nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2023‒04‒03
sixteen papers chosen by
Joseph Marchand
University of Alberta

  1. Does Offshoring Shape Labor Market Imperfections? A Comparative Analysis of Belgian and Dutch Firms By Dobbelaere, Sabien; Fuss, Catherine; Vancauteren, Mark
  2. Earnings Penalty of Educational Mismatch: A Comparison of Alternative Methods of Assessing Over-Education By Wen, Le; Maani, Sholeh A.
  3. Gender Differences in the Early Career Earnings of Economics Graduates By Bazen, Stephen; Charni, Kadija
  4. Wages and productivity in Argentinian manufacturing: A structuralist and distributional firm-level analysis By Gómez, María Celeste; Virgillito, Maria Enrica
  5. Universal Preschool Lottery Admissions and Its Effects on Long-Run Earnings and Outcomes By Randall Akee; Leah R. Clark
  6. Decomposition of the Changes in Household Disposable Income Distribution in China By Gong, Chen; Sologon, Denisa Maria; Nimeh, Zina; O'Donoghue, Cathal
  7. Wages and the Role of Intangibles in Finance By Adnan Velic
  8. Parental Allowance Increase and Labour Supply: Evidence from a Czech Reform By Jakub Grossmann; Filip Pertold; Michal Soltes
  9. First Impressions Matter. Interview Interactions and Interviewers' Subjective Measures By Doorley, Karina; Sierminska, Eva
  10. Wage Developments in Japan: Four Key Issues for the Post-COVID-19 Wage Growth By Ichiro Fukunaga; Kakuho Furukawa; Shunsuke Haba; Yoshihiko Hogen; Yosuke Kido; Tomohiro Okubo; Kotaro Suita; Kosuke Takatomi
  11. Robot adoption, worker-firm sorting and wage inequality: Evidence from administrative panel data By Ester Faia; Gianmarco I. P. Ottaviano; Saverio Spinella
  12. Managing Employee Retention Concerns: Evidence from U.S. Census Data By Eva Labro; James D. Omartian
  13. Wage Functions in China and Eastern Europe : A Large-Scale Comparative Meta Analysis By HORIE, Norio; IWASAKI, Ichiro; KUPETS, Olga; MA, Xinxin; MIZOBATA, Satoshi; SATOGAMI, Mihoko
  14. Exposure to war and its labor market consequences over the life cycle By Braun, Sebastian T.; Stuhler, Jan
  15. Accidents at work in Italy: an empirical analysis at the regional level By Andrea Salustri; Marco Forti; Maria Alessandra Antonelli; Alessia Marrocco
  16. Immunity-driven Comparative Advantage and its Palliative Effect on Social Health and Inequality: A Theoretical Perspective By Marjit, Sugata; Das, Gouranga G.

  1. By: Dobbelaere, Sabien (Vrije Universiteit Amsterdam); Fuss, Catherine (National Bank of Belgium); Vancauteren, Mark (Universiteit Hasselt and Statistics Netherlands)
    Abstract: We study the relationship between offshoring and the prevalence and intensity of labor market imperfections at the firm level in Belgium and the Netherlands. Wage-markup pricing stemming from workers' monopoly power is more prevalent than wage-markdown pricing originating from firms' monopsony power in both countries. Offshoring benefits firms in that imports of final as well as intermediate goods are associated with a higher prevalence and intensity of wage markdowns. The widening effect of offshoring on wage markdowns arises from an increase in productivity that is only imperfectly passed through into an increase in wages. Offshoring is negatively related to the prevalence of wage markups. This also holds for the intensity of wage markups measured by workers' bargaining power in Belgium.
    Keywords: wage markdowns, wage markups, firm-level offshoring
    JEL: F14 F16 J42 J50
    Date: 2023–02
  2. By: Wen, Le (University of Auckland); Maani, Sholeh A. (University of Auckland)
    Abstract: In this paper we systematically evaluate the impact of using the alternative methods conventionally used in the international literature on the measured incidence of educational mismatch and its earnings effects. We use a rich Australian longitudinal data set for a controlled group of full-time employed workers. Using panel data estimation, we address individual heterogeneity and measurement error, which are important in educational mismatch analysis. We show that alternative methods of measurement result in a range of estimates, with the Mode measure providing the most stable results across instrumental variables (IV) selections in panel fixed effects instrumental variables (FEIV) estimations. Based on the Mode measure, the incidence rate of over-education is 32.3%. The earnings penalty for each year of over-education is 2.5%, which is larger than 0.6% in fixed effect estimation and also larger than 1.9% in OLS estimations.
    Keywords: over-education, education mismatch, earnings, measurement error, instrumental variable
    JEL: J24 J31
    Date: 2023–02
  3. By: Bazen, Stephen (Aix-Marseille University); Charni, Kadija (ESSCA School of Management)
    Abstract: In contrast to the UK, the USA and Germany, the majority of students in economics in France are female. Using a national survey of three cohorts of French university graduates in economics, we examine the gender differential in early career earnings. There is a significant raw differential in favour of male economics graduates in both starting pay and earnings three years after graduation, and the latter is wider than the former. Between 1998 and 2013 both gaps have narrowed but have not disappeared. The raw male-female pay differential stood at 10% for economics graduates in 2013. An Oaxaca decomposition reveals that nearly all of the gap is due to a persistent unexplained component. The gender differential among economics graduates is compared to that in two scientific subject areas: the female-dominated life sciences, and physics and chemistry (taken together) where a majority of graduates are male. The gender pay gap is smaller and the general level of earnings is lower in both science subject areas compared to economics. The decomposition attributes the limited gap in life sciences mainly to a composition effect, whereas in economics and physics and chemistry it is almost entirely due to the unexplained component. Gender differences in occupation suggest that female economics graduates are under-represented in more technical roles where two in five male graduates are found and where pay tends to be higher. However, even when occupation and sector are included as controls in an Oaxaca decomposition, two thirds of the gender differential remain unexplained.
    Keywords: gender earnings differentials, graduate labour market
    JEL: J31 J71
    Date: 2023–02
  4. By: Gómez, María Celeste; Virgillito, Maria Enrica
    Abstract: Wages and productivity represent two of the most relevant variables to consider in economic development. Given the low productivity levels that emerging countries reveal, the accumulation of productive capabilities and a narrower dispersion across sectors would enable emerging countries to overcome the middle-income trap. Yet, this positive trend in productivity should translate into higher wages. Thus, we pose the following questions applied to a middle-income trapped country: is there a link between labour productivity and wages in the Argentine manufacturing sector? Does it differ across techno-productive classes or wage levels? Which factors affect this nexus, considering premature deindustrialisation? Using a firm-level dataset from 2010 to 2016, we perform quantile regression estimates to evaluate the link between productivity and wages across the conditional wage distribution among manufacturing firms. Based on a structural analysis, we identify the differences in these elasticities at 2-ISIC code levels and across Pavitt taxonomies. Our results confirm a positive, but extremely low, pass-through between productivity and wages in the Argentinian manufacturing firms, different across sectors according to their techno-productive capabilities, robust under different empirical strategies.
    Keywords: Gains from productivity, Development, Asymmetries
    JEL: J31 D24 L6 O14 C21
    Date: 2023
  5. By: Randall Akee; Leah R. Clark
    Abstract: We use an admissions lottery to estimate the effect of a universal (non-means tested) preschool program on students’ long-run earnings, income, marital status, fertility and geographic mobility. We observe long-run outcomes by linking both admitted and non-admitted individuals to confidential administrative data including tax records. Funding for this preschool program comes from an Indigenous organization, which grants Indigenous students admissions preference and free tuition. We find treated children have between 5 to 6 percent higher earnings as young adults. The results are strongest for individuals from the lower half of the household income distribution in childhood. Likely mechanisms include high-quality teachers and curriculum.
    Keywords: Children, Preschool, Returns to Education, Native Americans, Long-Run Outcomes, Income, Employment, Earnings, Wage Level
    JEL: I20 I21 I24 I26 J24 J31
    Date: 2023–03
  6. By: Gong, Chen (Maastricht University); Sologon, Denisa Maria (LISER (CEPS/INSTEAD)); Nimeh, Zina (Maastricht University); O'Donoghue, Cathal (National University of Ireland, Galway)
    Abstract: Studies have shown that the previously growing inequality in China has stabilized and even declined since 2008 (Kanbur et al., 2021), nevertheless, the drivers of the latest trans-formation in income inequality remain to be unraveled. We address this research gap by examining the changes in the distribution of household disposable income and its drivers in China from 2010 to 2016. We apply the distributional decomposition method proposed by Bourguignon et al. (2008) and Sologon et al. (2021), and quantify the contribution of all factors into four general dimensions, (1) demographic composition, (2) labor market structure, (3) price and return, and (4) governmental transfers. This study considers not only the individual labor income as with existing literature, but also models other family incomes and social transfers to reflect the real economic conditions more accurately. The decomposition results show that all four factors contribute positively to the decline in income inequality during the period studied. The changes in urban labor market structure, specifically the general forms of employment, occupational and industrial structure, have been contributing as inequality augmenting factors.
    Keywords: income distribution, decomposition, income inequality, microsimulation, overtime comparison, labor market structure, demographic structure
    JEL: D63 D31 F63
    Date: 2023–01
  7. By: Adnan Velic (Technological University Dublin)
    Abstract: This paper investigates the role of intangible and ICT capital in the growth of relative finance wages. Within a multi-level nested production framework, we find that the degree and effects of complementarity between skilled labor and different categories of capital are much more pronounced in finance than in the rest of the market economy. The stronger positive effects of such complementarity on finance skill premia are further reinforced by relatively stronger technical change in the sector. Controlling for various factors, subsequent reduced-form analysis also indicates that rising intangible or ICT capital in finance relative to that in non-finance increases corresponding relative aggregate and skilled finance wages through complementarity and volume effects. This implies that skill composition matters for relative finance wage growth. While skilled labor, compared to unskilled labor, predominantly drives finance wages, we also find that the finance sector contributes to income inequality by disproportionately affecting the market economy skill premium. Despite accounting for under a tenth of overall economic activity, finance offsets up to almost a third of declines in skilled-unskilled wage disparities nationally. Intensified intangible capital growth in the industry stands to exacerbate this trend. Finally, our study suggests that financial deregulation, globalization, banking competition, and domestic credit expansion positively affect finance relative to non-finance wages, while relative skilled labor supply increases and labor market rigidity impart negative effects. We obtain strong evidence that stricter labor market protection dampens the impact of banking competition.
    Keywords: skill premium, inequality, intangiblecapital, finance, factor-substitutionelasticities, factor-biasedproductivitygrowth, factor-income shares, multi-level nesting
    JEL: G2 J2 J3 O3 O4
    Date: 2023–03
  8. By: Jakub Grossmann; Filip Pertold; Michal Soltes
    Abstract: We study the effect of a CZK 80, 000 (36%) increase in parental allowance, a universal basic income-type benefit, on the labor supply of parents in the Czech Republic. Drawing a parental allowance does not preclude labor market activity, which allows us to study the income effect. After the reform, mothers substantially prolonged the average period they drew an allowance. The labor market participation of mothers of young children decreased by 6 percentage points (15%). The estimated effect corresponds to a non-labor income labor supply elasticity at the extensive margin of about -0.5. The effect is particularly strong among mothers with their first child (10 p.p. or 28%) and among university-educated mothers (16 p.p. or 36%). We observe a virtually identical reduction in hours worked. We found no effect on the labor supply of fathers.
    Keywords: Parental allowance; Maternal labor supply; Income effect of social policy; Czech Republic;
    Date: 2023–02
  9. By: Doorley, Karina (Economic and Social Research Institute, Dublin); Sierminska, Eva (LISER (CEPS/INSTEAD))
    Abstract: This note uses a unique dataset for Germany which contains interviewer-rated physical appearance assessments of survey respondents both before and after the interview to address three questions. Firstly, after the first impression of an individual's physical appearance, what characteristics make people appear more or less attractive to interviewers? We find that these differ widely by respondent gender. Second, how does this second impression vary by interviewer characteristics? We note differences by interview gender, education and age which has implications for the design of surveys which attempt to abstract "objective" measures of respondent characteristics from interviewers. Lastly, is the first impression of physical appearance most important in determining income or is there also a role for the second impression? Here we find that while it is the first impression which matters, the correlation between interviewer-rated attractiveness and income is higher if it is recorded by somebody of the same gender.
    Keywords: survey, beauty, income
    JEL: J31 C83 J70
    Date: 2023–02
  10. By: Ichiro Fukunaga (Bank of Japan); Kakuho Furukawa (Bank of Japan); Shunsuke Haba (Bank of Japan); Yoshihiko Hogen (Bank of Japan); Yosuke Kido (Bank of Japan); Tomohiro Okubo (Bank of Japan); Kotaro Suita (Bank of Japan); Kosuke Takatomi (Bank of Japan)
    Abstract: This paper examines various factors that have dampened nominal wage growth in Japan, comparing them with those in the U.S. and Europe, and shows that some of these factors have been changing since around the COVID-19 outbreak. Specifically, we point to the tightening of the labor market conditions partly reflecting demographic trends, the plateauing trend of the part-time worker ratio, signs that the job-to-job transition is becoming more active as wages rise, and an increased consideration of inflation for labor-management wage negotiations. Key issues on the outlook for the pace and durability of nominal wage growth in Japan are (A) whether wages will rise more broadly, including among full-time workers with relatively low mobility, (B) whether firms' growth expectations will increase, boosting investment and leading to higher labor productivity, (C) whether labor mobility will be facilitated by skill upgrading, and (D) whether the situation in which wage increases have been suppressed under the low inflation norm will change so that prices and nominal wages will rise together.
    Keywords: Business Wages; Labor market; Prices
    JEL: J20 J30
    Date: 2023–03–16
  11. By: Ester Faia; Gianmarco I. P. Ottaviano; Saverio Spinella
    Abstract: Leveraging the geographic dimension of a large administrative panel on employer-employee contracts, we study the impact of robot adoption on wage inequality through changes in worker-firm assortativity. Using recently developed methods to correctly and robustly estimate worker and firm unobserved characteristics, we find that robot adoption increases wage inequality by fostering both horizontal and vertical task specialization across firms. In local economies where robot penetration has been more pronounced, workers performing similar tasks have disproportionately clustered in the same firms ('segregation'). Moreover, such clustering has been characterized by the concentration of higher earners performing more complex tasks in firms paying higher wages ('sorting'). These firms are more productive and poach more aggressively. We rationalize these findings through a simple extension of a well-established class of models with two-sided heterogeneity, on-the-job search, rent sharing and employee Bertrand poaching, where we allow robot adoption to strengthen the complementarities between firm and worker characteristics.
    Keywords: robot adoption, worker-firm sorting, wage inequality, technological change, finite mixture models
    Date: 2023–02–10
  12. By: Eva Labro; James D. Omartian
    Abstract: Using Census microdata on 14, 000 manufacturing plants, we examine how firms man age employee retention concerns in response to local wage pressure. We validate our measure of employee retention concerns by documenting that plants respond with wage increases, and do so more when the employees’ human capital is higher. We doc ument substantial use of non-wage levers in response to retention concerns. Plants shift incentives to increase the likelihood that bonuses can be paid: performance target transparency declines, as does the use of localized performance metrics for bonuses. Furthermore, promotions become more meritocratic, ensuring key employees can be promoted and retained. Lastly, decision-making authority at the plant-level increases, offering more agency to local employees. We find evidence consistent with inequity aversion constraining the response to local wage pressure, and document spillovers in both wage and non-wage reactions across same-firm plants.
    Keywords: Retention concerns, Inequity aversion, Multi-divisional firms
    Date: 2023–02
  13. By: HORIE, Norio; IWASAKI, Ichiro; KUPETS, Olga; MA, Xinxin; MIZOBATA, Satoshi; SATOGAMI, Mihoko
    Abstract: This paper conducts a meta-analysis using 6453 estimates reported in 216 research works to compare the wage function in China and Eastern Europe. The results indicate that the wage systems in both China and Eastern Europe were structured consistently with economic theories. Nevertheless, it is also revealed that the shape of their wage functions has changed dynamically in recent decades. In fact, both China and Eastern Europe have experienced a flattening of their wage-experience profiles over time. At the same time, China and Eastern Europe have showed quite contrasting changes in the wage effects of education and gender.
    Keywords: wage function, research synthesis, meta-regression analysis, publication selection bias, China, Eastern Europe
    JEL: D31 I26 J16 J31 P23 P36
    Date: 2023–03
  14. By: Braun, Sebastian T.; Stuhler, Jan
    Abstract: With 70 million dead, World War II remains the most devastating conflict in history. Of the survivors, millions were displaced, returned maimed from the battlefield, or spent years in captivity. We examine the impact of such wartime experiences on labor market careers and show that they often become apparent only at certain life stages. While war injuries reduced employment in old age, former prisoners of war postponed their retirement. Many displaced workers, particularly women, never returned to employment. These responses are in line with standard life-cycle theory and thus likely extend to other conflicts.
    Keywords: World War II, labor market careers, war injuries, prisoners of war, displacement, life‐, cycle models
    JEL: J24 J26 N34
    Date: 2023
  15. By: Andrea Salustri; Marco Forti; Maria Alessandra Antonelli; Alessia Marrocco (Università Sapienza di Roma - Dipartimento di Studi Giuridici, Filosofici ed Economici)
    Abstract: This work proposes an analysis of occupational accidents in Italy at the regional level. To this end, INAIL and ISTAT data are used for the period 2010-2019 to apply different econometric estimation techniques (pooled OLS model, fixed effects model and random effects model) and to better consider regional specificities. As will be seen in the course of the work, in most of the estimates, the results show statistically significant correlations between some economic variables and the regional social context (GDP per capita, level of education, unemployment, fragility of the local labour market and level of crime in the region) and the accident phenomenon alternatively defined with different indicators. Therefore, the analysis seemingly confirms the relevance of the regional dimension, which should also be considered for possible policy interventions.
    Keywords: occupational accidents, business cycle, Italian regions, panel data
    JEL: J21 J28
    Date: 2023–03
  16. By: Marjit, Sugata; Das, Gouranga G.
    Abstract: We propose a model of "trade" between high income and low-income groups where the rich being scared of the spread of infection hires the poor to engage them in exposure-intensive outdoor activities as workers in the household industry. People who endure hardships and sustain exposure to unhygienic conditions may develop stronger immunity to fight the ongoing pandemic than members of the privileged class. The low-income group has greater endowment of immunity to income and for the rich it is lower. If such exchange takes place, essentially less immune people are withdrawn from exposure intensive activities and are being substituted by more immune workers. Thus, the spread and fatality will reduce with such a trade. The greater is the inequality, the more would be demand for labor for such work resulting in greater volume of such trade between low income and high-income workers. Thus, spread of the disease will be lower for countries where inequality is high. Later under a general equilibrium setting, we show that, ceteris paribus, a pandemic with a significant threat of infection and fatality would mean greater demand for poor workers; their income would rise and inequality would decline. If the pandemic increases demand for the top skilled, such as the case with virtual activities and derived demand for low skilled, relative wage for the top and bottom would increase.
    Keywords: Covid, Exposure-intensity, Gig economy, Wage Inequality, Herd-immunity, Comparative Advantage, Welfare, General Equilibrium
    JEL: D5 I18 J31 L8 N3 O1
    Date: 2023

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