nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2023‒11‒20
twenty papers chosen by
Joseph Marchand, University of Alberta

  1. Pension Reform, Incentives to Retire and Retirement Behavior: Empirical Evidence from Swedish Micro-data By Lisa Laun; Mårten Palme
  2. Artificial Intelligence and Jobs: Evidence from US Commuting Zones By Alessandra Bonfiglioli; Rosario Crinò; Gino Gancia; Ioannis Papadakis
  3. National Wage Setting By Hazell, Jonathon; Patterson, Christina; Sarsons, Heather; Taska, Bledi
  4. Monopsony and Automation By Marina Chugunova; Klaus Keller; Jose Azar; Sampsa Samila
  5. Does Wage Theft Vary by Demographic Group? Evidence from Minimum Wage Increases By Jeffrey Clemens; Michael R. Strain
  6. Making the invisible hand visible: Managers and the allocation of workers to jobs By Virginia Minni
  7. Occupational Differences in the Effects of Retirement on Hospitalizations for Mental Illness among Female Workers: Evidence from Administrative Data in China By Wang, Tianyu; Sun, Ruochen; Sindelar, Jody L.; Chen, Xi
  8. The Dynamics of Automation Adoption: Firm-Level Heterogeneity and Aggregate Employment Effects By Laura Bisio; Angelo Cuzzola; Marco Grazzi; Daniele Moschella
  9. Exports to Improve Women's Economic Opportunities in Morocco By Roche Rodriguez, Jaime Alfonso; Robertson, Raymond; Lopez-Acevedo, Gladys; Zárate, Daniela Ruiz
  10. A Tale of Two Fields? STEM Career Outcomes By Xuan Jiang; Joseph Staudt; Bruce A. Weinberg
  11. Remote work and high-proximity employment in Mexico By Lorenzo Aldeco Leo; Alejandrina Salcedo
  12. Spatial wage inequality in North America and Western Europe: changes between and within local labour markets 1975-2019 By Luis Bauluz; Sebastien Breau; Pawel Bukowski; Mark Fransham; Annie Seong Lee; Neil Lee; Margarita Lopez Forero; Clement Malgouyres; Filip Novokmet; Moritz Schularick; Gregory Verdugo
  13. The Effect of Mechanisation on Labour: Evidence from the Diffusion of Steam By Ridolfi, Leonardo; Salvo, Carla; Weisdorf, Jacob
  14. Inefficient Labor Market Sorting By Carsten Eckel; Stephen R. Yeaple
  15. What is a Labor Market? Classifying Workers and Jobs Using Network Theory By Jamie Fogel; Bernardo Modenesi
  16. European Funds and Firm Performance: Evidence from a Natural Experiment By Mesquita, José; Pereira dos Santos, João; Tavares, José
  17. An Economic View of Corporate Social Impact By Hunt Allcott; Giovanni Montanari; Bora Ozaltun; Brandon Tan
  18. Household portfolio choices under (non-)linear income risk: an empirical framework By Julio Gálvez
  19. Monitoring Harassment in Organizations By Laura Boudreau; Sylvain Chassang; Ada González-Torre; Rachel Heath
  20. Exploring the Effects of Medicaid During Childhood on the Economy and the Budget: Working Paper 2023-07 By Elizabeth Ash; William Carrington; Rebecca Heller; Grace Hwang

  1. By: Lisa Laun; Mårten Palme
    Abstract: This paper investigates to what extent the 1998 reform of Sweden’s public old-age pension system contributed to the increase in extensive margin labor supply among older workers seen in the country in recent decades. We use a large data set containing all males and females born in Sweden between 1927 and 1950 and observe their retirement behavior during 1991–2012. The data show that the reform changed the incentives to remain in the labor force ambiguously: although it induced an income effect towards later retirement through lower replacement levels, it also implied a lower price on leaving the labor market under some assumptions. We use an econometric model in which the economic incentives to stay in the labor market are measured by Social Security Wealth, defined at each hypothetical retirement age, and a variable measuring the implicit tax, imposed by the income security system, on staying in the labor force. The point estimates from our econometric model, which should be interpreted with caution, suggest that at most a small part of the increase in labor force participation of the elderly can be attributed to the pension reform.
    JEL: J2 J26
    Date: 2023–10
  2. By: Alessandra Bonfiglioli; Rosario Crinò; Gino Gancia; Ioannis Papadakis
    Abstract: We study the effect of Artificial Intelligence (AI) on employment across US commuting zones over the period 2000-2020. A simple model shows that AI can automate jobs or complement workers, and illustrates how to estimate its effect by exploiting variation in a novel measure of local exposure to AI: job growth in AI-related professions built from detailed occupational data. Using a shift-share instrument that combines industry-level AI adoption with local industry employment, we estimate robust negative effects of AI exposure on employment across commuting zones and time. We find that AI’s impact is different from other capital and technologies, and that it works through services more than manufacturing. Moreover, the employment effect is especially negative for low-skill and production workers, while it turns positive for workers at the top of the wage distribution. These results are consistent with the view that AI has contributed to the automation of jobs and to widen inequality.
    Keywords: artificial intelligence, automation, displacement, labor
    JEL: J23 J24 O33
    Date: 2023
  3. By: Hazell, Jonathon (London School of Economics); Patterson, Christina (University of Chicago Booth School of Business); Sarsons, Heather (University of British Columbia, Vancouver); Taska, Bledi (Burning Glass Technologies)
    Abstract: How do firms set wages across space? Using job-level vacancy data and a survey of HR managers, we show that 40-50% of a job's posted wages are identical across locations within a firm. Moreover, nominal posted wages within the firm vary relatively little with local prices, a pattern we verify with other measures of job level wages. Using the co-movement of wage growth across establishments, we argue these patterns reflect national wage setting - a significant minority of firms choose to set the same nominal wage for a job across all their establishments, despite varying local labor market conditions.
    Keywords: national wage setting, labor markets
    JEL: J24 J45 J33 H56
    Date: 2023–09
  4. By: Marina Chugunova (Max Planck Institute for Innovation and Competition); Klaus Keller (Max Planck Institute for Innovation and Competition); Jose Azar (University of Navarra, School of Economics and Business and IESE Business School); Sampsa Samila (IESE Business School, University of Navarra.)
    Abstract: We examine the impact of labor market power on firms' adoption of automation technologies. We develop a model that incorporates labor market power into the task-based theory of automation. We show that, due to higher marginal cost of labor, monopsonistic firms have stronger incentives to automate than wage-taking firms, which could amplify or mitigate the negative employment effects of automation. Using data from US commuting zones, our results show that commuting zones that are more exposed to industrial robots exhibit considerably larger reductions in both employment and wages when their labor markets demonstrate higher levels of concentration.
    Keywords: automation; employment; labor market concentration; industrial robots; wage setting;
    JEL: J23 J30 J42 L11 O33
    Date: 2023–10–17
  5. By: Jeffrey Clemens; Michael R. Strain
    Abstract: Using Current Population Survey data, we assess whether and to what extent the burden of wage theft — wage payments below the statutory minimum wage — falls disproportionately on various demographic groups following minimum wage increases. For most racial and ethnic groups at most ages we find that underpayment rises similarly as a fraction of realized wage gains in the wake of minimum wage increases. We also present evidence that the burden of underpayment falls disproportionately on relatively young African American workers and that underpayment increases more for Hispanic workers among the full working-age population.
    JEL: J08 J21 J38 K42
    Date: 2023–10
  6. By: Virginia Minni
    Abstract: Why do managers matter for firm performance? This paper provides evidence of the critical role of managers in matching workers to jobs within the firm using the universe of personnel records from a large multinational firm. The data covers 200, 000 white-collar workers and 30, 000 managers over 10 years in 100 countries. I identify good managers as the top 30% by their speed of promotion and leverage exogenous variation induced by the rotation of managers across teams. I find that good managers cause workers to reallocate within the firm through lateral and vertical transfers. This leads to large and persistent gains in workers? career progression and productivity. Seven years after the manager transition, workers earn 30% more and perform better on objective performance measures. In terms of aggregate firm productivity, doubling the share of good managers would increase output per worker by 61% at the establishment level. My results imply that the visible hands of managers match workers' specific skills to specialized jobs, leading to an improvement in the productivity of existing workers that outlasts the managers' time at the firm.
    Keywords: managers, career trajectories, internal labor markets, productivity
    JEL: J24 M5
    Date: 2023–10
  7. By: Wang, Tianyu (Renmin University of China); Sun, Ruochen (University of Pennsylvania); Sindelar, Jody L. (Yale University); Chen, Xi (Yale University)
    Abstract: Retirement, a major transition in the life course, may affect many aspects of retirees' well-being, including health and health care utilization. Leveraging differential statutory retirement age (SRA) by occupation for China's urban female workers, we provide some of the first evidence on the causal effect of retirement on hospitalizations attributable to mental illness and its heterogeneity. To address endogeneity in retirement decisions, we take advantage of exogeneity of the differing SRA cut-offs for blue-collar (age 50) and white-collar (age 55) female urban employees. We apply a Fuzzy Regression Discontinuity Design (RDD) around the SRA cut-offs using nationally representative hospital inpatient claims data that cover these workers. We show that blue-collar females incur more hospitalizations for mental illness after retirement, while no similar change is found for white-collar females. Conditional on blue-collar females being hospitalized, probabilities of overall and ER admissions due to mental illness increase by 2.3 and 1.2 percentage points upon retirement, respectively. The effects are primarily driven by patients within the categories of schizophrenia, schizotypal and delusional disorders; and neurotic, stress-related and somatoform disorders. Moreover, the 'Donut' RDD estimates suggest that pent-up demand at retirement unlikely dominates our findings for blue-collar females. Rather, our results lend support to their worsening mental health at retirement. These findings suggest that occupational differences in mental illness and related health care utilization at retirement should be considered when optimizing retirement policy schemes.
    Keywords: mental illness, behavioral disorders, retirement, inpatient care, blue-collar females, white-collar females
    JEL: I11 J26 J14 I18 H55
    Date: 2023–10
  8. By: Laura Bisio; Angelo Cuzzola; Marco Grazzi; Daniele Moschella
    Abstract: We investigate the impact of investment in automation-related goods on adopting and non- adopting firms in the Italian economy during 2011-2019. We integrate datasets on trade activities, firms’, and workers’ characteristics for the population of Italian importing firms and estimate the effects on adopters’ outcomes within a difference-indifferences design exploiting import lumpiness in product categories linked to automation and AI technologies. We find a positive average adoption effect on the adopters’ employment and on the value-added and average wage, whereas sales and productivity increase after an initial drop with a net positive effect five years after adoption. Crucially, the employment effect is heterogeneous across firms: a positive scale effect is predominant among small firms, whereas a negative displacement effect is predominant among medium and large firms. We complete the framework with a 5-digit sector-level analysis showing that adopting automation technologies has an overall negative effect on aggregate employment.
    Keywords: automation, employment, firm heterogeneity, imports, technology adoption
    JEL: D24 J23 L25 O33
    Date: 2023
  9. By: Roche Rodriguez, Jaime Alfonso (World Bank); Robertson, Raymond (Texas A&M University); Lopez-Acevedo, Gladys (World Bank); Zárate, Daniela Ruiz (Bank of Mexico)
    Abstract: Morocco's trade liberalization policies coincided with macroeconomic growth over the past two decades. The relationship between trade liberalization and individual-level labor-market outcomes, however, are not well understood. By combining three complementary approaches and modeling techniques, this paper estimates: (i) the relationship between trade agreements and trade flows, (ii) the relationship between trade exposure and various local labor market outcomes, and (iii) the relationship between firm employment and exports. Our results show that tariffs have fallen and trade, as a share of GDP has increased. Morocco's trade agreements, however, are not always associated with higher trade flows. Furthermore, trade has led to mixed results for workers. Increased trade has decreased informality but may have adversely affected female labor force participation (FLFP). Trade liberalization seems to have induced a shift from female labor-intensive industries, such as apparel, to capital-intensive sectors that are predominantly male-intensive. Our firm level analysis confirms these results by showing that increasing in employment from exports has occurred mainly in male, capital-intensive sectors. Labor-abundant countries might want to provide incentives to labor-intensive industries rather than only supporting capital-intensive ones - especially in industries where women typically perform the labor-intensive jobs. It is important to note that we focus mainly on the labor demand side. Policies related to the supply side should also be weighed to create incentives for females to join the labor force, such as policies addressing social norms, regulation, and barriers to job mobility.
    Keywords: gender, trade policy, trade flows, labor market outcomes, firm dynamics
    JEL: F13 F14 F15 F16 J23 J31 O15 O19
    Date: 2023–10
  10. By: Xuan Jiang; Joseph Staudt; Bruce A. Weinberg
    Abstract: Is the labor market for US researchers experiencing the best or worst of times? This paper analyzes the market for recently minted Ph.D. recipients using supply-and-demand logic and data linking graduate students to their dissertations and W2 tax records. We also construct a new dissertation-industry “relevance” measure, comparing dissertation and patent text and linking patents to assignee firms and industries. We find large disparities across research fields in placement (faculty, postdoc, and industry positions), earnings, and the use of specialized human capital. Thus, it appears to simultaneously be a good time for some fields and a bad time for others.
    Keywords: STEM Ph.D., knowledge, industry placement, ProQuest, dissertation, USPTO, patents
    JEL: F16 I20 J20 O15
    Date: 2023–10
  11. By: Lorenzo Aldeco Leo; Alejandrina Salcedo
    Abstract: We show that in Mexico, larger shares of potential remote work at the municipality level are related to lower post-pandemic employment in high proximity consumer services, a large sector that mainly employs low-income workers. We use a triple difference event study design where we compare employment in high and low proximity sectors across municipalities with different levels of remote work potential, before and after the pandemic. Our results are not driven by changing patterns of consumption associated to Internet access during the pandemic. Since high proximity employment tends to locate in places where the propensity to remote work occupations is larger, such as cities, our estimates imply that remote work may have slowed the employment recovery from the pandemic in certain regions. A counterfactual where we reassign remote work potential equally across municipalities results in a more robust recovery in Mexico's service-intensive central region, which faced the steepest, most persistent drop in service employment. Our results suggest that if remote work remains an important feature of labor markets, consumer service sectors in cities in the developing world may face challenges stemming from these new work arrangements in the post-COVID era.
    Keywords: remote work, consumer services, middle-income countries, regional labour markets
    JEL: O33 R11 J2
    Date: 2023–10
  12. By: Luis Bauluz; Sebastien Breau; Pawel Bukowski; Mark Fransham; Annie Seong Lee; Neil Lee; Margarita Lopez Forero; Clement Malgouyres; Filip Novokmet; Moritz Schularick; Gregory Verdugo
    Abstract: The rise of economic inequalities in advanced economies has been often linked with the growth of spatial inequalities within countries, yet there is limited comparative research that studies the relationship between national and subnational economic inequality. This paper presents the first systematic attempt to create internationally comparable evidence showing how different countries perform in terms of geographic wage inequalities. We create cross-country comparable measures of spatial wage disparities between and within similarly-defined local labour market areas (LLMAs) for Canada, France, (West) Germany, the UK and the US since the 1970s, and assess their contribution to national inequality. By the end of the 2010s, spatial inequalities in LLMA mean wages are similar in Canada, France, Germany and the UK; the US exhibits the highest degree of spatial inequality. Over the study period, spatial inequalities have nearly doubled in all countries, except for France where spatial inequalities have fallen back to 1970s levels. Due to a concomitant increase in within-place inequality, the contribution of places in explaining national wage inequality has remained fairly constant over the 40-year study period, except in the UK where we document a significant increase. Whilst common global social, economic and technological shocks are important drivers of spatial inequality, this variation in levels and trends of spatial inequality opens the way to comparative research exploring the role of national institutions in mediating how global shocks translate into economic disparities between places.
    Keywords: regional inequality, wage inequality, local labour markets
    Date: 2023–08–16
  13. By: Ridolfi, Leonardo (University of Siena); Salvo, Carla (Sapienza University of Rome); Weisdorf, Jacob (Sapienza University of Rome, CAGE, & CEPR)
    Abstract: We use the two earliest industrial censuses from 19th-century France to investigate the impact on industrial labour of one of the largest waves of mechanisation in history, the diffusion of steam power. We establish using OLS and IV analyses that wages and employment both grew significantly more among steam-adopting industries compared to their non-adopting peers. Growth in total revenue was also significantly higher among steam adopters while labour’s share did not change significantly compared to nonadopters. These findings dispute the common view that the historical modernisation of industry set labour back in absolute terms or relative to capitalists.
    Keywords: Capitalists, industrialisation, inequality, labour, mechanisation, productivity, technological progress, wages JEL Classification: I15, J42, J31, L92, O14, O33
    Date: 2023
  14. By: Carsten Eckel (LMU Munich); Stephen R. Yeaple (Pennsylvania State University)
    Abstract: A growing empirical literature attributes much of the productivity advantages of large, "superstar" firms to their adoption of best practice management techniques that allow them to better identify and use talented workers. The reasons for the incomplete adoption of these "structured management practices" and their welfare implications are not well understood. This paper provides a positive and normative analysis of these issues in a theoretical framework in which structured management practices induce sorting of talent across firms. Incomplete adoption arises because worker talent is in limited supply. In equilibrium there is excessive adoption of structured management practices and too much sorting of talented workers into large firms. In this second-best environment, policy changes that favor large firms, such as trade liberalization, have the potential to lower welfare.
    Keywords: labor market imperfection; misallocation; productivity; wage inequality; international trade; welfare;
    JEL: F12 F16 J31 J33 J42 M51
    Date: 2023–10–23
  15. By: Jamie Fogel; Bernardo Modenesi
    Abstract: This paper develops a new data-driven approach to characterizing latent worker skill and job task heterogeneity by applying an empirical tool from network theory to large-scale Brazilian administrative data on worker--job matching. We microfound this tool using a standard equilibrium model of workers matching with jobs according to comparative advantage. Our classifications identify important dimensions of worker and job heterogeneity that standard classifications based on occupations and sectors miss. The equilibrium model based on our classifications more accurately predicts wage changes in response to the 2016 Olympics than a model based on occupations and sectors. Additionally, for a large simulated shock to demand for workers, we show that reduced form estimates of the effects of labor market shock exposure on workers' earnings are nearly 4 times larger when workers and jobs are classified using our classifications as opposed to occupations and sectors.
    Date: 2023–11
  16. By: Mesquita, José (Universidade Nova de Lisboa); Pereira dos Santos, João (Queen Mary University of London); Tavares, José (Universidade Nova de Lisboa)
    Abstract: This paper analyses the impact of European Union (EU) funds on the performance of private firms. In particular, we examine a quasi-natural experiment consisting of a redrawing of administrative areas that expanded regional eligibility and led to a sudden increase in accessibility to EU grants for firms located in 33 Portuguese municipalities. Using a comprehensive linked employer-employee administrative dataset that covers the universe of private firms between 2003 and 2010, our difference-in-differences estimates uncover a significant and positive causal effect of increased eligibility on firms' sales, labour productivity, and average wages, while employment is not significantly altered. While firms' sales in the non-tradable sectors are positively impacted, firms' sales in more competitive, tradable, sectors remain unaffected by increased access to EU funds.
    Keywords: grants, regional policy, private firm, municipalities, Portugal
    JEL: C21 R10
    Date: 2023–10
  17. By: Hunt Allcott; Giovanni Montanari; Bora Ozaltun; Brandon Tan
    Abstract: The growing discussions of impact investing and stakeholder capitalism have increased interest in measuring companies' social impact. We conceptualize corporate social impact as the welfare loss that would be caused by a firm's exit. To illustrate, we quantify the social impacts of 74 firms in 12 industries using a new survey measuring consumer and worker substitution patterns combined with models of product and labor markets. We find that consumer surplus is the primary component of social impact (dwarfing profits, worker surplus, and externalities), suggesting that consumer impacts deserve more attention from impact investors. Existing ESG and social impact ratings are essentially unrelated to our economically grounded measures.
    JEL: D6 J23 L13 L62 L66 L71 L81 L93 M14 Q54
    Date: 2023–10
  18. By: Julio Gálvez (Banco de España)
    Abstract: This paper develops a flexible, semi-structural framework to empirically quantify the non-linear transmission of income shocks to household portfolio choice decisions both at the extensive and intensive margins. I model stock market participation and portfolio allocation rules as age-dependent functions of persistent and transitory earnings components, wealth and unobserved taste shifters. I establish non-parametric identification and propose a tractable, simulation-based estimation algorithm, building on recent developments in the sample selection literature. Using recent waves of PSID data, I find heterogeneous income and wealth effects on both extensive and intensive margins, over the wealth and life-cycle dimensions. These results suggest that preferences are heterogeneous across the wealth distribution and over the life cycle. Moreover, in impulse response exercises, I find sizeable extensive margin responses to persistent income shocks. Finally, I find heterogeneity in participation costs across households in the wealth distribution.
    Keywords: stock market participation, non-linear income persistence, sample selection, quantile selection models, latent variables
    JEL: C23 C24 D31 G50 J24
    Date: 2023–09
  19. By: Laura Boudreau (Columbia University); Sylvain Chassang (Princeton University); Ada González-Torre (Ben Gurion University); Rachel Heath (University of Washington)
    Abstract: We evaluate secure survey methods designed for the ongoing monitoring of harassment in organizations. To do so, we partner with a large Bangladeshi garment manufacturer and experiment with different designs of phone-based worker surveys. “Hard†garbling (HG) responses to sensitive questions, i.e., automatically recording a random subset as complaints, increases reporting of physical harassment by 290%, sexual harassment by 271%, and threatening behavior by 45%, from reporting rates of 1.5%, 1.8%, and 9.9%, respectively, under the status quo of direct elicitation. Rapport-building and removing team identifiers from responses do not significantly increase reporting. We show that garbled reports can be used to consistently estimate policy-relevant statistics of harassment, including: How prevalent is it? What share of managers is responsible for the misbehavior? and, How isolated are its victims? In our data, harassment is widespread, the problem is not restricted to a minority of managers, and victims are often isolated within teams.
    Keywords: Harassment, whistleblowing, garbling, secure survey design, gender, garments, Bangladesh
    JEL: C42 D82 J70 J71 J81 J83 M54
    Date: 2023–08
  20. By: Elizabeth Ash; William Carrington; Rebecca Heller; Grace Hwang
    Abstract: This paper examines the short- and long-term fiscal effects of Medicaid spending on children. In the short run, costs for Medicaid are paid upfront when the children (or their mothers) receive health care. In the long run, Medicaid enrollment during childhood has been shown to increase earnings in adulthood. Those higher earnings imply greater tax revenues and lower transfer payments by the federal government in the future. On a present-value basis, the Congressional Budget Office estimates that long-term fiscal effects of Medicaid spending on children could offset half or
    JEL: H20 H50 H60 I13 J3
    Date: 2023–11–01

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