstrap procedure that resamples from the exact distribution. I analyze the distribution of female professors at German universities and find an implicit quota of one or two women on the department level.
    Keywords: Gender, Academia, Bernoulli Sequences, Hypothesis Testing
    JEL: J71 C12 C18
    Date: 2022–05

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