nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2023‒03‒06
eighteen papers chosen by
Joseph Marchand
University of Alberta

  1. Task Mismatch and Salary Penalties: Evidence from the Biomedical PhD Labor Market By Holden A. Diethorn; Gerald R. Marschke
  2. Labor Market Concentration and Wages: Incumbents versus New Hires By Bassanini, Andrea; Batut, Cyprien; Caroli, Eve
  3. The impact of alternative childcare policies on mothers' employment in selected EU countries By Edlira Narazania; Ana Agundez Garcia; Michael Christl; Francesco Figari
  4. Training in Late Careers: A Structural Approach By Backhaus, Teresa
  5. Distorted Innovation: Does the Market Get the Direction of Technology Right? By Daron Acemoglu
  6. Does skill shortage pay off for nursing staff in Germany? Wage premiums for hiring problems, industrial relations, and profitability. By Kölling, Arnd
  7. Heterogeneous Adjustments of Labor Markets to Automation Technologies By Fabien Petit; Florencia Jaccoud; Tommaso Ciarli
  8. Losing height: measuring the regional loss of human capital from the Republican exile to Mexico By Sanchez Alonso, Blanca; Santiago Caballero, Carlos
  9. Information frictions, belief updating and internal migration: Evidence from Ghana and Uganda By Frohnweiler, Sarah; Beber, Bernd; Ebert, Cara
  10. Leveraging social comparisons: the role of peer assignment policies By Julien Senn; Jan Schmitz; Christian Zehnder
  11. Labour Market Power and the Dynamic Gains to Openness Reforms By Priyaranjan Jha; Antonio Rodriguez-Lopez; Adam Hal Spencer
  12. Long-Term Effects of Grade Retention By Simon ter Meulen
  13. The effects of schooling on cognitive skills: evidence from education expansions By Lorenzo Cappellari; Daniele Checchi; Marco Ovidi
  14. Do reduced working hours for older workers have health consequences and prolong work careers? By Ravaska, Terhi
  15. Implicit Contracts, Incentive Compatibility, and Involuntary Unemployment: Thirty Years On By MacLeod, W. Bentley; Malcomson, James
  16. Defying distance? The provision of services in the digital age By Dahlstrand Rudin, Amanda
  17. Does income transparency affect support for redistribution? Evidence from Finland's tax day By Maurice Dunaiski; Janne Tukiainen
  18. Revisiting the relationship between firm strategic capabilities and productivity in a multilevel analysis: Do labor market conditions matter? By Fernando Cárdenas Echeverri; Andres García-Suaza; Juan Esteban Garzon Restrepo

  1. By: Holden A. Diethorn; Gerald R. Marschke
    Abstract: We use the labor market for doctorates in the biomedical sciences, where career dislocation is common, as a case study of skill-task mismatch and its consequences. Using longitudinal, worker-level data on biomedical doctorates, we investigate mismatch as an explanation for the negative pecuniary returns to postdoc training. Our data contain unique worker-level job task information that allows us to compare the skills acquired in the years just after graduation to the tasks required in later employment. Our findings reveal a postdoc salary penalty when task mismatch is high, which is frequent, and a salary premium when skills align with tasks. Differences in accumulated task-specific human capital explain the between-sector heterogeneity in the returns to postdoctoral training, including the large and persistent salary penalties from postdoctoral training in industry, and the penalty overall. Task mismatch as a cost of pursuing risky careers in science and in other fields requiring large upfront investments in task-specific human capital has received little attention in the empirical labor literature.
    JEL: I26 J24 J31 J44
    Date: 2023–02
  2. By: Bassanini, Andrea (OECD); Batut, Cyprien (Paris School of Economics); Caroli, Eve (Université Paris-Dauphine)
    Abstract: We investigate the impact of labor market concentration on average wages and decompose it into its effects on new hires and incumbents, where incumbents are defined as individuals who were already employed in the same firm the year before. Using administrative data for France, we find that concentration negatively affects both new hires' and incumbents' wages with elasticities ranging from -0.0287 to -0.0296 and -0.0185 to -0.0230, respectively. It also reduces the probability that a worker be a new hire rather than an incumbent. When decomposing the overall effect of labor market concentration on wages into its different components, we find that the negative effect on incumbents' wages accounts for between two thirds and three fourth of the total.
    Keywords: labor market concentration, monopsony, wages, incumbents
    JEL: J31 J42 L41
    Date: 2023–01
  3. By: Edlira Narazania (JRC Sevilla); Ana Agundez Garcia (JRC Sevilla); Michael Christl (JRC Sevilla); Francesco Figari (University of Eastern Piedmont)
    Abstract: This paper contributes to the debate on the revision of the Barcelona targets on childcare, as promoted by the European Commission in 2022, that aims to provide childcare for children below the age of 3. Using EUROLAB, a structural model of labour supply that can also accounts for labour demand constraints, we estimate female labour market participation reactions to alternative scenarios of formal childcare policies in European countries with very low child care provision for children below 3. We quantify the potential increases in the labour supply of mothers (at the extensive and intensive margins) in the case of fulfilling potential new targets of childcare provision (40%, 50%, 60% and 65%). Achieving these targets would lead to significantly increased labour supply of mothers especially in countries like Hungary and Poland where the current share of formal childcare and/or female labour participation is low. In countries like Portugal, that are far beyond the existing childcare target, changes in labour supply incentives are instead expected to be moderate. We further show that when accounting for labour demand, the expected final employment effects will be less pronounced, but still positive.
    Keywords: Labour market equilibrium, labour supply, labour demand, structural models, discrete choice, childcare
    JEL: J20 J22 J23 J13
    Date: 2023–02
  4. By: Backhaus, Teresa (University of Bonn)
    Abstract: This study investigates the role of on-the-job training in the employment outcomes of less educated men in their late careers. Using survey data from the German National Education Panel Study adult cohort, I estimate a structural dynamic discrete-choice model reflecting the trade-offs of the employees' training participation decision. The data set enables me to distinguish whether non-participation is due to lack of availability of training or due to individual cost-benefit considerations. As a consequence, I can investigate whether future policy interventions should target the provision of training or the individual participation incentives. I find that on-the-job training has a positive impact on the employees' employment prospects. Counterfactual simulations show that a reduction of the individual training costs would increase training participation and positively affect the employment rate near retirement. In contrast, an increase in the general availability of training would not be effective.
    Keywords: on-the-job training, late career, less educated, structural model
    JEL: E24 J14 J22 J24 M53
    Date: 2023–01
  5. By: Daron Acemoglu
    Abstract: In the presence of markup differences, externalities and other social considerations, the equilibrium direction of innovation can be systematically distorted. This paper builds a simple model of endogenous technology, which generalizes existing comparative static results and characterizes potential distortions in the direction of innovation. I show that empirical findings across a number of different areas are consistent with this framework's predictions and I use data from several studies to estimate its key parameters. Combining these numbers with rough estimates of differential externalities and markups, I provide suggestive evidence that equilibrium distortions in the direction of technology can be substantial in the context of industrial automation, health care, and energy, and correcting these distortions could have sizable welfare benefits.
    JEL: C65 J23 J24 L65 O14 O31 O33
    Date: 2023–02
  6. By: Kölling, Arnd
    Abstract: This study investigates the impact of hiring problems, industrial relations at the workplace and profitability on compensation and wage premia for nursing staff in Germany. Based on Mincer-type earnings functions and a large linked-employee dataset, regressions with unobserved individual and firm-specific fixed effects are estimated. The econometric analysis shows that firms with staffing problems pay a wage premium of about 4 to 5% for nurses. However, this only holds for firms that do not have a works council and/or are not profitable. Here, the wage premium for staffing is paid at the expense of previous premiums for co-determination at the workplace or rent sharing. These premiums are significantly reduced or eliminated due to better outside options. Overall, the pay increases for nurses in firms with staffing problems. Nevertheless, this does not apply to all skilled workers in Germany.
    Keywords: Shortage of skilled labor; works councils; wage premium; nurses
    JEL: J23 J24 J52 J63
    Date: 2023–02–02
  7. By: Fabien Petit; Florencia Jaccoud; Tommaso Ciarli
    Abstract: This paper examines the labor market adjustments to four automation technologies (i.e. robots, communication technology, information technology, and software/database) in 227 regions across 22 European countries from 1995 to 2017. By constructing a measure of technology penetration, we estimate changes in regional employment and wages affected by automation technologies along with the reallocation of workers between sectors. We find that labor market adjustments to automation technologies differ according to i) the technology involved, ii) the sector of penetration, iii) the sectoral composition of the region, and iv) the region’s technological capabilities. These adjustments are driven largely by the reallocation of low-paid workers across sectors.
    Keywords: automation technology, labor market, employment reallocation, sectoral composition
    JEL: J21 O33 R23
    Date: 2023
  8. By: Sanchez Alonso, Blanca; Santiago Caballero, Carlos
    Abstract: Recent studies showed that Spanish republican exiles who travelled to Mexico to escape the effects and aftermath of the Spanish civil war were positively selected. However, the potential existence of regional differences in this positive selection needs to be addressed appropriately. Using a new dataset directly extracted from primary sources, we compare the heights of the republican exiles in Mexico with the estimations of those who stayed behind in their provinces of origin. We also study the existence of potential determinants to explain these differences. In addition to estimating how intense the loss of human capital was at the regional level, we also compare the heights of the republican exiles in Mexico with the heights of the Mexican population. Our results show significant regional differences in the positive selection of republican exiles. This was probably the consequence of the opportunities the local populations had to escape after the war started. We also show that Mexico was a place where Spanish migrants were able to obtain better occupations than their counterparts in Spain, meaning that although Mexico benefited from the arrival of a highly skilled labour force, it also provided republican exiles new opportunities.
    Keywords: Heights; Exile; Gender; War
    JEL: D6 J24 N0 N33 O15
    Date: 2023–01–20
  9. By: Frohnweiler, Sarah; Beber, Bernd; Ebert, Cara
    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
  10. By: Julien Senn; Jan Schmitz; Christian Zehnder
    Abstract: Using a large-scale real effort experiment, we explore whether and how different peer assignment mechanisms affect worker performance and stress. Letting individuals choose whom to compare to increases productivity to the same extent as a targeted exogenous matching policy aimed at maximizing motivational spillovers. These effects are significantly larger than those obtained through random assignment and their magnitude is comparable to the impact of monetary incentives that increase pay by about 10 percent. A downside of targeted peer assignment is that, unlike endogenous peer selection, it leads to a large increase in stress. We uncover the behavioral origins of these desirable effects of peer choice using a combination of choice data, text analysis and simulations. The key advantage of letting workers choose whom to compare to is that it allows those workers who want to be motivated to compare to a motivating peer while also permitting those for whom social comparisons have little benefits or are too stressful to avoid them. Altogether, our results highlight that policies should not only be compared regarding their effects on output, but also with respect to their potential unintended consequences.
    Keywords: Social comparisons, productivity, stress, incentives, real effort
    JEL: C93 J24 M54
    Date: 2023–02
  11. By: Priyaranjan Jha; Antonio Rodriguez-Lopez; Adam Hal Spencer
    Abstract: We develop a dynamic general equilibrium framework with firm heterogeneity and monopsonistic labour markets, for quantification of the impact of trade and FDI liberalisation episodes. Firms make standard extensive margin investment choices into exporting and multinational statuses. The labour market features upward-sloping supply curves and love of variety in employment. These features interact with the variable-fixed cost tradeoff of outward activity. We calibrate the model to U.S. data and study the effect of reductions in tariffs and outward FDI taxes in both bilateral and unilateral contexts, examining steady state and transitional effects. We compare the predictions of this model with a more standard version with perfectly competitive labour markets. Our headline finding is that the model with labour market power gives substantially different quantitative estimates to the perfectly competitive version. For instance, a bilateral trade liberalisation gives welfare gains that are over 10 times larger in the presence of monopsony power. Significant quantitative differences persist with a variety of robustness exercises.
    Keywords: monopsonistic labour market, trade liberalisation, love of firm variety, dynamics, foreign direct investment, corporate taxation
    JEL: F12 F13 F16 F23 F40 H25
    Date: 2023
  12. By: Simon ter Meulen
    Abstract: Grade retention offers students a chance to catch up with unmastered material but also leads to less labor-market experience by delaying graduation and labor-market entry. This is the first paper to quantify this trade-off, using an exit exam cutoff of Dutch academic secondary schools, where failing implies grade retention. I find no impact of retaining on final educational attainment, although retained students are later to graduate. Grade retention does lead to annual earnings loss at age 28 of 3000 euro (8.5%) due to reduced labor-market experience. Overall, grade retention is of no benefit for students around the cutoff.
    Keywords: grade retention, secondary education, higher education degrees, earnings loss
    JEL: I21 I23 I26
    Date: 2023
  13. By: Lorenzo Cappellari; Daniele Checchi; Marco Ovidi
    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 drop-ping 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: 2023–02
  14. By: Ravaska, Terhi
    Abstract: I examine the effects of reduced working hours on various health outcomes. I focus on individuals close to retirement and exploit a reform in part-time pension rules. Using detailed register data on health and job spells together with a difference-in-differences approach, I find that an earlier eligibility age for part-time pension program increased purchases of prescription drugs by approximately 1.0 percentage point over the following 6 years. In relative terms, this effect is small, around 2%, but is economically significant as drug purchases are largely subsidized by the state. However, looking at the long-term effects I do not find effects on mortality or severe health diagnoses. I also look at labour market exits and find that the reform did not reduce the risk of early withdrawal from the labour market.
    Keywords: part-time pension, health, eligibility age reform, work hours, Social security, taxation and inequality, J26, I10, fi=Sosiaaliturva|sv=Social trygghet|en=Social security|, fi=Terveyspalvelut|sv=Hälsovårdstjänster|en=Healthcare services|, fi=Työmarkkinat|sv=Arbetsmarknad|en=Labour markets|,
    Date: 2023
  15. By: MacLeod, W. Bentley (Princeton University); Malcomson, James (University of Oxford)
    Abstract: "Implicit Contracts, incentive compatibility, and involuntary unemployment" (MacLeod and Malcomson, 1989) remains our most highly cited work. We briefly review the development of this paper and of our subsequent related work, and conclude with reflections on the future of relational contract theory and practice.
    Keywords: relational contracts, informal enforcement, legal enforcement, incentives, private information
    JEL: D21 D23 D82 D86 L14 L22 L23 L24
    Date: 2023–01
  16. By: Dahlstrand Rudin, Amanda
    Abstract: Digital platforms are transforming services by making the physical distance between provider and user less relevant. I quantify the potential gains this flexibility offers in the context of digital primary care in Sweden, harnessing nationwide conditional random assignment between 200, 000 patients and 150 doctors. I evaluate causal effects of matching patients of varying risks to doctors with different skills and assess counterfactual policies compared to random assignment. Matching patients at high risk of avoidable hospitalizations to doctors skilled at triaging reduces avoidable hospitalizations by 20% on aggregate - without affecting other adverse outcomes, such as counter-guideline antibiotics prescriptions. Conversely, matching the best triaging doctors to the richest patients leads to more avoidable hospitalizations, since the most vulnerable patients are often the poorest. Hence, remote matching can sever the link between local area income and service quality in favor of a needs-based assignment, improving the effectiveness and equity of service provision.
    Keywords: skills; labor markets; health and inequality
    JEL: J24 J40 I10
    Date: 2022–12–07
  17. By: Maurice Dunaiski (UNODC Research); Janne Tukiainen (Department of Economics, University of Turku.)
    Abstract: This paper examines whether income transparency - the public release of citizens' income information - affects support for redistribution. We leverage a quasi-experiment in Finland, where every year on the so-called tax day, the authorities release income information on Finland's top earners to the public. To identify causal effects we compare respondents who took part in the European Social Survey shortly before and after the event. We find that the tax day increases perceptions that earnings of the top 10% are unfair, but that public support for redistribution remains largely unaffected. A notable exception are top earners, who decrease their support for redistribution, and young people, who increase their support for redistribution. Our results highlight the scope conditions of previous experimental studies, and suggest that increasing exposure to inequality through a real-world policy, rather than experimental treatments, may trigger only marginal changes in support for redistribution.
    Keywords: income transparency, inequality, redistribution, taxes
    JEL: D31 D63 D72 D80 H20 H23 H24 H31
    Date: 2023–02
  18. By: Fernando Cárdenas Echeverri; Andres García-Suaza; Juan Esteban Garzon Restrepo
    Abstract: This paper studies the relationship between managerial capital, social capital and firm productivity in Colombia, and explores whether this relationship depends on labor quality and formality. Results confirm a positive and significant effect of firm capabilities (managerial and social capital) on TFP (total factor productivity) and suggest a substitution effect between them. A positive effect of labor quality and formality on firm productivity is documented. Even though results are not conclusive, labor quality appears to increase the effect of managerial capital and reduce that for social capital, while labor formality seems to have no impact on their marginal effect. This is important for policy makers reinforcing the importance of quality education, labor formality and the relevance of programs promoting adoption of managerial practices and development of networks.
    Keywords: Productivity, Managerial Capital, Social Capital, Labor formality, Developing countries
    JEL: L10 L25 M21 O40
    Date: 2023–02–15

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