nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2022‒10‒24
nineteen papers chosen by
Joseph Marchand
University of Alberta

  1. Labor Supply and Occupational Choice By Andrés Erosa; Luisa Fuster; Gueorgui Kambourov; Richard Rogerson
  2. Dissecting Idiosyncratic Earnings Risk By Elin Halvorsen; Hans Holter; Serdar Ozkan; Kjetil Storesletten
  3. Working from Home in European Countries before and during the Covid-19 Pandemic By Vahagn Jerbashian; Montserrat Vilalta-Bufí
  4. Foreign demand shocks to production networks: Firm responses and worker impacts By Emmanuel Dhyne; Ayumu Ken Kikkawa; Toshiaki Komatsu; Magne Mogstad; Felix Tintelnot,
  5. The impact of university openings on labor market outcomes By Samia FERHAT
  6. Technology adoption and specialized labor By Elias Carroni; Marco Delogu; Giuseppe Pulina
  7. Market Power And Wage Inequality By Shubhdeep Deb; Jan Eeckhout; Aseem Patel; Lawrence Warren
  8. A Worker's Backpack as an alternative to PAYG pension systems By Julián Díaz-Saavedra; Ramon Marimon; João Brogueira de Sousa
  9. The multiple dimensions of selection into employment By Kenza Elass
  10. Time Pressure Preferences By Buser, Thomas; van Veldhuizen, Roel; Zhong, Yang
  11. Is the Covid-19 Pandemic Fast-Tracking Automation in Developing Countries? Evidence from Colombia By Leonardo Bonilla-Mejía; Luz A. Flórez; Didier Hermida; Francisco Lasso-Valderrama; Leonardo Fabio Morales; Juan J. Ospina-Tejeiro; José Pulido
  12. Intensive and Extensive Margins of Labor Supply in HANK: Aggaregate and Disaggregate Implications. By Eunseong Ma
  13. Nestedness in the Brazilian Financial System By Sidney Caetano; Nelson da Silva
  14. Special interest groups, labor market regulations, and labor market performance in the U.S. states By Cole, Ismail M.; Agiobenebo, Tamunopriye J.
  15. Monetary Policy and Inequality: How Does One Affect the Other? By Eunseong Ma
  16. Experimental Research on Retirement Decision-Making: Evidence from Reproductions By Kremena Bachmann; Andre Lot; Xiaogeng Xu; Thorsten Hens
  17. Real Wage Cyclicality and Monetary Policy. By Eunseong Ma
  18. Diversity versus Equity in Government Contracting By Rosa, Benjamin
  19. Indignity of Labor: Role of Occupational Prestige in Unemployment By Baisakhi Marjit; Sugata Marjit; Kausik Gupta; Saibal Kar

  1. By: Andrés Erosa; Luisa Fuster; Gueorgui Kambourov; Richard Rogerson
    Abstract: We document a robust negative relationship between mean annual hours in an occupation and the dispersion of annual hours within that occupation. We study a unified model of occupational choice and labor supply that features heterogeneity across occupations in the return to working additional hours and show that it can match the key features of the data both qualitatively and quantitatively. Occupational choice in our model is shaped both by selection on comparative advantage and selection on tastes for leisure. Our quantitative work finds that the dominant source of differences in hours across occupations is selection on tastes for leisure.
    JEL: J22 J24 J31
    Date: 2022–09
  2. By: Elin Halvorsen; Hans Holter; Serdar Ozkan; Kjetil Storesletten
    Abstract: This paper examines whether nonlinear and non-Gaussian features of earnings dynamics are caused by hours or hourly wages. Our findings from the Norwegian administrative and survey data are as follows: (i) Nonlinear mean reversion in earnings is driven by the dynamics of hours worked rather than wages since wage dynamics are close to linear, while hours dynamics are nonlinear—negative changes to hours are transitory, while positive changes are persistent. (ii) Large earnings changes are driven equally by hours and wages, whereas small changes are associated mainly with wage shocks. (iii) Both wages and hours contribute to negative skewness and high kurtosis for earnings changes, although hour-wage interactions are quantitatively more important. (iv) When considering household earnings and disposable household income, the deviations from normality are mitigated relative to individual labor earnings: changes in disposable household income are approximately symmetric and less leptokurtic.
    Keywords: earnings dynamics; income shocks; insurance; wages; hours; higher-order earnings risk; skewness; kurtosis; machine learning
    JEL: E24 H24 J24 J31
    Date: 2022–09–16
  3. By: Vahagn Jerbashian; Montserrat Vilalta-Bufí
    Abstract: We use data from the EU Labour Force Survey for 8 countries and document the levels of working from home in the sample countries, industries, and occupations in the 2011-2019 period and its changes in 2020, the year when the COVID-19 pandemic started. We show that there are significant differences in working from home across countries, industries, and occupations and that working from home has increased almost everywhere in the 2011-2019 period and more significantly in 2020. Countries that had the lowest levels of working from home in 2019 enacted the most stringent stay-home and workplace closure policies and experienced the largest growth rates in working from home in 2020. Finally, we compute a measure of working from home capacity for the sample countries using the observed working from home levels.
    Keywords: working from home, pandemic, occupations, industries
    JEL: J23 J24
    Date: 2022
  4. By: Emmanuel Dhyne (: Economics and Research Department, National Bank of Belgium); Ayumu Ken Kikkawa (Sauder School of Business, UBC); Toshiaki Komatsu (University of Chicago); Magne Mogstad (University of Chicago and NBER); Felix Tintelnot, (University of Chicago and NBER)
    Abstract: We quantify and explain the firm responses and worker impacts of foreign demand shocks to domestic production networks. To capture that firms can be indirectly exposed to such shocks by buying from or selling to domestic firms that import or export, we use Belgian data with information on both domestic firm-to-firm sales and foreign trade transactions. Our estimates of firm responses suggest that Belgian firms pass on a large share of a foreign demand shock to their domestic suppliers, face upward-sloping labor supply curves, and have sizable fixed overhead costs in labor. Motivated and guided by these findings, we develop and estimate an equilibrium model that allows us to study how idiosyncratic and aggregate changes in foreign demand propagate through a small open economy and affect firms and workers. Our results suggest that the way the labor market is typically modeled in existing research on foreign demand shocks — with no fixed costs and perfectly elastic labor supply — would grossly understate the decline in real wages due to an increase in foreign tariffs.
    Keywords: : Production networks, Foreign demand shocks, Imperfect labor market, Fixed costs.
    JEL: F16 J22 E00
    Date: 2022–09
  5. By: Samia FERHAT (Université de Cergy-Pontoise, THEMA)
    Abstract: In this paper, I study the impact of university openings on labor market outcomes. I focus on university openings that occurred in France in the 90’s, and exploit five waves from representative samples of young individuals who left the French education system, starting from wave 1992. I use difference-in-differences estimation techniques, and find that the impact of university openings on labor market outcomes is heterogeneous according to the characteristics of the region where the opening occurs. I find that opening a new university increases the probability of being employed by about 8% points and increases wages by 5% in regions characterized by a lower level of education and a more disadvantaged socio-economical background. In contrast, no impact is found in regions where the unemployment rate is low and where the population is highly educated.
    Keywords: Human capital, university openings, labor market outcomes.
    JEL: I26 J21 J23 J24
    Date: 2022
  6. By: Elias Carroni; Marco Delogu; Giuseppe Pulina
    Abstract: Empirical evidence identifies shortages of specialized labor as one of the main obstacles to technology adoption. In this paper, we explain this phenomenon by developing a model in which firms require specialized labor to produce with a new (more efficient) technology. We assume that the cost of specializing labor increases with the efficiency gains that can be attained through the new technology. This reveals two opposing effects on the endogenous share of specialized labor. On the one hand, there is a wage effect by which efficiency gains widen the wage gap between specialized and unspecialized workers, raising the share of specialized labor. On the other hand, there is a learning effect by which efficiency gains increase specialization costs, reducing the share of specialized labor. We show the learning effect will dominate when firms have sufficient market power.
    Keywords: Technology adoption, education, product differentiation
    JEL: O33 J24 I26
    Date: 2022–09
  7. By: Shubhdeep Deb; Jan Eeckhout; Aseem Patel; Lawrence Warren
    Abstract: We propose a theory of how market power affects wage inequality. We ask how goods and labor market power jointly affect the level of wages, the Skill Premium, and wage inequality. We then use detailed microdata from the US Census between 1997 and 2016 to estimate the parameters of labor supply, technology and the market structure. We find that a less competitive market structure lowers the wage level, contributes 7% to the rise in the Skill Premium and accounts for half of the increase in between-establishment wage variance.
    Keywords: Market Power. Wage Inequality. Skill Premium. Technological Change. Market Structure. Endogenous Markups. Endogenous Markdowns.
    JEL: L1 C6 D3 D4 D5
    Date: 2022–09
  8. By: Julián Díaz-Saavedra; Ramon Marimon; João Brogueira de Sousa
    Abstract: Facing an ageing population and historical trends of low employment rates, pay-as-you-go (PAYG) pension systems, currently in place in several European countries, imply very large economic and welfare costs in the coming decades. In an overlapping generations economy with incomplete insurance markets and frictional labour markets, an employment fund, which can be used while unemployed or retired, can enhance production efficiency and social welfare. With an appropriate design, the sustainable Backpack employment fund (BP) can greatly outperform -measured by average social welfare in the economy- existing pay-as-you go systems and also Pareto dominate a full privatization of the pension system, as well as a standard fully funded defined contribution pension system. We show this in a calibrated model of the Spanish economy, by comparing the effect of its ageing transition under these different pension systems and by showing how a front-loaded reform-transition, from the PAYG to the BP system can be Pareto improving, while minimizing the cost of the reform.
    Keywords: social security reform, ageing, taxation, debt
    JEL: C68 H55 J26
    Date: 2022–09
  9. By: Kenza Elass (Aix-Marseille Univ, CNRS, AMSE, Marseille, France.)
    Abstract: A vast literature on gender wage gaps has examined the importance of selection into employment. However, most analyses have focused only on female labour force participation and gaps at the median. The Great Recession questions this approach both because of the major shift in male employment that it implied but also because women's decisions to participate seem to have been different along the distribution, particularly due to an "added worker effect". This paper uses the methodology proposed by Arellano and Bonhomme (2017) to estimate a quantile selection model over the period 2007-2018. Using a tax and benefit microsimulation model, I compute an instrument capturing the male selection induced by the crisis as well as female decisions: the potential out-of-work income. Since my instrument is crucially determined by the welfare state, I consider three countries with notably different benefit systems-the UK, France and Finland. My results imply different selection patterns across countries and a sizeable male selection in France and the UK. Correction for selection bias lowers the gender wage gap and, in most recent years, reveals an increasing shape of gender gap distribution with a substantial glass ceiling for the three countries.
    Keywords: gender wage gap, sample selection, quantile selection model, wage inequality, quantiles, selection, glass ceilings, sticky floors
    JEL: J31 J21 J16 C21
    Date: 2022–09
  10. By: Buser, Thomas (University of Amsterdam); van Veldhuizen, Roel (Department of Economics, Lund University); Zhong, Yang (University of Amsterdam)
    Abstract: Many professional and educational settings require individuals to be willing and able to perform under time pressure. We use a lab experiment to elicit preferences for working under time pressure in an incentivized way by eliciting the minimum additional payment participants require to complete a cognitive task under various levels of time pressure versus completing it without time pressure. We make three main contributions. First, we document that participants are averse to working under time pressure on average. Second, we show that there is substantial heterogeneity in the degree of time pressure aversion across individuals and that these individual preferences can be partially captured by simple survey questions. Third, we include these questions in a survey of bachelor students and show that time pressure preferences correlate with future career plans. Our results indicate that individual differences in time pressure aversion could be an influential factor in determining labor market outcomes.
    Keywords: Time Pressure; Experiment; Gender
    JEL: C90 D91 J22
    Date: 2022–09–13
  11. By: Leonardo Bonilla-Mejía; Luz A. Flórez; Didier Hermida; Francisco Lasso-Valderrama; Leonardo Fabio Morales; Juan J. Ospina-Tejeiro; José Pulido
    Abstract: This paper assesses whether the Covid-19 pandemic accelerated automation in developing countries. We studied the case of Colombia, a country with low R&D and productivity and with high labor informality and unemployment. We estimated event-study models to assess the differential effect of the pandemic on job openings and salaried employment by the potential degree of automation of each occupation. Our results suggest that both vacancies and salaried employment fell more in highly automatable occupations during the pandemic and have since experienced a slower recovery. The effect of the pandemic on automation is mostly driven by sectors that were affected by mobility restrictions. We also found heterogeneous effects by age and gender. The acceleration of automation is mainly affecting the labor market for females and individuals over the age of 40. Finally, we explored the differential effect on occupations with wages around the minimum wage. We found that occupations with wages close to the minimum wage exhibit the highest effect, especially at the onset of the pandemic. **** RESUMEN: Este documento evalúa si la pandemia del Covid-19 aceleró el proceso de automatización en países en desarrollo. El estudio se enfoca en Colombia, un país con baja inversión en Investigación y Desarrollo (I&D), baja productividad, además de una alta informalidad laboral y desempleo. Se estima un modelo de estudio de eventos para evaluar si durante la pandemia se presentó un efecto diferencial en la demanda laboral de acuerdo al grado potencial de automatización de las ocupaciones. Nuestros resultados sugieren que, durante la pandemia, tanto las vacantes como el nivel de empleo asalariado cayeron más en ocupaciones con alto potencial de automatización y, desde entonces, han presentado una recuperación mucho más lenta. Este efecto se ha observado principalmente en los sectores que se vieron afectados por las restricciones de movilidad. Igualmente encontramos efectos heterogéneos por edad y género, donde el mercado laboral de las mujeres y los individuos mayores de 40 años han sido los más afectados. Finalmente, exploramos el efecto diferencial en las ocupaciones con salarios alrededor del salario mínimo; los resultados indican que las ocupaciones con salarios más cerca al salario mínimo son las más afectadas, especialmente al inicio de la pandemia.
    Keywords: Automation, pandemic Covid-19, vacancies, employment, Automatización, pandemia Covid-19, vacantes y empleo.
    JEL: J23 O30 J60
    Date: 2022–10
  12. By: Eunseong Ma (Yonsei University)
    Abstract: This paper studies how adjustment along intensive and extensive margins of labor supply affects aggregate and disaggregate effects of monetary policy. To this end, I develop a heterogeneous-agent New Keynesian (HANK) economy where a nonlinear mapping from hours worked into labor services generates operative adjustment along intensive and extensive margins of labor supply. I find that monetary policy has significantly different effects on earnings inequality, depending on the extent to which margin is dominant, even if it generates similar aggregate responses.
    Keywords: Monetary policy; Intensive and extensive margins; Earnings inequality.
    JEL: E52 D31 D52 J21
    Date: 2022–09
  13. By: Sidney Caetano; Nelson da Silva
    Abstract: Covid-19 has impacted the labor market, not only by reducing the level of occupancy but also by altering real effective earnings and hours effectively worked. We measure labor demand and supply shocks using data from the Continuous PNAD - Continuous National Household Sample Survey. The estimated shocks are interpreted as exogenous shifts in the labor supply and demand curves and are empirically measured by the estimation of a Bayesian Structural Autoregressive Vector model. We use sign restrictions to identify labor demand and supply shocks. Our results show, in the second quarter of 2020, adverse and significant effects of both shocks on hours worked, with greater relevance of demand shocks and greater impacts on activities related to the service sector. About 70% of the decline in hours worked in the latter sector was explained by demand shocks. In the third quarter of 2020, the signal of the shocks was reversed and the increase in hours worked was again sustained by demand shocks, although some activities in the service sector registered an increase in the importance of labor supply shocks. In the following quarters, shocks converge to their historical patterns.
    Date: 2022–09
  14. By: Cole, Ismail M.; Agiobenebo, Tamunopriye J.
    Abstract: This paper uses data from the fifty US states from 2006-2015 to explore how labor market regulations and the strength of special interest groups’ (SIGs) influence in the political process might affect labor market performance. A dynamic panel data model is specified and estimated using a sequential two-stage (two-step GMM) method (Kripfganz and Schwarz (2019)), which addresses endogeneity and other estimation issues, and allows direct parameter estimates for the time-constant dummies measuring SIGs influence. We find that the performance impact of alternative measures of regulation depends on the strength of SIGs' influence and that neglecting to account for such influence, as in the sizeable empirical literature, may lead to misspecification problems serious enough to undermine the validity of conclusions drawn about the nature of the relationships between the regulations and labor market performance. We also find strong support for various hypotheses relating to the independent and combined effects of labor market regulations and SIGs' influence on labor market performance. Also, in most cases, these effects are significantly stronger in the states where the SIGs' influence is dominant, such as Alabama, Florida, Hawaii, and Nevada. An apparent implication of this study is that an analysis of labor market performance that ignores the role of SIGs is, at best incomplete.
    Keywords: regulation,special interest groups,rent-seeking,labor market performance,multiplicative interaction models
    Date: 2022
  15. By: Eunseong Ma (Yonsei University)
    Abstract: This paper studies a labor-supply-side channel affecting the relationship between monetary policy and income inequality. To this end, I build a heterogeneous-agent New Keynesian economy with indivisible labor in which both macro and micro labor supply elasticities are endogenously generated. First, I find that monetary policy shocks have distributional consequences due to a substantial heterogeneity in labor supply elasticity across households. Second, a more equal economy is associated with more effective monetary policy in terms of output. I document supporting empirical evidence for the key mechanism of the model using micro-level data and state-level data in the U.S.
    Keywords: Monetary policy; Inequality; Labor supply elasticity; Indivisible labor.
    JEL: E52 D31 D52 J21
    Date: 2022–09
  16. By: Kremena Bachmann (University of Zurich - Department of Banking and Finance; Zurich University of Applied Sciences); Andre Lot (Norwegian School of Economics and Zurich University of Applied Sciences); Xiaogeng Xu (Hanken School of Economics); Thorsten Hens (University of Zurich - Department of Banking and Finance; Norwegian School of Economics and Business Administration (NHH); Swiss Finance Institute)
    Abstract: We adapt the design of five experimental studies on retirement decision-making and conduct reproductions with a larger sample from the broader population. We reproduce most of the main effects of the original studies. In particular, we find that consumption decisions are less efficient when subjects need to borrow from the future than save from the present. When subjects collect retirement benefits as lump-sum instead of annuities, they choose to retire later. The duration of retirement affects the saving behavior of the subjects. Savings are higher when they are incentivized with matching contributions than with tax rebates. When faced with stochastic survival risk, subjects make partial adjustments to spending paths. We also propose a further experimental research agenda in related topics and discuss practical issues on subject recruitment, attrition, and redesign of complex tasks.
    Keywords: household finance; retirement decision; savings; annuities; life-cycle optimization; income smoothing; experiments; reproductions
    JEL: C91 D15 G51 J26
    Date: 2022–09
  17. By: Eunseong Ma (Yonsei University)
    Abstract: Conventional wisdom based on many empirical studies has long held that real wages are procyclical conditional on a monetary policy shock. This paper challenges this conventional view by developing a quantitative heterogeneous-agent New Keynesian economy with sticky wages. I find that true real wages may be countercyclical conditional on a monetary policy shock, but the data may predict the wrong direction of the real wage dynamics due to the inconsistent definition. This result implies that the predictions of New Keynesian models with wage rigidities are consistent with the data.
    Keywords: Monetary policy; Real wages; Labor share; Earnings inequality.
    JEL: E52 J31 D31
    Date: 2022–08
  18. By: Rosa, Benjamin
    Abstract: Many governments aim to give disadvantaged firms an equal opportunity to compete for government contracts and will use diversity in awards as a measure of success. I show theoretically that, when ex ante identical disadvantaged firms differ in an identifiable but irrelevant characteristic, diversity in awards may not translate into equity in opportunity—as buyers may discriminate within the disadvantaged group. Subcontracting data on Disadvantaged Business Enterprises in New Mexico show that inequities can arise in practice.
    Keywords: Affirmative action, statistical discrimination, government contracting.
    JEL: D63 H57 J71 L24
    Date: 2022–09–27
  19. By: Baisakhi Marjit; Sugata Marjit; Kausik Gupta; Saibal Kar
    Abstract: Occupational prestige or job status may induce people to remain unemployed even when jobs are available. Thus measured unemployment will always have a voluntary component. Accumulated wealth in a family tends to increase the opportunity cost of job search, more so in a world where job status is socially important. Thus prosperity and unemployment may go hand in hand independent of the standard income effect. The paper shows that measured unemployment always may have a voluntary component. In fact an increase in reservation wage increases voluntary unemployment. However, the impact on the level in involuntary unemployment of such an increase cannot be easily predicted.
    Keywords: occupational prestige, reservation wage, ability to work, unemployment
    JEL: J24 J28 J33
    Date: 2022

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