nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2023‒05‒15
nineteen papers chosen by
Joseph Marchand
University of Alberta

  1. Employers' Demand for Personality Traits By Brenčič, Vera; McGee, Andrew
  2. The Labor Market Returns to Very Short Postsecondary Certificates By Darolia, Rajeev; Guo, Chuanyi; Kim, Youngran
  3. The Motherhood Wage and Income Traps By Barigozzi, Francesca; Cremer, Helmuth; Thibault, Emmanuel
  4. Impact of Graduating with Honors on Entry Wages of Economics Majors By Atay, Salim; Asik, Gunes A.; Tumen, Semih
  5. Skill Depreciation during Unemployment: Evidence from Panel Data By Jonathan P. Cohen; Andrew C. Johnston; Attila S. Lindner
  6. Biased Expectations and Labor Market Outcomes: Evidence from German Survey Data and Implications for the East-West Wage Gap By Almut Balleer; Georg Duernecker; Susanne Forstner; Johannes Goensch
  7. Shifts in Composition of Jobs: Upgrading, Downgrading or Polarization? The Case of Russia 2000-2019 By Gimpelson, Vladimir; Kapeliushnikov, Rostislav
  8. Factor Substitution Possibilities, Labor Share Dynamics, and Inequality in an Age of Intangibles By Adnan Velic
  9. Exposure to War and Its Labor Market Consequences over the Life Cycle By Braun, Sebastian Till; Stuhler, Jan
  10. Parental Allowance Increase and Labor Supply: Evidence from a Czech Reform By Jakub Grossmann; Filip Pertold; Michal Šoltés
  11. The Pandemic Push: Digital Technologies and Workforce Adjustments By Gathmann, Christina; Kagerl, Christian; Pohlan, Laura; Roth, Duncan
  12. Technological Change, Firm Heterogeneity and Wage Inequality By Cortes, Guido Matias; Lerche, Adrian; Schönberg, Uta; Tschopp, Jeanne
  13. The drivers of labour share and impact on pay inequality: A firm-level investigation By Roya Taherifar; Mark J. Holmes; Gazi M. Hassan
  14. Non-compete agreements in a rigid labour market: The case of Italy By Tito Boeri; Andrea Garnero; Lorenzo G. Luisetto
  15. Political incentives and corruption evidence from ghost students By Leopoldo Fergusson
  16. The Effects of the Decentralization of Collective Bargaining on Wages and Wage Dispersion: Evidence from the Finnish Forest and IT Industries By Kauhanen, Antti
  17. Decomposing Migrant Self-Selection: Education, Occupation, and Unobserved Abilities By Ilpo Kauppinen; Panu Poutvaara
  18. Importing sobrie'tea': Understanding the tea trade during the Industrial Revolution By Kabeer Bora
  19. Academic Migration and Academic Networks: Evidence from Scholarly Big Data and the Iron Curtain By Donia Kamel; Laura Pollacci

  1. By: Brenčič, Vera (University of Alberta); McGee, Andrew (University of Alberta)
    Abstract: We measure firms' demand for workers' personality traits expressed in job ads and find that firms primarily demand workers who are extroverted, conscientious, and open-to-experience. The personality demand measures are correlated with the soft skills required on the job and produce intuitively plausible rankings of occupations in terms of personality requirements. Consistent with firms needing more time to fill vacancies with more requirements, ads requiring extroversion and conscientiousness remain posted online longer. Using the personality demand measures and wage information in the ads, we show theoretically and empirically that firms seeking conscientious workers are less likely to offer incentive pay.
    Keywords: personality, job ads, method of pay
    JEL: D22 J23 J24 J33 M51
    Date: 2023–04
  2. By: Darolia, Rajeev (University of Kentucky); Guo, Chuanyi (affiliation not available); Kim, Youngran (Michigan State University)
    Abstract: Major policy initiatives and high award rates have led to questions about the value of short-term postsecondary credentials. We examine the labor market returns to very short certificates, including those that require only a few credits to complete, using data from a state that has among the highest awarding rates of such credentials. We do not find strong evidence that rapid certificates (those that require 6 credits or fewer) have lower immediate labor market returns than longer but still short-term certificates (7-36 credits). For health students, rapid certificates yield the greatest immediate earnings and employment gains, though these benefits appear to fade out. We also find that, compared to pre-enrollment, health and skilled trades students who earned a rapid certificate are most likely to switch into an establishment whose industry aligns with the field of study.
    Keywords: returns to education, postsecondary certificates
    JEL: I26 J24 J38
    Date: 2023–04
  3. By: Barigozzi, Francesca (University of Bologna); Cremer, Helmuth (Toulouse School of Economics); Thibault, Emmanuel (Toulouse School of Economics)
    Abstract: We present a simple dynamic model based on on-the-job human capital accumulation affecting the dynamic of wage rates and labor earnings. We show how these dynamics are determined by the interplay between the supply and demand sides of the labor market. The model can generate and explain the different dynamics of women's earnings after childbirth documented in the empirical literature on child penalties. We show that the temporary negative shock in labor supply due to childbearing may create a wage trap and a permanent divergence of labor earnings between genders. Even when the wage trap is avoided, and working mothers are on a path toward a high-wage equilibrium, slow convergence can permanently lose earnings. We use this model to study the impact of different policies on the gender wage gap and child penalties. We show that mandatory maternal leave exacerbates the shock which pleads against long leaves. Similarly, cash transfers to mothers via the income effect on labor supply aggravate gender wage differences. By contrast, temporary subsidies to mothers' wages (possibly in the form of Income Tax Credits) are not only useful to exit the wage trap, but also to speed up recovery and reduce the child penalty when the shock in labor supply is small enough to avoid the wage trap. Other family policies, like formal child-care subsidies and in-kind provision of formal childcare, are potentially useful because they reduce the mothers' cost of labor supply, but they affect mothers' choices only indirectly.
    Keywords: child penalty, mothers' earnings dynamics, multiple equilibria, wage and income traps
    JEL: J31 H24
    Date: 2023–04
  4. By: Atay, Salim (Istanbul Technical University); Asik, Gunes A. (TOBB University of Economy and Technology); Tumen, Semih (TED University)
    Abstract: Employers use various proxies to predict the future labor productivity levels of the job applicants. Success in school, especially in high-level coursework, is among the most widely used proxies to screen the entry-level candidates. We estimate the causal effect of graduating with honors – i.e., with a GPA of 3.00 and above out of 4.00 – on the starting wages of economics majors in Türkiye. Using comprehensive micro data on all economics majors between 2014-2018, matched with administrative records about their first jobs, we implement a regression discontinuity analysis to investigate whether there is any statistically significant jump in the starting wages at the honors-degree cutoff. We find that graduating with honors increases the wages of males, while there is no impact on females. We further document that the impact on males is almost entirely driven by the graduates of non-elite universities. In particular, graduating with an honors degree increases the entry wages of males from non-elite universities by about 4 percent, on average. We provide an explanation for these patterns using the theory of statistical discrimination. We discuss the potential reasons behind the heterogeneous signal value of graduating with honors between males versus females and elite versus non-elite university graduates.
    Keywords: honors degree, economics majors, entry wages, statistical discrimination, regression discontinuity
    JEL: J31 J71 I26
    Date: 2023–04
  5. By: Jonathan P. Cohen; Andrew C. Johnston; Attila S. Lindner
    Abstract: We use a panel of survey responses linked to administrative data in Germany to measure the depreciation of skills while workers are unemployed. Both the reemployment hazard rate and reemployment earnings steadily fall with unemployment duration, and indicators of depression and loneliness rise substantially. Despite this, we find no decline in a wide range of cognitive and noncognitive skills while workers remain unemployed. We find the same pattern in a panel of American workers. The results imply that skill depreciation in general human capital is unlikely to be a major explanation for duration dependence.
    JEL: I32 J24 J6 J60 J64
    Date: 2023–04
  6. By: Almut Balleer; Georg Duernecker; Susanne Forstner; Johannes Goensch
    Abstract: We measure individual bias in labor market expectations in German survey data and find that workers on average significantly overestimate their individual probabilities to separate from their job when employed as well to find a job when unemployed. These biases vary significantly between population groups. Most notably, East Germans are significantly more pessimistic than West Germans. We find a significantly negative relationship between the pessimistic bias in job separation expectations and wages, and a significantly positive relationship between optimistic bias in job finding expectations and reservation incomes. We interpret and quantify the effects of (such) expectation biases on the labor market equilibrium in a search and matching model of the labor market. Removing the biases could substantially increase wages and expected lifetime income in East Germany. The bias difference in labor market expectations explains part of the East-West German wage gap.
    Keywords: labor market risk, biased beliefs, wages, reservation wages
    JEL: E24 J31 D84
    Date: 2023
  7. By: Gimpelson, Vladimir (University of Wisconsin-Madison); Kapeliushnikov, Rostislav (CLMS, Higher School of Economics, Moscow)
    Abstract: In this study, we explore the changing employment structure in the Russian economy since 2000. Does it change through a consequent substitution of relatively worst (in terms of quality) jobs by better jobs? Or through the destruction of middle quality jobs? Or do we observe stagnation and conservation of the job structure? Structural change of this sort can be brought by various factors among which technological progress and international trade that shape demand for labor of different quality and complexity play a special role. In search for clues to these questions, the authors use large data sets that cover two sub-periods divided by the 2008/9 crisis. The estimates presented in the paper allow the rejection of the polarization hypothesis and they document a fast upgrade of the job structure during the 1st sub-period and a stalemate during the 2nd one. Apparently, risks of job polarization are likely to be minimal until economic growth is recovered and a movement to the technological frontier is accelerated.
    Keywords: job, job structure, employment, polarization, wage distribution
    JEL: J21 J24 J31 J62
    Date: 2023–04
  8. By: Adnan Velic (Technological University Dublin)
    Abstract: We examine the economy-wide degree of substitutability between intangible capital and other factor inputs in production using a large sample of advanced countries. In this context, we turn to studying the implications of intangible and tangible capital growth for labor income share dynamics. Compared to tangible capital, we find that intangible capital more strongly complements skilled labor. The analysis further indicates relative fungibility between tangible capital and a composite of intangible capital and skilled labor, in line with the rising prominence of knowledge-intensive tasks and AI-driven online platforms. The intrinsic nature of intangibles and their asymmetric effects across skilled and unskilled labor productivity based on our substitution elasticities suggest that intangible capital growth increases income inequality more aggressively.
    Keywords: factor substitution, skills, laborincomeshares, (in)tangiblecapital, incomeinequality, management, productivity, growth
    JEL: E2 J2 J3 O3 O4
    Date: 2023–04
  9. By: Braun, Sebastian Till (University of Bayreuth); Stuhler, Jan (Universidad Carlos III de Madrid)
    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: 2023–03
  10. By: Jakub Grossmann; Filip Pertold; Michal Šoltés
    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
    JEL: J13 J20 H53
    Date: 2023
  11. By: Gathmann, Christina (LISER); Kagerl, Christian (Institute for Employment Research (IAB), Nuremberg); Pohlan, Laura (Institute for Employment Research (IAB), Nuremberg); Roth, Duncan (Institute for Employment Research (IAB), Nuremberg)
    Abstract: Based on a unique survey and administrative employer-employee data, we show that the COVID-19 pandemic acted as a push factor for the diffusion of digital technologies in Germany. About two in three firms invested in digital technologies, in particular in hardware and software to enable decentralized communication, management and coordination. The investments encouraged additional firm-sponsored training despite pandemic-related restrictions indicating that investments in digital technologies and training are complements. We then demonstrate that the additional investments helped firms to insure workers against the downturn during the pandemic. Firms that made additional investments relied less on short-time work, had more of their regular employees working normal hours and had to lay off fewer marginal workers. Male, younger and medium-skilled workers benefitted the most from the insurance effect of digital investments.
    Keywords: innovation, digital technologies, COVID-19, pandemic, investment, training, employment, worker flows
    JEL: D22 E22 J23 J63
    Date: 2023–04
  12. By: Cortes, Guido Matias (York University, Canada); Lerche, Adrian (LMU Munich); Schönberg, Uta (University College London); Tschopp, Jeanne (University of Bern)
    Abstract: We argue that skill-biased technological change not only affects wage gaps between skill groups, but also increases wage inequality within skill groups, across workers in different workplaces. Building on a heterogeneous firm framework with labor market frictions, we show that an industry-wide skill-biased technological change shock will increase between-firm wage inequality within the industry through four main channels: changes in the skill wage premium (as in traditional models of technological change); increased employment concentration in more productive firms; increased wage dispersion between firms for workers of the same skill type; and increased dispersion in the skill mix that firms employ, due to more sorting of skilled workers to more productive firms. Using rich administrative matched employer-employee data from Germany, we provide empirical evidence of establishment-level patterns that are in line with the predictions of the model. We further document that industries with more technological adoption exhibit particularly pronounced patterns along the dimensions highlighted by the model.
    Keywords: skill-biased technological change, heterogeneous firms, between-firm inequality
    JEL: J31
    Date: 2023–04
  13. By: Roya Taherifar (University of Waikato); Mark J. Holmes (University of Waikato); Gazi M. Hassan (University of Waikato)
    Abstract: Income inequality and labour share have followed divergent trends in Australia. Empirical studies have attempted to explain their movement and their relationship using macro data. However, what is lacking is a firm-level study to capture the determinants of labour share specific to the firm’s production technology and market structures with an investigation into the impact on pay inequality inside firms. Hence, we conduct the first Australian firm-level study using a sample of Australian listed firms over the period 2004-2019. First, we examine the impact of technological progress, product market power and labour market power on the labour share. The results show that the decline in Australian labour share is mainly driven by technological progress and increasing product market power. However, labour market power does not have a significant impact on labour share. These findings are robust to an array of sensitivity tests. Second, we examine the impact of labour share on pay inequality within firms. We find robust evidence that declining labour share is a significant driving force in the evolution of pay inequality. Moreover, a 10 per cent decline in labour share rises pay inequality by 4.19 per cent. Additional tests show that technological progress and product market power can moderate the negative impact of labour share on pay inequality.
    Keywords: Income Distribution;Mark-up;Labour Share;Pay Inequality;Total Factor Productivity
    JEL: D33 J31 D42
    Date: 2023–04–17
  14. By: Tito Boeri; Andrea Garnero; Lorenzo G. Luisetto
    Abstract: Non-compete clauses (NCCs) limiting the mobility of workers have been found to be rather widespread in the US, a flexible labour market with large turnover rates and a limited coverage of collective bargaining. This paper explores the presence of such arrangements in a rigid labour market, with strict employment protection regulations by OECD standards and where all employees are, at least on paper, subject to collective bargaining. Based on a representative survey of employees in the private sector, an exam of collective agreements and case law, we find that in Italy i) collective agreements play no role in regulating the use of NCCs while the law specifies only the formal requirements, ii) about 16% of private sector employees are currently bound by a NCC, iii) NCCs are relatively frequent among low educated employees in manual and elementary low paid occupations having no access to any type of confidential information, and iv) in addition to NCCs, a number of other arrangements limit the post-employment activity of workers. Many of the NCCs do not comply with the minimum requirements established by law and yet workers do not consider them as unenforceable and appear to behave as they were effective. Even when NCCs are unenforceable they appear to negatively affect wages when they are introduced without changing the tasks of the workers involved. Normative implications are discussed in the last section of the paper.
    Keywords: non-compete clauses, monopsony, labour market concentration, employment, wages
    Date: 2023–04–03
  15. By: Leopoldo Fergusson
    Abstract: We study the effect of links between politicians on corruption under prevailing clientelism. Connections between politicians increase fabricated "ghost" students to obtain more national transfers, without raising the quality or quantity of education. Bureaucratic turnover, temporary and discretionary hiring, electoral fraud, and complaints against functionaries also increase. Effects on ghosts are larger in municipalities with more clientelism, discretion over resource spending, and weaker oversight. The findings favor a venal view of corruption, where politicians divert resources for personal gain rather than to favor their constituencies. Nonetheless, they have better future career prospects, reflecting a failure of electoral control.
    Keywords: Education, political agency, corruption, clientelism.
    JEL: D7 H5 H7 I2
    Date: 2023–04–19
  16. By: Kauhanen, Antti
    Abstract: Abstract Recently, Finnish forest industries shifted from sectoral collective bargaining to firm-level bargaining, and the IT services industry shifted to a hybrid of sector- and firm-level bargaining. Using administrative data on monthly wages and the synthetic difference-in-differences method, I study the causal effects of collective bargaining decentralization on the level and dispersion of wages. Despite the substantial change in the level of collective bargaining, I generally find muted effects on the level and dispersion of wages. I find positive and economically and statistically significant effects on wage levels and within-firm wage dispersion only for blue-collar workers in the paper industry. The results are, in many respects, similar to those reported previously, especially by studies using credible designs. A possible explanation for the modest changes in the level and dispersion of wages is that employers still face fairly strong unions. Unions also have substantial bargaining power locally, which limits the scope of changes due to bargaining decentralization. It should also be noted that these results are short-term results and long-term results may be different.
    Keywords: Collective bargaining, Decentralization, Local bargaining, Wage dispersion
    JEL: J31 J52 J53
    Date: 2023–04–25
  17. By: Ilpo Kauppinen; Panu Poutvaara
    Abstract: We analyze self-selection and sorting of emigrants from Finland, using full-population administrative data from Statistics Finland. We analyze emigration events lasting at least five years and decompose migrant self-selection into education, occupation, and unobserved abilities. Our analysis focuses on Finnish citizens satisfying three criteria: they were between 25-54 years of age; they had no immigrant background; and they were employed. We find that emigrants from Finland are strongly positively self-selected in terms of education and earnings. We also find strong evidence of sorting: men who emigrate outside Nordic countries are considerably better educated and have higher earnings and residual earning than men who emigrate to Nordic countries. Most of the self-selection in terms of higher earnings can be explained by emigrants being more educated. Adding occupational controls increases the fraction of explained self-selection only marginally. While men are positively self-selected also with respect to residual earnings, women are not.
    Keywords: international migration, self-selection, Roy model, education, residual earnings
    JEL: F22 I26 J31
    Date: 2023
  18. By: Kabeer Bora
    Abstract: Economic historian Robert Allen observed that during the Industrial Revolution, the British working class experienced a period of stagnant real wages. This has led many historians to investigate changes in the diet of the working class during that time. While there has been a focus on the entire food basket, this paper concentrates on the consumption of tea, which was entirely imported. I seek to explore why demand for tea increased during the Industrial Revolution by examining the effect of working hours on tea imports between 1760 and 1834. I aim to identify the determinants of tea demand and while underlining the crucial role that increasing working hours played in surplus extraction. The Industrial Revolution was characterized by long working hours, and the declining consumption per capita of so-called luxury items, such as tea, was actually due to their use as stimulants. To examine the relationship between working hours and tea imports, I employ a Dynamic OLS (DOLS) methodology, which demonstrates that tea imports responded positively to increasing working hours. This finding is corroborated by another method, the Fully Modified OLS (FM-OLS). I also propose new methods for calculating hours worked and tea imports in the process.
    Keywords: Tea, Working hours, Time Series, Trade History, Industrial Revolution JEL Classification: N33, J22, I15, N73, F14
    Date: 2023
  19. By: Donia Kamel; Laura Pollacci
    Abstract: Iron Curtain and Big Data are two words usually used to denote completely two different eras. Yet, the context the former offers and the rich data source the latter provides, enable the causal identification of the effect of networks on migration. Academics in countries behind the Iron Curtain were strongly isolated from the rest of the world. This context poses the question of the importance of academic networks for migration post the fall of the Berlin Wall and Iron Curtain. Using Microsoft Academic Knowledge Graph, a scholarly big data source, mapping of academics’ networks is possible and information about the size and quality of their co-authorships, by location is achieved. Focusing on academics from Eastern Europe (henceforth EE) from 1980-1988 and their academic networks (1980-1988), We investigate the effect of academic network characteristics, by location, on the probability to migrate post the fall of the Berlin Wall in 1989 and up to 2003, marking the year many EE countries held referendums or signed treaties to join the EU. The unique context ensures that there was no anticipation of the fall of the Eastern Bloc and together with the data that offers unique rich information, identification is achieved. Approximately 30k academics from EE were identified, from which 3% were migrants. The results could be explained by two channels, the cost and signalling channel. The cost channel is how the network characteristic reduces or increases the cost of migration and thus acting as a facilitator or a de-facilitator of migration. The signal channel on the other hand in which the network characteristic serves as a signal for the academic himself and his quality and his potential contribution and addition to the new host institution, thus also serving as a facilitator or a de-facilitator of migration. We find that mostly network size and quality results could be explained by the cost channel and signalling channel, respectively. Size of the network tends to be more important than the quality, which is a context-specific result. We find heterogeneous effects by fields of study that align with previous lines of research. Heterogeneous effects are explained by two things: threat of attention and arrest from KGB and the role of reputation, language, and network barriers.
    Keywords: networks, migration, academic networks, Big Data, brain drain, Iron Curtain, Eastern Europe
    JEL: C55 D85 F50 I20 I23 J24 N34 N44 O15
    Date: 2023

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