nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2023‒12‒18
nineteen papers chosen by
Joseph Marchand, University of Alberta

  1. Technology and Labor Displacement: Evidence from Linking Patents with Worker-Level Data By Leonid Kogan; Dimitris Papanikolaou; Lawrence D.W. Schmidt; Bryan Seegmiller
  2. Economic Sanctions and Informal Employment By Kelishomi, Ali Moghaddasi; Nistico, Roberto
  3. Using Domain-Specific Word Embeddings to Examine the Demand for Skills By Chaturvedi, Sugat; Mahajan, Kanika; Siddique, Zahra
  4. Job Transitions and Employee Earnings After Acquisitions: Linking Corporate and Worker Outcomes By David Arnold; Kevin S. Milligan; Terry Moon; Amirhossein Tavakoli
  5. Wages and Wage Inequality During the COVID-19 Pandemic in South Africa By Timothy Köhler; Haroon Bhorat
  6. "This time it's different" Generative Artificial Intelligence and Occupational Choice By Daniel Goller; Christian Gschwends; Stefan C. Wolter
  7. Informal Work and Official Employment Statistics: What’s Missing? By Anat Bracha; Mary A. Burke
  8. Employment Protection, Job Insecurity, and Job Mobility By Marco Bertoni; Simone Chinetti; Roberto Nisticò
  9. Optimal Taxation in the Life Cycle with Human Capital Investment Abstract : This paper studies optimal taxes in a lifecycle model with unverifiable human capital investment inseparable from regular consumption. The planner faces asymmetric information regarding agents’ exogenous abilities and endogenous human capital. Agents deviate in two ways: misreporting ability and mis-investing in human capital. We characterize the distortions in a model with i.i.d. shocks and full human capital depreciation. Distortions are characterized by capital wedges that are positive over the life cycle, labor wedges that are negative early and positive later in the life cycle, and net human capital wedges that are positive in the life cycle. These wedges serve as mechanisms to eliminate the distortion to consumption due to inseparability from education expenditure. Calibrate to U.S. data, we show numerically that these results apply in a richer model with persistent shocks and non-full human capital depreciation. Simulation suggests that average capital wedges are positive in all working periods, with progressive capital wedges in contemporary skills, average labor wedges are negative in early and positive in later periods, with hump-shape in skills and nonzero at the top and the bottom of the skill distribution, a nd net human capital wedges are positive and regressive in skills, indicating that human capital subsidies are in favor of the high skilled. By Been-Lon Chen; Fei-Chi Liang
  10. College Attrition and the Dynamics of Information Revelation By Arcidiacono, Peter; Aucejo, Esteban; Maurel, Arnaud; Ransom, Tyler
  11. Wages and the Great War: evidence from the largest draft lottery in history By Bruno Caprettini; Hans-Joachim Voth
  12. Urban Transit Infrastructure: Spatial Mismatch and Labor Market Power By Vial Lecaros Felipe; Zárate Román D.; Pérez Pérez Jorge
  13. Minimum Wage Non-compliance: The Role of Co-determination Abstract: We analyse in what way co-determination affects non-compliance with the German minimum wage, which was introduced in 2015. The Works Constitution Act (WCA), the law regulating co-determination at the plant level, provides works councils with indirect means to ensure compliance with the statutory minimum wage. Based on this legal situation, our theoretical model predicts that non-compliance is less likely in co-determined firms because works councils enhance the enforcement of the law. The economic correlates of co-determination, such as higher productivity and wages, affect non-compliance in opposite directions. The empirical analysis, using data from the German Socio-economic Panel (SOEP) for the years 2016 and 2019, demonstrates that non-compliance occurs less often for employees in co-determined establishments, while there is no impact on the difference between the minimum wage and the amount, which was actually paid. Therefore, co-determination helps to secure the payment of minimum wages. By Laszlo Goerke; Markus Pannenberg
  14. Union and Firm Labor Market Power By Miren Azkarate-Askasua; Miguel Zerecero
  15. Does Dual Vocational Education and Training Pay Off? By Samuel Bentolila; Antonio Cabrales; Marcel Jansen
  16. Economic Opportunities and Human Capital Investments: Evidence from Artisanal Gold Mining in Africa By Ghazarian, Avenia; Khan, Akib
  17. Perspectives on the Labor Share By Loukas Karabarbounis
  18. Do Two Wrongs Make a Right? Measuring the Effect of Publications on Science Careers By Donna K. Ginther; Carlos Zambrana; Patricia Oslund; Wan-Ying Chang
  19. Who is in favor of affirmative action? Representative evidence from an experiment and a survey By Herzog, Sabrina; Schildberg-Hörisch, Hannah; Trieu, Chi; Willrodt, Jana

  1. By: Leonid Kogan; Dimitris Papanikolaou; Lawrence D.W. Schmidt; Bryan Seegmiller
    Abstract: We develop measures of labor-saving and labor-augmenting technology exposure using textual analysis of patents and job tasks. Using US administrative data, we show that both measures negatively predict earnings growth of individual incumbent workers. While labor-saving technologies predict earnings declines and higher likelihood of job loss for all workers, labor-augmenting technologies primarily predict losses for older or highly-paid workers. However, we find positive effects of labor-augmenting technologies on occupation-level employment and wage bills. A model featuring labor-saving and labor-augmenting technologies with vintage-specific human capital quantitatively matches these patterns. We extend our analysis to predict the effect of AI on earnings.
    JEL: E0 E01 J01 J23 J24 O3 O4
    Date: 2023–11
  2. By: Kelishomi, Ali Moghaddasi (Loughborough University); Nistico, Roberto (University of Naples Federico II)
    Abstract: This paper examines how economic sanctions affect the allocation of workers across formal and informal employment. We analyse the case of the unprecedented sanctions imposed on Iran in 2012. Employing a difference-in-differences approach, we compare the probability of being employed in the informal sector before and after 2012 for workers in industries with different pre-existing exposure to international trade. Our analysis reveals that, following the sanctions, workers in industries with higher trade exposure are significantly more likely to experience informal employment compared to workers in industries with lower trade exposure. These results remain robust when accounting for potential sorting issues by using an instrumental variable approach. Our findings suggest that the sudden shock to market access caused by the sanctions might have induced a decline in firms' productivity, especially in industries that heavily depend on imported inputs, and therefore an increase in firms' incentives to reduce the costs by shifting their employees to the informal sector. This sheds light on an important margin of labour market adjustment through which sanctions can affect the economy of the target country.
    Keywords: economic sanctions, exposure to trade, informal employment, labor reallocation
    JEL: E26 F16 F51 O17
    Date: 2023–11
  3. By: Chaturvedi, Sugat (Ahmedabad University); Mahajan, Kanika (Ashoka University); Siddique, Zahra (University of Bristol)
    Abstract: We study the demand for skills by using text analysis methods on job descriptions in a large volume of ads posted on an online Indian job portal. We make use of domain-specific unlabeled data to obtain word vector representations (i.e., word embeddings) and discuss how these can be leveraged for labor market research. We start by carrying out a data-driven categorization of required skill words and construct gender associations of different skill categories using word embeddings. Next, we examine how different required skill categories correlate with log posted wages as well as explore how skills demand varies with firm size. We find that female skills are associated with lower posted wages, potentially contributing to observed gender wage gaps. We also find that large firms require a more extensive range of skills, implying that complementarity between female and male skills is greater among these firms.
    Keywords: text analysis, online job ads, gender, skills demand, machine learning
    JEL: J16 J23 J31 J63 J71 L2
    Date: 2023–11
  4. By: David Arnold; Kevin S. Milligan; Terry Moon; Amirhossein Tavakoli
    Abstract: This paper connects changes in employer characteristics through job transitions to employee earnings following mergers and acquisitions (M&As). Using firm balance sheet data linked to individual earnings data in Canada and a matched difference-in-differences design, we find that after M&As acquirers expand while targets shrink substantially relative to their matched control groups. Additionally, profit margins decrease for both acquirers and targets in the medium run. Furthermore, workers at target firms suffer losses in earnings, and this decline in earnings is entirely driven by workers who move to other firms after an M&A event. We find that workers leaving target firms after M&As move to larger firms with higher wage premiums, but with much worse match qualities on average. Taken together, it appears that job transitions to employers with poor match qualities primarily explain the post-M&A decline in worker earnings in our setting.
    JEL: E21 G34 J31 J42 L25
    Date: 2023–11
  5. By: Timothy Köhler; Haroon Bhorat (Development Policy Research Unit, University of Cape Town)
    Abstract: Because the COVID-19 pandemic affected the supply, demand, and nature of work, the implications for wage inequality are ex ante unclear. In South Africa, a country characterised by extreme income inequality driven by wage inequality, these effects are not yet fully understood due to the unavailability of adequate data. This paper makes use of representative and individual-level survey data not available in the public domain provided by Statistics South Africa, to analyse the evolution of the level and nature of wage inequality and its drivers in the country from 2019 to 2022. We first show that missing wage data in the survey is large and non-randomly distributed, justifying imputation. We show that the imputations in the public data are of poor quality and result in an underestimation of wages across the distribution, but parametrically adjusting the raw data for outliers and missing data yields reliable estimates. We find that pre-pandemic wage inequality was extremely high and stable. At the pandemic’s onset, real wages mechanically rose primarily due to a composition effect induced by a regressive distribution of job loss. 70 percent of this rise at the mean is explained by this effect, while changes in the returns to characteristics played a relatively muted role. Not considering this former effect leads to misinterpretations of wage dynamics. Composition-controlled indices suggest the pandemic increased wage inequality up to 8 percent or 5 Gini points at its onset, but this was temporary. As the pandemic progressed and employment partially recovered, wage reductions toward prepandemic levels stemmed more from lasting changes in the returns to various characteristics than a more similar worker profile, indicative of a persistence of effects on the structure of the labour market.
    Keywords: COVID-19; wage; inequality; labour market; South Africa; developing country
    JEL: D63 J01 J21 J30 J31
    Date: 2023–10
  6. By: Daniel Goller; Christian Gschwends; Stefan C. Wolter
    Abstract: In this paper, we show the causal influence of the launch of generative AI in the form of ChatGPT on the search behavior of young people for apprenticeship vacancies. There is a strong and long-lasting decline in the intensity of searches for vacancies, which suggests great uncertainty among the affected cohort. Analyses based on the classification of occupations according to tasks, type of cognitive requirements, and the expected risk of automation to date show significant differences in the extent to which specific occupations are affected. Occupations with a high proportion of cognitive tasks, with high demands on language skills, and those whose automation risk had previously been assessed by experts as lower are significantly more affected by the decline. However, no differences can be found with regard to the proportion of routine vs. non-routine tasks.
    Keywords: Artificial intelligence, occupational choice, labor supply, technological change
    JEL: J24 O33
    Date: 2023–11
  7. By: Anat Bracha; Mary A. Burke
    Abstract: Using eight consecutive waves of the Survey of Informal Work Participation (SIWP) spanning 2015 through 2022, we investigate informal “gig” work participation in the United States— broadly defined to include online and offline activities—and its implications for the measurement of employment. Our results suggest that employment rates among US household heads were consistently understated in the Current Population Survey (CPS). Under conservative estimates, we find that the employment-to-population ratio would have been 0.25 to 1.1 percentage points higher over the 2015–2022 period and as much as 5.1 percentage points higher under more generous estimates. Along the intensive margin, we find evidence that a significant number of informal work hours are missing from official employment surveys, partly because employed individuals do not fully report their informal hours. Comparing informal workers who are classified as employed by the CPS with those who are arguably misclassified as nonemployed, we find that the latter are, on average, older, less educated, and less likely to cite income as a motivation for gig work, and an elevated share are disabled. The data also indicate that certain types of income-earning activities, such as renting and selling, are less likely to be perceived as “work.” These results suggest ways to improve official surveys to better capture those employed in gig work and obtain a fuller picture of the labor market.
    Keywords: gig work; informal work; labor market; Current Population Survey; employment
    JEL: J21 J22 J46 J48 E26
    Date: 2023–09–01
  8. By: Marco Bertoni (University of Padova, IZA and NETSPAR.); Simone Chinetti (University of Naples Federico II.); Roberto Nisticò (University of Naples Federico II, CSEF and IZA.)
    Abstract: This study leverages the Italian Jobs Act reform as a natural experiment to examine the impact of reduced employment protection on job insecurity and job mobility. The reform significantly lowered protection for open-ended contract workers in large firms hired after March 7, 2015, and introduced a sharp discontinuity in severance pay at 2-year tenure. Treated employees exhibit increased fear of job loss and higher termination rates. The higher job insecurity prompts workers in low-pay sectors and in low-quality firms to actively pursue job mobility, transitioning towards higher-paying positions. Conversely, workers in high-paying sectors respond by intensifying their efforts to secure their existing jobs. Crucially, all effects disappear for workers above the 2-year tenure threshold, when they become entitled to a 50% higher severance pay. These findings emphasize a complex trade-off behind the design of employment protection systems, as addressing early-stage insecurity with tailored social insurance may counteract upward mobility effects.
    Keywords: employment protection; job insecurity; job mobility; on-the-job search.
    JEL: J22 J28 J41 J65
    Date: 2023–10–13
  9. By: Been-Lon Chen (Institute of Economics, Academia Sinica, Taipei, Taiwan); Fei-Chi Liang (Institute of Economics, Academia Sinica, Taipei, Taiwan)
    Keywords: Optimal capital and labor taxes, Human capital accumulation
    JEL: E62 H21 J24
    Date: 2023–10
  10. By: Arcidiacono, Peter (Duke University); Aucejo, Esteban (London School of Economics); Maurel, Arnaud (Duke University); Ransom, Tyler (University of Oklahoma)
    Abstract: We examine how informational frictions impact schooling and work outcomes. To do so, we estimate a dynamic structural model where individuals face uncertainty about their academic ability and productivity, which respectively determine their schooling utility and wages. Our framework accounts for heterogeneity in college types and majors, as well as occupational search frictions and work hours. Individuals learn from grades and wages in a correlated manner, and may change their choices as a result. Removing informational frictions would increase the college graduation rate by 4.4 percentage points, which would increase further by 2 percentage points in the absence of search frictions. Providing students with full information about their abilities would also result in large increases in the college and white-collar wage premia, while reducing the college graduation gap by family income.
    Keywords: college dropout, dynamic discrete choice, learning, human capital
    JEL: C35 D83 J24
    Date: 2023–11
  11. By: Bruno Caprettini; Hans-Joachim Voth
    Abstract: Do veterans earn less? During WW I, the US organized “the greatest human lottery in history”: a random draft of 24 million men. Ultimately, 2.8 million Americans were selected to join the armed forces. We sample 10% of registrants of the 1917 lottery and match these men with the 1930 and 1940 US Federal Censuses. Low lottery numbers significantly increased the likelihood of serving in World War I. Importantly, military service also had a positive causal effect on earnings and occupational outcomes. Veterans joined professions with higher cognitive skill requirements, including higher intelligence, language, reasoning, and math requirements. Randomly-assigned military service had fundamentally different effects during World War I than in Vietnam. We rationalize this finding by analyzing complier characteristics.
    Keywords: Veterans’ income, lottery, IV, effect of war participation
    JEL: N42 J45 I23 J24 N32
    Date: 2023–11
  12. By: Vial Lecaros Felipe; Zárate Román D.; Pérez Pérez Jorge
    Abstract: This paper estimates the effects of a subway expansion on labor market outcomes in Santiago, Chile. First, we estimate these effects through a reduced-form analysis. We find changes in work locations and wages consistent with a reduction in firms' labor market power in areas where the subway expanded. We then lay out a model with labor market oligopsonies to calculate the welfare gains from the subway expansion. The model allows decomposition of welfare gains into i) efficiency gains from improved worker-firm matching and ii) gains from reducing labor misallocation due to labor market power. We analyze the distributional implications of the subway expansion. We find that workers benefit as firms see reduced profits. In a model with labor market power these welfare gains are larger than in a competitive model.
    Keywords: transit infrastructure;labor market power;spatial misallocation;quantitative spatial economics
    JEL: J44 R12 R42
    Date: 2023–11
  13. By: Laszlo Goerke (Institute for Labour Law and Industrial Relations in the European Union (IAAEU), Trier University); Markus Pannenberg (University of Applied Sciences Bielefeld)
    Keywords: Negative emotions, immigration concerns, bereavement
    JEL: J30 J53 K31 K42 M54
    Date: 2023–11
  14. By: Miren Azkarate-Askasua; Miguel Zerecero
    Abstract: Can union and firm market power counteract each other? What are the output and welfare effects of employer and union labor market power? Using data from French manufacturing firms, we leverage mass layoff shocks to competitors to identify a negative effect of employment concentration on wages. In line with the reduced form evidence and the French institutional setting, we develop and estimate a multi-sector bargaining model that incorporates employer market power. We find that in the absence of unions output decreases by 0.48 percent because they partially counteract distortions coming from oligopsony power. Furthermore, eliminating employer and union labor market power increases output by 1.6 percent and the labor share by 21 percentage points. Workers’ geographic mobility is key to realizing the output gains.
    Keywords: Labor markets, Wage setting, Misallocation, Monopsony, Unions
    JEL: J2 J42 J51
    Date: 2023–11
  15. By: Samuel Bentolila; Antonio Cabrales; Marcel Jansen
    Abstract: This paper analyzes the causal impact of dual vocational education and training (VET) on the labor market insertion of youth. Using matched education and social security records, we estimate the causal impact of a major reform that introduced a new dual track, which combines firm- and school-based training, on the labor market outcomes of the first three dual VET cohorts in the Spanish region of Madrid.
    Date: 2023–11
  16. By: Ghazarian, Avenia (Mistra Center for Sustainable Markets (Misum)); Khan, Akib (Uppsala University)
    Abstract: How does human capital investment respond to local economic opportunities? Income gains can increase the demand for schooling while new jobs raise the opportunity costs. We investigate this question in the context of rapid growth in artisanal gold mining in sub-Saharan Africa. We compile 45 waves of Demographic and Health Surveys covering 1.3 million individuals from 14 countries in this region. Identification comes from two sources of variation: one in the global gold price and the other in the exposure of households to places that are geologically suitable for artisanal gold mining. We find that a near-tripling of the global gold price – reflecting changes between 2005 and 2010 – leads to a decline in school attendance: by 3.1 pp for 11 to 15-year-olds and by 2.3 pp for 16 to 20-year-olds who live near gold-suitable areas. These reductions are higher for boys. Taken together, these results highlight the potential costs of economic development driven by natural resources.
    Keywords: Human capital investment; Economic opportunities; Artisanal mining; Gold; Africa
    JEL: J24 O15 Q32
    Date: 2023–11–27
  17. By: Loukas Karabarbounis
    Abstract: As of 2022, the share of U.S. income accruing to labor is at its lowest level since the Great Depression. Updating previous studies with more recent observations, I document the continuing decline of the labor share for the United States, other countries, and various industries. I discuss how changes in technology and product, labor, and capital markets affect the trend of the labor share. I also examine its relationship with other macroeconomic trends, such as rising markups, higher concentration of economic activity, and globalization. I conclude by offering some perspectives on the economic and policy implications of the labor share decline.
    Keywords: Inequality; Production; Labor share
    JEL: J30 E20 D20
    Date: 2023–11–03
  18. By: Donna K. Ginther; Carlos Zambrana; Patricia Oslund; Wan-Ying Chang
    Abstract: This paper examines whether publication data matched to the Survey of Doctorate Recipients can be used for research purposes. We use Gold Standard data created to validate the publication match quality and compare these measures to publications assigned by a machine-learning algorithm developed by Thomson Reuters (now Clarivate). Our econometric model demonstrates that publications likely suffer from non-classical measurement error. Using horse race and instrumental variable models, we confirm that the Gold Standard data are relatively free from measurement error but show that the Clarivate data suffer from non-classical measurement error. We employ a variety of methods to adjust the Clarivate data for false negatives and false positives and demonstrate that with these adjustments the data produce estimates very similar to the Gold Standard. However, these adjustments are not as useful when publications are used as a dependent variable. We recommend using subsamples of the data that have better match quality when using the Clarivate data as a dependent variable.
    JEL: C26 J40 O30
    Date: 2023–11
  19. By: Herzog, Sabrina; Schildberg-Hörisch, Hannah; Trieu, Chi; Willrodt, Jana
    Abstract: Although affirmative action remains controversial, little is known about who supports or opposes it and why. This paper investigates preferences for affirmative action by combining causal evidence from an experiment on the role of self-serving motives and in-group favoritism with survey data on three different affirmative action policies. Our results rely on a population-representative sample from the US. We find that support for affirmative action is based both on self-serving motives and principled grounds (e.g., related to an individual's altruism, fairness perceptions, concerns for efficiency, and political views). By contrast, in-group favoritism and socio-demographic characteristics play a much smaller role.
    Keywords: support for affirmative action, self-serving motives, in-group fa-voritism, altruism, efficiency, fairness, discrimination
    JEL: C99 D01 D63 J78
    Date: 2023

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