nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2023‒06‒26
nineteen papers chosen by
Joseph Marchand
University of Alberta

  1. Imperfect Signals By Georg Graetz
  2. Labor Market Frictions and Spillover Effects from Publicly Announced Sectoral Minimum Wages By Demir, Gökay
  3. Employment and Reallocation Effects of Higher Minimum Wages By Moritz Drechsel-Grau
  4. Curriculum Updates in Vocational Education and Changes in Graduates' Skills and Wages By Andreas F. Buehler; Patrick Lehnert; Uschi Backes-Gellner
  5. Time Averaging Meets Labor Supplies of Heckman, Lochner, and Taber By Sebastian Graves; Victoria Gregory; Lars Ljungqvist; Thomas J. Sargent
  6. Working Remotely? Selection, Treatment, and the Market for Remote Work By Natalia Emanuel; Emma Harrington
  7. Opening doors for immigrants: The importance of occupational and workplace-based cultural skills for successful labor market entry By Chiara Zisler; Damiano Pregaldini; Uschi Backes-Gellner
  8. Career Preferences and Socio-Economic Background By Paul Schüle
  9. ‘Earned, Not Given’? The Effect of Lowering the Full Retirement Age on Retirement Decisions By Mathias Dolls; Carla Krolage
  10. The Kaldor-Verdoorn Law at the Age of Robots and AI. By Andrea Borsato; Andre Lorentz
  11. Time Use and Macroeconomic Uncertainty By Matteo Cacciatore; Stefano Gnocchi; Daniela Hauser
  12. Improving Health and Safety in the Informal Sector: Evidence from a Randomized Trial in Bangladesh By Islam, Asad; Lee, Wang-Sheng; Triyana, Margaret; Xia, Xing
  13. The Impact of Margaret Sanger’s Birth Control Clinics on Early 20th Century U.S. Fertility and Mortality By Stefan Bauernschuster; Michael Grimm; Cathy M. Hajo
  14. Minimum wages and changing wage inequality in India By Saloni Khurana; Kanika Mahajan; Kunal Sen
  15. Innovation and the Labor Market: Theory, Evidence and Challenges By Corrocher, Nicoletta; Moschella, Daniele; Staccioli, Jacopo; Vivarelli, Marco
  16. Managerial Practices and Student Performance: Evidence from Changes in School Principals By Di Liberto, Adriana; Giua, Ludovica; Schivardi, Fabiano; Sideri, Marco; Sulis, Giovanni
  17. Where do STEM graduates stem from? The intergenerational transmission of comparative skill advantages By Hanushek, Eric Alan; Jacobs, Babs; Schwerdt, Guido; van der Velden, Rolf; Vermeulen, Stan; Wiederhold, Simon
  18. Same-sex role model effects in education By Alexandra de Gendre; Jan Feld; Nicolás Salamanca; Ulf Zölitz
  19. Provider effects in antibiotic prescribing: Evidence from physician exits By Shan Huang; Hannes Ullrich

  1. By: Georg Graetz
    Abstract: A pre-condition for employer learning is that signals at labor market entry do not fully reveal graduates’ productivity. I model various distinct sources of signal imperfection—such as noise and multi-dimensional types—and characterize their implications for the private return to skill acquisition. Structural estimates using NLSY data suggest an important role for noise, pushing the private return below the social return. This induces substantial under-investment and causes output losses of up to 22 percent. Value-added-based evidence from Swedish high school graduates also points to noise and under-investment. Highlighting the distinction between schooling duration and skills acquired, I conclude that individuals likely spend too much time in school, but learn too little.
    Keywords: human capital, signalling, employer learning, returns to schooling
    JEL: D82 I26 J24 J31
    Date: 2023
  2. By: Demir, Gökay (RWI – Leibniz Institute for Economic Research)
    Abstract: This paper analyzes the spillover effects of the first sectoral minimum wage in Germany. Using a triple differences estimation, the study examines the impact of public discussion and announcement of the minimum wage on workers and industries outside the minimum wage sector. The results show that the public discussion and announcement led to an increase in wages, job-to-job transitions and reallocation from low-paying to high-paying establishments among sub-minimum wage workers in similar jobs outside the minimum wage sector. The main mechanism for these effects appears to be the reduction of information frictions, rather than strategic interaction of employers.
    Keywords: spillover, labor market frictions, minimum wages, information frictions
    JEL: J31 J38 J42 J62
    Date: 2023–06
  3. By: Moritz Drechsel-Grau
    Abstract: This paper studies the employment and reallocation effects of minimum wages in Germany in a search-and-matching model with endogenous job search effort and vacancy posting, multiple employment levels, a progressive tax-transfer system, and worker and firm heterogeneity. I find that minimum wages up to 70% of the median wage significantly increase productivity, hours worked and output without reducing employment. In frictional labor markets, however, reallocation takes time whenever the minimum wage cuts deep into the wage distribution. I show that gradually implementing a high minimum wage is necessary to avoid elevated unemployment rates during the transition.
    Keywords: minimum wage, reallocation, employment, job search, worker and firm heterogeneity, hours worked, equilibrium search-and-matching model, transition dynamics
    JEL: E24 E25 E64 J20 J31 J38
    Date: 2023
  4. By: Andreas F. Buehler; Patrick Lehnert; Uschi Backes-Gellner
    Abstract: This paper examines how the nature of curriculum updates of vocational education and training (VET) changes VET graduates' occupational skill bundles and wages. Using VET curriculum texts as data, we apply natural language processing methods to identify the nature of changes in curriculum updates. We introduce and measure two dimensions of curriculum updates: the 'novelty rate' (degree of new skills entering an updated curriculum) and the 'removal rate' (degree of old skills being dropped from the old curriculum). By matching this information on VET curriculum updates with labour market data for VET graduates, we empirically investigate how different types of curriculum updates change the wages of graduates with updated curricula compared to those of graduates with old curricula. We find non-linear relations and complementarities between the dimensions of updates and graduates' wages: the association of the novelty rate with wages is u-shaped whereas the association of the removal rate with wages is inversely u-shaped. Most important are the combined results of adding and removing skills. While adding lots of new skills without removing old ones is not beneficial, removing skills with all kinds of curriculum updates is. A further analysis on the actual skills that are added or removed illustrates the trade-offs that curriculum designers must make.
    Keywords: nature of curriculum updates, changes in skills, vocational education and training, curricula
    JEL: I26 J24 M53
    Date: 2023–06
  5. By: Sebastian Graves; Victoria Gregory; Lars Ljungqvist; Thomas J. Sargent
    Abstract: We incorporate time-averaging into the canonical model of Heckman, Lochner, and Taber (1998) (HLT) to study retirement decisions, government policies, and their interaction with the aggregate labor supply elasticity. The HLT model forced all agents to retire at age 65, while our model allows them to choose career lengths. A benchmark social security system puts all of our workers at corner solutions of their career-length choice problems and lets our model reproduce HLT model outcomes. But alternative tax and social security arrangements dislodge some agents from those corners, bringing associated changes in equilibrium prices and human capital accumulation decisions. A reform that links social security benefits to age but not to employment status eliminates the implicit tax on working beyond 65. High taxes with revenues returned lump-sum keep agents off corner solutions, raising the aggregate labor supply elasticity and threatening to bring about a “dual labor market” in which many people decide not to supply labor.
    Keywords: time averaging; labor supply elasticity; retirement; taxation; Laffer curve; social security reform
    JEL: E24 E60 J22 J26
    Date: 2023–05–29
  6. By: Natalia Emanuel; Emma Harrington
    Abstract: How does remote work affect productivity and how productive are workers who choose remote jobs? We estimate both effects in a U.S. Fortune 500 firm’s call centers that employed both remote and on-site workers in the same jobs. Prior to COVID-19, remote workers answered 12 percent fewer calls per hour than on-site workers. When the call centers closed due to COVID-19, the productivity of formerly on-site workers declined by 4 percent relative to already-remote workers, indicating that a third of the initial gap was due to a negative treatment effect of remote work. Yet an 8 percent productivity gap persisted, indicating that the majority of the productivity gap was due to negative worker selection into remote work. Difference-in-differences designs also indicate that remote work degraded call quality— particularly for inexperienced workers—and reduced workers’ promotion rates. In a model of the market provision of remote work, we find that firms were in a prisoner’s dilemma: all firms would have gained from offering comparable remote and on-site jobs, but any individual firm was loathe to attract less productive workers.
    Keywords: remote work; Work-from-home; worker productivity; Selection
    JEL: J24 L23 L84 M54
    Date: 2023–05–01
  7. By: Chiara Zisler; Damiano Pregaldini; Uschi Backes-Gellner
    Abstract: Young immigrants who often lack country-specific human capital face greater challenges in the transition from education to the labor market (e.g., lower employment probabilities, longer unemployment spells) than native adolescents. This paper analyzes the importance, for a successful transition, of occupational skills and workplace-based cultural skills that workers can acquire only at the work. We exploit the Swiss vocational education and training (VET) setting, in which students acquire occupational skills in one of two different types of vocational education programs: either dual programs with training in firms based on employment contracts and complemented by vocational schooling, or school-based programs without employment contracts. While well-defined curricula ensure identical occupational skills in both programs, the training of workplace-based cultural skills differs systematically. As young immigrants lack these essential workplace-related cultural skills compared to natives, we expect that additional workplace-based cultural skills training in dual VET improves immigrants' transition into the labor market and thereby their longer-term employment prospects. Using administrative data, we compare how both programs affect the labor market entry of immigrant groups with pronounced cultural disadvantages. To estimate causal effects on employment outcomes, we use differences in VET traditions across Swiss language regions as an instrument. Results show that completing dual VET leads to significantly reduced unemployment probabilities for young immigrants compared to natives in the first year after graduation, suggesting that beyond well-defined curricula for occupational skills, workplace-based cultural skills are crucial for immigrants' transitions from education into the labor market.
    Keywords: Age of arrival, Assimilation, Cultural distance, Immigrants, Labor market integration, Skills
    JEL: J24 J61
    Date: 2023–06
  8. By: Paul Schüle
    Abstract: Career decisions, that is educational and occupational choice, are not only made by comparing expected incomes, but also by considering non-monetary rewards like social impact, chances of promotion, or the compatibility of work and family. In this paper, I use rich panel data from Germany to show that preferences about such aspects of a career as stated at age 17 are strong predictors of future earnings in the labor market. At the same time, these preferences differ significantly by socioeconomic background, and intergenerational income persistence is reduced by 8–22 percent when accounting for career preferences.
    Keywords: Equality of opportunity, intergenerational mobility, occupational choice
    JEL: D01 D63 J24 J62 I38
    Date: 2023
  9. By: Mathias Dolls; Carla Krolage
    Abstract: This paper analyzes behavioral responses to a 2014 reform in the German public pension system that lowered the full retirement age (FRA) of individuals with a long contribution history by up to two years and framed the new FRA as reference age for retirement. Using administrative data from public pension insurance accounts, we first document a substantial bunching response at the FRA exceeding the control group’s bunching by 83%. Second, we show in a difference-in-difference setting that a 1.0 year decrease in the FRA leads to a reduction in the average pension claiming age by 0.3-0.4 years. Treated individuals neither have poorer health nor are more likely to be liquidity-constrained than individuals in the control group. Our results suggest that the strong responses to the reform are driven both by the new FRA serving as a reference point and by financial incentives. Estimated fiscal costs of the reform are at the upper end of the range of previous back-of-the-envelope calculations.
    Keywords: retirement age, early retirement, pension reform
    JEL: H55 J14 J18 J26
    Date: 2023
  10. By: Andrea Borsato; Andre Lorentz
    Abstract: This paper contributes to the literature around the Kaldor-Verdoorn law and analyses the impact of robotisation on the channel through which the law shapes labour-productivity growth. We start with a simple evolutionary interpretation of the law that combines Kaldorian and Post-Keynesian arguments with the neo-Schumpeterian theory of innovation and technological change. Then we apply a GMM estimator to a panel of 17 industries in 25 OECD capitalist economies for the period 1990-2018. After elaborating on the general evidence of the Kaldor-Verdoorn law in the sample, we investigate the effect of increasing robotisation. The estimates suggest that for industries with a higher-than-average robot density, the increasing adoption of robots weakens, at least, the meso-economic channel that relates productivity growth to mechanisation. Yet, the higher degree of robotisation strengthens the mechanism that links labour productivity growth at the industrial level to the macro-level dynamic increasing returns to scale that emerge from a general expansion of economic activities through the many interactions between sectors. Such results are in agreement with the empirical literature that suggests different impacts from robotisation on the basis of the level of economic activity considered.
    Keywords: Labour productivity, Kaldor-Verdoorn law, Robotisation, GMM.
    JEL: J23 O33 O47
    Date: 2023
  11. By: Matteo Cacciatore; Stefano Gnocchi; Daniela Hauser
    Abstract: We estimate the effects of economic uncertainty on time use and discuss its macroeconomic implications. Using data from the American Time Use Survey, we first infer cyclical variation in home production and leisure time. We then document that higher uncertainty increases housework and reduces market hours worked, with modest effects on leisure. Finally, we propose a model of housework with time-varying uncertainty that quantitatively accounts for these results. We use the model to demonstrate that substitution between market and non-market work provides an additional insurance margin to households, weakening precautionary savings and labor supply. However, time-use reallocation also lowers aggregate demand, ultimately amplifying the contractionary effects of uncertainty. Policies that reallocate time use toward housework (e.g., lockdown restrictions) amplify the recessionary effects of uncertainty and can result in aggregate dynamics consistent with a supply-side shock.
    Keywords: Business fluctuations and cycles; Coronavirus disease (COVID-19); Domestic demand and components; Monetary policy and uncertainty
    JEL: E24 E32 E52 J22
    Date: 2023–05
  12. By: Islam, Asad (Monash University); Lee, Wang-Sheng (Monash University); Triyana, Margaret (Nanyang Technological University, Singapore); Xia, Xing (affiliation not available)
    Abstract: Workers in small businesses in low- and middle-income countries are exposed to significant risks of occupational accidents and illnesses. A safe and healthy workplace could improve the productivity and sustainability of the business. In this paper, we conduct a randomized controlled trial in Bangladesh that provides informal firms with information on occupational health and safety (OHS) to improve their workplace practices. The intervention comprised two treatment arms: one focused solely on OHS training (the OHS arm), while the other offered business training and access to financing in addition to OHS training (the OHS+Biz arm). After two years, treated firms showed improvements in business practices, particularly those related to safety and a decent work environment. Moreover, both treatment arms experienced increased output and sales revenue. The OHS+Biz arm generally had no additional impact on firm outcomes compared to the OHS arm, suggesting that OHS information is the primary factor driving safer and healthier workplaces, which consequently can lead to better firm outcomes.
    Keywords: occupational health and safety, enterprise training, randomized controlled trial, informal economy, information, credit access
    JEL: J28 C93 J81 I15 M53 J24 O14
    Date: 2023–05
  13. By: Stefan Bauernschuster; Michael Grimm; Cathy M. Hajo
    Abstract: Margaret Sanger established the first birth control clinic in New York in 1916. From the mid-1920s, “Sanger clinics” spread over the entire U.S. Combining newly digitized data on the roll-out of these clinics, full-count Census data, and administrative vital statistics, we find that birth control clinics accounted for 5.0–7.8% of the overall fertility decline until 1940. Moreover, birth control clinics had a significant and meaningful negative effect on the incidence of stillbirths and infant mortality. The effect of birth control clinics on puerperal deaths is consistently negative, yet insignificant. Further suggestive evidence points towards positive effects on female employment.
    Keywords: birth control, fertility, mortality, Margaret Sanger, demographic transition
    JEL: D10 J13 J23 N32 O12
    Date: 2023
  14. By: Saloni Khurana; Kanika Mahajan; Kunal Sen
    Abstract: Using nationally representative data on employment and earnings, this paper documents a fall in wage inequality in India over the last two decades. It then examines the role played by increasing minimum wages for the lowest skilled workers in India in contributing to the observed decline. Exploiting regional variation in changes in minimum wages over time in the country, we find that an increase in minimum wages by one per cent led to an increase in wages for workers in the lowest quintile by 0.17 per cent.
    Keywords: Minimum wage, Wage inequality, India, Employment
    Date: 2023
  15. By: Corrocher, Nicoletta (Bocconi University); Moschella, Daniele (Sant'Anna School of Advanced Studies); Staccioli, Jacopo (Università Cattolica del Sacro Cuore); Vivarelli, Marco (Università Cattolica del Sacro Cuore)
    Abstract: This paper deals with the complex relationship between innovation and the labor market, analyzing the impact of new technological advancements on overall employment, skills and wages. After a critical review of the extant literature and the available empirical studies, novel evidence is presented on the distribution of labor-saving automation (namely robotics and AI), based on natural language processing of US patents. This mapping shows that both upstream high-tech providers and downstream users of new technologies—such as Boeing and Amazon—lead the underlying innovative effort.
    Keywords: innovation, technological change, skills, wages, technological unemployment
    JEL: O33
    Date: 2023–05
  16. By: Di Liberto, Adriana (University of Cagliari); Giua, Ludovica (University of Cagliari); Schivardi, Fabiano (LUISS Guido Carli University); Sideri, Marco (University of Cagliari); Sulis, Giovanni (University of Cagliari)
    Abstract: We study how managerial practices of school principals affect student performance and aspirations. We link administrative data on secondary Italian students to the management scores of their school principals in 2011 and 2015 based on the World Management Survey methodology. The frequent turnover of school principals over this period allows us to causally interpret school-fixed-effect estimates. We find that management quality positively and substantially impacts standardized math and language tests and student desire to attend college. The comparison to pooled-OLS suggests that fixed effects correct for the downward bias arising from selection of better school principals into more difficult schools.
    Keywords: management, productivity, school principals, student outcomes
    JEL: L2 I2 M1 O32
    Date: 2023–06
  17. By: Hanushek, Eric Alan; Jacobs, Babs; Schwerdt, Guido; van der Velden, Rolf; Vermeulen, Stan; Wiederhold, Simon
    Abstract: The standard economic model of occupational choice following a basic Roy model emphasizes individual selection and comparative advantage, but the sources of comparative advantage are not well understood. We employ a unique combination of Dutch survey and registry data that links math and language skills across generations and permits analysis of the intergenerational transmission of comparative skill advantages. Exploiting within-family between-subject variation in skills, we show that comparative advantages in math of parents are significantly linked to those of their children. A causal interpretation follows from a novel IV estimation that isolates variation in parent skill advantages due to their teacher and classroom peer quality. Finally, we show the strong influence of family skill transmission on children's choices of STEM fields.
    Keywords: causality, intergenerational mobility, parent-child skill transmission, STEM
    JEL: I24 I26 J12 J24 J62
    Date: 2023
  18. By: Alexandra de Gendre; Jan Feld; Nicolás Salamanca; Ulf Zölitz
    Abstract: We study same-sex role model effects of teachers with a meta-analysis and our own study of three million students in 90 countries. Both approaches show that role model effects on performance are, on average, small: 0.030 SD in the meta-analysis and 0.015 SD in our multi-country study. Going beyond test scores, our multi-country study documents larger average role model effects on job preferences (0.063 SD). To understand the universality of these effects, we estimate the distributions of country-level same-sex role model effects. Although role model effects on test scores appear universally small, we find substantial cross-country variation for job preferences, with larger effects in countries with larger gender gaps. These results are consistent with role models inspiring students to overcome gender stereotypes and pursue a STEM career. However, in countries with negligible gender gaps, role models do not seem to have this equalizing function.
    Keywords: Same-sex role models, STEM, teachers, external validity, multi-country study, gender role models, standardized test scores, grades, job preferences, science, math, reading, meta-analysis, meta-science
    JEL: I21 I24 J24
    Date: 2023–06
  19. By: Shan Huang; Hannes Ullrich
    Abstract: In the fight against antibiotic resistance, reducing antibiotic consumption while preserving healthcare quality presents a critical health policy challenge. We investigate the role of practice styles in patients’ antibiotic intake using exogenous variation in patient-physician assignment. Practice style heterogeneity explains 49% of the differences in overall antibiotic use and 83% of the differences in second-line antibiotic use between primary care providers. We find no evidence that high prescribing is linked to better treatment quality or fewer adverse health outcomes. Policies improving physician decision-making, particularly among high-prescribers, may be effective in reducing antibiotic consumption while sustaining healthcare quality.
    Keywords: antibiotic prescribing, practice styles, primary care providers
    JEL: I11 J44 I12
    Date: 2023–06–05

This nep-lma issue is ©2023 by Joseph Marchand. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.