nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2023‒02‒13
fifteen papers chosen by
Joseph Marchand
University of Alberta

  1. Human Capital Spillovers and Returns to Education By Hugo Reis; Paulo Guimarães; Pedro Portugal; Ana Rute Cardoso
  2. The Evolution of Labor Market Disparities between Hispanic and Non-hispanic Men: 1970-2019 By Kospentaris, Ioannis; Stratton, Leslie S.
  3. When are wages cut? The roles of incomplete contracts and employee involvement By Marco Fongoni; Daniel Schaefer; Carl Singleton
  4. What’s Driving the Decline in Entrepreneurship? By Nicholas Kozeniauskas
  5. First to $ 15: Alberta's minimum wage policy on employment by wages, ages, and places By Fossati, Sebastian; Marchand, Joseph T.
  6. Fixed and Variable Longevity Annuities in Defined Contribution Plans: Optimal Retirement Portfolios Taking Social Security into Account By Vanya Horneff; Raimond Maurer; Olivia S. Mitchell
  7. Are more automatable jobs less satisfying? By Arthur Jacobs; Elsy Verhofstadt; Luc Van Ootegem
  8. Rural income diversification in Ethiopia: Patterns, trends, and welfare impacts By Abate, Gashaw Tadesse; Bachewe, Fantu Nisrane; Regassa, Mekdim D.; Minot, Nicholas
  9. The Macroeconomic Consequences of Subsistence Self-Employment By Sergio Ocampo; Juan Herreño
  10. Turning worries into cognitive performance: Results from an online experiment during Covid By Timothée Demont; Daniela Horta Sáenz; Eva Raiber
  11. The Divergent Dynamics of Labor Market Power in Europe By Mr. Ippei Shibata; Mr. Davide Malacrino; Mr. Federico J Diez
  12. The effects of schooling on cognitive skills: evidence from education expansions. By Lorenzo Cappellari; Daniele Checchi; Marco Ovidi
  13. Historical roots of the dual-earner model: Women’s labour force participation in Sweden, 1870–1960 By Molinder, Jakob
  14. Frames, Incentives, and Education: Effectiveness of Interventions to Delay Public Pension Claiming By Franca Glenzer; Pierre-Carl Michaud; Stefan Staubli
  15. Participation of the social economy in the provision of Sweden’s public employment services By OECD

  1. By: Hugo Reis; Paulo Guimarães; Pedro Portugal; Ana Rute Cardoso
    Abstract: In this paper, we quantify the impact of co-workers’ human capital on a worker’s productivity and, more specifically, the spillovers of co-workers’ education within the workplace. We identify the impact of peer quality and provide an unambiguous decomposition of the impact of unobserved heterogeneity on the estimated returns to education. We find that peer effects are quite sizeable. A one standard deviation increase in the measure of peer quality leads to a wage increase of 2.1 percent. We also unveil that an additional year of average education of co-workers yields a 0.5 percent increase in the individual own wage.
    JEL: I26 J24 J31
    Date: 2022
  2. By: Kospentaris, Ioannis (Virginia Commonwealth University); Stratton, Leslie S. (Virginia Commonwealth University)
    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: 2023–01
  3. By: Marco Fongoni (Aix-Marseille Univ, CNRS, AMSE, Marseille, France.); Daniel Schaefer (Department of Economics, Johannes Kepler University Linz, Austria); Carl Singleton (Department of Economics, University of Reading, Whiteknights, UK)
    Abstract: We develop a model of incomplete employment contracts such that employees have some discretion over effort, which depends on their work morale. Nominal wage cuts have a strong negative effect on morale, while employee involvement in workplace decision-making tends to increase morale. We derive predictions on how these two mechanisms affect the decisions of firms to cut nominal wages. Using matched employer-employee and manager survey data from Great Britain, we find support for our model: nominal wage cuts are only half as likely when managers think that employees have some discretion over how they perform their work, but this reduced likelihood recovers partially when employees are involved in the decision-making process at their workplace.
    Keywords: wage rigidity; reciprocity; workplace relations; employer-employee data
    JEL: E24 E70 J31 J41
    Date: 2023–01
  4. By: Nicholas Kozeniauskas
    Abstract: Why has there been a steady decline in entrepreneurship in the US in recent decades? To answer this question, I develop a general equilibrium occupation choice model and combine it with data on these choices. Skill-biased technical change can account for much of the decline in the relative entrepreneurship rate of more educated people, but cannot explain the decline in the aggregate level of entrepreneurship. The major factors in the decline in the share of people who are entrepreneurs, the firm entry rate, and the size of the entrepreneur sector are rising entry costs and outsized productivity gains by large non-entrepreneur firms.
    JEL: E23 E24 J24 J31
    Date: 2022
  5. By: Fossati, Sebastian; Marchand, Joseph T.
    Abstract: Most minimum wage studies are identified on small, plentiful, and expected wage changes, spread out over time. A recent set of changes have instead been large, unexpected, and quick, following the "Fight for $ 15" movement. Alberta is the first state or province to have this $ 15 minimum wage, with an unexpectedly large increase (47%) occurring over a short horizon (3 years). The employment effects of this policy are estimated using a synthetic control approach on Labour Force Survey data. Similar to the existing literature, workers moved up the wage distribution, increment by increment, reaching past the 15th percentile, but not all remained employed. Employment losses were found mostly among younger workers, at magnitudes similar to previous elasticities. Newer to the literature, regional employment losses were found mostly outside of Alberta's two main cities, but youth employment losses were similar between urban and non-urban areas, with an urban older worker offset.
    Keywords: employment, Fight for $ 15, geography, minimum wage, synthetic control
    JEL: J21 J38 J48 J82 R23
    Date: 2022
  6. By: Vanya Horneff; Raimond Maurer; Olivia S. Mitchell
    Abstract: This paper investigates retirees’ optimal purchases of fixed and variable longevity income annuities using their defined contribution (DC) plan assets and given their expected Social Security benefits. As an alternative, we also evaluate using plan assets to boost Social Security benefits through delayed claiming. We determine that including deferred income annuities in DC accounts is welfare enhancing for all sex/education groups examined. We also show that providing access to well-designed variable deferred annuities with some equity exposure further enhances retiree wellbeing, compared to having access only to fixed annuities. Nevertheless, for the least educated, delaying claiming Social Security is preferred, whereas the most educated benefit more from using accumulated DC plan assets to purchase deferred annuities.
    JEL: D91 G11 G14 G22 G53
    Date: 2023–01
  7. By: Arthur Jacobs; Elsy Verhofstadt; Luc Van Ootegem (-)
    Abstract: We investigate whether the characteristics which render a job more likely to disappear due to automation also make that job less satisfying. The literature on automation offers convincing reasons infavour of this hypothesis, but it has not been empirically tested before. We use a widely-established, occupation-level measure of automatability and find that more automatable jobs are indeed significantly less satisfying using data from the European Working Conditions Survey. The effect is sizeableand robust to controlling for a wide range of individual-level variables and job-context variables. Our finding suggests that more automatable occupations are less satisfying because of their inherent nature (i.e. the nature of the tasks required for the performance of that occupation). We conduct a mediation analysis and find that the smaller creative intelligence requirement related to automatable occupations is the most important reason for their lower job satisfaction. We discuss to what extent these economy-wide findings translate to the level of the individual worker, in the context of a labor market segmented by education level.
    Keywords: Automation, Job Satisfaction, Occupational Task Content, European Working Conditions Survey
    Date: 2023–01
  8. By: Abate, Gashaw Tadesse; Bachewe, Fantu Nisrane; Regassa, Mekdim D.; Minot, Nicholas
    Abstract: Increased diversification of rural households into the rural non-farm economy is an important driver of economic growth and structural transformation in countries like Ethiopia where the vast majority of people live in rural areas and are largely dependent on seasonal agriculture. Some of the benefits of diversification include efficient utilization of asset endowments (e.g., labor during dry season) and reduction of risks. In this study we explore the: (i) patterns and trends of diversification, (ii) drivers of diversification including the association between rainfall risk/shocks and diversification, and (iii) welfare effects of diversification during the recent decade using three rounds of representative household data from the four main regions of Ethiopia. We used Cragg’s double-hurdle model, a method that considers the two-step decision making process in diversification (i.e., participation and extent of participation), to identify the determinants of diversification and a fixed-effect and instrumental variable (IV) approaches to understand the links between diversification and household welfare. The descriptive results show that rural households generally adopt a livelihood strategy dominated by farming and that the level of diversification has been stagnant over the period of analysis considered. More importantly, the vast majority of households continue to draw a substantial share of their income from crop production, followed by livestock. The income from non-farm activities accounts only between 17 percent and 23 percent of the total income. The econometrics results show that diversification is positively associated with credit access, membership in social insurance, ownership of mobile phone, relative measure of household wealth, and population density. Conversely, access to relatively large, fertile, and irrigable land discourages diversification into non-farm activities. The analysis on the association between rainfall risks and diversification indicates that rural households use income diversification both as risk mitigation and shock coping strategy. The results on the link between income diversification and household welfare indicate a positive association between diversification and household total consumption expenditure, dietary diversity score, and housing/roof quality. In sum, the results imply the need for a deliberate effort to expand the non-farm economy so as to tap its full potential for employment generation, income growth, and welfare improvements. A starting point could be for agricultural and rural development policies and investments to go beyond promotion of cereal crop production and facilitate participation in high value crop, livestock, aquaculture production. Incentivizing investments in value addition activities that can create and enrich upward and downward linkages in the midstream segment of agricultural value chains is another potential avenue to boost rural non-farm economy.
    Keywords: ETHIOPIA; EAST AFRICA; AFRICA SOUTH OF SAHARA; AFRICA; income; rural areas; welfare; diversification; risk; shock; nonfarm income; income diversification
    Date: 2022
  9. By: Sergio Ocampo (University of Western Ontario); Juan Herreño (University of California San Diego)
    Abstract: We evaluate the aggregate effects of expansions of credit supply in environments where subsistence self-employment is prevalent. We extend a standard macro development model to include unemployment risk, which becomes a key driver of selection into self-employment. The model is consistent with the joint distribution of earnings and occupations, the reaction of wages to labor demand shocks, and the small effects of expansions in the supply of microloans on the earnings of the self-employed. We find that the elasticity of aggregate output to expansions in credit supply is proportional to the elasticity of individual earnings. This proportionality arises due to the muted effects of wages in general equilibrium in the presence of subsistence self-employment, and is not present in models without subsistence self-employment due to a larger wage response, and a larger crowding-out of private savings in response to a higher availability of credit.
    Keywords: Self-Employment, Unemployment, Development, Micro-Finance
    JEL: E44 O11 O16 O17
    Date: 2023
  10. By: Timothée Demont (Aix-Marseille Univ, CNRS, AMSE, Marseille, France.); Daniela Horta Sáenz (Aix-Marseille Univ, CNRS, AMSE, Marseille, France.); Eva Raiber (Aix-Marseille Univ, CNRS, AMSE, Marseille, France.)
    Abstract: Worrisome topics, such as climate change, economic crises, or the Covid-19 pandemic, are increasingly present and pervasive due to digital media and social networks. Do such worries affect cognitive performance? The effect of a distressing topic might be very different depending on whether people have the scope and means to cope with the consequences. It can also differ by how performance is rewarded, for instance, if is there a goal that people can focus on. In an online experiment during the Covid-19 pandemic, we test how the cognitive performance of university students responds to topics discussing (i) current mental health issues related to social restrictions or (ii) future labor market uncertainties linked to the economic contraction. Moreover, we study how the response is affected by a performance goal by conditioning payout on reaching a minimum level. We find that the labor market topic increases cognitive performance when performance is motivated by a goal. Conversely, there is no such effect after the mental health topic. We even find a weak negative effect among those mentally vulnerable when payout is not based on reaching a goal. The positive effect is driven by students with larger financial and social resources, pointing at an inequality-widening mechanism.
    Keywords: cognitive performance, financial worries, COVID-19, financial incentives, anxiety, coping behaviors
    JEL: C91 D91 D81
    Date: 2023–01
  11. By: Mr. Ippei Shibata; Mr. Davide Malacrino; Mr. Federico J Diez
    Abstract: We use firm-level data from 10 European countries to establish several new stylized facts about firms’ labor market power. First, we find the pervasive presence of labor market power across countries and sectors, measured by average and median markdowns above unity. Second, focusing on the dynamics, we find that weighted average markdowns have increased 1.3 percent between 2000 and 2017. However, median and unweighted average markdowns have actually decreased over the same time period, suggesting the existence of divergent paths across the markdown distribution. Third, we show that high-markdown firms tend to have a large footprint in both their product and input (labor) markets, and are most commonly listed and found among services sectors. Finally, a Melitz-Polanec decomposition of the change in weighted average markdown finds that the increase has been driven by a reallocation of resources towards high-markdown incumbents and by the extensive margin via the net entry of high-markdown firms while, in contrast, there was a decline in within-firm markdowns. Our findings highlight the importance of using granular and broad-based data for a thorough analysis of firms’ labor market power.
    Keywords: Monopsony; labor market power; markdowns; secular trends; high-markdown firm; weighted average markdown; high-markdown incumbent; markdown distribution; Labor markets; Employment; Services sector; Wages; Europe
    Date: 2022–12–09
  12. By: Lorenzo Cappellari (Università Cattolica del Sacro Cuore; Dipartimento di Economia e Finanza, Università Cattolica del Sacro Cuore); Daniele Checchi; Marco Ovidi (Università Cattolica del Sacro Cuore; Dipartimento di Economia e Finanza, Università Cattolica del Sacro Cuore)
    Abstract: We quantify the causal effect of schooling on cognitive skills across 21 countries and the full distribution of working-age individuals. We exploit exogenous variation in educational attainment induced by a broad set of institutional reforms affecting different cohorts of individuals in different countries. We find a positive effect of an additional year of schooling on internationally-comparable numeracy and literacy scores. We show that the effect is substantially homogeneous by gender and socio-economic background and that it is larger for individuals completing a formal qualification rather than dropping out. Results suggest that early and late school years are the most decisive for cognitive skill development. Exploiting unique survey data on the use of skills, we find suggestive evidence that our result is mediated by access to high-skill jobs.
    Keywords: Cognitive skills, Educational Policies, Returns to schooling.
    JEL: H52 I21 I28
    Date: 2022–12
  13. By: Molinder, Jakob (Department of Economic History, Lund University)
    Abstract: Today, Sweden has one of the highest female labour force participation rates in the developed world, but how deep are the roots of women’s involvement in gainful employment? In this article, I present new estimates of women’s labour force participation rate between 1870 and 1960, the time when the country shifted from a predominantly agrarian economy to an industrial and services-based society. The revised data give a very different pattern from existing series; I find that female participation displays a clear U-shape: falling from the late nineteenth century, reaching a trough in the 1940s, and then starting to rise from the 1960s. Falling employment in agriculture was not balanced out by expanding opportunities in manufacturing, but women’s gainful employment started expanding as the white-collar services sector grew and women’s education increased - following the pattern set out by Goldin’s theory of the U-curve. The male breadwinner period was short and less pronounced in Sweden than in most other countrieshowever. Participation among adult women in the late nineteenth century was above 55 percent, and never fell below 40 percent at the lowest point. My findings lend support to the idea that the dual-earner model of present-day Sweden could be the outcome of a longer historical trajectory.
    Keywords: Female labor force participation; Sweden; Dual-earner; Breadwinner
    JEL: J21 N33 N34
    Date: 2022–12–13
  14. By: Franca Glenzer; Pierre-Carl Michaud; Stefan Staubli
    Abstract: Many near-retirees forgo a higher stream of public pension income by claiming early. We provide both quasi-experimental and survey-experimental evidence that the timing of public pension claiming is relatively inelastic to changes in financial incentives in Canada. Using the survey experiment, we evaluate the effect of two different educational interventions and different ways of framing the incentive to delay claiming. While all three types of interventions induce delays, these interventions have heterogeneous financial consequences for participants who react.
    Keywords: pension claiming; annuities; retirement; financial education; framing
    JEL: D91 H55 J14 J26
    Date: 2023
  15. By: OECD
    Abstract: Sweden is undergoing a major reform of its public employment service Arbetsförmedlingen towards contracting out employment services to independent providers. At the same time, Arbetsförmedlingen is also undergoing a significant restructuring, resulting in a downscaling of physical presence across the country and an increased digitalisation of services. As this report shows, the social economy and in particular work integration social enterprises can play an important role in the delivery of publicly-financed employment services. The report analyses the main features of the social economy in general as well as its current role in employment policies in Sweden. Moreover, it discusses challenges in engaging social economy organisations as providers in the market for contracted-out employment services in Sweden with respect to the legal framework, contracting rules, financial barriers, payment models, and co-operation structures. Lastly, it offers recommendations based on international practice to help design and implement the proposed policy recommendations in the Swedish context.
    Keywords: Local Labour Markets, Public Employment Services, Social Economy, Work Integration Social Enterprises
    JEL: H53 H75 J48 P11 R58
    Date: 2023–01–28

This nep-lma issue is ©2023 by Joseph Marchand. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.