nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2023‒04‒24
sixteen papers chosen by
Joseph Marchand
University of Alberta

  1. Is Pay Transparency Good? By Zoe B. Cullen
  2. Working Longer, Working Stronger? The Forward-Looking Effects of Increasing the Retirement Age on (Un)employment Behaviour By Niklas Gohl
  3. Labour quality growth in Poland By Jan Baran
  4. Pension Reforms and Couples' Labour Supply Decisions By Moghadam, Hamed Markazi; Puhani, Patrick A.; Tyrowicz, Joanna
  5. Basic reading and mathematics skills and the labour market outcomes of young people: Evidence from PISA and linked administrative data By Lisa Meehan; Gail Pacheco; Thomas Schober
  6. The Impact of Relative CEO Pay on Employee Productivity By Afzali, Aaron; Oxelheim, Lars; Randøy, Trond; Paulo Vieito, João
  7. Digitalization During the COVID-19 Crisis: Implications for Productivity and Labor Markets in Advanced Economies By Mr. Ippei Shibata; Carlo Pizzinelli; Marina M. Tavares; Andrea Medici; Longji Li; Myrto Oikonomou; Jiaming Soh; Ms. Florence Jaumotte
  8. Impact of COVID-19 shock on a segmented labour market: Analysis using a unique panel dataset By Das, Satadru; Ghosh, Saurabh; Mazumder, Debojyoti; Tushavera, Jitendra
  9. School ICT resources, teachers, and online education:Evidence from school closures in Japan during the COVID-19 pandemic By Hideo Akabayashi; Shimpei Taguchi; Mirka Zvedelikova
  10. Bitter Convergence: Contemporary Crisis of Labour in Rural West Bengal By Manikantha Nataraj; Soham Bhattacharya
  11. Revisiting Productivity Dynamics in Europe: A New Measure of Utilization-Adjusted TFP Growth By Diego Comin; Javier Quintana; Tom Schmitz; Antonella Trigari
  12. Difference-in-Differences with Unequal Baseline Treatment Status By Alisa Tazhitdinova; Gonzalo Vazquez-Bare
  13. Banking on Snow: Bank Capital, Risk, and Employment By Simon Baumgartner; Alex Stomper; Thomas Schober; Rudolf Winter-Ebmer
  14. Why Are the Wealthiest So Wealthy? A Longitudinal Empirical Investigation By Serdar Ozkan ⓡ; Joachim Hubmer ⓡ; Sergio Salgado ⓡ; Elin Halvorsen ⓡ; Serdar Ozkan
  15. The Relationship Between the University Wage Premium and the Urban-Rural Divide in Australia By Boss, Daniel
  16. Trade Shocks, Population Growth, and Migration By Sofía Fernández Guerrico

  1. By: Zoe B. Cullen
    Abstract: Countries around the world are enacting pay transparency policies to combat pay discrimination. 71% of OECD countries have done so since 2000. Most are enacting transparency horizontally, revealing pay between co-workers of similar seniority within a firm. While these policies have narrowed co-worker wage gaps, they have also lead to counterproductive peer comparisons and caused employers to bargain more aggressively, lowering average wages. Other pay transparency policies, without directly targeting discrimination, have benefited workers by addressing broader information frictions in the labor market. Vertical pay transparency policies reveal to workers pay differences across different levels of seniority. Empirical evidence suggests these policies can lead to more accurate and more optimistic beliefs about earnings potential, increasing employee motivation and productivity. Cross-firm pay transparency policies reveal wage differences across employers. These policies have encouraged workers to seek jobs at higher paying firms, negotiate higher pay, and sharpened wage competition between employers. We discuss the evidence on pay transparency’s effects, and open questions.
    JEL: J08 J31 J78
    Date: 2023–03
  2. By: Niklas Gohl
    Abstract: Leveraging two cohort-specific pension reforms, this paper estimates the forward-looking effects of an exogenous increase in the working horizon on (un)employment behaviour for individuals with a long remaining statutory working life. Using difference-in-differences and regression discontinuity approaches based on administrative and survey data, I show that a longer legal working horizon increases individuals’ subjective expectations about the length of their work life, raises the probability of employment, decreases the probability of unemployment, and increases the intensity of job search among the unemployed. Heterogeneity analyses show that the demonstrated employment effects are strongest for women and in occupations with comparatively low physical intensity, i.e., occupations that can be performed at older ages.
    Keywords: retirement policies, employment, DiD
    JEL: J24 J26 H21
    Date: 2023–03–28
  3. By: Jan Baran (Narodowy Bank Polski & University of Warsaw, Faculty of Economic Sciences)
    Abstract: The paper investigates changes in the quality of the labour input in Poland in 2006-2020. Labour quality – which captures compositional changes of the workforce, referring to education, experience, gender and occupation – substantially improved, growing on average by 0.55% a year, compared to much slower growth of unadjusted labour input (hours worked) of 0.11% a year. Growth in the labour quality, which means improvement in workers’ characteristics, was mainly driven by positive changes in the educational composition of workers. Labour quality growth showed less volatility compared to growth of hours worked in the economy and it was negatively correlated to both growth of hours worked and GDP growth, mitigating procyclicality of the labour input. Additionally, falling tertiary education wage premia are documented.
    Keywords: human capital, labour quality, labour input.
    JEL: E24 J21 J24
    Date: 2023
  4. By: Moghadam, Hamed Markazi; Puhani, Patrick A.; Tyrowicz, Joanna
    Abstract: To determine how wives' and husbands' retirement options affect their spouses' (and their own) labour supply decisions, we exploit (early) retirement cutoffs by way of a regression discontinuity design. Several German pension reforms since the early 1990s have gradually raised women's retirement age from 60 to 65, but also increased ages for several early retirement pathways affecting both sexes. We use German Socio-Economic Panel data for a sample of couples aged 50 to 69 whose retirement eligibility occurred (i) prior to the reforms, (ii) during the transition years, and (iii) after the major set of reforms. We find that, prior to the reforms, when several retirement options were available to both husbands and wives, both react almost symmetrically to their spouse reaching an early retirement age, that is both husband and wife decrease their labour supply by about 5 percentage points when the spouse reaches age 60). This speaks in favour of leisure complementarities. However, after the set of reforms, when retiring early was much more difficult, we find no more significant labour supply reaction to the spouse reaching a retirement age, whereas reaching one's own retirement age still triggers a significant reaction in labour supply. Our results may explain some of the diverse findings in the literature on asymmetric reactions between husbands and wives to their spouse reaching a retirement age: such reactions may in large parts depend on how flexibly workers are able to retire.
    Keywords: retirement coordination, labour market participation, household decisions, regression discontinuity design
    JEL: J22 J26
    Date: 2023
  5. By: Lisa Meehan (NZ Work Research Institute, Auckland University of Technology); Gail Pacheco (NZ Work Research Institute, Auckland University of Technology); Thomas Schober (NZ Work Research Institute, Auckland University of Technology)
    Abstract: This paper uses Programme for International Student Assessment (PISA) data linked to administrative data to track the educational and labour market outcomes of young people. Students with lower skills have lower rates of participation in further education. While men with low skills out-earn their higher-skilled counterparts when they are very young, their earnings are overtaken by those with higher skills when they are in their early twenties and earn around 15% less by the age of 25. The differences among women are substantially larger - women with low skills earn about 35% less than their higher-skilled counterparts by age 25.
    Keywords: PISA, cognitive skills, education, labour market, earnings
    JEL: J31 J24 I21 I26
    Date: 2023–03
  6. By: Afzali, Aaron (Hanken School of Economics); Oxelheim, Lars (School of Business and Law, University of Agder, Norway); Randøy, Trond (School of Business and Law, University of Agder, Norway); Paulo Vieito, João (Polytechnic Institute of Viana do Castelo, School of Business Studies, Portugal)
    Abstract: In this study, we examine the relationship between within-firm pay inequality and employee productivity. We use hand-collected data on a sample of S&P 1500 companies from 2018-2022 and find a concave relationship between the relative CEO pay and employee productivity. Consistent with tournament theory, we show that the pay gap between the CEO and the Vice Presidents initially positively affects employee productivity. However, this positive effect only works up to a certain level, at which - as expressed by the CEO-employee pay ratio - employee discontent initiates a fall in firm-level productivity. We identify this tipping point as the point at which CEO pay exceeds the median worker’s pay by a factor of 40. The average CEO-employee pay ratio in our sample is 193:1, suggesting that most firms could have avoided a fall in productivity by reducing their CEO-employee pay ratio. Our results remain robust after controlling for endogeneity. From a public policy perspective, our findings pave the way for corporate self-regulation of CEO pay to avoid politically imposed hard laws.
    Keywords: CEO pay; CEO pay-employee ratio; Employee productivity; Tournament incentives
    JEL: G18 G32 G34 J24 J33 M12
    Date: 2023–04–05
  7. By: Mr. Ippei Shibata; Carlo Pizzinelli; Marina M. Tavares; Andrea Medici; Longji Li; Myrto Oikonomou; Jiaming Soh; Ms. Florence Jaumotte
    Abstract: Digitalization induced by the pandemic was seen both as a possible silver-lining from the crisis that could increase longer-term productivity and a risk for further labor market inequality between digital and non-digital workers. The note shows that the pandemic accelerated digitalization and triggered a partial catch-up by less digitalized entities in advanced economies. Higher digitalization levels shielded substantially productivity and hours worked during the crisis. However, the extent to which the pandemic-induced digitalization led to structural change in the economy is less clear. Less digitalized sectors have rebounded more strongly, albeit after stronger declines, and while workers in digital occupations were more shielded from the crisis, there does not appear to be a structural change in the composition of labor demand. Meanwhile, shifts in labor supply are more likely to be permanent, driven by the increase in working from home.
    Keywords: Digitalization; COVID-19; labor market; productivity; productivity regression analysis; digitalization level; longer-term productivity; pandemic-induced digitalization; labor market tightness; Labor productivity; Labor markets; Total factor productivity; Europe
    Date: 2023–03–13
  8. By: Das, Satadru; Ghosh, Saurabh; Mazumder, Debojyoti; Tushavera, Jitendra
    Abstract: This paper studies the impact of economic crisis caused by the COVID on the Indian labour market using the Periodic Labour Force Survey (PLFS). The unique dataset offers the opportunity to analyse sectoral transition and mobility of workers in response to a crisis due to its rotational panel framework. We employ transition matrices, non-parametric cumulative distribution functions, and machine learning techniques to identify the impact of COVID shock on formal and informal sector workers and whether this impact was heterogeneous. We find that labour market outcomes, both in terms of employment status and income, became even more divergent between the formal and informal sectors during the first wave of pandemic and remained divergent in the recovery phase. The classification analysis highlights that the sector in which the worker was employed (formal or informal sector), was an important predictor of income loss during the first wave.
    Keywords: Segmented Labour Market, Informality, COVID scarring.
    JEL: J31 J46 J62
    Date: 2023–03
  9. By: Hideo Akabayashi (Faculty of Economics, Keio University); Shimpei Taguchi (Graduate School of Economics, Keio University (Graduate student)); Mirka Zvedelikova (Institute of Social and Economic Research, Osaka University)
    Abstract: As schools worldwide were forced to close due to the COVID-19 pandemic in early 2020, they struggled to switch to online education. Using Japan fs nationwide administrative data, we examine the impact of schools f ICT equipment and teachers f IT skills on the provision of online classes, communication with students f families, and teachers f working hours during and shortly after the closures. To isolate supply-side effects, we exploit differences in ICT resources between public elementary and junior high schools using a municipality-level fixed effects model, the level at which ICT resources are decided. We find that basic ICT equipment was critical to implementing online classes, but IT skills were not. Furthermore, we observe no effect of ICT resources on schools f communication with families. However, IT skills were associated with teachers f working hours. In particular, weak IT skills resulted in a higher percentage of teachers working overtime.
    Keywords: COVID-19, remote education, overtime work, teachers f skills, school resources
    JEL: I20 J22 H75
    Date: 2023–03–15
  10. By: Manikantha Nataraj (University of Strathclyde, Glasgow, Scotland.); Soham Bhattacharya (Dr B R Ambedkar School of Economics University, Bengaluru, India.)
    Abstract: Amidst a rising unemployment crisis in rural India, a pertinent concern has also been raised with respect to the working conditions prevailing in the countryside. Using two nationally representative surveys, between 2011- 2019, the study focuses on a few aspects of rural employment in the country, using the state of West Bengal as an illustration. Characterised by a stunted structural transformation of the rural economy, the conditions of employment in the state reveal two aspects of precarity. First, the predominance of self-employment as a form of employment in both farm and non-farm sectors is diagnosed with a small and petty scale of production. The returns from such petty enterprises are meagre. Second, a constant process of informalisation within the formal jobs in the rural non-farm sector have deepened the vulnerability of the workforce. These two crises together indicate a fatal process of convergence, where earnings from both, self-employment and salaried jobs, are eventually converging with the lowly paid rural casual wage work. This process of convergence of earnings is intimately related to the larger processes of immiserisation, and liquidation of entitlements of workers in the current neoliberal regime.
    Keywords: Employment; Rural Labour; Working Condition; West Bengal.
    Date: 2023–03
  11. By: Diego Comin; Javier Quintana; Tom Schmitz; Antonella Trigari
    Abstract: We compute new estimates for Total Factor Productivity (TFP) growth in five European countries and in the United States. Departing from standard methods, we account for positive profits and use firm surveys to proxy for unobserved changes in factor utilization. These novelties have a major impact in Europe, where our estimated TFP growth series are less volatile and less cyclical than the ones obtained with standard methods. Based on our approach, we provide annual industry-level and aggregate TFP series, as well as the first estimates of utilization-adjusted quarterly TFP growth in Europe. JEL Codes: E01, E30, O30, O40
    Date: 2023
  12. By: Alisa Tazhitdinova; Gonzalo Vazquez-Bare
    Abstract: We study a difference-in-differences (DiD) framework where groups experience unequal treatment statuses in the pre-policy change period. This approach is commonly employed in empirical studies but it contradicts the canonical model's assumptions. We show that in such settings, the standard DiD approach fails to recover the average treatment effect (ATT), unless the treatment effect is immediate and constant over time. Furthermore, the usual parallel trends test is invalid, meaning one may find pre-trends when the parallel trends assumption holds, and vice versa. We discuss two solutions. First, we show that including a linear term trend will recover the ATT if the differences in trends are constant over time (both in unequal baseline and canonical DiD settings) but not otherwise. Second, estimation in reverse also recovers the ATT if the potential outcomes do not depend on past treatments and post-policy statuses are converging.
    JEL: C21 C23
    Date: 2023–03
  13. By: Simon Baumgartner (Humboldt University Berlin); Alex Stomper (Humboldt University Berlin); Thomas Schober (NZ Work Research Institute, Auckland University of Technology); Rudolf Winter-Ebmer (Johannes Kepler University Linz)
    Abstract: How does small-firm employment respond to exogenous labour productivity risk? We find that this depends on the capitalization of firms’ local banks. The evidence comes from firms employing workers whose productivity depends on the weather. Weather- induced labour productivity risk reduces this employment, and this effect is stronger in regions where the regional banks have less equity capital. Bank capitalization also proxies for the extent to which the regional banks’ borrowers can obtain liquidity when the regions are hit by weather shocks. We argue that, as liquidity providers, well- capitalized banks support economic adaptation to climate change.
    Date: 2023–03
  14. By: Serdar Ozkan ⓡ; Joachim Hubmer ⓡ; Sergio Salgado ⓡ; Elin Halvorsen ⓡ; Serdar Ozkan
    Abstract: We use Norwegian administrative panel data on wealth and income between 1993 and 2015 to study lifecycle wealth dynamics, focusing on the wealthiest households. On average, the wealthiest start their lives substantially richer than other households in the same cohort, own mostly private equity, earn higher returns, derive most of their income from dividends and capital gains, and save at higher rates. At age 50, the excess wealth of the top 0.1% group relative to mid-wealth households is accounted for in about equal terms by higher saving rates (34%), higher initial wealth (32%), and higher returns (27%), while higher labor income (5%) and inheritances (1%) account for the small residual. There is significant heterogeneity among the wealthiest: one-fourth of them—which we dub the “New Money”—start with negative wealth but experience rapid wealth growth early in life. Relative to the quartile of top owners that already started their life rich—the “Old Money”—the New Money are characterized by even higher saving rates and returns and also by higher labor income. Their excess wealth is mainly explained by higher saving rates (46%), higher returns (34%), and higher labor income (16%).
    Keywords: wealth inequality, lifecycle wealth dynamics, rate of return heterogeneity, bequests, saving rate heterogeneity
    JEL: D14 D15 E21
    Date: 2023
  15. By: Boss, Daniel (Monash University)
    Abstract: This paper extends research conducted on the wage premia in Australia from acquiring tertiary education qualifications, covering the period 2007-08 to 2019-20. This analysis finds that while there is an increase in wages for those that complete tertiary education, the proportional increase in wages from obtaining university qualification declines marginally over the period. Conversely, the proportional increase in wages from obtaining other tertiary qualifications remains constant, with males consistently earning higher proportional increases than females. When accounting for location, there is no consistent significant effect on wages when comparing capital city and regional populations. However, when the mining industry is also accounted for, there is a significant positive effect to wages from living in a capital city in most years assessed, ranging from 2.5 to 6.7 per cent
    Keywords: Wage Premium ; Tertiary Education ; Labour Market JEL classifications: J30 ; J61
    Date: 2023
  16. By: Sofía Fernández Guerrico
    Abstract: This paper examines the effect of trade-induced changes in Mexican labor demand on population growth and migration responses at the local level. It exploits cross-municipality variation in exposure to a change in trade policy between the United States and China that eliminated potential tariff increases on Chinese imports, negatively affecting Mexican manufacturing exports to the United States. Municipalities more exposed to the policy change, via their industry structure, experienced greater employment loss. In the five years following the change in trade policy, more exposed municipalities experience increased population growth, driven by declines in out-migration. Conversely, 6 to 10 years after the change in trade policy, exposure to increased trade competition is associated with decreased population growth, driven by declines in in-migration and return migration rates, and increased out-migration. The sluggish regional adjustment is consistent with high moving costs and transitions across sectors in the short term.
    Keywords: Trade competition; Job displacement; Population growth
    JEL: F16 J23 O12 R12 R23
    Date: 2023–02–27

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