nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2023‒07‒31
fifteen papers chosen by
Joseph Marchand
University of Alberta

  1. What Makes Hiring Difficult? Evidence from Linked Survey-Administrative Data By Bertheau, Antoine; Larsen, Birthe; Zhao, Zeyu
  2. How Do Firms Respond to State Retirement Plan Mandates? By Adam Bloomfield; Kyung Min Lee; Jay Philbrick; Sita Slavov
  3. Preference-Choice Mismatch and University Dropout By Fouarge, Didier; Heß, Pascal
  4. The Welfare Economics of Reference Dependence By Daniel Reck; Arthur Seibold
  5. Tax policies, informality, and real wage rigidities By Andres García-Suaza; Fernando Jaramillo; Marlon Salazar
  6. In-Kind Welfare Benefits and Reincarceration Risk: Evidence from Medicaid By Marguerite Burns; Laura Dague
  7. Does Performance Pay Increase the Risk of Marital Instability? By Mehrzad B. Baktash; John S. Heywood; Uwe Jirjahn
  8. Research on labour market impacts of the Temporary Foreign Worker Program By Cardoso, Miguel; Haan, Michael; Lombardo, Federico; Yoshida, Yoko
  9. COVID-19 and productivity-enhancing digitalisation: Firm-level evidence from Slovenia By Martin Borowiecki; Federico Giovannelli; Jens Høj
  10. Employment versus Efficiency: Which Firms Should R&D Tax Credits Target? By Anna Bernard; Rahim Lila; Joana Silva
  11. The Impact of Fear on Police Behavior and Public Safety By Sungwoo Cho; Felipe Gonçalves; Emily Weisburst
  12. The Urban Wage Premium in Historical Perspective By Kyle Butts; Taylor Jaworski; Carl Kitchens
  13. The Decline of Labor Share and New Technology Diffusion: Implications for markups and monopsony power By KUSAKA Shoki; OKAZAKI Tetsuji; ONISHI Ken; WAKAMORI Naoki
  14. Skill Acquisition and the Gains from Trade: A Cross-country Quantitative Analysis By Ma, Xiao; Nakab, Alejandro; Zhang, Yiran
  15. Industrial versus artisanal mining: The effects on local employment in Liberia By Melanie Gräser

  1. By: Bertheau, Antoine (University of Copenhagen); Larsen, Birthe (University of Copenhagen); Zhao, Zeyu (Copenhagen Business School)
    Abstract: We design a survey that asks firms about the obstacles that discourage them from hiring despite having potential needs. Using Danish administrative data and subjective beliefs elicited from our survey, we show how hiring obstacles vary across firms. Over two-thirds of employers agree that skill shortages are a hiring obstacle. One-third of employers consider labor costs, the time to find candidates, and the time to train new recruits as hiring obstacles. High-wage firms are less discouraged by labor costs, while younger or smaller firms are more discouraged by search and training time. Around thirty percent of employers prefer to hire the already employed over the unemployed because they believe that unemployed workers have lower abilities due to negative selection or skill depreciation during unemployment. Firms with such preferences are more likely to report hiring obstacles.
    Keywords: labor demand, hiring behavior, linked survey-administrative data, employer perceptions
    JEL: J23 M12
    Date: 2023–06
  2. By: Adam Bloomfield; Kyung Min Lee; Jay Philbrick; Sita Slavov
    Abstract: This paper investigates the effect of state retirement plan mandates on the supply of employer-sponsored retirement plans (ESRPs) by firms. These policies require employers to either (1) offer ESRPs to workers or (2) facilitate automatic payroll deductions that are deposited into individual retirement accounts (IRAs) established for workers by the state. In this paper, we utilize individual-level data from the Current Population Survey (CPS) and firm-level data from Form 5500 filings to examine the effect of these automatic-enrollment IRA (“auto-IRA”) policies on employer decisions to offer, and worker inclusion in, ESRPs. We exploit variation in the timing of implementation across states and firm size categories and estimate that auto-IRA policies increase the probability that an individual works for a firm with an ESRP by roughly 3 percent, and the probability that the individual participates in that ESRP by 33 percent. These policies also increase the number of ESRP participants at the average firm in our sample by 3-5 percent.
    JEL: D14 H75 J26
    Date: 2023–06
  3. By: Fouarge, Didier (ROA, Maastricht University); Heß, Pascal (Institute for Employment Research (IAB), Nuremberg)
    Abstract: Drawing on data from the German National Educational Panel Study (NEPS), we show that students who select majors that do not match their occupational preferences prior to enrolling in university are more likely to drop out than those who do choose majors that match their occupational preferences. Our findings suggest that this gap cannot be explained by institutional obstacles to entering a major. Instead, the primary mechanisms behind this phenomenon are indecisiveness and preference changes.
    Keywords: dropout, preferences, mismatch, tertiary education
    JEL: J24 D83
    Date: 2023–06
  4. By: Daniel Reck; Arthur Seibold
    Abstract: Empirical evidence suggests that individuals often evaluate options relative to a reference point, especially seeking to avoid losses. We undertake the first welfare analysis under reference-dependent preferences. We characterize the welfare impact of changes in reference points and prices, decomposing these into direct and behavioral effects. The sign of direct and behavioral effects depends on the form of reference-dependent payoffs; which of these effects matter for welfare depends on whether reference dependence reflects a bias or a normative preference. We derive sufficient statistics formulas quantifying the social welfare effects of changes in reference points and prices in terms of estimable reduced-form parameters and normative judgments. We illustrate these findings with an empirical application to reference dependence exhibited in German workers' retirement decisions. We find positive social welfare effects of increasing the Normal Retirement Age, but ambiguous effects of financial incentives to postpone retirement.
    JEL: D60 D90 H55
    Date: 2023–06
  5. By: Andres García-Suaza; Fernando Jaramillo; Marlon Salazar
    Abstract: Developing countries have a vast informal sector generally associated with low productivity levels. The response of informal employment to tax policies might depend on labor market rigidities. This paper proposes a theoretical framework consisting of a search and matching model with segmentation in the labor market to understand how tax policies and enforcement interact to determine the size of the formal sector. The analytical results show that decreasing payroll taxes increases formal employment demand, and enforcement expenditure decreases informal employment offers. The model suggests that a tax policy combination leads to a significant impact on informality reduction. Moreover, the magnitude of the effect of tax policies depends on real wage rigidities, i.e., when the economy faces high real wage rigidities, the tax policies have a higher effect on informality reduction. **** RESUMEN: Los países en desarrollo presentan un sector informal relevante asociado con bajos niveles de productividad. Los efectos de las políticas tributarias sobre los niveles de informalidad dependen de las rigideces del mercado laboral. En el presente artículo se propone un modelo de busqueda y emparejamiento en un mercado laboral segmentado para entender la interaccion entre las políticas tributarias y la aplicacion de la ley sobre el sector formal. Los resultados analíticos muestran que, disminuir los impuestos a la nomina genera aumentos en la demanda de empleo formal, mientras que un aumento en el gasto de auditar a las empresas disminuye la oferta de empleo informal. El modelo sugiere un impacto significativo en la reduccion de la informalidad al combinar las políticas tributarias. Ademas, la magnitud del efecto de las políticas depende de las rigideces en los salarios reales. De esta forma, cuando la economía presenta altas rigideces en los salarios reales, las políticas tributarias tienen un mayor efecto sobre la reducción de la informalidad.
    Keywords: Informality, payroll taxes, fiscal policy, enforcement, search frictions, shirking, Informalidad, Impuestos a la nómina, Política fiscal, Aplicación de la ley, Busqueda y Emparejamiento
    JEL: E26 E62 J21 J46 J31 O17 K42
    Date: 2023–07
  6. By: Marguerite Burns; Laura Dague
    Abstract: Most of the 600, 000 adults returning to the community from state and federal prisons annually in the U.S. carry substantial debt, have low income and low education, and limited formal employment prior to entering prison. Upon reentry, they face financial hardship, high rates of morbidity and mortality, and high incidence of re-offense. Medicaid coverage, as a means-tested transfer program providing subsidized health insurance, may influence reincarceration through both financial and health channels. In this paper, we provide a comprehensive look at the effects of public health insurance coverage on post-release behavior of formerly incarcerated adults. We study a natural experiment in which two separate state policy changes resulted in a 60 percentage point increase in Medicaid enrollment at release. Using a series of linked individual level administrative datasets, we estimate the effects of this change in Medicaid enrollment, finding declines in reincarceration, increased employment, and higher health care use. Leveraging data on financial concerns and need for mental health and substance use treatment to examine mechanisms, we find support for a financial channel and mixed support for health channels. Policies that enhance access to healthcare and provide financial security for this population may have significant benefits for individuals and society.
    JEL: H75 I13 J22 K42
    Date: 2023–06
  7. By: Mehrzad B. Baktash; John S. Heywood; Uwe Jirjahn
    Abstract: This paper uses German survey data on married couples to examine the association of performance pay at work and subsequent separation or divorce. Despite extensive controls, performance pay remains associated with an increased probability of separation or divorce. Yet, the results are entirely gender specific. When husbands earn performance pay, no association with marital instability is found. When wives earn performance pay, the association is large and robust. This pattern persists across a variety of modeling choices and attempts to account for endogeneity. We argue that the pattern fits theoretical expectations and discuss the implications.
    Keywords: Performance Pay, Separation, Divorce, Gender
    JEL: J33 I31 J32
    Date: 2023
  8. By: Cardoso, Miguel; Haan, Michael; Lombardo, Federico; Yoshida, Yoko
    Keywords: migrant workers, temporary employment, labor market policy, impact analysis, labour market, employment effect, Canada
    Date: 2023
  9. By: Martin Borowiecki; Federico Giovannelli; Jens Høj
    Abstract: This paper provides evidence on the impact of digitalisation on productivity in Slovenia during the COVID-19 crisis. The pandemic affected overall labour productivity negatively. Nonetheless, results show that firms that were more ICT-intensive before the pandemic experienced a smaller decline in their labour productivity growth compared to their less ICT-intensive peers in the same 2-digit level sector. This resilience effect was strongest for firms that are integrated in global value chains. A second finding is that COVID-19 resulted in productivity-enhancing reallocation of labour to ICT-intensive firms, reflecting that these firms registered higher employment growth relative to their less ICT-intensive peers during the pandemic. A third finding is that high levels of state ownership in a sector was associated with less productivity-enhancing reallocation. This suggests that state-owned enterprises retained workers that could be redirected to more productive firms. Together, these findings highlight the potential of digitalisation to support resilience and stronger productivity growth, although labour market rigidities and state ownership hamper the positive impact of digitalisation.
    Keywords: digitalisation, labour reallocation, productivity
    JEL: D24 E22 E24 O33
    Date: 2023–07–10
  10. By: Anna Bernard; Rahim Lila; Joana Silva (Católica School of Business and Economics, Universidade Católica Portuguesa; Charles Rivers Associate; Católica School of Business and Economics, Universidade Católica Portuguesa)
    Abstract: R&D tax credits, by stimulating private sector innovation, can play a key role in promoting employment and firm performance. This paper examines the program impact on the trajectory of firms in terms of technology adoption, firm performance and workforce composition, and the extent to which it depends on the size of the targeted firms. It uses rich longitudinal micro-data on innovation, firms and their workers. Combining matching with a staggered adoption differences-in-differences, we show that tax credits increase investment in R&D-related activities while funds are being received, but not thereafter. Productivity and efficiency (but not employment) increase in large firms. These effects are driven by structural changes, both in terms of the increased share of skilled individuals within the firm (keeping the overall employment level constant) and enhanced technological adoption. In contrast, small firms mostly respond by increasing employment and production scale. Our results suggest that an important trade-off: R&D tax credit programs that target large firms are likely to lead to efficiency and productivity gains, but limited effects on employment of supported firms. In contrast, R&D tax credit programs that mostly benefit small firms may lead to employment gains in supported firms, but limited effects on structural changes in productivity and efficiency.
    Keywords: R&D tax credits, Innovation, SIFIDE, Matching, Differences-in-Differences
    JEL: O31 O38 H25
    Date: 2023–07
  11. By: Sungwoo Cho; Felipe Gonçalves; Emily Weisburst
    Abstract: We examine how changes in the salience of workplace risk affect police behavior and public safety. Specifically, we investigate cases of police officer deaths while on duty. Officers respond to a peer death by decreasing arrest activity for one to two months, consistent with heightened fear. Reductions are largest for low-level arrests and are more pronounced in smaller cities. Crime does not increase on average during this period, nor do we observe crime spikes in cities with larger or longer arrest declines. While shocks in fatality risk generate substantial enforcement responses, officer fear is unlikely to harm public safety.
    JEL: J28 J45 K42
    Date: 2023–06
  12. By: Kyle Butts; Taylor Jaworski; Carl Kitchens
    Abstract: We estimate the urban wage premium in the United States from 1940 to 2010. Drawing on recent advances in the literature on selection on unobservables, we show how to control for heterogeneity in the characteristics of individuals that choose to live in cities to address endogenous sorting. Estimates from naive comparisons of individuals living in urban versus non-urban areas substantially overstate the urban wage premium. We find that the premium is highest in the middle of the twentieth century (about 12 percent in 1940 and 1950) relative to the early in twenty-first century (declining to a few percent by 2010). Overall, the urban wage premium is decreasing and sorting explains a larger fraction of the difference in urban versus non-urban earnings across our sample period.
    JEL: N92 R0
    Date: 2023–06
  13. By: KUSAKA Shoki; OKAZAKI Tetsuji; ONISHI Ken; WAKAMORI Naoki
    Abstract: We investigate the cause of the decline in labor share using highly-detailed plant level data from the cement industry. Using the information on production technology at each plant, we show that the major source of the decline is due to the diffusion of new technology; The labor share decreases for the plants adopting more advanced capital-intensive technology, whereas it remains steady for the plants keeping the same technology. The use of plant-level technology data is key to rejecting other potential hypotheses, such as increasing market power and monopsony power, and our conclusion would be qualitatively different without it.
    Date: 2023–07
  14. By: Ma, Xiao; Nakab, Alejandro; Zhang, Yiran
    Abstract: This paper studies the impact of trade openness on welfare through alterations in workers' skill acquisition. We integrate endogenous choices of learning investments into a multisector Eaton-Kortum model. In the model, workers can opt to become skilled through education and further enhance their human capital via on-the-job training. Both education and on-the-job training entail time and material costs. Our model reveals that trade openness influences skill acquisition by: (1) reallocating labor between sectors, as skill intensities and on-the-job learning opportunities vary across sectors; and (2) allowing producers in each country to source varieties from more cost-effective suppliers in other countries, thus reducing unit costs of material inputs and raising real wage rates. Our calibrated model indicates that the gains in skill acquisition account for 20% of the total gains from trade. We also find that the gains in skill acquisition primarily stem from increased real wage rates that encourage skill acquisition.
    Keywords: gains from trade; education; on-the-job learning
    JEL: F1 J2
    Date: 2023–06
  15. By: Melanie Gräser (Department of Economics, Vienna University of Economics and Business)
    Abstract: Using novel data on industrial, semi-industrial, and artisanal mining, this paper analyses the impact of different mining types on employment outcomes for individuals living close to mines in Liberia. The econometric strategy exploits the temporal variation in mine openings and closings and the spatial variation in mine locations in a difference-in-difference analysis. Primary data collected through qualitative interviews at mining sites explains the mechanisms behind the econometric results. The findings provide the first causal evidence on employment effects of a boom-and-bust cycle of artisanal mining. A boom seems to shift employment from subsistence agriculture to more productive sectors and a bust decreases the likelihood for individuals to work. In contrast, the opening of industrial gold mines seems to decrease employment in more productive sectors and increase employment in agriculture, while industrial iron ore mines have no effect. This paper shows that benefits of mining for the local population depend on the type of mining, the commodities mined, and the local boom-bust cycle of mining.
    Keywords: Natural resources, extractive industries, Liberia, industrial mining, artisanal mining
    JEL: J21 L72 O13 O55 O14 Q32 Q33
    Date: 2023–07

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