nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2022‒10‒03
seventeen papers chosen by
Joseph Marchand
University of Alberta

  1. The Age-Wage-Productivity Puzzle: A Contribution from Professional Football By Rachel Scarfe; Carl Singleton; Adesola Sunmoni; Paul Telemo
  2. The Relation between Skills and Job Security: Identifying the Contractual Return to Skills By Diris, Ron; Van Vliet, Olaf
  3. The Effect of Working from Home on the Agglomeration Economies of Cities: Evidence from Advertised Wages By Liu, Sitian; Su, Yichen
  4. COVID-19 and Entrepreneurship Entry and Exit: Opportunity Amidst Adversity By Otrachshenko, Vladimir; Popova, Olga; Nikolova, Milena; Tyurina, Elena
  5. How Worker Productivity and Wages Grow with Tenure and Experience: The Firm Perspective By Andrew Caplin; Minjoon Lee; Søren Leth-Petersen; Johan Sæverud; Matthew D. Shapiro
  6. Banking on Snow: Bank Capital, Risk, and Employment By Baumgartner, Simon; Stomper, Alex; Schober, Thomas; Winter-Ebmer, Rudolf
  7. Social Preferences and Rating Biases in Subjective Performance Evaluations By Kusterer, David; Sliwka, Dirk
  8. Team Incentives and Lower Ability Workers: An Experimental Study on Real-Effort Tasks By Richard B. Freeman; Xiaofei Pan; Xiaolan Yang; Maoliang Ye
  9. Identifying and Overcoming Gender Barriers in Tech: A Field Experiment on Inaccurate Statistical Discrimination By Jan Feld; Edwin Ip; Andreas Leibbrandt; Joseph Vecci
  10. Measuring Small Business Dynamics and Employment with Private-Sector Real-Time Data By Kurmann, Andre; Lalé, Etienne; Ta, Lien
  11. Impact of the collection mode on labor income data. A study in the times of COVID19 By García-Suaza, A; Lobo, J; Montoya, S; Ordóñez, J; Oviedo, J. D
  12. Why Don't We Sleep Enough? A Field Experiment Among College Students By Mallory L. Avery; Osea Giuntella; Peiran Jiao
  13. More than a Ban on Smoking? Behavioural Spillovers of Smoking Bans in the Workplace By Joan Costa-Font; Luca Salmasi; Sarah Zaccagni
  14. Splitting up or dancing together? Local institutional structure and the performance of urban areas By Marco Di Cataldo; Licia Ferranna; Margherita Gerolimetto; Stefano Magrini
  15. Labour market and inflation relationship indicator By Evgeny Postnikov; Dmitry Orlov
  16. Wage Expectations and Access to Healthcare Occupations: Evidence from an Information Experiment By Juliana Bernhofer; Alessandro Fedele; Mirco Tonin
  17. Introducing the Medical Expenditure Panel Survey-Insurance Component with Administrative Records (MEPS-ICAR): Description, Data Construction Methodology, and Quality Assessment By Thomas A. Hegland; Alice Zawacki; G. Edward Miller

  1. By: Rachel Scarfe (School of Economics, University of Edinburgh); Carl Singleton (Department of Economics, University of Reading); Adesola Sunmoni (Department of Economics, University of Reading); Paul Telemo (School of Economics, University of Edinburgh)
    Abstract: There is an inverted u-shaped relationship between age and wages in most labour markets and occupations, but the effects of age on productivity are less clear. We use panel data on the productivity and salaries of all elite professional footballers (soccer players) in North America to estimate age-productivity and age-wage profiles, which control for unobserved player characteristics and for entry and exit from this market, finding stark differences. While the productivity of footballers tends to peak in their early to mid-20s and then falls slowly, wages continue to increase throughout most of their careers, up to age 30, after which they fall rapidly. This discrepancy has been observed in other labour markets and poses the question: why are the youngest and oldest workers seemingly underpaid relative to their productivity? We consider a number of possible mechanisms that could be responsible without finding a clear culprit.
    Keywords: Labour productivity, Wages, Aging, Major League Soccer
    JEL: J23 J24 J31 J41 Z22
    Date: 2022–09–09
  2. By: Diris, Ron (University of Leiden); Van Vliet, Olaf (Leiden University)
    Abstract: The last decades have shown that the traditional steady job with a permanent contract is on the decline. While permanent contracts and the insider position that they bring are highly valued by workers, research on the returns to human capital have predominantly focused on wages as subject of that return. This study uses PIAAC data from 29 countries to estimate how skills relate to the odds of obtaining a permanent contract, versus alternative contractual arrangements for employees. Our pooled analysis shows that skills substantially relate to having a permanent contract across the full sample. Numeracy skills contribute more than literacy skills; a difference that is largely driven by sorting to occupations and industries. We further identify substantial heterogeneities across countries, in which either no skills, only numeracy skills or only literacy skills significantly predict permanent employment at the country level, but never both. Moreover, this "contractual return to skills" differs substantially from the traditional wage return to skills across countries. We find suggestive evidence that these differences relate to demand factors and labour market institutions.
    Keywords: skills, human capital, labour markets, temporary employment
    JEL: I21 J24
    Date: 2022–08
  3. By: Liu, Sitian; Su, Yichen
    Abstract: We analyze the effect of working from home on the agglomeration economies of large cities and the aggregate productivity implications of such an effect. Using advertised wages from job ads, we show that occupations with the highest work-from-home adoption during the COVID-19 pandemic saw a strong decrease in the urban wage premium. The decline in the urban wage premium is accompanied by an exodus of employment (based on firms' locations) from large cities to small cities. In contrast, occupations with low or moderate levels of work-from-home adoption saw much smaller overall reduction in the urban wage premium. The empirical evidence in our paper points to weakened agglomeration economies in large cities among professions with the highest prevalence of working from home. A decomposition exercise reveals that a sizable portion of the decline in the urban wage premium is driven by the decline in the urban wage premium of relationship-building skills, suggesting that the decreased agglomeration effect in large cities is at least partially a result of reduced occurrence of interactive activities.
    Keywords: Agglomeration; Productivity; Spillover; Urban Wage Premium; Working from Home; Remote; Virtual; WFH; Wages; Job Posting; COVID-19; Pandemic
    JEL: J24 J31 R12 R23
    Date: 2022–09–01
  4. By: Otrachshenko, Vladimir (Justus Liebig University, Giessen); Popova, Olga (Leibniz Institute for East and Southeast European Studies (IOS)); Nikolova, Milena (University of Groningen); Tyurina, Elena
    Abstract: We theoretically and empirically examine how acquiring new skills and increased financial worries influenced entrepreneurship entry and exit intentions during the pandemic. To that end, we analyze primary survey data we collected in the aftermath of the COVID-19's first wave in Russia, which has had one of the highest COVID-19 infection rates globally. Our results show that acquiring new skills during the pandemic helps maintain an existing business and encourages start-ups in sectors other than information technology (IT). For IT start-ups, having previous experience matters more than new skills. While the pandemic-driven financial worries are associated with business closure intentions, they also inspire new business start-ups, highlighting the creative destruction power of the pandemic. Furthermore, preferences for formal employment and remote work also matter for entrepreneurial intentions. Our findings enhance the understanding of entrepreneurship formation and closure in a time of adversity and suggest that implementing entrepreneurship training and upskilling policies during the pandemic can be an important policy tool for innovative small business development.
    Keywords: business entry, information technology (IT), business closure, COVID-19, entrepreneurship intentions, self-employment, Russia
    JEL: E24 J24 L26 P20
    Date: 2022–08
  5. By: Andrew Caplin (New York University and NBER); Minjoon Lee (Carleton University); Søren Leth-Petersen (University of Copenhagen); Johan Sæverud (University of Copenhagen); Matthew D. Shapiro (University of Michigan and NBER)
    Abstract: How worker productivity evolves with tenure and experience is central to economics, shaping, for example, life-cycle earnings and the losses from involuntary job separation. Yet, worker-level productivity is hard to identify from observational data. This paper introduces direct measurement of worker productivity in a firm survey designed to separate the role of on-the-job tenure from total experience in determining productivity growth. Several findings emerge concerning the initial period on the job. (1) On-the-job productivity growth exceeds wage growth, consistent with wages not being allocative period-by-period. (2) Previous experience is a substitute, but a far less than perfect one, for on-the-job tenure. (3) There is substantial heterogeneity across jobs in the extent to which previous experience substitutes for tenure. The survey makes use of administrative data to construct a representative sample of firms, check for selective non-response, validate survey measures with administrative measures, and calibrate parameters not measured in the survey.
    Keywords: Productivity, Wages, Tenure, Experience, Firm survey
    JEL: E24 J24 J30
    Date: 2022–09–11
  6. By: Baumgartner, Simon (Humboldt University Berlin); Stomper, Alex (Humboldt University Berlin); Schober, Thomas (Auckland University of Technology); Winter-Ebmer, Rudolf (University of Linz)
    Abstract: How does small-firm employment respond to exogenous labor productivity risk? We find that this depends on the capitalization of firms' local banks. The evidence comes from firms offering (quasi-) fixed employment to workers whose productivity depends on the weather. Weather risk reduces this employment, and the effect is stronger in regions where the regional banks have less equity capital. Bank capitalization also proxies for the extent to which the regional banks' borrowers can obtain liquidity when the regions are hit by weather shocks. We argue that, as liquidity providers, well-capitalized banks support economic adaptation to climate change.
    Keywords: quasi-fixed employment, labor productivity risk, bank liquidity
    JEL: J23 J41 E44
    Date: 2022–08
  7. By: Kusterer, David (University of Cologne); Sliwka, Dirk (University of Cologne)
    Abstract: We study the determinants of biases in subjective performance evaluations in an MTurk experiment to test the implications of a standard formal framework of rational subjective evaluations. In the experiment, subjects in the role of workers work on a real effort task. Subjects in the role of supervisors observe subsamples of the workers' output and assess their performance. We conduct 6 experimental treatments varying (i) whether workers' pay depends on the performance evaluation, (ii) whether supervisors are paid for the accuracy of their evaluations, and (iii) the precision of the information available to supervisors. In line with the predictions of the model of optimal evaluations we find that ratings are more lenient and less accurate when they determine bonus payments and that rewards for accuracy reduce leniency. When supervisors have access to more detailed performance information their ratings vary to a stronger extent with observed performance. In contrast to the model's prediction we do not find that more prosocial supervisors always provide more lenient ratings, but that they invest more time in the rating task and achieve a higher rating accuracy.
    Keywords: subjective performance evaluation, bias, bonuses, differentiation, social preferences
    JEL: J33 C91 M52
    Date: 2022–08
  8. By: Richard B. Freeman; Xiaofei Pan; Xiaolan Yang; Maoliang Ye
    Abstract: Team incentives are important in many compensation systems that pay workers according to the output of their team as well as to their own output, with team bonuses often depending on whether the team meets or exceeds specified thresholds. Yet little is known about how team members with different abilities respond to compensation rules and thresholds. We contrast the performance of lower ability participants and higher ability participants in an experiment with three distribution schemes – equal sharing, piece rate sharing, and tournament style winner-takes-all – in settings with and without a team threshold. Workers randomly assigned to equal sharing had higher productivity than those assigned to winner-takes-all and had similar productivity to workers in individual piece-rate scheme with no team element. Output under equal sharing was boosted by the higher productivity of less able workers, possibly motivated by a desire to avoid guilt feelings about letting down their partners, per models of guilt aversion. Given a choice of distribution schemes, participants selected piece rate sharing over equal sharing and favored both of those over winner-takes-all, with persons facing a team threshold evincing greater preference for equal sharing and concern about cooperation in chatting about the teams’ compensation system than others. The findings suggest that organizations with teams of workers with varying abilities are likely to do better if the organization can fully consider lower ability workers’ responsiveness to sharing in rewards, e.g., to have an equal sharing component in its compensation system when they are strongly guilt averse.
    JEL: C91 C92 D23 J33
    Date: 2022–09
  9. By: Jan Feld (School of Economics and Finance, Victoria University of Wellington); Edwin Ip (Department of Economics, University of Exeter); Andreas Leibbrandt (Department of Economics, Monash University); Joseph Vecci (Department of Economics, University of Gothenburg)
    Abstract: Women are significantly underrepresented in the technology sector. We design a field experiment to identify statistical discrimination in job applicant assessments and test treatments to help improve hiring of the best applicants. In our experiment, we measure the programming skills of job applicants for a programming job. Then, we recruit a sample of employers consisting of human resource and tech professionals and incentivize them to assess the performance of these applicants based on their resumes. We find evidence consistent with inaccurate statistical discrimination: while there are no significant gender differences in performance, employers believe that female programmers perform worse than male programmers. This belief is strongest among female employers, who are more prone to selection neglect than male employers. We also find experimental evidence that statistical discrimination can be mitigated. In two treatments, in which we provide assessors with additional information on the applicants' aptitude or personality, we find no gender differences in the perceived applicant performance. Together, these findings show the malleability of statistical discrimination and provide levers to improve hiring and reduce gender imbalance.
    Keywords: inaccurate beliefs, discrimination, gender, field experiment
    JEL: J71 D90 C93
    Date: 2022–09–16
  10. By: Kurmann, Andre (Drexel University); Lalé, Etienne (University of Québec at Montréal); Ta, Lien (Drexel University)
    Abstract: The COVID-19 pandemic has led to an explosion of research using private-sector datasets to measure business dynamics and employment in real-time. Yet questions remain about the representativeness of these datasets and how to distinguish business openings and closings from sample churn – i.e., sample entry of already operating businesses and sample exits of businesses that continue operating. This paper proposes new methods to address these issues and applies them to the case of Homebase, a real-time dataset of mostly small service-sector sector businesses that has been used extensively in the literature to study the effects of the pandemic. We match the Homebase establishment records with information on business activity from Safegraph, Google, and Facebook to assess the representativeness of the data and to estimate the probability of business closings and openings among sample exits and entries. We then exploit the high frequency / geographic detail of the data to study whether small service-sector businesses have been hit harder by the pandemic than larger firms, and the extent to which the Paycheck Protection Program (PPP) helped small businesses keep their workforce employed. We find that our real-time estimates of small business dynamics and employment during the pandemic are remarkably representative and closely fit population counterparts from administrative data that have recently become available. Distinguishing business closings and openings from sample churn is critical for these results. We also find that while employment by small businesses contracted more severely in the beginning of the pandemic than employment of larger businesses, it also recovered more strongly thereafter. In turn, our estimates suggests that the rapid rollout of PPP loans significantly mitigated the negative employment effects of the pandemic. Business closings and openings are a key driver for both results, thus underlining the importance of properly correcting for sample churn.
    Keywords: small business activity, sample turnover versus business openings/closings, matching records, COVID-19, Paycheck Protection Program
    JEL: E01 E24 E32 E60
    Date: 2022–08
  11. By: García-Suaza, A; Lobo, J; Montoya, S; Ordóñez, J; Oviedo, J. D
    Abstract: The strict confinement implemented by the National Government of Colombia to contain the expansion of the pandemic caused by COVID-19 generated challenges in data collection operations through household surveys. As a result, the surveys with face-to-face collection methods migrated to a remote mode, through telephone surveys, which could have changed the possible reporting biases of variables, such as income. This paper studies the effect of the change in the information collection model in the Great Integrated Household Survey (Gran Encuesta Integrada de Hogares) of Colombia on the report of labor income. To do this, we exploit the geographical variation in implementing collection methods and an integration of the survey with a social security administrative record to quantify the variation on the report.
    Keywords: Household surveys, measurement bias, labor income, administrative data, COVID-19, Colombia.
    JEL: C83 C81 J31
    Date: 2022–09–14
  12. By: Mallory L. Avery; Osea Giuntella; Peiran Jiao
    Abstract: This study investigates the mechanisms affecting sleep choice and explores whether commitment devices and monetary incentives can be used to promote healthier sleep habits. To this end, we conducted a field experiment with college students, providing them incentives to sleep and collecting data from wearable activity trackers, surveys, and time-use diaries. Monetary incentives were effective in increasing sleep duration with some evidence of persistence after the incentive was removed. We uncover evidence of demand for commitment. Our results are consistent with partially sophisticated time-inconsistent preferences and overconfidence, and have implications for the effectiveness of information interventions on sleep choice.
    JEL: B49 C93 I10
    Date: 2022–08
  13. By: Joan Costa-Font (Department of Health Policy, London School of Economics and Political Science); Luca Salmasi (Department of Economics and Finance, Catholic University, Rome); Sarah Zaccagni (Sarah Zaccagni, Department of Economics, CEBI and CEHA, University of Copenhagen)
    Abstract: Are workplace smoking bans (WSBs) more than a ban on smoking? We study whether WSBs influence smoking cessation and exert behavioural spillover effects on (i) a set of health behaviours, and (ii) on individuals not directly affected by the bans. Drawing upon quasi-experimental evidence from Russia, which introduced a WSB (in addition to a ban on smoking in public places), and adopting a difference-in-differences (DiD) strategy, which compares employed individuals (exposed to the work and public place ban) to unemployed individuals (exposed only to the ban in public places), we document three sets of findings. First, unlike previous studies that focus on smoking bans in public places, we find robust evidence that WSBs increase smoking cessation by 2.9 percentage points (pp) among men. Second, we find that quitters are less likely to use alcohol (6.7 pp reduction among men and 3.5 pp among women), and they reduce their alcohol consumption (10 percent among men). WSBs are found to influence the health behaviour of those not directly affected by the reform, such as never smokers. Our findings are consistent with a model of joint formation of health behaviours, and suggest the need to account for a wider set of spillover effects when estimating the welfare effect of WSBs.
    Keywords: Joint formation of behaviours, workplace smoking bans, behavioural spillovers, smoking, drinking, physical activity, healthy identity, Russia
    JEL: I18 H75 L51
    Date: 2022–09–11
  14. By: Marco Di Cataldo (Department of Economics, University Of Venice CÃ Foscari; Department of Geography and Environment, London School of Economics); Licia Ferranna (Department of Economics, University Of Venice CÃ Foscari); Margherita Gerolimetto (Department of Economics, University Of Venice CÃ Foscari); Stefano Magrini (Department of Economics, University Of Venice CÃ Foscari)
    Abstract: This paper analyses institutional changes in local governance structures as determinants of wage premia and innovation capacity of urban areas. By combining individual and metropolitan area data for the US, we study the role of institutional fragmentation related to the number of local governments operating in an area, and institutional coordination, stemming from the creation of authorities fostering the collaboration of local governments. Our findings suggest that more fragmented institutional landmarks do not benefit the wage competitiveness and innovativeness of urban areas. If anything, they harm them. Conversely, stronger coordination among local governments boosts the productivity of functional regions by increasing their wage premia and improving their capacity to innovate. Coordination agreements between different counties or municipalities are especially relevant in the case of urban areas modifying their functional borders over time. These findings provide key insights into the economic effects of reforming the governance structure of metropolitan areas.
    Keywords: local governance, US MSAs, fragmentation, coordination, wage premium, innovation
    JEL: H70 R12 R23 J3
    Date: 2022
  15. By: Evgeny Postnikov (Bank of Russia, Russian Federation); Dmitry Orlov (Bank of Russia, Russian Federation)
    Abstract: The labour market is closely connected to inflation processes, and is therefore a key factor to consider in monetary policy decisions. Russian regions differ substantially in terms of employment, wages, migration flows and the age structure of their population. Therefore, the effects of regional changes in the labour market on prices may be different. Since the Central bank’s inflation targeting policy is pursued nationwide, it is important for a regulator to factor in regional heterogeneity when assessing the impact of changes in the labour market on inflation growth. This paper brings forward a composite indicator of the contribution of labour market changes to inflation increase – the Labour Market Indicator (LMI). To capture regional heterogeneity in terms of market labour indicators, regions are grouped into four clusters with different social, demographic and economic characteristics. We make the case that the impact of unemployment on inflation can be described as slight or moderate in Russia. The calculated quarterly LMI values are overall consistent with the actual effect of the labour market on inflation processes over the entire time horizon under study, which suggests that the estimates are reliable. The important benefit of the LMI is that it is possible to interpret and allows to assess the future impact of labour market on inflation one quarter ahead of available statistical data – which helps make better informed monetary policy decisions.
    Keywords: impact of the labour market on inflation, regional heterogeneity, clustering, principal component analysis, unemployment, wages, regression analysis.
    JEL: C32 C38 E24 E31
    Date: 2022–09
  16. By: Juliana Bernhofer (Department of Economics, Ca' Foscari University of Venice, Italy); Alessandro Fedele (Free University of Bozen-Bolzano, Italy); Mirco Tonin (Free University of Bozen-Bolzano, Italy)
    Abstract: Health systems around the world face an increasing shortage of workers. It is thus important to understand what motivates people to enter the sector. We study how financial incentives affect the performance on the entry test into medical and healthcare schools, a crucial step for aspiring healthcare professionals. To this end, we conduct a randomized information experiment with Italian applicants. We first elicit applicants' expectations about the starting wage of the healthcare job they want to study for. We then inform the treatment group about the true starting wages, while we provide no information to the control group. We finally collect the test scores obtained by applicants. Correcting wage expectations enhances the test scores when expectations are lower than the true wage level, while no significant effects occur when expectations are higher. The treatment does not induce negative selection in terms of ability and altruism. Our findings provide novel experimental evidence that wages matter for prospective students in the health sector and suggest an impact of prospective financial rewards also at a very early stage of careers.
    Keywords: Information Experiment; Applicants to Medical and Healthcare Schools; Wage Expectations; Admission Test Scores.
    JEL: I1 I23 J3 C9
    Date: 2022–09
  17. By: Thomas A. Hegland; Alice Zawacki; G. Edward Miller
    Abstract: This report introduces a new dataset, the Medical Expenditure Panel Survey-Insurance Component with Administrative Records (MEPS-ICAR), consisting of MEPS-IC survey data on establishments and their health insurance benefits packages linked to Decennial Census data and administrative tax records on MEPS-IC establishments’ workforces. These data include new measures of the characteristics of MEPS-IC establishments’ parent firms, employee turnover, the full distribution of MEPS-IC workers’ personal and family incomes, the geographic locations where those workers live, and improved workforce demographic detail. Next, this report details the methods used for producing the MEPS-ICAR. Broadly, the linking process begins by matching establishments’ parent firms to their workforces using identifiers appearing in tax records. The linking process concludes by matching establishments to their own workforces by identifying the subset of their parent firm’s workforce that best matches the expected size, total payroll, and residential geographic distribution of the establishment’s workforce. Finally, this report presents statistics characterizing the match rate and the MEPS-ICAR data itself. Key results include that match rates are consistently high (exceeding 90%) across nearly all data subgroups and that the matched data exhibit a reasonable distribution of employment, payroll, and worker commute distances relative to expectations and external benchmarks. Notably, employment measures derived from tax records, but not used in the match itself, correspond with high fidelity to the employment levels that establishments report in the MEPS-IC. Cumulatively, the construction of the MEPS-ICAR significantly expands the capabilities of the MEPS-IC and presents many opportunities for analysts.
    Keywords: Employer-sponsored health insurance, administrative records, data linkages, worker income and demographics, and employee turnover
    JEL: I13 J32
    Date: 2022–08

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