nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2023‒08‒14
eighteen papers chosen by
Joseph Marchand
University of Alberta

  1. Labor Market Regulation and Firm Adjustments in Skill Demand By Bottasso, Anna; Bratti, Massimiliano; Cardullo, Gabriele; Conti, Maurizio; Sulis, Giovanni
  2. Labour costs and the decision to hire the first employee By Bart Cockx; Sam Desiere
  3. Time Use, College Attainment, and The Working-from-Home Revolution By Benjamin W. Cowan
  4. Accident-Induced Absence from Work and Wage Ladders By Anikó Bíró; Márta Bisztray; João G. da Fonseca; Tímea Molnár
  5. Closing the Gender Gap in Salary Increases: Evidence from a Field Experiment on Promoting Pay Equity By Alfitian, Jakob; Deversi, Marvin; Sliwka, Dirk
  6. The Gender Pay Gap and its Determinants across the Human Capital Distribution By Ariel J. Binder; Amanda Eng; Kendall Houghton; Andrew Foote
  7. Injury Risk, Concussions, Race, and Pay in the NFL By Keefer, Quinn; Kniesner, Thomas J.
  8. The Spillover Effects of Top Income Inequality By Joshua D. Gottlieb; David Hémous; Jeffrey Hicks; Morten Olsen
  9. The fall and rebound of average establishment size in West Germany By Kovalenko, Tim; Sauerbier, Timo; Schröpf, Benedikt
  10. Incentive Complexity, Bounded Rationality and Effort Provision By Abeler, Johannes; Huffman, David B.; Raymond, Collin
  11. Tightening Access to Early Retirement: Who Can Adapt? By Boockmann, Bernhard; Kroczek, Martin; Laub, Natalie
  12. New technologies and jobs in Europe By Albanesi, Stefania; Da Silva, António Dias; Jimeno, Juan F.; Lamo, Ana; Wabitsch, Alena
  13. What does job applicants' body art signal to employers? By Stijn Baert; Jolien Herregods; Philippe Sterkens
  14. State-Level Trucking Employment and the COVID-19 Pandemic in the U.S: Understanding Heterogenous Declines and Rebounds By Phares, Jonathan; Miller, Jason W.; Burks, Stephen V.
  15. The Incentive Effects of Sickness Benefit for the Unemployed – Analysis of a Reduction in Potential Benefit Duration By Márton Csilalg; Lili Márk
  16. Persistent Overconfidence and Biased Memory: Evidence from Managers By Huffman, David B.; Raymond, Collin; Shvets, Julia
  17. Pro-environment Attitudes and Worker Commuting Behavior By Gimenez-Nadal, José Ignacio; Molina, José Alberto; Velilla, Jorge
  18. Fiscal Tightening and Skills Mismatch By Konstantinos Mavrigiannakis; Andreas Vasilatos; Eugenia Vella

  1. By: Bottasso, Anna (University of Genova); Bratti, Massimiliano (University of Milan); Cardullo, Gabriele (University of Genova); Conti, Maurizio (University of Genova); Sulis, Giovanni (University of Cagliari)
    Abstract: We study how changes in labor market regulation may trigger firm adjustments in skill demand. Leveraging rich administrative data from Italy, we investigate the effects of a reform that reduced firing costs for permanent employees and tightened temporary contracts' regulation to increase job stability. By using a difference-in-differences design, we document that the reform had unintended effects, inducing firms to increase layoffs of unskilled permanent employees and reducing hirings of unskilled workers on temporary contracts, but had no effect on skilled workers or permanent hirings. A theoretical search and matching model with heterogeneous skills and contract durations rationalizes our main findings.
    Keywords: labor market regulation, employment protection, temporary work, skill demand, worker flows
    JEL: J42 J63 J65 M53
    Date: 2023–06
  2. By: Bart Cockx; Sam Desiere (-)
    Abstract: Firms without paid employees account for up to 80% of all firms, but only a small minority ever hires. This paper investigates the relationship between labour costs and the decision to hire a first employee and become an employer. Leveraging a unique policy in Belgium that permanently reduced the labour cost of the first employee by 13%, we find that the number of new, first-time employers jumped by 31% immediately following the reform. The elasticity of the probability to hire the first employee with respect to the labour cost is -2.39 [95% CI: -3.45, -1.25].
    Keywords: nonemployers, hiring decisions, payroll taxes, small businesses
    JEL: D22 H25 J08 J23 L26 M13
    Date: 2023–05
  3. By: Benjamin W. Cowan
    Abstract: I demonstrate that the profound change in working from home (WFH) in the wake of the COVID-19 pandemic is concentrated among individuals with college degrees. Relative to 2015-19, the number of minutes worked from home on fall 2021 weekdays increased by over 90 minutes for college graduates; for non-graduates, it was 17 minutes. The share of work done at home (for those who worked at all) increased by 21% for graduates and 6% for non-graduates. Average minutes worked changed little for either group. Daily time spent traveling (e.g., commuting) fell by 24 minutes for college graduates but did not change for non-graduates. I examine how time-use patterns change for college graduates relative to non-graduates over the same period. Preliminary evidence suggests that time spent with children has risen for college graduates relative to non-graduates, potentially a sign that gaps in children’s outcomes by college attainment will be exacerbated by the WFH revolution.
    JEL: I12 I24 J22 J24 J32
    Date: 2023–07
  4. By: Anikó Bíró (Centre for Economic and Regional Studies); Márta Bisztray (Centre for Economic and Regional Studies); João G. da Fonseca (Université de Montréal); Tímea Molnár (Central European University and IZA)
    Abstract: How do temporary spells of absence from work affect individuals’ labor trajectory? To answer this question, we augment a `wage ladder' model, in which individuals receive alternative takeit-or-leave-it wage offers from firms and potentially suffer accidents which may push them into temporary absence. In such an environment, during absence, individuals do not have the opportunity to receive alternative wage offers that they would have received had they remained present. To test our model's predictions and to quantify the importance of foregone opportunities to climb the wage ladder, we use linked employer-employee administrative data from Hungary, that is linked to rich individual-level administrative health records. We use unexpected and mild accidents with arguably no permanent labor productivity losses, as exogenous drivers of short periods of absence. Difference-in-Differences results show that, relative to counterfactual outcomes in the case of no accidents, (i) even short (3-12-months long) periods of absence due to accidents decrease individuals' wages for up to two years, by around 2.5 percent; and that (ii) individuals reallocate to lower-paying employers. The share of wage loss due to missed opportunities to switch employers is between 7-20 percent over a two-year period after returning to work, whereas at most 2 percent is due to occupation switches. Our results are robust to (a) instrumenting absence with having suffered an accident, (b) exploiting the random nature of the time of the accident, and (c) within-firm matching of individuals with and without an accident and subsequent absence spell.
    Keywords: Keywords: wage ladder; accidents; health shocks; temporary absence from work
    JEL: J22 J23 I10
    Date: 2023–07
  5. By: Alfitian, Jakob (University of Cologne); Deversi, Marvin (Education Y); Sliwka, Dirk (University of Cologne)
    Abstract: We present a natural field experiment on promoting pay equity through simple modifications to the salary review process involving 623 middle managers and 8, 951 subordinate employees of a large technology firm. We first document a gender gap not only in salary levels but also in salary increases. Our treatments provide for a gender-blind reallocation of the salary increase budget available to middle managers aimed at promoting pay equity, along with different variants of a corresponding decision guidance. We show that the budget reallocation combined with an explicit decision guidance, while still leaving middle managers discretion in allocating the budget, can completely eliminate the gender gap in salary increases. The treatments also do not appear to undermine the desired performance differentiation in salary increases. We thus show that simple modifications to the salary review process can go a long way toward achieving pay equity by preventing gender gaps from widening throughout employees' careers.
    Keywords: gender pay gap, pay equity, randomized controlled trial, salary structure
    JEL: J31 J71 M52
    Date: 2023–06
  6. By: Ariel J. Binder; Amanda Eng; Kendall Houghton; Andrew Foote
    Abstract: This paper leverages a unique linkage between American Community Survey data and postsecondary transcript records to examine how the gender pay gap, and its proximate determinants, varies across the distribution of education credentials in the 15 years following graduation. Although recent literature focuses on career disparities between the highest-educated women and men, we find evidence that the pay gap is smaller at higher education levels. Field-of-degree and occupation effects explain most of the gap among top bachelor’s graduates, while labor supply and unobserved channels matter more for less-competitive bachelor’s, associate’s, and certificate graduates. This heterogeneity in gap levels and mechanisms is especially large in the first decade following graduation. Our results suggest that contemporary early-career gender inequality lacks a unified explanation and requires different policy interventions for different subgroups. More research is needed to understand the larger unexplained gender pay gap among less-educated individuals.
    Keywords: gender pay gap, postsecondary transcript records, college selectivity, human capital, field and occupation choice, labor supply
    JEL: I24 I26 J16 J31
    Date: 2023–06
  7. By: Keefer, Quinn (California State University San Marcos); Kniesner, Thomas J. (Claremont Graduate University)
    Abstract: We make two main contributions to the literature on work-related injury risk and economic outcomes in the context of American professional football. One is to examine an increasingly important specific injury, concussions, and compare its subsequent economic effects to those of other types of football injuries. Our other contribution is to study the role of race in understanding injury risk and severity and their resulting economic consequences, which has been overlooked in previous sports injury research. Using a specific position, tight ends, which allows conditioning on fine-grained relevant measures of player demographics, playing time, and performance, we find that whether a player continues to play NFL football from year to year is affected by type of injury and the player's race. We calculate that the average ex post loss in annual compensation from a concussion is about 7%. Moreover, the effect of games missed due to concussion on continued employment is triple that of other injuries. Being white positively affects length of playing career independent of the measured productivity of the players involved. The racial gap in career length is approximately equal to the effect of an additional game missed from concussion. With respect to heterogeneity in the effects of injuries, both concussions and other injury types affect ex post economic outcomes equally for white and nonwhite players. Both injuries and race affect compensation solely through their effects on career length.
    Keywords: work-related injuries, concussions, race, pay, NFL, tight ends, panel data
    JEL: D81 J31 J81 Z21 Z22 C23
    Date: 2023–07
  8. By: Joshua D. Gottlieb; David Hémous; Jeffrey Hicks; Morten Olsen
    Abstract: Top income inequality in the United States has increased considerably within occupations. This phenomenon has led to a search for a common explanation. We instead develop a theory where increases in income inequality originating within a few occupations can “spill over” through consumption into others. We show theoretically that such spillovers occur when an occupation provides non divisible services to consumers, with physicians our prime example. Examining local income inequality across U.S. regions, the data suggest that such spillovers exist for physicians, dentists, and real estate agents. Estimated spillovers for other occupations are consistent with the predictions of our theory.
    Keywords: Income inequality, Assignment model, Occupational inequality, Superstars
    JEL: D31 J24 J31 O15
    Date: 2023–06
  9. By: Kovalenko, Tim; Sauerbier, Timo; Schröpf, Benedikt
    Abstract: In West Germany, the average size of establishments declined during the 1990s and started to increase again in the late 2000s, while the employer size wage premium followed the opposite trajectory. In this paper, we show that these two developments are interrelated. More precisely, our results suggest that variations in the employer size wage premiums induced establishments to vary their employment level, consistent with monopsony power on the labor market. Moreover, our regional analyses show that average establishment size correlates positively with GDP per capita. We rationalize these findings with a heterogeneous firms model with monopsonistic competition in the labor market, stemming from the household's love-of-variety preferences for employers. Both empirics and theory reveal that higher size wage premiums decrease average establishment size by downsizing incumbent establishments and triggering the entry of small establishments, thus also negatively affecting aggregate productivity.
    Keywords: Establishment Size, Size Wage Premium, Productivity, Labor Market Power, Germany
    JEL: E24 J31 J42 L25
    Date: 2023
  10. By: Abeler, Johannes (University of Oxford); Huffman, David B. (University of Pittsburgh); Raymond, Collin (Purdue University)
    Abstract: Using field and laboratory experiments, we demonstrate that the complexity of incentive schemes and worker bounded rationality can affect effort provision, by shrouding attributes of the incentives. In our setting, complexity leads workers to over-provide effort relative to a fully rational benchmark, and improves efficiency. We identify contract features, and facets of worker cognitive ability, that matter for shrouding. We find that even relatively small degrees of shrouding can cause large shifts in behavior. Our results illustrate important implications of complexity for designing and regulating workplace incentive contracts.
    Keywords: complexity, bounded rationality, shrouded attribute, ratchet effect, dynamic incentives, field experiments
    JEL: D8 D9 J2 J3
    Date: 2023–07
  11. By: Boockmann, Bernhard (Institut für Angewandte Wirtschaftsforschung (IAW)); Kroczek, Martin (Institut für Angewandte Wirtschaftsforschung (IAW)); Laub, Natalie (Institut für Angewandte Wirtschaftsforschung (IAW))
    Abstract: We study heterogeneity in the effects of two pension reforms in Germany that closed pathways into early retirement: the abolition of an old-age pension scheme for women and the abolition of a pension after unemployment or part-time work. We focus on heterogeneity with respect to several occupational characteristics. Both reforms had significant effects on individual employment states, and in both cases the effects differ significantly by occupation. The positive effect on employment is smaller in occupations with higher job strain and, in case of the old-age pension for women, the effect on unemployment is larger. The effects also differ by occupational tasks, PC use and the introduction of new technologies.
    Keywords: pension reforms, effect heterogeneity, occupational demands, occupational tasks
    JEL: J18 J22 J26
    Date: 2023–07
  12. By: Albanesi, Stefania; Da Silva, António Dias; Jimeno, Juan F.; Lamo, Ana; Wabitsch, Alena
    Abstract: We examine the link between labour market developments and new technologies such as artificial intelligence (AI) and software in 16 European countries over the period 2011-2019. Using data for occupations at the 3-digit level in Europe, we find that on average employment shares have increased in occupations more exposed to AI. This is particularly the case for occupations with a relatively higher proportion of younger and skilled workers. This evidence is in line with the Skill Biased Technological Change theory. While there exists heterogeneity across countries, only very few countries show a decline in employment shares of occupations more exposed to AI-enabled automation. Country heterogeneity for this result seems to be linked to the pace of technology diffusion and education, but also to the level of product market regulation (competition) and employment protection laws. In contrast to the findings for employment, we find little evidence for a relationship between wages and potential exposures to new technologies. JEL Classification: J23, O33
    Keywords: artificial intelligence, employment, occupations, skills
    Date: 2023–07
  13. By: Stijn Baert; Jolien Herregods; Philippe Sterkens (-)
    Abstract: In this study, we present a state-of-the-art scenario experiment which, for the first time in the literature, directly measures the stigma surrounding job candidates with tattoos and piercings using real recruiters. We find that job candidates with body art are perceived as less pleasant to work with, less honest, less emotionally stable, less agreeable, less conscientious and less manageable. This goes hand in hand with lower hireability for men with body art but not for women. Compared to candidates who reveal obesity, a characteristic we also randomise, those with body art score better overall in terms of hireability and rated personality, similar in terms of rated taste to collaborate but worse in terms of rated direct productivity drivers.
    Keywords: body art, obesity, stigma, personality, hiring, taste discrimination, statistical discrimination
    JEL: C91 J24 J71
    Date: 2023–07
  14. By: Phares, Jonathan (Iowa State University); Miller, Jason W. (Michigan State University); Burks, Stephen V. (University of Minnesota, Morris)
    Abstract: Some of the U.S. states saw sharper declines in truck transportation payrolls at the onset of the COVID-19 shutdown, and others displayed differing trajectories in the rebound of truck transportation payrolls during the economic recovery. Analyzing why provides theoretical and practical insights regarding labor dynamics in the trucking sector. In this vein we extend factor market rivalry theory regarding labor dynamics in the trucking sector: we suggest that trucking firms have compound relations with demand generating sectors in that they may compete for the same workers. Sectors differ in how output changes affect both their demand for trucking freight and the extent of their labor poaching; this creates differing net effects on trucking employment. We create a state-level archival data set of truck transportation establishment payrolls from the Quarterly Census of Employment and Wages, which we combine with other archival sources. We test our hypotheses via discontinuous growth curve models estimated using the mixed effects modeling framework. Effects vary by time period and industry, but manufacturing and natural resource extraction stand out in perhaps surprising ways, and changes in demand for local freight movements are especially important. Our results align with our theory and have important implications for managers and policy makers.
    Keywords: truck transportation, motor carrier, COVID-19, pandemic shutdown, pandemic recovery, trucking employment
    JEL: J21 L92 R41
    Date: 2023–06
  15. By: Márton Csilalg (Centre for Economic and Regional Studies, Budapest Institute for Policy Analysis); Lili Márk (Central European University)
    Abstract: In Hungary, employees could claim sickness insurance benefit within 3 days of job-loss, which would enable them to extend their benefit duration by up to 90 days. The maximum number of days of this ‘passive sickness benefit’ was halved in 2007. We first investigate whether claiming passive sickness benefit was related to the monetary advantage relative to claiming unemployment insurance benefits. Then, we explore the effect of potential benefit duration on the transitions to stable employment relying on the variation induced by the policy change. Relying on high quality longitudinal matched administrative data we can estimate these relationships while using controls for employment histories and healthcare spending. On the one hand, we find that passive sickness benefit claiming behavior was indeed correlated with the financial gains. On the other hand, we find only a very small and insignificant immediate effect on transitions to employment when maximum benefit duration was cut by 45 days. However, we find that job finding hazard on the week after benefit exhaustion increased more for individuals who were not on sick leave just prior to job-loss. Our finding is suggestive that a non-negligible proportion of this group were subject to moral hazard.
    Keywords: sickness absence; statutory long-term sick pay; difference-in-difference methods
    JEL: I18 J22 J32
    Date: 2023–06
  16. By: Huffman, David B. (University of Pittsburgh); Raymond, Collin (Purdue University); Shvets, Julia (University of Cambridge)
    Abstract: A long-standing puzzle is how overconfidence can persist in settings characterized by repeated feedback. This paper studies managers who participate repeatedly in a high-powered tournament incentive system, learning relative performance each time. Using reduced form and structural methods we find that: (i) managers make overconfident predictions about future performance; (ii) managers have overly-positive memories of past performance; (iii) the two phenomena are linked at an individual level. Our results are consistent with models of motivated beliefs in which individuals are motivated to distort memories of feedback and preserve unrealistic expectations.
    Keywords: overconfidence, memory, tournament, motivated beliefs
    JEL: D82 D83 J33 L25 L81 M52 M54
    Date: 2023–07
  17. By: Gimenez-Nadal, José Ignacio (University of Zaragoza); Molina, José Alberto (University of Zaragoza); Velilla, Jorge (University of Zaragoza)
    Abstract: The private vehicle is, for most developed countries, the prevalent commuting mode of workers, and one of the main source of CO2 emissions. The choice of the mode of transport for commuting trips clearly depends on individual preferences, and it may be that pro-environmental attitudes and values are related to environmental awareness and minimization of harm to the environment. This paper explores how pro-environmental attitudes and values relate to commuting behaviors, using data from the American Time Use Survey for the period 2003-2019. We focus on the time spent commuting, and on commuting modes. The results show that, net of observable factors, regions in which social attitudes are more pro-environmental are related to longer commuting times, but also to a higher percentage of active commuters and public transit commuters. These results suggest that policies aimed at shifting pro-environmental social values may help in reducing the use of private vehicles and encourage green means of transport, in order to reduce the environmental costs of commuting.
    Keywords: pro-environmental attitudes, commuting time, transport mode, American Time Use Survey, American Values Survey, general social survey
    JEL: A13 Q52 R41
    Date: 2023–06
  18. By: Konstantinos Mavrigiannakis (Athens University of Economics and Business); Andreas Vasilatos (Athens University of Economics and Business); Eugenia Vella
    Abstract: The paper documents a new link between fiscal tightening and the vertical skills mismatch rate (share of over-qualified workers). Using data for Greece, where this rate exceeds one-third, and a variety of structural Bayesian vector auto regressions and identification strategies, we show that fiscal tightening increases mismatch. We then introduce the latter in a DSGE model with heterogeneous households and labor frictions. In line with the data, a fiscal tightening shock raises the mismatch rate in the model. This result holds for production function specifications both with and without capital-skill complementarity (CSC).
    Keywords: skills mismatch, fiscal shocks, capital-skill complementarity, SVAR, DSGE model
    JEL: J24 F41 J63 E62
    Date: 2023–05–30

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