nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2023‒11‒13
nineteen papers chosen by
Joseph Marchand, University of Alberta

  1. The Impact of Restricting Fixed-Term Contracts on Labor and Skill Demand By Giuseppe Grasso; Konstantinos Tatsiramos
  2. Accounting for firms in gender-ethnicity wage gaps throughout the earnings distribution By Van Phan; Carl Singleton; Alex Bryson; John Forth; Felix Ritchie; Lucy Stokes; Damian Whittard
  3. Temperature and the Timing of Work By Sam Cosaert; Adrián Nieto; Konstantinos Tatsiramos
  4. Graying and staying on the job: The welfare implications of employment protection for older workers By Morries, Todd; Dostie, Benoît
  5. Unintended Consequences of Youth Entrepreneurship Programs: Experimental Evidence from Rwanda By Blimpo, Moussa; Pugatch, Todd
  6. Downward Rigidity in the Wage for New Hires By Hazell, Jonathon; Taska, Bledi
  7. Labor Market Power and Development By Armangué-Jubert, Tristany; Guner, Nezih; Ruggieri, Alessandro
  8. Macroeconomic Impacts of Immigration in the Canadian Atlantic Region: An Empirical Analysis Using the Focus Model By Dungan, Peter; Fang, Tony; Gunderson, Morley; Murphy, Steve
  9. Job Creation and Job Destruction in Turkey: 2006 - 2021 By Ayhan, Sinem H.; Lehmann, Hartmut; Pelek, Selin
  11. Factors Influencing Labor Share: Automation, Task Innovation, and Elasticity of Substitution By Baek, Seungjin; Jeong, Deokjae
  12. Antitrust Enforcement Increases Economic Activity By Tania Babina; Simcha Barkai; Jessica Jeffers; Ezra Karger; Ekaterina Volkova
  13. Skills, Aspirations, and Occupations By Alexis Orellana; Kegon Teng Kok Tan
  14. Productivity and quality-adjusted life years: QALYs, PALYs and beyond By Hansen, Kristian S.; Moreno-Ternero, Juan D.; Østerdal, Lars P.
  15. Skills and human capital for the low-carbon transition in developing and emerging economies By Francesco Vona
  16. "Navigating the Precarious Path: Understanding the Dualisation of the Italian Labour Market through the Lens of Involuntary Part-Time Employment". By Liliana Cuccu; Vicente Royuela; Sergio Scicchitano
  17. Technological Innovations and Workers’ Job Insecurity: The Moderating Role of Firm Strategies By Mauro Caselli; Andrea Fracasso; Arianna Marcolin; Sergio Scicchitano
  18. Minimum wage and manufacturing labor share: Evidence from North Macedonia By Marjan Petreski; Jaakko Pehkonen
  19. The effect of a minor health shock on labour market outcomes: The case of concussions By Florian Fouquet; Lisa Meehan; Gail Pacheco; Alice Theadom

  1. By: Giuseppe Grasso; Konstantinos Tatsiramos
    Abstract: This paper examines the impact of increasing the relative cost of fixed-term contracts on labor demand as well as the demand for standard measures of human capital and specific skill requirements. We evaluate a 2018 Italian labor law reform that raised the cost of fixed-term contracts while keeping permanent contract costs unchanged. We employ a difference- indifferences research design, leveraging the variation in firms’ exposure to the reform resulting from their diverse reliance on fixed-term contracts due to differing reactions to earlier labor market reforms. Using rich data covering the near universe of online job vacancies in Italy, our findings indicate that the increase in hiring costs for temporary contracts led to a decrease in the relative demand for temporary workers and an increase in the demand for permanent workers. This shift in demand was accompanied by upskilling towards workers with higher levels of human capital and specific skill requirements. When offering jobs under permanent contracts, firms increased their demand for workers with a college degree and social skills. At the same time, they reduced their demand for workers with only a high school degree and no work experience. On the other hand, when offering jobs under fixed-term contracts, firms increased their demand for workers with some work experience and social skills. These findings suggest that while restricting fixed-term contracts encouraged the hiring of permanent workers, such reforms might have unintended consequences by raising the hiring standards for job entry, thereby reducing employment opportunities for less qualified workers.
    Keywords: hiring costs, employment protection, dual labor markets, skills
    JEL: J23 J24 J63 K31
    Date: 2023
  2. By: Van Phan (Bristol Business School, University of West of England); Carl Singleton (Department of Economics, University of Reading); Alex Bryson (Social Research Institute, University College London); John Forth (Bayes Business School, City, University of London); Felix Ritchie (Bristol Business School, University of West of England); Lucy Stokes (National Institute of Economic and Social Research (NIESR)); Damian Whittard (Bristol Business School, University of West of England)
    Abstract: Previous studies of gender-ethnicity wage gaps have almost exclusively been confined to analyses of household data, so do not fully account for employer influence and wage-setting power. Exploiting high quality employer-employee payroll data on jobs, hours, and earnings, linked with the personal and family characteristics of workers from the population census for England and Wales, we show that firm-specific wage effects account for sizeable parts of the estimated differences between the wages of white and ethnic minority workers at the mean and other points in the wage distribution, which would otherwise mostly have been attributed to differences in individual worker attributes, such as education levels, occupations, and locations. Nevertheless, substantial gaps persist between the wages of white and ethnic minority employees, especially among higher earners. These patterns differ notably by gender and whichever ethnic minority group is compared with white workers. Since most of the wage disadvantage for ethnic minorities appears to sit within firms, our findings suggest that recent legislative reforms on firm-level gender pay gap transparency could be worth extending in the UK, to encompass gender-ethnicity gaps.
    Keywords: Employer-Employee Data, Unconditional Quantile Regression, Decomposition Methods, UK Labour Market
    JEL: J31 J7 J71
    Date: 2023–10–26
  3. By: Sam Cosaert; Adrián Nieto; Konstantinos Tatsiramos
    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
  4. By: Morries, Todd; Dostie, Benoît
    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.
    Keywords: employment protection, retirement, welfare, active and passive savings responses, health effects, spousal spillovers
    JEL: J26 J78 H55
    Date: 2023
  5. By: Blimpo, Moussa (University of Toronto); Pugatch, Todd (Oregon State University)
    Abstract: The persistently high employment share of the informal sector makes entrepreneurship a necessity for youth in many developing countries. We exploit exogenous variation in the implementation of Rwanda's entrepreneurship education reform in secondary schools to evaluate its effect on student economic outcomes up to three years after graduation. Using a randomized controlled trial, we evaluated a three-year intensive training for entrepreneurship teachers, finding pedagogical changes as intended and increased entrepreneurial activity among students. In this paper, we tracked students following graduation and found that increased entrepreneurship persisted one year later, in 2019. Students from treated schools were six percentage points more likely to be entrepreneurs, an increase of 19 percent over the control mean. However, gains in entrepreneurship faded after three years, in 2021. Employment was six percentage points lower in the treatment group. By some measures, income and profits were lower in the treatment group, with no robust differences in these outcomes overall. Lower incomes and profits were concentrated among marginal students induced into entrepreneurship by the program. Youth entrepreneurship programs may therefore steer some participants away from their comparative advantage. Nonetheless, the program increased university enrollment, suggesting the potential for higher long run returns.
    Keywords: entrepreneurship education, youth employment, secondary school, pedagogy, randomized controlled trials, Rwanda
    JEL: I25 I26 I28 J24 O12 O15
    Date: 2023–09
  6. By: Hazell, Jonathon (London School of Economics); Taska, Bledi (Burning Glass Technologies)
    Abstract: Wage rigidity is an important explanation for unemployment fluctuations. In benchmark models wages for new hires are key, but there is limited evidence on this margin. We use wages posted on vacancies, with job and establishment information, to measure the wage for new hires. We show that our measure of the wage for new hires is rigid downward and flexible upward, in two steps. First, wages change infrequently at the job level, and fall especially rarely. Second, wages do not respond to rises in unemployment, but respond strongly to falls in unemployment. Job information is crucial for detecting downward rigidity.
    Keywords: wage rigidity, online vacancy data
    JEL: E24 J31 J63 E32
    Date: 2023–10
  7. By: Armangué-Jubert, Tristany (Barcelona Graduate School of Economics); Guner, Nezih (CEMFI); Ruggieri, Alessandro (CUNEF, Madrid)
    Abstract: Imperfect competition in labor markets can lead to efficiency losses and lower aggregate output. In this paper, we study whether differences in competitiveness of labor markets can help explain differences in GDP per capita across countries. We structurally estimate a model of oligopsony with free entry for countries at different stages of development and show that the labor supply elasticity, which determines the extent of firms' labor market power, is increasing with GDP per capita. Wage mark-downs range from 55 percent among low-income countries to around 23 percent among the richest. Output per capita in poorer countries would increase by up to 69 percent if their labor markets were as competitive as in countries at the top of the development ladder.
    Keywords: labor market power, oligopsony, development, inequality
    JEL: J42 L13 O11 E24
    Date: 2023–10
  8. By: Dungan, Peter (University of Toronto); Fang, Tony (Memorial University of Newfoundland); Gunderson, Morley (University of Toronto); Murphy, Steve (University of Toronto)
    Abstract: We simulate the impact of an increase in immigration into the Atlantic provinces based on the FOCUS macro-econometric model at the University of Toronto. That national model was adapted to reflect the regional dimensions of the Atlantic provinces. We find robust evidence of positive outcomes for the Atlantic region so long as it is part of a broader increase in immigration for the country as a whole. The positive outcome encompasses higher GDP and GDP per capita, higher consumption, and improved government fiscal balances at both the federal and provincial levels that could in turn be used for tax reductions or the enhancement of government services. These benefits could be enhanced further by carefully targeting new immigrants for needed skills and for their likelihood of remaining in the Atlantic region.
    Keywords: immigration, macroeconomic impacts, Atlantic Canada, FOCUS Model
    JEL: J11 J15 J18 J24
    Date: 2023–10
  9. By: Ayhan, Sinem H. (Institute for East and Southeast European Studies, Regensburg); Lehmann, Hartmut (Leibniz Institute for East and Southeast European Studies (IOS)); Pelek, Selin (Galatasaray University)
    Abstract: This paper examines the dynamics of Turkey's labor market using job flow analysis. We analyze administrative data from 2006 to 2021, encompassing all non-financial firms and their employees registered with social security institutions, to examine employment dynamics during various periods, including significant shocks like the 2008 global recession, the local currency collapse in late 2018, and the first two years of the COVID-19 pandemic. We examine how an extended set of firm characteristics influences employment structure dynamics. Turkey's labor market is highly dynamic, with job reallocation rates ranging from 34% to 44%, surpassing Anglo-Saxon nations and significantly exceeding transition countries, but having similar rates of developing countries. High excess job reallocation rates reveal substantial and genuine job structure changes in Turkey, especially notable in the construction sector, where job creation persistence is remarkably low. Micro firms (up to 10 employees) dominate job creation and destruction, with declining job flow rates as firms grow larger or older. Low-tech industries in manufacturing display a similar pattern, contributing significantly to job creation and destruction. Firms strongly engaged in imports and/or exports also contribute more to job creation and job destruction compared to those with low exposure to international trade.
    Keywords: job creation, job destruction, firm characteristics, administrative data, Turkey
    JEL: E24 J08 J23 J63 L25 L26
    Date: 2023–09
  10. By: Olivier CARDI; Romain RESTOUT
    Abstract: The contractionary effect of aggregate technology shocks on hours worked has shrunk over time in OECD countries. Our estimates suggest that this finding can be attributed to the increasing share of the variance of technology improvements driven by asymmetric technology shocks across sectors. While technology improvements uniformly distributed across sectors are found empirically to give rise to a dramatic decline in total hours worked, asymmetric technology shocks do the opposite. By depreciating non-traded prices, symmetric technology shocks generate a contractionary effect on non-traded labor and thus on total hours. In contrast, by appreciating non-traded prices, technological change concentrated toward traded industries puts upward pressure on wages which has a strong expansionary effect on total hours worked. A two-sector open economy model with frictions into the movements of inputs can reproduce the time -increasing response of both total and sectoral hours worked we estimate empirically once we allow for factor-biased technological change and we let the share of asymmetric technology shocks increase over time. A model with endogenous technology decisions reveals that two-third of the progression of asymmetric technology shocks is driven by greater exposition of traded industries to the international stock of knowledge.
    Keywords: Sector-biased technology shocks; Endogenous technological change; Factor-augmenting efficiency; Open economy; Labor reallocation; CES production function; Labor income share.
    JEL: E25 E62 F11 F41 O33
    Date: 2023
  11. By: Baek, Seungjin; Jeong, Deokjae
    Abstract: This paper explores the underlying factors contributing to the recent decline in labor share, focusing specifically on the roles of automation and the development of new tasks that are exclusive to humans. First, our paper strengthens the argument that automation has a negative impact on labor share. Second, we are the first to empirically estimate the influence of new human-exclusive tasks on labor share. Our findings suggest that the positive impact of human-exclusive tasks dominates the negative impact brought about by automation. Third, we find that the elasticity of substitution between labor and capital is less than one, offering a coherent framework for predicting how various factors ---capital price, robot price, and wages--- impact labor share. We identify two distinct mechanisms through which robots negatively affect labor share: automation and a reduction in the price of robots. Our general equilibrium model predicts that the latter will gain increasing importance in the future as robots become more prevalent. Lastly, we estimate the elasticity of substitution between tasks to be one, empirically validating an assumption that many existing studies have made.
    Keywords: automation; tasks; labor share; robot; elasticity of substitution
    JEL: D24 D33 E24 E25 J23 O33 O57
    Date: 2023–10–01
  12. By: Tania Babina; Simcha Barkai; Jessica Jeffers; Ezra Karger; Ekaterina Volkova
    Abstract: We hand-collect and standardize information describing all 3, 055 antitrust law suits brought by the Department of Justice (DOJ) between 1971 and 2018. Using restricted establishment-level microdata from the U.S. Census, we compare the economic outcomes of a non-tradable industry in states targeted by DOJ antitrust lawsuits to outcomes of the same industry in other states that were not targeted. We document that DOJ antitrust enforcement actions permanently increase employment by 5.4% and business formation by 4.1%. Using an event-study design, we find (1) a sharp increase in payroll that exceeds the increase in employment, meaning that DOJ antitrust enforcement increases average wages, (2) an economically smaller increase in sales that is statistically insignificant, and (3) a precise increase in the labor share. While we cannot separately measure the quantity and price of output, the increase in production inputs (employment), together with a proportionally smaller increase in sales, strongly suggests that these DOJ antitrust enforcement actions increase the quantity of output and simultaneously decrease the price of output. Our results show that government antitrust enforcement leads to persistently higher levels of economic activity in targeted industries.
    Keywords: antitrust enforcement, economic activity, employment, business formation
    JEL: L4 E24 K21 J21
    Date: 2023–10
  13. By: Alexis Orellana (Northwestern University); Kegon Teng Kok Tan (University of Rochester)
    Abstract: It is well documented that children often "inherit" the occupations of their parents. This paper studies the role of early occupational aspirations in determining later life outcomes, a potentially important channel for intergenerational correlations in occupations. Using the Wisconsin Longitudinal Study, we estimate a lifecycle model of college choice and occupation choice to quantify the effect of aspirations on education and wages. We find that aspirations have a sizeable impact on educational attainment and wages, even conditional on latent skills that we recover from the choice model. We also simulate the importance of family background conditional on skills through the strong correlation between family background and aspirations. Our findings suggest that aspirations may be a valuable lever for reducing intergenerational inequality.
    Keywords: college choice, occupations, lifecycle wage growth, aspirations
    JEL: I24 J24
    Date: 2023–10
  14. By: Hansen, Kristian S. (National Research Centre for the Working Environment (NFA)); Moreno-Ternero, Juan D. (Department of Economics, Universidad Pablo de Olavide); Østerdal, Lars P. (Department of Economics, Copenhagen Business School)
    Abstract: We develop a general framework for the evaluation of health and productivity of a population of individuals. In such a framework, we characterize Productivity-and-Quality-Adjusted Life Years evaluation functions, which range from the classical Quality-Adjusted Life Years (QALYs) to its polar Productivity-Adjusted Life Years (PALYs). Our frame-work and characterization results provide a new normative basis for the economic evalu-ation of health care or occupational health and safety policies.
    Keywords: Health; productivity; QALYs; PALYs; axioms
    JEL: D63 I10 J24
    Date: 2023–10–23
  15. By: Francesco Vona (University of Milan and Fondazione Eni Enrico Mattei)
    Abstract: Developing and emerging economies face enormous challenges to reconcile economic development and job creation with decarbonization. An essential aspect of such “early-stage” decoupling of growth and carbon emissions is to develop a skill base that favours the diffusion of green productions and technologies. This paper sheds light on the role of the adjustments in the skill supply and of labour market institutions to pursue such early stage decoupling in developing and emerging economies. The paper begins by defining green growth strategies and the associated green skill requirement. To overcome measurement issues and data limitations, it then assesses the advantages and disadvantages of the task-based approach to green labour markets, emphasizing critical issues for developing countries as well as the opportunities to collect original data. Finally, it derives some policy recommendations to solve the coordination failure between investments in skills, particularly technical skills, and green technology adoption.
    Keywords: Skills, tasks, green economy, developing and emerging economies, structural change, green technological change, labour market institutions
    JEL: J24 Q56 O13 O14
    Date: 2023–10
  16. By: Liliana Cuccu (University of Barcelona); Vicente Royuela (University of Barcelona); Sergio Scicchitano (John Cabot University, INAPP National Institute for Public Policy Analysis and Global Labor Organization (GLO).)
    Abstract: This paper investigates the surge in Involuntary Part-Time (IPT) employment in Italy from 2004 to 2019, exploring its impact on various socio-economic groups and adopting a spatial perspective. Our study tests the hypothesis that technological shifts, specifically routine biased technological change (RBTC), and the expansion of household substitution services contribute to IPT growth. We uncover a widening negative gap in IPT prevalence among marginalized groups- women, young, and less skilled workers. After controlling for sector and occupation, the higher IPT propensity diminishes but remains significant, hinting at persistent discrimination. Additionally, segregation into more exposed occupations and sectors intensifies over time. Leveraging province-level indicators, and using a Partial Adjustment model, we find support for RBTC’s correlation with IPT, especially among women. The impact of household substitution services is notably pronounced for women, highlighting sector segregation and gender norms’ influence.
    Keywords: Involuntary part-time, Precarisation of labour, Automation. JEL classification: J21, J24, O33.
    Date: 2023–10
  17. By: Mauro Caselli; Andrea Fracasso; Arianna Marcolin; Sergio Scicchitano
    Abstract: In this paper, we empirically assess whether the perceived implications of technological innovations on the probability of job loss vary according to the innovation-related strategies adopted by firms. We take advantage of a unique dataset based on a large and representative cross-sectional survey covering several characteristics of Italian workers and their firms. We find that the relationship between technological innovations and job insecurity is moderated by firms’ technology-specific training programs, their dismissal plans, and the impact of innovations on the tasks and activities performed by workers. Thus, workers’ perceptions of job insecurity vary significantly across innovative firms and the adoption of technological innovations in the workplace has a multifaceted impact on the perceptions of job insecurity of the affected workers.
    Keywords: job insecurity, technology, innovation, firms
    JEL: J28 O33
    Date: 2023
  18. By: Marjan Petreski; Jaakko Pehkonen
    Abstract: The objective of the paper is to understand if the minimum wage plays a role for the labor share of manufacturing workers in North Macedonia. We decompose labor share movements on those along a share-capital curve, shifts of this locus, and deviations from it. We use the capital-output ratio, total factor productivity and prices of inputs to capture these factors, while the minimum wage is introduced as an element that moves the curve off. We estimate a panel of 20 manufacturing branches over the 2012-2019 period with FE, IV and system-GMM estimators. We find that the role of the minimum wage for the labor share is industry-specific. For industrial branches which are labor-intensive and low-pay, it increases workers' labor share, along a complementarity between capital and labor. For capital-intensive branches, it reduces labor share, likely through the job loss channel and along a substitutability between labor and capital. This applies to both branches where foreign investment and heavy industry are nested.
    Date: 2023–10
  19. By: Florian Fouquet (LEMNA, Nantes Université & GAINS, Le Mans Université); Lisa Meehan (NZ Work Research Institute, Auckland University of Technology); Gail Pacheco (NZ Work Research Institute, Auckland University of Technology); Alice Theadom (Traumatic Brain Injury Network, Auckland University of Technology)
    Abstract: The literature on health shocks finds that minor injuries have only a short-term impact on labour market outcomes. However, mild traumatic brain injuries (mTBIs, commonly referred to as concussions) may be different as the medical literature highlights that they can have long-term health and cognitive effects. We use administrative data on all medically-diagnosed mTBIs in New Zealand linked to monthly tax records to examine the labour market effects of suffering a mTBI up to four years after the injury. We use a comparison group of those who suffer a mTBI but at a later date to overcome potential endogeneity issues, and employ a doubly-robust difference-in-differences method. We find that suffering a mTBI has negative effects on both employment and earnings. Rather than dissipating over time, these negative effects grow, representing a decrease in employment rate of 20 percentage points and earning losses of about a third after 48 months. Our results highlight the need for timely diagnosis and treatment to mitigate the effect of mTBIs on individuals’ labour market outcomes to reduce economic and social costs.
    Keywords: : health shock, mild traumatic brain injury, labour market outcomes
    JEL: I10 I14 J01 J31
    Date: 2023–10

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