nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2023‒01‒23
twenty papers chosen by
Joseph Marchand
University of Alberta

  1. Is There an Ethnic Pay Gap in Germany? Evidence from a Representative Sample of the Adult Population By Ayaita, Adam
  2. Labor market frictions and spillover effects from publicly announced sectoral minimum wages By Demir, Gökay
  3. Risk Management and the Autonomy of Labor By Andreas J. Dambaur; Keith Marzilli Ericson; Johannes G. Jaspersen; Sandra Zoller
  4. Hours Inequality By Daniele Checchi; Cecilia García-Peñalosa; Lara Vivian; Cecilia Garcia-Peñalosa
  5. Market Facilitation Program Payments, Employer-Sponsored Health Insurance Coverage and Off-Farm Employment By Mishra, Ashok K.; Villacis, Alexis H.; Miller, Cristina D. M.
  6. The Ongoing Impact of Gender Pay Gap Transparency Legislation By Jones, Melanie K.; Kaya, Ezgi; Papps, Kerry L.
  7. Labor Market Power Across Cities By Claudio Luccioletti
  8. Cash Transfers and Labor Supply: New Evidence on Impacts and Mechanisms By Cuong Viet Nguyen; Finn Tarp
  9. The Spillover Effect of Services Offshoring on Local Labour Markets By Magli, Martina
  10. Technological and Organizational Change and the Careers of Workers By Michele Battisti; Christian Dustmann; Uta Schönberg
  11. The Effect of Pension Wealth on Employment By Becker, Sebastian; Buslei, Hermann; Geyer, Johannes; Haan, Peter
  12. Information Frictions, Belief Updating and Internal Migration: Evidence from Ghana and Uganda By Frohnweiler, Sarah; Beber, Bernd; Ebert, Cara
  13. Does Access to Liquefied Petroleum Gas (LPG) Reduce Women Household Burden? Evidence from India By Su, Qinghe; Azam, Mehtabul
  14. The Gendered Crisis: Livelihoods and Mental Well-Being in India during COVID-19 By Afridi, Farzana; Dhillon, Amrita; Roy, Sanchari
  15. "The Decline of Labor Share and New Technology Diffusion: Implications forMarkups andMonopsony Power" By Shoki Kusaka; Tetsuji Okazaki; Ken Onishi; Naoki Wakamori
  16. Common Ownership, Competition, and Top Management Incentives By Miguel Anton; Florian Ederer; Mireia Gine; Martin C. Schmalz
  17. Asymmetric Globalization, Top Performers’ Income and Inequality By Joel Hellier
  18. Optimal Gradualism By Nils Haakon Lehr; Pascual Restrepo
  19. Nothing Propinks Like Propinquity: Using Machine Learning to Estimate the Effects of Spatial Proximity in the Major League Baseball Draft By Majid Ahmadi; Nathan Durst; Jeff Lachman; John A. List; Mason List; Noah List; Atom T. Vayalinkal
  20. Overshadowed by popularity: The value of second-tier stars in European football By Fabienne Jedelhauser; Raphael Flepp; Egon Franck

  1. By: Ayaita, Adam
    Abstract: This study investigates a disparity in hourly wages (i.e., a pay gap) between employees with an ethnic minority vs. ethnic majority background in Germany. To this aim, a Blinder-Oaxaca decomposition based on a representative survey of the adult population in Germany is used. The analysis is restricted to employees who completed secondary schooling in Germany (N = 9, 304). The results show that, overall, ethnic minority employees receive significantly lower gross hourly wages than ethnic majority employees, and this difference amounts to 13.8%. The larger part of this gap is explained by group differences in demographic, human capital, and occupational characteristics—in particular, education level, work experience, job tenure, the precise employment status, and occupational status. However, there is also a significant unexplained pay gap that amounts to 2.7% lower wages for ethnic minority (vs. ethnic majority) employees, indicating potential wage discrimination against ethnic minority employees. The total, explained, and unexplained ethnic pay gaps appear to be somewhat larger among men than among women. Finally, an exploratory analysis suggests that the part of the ethnic pay gap that has remained unexplained might be largely explained by whether employees hold the German citizenship and whether they were born in Germany.
    Keywords: discrimination, ethnic background, ethnicity, Germany, pay gap, wages
    JEL: J24 J31 J38 J71
    Date: 2023
  2. By: Demir, Gökay
    Abstract: I analyze the spillover effects of publicly announced sectoral minimum wages in Germany. My identification strategy exploits exposure to sectoral minimum wages across workers and industries outside the minimum wage sector in a triple differences estimation. Subminimum wage workers in related industries outside of the minimum wage sector experience an increase in wages, job-to-job transitions, and reallocation from low-paying to high-paying establishments after the public announcement of Germany's first sectoral minimum wage. The reduction of information frictions, rather than the strategic interaction of employers, appears to be the main mechanism for these effects. When examining the spillover effects of other sectoral minimum wages from various contexts, I only discover positive spillover effects on sub-minimum wage workers in related industries outside the minimum wage sectors if the typical employment relationship in the minimum wage sector is comparable to that of the workers in my sample.
    Keywords: Spillover, labor market frictions, minimum wages, information frictions
    JEL: J31 J38 J42 J62
    Date: 2022
  3. By: Andreas J. Dambaur; Keith Marzilli Ericson; Johannes G. Jaspersen; Sandra Zoller
    Abstract: Foresightful workers can take actions to reduce their exposure to risk in labor markets, but existing evidence on narrow bracketing suggests that individuals might not optimally integrate risk reduction decisions with subsequent labor decisions. In an online labor market, we vary the level of worker autonomy when transcribing a set of documents and measure the willingness to do preventative tasks to reduce the expected total task length. If workers integrate their risk management decisions with subsequent labor effort, the high-autonomy group should be more likely to engage in prevention, since they can adjust their work to accommodate the preventative effort. In contrast, if workers narrowly bracket the decision, it should not be affected by autonomy. We find that workers in the high autonomy condition are more likely to undertake prevention, consistent with an integrated view of risk management and later labor decisions. Our results have implications for designing effective incentive systems, particularly in times of the gig-economy and rising popularity of working from home.
    JEL: D90 J24 M54
    Date: 2022–12
  4. By: Daniele Checchi; Cecilia García-Peñalosa; Lara Vivian; Cecilia Garcia-Peñalosa
    Abstract: The vast literature on earnings inequality has so far largely ignored the role played by hours of work. This paper argues that in order to understand earnings dispersion we need to consider not only the dispersion of hourly wages but also inequality in hours worked as well as the correlation between the two. We use data for the US, the UK, France, and Germany over the period 1991-2016 to examine the evolution of inequality in hours worked and of the correlation between individual hours and wages, assessing their contribution to recent trends in earnings inequality. We find that, other than in the US, hours inequality is an important force, and that it has increased over the period under analysis. The elasticity of hours with respect to wages has also played a key role, notably in the two continental economies. This elasticity used to be negative, thus tending to reduce inequality as those with lower hourly wages worked longer hours, but has increased over the past decades, becoming nil or positive, and hence eroding an important equalizing force. The paper examines which are the potential factors behind the change in the elasticity, notably the role of trade and labour market institutions.
    Keywords: earnings inequality, working hours, hours elasticity
    JEL: D31 J22
    Date: 2022
  5. By: Mishra, Ashok K. (Arizona State University); Villacis, Alexis H. (Arizona State University); Miller, Cristina D. M. (U.S. Department of Agriculture)
    Abstract: About two-thirds of U.S. farm households are employed off the farm. Off-farm sources represent 85 percent of the income earned by the average farm household and have turned into their main source of health insurance coverage. Farmers receive various government farm program payments, including the recently added Market Facilitation Program (MFP) payments. These payments have an unintended consequence on labor supply by farm operator households. Using farm household-level data from the 2019 Agricultural Resource Management Survey, this study investigates the impact of employer-sponsored health insurance coverage and participation in MFP on off-farm labor allocation decisions of U.S. farm families. Results from our empirical model show that farm families are 52% more likely to work off the farm if off-farm jobs provide employer-sponsored health insurance coverage. More importantly, results show that MFP payments have a significant and negative effect on the off-farm employment of U.S. farm-operator households.
    Keywords: Agricultural Resource Management Survey, government subsidies, employer-sponsored health insurance coverage, off-farm employment
    JEL: C34 I13 J22 J38 J43 Q12 Q18
    Date: 2022–12
  6. By: Jones, Melanie K. (Cardiff University); Kaya, Ezgi (Cardiff University); Papps, Kerry L. (University of Bradford)
    Abstract: This paper examines the ongoing impact of gender pay gap transparency legislation using a sudden COVID-19-induced temporary suspension to legislation in the UK. Compared to organisations that did not report during the suspension year, reporting organisations have a 6% lower gender pay gap a year later. This is driven by a relative increase in females in the top pay quartile at the same time as rising female concentration in the workforce overall. Further analysis supports the hypothesis that ongoing reporting is most effective in organisations with weaker pre-existing pressures to narrow their gender pay gap through female representation and voice.
    Keywords: gender pay gap, pay transparency, equality legislation, COVID-19
    JEL: J31 J38 J78
    Date: 2022–12
  7. By: Claudio Luccioletti (CEMFI, Centro de Estudios Monetarios y Financieros)
    Abstract: Workers in larger cities are paid higher wages. The city-size wage premium may reflect the productivity gains from agglomeration or sorting of more productive workers in densely populated areas. However, local labor markets in large cities have more firms and are expected to be more competitive, which could also generate part of the urban earnings premium. I quantify the importance of this channel with rich administrative data for Spain using a spatial equilibrium model to guide the empirical strategy. To address the identification challenge posed by labor market power and wages moving endogenously with unobserved local productivity shocks, I first control for firms’ revenues per worker and for time trends that are heterogeneous across local labor markets. I then develop a new instrumental variable that leverages quasi-experimental variation in monopsony power stemming from changes over time in the size of local public firms. I conclude that 20–30% of the city-size wage premium and 6–15% of the employment gap between small and large cities can be attributed to differences in labor market power across locations.
    Keywords: Labor market power, city sizes, wage premium.
    JEL: R10 J42 R23
    Date: 2022–12
  8. By: Cuong Viet Nguyen (International School, Vietnam National University, Hanoi, Viet Nam; and Mekong Development Research Institute, Hanoi, Viet Nam); Finn Tarp (University of Copenhagen, Denmark)
    Abstract: We study the impact of a national cash transfer program in Vietnam on labor supply using large household surveys and a regression-discontinuity design based on discontinuity in age eligibility. We do not find evidence of a disincentive effect of the cash transfer on labor supply for adults aged 15-64. More importantly, we find robust evidence that the transfer program causes the adults to move from self-employed non-farm work to wage-paying jobs. A likely mechanism is that the transfer program reduces the labor force participation of older people, and they help housework and childcare for younger adults to have wage-paying jobs.
    Keywords: Cash transfer, social security, employment, labor market participation, Vietnam
    JEL: J22 N35 H55
    Date: 2023–01–04
  9. By: Magli, Martina (LMU Munich)
    Abstract: I provide new empirical evidence on the direct and indirect impact of services offshoring on local employment and wages, using a unique dataset on firms in the UK for the period 2000-2015. Exploiting variation in firms' services offshoring across labour markets, I show positive aggregate local labour employment and wage elasticity to services offshoring. Spillovers from offshoring to non-offshoring firms explain the positive results, and services offshoring complementary to firms' production has a larger effect than the offshoring competing with firms' outputs. Finally, I show that services offshoring widens firms' employment and wage dispersion within local labour markets.
    Keywords: services offshoring; local labour market; spillover effect; quantile analysis;
    JEL: F1 F16 J2
    Date: 2022–12–22
  10. By: Michele Battisti; Christian Dustmann; Uta Schönberg
    Abstract: This paper investigates the effects of technological and organizational change (T&O) on jobs and workers. We show that although T&O reduces firm demand for routine relative to abstract task-based jobs, affected workers do not face higher probability of non-employment or lower earnings growth than unaffected workers. Rather, firms that adopt T&O offer routine workers re-training opportunities to upgrade to more abstract jobs. Older workers form an important exception: T&O increases the risk that they permanently withdraw from the labor market and reduces their earnings, regardless of the tasks they performed in the firm prior to T&O.
    Keywords: careers of workers, technological change
    JEL: J20 O30
    Date: 2022
  11. By: Becker, Sebastian (DIW Berlin); Buslei, Hermann (DIW Berlin); Geyer, Johannes (DIW Berlin); Haan, Peter (DIW Berlin)
    Abstract: This study provides novel evidence about the pension wealth elasticity of employment. For the identification we exploit reform-induced variation of pension wealth that is related to the number of children but which does not affect the implicit tax rate of employment. We use a difference-in-differences estimator based on administrative data from the German pension insurance and find that, on average, the negative employment effect of pension wealth is significant and economically important. Heterogeneity analyses document a strong age pattern showing that the employment effects are driven by behavioral responses of women close to retirement. The age pattern is partly explained by the positive effect of pension wealth on disability pensions after the age of 60.
    Keywords: pension reform, pension wealth elasticity, female labour supply, retirement, differences in differences
    JEL: H55 J13 J21 J26
    Date: 2022–12
  12. By: Frohnweiler, Sarah (RWI); Beber, Bernd (RWI); Ebert, Cara (RWI)
    Abstract: Information frictions about the benefits of migration can lead to inefficient migration choices. We study the effects of a randomly assigned information treatment about regional income differentials in Ghana and Uganda to learn about participants' belief updating and subsequent changes in migration intentions and destination preferences. Participants react to the provided information by correcting their destination preferences towards regions with higher incomes, whereas their intent to migrate changes less. Participants' belief updating follows an asymmetric process restricted to individuals who initially underestimated regional differentials. The results suggest that income differentials matter for where to and less whether to migrate.
    Keywords: income differentials, migration decision, belief updating
    JEL: J31 J68 O15
    Date: 2022–12
  13. By: Su, Qinghe (Oklahoma State University); Azam, Mehtabul (Oklahoma State University)
    Abstract: Using the nationally representative Indian Time Use Survey, we study whether the use of Liquefied Petroleum Gas (LPG) as cooking fuel affects the time spent in cooking and employment activities for Indian rural women. We instrument use of LPG by a leave-one-out spatial instrument constructed by taking the average level of LPG use in the village where the average is calculated leaving the concerned household. We find no impact of LPG on the probability of women participating in cooking activities. However, use of LPG reduces (increases) time spent in cooking (employment) activities. We also find evidence of rebound effect where use of LPG leads to marginally more cooking events in a day. We find that LPG impact on time spent in cooking and employment is mostly driven by married women.
    Keywords: access to LPG, time use, instrument variable, women, India
    JEL: J22 O12 O13 O33
    Date: 2022–12
  14. By: Afridi, Farzana (Indian Statistical Institute); Dhillon, Amrita (King's College London); Roy, Sanchari (King's College London)
    Abstract: This paper studies the impact of the COVID-19 pandemic on the gendered dimensions of employment and mental health among urban informal-sector workers in India. First, we find that men's employment declined by 84 percentage points during pandemic relative to pre-pandemic employment, while their monthly earnings fell by 89 per cent relative to the baseline mean. In contrast, women did not experience any significant impact on employment during pandemic, as reported by their husbands. Second, we document very high levels of pandemic-induced mental stress, with wives reporting greater stress than husbands. Third, this gendered pattern in pandemic-induced mental stress is partly explained by men's employment losses, which affected wives more than husbands. In contrast, women staying employed during the pandemic is associated with worse mental health for them and their (unemployed) husbands. Fourth, pre-existing social networks are associated with higher mental stress for women relative to men, possibly due to the 'home-based' nature of women's networks.
    Keywords: COVID-19, wage employment, mental health, social networks, gender, India
    JEL: J16 J22 J23
    Date: 2022–12
  15. By: Shoki Kusaka (Nomura Asset Management Co., Ltd.); Tetsuji Okazaki (Faculty of Economics, The University of Tokyo); Ken Onishi (Nomura Asset Management Co., Ltd.); Naoki Wakamori (Nomura Asset Management Co., Ltd.)
    Abstract: We study the mechanism behind the decline in labor share using highly detailed plant-level data on the cement industry in Japan. Using information on the production technology in place at each plant, we find that most of the labor share decline can be explained by new technology diffusion (introduction of the “new suspension preheater kiln†). The labor share stays constant, or even slightly increases, over time within plants with the same technology, whereas the aggregate labor share declines as production shifts to plants with a new and more capital-intensive technology. We also find that the information on plant-level technology is key to rejecting other potential hypotheses and that we would reach a qualitatively different conclusion without this information. To show this, we examine, with and without technology information, two alternative hypotheses; (i) the decline in labor share is associated with an increase in markups, and (ii) firms exercise monopsony power in the labor market. We reject these two hypotheses with technology information but may not without it.
    Date: 2022–12
  16. By: Miguel Anton; Florian Ederer; Mireia Gine; Martin C. Schmalz
    Abstract: We present a mechanism based on managerial incentives through which common ownership affects product market outcomes. Firm-level variation in common ownership causes variation in managerial incentives and productivity across firms, which leads to intra-industry and intra-firm cross-market variation in prices, output, markups, and market shares that is consistent with empirical evidence. The organizational structure of multiproduct firms and the passivity of common owners determine whether higher prices under common ownership result from higher costs or from higher markups. Using panel regressions and a difference-in-differences design we document that managerial incentives are less performance-sensitive in firms with more common ownership.
    JEL: D21 G32 J33 L13 L21 M12
    Date: 2022–12
  17. By: Joel Hellier (LEM-CNRS (UMR 9221), Lille Univ. and LEMNA, Nantes Univ.)
    Abstract: This paper proposes a new explanation for the rise in top performers’ income based on an asymmetry in globalization, with one country producing globalized non-rivalrous performances (music, films, series, entertainment programmes etc.) whereas other countries produce purely domestic ones. In the country with globalized performances, the globalization dynamics (growing number of countries involved in the global market) entails an increase in the number and incomes of performers and an increase in inequality by the top. In countries with purely national performances, the participation in the global economy reduces the number and incomes of performers and lessens inequality by the top. In contrast, when globalization is symmetric (all countries producing globalized performances), there is no change in the number and incomes of performers in all countries compared to cultural autarky. These results are in line with several characteristics observed in activities directly impacted by the cultural supremacy of American and English speaking countries in the global economy: 1) the share of Anglo-Saxon countries in the top 100 richest is substantially higher for actresses, actors, singers and TV show and film producers than for other occupations (CEOs, businessmen etc.), 2) the increase in the share of top incomes is significantly higher in Anglo-Saxon countries, and 3) the increase in inequality is greater in those countries.
    Keywords: Asymmetry, Globalization, Inequality, Performers, Superstars.
    JEL: F66 J31 J44 L82
    Date: 2023–01
  18. By: Nils Haakon Lehr; Pascual Restrepo
    Abstract: This paper studies how gradualism affects the welfare gains from trade, technology, and reforms. When people face adjustment frictions, gradual shocks create less adverse distributional effects in the short run. We show that there are welfare gains from inducing a more gradual transition via temporary taxes on trade and technology, and provide formulas for the optimal path for taxes. Our formulas account for the possibility that reallocation effort responds to policy, and for the existence of income taxes and assistance programs. Using these formulas, we compute the optimal temporary taxes needed to mitigate the distributional consequences of rising import competition from China and the deployment of automation technologies substituting for routine jobs. Our formulas can also be used to compute the optimal timing of economic reforms or trade liberalizations, and we apply them to study Colombia’s trade liberalization in 1990—a prominent example where optimal policy called for a more gradual reform.
    JEL: E24 F68 H23 J2
    Date: 2022–12
  19. By: Majid Ahmadi; Nathan Durst; Jeff Lachman; John A. List; Mason List; Noah List; Atom T. Vayalinkal
    Abstract: Recent models and empirical work on network formation emphasize the importance of propinquity in producing strong interpersonal connections. Yet, one might wonder how deep such insights run, as thus far empirical results rely on survey and lab-based evidence. In this study, we examine propinquity in a high-stakes setting of talent allocation: the Major League Baseball (MLB) Draft from 2000-2019 (30, 000 players were drafted from a player pool of more than a million potential draftees). Our findings can be summarized in four parts. First, propinquity is alive and well in our setting, and spans even the latter years of our sample, when higher-level statistical exercises have become the norm rather than the exception. Second, the measured effect size is consequential, as MLB clubs pay a significant opportunity cost in terms of inferior talent acquired due to propinquity bias: for example, their draft picks are 38% less likely to ever play a MLB game relative to players drafted without propinquity bias. Third, those players who benefit from propinquity bias fare better both in terms of the timing of their draft picks and their initial financial contract, conditional on draft order. Finally, the effect is found to be the most pronounced in later rounds of the draft, where the Scouting Director has the greatest latitude.
    JEL: C93 D4 J30 J7
    Date: 2022–12
  20. By: Fabienne Jedelhauser (Department of Business Administration, University of Zurich); Raphael Flepp (Department of Business Administration, University of Zurich); Egon Franck (Department of Business Administration, University of Zurich)
    Abstract: Superstars in European football are exceptionally talented and enjoy celebrity status. While second-tier stars, i.e., players barely below superstar status, lack popularity, their marginal contribution to team performance on the pitch relative to that of superstars is unknown. Relying on league-specific preseason market value distributions to define superstars and second-tier stars, we compare the marginal contributions of superstars and second-tier stars to team performance on the pitch in the top five European football leagues. Examining the impact of unexpected injury-related absences, we find that second-tier stars’ marginal contribution is at least equal to that of superstars. Thus, European football players with the highest market values do not outperform second-tier stars in terms of their marginal contributions to team performance on the pitch. These findings have important implications for football managers, as the players with arguably the highest costs for clubs do not contribute accordingly to short-run sportive success.
    Keywords: Superstars; second-tier stars; marginal contribution; team performance; football
    JEL: Z20 J44
    Date: 2022–12

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