nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2023‒10‒30
nineteen papers chosen by
Joseph Marchand, University of Alberta

  1. Signaling Specific Skills and the Labor Market of College Graduates By Busso, Matias; Montaño, Sebastián; Muñoz-Morales, Juan S.
  2. Social Skills and the Individual Wage Growth of Less Educated Workers By Aghion, Philippe; Bergeaud, Antonin; Blundell, Richard; Griffith, Rachel
  3. Temperature and the Timing of Work By Cosaert, Sam; Nieto Castro, Adrian; Tatsiramos, Konstantinos
  4. Making Their Own Weather? Estimating Employer Labour-Market Power and Its Wage Effects By Martins, Pedro S.; Melo, António
  5. Inequality of Opportunity in Wealth: Levels, Trends, and Drivers By Graeber, Daniel; Hilbert, Viola; König, Johannes
  6. Obsolescence Rents: Teamsters, Truckers, and Impending Innovations By Costas Cavounidis; Qingyuan Chai; Kevin Lang; Raghav Malhotra
  7. Can Vocational Education Improve Schooling and Labour Outcomes? Evidence from a Large Expansion By Ferreira, João R.; Martins, Pedro S.
  8. Robot Imports and Firm-Level Outcomes By Alessandra Bonfiglioli; Rosario Crinò; Herald Fadinger; Gino Gancia
  9. The Health Burden of Job Strain: Evidence from Europe By Petru Crudu; Giacomo Pasini
  10. Police Discretion and Public Safety By Felipe M. Gonçalves; Steven Mello
  11. Artificial Intelligence and Employment: A Look into the Crystal Ball By Dario Guarascio; Jelena Reljic; Roman Stoellinger
  12. Long-term effects of early adverse labour market conditions: A Causal Machine Learning approach By Petru Crudu
  13. Self-Employment Within the Firm By Vittorio Bassi; Jung Hyuk Lee; Alessandra Peter; Tommaso Porzio; Ritwika Sen; Esau Tugume
  14. On the evolution of the wage premium for party membership in China By Alessia Amighini; Weidi Fang; Martin Zagler
  15. Transitions to and from formal employment and income dynamics: Evidence from developing economies By Mariya Aleksynska; Justina La; Thomas Manfredi
  16. Artificial Intelligence and Workers' Well-Being By Giuntella, Osea; König, Johannes; Stella, Luca
  17. When Is High Turnover Cheaper? A Simple Model of Cost Tradeoffs in a Long‐Distance Truckload Motor Carrier, with Empirical Evidence and Policy Implications By Burks, Stephen V.; Kildegaard, Arne; Miller, Jason W.; Monaco, Kristen
  18. Scientific Background to the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2023 By Committee, Nobel Prize
  19. Do Public Works Programs Have Sustained Impacts? A Review of Experimental Studies from LMICs By Aanchal Bagga; Marcus Holmlund; Nausheen Khan; Subha Mani; Eric Mvukiyehe; Patrick Premand

  1. By: Busso, Matias (Inter-American Development Bank); Montaño, Sebastián (University of Maryland); Muñoz-Morales, Juan S. (IÉSEG School of Management)
    Abstract: We use census-like data and a regression discontinuity design to study the labor market impacts of a signal provided by a government-sponsored award given to top-performing students on a nationwide college exit exam in Colombia. Students who can signal their high level of specific skills earn seven to ten percent more than identical students lacking such a signal. The signal allows workers to find jobs in more productive firms and sectors that better use their skills. The positive returns persist for up to five years. The signal favors workers from less advantaged groups who enter the market with weaker signals.
    Keywords: signaling, skills, wage returns, awards, college reputation, Colombia
    JEL: J20 J24 J31 J44 O15 D80
    Date: 2023–09
  2. By: Aghion, Philippe (LSE); Bergeaud, Antonin (HEC Paris); Blundell, Richard (University College London); Griffith, Rachel (University of Manchester)
    Abstract: We use matched employee-employer data from the UK to highlight the importance of social skills, including the ability to work well in a team and communicate effectively with co-workers, as a driver for individual wage growth for workers with few formal educational qualifications. We show that lower educated workers in occupations where social skills are more important experience steeper wage growth with tenure, and also higher early exit rates, than equivalent workers in occupations where social skills are less important. Moreover, the return to tenure in occupations where social skills are important is stronger in firms with a larger share of higher educated workers. We rationalize our findings using a model of wage bargaining with complementarity between the skills and abilities of less educated workers and the firm's other assets.
    Keywords: team work, social skills, individual wage growth, firm pay premium
    JEL: J31 J24 L25
    Date: 2023–09
  3. By: Cosaert, Sam (University of Antwerp); Nieto Castro, Adrian (University of Luxembourg, LISER); Tatsiramos, Konstantinos (University of Luxembourg, LISER)
    Abstract: We leverage U.S. county-day temperature variation combined with daily time use data to examine the effect of temperature on the timing of work. We find that warmer (colder) temperatures increase (decrease) working time during the night and decrease (increase) working time in the morning. These effects are pronounced among workers with increased bargaining power, flexible work schedules, greater exposure to ambient temperature while at work, and fewer family-related constraints. Workers compensate for the shifts in the timing of work triggered by temperature fluctuations by adjusting their sleep time, without changing the timing of leisure and home production activities.
    Keywords: weather, time use, work schedule, labor supply, non-market activities, sleep
    JEL: J22 Q54 I31
    Date: 2023–09
  4. By: Martins, Pedro S. (Nova School of Business and Economics); Melo, António (University of Turin)
    Abstract: The subdued wage growth observed in many countries has spurred interest in monopsony views of regional labour markets. This study measures the extent and robustness of employer power and its wage implications exploiting comprehensive matched employer-employee data. We find average (employment-weighted) Herfindhal indices of 800 to 1, 100, stable over the 1986-2019 period covered, and that typically less than 9% of workers are exposed to concentration levels thought to raise market power concerns. When controlling for both worker and firm heterogeneity and instrumenting for concentration, we find that wages are negatively affected by employer concentration, with elasticities of around -1.4%. We also find that several methodological choices can change significantly both the measurement of concentration and its wage effects.
    Keywords: oligopsony, wages, regional labour markets, worker mobility, Portugal
    JEL: J42 J31 J63
    Date: 2023–09
  5. By: Graeber, Daniel (DIW Berlin); Hilbert, Viola (DIW Berlin); König, Johannes (DIW Berlin)
    Abstract: While inequality of opportunity (IOp) in earnings is well studied, the literature on IOp in individual net wealth is scarce to non-existent. This is problematic because both theoretical and empirical evidence show that the position in the wealth and income distribution can significantly diverge. We measure ex-ante IOp in net wealth for Germany using data from the Socio-Economic Panel (SOEP). Ex-ante IOp is defined as the contribution of circumstances to the inequality in net wealth before effort is exerted. The SOEP allows for a direct mapping from individual circumstances to individual net wealth and for a detailed decomposition of net wealth inequality into a variety of circumstances; among them childhood background, intergenerational transfers, and regional characteristics. The ratio of inequality of opportunity to total inequality is stable from 2002 to 2019. This is in sharp contrast to labor earnings, where ex-ante IOp is declining over time. Our estimates suggest that about 62% of the inequality in net wealth is due to circumstances. The most important circumstances are intergenerational transfers, parental occupation, and the region of birth. In contrast, gender and individuals' own education are the most important circumstances for earnings.
    Keywords: inequality, wealth, inequality of opportunity, decomposition
    JEL: D63 J62 D31 J24
    Date: 2023–09
  6. By: Costas Cavounidis; Qingyuan Chai; Kevin Lang; Raghav Malhotra
    Abstract: We consider large, permanent shocks to individual occupations whose arrival date is uncertain. We are motivated by the advent of self-driving trucks, which will dramatically reduce demand for truck drivers. Using a bare-bones overlapping generations model, we examine an occupation facing obsolescence. We show that workers must be compensated to enter the occupation - receiving what we dub obsolescence rents - with fewer and older workers remaining in the occupation. We investigate the market for teamsters at the dawn of the automotive truck as an á propos parallel to truckers themselves, as self-driving trucks crest the horizon. As widespread adoption of trucks drew nearer, the number of teamsters fell, the occupation became ‘grayer’, and teamster wages rose, as predicted by the model.
    JEL: J20 J31 J62 O33
    Date: 2023–09
  7. By: Ferreira, João R. (Nova School of Business and Economics); Martins, Pedro S. (Nova School of Business and Economics)
    Abstract: We evaluate the education and labour impact of vocational education and training (VET). Identification draws on different IVs from the large-scale, staggered introduction of VET courses in public schools in Portugal from 2005. We also exploit the large gender differences in VET, with many courses selected almost only by either boys or girls. Drawing on rich student-school matched panel data, we find that VET increased upper-secondary graduation rates dramatically: our LATE estimates typically exceed 50 percentage points. These effects are even stronger for low-achieving students and welfare recipients. Moreover, we find evidence of regional youth employment growth following VET expansions. VET graduates also benefit from higher wages and other positive outcomes over several years, compared to both academic-track and lower-secondary graduates.
    Keywords: educational attainment, vocational education, matched student-teacher-school data, VET wage differentials
    JEL: I21 I26 I28 J24
    Date: 2023–09
  8. By: Alessandra Bonfiglioli; Rosario Crinò; Herald Fadinger; Gino Gancia
    Abstract: We use French data over the 1994-2013 period to study how imports of industrial robots affect firm-level outcomes. Guided by a simple model, we develop a novel empirical strategy to identify the causal effects of robot adoption. Our results suggest that, while demand shocks generate a positive correlation between robot imports and employment at the firm level, exogenous exposure to automation leads to job losses. We also find that robot exposure increases labor productivity and some evidence that it may raise the relative demand for high-skill professions.
    Keywords: Automation, Displacement, Firms, Robots
    JEL: J23 J24 O33 D22
    Date: 2023–10
  9. By: Petru Crudu (Department of Economics, University Of Venice CÃ Foscari); Giacomo Pasini (Department of Economics, University Of Venice CÃ Foscari; NETSPAR)
    Abstract: This study examines the impact of occupational stressors and tasks throughout an individual’s career on their health in older age. Leveraging comprehensive job occupation data from the SHARE dataset, we establish precise connections between stressors and specific jobs at the 4-digit ISCO code level. To ensure accurate measurement of physical exertion, we propose the use of Metabolic Equivalent of Task (MET) based on the metabolic rate consumption associated with each task. Our study makes two key contributions. First, we provide compelling evidence that individuals, especially women, engaged in physically demanding jobs experience significantly worse health in older age. Our results remain valid after conducting several robustness checks and after controlling for a rich set of variables. Secondly, we introduce a novel methodology to identify harmful tasks and measure overall Job Strain Intensity, which also incorporates unobserved occupational stressors. This approach allows us to pinpoint specific harmful tasks and 4-digit ISCO codes, providing valuable insights for targeted retirement schemes and addressing important considerations regarding the fairness of statutory retirement ages. Additionally, policymakers can benefit from our findings to foster healthier work environments and guide investments towards automating high-risk tasks, thereby improving overall workplace safety and well-being.
    Keywords: Health, Job Tasks, Working Conditions, MET
    JEL: I1 I14 I18 J24 J28
    Date: 2023
  10. By: Felipe M. Gonçalves; Steven Mello
    Abstract: We study the implications of police discretion for public safety. Highway patrol officers exercise discretion over fines by deviating from statutory fine rules. Relying on variation across officers in this discretionary behavior, we find that harsher sanctions reduce future traffic offending and crash involvement. We then show that officer discretion over sanctions decreases public safety by comparing observed reoffending rates with those in a counterfactual without discretion, estimated using an identification at infinity approach. About half the safety cost of discretion is due to officer decisions which result in harsh sanctions for motorists who are least deterred by them. We provide evidence that this officer behavior is attributable to a preference for allocating harsh fines to motorists with higher recidivism risk, who are also the least responsive to harsher sanctions.
    JEL: D73 J45 K42
    Date: 2023–09
  11. By: Dario Guarascio; Jelena Reljic; Roman Stoellinger
    Abstract: This study provides evidence of the employment impact of AI exposure in European regions, addressing one of the many gaps in the emerging literature on AI's effects on employment in Europe. Building upon the occupation-based AI-exposure indicators proposed by Felten et al. (2018, 2019, 2021), which are mapped to the European occupational classification (ISCO), following Albanesi et al. (2023), we analyse the regional employment dynamics between 2011 and 2018. After controlling for a wide range of supply and demand factors, our findings indicate that, on average, AI exposure has a positive impact on regional employment. Put differently, European regions characterised by a relatively larger share of AI-exposed occupations display, all else being equal and once potential endogeneity concerns are mitigated, a more favourable employment tendency over the period 2011-2018. We also find evidence of a moderating effect of robot density on the AI-employment nexus, which however lacks a causal underpinning.
    Keywords: Artificial intelligence; industrial robots; labour; regional employment; occupations
    JEL: J21 J23 O33 R1
    Date: 2023–10
  12. By: Petru Crudu (Department of Economics, University Of Venice CÃ Foscari)
    Abstract: This study estimates the long-term causal effects of completing education during adverse labour market conditions, measuring outcomes 35 years post-education. To achieve this, the study combines historical regional unemployment rates with detailed SHARE microdata for European cohorts completing education between 1960 and 1990 in a novel database. A systematic heterogeneity analysis is conducted by leveraging the Causal Forest, a causal machine learning estimator that allows estimates at various aggregation levels. Furthermore, the causal link is validated using an instrumental variable approach. The main findings reveal that a one-percentage-point increase in the unemployment rate at the time of completing education leads to a significant decline in earnings (-5.2%) and self-perceived health (-2.23%) after 35 years. The heterogeneity analysis uncovers that the results are primarily driven by less educated individuals and highlights a permanent disadvantage for women in labour market participation. This study also provides evidence that systematic divergence in life trajectories can be explained by search theory and human capital models. Overall, the research suggests that the consequences of limited post-education opportunities can be permanent, underscoring the importance of identifying vulnerable groups for effective policy interventions.
    Keywords: Long-term Effects, Unemployment, Heterogeneous Effects, GRF
    JEL: J31 I1 J24 I24 E24
    Date: 2023
  13. By: Vittorio Bassi; Jung Hyuk Lee; Alessandra Peter; Tommaso Porzio; Ritwika Sen; Esau Tugume
    Abstract: We collect time-use data for entrepreneurs and their workers in over 1, 000 manufacturing firms in urban Uganda. We document limited labor specialization within the firm for establishments of all sizes and argue that this is likely due to the prevalence of product customization. We then develop a general equilibrium model of task assignment within the firm, estimate it with our data, and find large barriers to labor specialization. This setting is close, in terms of aggregate productivity and firm scale, to an extreme benchmark in which each firm is just a collection of self-employed individuals sharing a production space. Given how firms are organized internally, the benefits from alleviating other frictions that constrain firm growth are muted: most African firms resemble artisanal workshops whose business model is not easily scalable.
    JEL: L23 L25 O11 O14 O17
    Date: 2023–09
  14. By: Alessia Amighini (UPO University of Eastern Piedmont & Brueghel, Brussels); Weidi Fang (Department of Economics, Vienna University of Economics and Business); Martin Zagler (UPO University of Eastern Piedmont & Department of Economics, Vienna University of Economics and Business)
    Abstract: We analyze the evolution of wage differentials between party members and non-members across more than two decades (1995-2018). We apply the Oaxaca-Blinder composition method to disentangle the contribution to the wage gap of different levels of human capital from discrimination against non- members. We also run quantile regressions to estimate the slope of the wage premium functions applying the Macada-Mata decomposition. Our results show party wage premium has decreased over time, but it is still high. There is also evidence of a widening divergence between urban and rural workers, with the former getting higher wage premia since 2013, while the latter have lost most of their return to party membership, and is still positive only for workers in the top quintile. A positive discrimination for CPC members (not justified by characteristics) started in 2013; the party still recruits elites, but over-pays them for party loyalty more than for their qualifications, attracting opportunists.
    Keywords: Communist Party of China (CPC), wage premium for CPC membership, decomposition methods, China
    JEL: D43 P21 J32 J43 J71
    Date: 2023–09
  15. By: Mariya Aleksynska; Justina La; Thomas Manfredi
    Abstract: Using panel data for Indonesia, Malawi, Peru and South Africa, this paper investigates the relationship between transitions to formal employment and workers’ labour income. It shows that transiting from informal to formal employment increases the probability of improving workers’ labour income in both absolute and relative terms. However, income gains from formalisation do not accrue to all workers equally. Switching to formal employment has the greatest potential to improve the labour income of the richest workers. The chances of improving the labour income of the poorest workers through formalisation are slim. Transitions between formal and informal employment affect income gains and losses differently for men and women, older and younger workers, and workers with different levels of schooling. The effects of labour market transitions on income changes are considerably greater in magnitude than other life events such as a births, separation, or death of a partner or spouse.
    Keywords: informal employment, informality, labour market transitions, poverty
    JEL: D31 E26 I3 J46
    Date: 2023–10–06
  16. By: Giuntella, Osea (University of Pittsburgh); König, Johannes (DIW Berlin); Stella, Luca (Free University of Berlin)
    Abstract: This study explores the relationship between artificial intelligence (AI) and workers' well-being and mental health using longitudinal survey data from Germany (2000-2020). We construct a measure of individual exposure to AI technology based on the occupation in which workers in our sample were first employed and explore an event study design and a difference-in-differences approach to compare AI-exposed and non-exposed workers. Before AI became widely available, there is no evidence of differential pre-trends in workers' well-being and concerns about their economic futures. Since 2015, however, with the increasing adoption of AI in firms across Germany, we find that AI-exposed workers have become less satisfied with their life and job and more concerned about job security and their personal economic situation. However, we find no evidence of a significant impact of AI on workers' mental health, anxiety, or depression.
    Keywords: artificial intelligence, future of work, well-being, mental health
    JEL: I10 J28 O30
    Date: 2023–09
  17. By: Burks, Stephen V. (University of Minnesota, Morris); Kildegaard, Arne (University of Minnesota, Morris); Miller, Jason W. (Michigan State University); Monaco, Kristen (Federal Maritime Commission)
    Abstract: The U.S. trucking industry has been calling out a shortage of truck drivers for nearly forty years, since soon after its economic deregulation in 1980. Burks and Monaco (2019) provided evidence that the overall truck driver labor market works about as well as any blue collar labor market, and suggested persistently high driver turnover uniquely at long‐distance truckload firms (central to long distance freight but employing only 20% of tractor‐trailer truckers) drives the shortage perception. The American Trucking Associations (ATA) agreed with the location of the problem, but argued that a driver shortage and high turnover are distinct, and that a long‐term shortage does exist. We review the evidence for a shortage and find it unconvincing. We also review empirical evidence that long‐distance truckload has had persistently high‐turnover since the mid‐1980s. To explain this, we provide a simple model of long‐distance truckload cost minimization in which there is a tradeoff between the costs of turnover and two other costs, higher pay to offset bad working conditions (compensating differentials), and running trucks out‐of‐ route to get drivers home regularly (inefficient capital use). We show that high turnover is likely structural because it is part of the least‐cost mixture. We then use our model to analyze the potential impacts of two technological changes (truck simulators and partially automated trucks), and a key policy championed by the ATA to "fix the shortage, " interstate teenaged truckers. We show that these are likely to have results opposite to those the industry and policy makers expect.
    Keywords: costs, less‐than-truckload, truckload, driver shortage, driver turnover, long‐distance motor carrier, teenaged truck drivers, partially automated trucks, truck transportation
    JEL: L1 J42 L9
    Date: 2023–09
  18. By: Committee, Nobel Prize (Nobel Prize Committee)
    Abstract: Women are severely underrepresented in the global labor market: around 50% of women work or actively seek work for income, compared to 80% for men. The gender differences in participation are fundamentally driven by variation in women’s participation rates – men’s participation rates are broadly constant across time and countries. The participation gaps between men and women are particularly large in South Asia, the Middle East, and North Africa, where they sometimes exceed 50 percentage points.
    Keywords: Gender in labor markets;
    JEL: J70 J71 J78
    Date: 2023–10–09
  19. By: Aanchal Bagga (Tufts University); Marcus Holmlund (DIME and World Bank); Nausheen Khan (DIME and World Bank); Subha Mani (Fordham University, Department of Economics); Eric Mvukiyehe (Duke University); Patrick Premand (DIME and World Bank)
    Abstract: Many low- and middle-income countries (LMICs) have introduced public works programs that offer temporary cash-for-work opportunities to poor individuals. This paper reviews experimental evidence on the impacts of public works programs on participants over the short and medium run, providing new insights on whether they have sustained impacts. The findings show that public works mainly increase employment and earnings during the program. Short-term positive effects tend to fade in the medium run, except in a few cases in which large impacts on savings or investments in self-employment activities are also observed. Importantly, the estimated impacts on earnings are much lower than planned transfer amounts due to forgone earnings, raising questions about cost- effectiveness. There is also little evidence of public works programs improving food consumption expenditure. The review finds evidence of improvements in psychological well-being and women's empowerment in some cases, but not systematically, and with limitations in measurement. The paper concludes by outlining directions for future research.
    Keywords: Public works programs, Experimental evidence, Low- and middle-income countries, Sustainability, Social protection, Safety nets, Employment
    JEL: H41 C93 O12 J22 I38
    Date: 2023

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