nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2023‒10‒16
fifteen papers chosen by
Joseph Marchand, University of Alberta

  1. Women in management and the gender pay gap By Virginia Sondergeld; Katharina Wrohlich
  2. The Minimum Wage and Inequality Between Groups By Francine D. Blau; Isaac Cohen; Matthew L. Comey; Lawrence Kahn; Nikolai Boboshko
  3. Individualism, Creativity, and Innovation By Katharina Hartinger
  4. The Evolution of Work from Home By Barrero, José María; Bloom, Nicholas; Davis, Steven J.
  5. Retirement Consumption and Pension Design By Jonas Kolsrud; Camille Landais; Daniel Reck; Johannes Spinnewijn
  6. Risk Attitudes and Informal Employment in Ukraine By Dohmen, Thomas; Khamis, Melanie; Lehmann, Hartmut; Pignatti, Norberto
  7. The G.I. Bill and Underemployment By Domnisoru, Ciprian
  8. How to Identify and Estimate the Demand for Job Safety? By Zhang, Nan; Mendelsohn, Robert; Shaw, Daigee
  9. Declining Business Dynamism in Europe: The Role of Shocks, Market Power, and Technology By Filippo Biondi; Sergio Inferrera; Matthias Mertens; Javier Miranda
  10. Graying and staying on the job: The welfare implications of employment protection for older workers By Todd Morris; Benoit Dostie
  11. Low-Wage Jobs, Foreign-Born Workers, and Firm Performance By Amuedo-Dorantes, Catalina; Arenas-Arroyo, Esther; Mahajan, Parag; Schmidpeter, Bernhard
  12. Credit Supply Shocks and Firm Dynamics: Evidence from Brazil By Samuel Bazzi; Marc-Andreas Muendler; Raquel F. Oliveira; James E. Rauch
  13. Are Software Automation and Teleworkers Substitutes? Preliminary Evidence from Japan By Richard Baldwin; Toshihiro Okubo
  14. Trade-Offs in Choosing a College Major By Michael Kaganovich
  15. Vacancy posting, firm balance sheets, and pandemic policy By Van Dijcke, David; Buckmann, Marcus; Turrell, Arthur; Key, Tomas

  1. By: Virginia Sondergeld (DIW Berlin, FU Berlin); Katharina Wrohlich (DIW Berlin, University of Potsdam, IZA)
    Abstract: We analyze the impact of women’s managerial representation on the gender pay gap among employees on the establishment level using German Linked-Employer-Employee-Data from the years 2004 to 2018. For identification of a causal effect we employ a panel model with establishment fixed effects and industry-specific time dummies. Our results show that a higher share of women in management significantly reduces the gender pay gap within the firm. An increase in the share of women in first-level management e.g. from zero to above 33 percent decreases the adjusted gender pay gap from a baseline of 15 percent by 1.2 percentage points, i.e. to roughly 14 percent. The effect is stronger for women in second-level than first-level management, indicating that women managers with closer interactions with their subordinates have a higher impact on the gender pay gap than women on higher management levels. The results are similar for East and West Germany, despite the lower gender pay gap and more gender egalitarian social norms in East Germany. From a policy perspective, we conclude that increasing the number of women in management positions has the potential to reduce the gender pay gap to a limited extent. However, further policy measures will be needed in order to fully close the gender gap in pay.
    Keywords: gender pay gap, women in management, board diversity, two-way fixed effects, linked employer-employee data
    JEL: J16 J31 J71
    Date: 2023–09
  2. By: Francine D. Blau; Isaac Cohen; Matthew L. Comey; Lawrence Kahn; Nikolai Boboshko
    Abstract: We use wage data from the Current Population Survey Merged Outgoing Rotation Group (CPS MORG) to study the effect of state and federal minimum wage policies on gender, race, and ethnic inequality throughout the wage distribution, focusing on lower-tail inequality between men and women, Blacks and Whites, and Hispanics and Whites. We use estimates from three empirical strategies — two reduced-form, one structural — to provide counterfactual simulations of between-group inequality over four key “epochs” of minimum wage policy changes since 1979. Declines in the real minimum wage during the 1980s slowed progress in narrowing between-group inequality during that period. Fairly muted shifts in national and state policies from 1989 to 1998 and 1998 to 2007 meant that the minimum wage was less important over those time spans. Since 2007, several states have opted for steep minimum wage hikes, which we find have especially improved Hispanics’ relative wages, both because they continue to earn low wages and because they reside disproportionately in those states. Finally, we make predictions about the effect of raising the federal minimum wage to $12. We find that a change of this magnitude would reduce existing between-group wage gaps below the 15th percentile by 25-50% and would therefore have an economically important impact on gender, racial, and ethnic inequality in the present day.
    JEL: J15 J16 J31 J38
    Date: 2023–09
  3. By: Katharina Hartinger (Johannes Gutenberg-University Mainz, Germany)
    Abstract: Individualist societies are more innovative, but little is known about the underlying individual behaviors. I use international labor-market and patent data to show that individualism—the cultural dimension that emphasizes individual achievements over collective action—positively affects individual innovation. Comparing migrants from different cultural origins within the same destination country and using variation in individualism at the country, region, and person level, I find that more individualist migrants select into more innovative occupations—including research, creative jobs, and ambitious entrepreneurship. Individualists also engage more readily in knowledge diffusion on the job—even when accounting for occupational selection—by investing more time in active learning. Taken together, those innovation choices account for 44 percent of the individualism productivity premium. Individualism also positively affects patenting behavior as a direct innovation output measure.
    JEL: O31 D91 J24 Z13
    Date: 2023–09–27
  4. By: Barrero, José María (Instituto Tecnológico Autónomo de México Business School); Bloom, Nicholas (Stanford University); Davis, Steven J. (Hoover Institution)
    Abstract: Full days worked at home account for 28 percent of paid workdays among Americans 20-64 years old, as of mid 2023, according to the Survey of Working Arrangements and Attitudes. That's about four times the 2019 rate and ten times the rate in the mid-1990s that we estimate in time-use data. We first explain why the big shift to work from home has endured rather than reverting to pre-pandemic levels. We then consider how work-from-home rates vary by worker age, sex, education, parental status, industry and local population density, and why it is higher in the United States than other countries. We also discuss some implications of the big shift for pay, productivity, and the pace of innovation. Over the next five years, U.S. business executives anticipate modest increases in the share of fully remote jobs at their own companies and in the share of jobs with hybrid arrangements, whereby the employee splits the workweek between home and employer premises. Other factors that portend an enduring shift to work from home include the ongoing adaptation of managerial practices and further advances in technologies, products, and tools that support remote work.
    Keywords: work from home, productivity, labor costs, job amenities, COVID-19
    JEL: D13 D23 E24 J22 J31 M54 R3
    Date: 2023–09
  5. By: Jonas Kolsrud; Camille Landais; Daniel Reck; Johannes Spinnewijn
    Abstract: This paper analyzes consumption to evaluate the distributional effects of pension reforms. Using Swedish administrative data, we show that on average workers who retire earlier consume less while retired and experience larger drops in consumption around retirement. Interpreted via a theoretical model, these findings imply that reforms incentivizing later retirement incur a substantial consumption-smoothing cost. Turning to other features of pension policy, we find that reforms that redistribute based on early-career labor supply would have opposite-signed redistributive effects, while differentiating on wealth may help to target pension benefits toward those who are vulnerable to larger drops in consumption around retirement.
    JEL: H55
    Date: 2023–08
  6. By: Dohmen, Thomas (University of Bonn and IZA); Khamis, Melanie (Wesleyan University); Lehmann, Hartmut (Leibniz Institute for East and Southeast European Studies (IOS)); Pignatti, Norberto (ISET, Tbilisi State University)
    Abstract: Using data from the four waves of the Ukrainian Longitudinal Monitoring Survey - ULMS (2003, 2004, 2007 and 2012), we analyze whether workers with a higher willingness to take risks are more likely to select into informal employment contracts. The data permit us to distinguish between five employment states: formal and informal self-employment, formal salaried employment, voluntary informal salaried employment, and involuntary informal salaried employment. The empirical evidence reveals risk attitudes as a strong causal determinant of the incidence of all types of informal employment but involuntary informal salaried employment. We also provide evidence that our results are not driven by reverse causality: risk attitudes impact on the choice of employment state whilst this latter does not influence risk attitudes. Linking risk attitudes with selection into employment states, we also can establish that along the formal-informal divide the Ukrainian labor market is predominantly segmented for salaried workers whilst it is integrated for the self-employed.
    Keywords: risk attitudes, informal employment, labor market segmentation, Ukraine
    JEL: D91 J42 J46 P23
    Date: 2023–09
  7. By: Domnisoru, Ciprian (Aalto University)
    Abstract: While the ill luck of graduating during a recession is understood to potentially result in job mismatch, less is known about the drivers of underemployment outside of business cycles. This paper shows that the college subsidy investments undertaken as part of the WWII, Vietnam War, and Post-9/11 G.I. Bills led to persistent and sizable increases in the underemployment rate among bachelor's degree holders. In turn, underemployment explains approximately a quarter of the earnings penalty experienced by recent college educated veterans, over and above lost labor market experience, lower rates of graduate school completion and combat exposure effects.
    Keywords: underemployment, veterans, subsidies
    JEL: I22 J24 J31
    Date: 2023–09
  8. By: Zhang, Nan; Mendelsohn, Robert; Shaw, Daigee
    Abstract: The hedonic wage equation is the relationship between wages and job and personal attributes (such as safety and working experiences) when the labor market is in equilibrium. The estimated equations have often been used to measure marginal values of risk reduction (safety) (or the value of a statistical life) in the literature. To measure the nonmarginal value of risk reduction, we need to estimate the demand for safety equation. However, no paper has estimated the demand function for safety because identifying the demand function requires data from multiple labor markets, which is difficult to find within a country. Thus, most papers estimate the hedonic wage equation of a single labor market in a country. By taking advantage of a panel dataset regarding the labor market in Taiwan, we divide the labor market into three sequentially separated markets to solve the identification problem. We first estimate the hedonic wage equation for each labor market in the first stage. Then, we estimate the demand for safety in the second stage using the IV approach to address the endogeneity problem in the demand equation. The main contributions of this study are twofold: First, we point out that job risk is not endogenous in estimating the hedonic wage equation, which is different from most hedonic wage studies where job risk has always been taken to be endogenous following Viscusi (1978). Second, this is the first study that has successfully estimated the demand for job risk reduction in the hedonic literature. We find significant income and substitution effects: workers with higher potential income or exposed to higher risks exhibit a higher marginal willingness to pay (MWTP). We also find heterogeneity in MWTP: older workers have higher MWTP, while there are no significant differences between genders. We then conduct welfare analyses regarding nonmarginal changes in risks.
    Keywords: hedonic wage model; identification; endogeneity; demand for safety; the value of a nonmarginal change in risk reduction
    JEL: J17 J28 Q51
    Date: 2023
  9. By: Filippo Biondi (KU Leuven and Research Foundation Flanders (FWO)); Sergio Inferrera (Queen Mary University of London); Matthias Mertens (Halle Institute for Economic Research (IWH) and the Competitiveness Research Network (CompNet)); Javier Miranda (Halle Institute for Economic Research (IWH) and the Competitiveness Research Network (CompNet))
    Abstract: We study the changing patterns of business dynamism in Europe after 2000 using novel micro-aggregated data that we collect for 19 European countries. In all of them, we document a decline in job reallocation rates that concerns most economic sectors. This is mainly driven by dynamics within sectors, size classes, and age classes rather than by compositional changes. Large and mature firms show the strongest decline in job reallocation rates. Simultaneously, the shares of employment and sales of young firms decline. Consistent with US evidence, firms’ employment changes have become less responsive to productivity. However, the dispersion of firms’ productivity shocks has decreased too. To enhance our understanding of these patterns, we derive a firm-level framework that relates changes in firms’ productivity, market power, and technology to job reallocation and firms’ responsiveness.
    Keywords: Business dynamism, productivity, responsiveness of labor demand, market power, European cross-country data, technological change
    JEL: D24 J21 J23 J42 L11 L25
    Date: 2023–10–25
  10. By: Todd Morris; Benoit Dostie
    Abstract: We study the welfare implications of employment protection for older workers, exploiting recent bans on mandatory retirement across Canadian provinces. Using linked employeremployee tax data, we show that the bans cause large and similar reductions in job separation rates and retirement hazards at age 65, with further reductions at higher ages. The effects vary substantially across industries and firms, and around two-fifths of the adjustments occur between ban announcement and implementation dates. We find no evidence that the demand for older workers falls, but the welfare effects are mediated by spillovers on savings behavior, workplace injuries, and spousal retirement timing. Nous étudions les répercussions de la protection de l’emploi sur le bien-être des travailleurs âgés, en exploitant les récentes interdictions de la retraite obligatoire dans les provinces canadiennes. À l’aide de données fiscales couplées sur les employés et les employeurs, nous montrons que les interdictions entraînent des réductions importantes et similaires aux taux de cessation d’emploi et des risques de retraite à l’âge de 65 ans, et d’autres réductions à des âges plus élevés. Les effets varient considérablement d’une industrie et d’une entreprise à l’autre, et environ les deux cinquièmes des ajustements surviennent entre l’annonce de l’interdiction et les dates de mise en œuvre. Nous ne trouvons aucune preuve que la demande de travailleurs âgés diminue, mais les effets sur le bien-être sont atténués par les retombées sur le comportement d’épargne, les blessures en milieu de travail et le moment où le conjoint prend sa retraite.
    Keywords: employment protection, retirement, welfare, active and passive savings responses, health effects, spousal spillovers, protection de lâemploi, retraite, bien-être social, épargne active et passive, effets sur la santé, retombées pour le conjoint
    JEL: J26 J78 H55
    Date: 2023–09–28
  11. By: Amuedo-Dorantes, Catalina (University of California, Merced); Arenas-Arroyo, Esther (Vienna University of Economics and Business); Mahajan, Parag (University of Delaware); Schmidpeter, Bernhard (University of Linz)
    Abstract: We examine how migrant workers impact firm performance using administrative data from the United States. Exploiting an unexpected change in firms' likelihood of securing low-wage workers through the H-2B visa program, we find limited crowd-out of other forms of employment and no impact on average pay at the firm. Yet, access to H-2B workers raises firms' annual revenues and survival likelihood. Our results are consistent with the notion that guest worker programs can help address labor shortages without inflicting large losses on incumbent workers.
    Keywords: guest workers, migrants, employment, firm dynamics, H-2B visa
    JEL: J23 F22 J61
    Date: 2023–09
  12. By: Samuel Bazzi; Marc-Andreas Muendler; Raquel F. Oliveira; James E. Rauch
    Abstract: We explore how financial constraints distort the entry decisions among otherwise productive entrepreneurs and limit growth of promising young firms. A model of liquidity-constrained entrepreneurs suggests that the easing of credit constraints can induce more entry of firms with greater long-run growth potential than the easing of conventional entry barriers would bring about. We explore this growth mechanism using a large-scale program to expand the supply of credit to small and medium enterprises in Brazil. Local credit supply shocks generate greater firm entry but also greater exit with no effect on short-run employment growth in the formal sector. However, credit expansions increase average capability among entering firms, which enter at larger size, survive longer, and grow faster. These firm dynamics are more pronounced in areas with weaker credit markets ex ante and consistent with local bank branches using cheap targeted credit lines to expand lending more broadly. Our findings provide new evidence on the general equilibrium effects of credit supply expansions.
    JEL: D21 D22 D92 L25 L26 M13 O12
    Date: 2023–09
  13. By: Richard Baldwin; Toshihiro Okubo
    Abstract: Digital technology is reshaping workplaces by enabling spatial separation of offices, known as telework, or remote intelligence (RI), and by facilitating automation of service sector tasks via artificial intelligence (AI). This paper is a first attempt to empirically investigate whether AI and RI are complements or substitutes in the service sector. It uses a worker-level panel of surveys collected from around 10, 000 workers from pre-COVID-19 pandemic to late 2022, we find preliminary evidence that suggests that AI and RI are complements rather than substitutes. The evidence comes first from the positive correlation of investments in AI-promoting and RI-promoting software at the firm and worker level, and second from the positive correlation of workers' expectations regarding telework and software automation. The evidence is far from definitive but suggests that the complement-substitution question is a fruitful line for future research.
    JEL: F6
    Date: 2023–08
  14. By: Michael Kaganovich
    Abstract: Recent empirical analyses reveal substantial differences in the choices of college majors between demographic and socio-economic groups that are further amplified upon students’ adjustment of their educational choices in the course of studies. The best documented and salient are the differences between genders, whereby women tend to be significantly underrepresented in some quantitatively oriented academic fields such as STEM, Business, and Economics, which also happen to be associated with relatively more lucrative careers, and overrepresented in others, such as Humanities and Education. Among potential explanations for this gender imbalance, some scholars noted that those more lucrative fields tend to have a more competitive environment and assign, on average, lower grades and conjectured that female students exhibit stronger aversion to low grades, hence their relative aversion to low-grading disciplines. The empirical literature also brings up a competing reasoning that gender biases in the choices of disciplines are directly driven by differences in preferences toward fields and pecuniary as well as non-pecuniary aspects of careers associated with them. This paper develops a theoretical model, which proposes a foundation for the latter explanation as a predominant one and reconciling it with the empirical evidence of gender differences in responsiveness to grades mentioned above. The paper argues that a student’s responsiveness to grades, in terms of the initial choice of and persistence in majors, is field-specific and is the stronger, the weaker is the student’s preferential attachment to the field. A key implication is that categories of students who attach high importance to pecuniary benefits of post-college careers, will be more tolerant toward inferior grades they may receive in the disciplines which promise such lucrative careers. It further explains why such students also tend to exhibit higher dropout rates from college.
    Keywords: higher education, college major, switching majors, dropout, gender gap
    JEL: I23 I24 J24 D21
    Date: 2023
  15. By: Van Dijcke, David (Department of Economics, University of Michigan); Buckmann, Marcus (Bank of England); Turrell, Arthur (Data Science Campus, Office for National Statistics); Key, Tomas (Bank of England)
    Abstract: We assess how balance sheets propagated labour demand shocks during Covid-19 using novel matched data on firms and online job postings. Exploiting regional and firm-level variation in three pandemic policies in the UK, we find that financially healthy firms increased vacancies more in response to positive shocks. Less-leveraged firms and firms with higher credit scores increased postings more in response to the Eat Out to Help Out’s local demand subsidies and after receiving a Bounce Back Loan Scheme loan, respectively. These findings complement the link between leverage and employment losses in response to negative shocks.
    Keywords: Covid-19; recession; vacancies; Indeed; job postings; job ads; heterogeneity; firm; firm-level; balance sheets; industry; big data; alternative data; labour market; natural language processing
    JEL: C50 D20 G30 H10 J20 J60
    Date: 2023–07–21

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