nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2023‒02‒20
seventeen papers chosen by
Joseph Marchand
University of Alberta

  1. Measuring Returns to Experience Using Supervisor Ratings of Observed Performance: The Case of Classroom Teachers By Courtney A. Bell; Jessalynn K. James; Eric S. Taylor; James Wyckoff
  2. When are wages cut? The roles of incomplete contracts and employee involvement By Marco Fongoni; Daniel Schaefer; Carl Singleton
  3. Born to Care (or Not): How Gender Role Attitudes Affect Occupational Sorting By Carlianne Patrick; Heather Stephens; Amanda Weinstein
  4. 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; Athiphat Muthitacharoen
  5. Do Minimum Wage Hikes Lead to Employment Destruction? Evidence from a Regression Discontinuity Design in Argentina By Nicolás Abbate; Bruno Jiménez
  6. Trading Places: Mobility Responses of Native and Foreign-Born Adults to the China Trade Shock By David Autor; David Dorn; Gordon H. Hanson
  7. Estimating the Impact of the Age of Criminal Majority: Decomposing Multiple Treatments in a Regression Discontinuity Framework By Michael Mueller-Smith; Benjamin Pyle; Caroline Walker
  8. Estimating the Effects of the ADA Amendments Act on the Hiring and Termination of Individuals with Disabilities, Using New Disability Categorizations By Patrick Button; Philip Armour; Simon Hollands
  9. The future geography of industries and occupations By Milene Tessarin; Deyu Li; Sergio Petralia; Ron Boschma
  10. The Market for CEOs: Evidence from Private Equity By Paul A. Gompers; Steven N. Kaplan; Vladimir Mukharlyamov
  11. Effects of the Minimum Wage on U.S. County Labor Markets By Otterby, Dawn; Crawley, Andrew; Gabe, Todd
  12. Do larger firms have higher markups? By Mertens, Matthias; Mottironi, Bernardo
  13. Frontline workers in education, health and welfare: how much do they earn in European countries? A comparative income analysis based on the EU-LFS By Lehwess-Litzmann, René
  14. Automation when skills are bundled By Hernnäs, Sofia
  15. Two Decades of Social Security Claiming By Sita Slavov
  16. Exploiting Growth Opportunities: The Role of Internal Labor Markets By Giacinta Cestone; Chiara Fumagalli; Francis Kramarz; Giovanni Pica
  17. The Effects of Competition on Physician Prescribing By Janet Currie; Anran Li; Molly Schnell

  1. By: Courtney A. Bell; Jessalynn K. James; Eric S. Taylor; James Wyckoff
    Abstract: We study the returns to experience in teaching, estimated using supervisor ratings from classroom observations. We describe the assumptions required to interpret changes in observation ratings over time as the causal effect of experience on performance. We compare two difference-in-differences strategies: the two-way fixed effects estimator common in the literature, and an alternative which avoids potential bias arising from effect heterogeneity. Using data from Tennessee and Washington, DC, we show empirical tests relevant to assessing the identifying assumptions and substantive threats—e.g., leniency bias, manipulation, changes in incentives or job assignments—and find our estimates are robust to several threats.
    JEL: I2 J24 M5
    Date: 2023–01
  2. By: Marco Fongoni (École d'Économie d'Aix-Marseille, Aix-Marseille Université); Daniel Schaefer (Institut für Volkswirtschaftslehre, Johannes-Kepler-Universität Linz); Carl Singleton (Department of Economics, University of Reading)
    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: 2023–01–30
  3. By: Carlianne Patrick (Department of Economics, Georgia State University); Heather Stephens (Regional Research Institute, West Virginia University); Amanda Weinstein (Department of Economics, University of Akron)
    Abstract: Occupation segregation explains a significant portion of the gender wage gap, with women working in lower paid female-dominated occupations. We examine how childhood and adolescent exposure to gender biased norms about work influence this occupational sorting. We document that early life exposure to traditional gender role attitudes, which view women’s role as caretakers, increase women’s likelihood of employment in care occupations and decrease the likelihood for men, thereby increasing the gender care occupation gap. A decomposition of the factors affecting this sorting shows that a primary channel is through differences in the choice of post-secondary field of study or major. Our results suggest that traditional gender role attitudes may work to segment the labor market for men and women and contribute to the gender wage gap. This suggests that more egalitarian gender role attitudes which increase the share of men entering care occupations would increase wages for both men and women, lowering the gender wage gap.
    Keywords: gender role attitudes, occupation choice
    JEL: J24 J31 R23
    Date: 2023–01
  4. By: Athiphat Muthitacharoen; Trongwut Burong; Athiphat Muthitacharoen
    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 U-shaped 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
  5. By: Nicolás Abbate (CEDLAS-IIE-FCE-UNLP); Bruno Jiménez (Princeton University & CEDLAS-IIE-FCE-UNLP)
    Abstract: In this paper, we evaluate a series of minimum wage hikes implemented in the early XXIst century in Argentina using administrative records of registered employment. We identify the effect of raising the minimum wage on job separations via a regression discontinuity design. More specifically, we compare the match destruction rates for a treatment group directly bound by the minimum wage hikes and a control group slightly out of its legal scope. We show that this method represents an improvement over previous ones because it reduces the incidence of Type-I error. We find that, when aggregated, these hikes had a precisely estimated zero effect on separation rates. However, the increases enacted in 2008 arise as an exception. They decreased separations by 4.8 percentage points (19%). These results suggest that the employment effects of minimum wages may not flow through employment destruction.
    JEL: J31 J80 K31
    Date: 2023–02
  6. By: David Autor; David Dorn; Gordon H. Hanson
    Abstract: Previous research finds that the greater geographic mobility of foreign than native-born workers following economic shocks helps to facilitate local labor market adjustment to shifting regional economic conditions. We examine the role that immigration may have played in enabling U.S. commuting zones to respond to manufacturing job loss caused by import competition from China. Although population headcounts of the foreign-born fell by more than those of the native-born in regions exposed to the China trade shock, the overall contribution of immigration to labor market adjustment in this episode was small. Because most U.S. immigrants arrived in the country after manufacturing regions were already mature, few took up jobs in industries that would later see increased import penetration from China. The foreign-born share of the working-age population in regions with high trade exposure was only three-fifths that in regions with low exposure. Immigration thus appears more likely to aid adjustment to cyclical shocks, in which job loss occurs in regions that had recent booms in hiring, rather than facilitating adjustment to secular regional decline, in which hiring booms occurred in the more distant past.
    JEL: E24 F14 F16 J23 J31 L60 O47 R12 R23
    Date: 2023–01
  7. By: Michael Mueller-Smith; Benjamin Pyle; Caroline Walker
    Abstract: This paper studies the impact of adult prosecution on recidivism and employment trajectories for adolescent, first-time felony defendants. We use extensive linked Criminal Justice Administrative Record System and socio-economic data from Wayne County, Michigan (Detroit). Using the discrete age of majority rule and a regression discontinuity design, we find that adult prosecution reduces future criminal charges over 5 years by 0.48 felony cases (? 20%) while also worsening labor market outcomes: 0.76 fewer employers (? 19%) and $674 fewer earnings (? 21%) per year. We develop a novel econometric framework that combines standard regression discontinuity methods with predictive machine learning models to identify mechanism-specific treatment effects that underpin the overall impact of adult prosecution. We leverage these estimates to consider four policy counterfactuals: (1) raising the age of majority, (2) increasing adult dismissals to match the juvenile disposition rates, (3) eliminating adult incarceration, and (4) expanding juvenile record sealing opportunities to teenage adult defendants. All four scenarios generate positive returns for government budgets. When accounting for impacts to defendants as well as victim costs borne by society stemming from increases in recidivism, we find positive social returns for juvenile record sealing expansions and dismissing marginal adult charges; raising the age of majority breaks even. Eliminating prison for first-time adult felony defendants, however, increases net social costs. Policymakers may still find this attractive if they are willing to value beneficiaries (taxpayers and defendants) slightly higher (124%) than potential victims.
    Keywords: juvenile and criminal justice, regression discontinuity, machine learning, recidivism, employment
    JEL: C36 C45 K14 K42 J24
    Date: 2023–01
  8. By: Patrick Button (Tulane University); Philip Armour (RAND Corporation); Simon Hollands (Snap Inc.)
    Abstract: Disability discrimination laws are often used to potentially increase employment for individuals with disabilities. However, legal theory and empirical economics research do not provide conclusive answers as to how expansions in disability discrimination laws affect economic outcomes, namely hiring rates, for individuals with disabilities. We estimate the effect of the ADA Amendments Act (ADAAA) on employment transitions: hirings and terminations for individuals with disabilities relative to those without disabilities. To calculate employment transitions, we use data from the Survey of Income and Program Participation (SIPP). We also use the SIPP to develop additional measures and categorizations of disability based on whether the conditions are physical or mental, and whether they are salient to an employer at the hiring stage. We find that the ADAAA is generally associated with positive employment effects: increases or no effects on hiring rates, and decreases or no effects on termination rates. Our strongest and most robust results are that we find increases in hiring for those with nonsalient physical conditions and decreased terminations for those with salient physical conditions. Our results suggest that the effects of the ADAAA vary by disability type—especially by disability saliency—and are stronger for the groups most targeted by broader coverage of the ADAAA.
    Keywords: disability, employment discrimination, discrimination law, Americans with Disabilities Act, Americans with Disabilities Amendments Act, Sutton Trilogy
    JEL: J71 J78 K31 J14
  9. By: Milene Tessarin; Deyu Li; Sergio Petralia; Ron Boschma
    Abstract: In this report we evaluate the opportunities for regional diversification in Europe over the last decade. We use microdata from the European Labour Force Survey to empirically test the entry and exit of occupational specializations at the regional level. Our results show that NUTS 2 regions are more likely to diversify into new occupations that are related to their existing local labour markets. So, the new opportunities for diversification are path-dependent, that is, they depend on the previous (occupational) production structure of the regions. Relatedness is especially important for diversifying toward complex occupations, thus increasing the potential economic benefits of the regions. However, there are significant regional heterogeneities in this related diversification process. Relatedness is positively associated with occupational specialization, but it loses strength as GDP per capita increases among European regions. Finally, we point out some policy orientations that can guide the paths of occupational diversification for European regions.
    Date: 2023–01
  10. By: Paul A. Gompers; Steven N. Kaplan; Vladimir Mukharlyamov
    Abstract: Most research on the CEO labor market studies public company CEOs while largely ignoring CEOs in private equity (PE) funded companies. We fill this gap by studying the market for CEOs among U.S. companies purchased by PE firms in large leveraged buyout transactions. 71% of those companies hired new CEOs under PE ownership. More than 75% of the new CEOs are external hires with 67% being complete outsiders. These results are strikingly different from studies of public companies, particularly, Cziraki and Jenter (2022) who find that 72% of new CEOs in S&P 500 companies are internal promotions. The most recent experience of 67% of the outside CEOs was at a public company with almost 50% of external hires having some previous experience at an S&P 500 firm. We estimate the total compensation of buyout CEOs and find that it is much higher than that of CEOs of similarly sized public companies and slightly lower than that of S&P 500 CEOs. Overall, our results suggest that the broader market for CEOs is active and that, at least for PE funded portfolio companies, firm-specific human capital is relatively unimportant.
    JEL: G24 G3 G32 J30
    Date: 2023–01
  11. By: Otterby, Dawn; Crawley, Andrew; Gabe, Todd
    Abstract: This study investigates the impacts of the minimum wage on U.S. regional labor markets. The empirical analysis uses panel data covering ten years and (most) U.S. counties to examine the relationship between the minimum wage and several key components of the labor market. Following past research, we use data on the number of people in the labor force to represent labor supply, but—as an extension to the literature—we use job postings data as a measure of labor demand. Consistent with previous studies, our findings show a positive relationship between the number of people in the labor force and a county’s minimum wage. The results, however, show that the relationship between job postings and the minimum wage is not statistically significant in the full-sample analysis of U.S. counties. Additional analyses also suggest that metropolitan and urban labor markets react differently to changes in the minimum wage when compared to their non-metropolitan and rural counterparts.
    Keywords: Minimum Wage, U.S. Counties, Job Postings
    JEL: J38 J64 R11 R50
    Date: 2023–01–20
  12. By: Mertens, Matthias; Mottironi, Bernardo
    Abstract: Several models posit a positive cross-sectional correlation between markups and firm size, which, among others, characterizes misallocation, factor shares, and gains from trade. Yet, taking labor market power into account in markup estimation, we show that larger firms have lower markups. This correlation turns positive only after conditioning on wage markdowns, suggesting interactions between product and labor market power. Our findings are robust to common criticism (e.g., price bias) and hold across 19 European countries. We discuss the resulting implications and highlight studying input and output market power within an integrated framework as an important next step for future research.
    Keywords: firm size, markdowns, market power, markups
    JEL: J42 L11 L13 L25
    Date: 2023
  13. By: Lehwess-Litzmann, René
    Abstract: The present paper analyses frontline workers’ incomes in the fields of education, health, and welfare (“EHW”). In the face of an upsurge in demand for such services, the question is how EHW occupations can attract enough qualified workers, now and in the future. In public perception, EHW work is poorly paid, while empirically, wage heterogeneity between occupations is quite large. A comprehensive comparison of EHW occupations’ wages across Europe is still lacking. The present contribution seeks to fill this gap by comparing incomes for 24 European countries, based on data from the European Union’s labour force survey (EU-LFS) between 2016 and 2020. Our descriptive analysis yields that EHW workers earn slightly above-average incomes in the majority of countries. This result can be explained by the high share of EHW workers with a tertiary education level. By contrast, for EHW workers with only secondary education, we find that they earn less in EHW than in other labour-market segments. Both outside and inside the EHW, we observe higher incomes for men than for women. Between EHW occupations, there is an income hierarchy led by medical doctors and tertiary education teachers. At the lower end, there are personal care workers with lower formal education who earn below-average incomes in all observed countries. Yet the degree to which they are penalised differs widely. From a dynamic perspective, our findings hint at a slightly deteriorating relative income position of EHW workers in the 2010s, apparently caused less by declining wages than by structural change in the wider labour market.
    Keywords: income, care work, inequality, Europe
    Date: 2022
  14. By: Hernnäs, Sofia (Institutet för bostadsforskning vid Uppsala universitet.)
    Abstract: Automation affects workers because it affects the return to their skills when performing different tasks. I propose a general equilibrium model of occupational choice and technological change which takes two important labor market features into account: (i) automation happens to tasks and (ii) workers have bundled skills. Equilibrium skill returns vary across tasks, and the impact of automation on skill returns is task-specific. I find that, to a first-order approximation, skill returns depend only on the relative skill allocation in each task. In equilibrium, automation reduces employment in the task subjected to automation so long as tasks are gross complements. This reduction in employment increases both tasks’ intensity in the skill used intensively in the automated task. This increased intensity is coupled with a universal decline in the return to the skill used intensively in the automated task. Conversely, the return to the other skill increases in both tasks.
    Keywords: automation; bundled skills;
    JEL: J20
    Date: 2023–01–24
  15. By: Sita Slavov
    Abstract: Twenty years ago, the adjustment to monthly Social Security benefits for early or delayed claiming was, on average, roughly actuarially fair, although some subsets of individuals could gain from delay. Since then, delaying claiming has become much more attractive thanks to three factors: a more generous delayed retirement credit, improvements in mortality, and historically low real interest rates. In this article, I examine how these three factors influence optimal claiming behavior. I also discuss empirical patterns of claiming across individuals and over time, as well as explanations for these patterns. I argue that although many people appear to claim suboptimally early, this behavior may be changing as information spreads about the importance of the claiming decision. Finally, I discuss policy towards claiming and the impact that an increase in strategic claiming could have on Social Security’s finances.
    JEL: G59 H55 J26
    Date: 2023–01
  16. By: Giacinta Cestone (Bayes Business School, City University of London and ECGI.); Chiara Fumagalli (Università Bocconi, CSEF and CEPR); Francis Kramarz (CREST (ENSAE), Institut Polytechnique de Paris.); Giovanni Pica (Università della Svizzera Italiana (USI) and CSEF.)
    Abstract: We explore how business groups use internal labor markets (ILMs) in response to changing economic conditions. We show that following the exit of a large industry competitor, groupaffiliated firms expand and gain market share by increasing their reliance on the ILM to ensure swift hiring, especially of technical managers and skilled blue collar workers. The ability to take advantage of this shock to growth opportunities is greater in firms with closer access to their affiliates’ human capital, as geographical proximity facilitates employee relocations across units. Overall, our findings point to the ILM as a prominent mechanism making affiliation with a business group valuable at times of change. For the ILM to perform its role in the face of industry shocks, group sectoral diversification must be combined with geographical proximity between affiliates.
    Keywords: Business Groups, Human Capital, Labor Market Frictions, Internal Labor Markets.
    JEL: G30 L22 J20
  17. By: Janet Currie; Anran Li; Molly Schnell
    Abstract: We ask how competition influences the prescribing practices of physicians. Law changes granting nurse practitioners (NPs) the ability to prescribe controlled substances without physician collaboration or oversight generate exogenous variation in competition. In response, we find that general practice physicians (GPs) significantly increase their prescribing of controlled substances such as opioids and controlled anti-anxiety medications. GPs also increase their co-prescribing of opioids and benzodiazepines, a practice that goes against prescribing guidelines. These effects are more pronounced in areas with more NPs per GP at baseline and are concentrated in physician specialties that compete most directly with NPs. Our findings are consistent with a simple model of physician behavior in which competition for patients leads physicians to move toward the preferences of marginal patients. These results demonstrate that more competition will not always lead to improvements in patient care and can instead lead to excessive service provision.
    JEL: I11 J44 L10
    Date: 2023–01

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