nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2023‒01‒30
nineteen papers chosen by
Joseph Marchand
University of Alberta

  1. Working from Home in the Netherlands: Looking Inside the Blackbox of Work and Occupations By Emil Mihaylov
  2. Eclipse of Rent-Sharing: The Effects of Managers' Business Education on Wages and the Labor Share in the US and Denmark By Daron Acemoglu; Alex Xi He; Daniel le Maire
  3. Labour market concentration, wages and job security in Europe By Andrea Bassanini; Giulia Bovini; Eve Caroli; Jorge Casanova Ferrando; Federico Cingano; Paolo Falco; Florentino Felgueroso; Marcel Jansen; Pedro S. Martins; António Melo; Michael Oberfichtner; Martin Popp
  4. Investment Tax Credits and the Response of Firms By Lerche, Adrian
  5. Fundamentally Reforming the DI System: Evidence from German Notch Cohorts By Bjoern Fischer; Johannes Micha Geyer; Nicolas R. Ziebarth
  6. Public sector wage compression and wage inequality: Gender and geographic heterogeneity By Jørn Rattsø; Hildegunn E Stokke
  7. Effort and Selection Effects of Performance Pay in Knowledge Creation By Erina Ytsma
  8. How Substitutable Are Workers? Evidence from Worker Deaths By Simon Jäger; Jörg Heining
  9. How High Can You Climb? Earnings Inequality and Intragenerational Earnings Mobility in a Developing Country: Evidence from Thai Tax Returns By Athiphat Muthitacharoen; Trongwut Burong
  10. Heterogeneous labor market response to monetary policy: small versus large firms By Aarti Singh; Jacek Suda; Anastasia Zervou
  11. The Evolution of Labor Market Disparities between Hispanic and non-Hispanic Men: 1970-2019 By Kospentaris, Ioannis; Stratton, Leslie S.
  12. Firms, Informality and Institutions. The case of Colombia By Fernández, C
  13. Optimal Retirement with Disability Pensions By Hans Fehr; Adrian Fröhlich
  14. Gender Wage Gap in European Emerging Markets : A Meta-Analytic Perspective By Iwasaki, Ichiro; Satogami, Mihoko
  15. Learning about labour markets By Jake Bradley; Lukas Mann
  16. Spillover effects of employment protection By Pierre Cahuc; Pauline Carry; Franck Malherbet; Pedro S. Martins
  17. Selective Exercise of Discretion in Disability Insurance Awards By Pilar Garcia-Gomez; Pierre Koning; Owen O'Donnell
  18. A Semi-nonparametric Copula Model for Earnings Mobility By Costanza Naguib; Patrick Gagliardini
  19. Does FinTech Promote Entrepreneurship? Evidence from China By Alraqeb Zeynep; Knaack Peter; Macaire Camille

  1. By: Emil Mihaylov (Vrije Universiteit Amsterdam)
    Abstract: The paper provides new evidence on the ability to work from home (WFH) for hundreds of Dutch occupations and examines how WFH is related to various occupation-specific characteristics. This is done by linking several publicly available datasets from Statistics Netherlands, which contain different occupation-specific information (e.g., tasks descriptions, measures of physical and socio-psychological workload, autonomy of work, computer use at work, workplace accidents and injuries, job satisfaction and job turnover, actual WFH, etc.). The paper finds that WFH is possible only in high and mid-skilled occupations such as managers, professionals, technicians and associate professionals, and clerical support workers, while it is nearly impossible in low-skilled professions such as plant and machine operators and elementary occupations. Around 16% of the employed persons in the Netherlands work in occupations that cannot be done from home, 24% work in occupations that can be performed entirely from home, and 54% are employed in occupations with significant possibilities to WFH (i.e., their occupations contain 50% or more teleworkable tasks). Furthermore, the ability to WFH is negatively related to physical work, repetitive work, and dangerous work and positively related to working on screens and independence at work. The potential to WFH is also positively correlated with job satisfaction and negatively correlated with victimisation at work (i.e., intimidation, violence, bullying, unwanted sexual attention), incidence and duration of sick leave, and work-related reasons for sick leave. The analyses in the paper are of a descriptive nature.
    Keywords: working from home, occupations, job tasks, Netherlands, Covid-19
    JEL: J21 J22 J24 J29 J81
    Date: 2022–12–22
  2. By: Daron Acemoglu; Alex Xi He; Daniel le Maire
    Abstract: This paper provides evidence from the US and Denmark that managers with a business degree (“business managers") reduce their employees' wages. Within five years of the appointment of a business manager, wages decline by 6% and the labor share by 5 percentage points in the US, and by 3% and 3 percentage points in Denmark. Firms appointing business managers are not on differential trends and do not enjoy higher output, investment, or employment growth thereafter. Using manager retirements and deaths and an IV strategy based on the diffusion of the practice of appointing business managers within industry, region and size quartile cells, we provide additional evidence that these are causal effects. We establish that the proximate cause of these (relative) wage effects are changes in rent-sharing practices following the appointment of business managers. Exploiting exogenous export demand shocks, we show that non-business managers share profits with their workers, whereas business managers do not. But consistent with our first set of results, these business managers show no greater ability to increase sales or profits in response to exporting opportunities. Finally, we use the influence of role models on college major choice to instrument for the decision to enroll in a business degree in Denmark and show that our estimates correspond to causal effects of practices and values acquired in business education--rather than the differential selection into business education of individuals unlikely to share rents with workers.
    Keywords: business education, labor share, management, rent sharing, wages
    JEL: J30 J31 J53 M52 G30
    Date: 2022–12
  3. By: Andrea Bassanini; Giulia Bovini; Eve Caroli; Jorge Casanova Ferrando; Federico Cingano; Paolo Falco; Florentino Felgueroso; Marcel Jansen; Pedro S. Martins; António Melo; Michael Oberfichtner; Martin Popp
    Abstract: We investigate the impact of labour market concentration on two dimensions of job quality, namely wages and job security. We leverage rich administrative linked employer-employee data from Denmark, France, Germany, Italy, Portugal and Spain in the 2010s to provide the first comparable cross-country evidence in the literature. We show that the elasticities of wages with respect to labour market concentration are strikingly similar across countries. Increasing labour market concentration by 10% reduces wages by 0.19% in Germany, 0.22% in France, 0.25% in Portugal and 0.29% in Denmark. We find greater elasticities for job security. An increase in labour market concentration by 10% reduces the probability of being hired on a permanent contract by 0.46% in France, 0.51% in Germany and 2.34% in Portugal. In Italy and Spain, while not affecting this probability, labour market concentration has a strong negative effect on conversions to a permanent contract once hired on a temporary one. Using German and Portuguese data, we provide suggestive evidence that the similarity of our wage elasticities across countries and the greater sensitivity of job security to labour market concentration may be explained by the fact that sector-level collective bargaining is dominant in the countries we study and that it sets wages but usually not contract type.
    Keywords: Labour market concentration, Monopsony, Wages, Job security, Collective bargaining
    JEL: J31 J42 J52 L41
    Date: 2023
  4. By: Lerche, Adrian (Institute for Employment Research (IAB), Nuremberg, Germany ; LMU Munich ; IZA)
    Abstract: "This paper estimates the direct effects of investment tax credits on firms’ production behavior and the additional indirect effects arising from agglomeration economies. Exploiting a change in tax credit rates by firm size in Germany, I find that manufacturing firms increase capital and employment, with labor demand in information and communication technology-intensive industries shifting towards college-educated workers. Using geolocation data, I show that agglomeration benefits lead to a sizable further firm production expansion with these benefits materializing within distances of 5 kilometers. Worker flows from the service sector and from non-employment, rather than between manufacturing firms, explain the employment effects." (Author's abstract, IAB-Doku) ((en))
    Keywords: IAB-Open-Access-Publikation
    JEL: H25 H32 J23 R11 D22
    Date: 2022–12–27
  5. By: Bjoern Fischer; Johannes Micha Geyer; Nicolas R. Ziebarth
    Abstract: We study a fundamental reform of the public Disability Insurance (DI) system in Germany. Effective 2001, cohorts born after 1960 are no longer eligible for “occupational DI.” Occupational DI (ODI) implies benefit eligibility when health shocks prevent employees from working in their previous occupation. For the affected “notch cohorts”, the new DI eligibility rules require work disability in any job. Using administrative data, we first show that the reform significantly reduced the inflow of new DI beneficiaries by more than 30% in the long-run. Next, we validate these findings using representative SOEP household panel data comprised of the entire underlying population. The second part studies interaction effects with the private ODI market. Using representative data, we do not find much evidence that the notch cohorts purchased individual private ODI policies at significantly higher rates to compensate for the reduced generosity of the public DI system. To explain such low take-up, we employ a general equilibrium model featuring the roles of the social safety net, administrative costs, and asymmetric information. These driving forces help explain three stylized facts in the individual experience-rated private market for ODI policies: (1) low private ODI take-up and interaction effects with the public system---despite a high lifecycle work disability risk, (2) strong and positive income and health gradients in private ODI take-up, and (3) inversely related income and health gradients in the lifecycle work disability risk. Simulations illustrate that policy reforms to lower administrative costs have the greatest potential to foster take-up and flatten its income and health gradients.
    JEL: H53 H55 I10 I14 I18 J14 J21 J26
    Date: 2022–12
  6. By: Jørn Rattsø (Department of Economics, Norwegian University of Science and Technology); Hildegunn E Stokke (Department of Economics, Norwegian University of Science and Technology)
    Abstract: Studies of wage inequality concentrate on private wages. Public sector wages are typically assumed to contribute to overall wage equality. We challenge this understanding in an analysis of the relative skill premium in public versus private sectors. The analysis of heterogeneity across gender and geography is based on rich register data for Norway. The raw data confirm the relative wage compression in the public sector. However, this is a male phenomenon and only prevalent in large cities when unobserved worker and firm characteristics are taken into account. With identification based on shifters between private and public sectors and movers between city-size groups, wage setting for female workers in the public sector increases wage inequality in all regions, particularly in the periphery. The result is consistent with policies promoting recruitment of high-educated female workers and expansion of public services in the periphery counterbalancing the desired equality effect of public wages.
    Keywords: Wage inequality, skill premium, geography, private-public wages
    JEL: J31 J45 R23
    Date: 2022–12–20
  7. By: Erina Ytsma
    Abstract: The effects of performance pay in routine, easy to measure tasks are well-documented, but they are much less understood in knowledge creation. This paper studies the effects of explicit and implicit, career concerns incentives common in knowledge work in a multitasking model, and estimates their causal effort and selection effects in knowledge creation by exploiting the introduction of performance pay in German academia as a natural experiment. Using data encompassing the universe of German academics, I find that performance incentives attract more productive academics, and research quantity increases by 14 to 18%, but without increasing output of the highest quality. The latter is explained by response heterogeneity. The quantity effort response is strongest for low productivity academics, who do not produce high quality work. High ability academics also produce more publications, but not more of the highest quality. Medium ability academics do not increase quantity but produce fewer high-quality papers.
    Keywords: performance pay, knowledge creation, career concerns, effort and selection effects, multitasking
    JEL: J33 M52 O31
    Date: 2022
  8. By: Simon Jäger; Jörg Heining
    Abstract: We estimate how exogenous worker exits affect firms’ demand for incumbent workers and new hires. Drawing on administrative data from Germany, we analyze 34,000 unexpected worker deaths, which, on average, raise the remaining workers’ wages and retention probabilities. The average effect masks substantial heterogeneity: Coworkers in the same occupation as the deceased see positive wage effects; coworkers in other occupations experience wage decreases when a high-skilled or specialized worker dies. Our findings imply substantial replacement costs, which are larger in thin markets and when skills are specialized.
    Date: 2022
  9. By: Athiphat Muthitacharoen; Trongwut Burong
    Abstract: This paper investigates inequality and intragenerational economic mobility in a developing country with large inequality. Understanding economic mobility is important because it shapes our perception of inequality. Despite its significance, evidence on intragenerational mobility, especially that based on administrative data, is relatively limited in developing countries. Using Thailand’s tax return data, we study the evolution of earnings inequality, estimate medium-term earnings mobility, and examine the heterogeneity of mobility across age, gender and employment arrangement. Our analysis yields three main findings. First, annual earnings inequality rises during the 2009-2018 period. We find that the inequality is largely permanent, and its increase is primarily driven by top-earnings workers. Second, we find that medium-term mobility follows a Ushaped pattern across the earnings distribution, with extremely high persistence at the top. Our suggestive comparison indicates that Thailand’s earnings mobility is among the lowest in the pool of evidence from both developed and developing countries. Third, there is a considerable heterogeneity in mobility regarding employment arrangement. Workers in less-formal jobs have much lower upward mobility than those in more-formal employment. Our findings also indicate significant heterogeneity in mobility with respect to gender and age. These findings highlight the importance of ensuring that any increase in inequality caused by the Covid-19 crisis does not become permanent, as well as improving access to opportunities for vulnerable workers.
    Keywords: Intragenerational earnings mobility; Inequality
    JEL: D31 D63 H20 J31 J60
    Date: 2023–01
  10. By: Aarti Singh (School of Economics, University of Sydney); Jacek Suda (Narodowy Bank Polski); Anastasia Zervou (Department of Economics, the University of Texas at Austin)
    Abstract: We study the heterogeneous effects of monetary policy on the labor market of large and small firms in the United States. We uncover the following facts: (i) Expansionary monetary policy boosts employment and hiring growth in small firms more than in large firms; however, a monetary contraction shrinks small firms’ employment and hiring growth less than in large firms. As a result, monetary policy has a countervailing effect on the employment concentration in large firms. (ii) There is an asymmetry in the effects of monetary contractions versus expansions with respect to firms’ employment and hiring growth. Not accounting for such asymmetry leads to the fallacious conclusion that small firms respond more than large firms to monetary policy shocks. This asymmetry also reveals that contractionary monetary policy shocks have immediate effects on the labor market while the effects of expansionary shocks are slower to manifest.(iii) The response of employment is weaker than that of hiring, highlighting the importance of using labor market flows. (iv) The growth of earnings of new hires decreases similarly across large and small firms in contractions but reacts more for small firms in expansions. We use a heterogeneous firms model with a working capital constraint, an upward-sloping marginal cost curve, and a financial accelerator effect. We augment this model with the wage effect summarized in fact (iv) and demonstrate how the additional wage effect can explain the differential response of the hiring and employment growth of small and large firms of fact (i).
    Keywords: Heterogeneous firms, financing constraints, labor market, monetary policy
    JEL: D22 E24 E52 J23 L25
    Date: 2023
  11. By: Kospentaris, Ioannis; Stratton, Leslie S.
    Abstract: We describe how ethnic disparities in the labor market between prime aged Hispanic and non-Hispanic white men have evolved over the last 50 years. Using data from the March CPS, the Census, and the ACS, we examine several employment and earning outcomes. Hispanics have experienced sizable gains to employment: from a negative 2% prior to 1990 to a positive 4% after 2010 compared to non-Hispanics. In terms of earnings, Hispanics face a substantial negative disparity between 20% and 30% with some improvement after 2000. Most of the employment gain is driven by those with less than a high school degree, while the earnings disparity increases with education. Comparing Hispanic immigrants with natives reveals much of the employment and earnings gains are attributable to Hispanic immigrants, particularly immigrants not fluent in English.
    Keywords: Hispanics, ethnicity, disparities, earnings, employment, education, immigration
    JEL: J15 J21 J31 J71
    Date: 2023
  12. By: Fernández, C
    Abstract: This paper illustrates how two well indented policies to reduce informality as the income tax waiver for small firms, and the income tax deduction of labor cost, end up generating a large amount of small firms hiring workers without a formal contract. This paper also shows the difficulties to reduce informality amidst the complex regulatory environment of Colombia. Policies oriented to reduce labor informality have a limited impact and are costly from the fiscal point of view, policies oriented to reduce business informality are more effective, but does not necessarily reduce labor informality if they are directed towards low productivity firms, because such firms do not have incentives to hire formally. The methodology used to illustrate these facts was the estimation of Ulyssea (2018) for the case of Colombia with the mentioned institutional constraints and a minimum wage. The data base used compiles most of the firm information available in the country (Fernández, 2021).
    Keywords: Informality, Firm informality, Business informality, Informal labor market, Taxonomy of informality, Policy recommendations for informality
    JEL: D22 D58 E24 J21 J46 O17
    Date: 2022–12–13
  13. By: Hans Fehr; Adrian Fröhlich
    Abstract: This paper develops a general equilibrium life-cycle model with endogenous retirement and disability risk, in order to quantify the impact of recent pension reforms in Germany. At certain ages households may either apply for disability pensions (DP) or old-age pensions (OAP), de-pending on eligibility rules and the generosity of the two programs. Our policy analysis focus on the increase in the normal retirement age (NRA) from age 65 to 67 (Reform 2007) and the recent increase in the maximum assessment age (MAA) for DP benefits (Reform 2018). In contrast to the first reform, the second reform received hardly any attention in the public pension debate in Germany. Our simulation results indicate that with current eligibility and benefit rules, the second reform will almost neutralize the financial and economic benefits of the first reform. Consequently, securing the financial stability of the system will require a tightening of eligibility rules and/or a reduction of early retirement benefits in the future.
    Keywords: overlapping generations, stochastic general equilibrium, endogenous retirement, disability pensions
    JEL: C68 D91 H55 J24
    Date: 2022
  14. By: Iwasaki, Ichiro; Satogami, Mihoko
    Abstract: In this paper, we report the results of a meta-analysis of 670 estimates extracted from 53 previous research works to estimate the gender wage gap in European emerging markets. A meta-synthesis of collected estimates exhibits that the gender differences have a statistically significant and economically meaningful impact on wage levels. Synthesis results also reveal that the gender wage gap in countries with EU membership is lower than that in non-EU member states and, nevertheless, the wage gap between men and women has a tendency to diminish over time in the region as a whole. The meta-regression analysis of literature heterogeneity and test for publication selection bias back up the findings obtained from the meta-synthesis.
    Keywords: gender wage gap, research synthesis, meta-regression analysis, publication selection bias, European emerging markets
    JEL: D31 I26 J31 P23 P36
    Date: 2023–01
  15. By: Jake Bradley; Lukas Mann
    Abstract: We study a general equilibrium model of the labor market in which agents slowly learn about their suitability for jobs. Our model reproduces desirable features of the data, many of which standard models fail to replicate. We explore how, in such an environment, asymmetric information can lead to substantial misallocation. We calibrate our model to US data and quantify the welfare loss arising from misallocation due to informational frictions. The tractability of the model allows us to explore the responsiveness of wages and employment to an aggregate shock. We find that wage rigidity arises endogenously because of protracted learning, and in line with the data, the model is able to generate a larger and more persistent employment response.
    Keywords: Learning, misallocation, labor markets, wage rigidity
    Date: 2023
  16. By: Pierre Cahuc; Pauline Carry; Franck Malherbet; Pedro S. Martins
    Abstract: Estimates of the impact of employment protection heavily rely on reduced-form methods, assuming that there are no indirect effects between firms. This paper exploits a labor law reform implemented in Portugal in 2009 which restricted the use of fixed-term contracts for large firms above a specific size threshold, to investigate and quantify spillover effects. Standardreduced-form estimates based on the hypothesis of the absence of spillover towards firms for which the reform does not apply yield a negative impact on employment of about 1.5%. However, we find evidence of significant spillovers. The estimation of the macroeconomic effects of the reform with a search and matching model accounting for spillovers yields an almost negligible employment impact of the reform, more than ten times smaller than that obtained with the reduced form estimates. This result underlines that the numerous reduced-form estimates of the impact of employment protection that rely on firm size thresholds must be interpreted with caution.
    Keywords: Employmentprotection legislation, Spillover effects, Directed search and matching
    JEL: J23 J41 J63
    Date: 2023
  17. By: Pilar Garcia-Gomez (Erasmus University Rotterdam); Pierre Koning (Vrije Universiteit Amsterdam); Owen O'Donnell (Erasmus University Rotterdam Author-Name: Carlos Riumallo Herl; Erasmus University Rotterdam)
    Abstract: Variation in assessor stringency in awarding benefits leaves applicants exposed to uninsured risk that could be systematic if discretion were exercised selectively. We test for this using administrative data on applications to the Dutch disability insurance program. We find that discretion is more often exercised in favor of lower-waged applicants. Pre-disability wages drop discontinuously just above disability thresholds for entitlement to partial benefits. Assessors are more likely to discard the highest-paying algorithm-generated job matches that determine earnings capacity and entitlement when evaluating lower-waged applicants. While these applicants benefit on average, they are exposed to greater risk from between assessor variation.
    JEL: D73 H42 H55
    Date: 2022–12–22
  18. By: Costanza Naguib; Patrick Gagliardini
    Abstract: In this paper we develop a novel semi-nonparametric panel copula model with external covariates for the study of wage rank dynamics. We focus on nonlinear dependence between the current and lagged worker’s ranks in the wage residuals distribution, conditionally on individual characteristics. We show the asymptotic normality of the Sieve estimator for our preferred mobility measure, which is an irregular functional of both the finite- and infinite-dimensional parameters, in the double asymptotics with N, T ?8. We derive an analytical bias correction for the incidental parameters bias induced by the individual fixed-effects. We apply our model to US data and we find that relative mobility at the bottom of the distribution is high for workers with a college degree and some experience. On the contrary, less-educated individuals are likely to remain stuck at the bottom of the wage rank distribution year after year.
    Keywords: Wage dynamics, rank, functional copula model, nonlinear autoregressive process, Sieve seminonparametric estimation
    JEL: C14 J31
    Date: 2023–01
  19. By: Alraqeb Zeynep; Knaack Peter; Macaire Camille
    Abstract: The rise of financial technology (FinTech) in China over the past decade has changed the traditional financial landscape in the country. We provide evidence on the role of digital financial services in promoting self-employment. We construct an indicator of relative FinTech adoption at the provincial-level in China. We show that the digitalization of financial services at an aggregated level is associated with a higher share of self-employed individuals in the total population. In rural areas, coverage breadth of digitalized financial services drives the positive impact on the share of self-employment, while in urban areas, digitalized insurance services appear to be more influential. We also show that the shift to self-employment is not at the expense of employment in private firms in the country. <p> L'essor des technologies financières (FinTech) en Chine au cours de la dernière décennie a modifié le paysage financier traditionnel du pays. Nous étudions la relation entre l’adoption de ces services et la part de l’entreprenariat dans la population totale. Nous construisons un indicateur de l'adoption relative des FinTech au niveau provincial dans le pays, et montrons que la numérisation des services financiers est associée à une part plus élevée d’autoentrepreneurs dans la population totale. Dans les zones rurales, l'étendue de la couverture des services financiers numérisés est à l'origine de cet impact positif, tandis que dans les zones urbaines, les services d'assurance numérisés semblent avoir plus d'influence. Nous montrons également que le passage à l'emploi indépendant ne se fait pas au détriment de l'emploi au sein des entreprises privées dans le pays.
    Keywords: Fintech, Financial Inclusion, Digitalization, China, Entrepreneurship; Fintech, inclusion financière, digitalisation, Chine, entreprenariat
    JEL: G23 J21 O33
    Date: 2022

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