nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2024‒01‒15
28 papers chosen by
Joseph Marchand, University of Alberta

  1. Firm Heterogeneity in Skill Returns By Böhm, Michael Johannes; Esmkhani, Khalil; Gallipoli, Giovanni
  2. Employment Protection, Job Insecurity, and Job Mobility By Bertoni, Marco; Chinetti, Simone; Nistico, Roberto
  3. How Do Firms Deal with the Risks of Employing Ex-prisoners? By Köllő, János; Boza, István; Ilyés, Virág; Kőműves, Zsófia; Mark, Lili Katalin
  4. Innovation Booms, Easy Financing, and Human Capital Accumulation By Johan Hombert; Adrien Matray
  5. “This Time It’s Different” Generative Artificial Intelligence and Occupational Choice By Daniel Goller; Christian Gschwendt; Stefan C. Wolter
  6. Robots, Tools, and Jobs: Evidence from Brazilian Labor Markets By Gustavo de Souza; Haishi Li
  7. Fund Flows and Income Risk of Fund Managers By Xiao Cen; Winston Wei Dou; Leonid Kogan; Wei Wu
  8. Signaling Worker Quality in a Developing Country: Lessons from a Certification Program By M. Antonella Mancino; Leonardo Fabio Morales; Diego F. Salazar
  9. On-the Job Wage Dynamics By Eric Smith
  10. Robots, Meaning, and Self-Determination By Nikolova, Milena; Cnossen, Femke; Nikolaev, Boris
  11. Technological Change and Returns to Training By Klauser, Roman; Tamm, Marcus
  12. Online Job Posts Contain Very Little Wage Information By Honey Batra; Amanda Michaud; Simon Mongey
  13. High Achieving First-Generation University Students By Shure, Nikki; Zierow, Larissa
  14. Industrial Policy, Rise of Skilled Labor, and Firm Growth in the Early Stage of Economic Development By Cho, Sunghun; Kim, Jaehyung
  15. The Hukou System and Wage Gap between Urban and Rural Migrant Workers in China : A Meta-Analysis By MA, Xinxin; LI, Yalan; IWASAKI, Ichiro
  16. The Impact of New Free Trade Agreements on Incumbent Firms and Workers By Dale-Olsen, Harald
  17. Automatability of Occupations, Workers' Labor-market Expectations, and Willingness to Train By Philipp Lergetporer; Katharina Wedel; Katharina Werner
  18. Impact of TB Epidemic on Worker and Firm Productivity: Regional Perspective from Ukraine By Nizalova, Olena; Shepotylo, Oleksandr
  19. Human Values and Selection into Supervisory Positions: Evidence from Nine European Countries By Hazans, Mihails; Masso, Jaan; Maurseth, Per Botolf
  20. The World's Rust Belts: The Heterogeneous Effects of Deindustrialization on 1, 993 Cities in Six Countries By Gagliardi, Luisa; Moretti, Enrico; Serafinelli, Michel
  21. Time-Varying Risk Premia, Labor Market Dynamics, and Income Risk By Maarten Meeuwis; Dimitris Papanikolaou; Jonathan L. Rothbaum; Lawrence D.W. Schmidt
  22. Robust Inference for the Frisch Labor Supply Elasticity By Michael P. Keane; Timothy Neal
  23. Online Job Posts Contain Very Little Wage Information By Honey Batra; Amanda M. Michaud; Simon Mongey
  24. Stairway to Heaven? Selection into Entrepreneurship, Income Mobility and Firm Performance By Jarkko Harju; Toni Juuti; Tuomas Matikka
  25. The Effects of Reforms on Retirement Behavior: Introduction and Summary By Axel H. Börsch-Supan; Courtney Coile
  26. Who Is in Favor of Affirmative Action? Representative Evidence from an Experiment and a Survey By Sabrina Herzog; Hannah Schildberg-Hörisch; Chi Trieu; Jana Willrodt
  27. Do Firms Mitigate Climate Impact on Employment? Evidence from US Heat Shocks By Viral V. Acharya; Abhishek Bhardwaj; Tuomas Tomunen
  28. Is the Impact of Opening the Borders Heterogeneous? By Costanza Naguib

  1. By: Böhm, Michael Johannes (TU Dortmund); Esmkhani, Khalil (Simon Fraser University); Gallipoli, Giovanni (University of British Columbia, Vancouver)
    Abstract: We quantify firm heterogeneity in skill returns and present direct evidence of worker–firm complementarities. Within a model of firms' demand for cognitive and noncognitive attributes we show that identification depends on the availability of skill measures. Linking administrative data to test scores we document worker sorting and convex earnings–skill relationships. We find that: (1) Both skills' returns vary substantially across employers and correlate weakly within-firm. (2) Workers with large endowments of a skill populate firms with higher returns to it. Sorting intensifies with the cross-sectional dispersion of returns. (3) Complementarities and sorting significantly influence the earnings distribution.
    Keywords: firm heterogeneity, skill return, sorting, earnings distribution
    JEL: D3 J23 J24 J31
    Date: 2023–12
  2. By: Bertoni, Marco (University of Padova); Chinetti, Simone (University of Naples Federico II); Nistico, Roberto (University of Naples Federico II)
    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: 2023–12
  3. By: Köllő, János (Institute of Economics, Budapest); Boza, István (Central European University, Budapest); Ilyés, Virág (HUN-REN Centre for Economic and Regional Studies); Kőműves, Zsófia (Cambridge Economic Policy Associates); Mark, Lili Katalin (Central European University, Budapest)
    Abstract: We use linked employer-employee data to investigate a large sample of past and future prisoners in Hungary, 2003-2011. We first compare their jobs, focusing on attributes that can reduce the penalty the employer must pay for a mistaken hiring decision. Second, we study if employers insure themselves by paying lower wages to ex-prisoners. Third, we analyze whether the probability of the match dissolving within a few months is lower if the firm could potentially base its hiring decision on referrals. The composition of former prisoners' employment is biased toward easy-to-cancel jobs. In the unskilled jobs held by most of them, they do not earn less than future convicts, but a minority in white-collar positions are paid significantly less. Ex-prisoners' jobs are less likely to dissolve quickly if the hiring firm potentially had access to co-worker, employer, or labor office referrals.
    Keywords: incarceration, reintegration, mobility, discrimination, Hungary
    JEL: J71 J23 J63
    Date: 2023–12
  4. By: Johan Hombert; Adrien Matray
    Abstract: Innovation booms are often fueled by easy financing that allows new technology firms to pay high wages that attracts skilled labor. Using the late 1990s Information and Communication Technology (ICT) boom as a laboratory, we show that skilled labor joining this new sector experienced sizeable long-term earnings losses. We show these earnings patterns are explained by faster skill obsolescence rather than either worker selection or the overall bust in the ICT sector. During the boom, financing flowed more to firms whose workers would experience the largest productivity declines, amplifying the negative effect of labor reallocation on aggregate human capital accumulation.
    JEL: E23 J24 O33
    Date: 2023–12
  5. By: Daniel Goller; Christian Gschwendt; 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
  6. By: Gustavo de Souza; Haishi Li
    Abstract: What is the effect of robots and tools on employment and inequality? Using natural language processing and an instrumental variable approach, we discover that robots have led to a sizable decrease in the employment and wages of low-skill workers in operational occupations. However, tools - machines that complement labor – have led to an equally large reinstatement of these workers, increasing their employment and wages. Using a quantitative model, we find that the lower prices of robots and tools over the last 20 years have reduced inequality and increased welfare without a significant effect on employment.
    Keywords: robots, automation, tools, labor-saving, labor-augmenting
    JEL: J23 J24
    Date: 2023
  7. By: Xiao Cen; Winston Wei Dou; Leonid Kogan; Wei Wu
    Abstract: Investment fund managers make asset allocation decisions on behalf of a significant segment of US households. To elucidate the incentives they operate under, as well as the income and career risks they face, we construct a unique and novel dataset, which encompasses detailed information on the compensation and career trajectories of managers within US active equity mutual funds. The dataset is the first-ever to contain such information, having been compiled based on the US Census Bureau's LEHD program and leveraging various “big” textual data sources. Our causal evidence indicates that, contrary to fund disclosures, managers' pay is primarily driven by Assets Under Management (AUM), with performance influencing compensation only via AUM. Fund flows, although they do not align with client interests, have a significant 6% positive impact on compensation for every one-standard-deviation increase. Systematic flow components impact base salaries, while idiosyncratic elements alter bonuses. Crucially, fund flows, as opposed to fund performance, exert a strong impact on the career outcomes of fund managers, especially concerning their downside career risk. Specifically, large fund outflows elevate a manager's likelihood of job turnover (with a substantial decline in income) by 4 percentage points.
    JEL: G11 G23 J24 J31 J33 J44 J63
    Date: 2023–12
  8. By: M. Antonella Mancino; Leonardo Fabio Morales; Diego F. Salazar
    Abstract: We evaluate the returns to signaling occupation-specific skills using unique administrative data from a nationwide certification program in Colombia. The program certifies skills and issues three certificates: basic, intermediate, and advanced. We use regression discontinuity methods to compare workers’ earnings around certificateassignment thresholds. Signaling advanced occupation-specific skills yields significant returns: 9.7% on average within two years of certification. Instead, we find no effects from signaling basic or intermediate occupation-specific skills. Two mechanisms drive our findings. First, the increase in earnings for salaried workers comes from promotions within a firm. Second, the certificate facilitates transitions from self-employment to salaried work. **** RESUMEN: En este trabajo evaluamos los beneficios de se˜nalar habilidades específicas de una ocupación, utilizando para dicho fin datos administrativos de un programa de certificaci´on a nivel nacional en Colombia dise˜nado y ejecutado por el SENA. El programa certifica habilidades en tres niveles: básico, intermedio y avanzado. A través de métodos de regresión discontinua comparamos los ingresos de los trabajadores alrededor de los umbrales de asignación de certificados. Se muestra evidencia de que certificar habilidades avanzadas, genera retornos significativos en el ingreso de los trabajadores: 9, 7% en promedio dentro de los dos a˜nos posteriores a la certificación. No encontramos efectos de certificar habilidades básicas o intermedias. Dos mecanismos explican estos hallazgos. En primer lugar, el aumento de los ingresos de los trabajadores asalariados proviene de ascensos dentro de las empresas. En segundo lugar, el certificado facilita la transición del trabajo por cuenta propia al trabajo asalariado.
    Keywords: Signaling, Labor demand, Wages, Se˜nalización, Demanda Laboral, Salarios
    JEL: J01 J31 J44
    Date: 2023–12
  9. By: Eric Smith
    Abstract: This paper assesses wage setting and wage dynamics in a search and matching framework where (i) workers and firms on occasion meet multilaterally; (ii) workers can recall previous encounters with firms; and (iii) firms cannot commit to future wages and workers cannot commit to not searching on the job. The resulting progression of wages (from firms paying just enough to keep their workers) yields a compensation structure consistent with well established but difficult to reconcile observations on pay dynamics within jobs at firms. Along with wage tenure effects, serial correlation in wage changes and wage growth are negatively correlated with initial wages.
    Keywords: wage dynamics, stock-flow matching, on-the-job search, no commitment
    JEL: J31 J63 J64
    Date: 2023
  10. By: Nikolova, Milena (University of Groningen); Cnossen, Femke (University of Groningen); Nikolaev, Boris (Colorado State University)
    Abstract: This paper is the first to examine the impact of robotization on work meaningfulness and autonomy, competence, and relatedness, which are essential to motivation and well-being at work. Drawing on surveys from workers and industry-specific robotization data across 14 industries in 20 European countries from 2005 to 2021, our analysis reveals a consistent negative impact of robotization on perceived work meaningfulness and autonomy. Using instrumental variables, we find that doubling robotization correlates with a 0.9% decrease in work meaningfulness and a 1% decrease in autonomy. To put this in perspective, aligning the robotization intensity of the top five industry with the leading industry's robotization level in 2020—which would mean a 7.5-fold increase—would lead to a 6.8% reduction in work meaningfulness and a 7.5% reduction in autonomy. The link between robotization, competence, and relatedness is also negative but less robust. We also examine how tasks, skills, and socio-demographic characteristics moderate the relationship. We find that workers with routine tasks drive the negative effects of robotization on autonomy. However, we also discover that engaging in social tasks and utilizing computers as tools for independent work can help workers maintain a sense of autonomy in industries and job roles that adopt robots. Our results highlight that by deteriorating work meaningfulness and self-determination, robotization can impact work life above and beyond its consequences for employment and wages.
    Keywords: work meaningfulness, self-determination theory, robotization, automation
    JEL: J01 J30 J32 J81 I30 I31 M50
    Date: 2023–12
  11. By: Klauser, Roman (RWI); Tamm, Marcus (Hochschule der Bundesagentur für Arbeit (HdBA))
    Abstract: Do returns to training differ if training is accompanied by technological innovations at the workplace? We analyze this potential heterogeneity of returns based on panel data from Germany that provide a unique measure for individuals' adoption of new technology at the workplace. In the preferred analysis we run fixed effects estimations. As a robustness test we also allow for individual time trends. The findings indicate positive wage effects and more job stability for training participants in general but no effects on wages and job mobility for new technology adoption. Furthermore, the combined occurrence of new technology adoption and of training participation does not make individuals better off in terms of wages or job stability compared with individuals experiencing neither training nor new technology adoption.
    Keywords: returns to education, training, technology
    JEL: I26 J24 J62 M53 O33
    Date: 2023–12
  12. By: Honey Batra; Amanda Michaud; Simon Mongey
    Abstract: We present six facts that characterize the little wage information contained in the universe of online job posts in the U.S. First, wage information is rare: only 14% of posts contain any wage information and the minority of these (6%) have a point wage. The majority (8%) feature a range of wages that are on average wide, spanning 28% of the midpoint (e.g. $21-28/hr or $32, 000$42, 000/yr). Second, information varies systematically along the occupation-wage gradient. Third, posted wages are 40% higher than wages in BLS data in low-wage occupations and 20% lower than BLS data in high-wage occupations. Fourth, among the wages that are posted, high wage firms are more opaque, with more and wider ranges. Fifth, there is zero correlation between wage information and local labor market tightness. Sixth, of the top 20 posting private firms, none have any wage information in more than 2% of their posts. Our findings caution against treating wage data from job postings as a stand-in for administrative data. We provide an example of bias in econometric inference that worsens as wage information falls.
    JEL: E20 J30
    Date: 2023–12
  13. By: Shure, Nikki (University College London); Zierow, Larissa (Ifo Institute for Economic Research)
    Abstract: First-generation university graduates have been found to face a series of disadvantages on their pathway to higher education and the labor market. We use unique, national level data on high achieving university graduates to attempt to disentangle the importance of lower prior attainment from parental educational background on a series of higher education and labor market outcomes. We compare first-generation and non-first-generation graduates who are recipients of a prestigious national scholarship program targeted at the top percentile of the student distribution in Germany. We find the first-generation high achievers are more likely to study at less prestigious institutions and at institutions that are closer to home even though they have the prior attainment to go further afield. They are also less likely to study subjects with high labor market returns and are more likely to work in jobs with high job security. We furthermore find evidence that especially female first- generation high achievers are less likely to see the value of the networking opportunities the scholarship provides.
    Keywords: socio-economic gaps, first-generation, higher education
    JEL: I24 J24
    Date: 2023–12
  14. By: Cho, Sunghun (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)); Kim, Jaehyung (New York University)
    Abstract: This paper examines the role of education policy in raising specific human capital for industrialization during the period of economic miracle in Korea. As part of the Heavy and Chemical Industry (HCI) drive, the Korean government built technical schools near industrial complexes, resulting in a prompt supply of skilled labor. With practical curricula and training, young and skilled workers were able to enter the new sector. We also document these two patterns by using the Technical School List and the Occupational Wage survey. This government-led education reform led to higher firm-level productivity and growth, which is one of the important aspects explaining the success of the industrial policy. Motivated by historical evidence, we combine the administrative Mining and Manufacturing survey with the Technical School List to study the effectiveness of industry-oriented education reform. We incorporate an education layer into the targeted industries under the HCI drive by exploiting the variation in technical school openings at the county level. Our results show that plants in treated regions tend to employ and invest more than those in control regions, but value-added and labor productivity are negatively correlated with our interaction terms. This implies that firms in HCI sectors experienced disproportionate growth and should pay higher on-the-job costs for workers while education reform may reduce the overall cost of hiring industry-specific labor. In contrast, non-HCI sector firms exhibit a positive correlation with value added and labor productivity. These firms might benefit from the education reform that improved overall quality of skilled workers. Lastly, the effect of education reform was concentrated before the end of the HCI drive period and did not persist after 1980. In the era of emerging industrial policy, our paper presents a new mechanism that encourages more workers to enter a new sector targeted by government-led plans. Our results serve as a starting point for re-evaluating contemporary industrial policy and underscore the need to consider this additional layer in future policy design.
    Keywords: Industrial Policy; Heavy and Chemical Industry Drive; IndustryOriented Education Reform
    JEL: O14 O25 O53
    Date: 2023–12–20
  15. By: MA, Xinxin; LI, Yalan; IWASAKI, Ichiro
    Abstract: This study performed a meta-analysis of 506 estimates extracted from 75 studies to estimate the effect size of rural household registration (hukou) on wage levels. Our meta-synthesis results indicated that the negative effect of rural hukou on wages is statistically significant; however, the effect size remains small in terms of the partial correlation coefficient. The results of the meta-regression analysis and test for publication selection bias indicated that the differences in the wage effect of hukou among genders, corporate ownership sectors, and periods are insignificant. We also found that publication selection bias is unlikely, and genuine evidence exists in the literature.
    Keywords: household registration (hukou) system, wage gap, rural migrant worker, synthesis, meta-regression analysis, publication selection bias, China
    JEL: D63 J31 J71 P21 P31
    Date: 2023–12
  16. By: Dale-Olsen, Harald (Institute for Social Research, Oslo)
    Abstract: Trade policies might affect firms' market power and their ability to reap product-market mark-ups. Thus, potentially they influence not only firms' economic performance, but also worker pay. Utilising panel-data on Norwegian Manufacturing exporters from 2005-18 and multi-product production function-estimation techniques and recent development within the literature on dynamic treatment effects in event studies with heterogeneous treatment effects, we show that free-trade agreements increase exports and return-on-assets for Norwegian incumbent exporters, but their mark-ups decline. On average, workers in these established firms benefit from free-trade agreements, but this depends on occupations, union strength and labour market tightness.
    Keywords: free-trade agreements, price-cost markups, profits, wages, multiproduct-function-estimation, dynamic treatment effects
    JEL: D24 F14 L11 J31 J42
    Date: 2023–12
  17. By: Philipp Lergetporer (TU München); Katharina Wedel (ifo Institut); Katharina Werner (ifo Institut)
    Abstract: We study how beliefs about the automatability of workers' occupation affect labor-market expectations and willingness to participate in further training. In our representative online survey, respondents on average underestimate the automation risk of their occupation, especially those in high-automatability occupations. Randomized information about their occupations’ automatability increases respondents’ concerns about their professional future, and expectations about future changes in their work environment. The information also increases willingness to participate in further training, especially among respondents in highly automatable occupation (+five percentage points). This uptick substantially narrows the gap in willingness to train between those in high- and low-automatability occupations.
    Keywords: automation; further training; labor-market expectations; survey experiment; information;
    JEL: J24 O33 I29 D83
    Date: 2023–12–20
  18. By: Nizalova, Olena; Shepotylo, Oleksandr
    Abstract: This paper investigates the indirect economic impact of tuberculosis epidemic in one of the high-burden countries, focusing on the productivity at the individual level measured by the average wages and at firm level measured by the average total factor productivity (TFP). We use unique administrative data collected at the level of firms and regions for 2003-2009 and find that the ongoing tuberculosis (TB) epidemic has considerable indirect economic costs in terms of lost productivity and related inefficien- cies. First of all, both firms and individuals in regions with higher TB prevalence have significantly lower TFP and wages. Moreover, consistent with the Compensating Wage Differentials theory and after controlling for the TB prevalence, the risk of contracting the disease - TB incidence rate - is associated with higher wages and higher produc- tivity - a kind of premium for individuals and firms to operate in a risky environment. The latter can also be viewed as a source of inefficiency as this may prevent firms from entering more competitive markets. Additional analysis reveals strong spatial effects which are consistent with the infectious nature of the diseases and emphasize the im- portance of containing the epidemic. Overall, we estimate that a 10% decrease in the TB prevalence can lead to a 1.05% gain in GDP: 0.15% in terms of higher individual productivity and 0.89% in terms of firms' productivity.
    Keywords: Tuberculosis, Productivity, Regional Wage, Total Factor Productivity, TB Epidemic
    JEL: O18 I15 J24
    Date: 2023
  19. By: Hazans, Mihails (University of Latvia); Masso, Jaan (University of Tartu); Maurseth, Per Botolf (Norwegian Business School (BI))
    Abstract: Do employees with supervisory responsibilities differ from other workers in terms of human values, especially those potentially affecting the quality and efficiency of supervision? This paper uses data from rounds 7-9 of the European Social Survey to examine the selection of employees into supervisory positions in nine Baltic Sea region countries, focusing on ten basic values and four higher order values identified by Schwarz (1992). In eight out of nine countries considered, statistically significant association with supervisory responsibilities is found for three higher order values: positive for Openness to Change and Self-Enhancement but negative for Conservation. By contrast, Self-Transcendence (covering Benevolence and Universalism) is not significantly associated with supervision. In Estonia, Finland, Denmark and (to a smaller extent) Norway and Germany, we find evidence for adverse selection into supervisory jobs based on the Power value posing a risk of autocratic behaviour. When looking at the link between the supervisor's values and the number of subordinates, we find that values that make it easier or harder to become a supervisor tend to work the same way in supervising more workers.
    Keywords: supervisory responsibilities, human values, adverse selection, social trust
    JEL: D91 J24 M51 P52
    Date: 2023–12
  20. By: Gagliardi, Luisa (Bocconi University); Moretti, Enrico (University of California, Berkeley); Serafinelli, Michel (University of Essex)
    Abstract: We investigate the employment consequences of deindustrialization for 1, 993 cities in France, Germany, Great Britain, Italy, Japan, and the United States. In all six countries we find a strong negative relationship between a city's share of manufacturing employment in the year of its country's manufacturing peak and the subsequent change in total employment, reflecting the fact that cities where manufacturing was initially more important experienced larger negative labor demand shocks. But in a significant number of cases, total employment fully recovered and even exceeded initial levels, despite the loss of manufacturing jobs. Overall, 34% of former manufacturing hubs–defined as cities with an initial manufacturing employment share in the top tercile–experienced employment growth faster than their country's mean, suggesting that a surprisingly large number of cities was able to adapt to the negative shock caused by deindustrialization. The U.S. has the lowest share, indicating that the U.S. Rust Belt communities have fared relatively worse compared to their peers in the other countries. We then seek to understand why some former manufacturing hubs recovered while others didn't. We find that deindustrialization had different effects on local employment depending on the initial share of college-educated workers in the labor force. While in the two decades before the manufacturing peak, cities with a high college share experienced a rate of employment growth similar to those with a low college share, in the decades after the manufacturing peak, the employment trends diverged: cities with a high college share experienced significantly faster employment growth. The divergence grows over time at an accelerating rate. Using an instrumental variable based on the driving distance to historical colleges and universities, we estimate that a one standard deviation increase in local college share results in a rate of employment growth per decade that is 9.1 percentage points higher. This effect is in part explained by faster growth in human capital-intensive services, which more than offsets the loss of manufacturing jobs.
    Keywords: manufacturing hubs, spatial heterogeneity, human capital
    JEL: J21 R12 J24
    Date: 2023–12
  21. By: Maarten Meeuwis; Dimitris Papanikolaou; Jonathan L. Rothbaum; Lawrence D.W. Schmidt
    Abstract: We show that time variation in risk premia leads to time-varying idiosyncratic income risk for workers. Using US administrative data on worker earnings, we show that increases in risk premia lead to lower earnings for low-wage workers; these declines are primarily driven by job separations. By contrast, productivity shocks affect the earnings mainly of highly paid workers. We build an equilibrium model of labor market search that quantitatively replicates these facts. The model generates endogenous time-varying income risk in response to changes in risk premia and matches several stylized features of the data regarding unemployment and income risk over the business cycle.
    JEL: E3 E40 G1 J20 J30
    Date: 2023–12
  22. By: Michael P. Keane; Timothy Neal
    Abstract: The Frisch labor supply elasticity plays a key role in many economic policy debates, but its magnitude remains controversial. Many studies estimate the Frisch elasticity using 2SLS regressions of hours changes on wage changes. But a little appreciated power asymmetry property of 2SLS causes estimates to appear spuriously imprecise when they are shifted away from the OLS bias. This makes it difficult for a 2SLS t-test to detect a true positive Frisch elasticity. We illustrate this problem in an application to NLSY97 data. We obtain an estimate of 0.60 for young men, but the t-test indicates it is insignificant. In contrast, the Anderson-Rubin (AR) test – which avoids the power asymmetry problem – implies the estimate is highly significant. The same power asymmetry issue that afflicts the t-test here will arise in many IV applications. Thus, we argue the AR test should be widely adopted in lieu of the t-test.
    Keywords: continuously updated GMM; Labor supply; 2SLS; LIML; weak instruments; Frisch elasticity; Anderson-Rubin test
    JEL: C12 J22 D15 C26
    Date: 2023–11–17
  23. By: Honey Batra; Amanda M. Michaud; Simon Mongey
    Abstract: We characterize the little wage information contained in online job posts. Wage information is rare: only 14% of posts contain any information. Of these, wage ranges are more common than point wages, and are wide on average, spanning 28% of the midpoint (e.g. $32, 000-$42, 000/yr). Posted wages are highly selected in low income occupations: 40% higher than wages of employed workers. High wage firms are more opaque, with more and wider ranges. We find zero correlation between wage information and local labor market tightness. We provide an example of bias in econometric inference that worsens as wage information falls.
    Keywords: Search; Wages; Labor
    JEL: D83 E24 J30
    Date: 2023–12–21
  24. By: Jarkko Harju (Tampere University and Finnish Center of Excellence in Tax Systems Research); Toni Juuti (Labour Institute for Economic Research LABORE, Tampere University and Finnish Center of Excellence in Tax Systems Research); Tuomas Matikka (VATT Institute for Economic Research and Finnish Center of Excellence in Tax Systems Research)
    Abstract: Using detailed full-population data from Finland, we provide evidence on selection into entrepreneurship and the dynamic implications of establishing a new business. Individuals at the very top of the personal income distribution are much more likely to start a new incorporated business compared to others. There is no similar selection based on parental income, but more than half of new entrepreneurs have entrepreneurial parents. Entrepreneurship is associated with a similar average income gain of 20% relative to comparable wage earners throughout both personal and parental income distributions. However, key firm-level outcomes such as productivity and job creation are positively linked with personal income. This suggests that high-income individuals do not only benefit from entrepreneurship personally, but their businesses are associated with the largest positive spillovers in the economy. In contrast, we find no significant differences in the outcomes of new firms by parental income or parental background in entrepreneurship.
    Keywords: entrepreneurship; income mobility; inequality; productivity
    JEL: L26 J24 J3
    Date: 2023–12
  25. By: Axel H. Börsch-Supan; Courtney Coile
    Abstract: The International Social Security (ISS) project compares the experiences of a dozen developed countries to study Social Security Programs and Retirement Around the World. The project was launched in the mid 1990s and was motivated by decades of decline in the labor force participation rate of older men. The first phases of the project documented that social security program provisions can create powerful incentives for retirement that are strongly correlated with the labor force behavior of older workers. Since then, the dramatic decline in men’s labor force participation has been replaced by sharply rising participation rates. Older women’s participation has increased dramatically as well. This tenth phase of the International Social Security (ISS) Project is the third step in explaining rising participation at older ages. The first step investigated changes in health and education as potential causes and showed that they could not account for the extent of changes in labor force participation. As a second step, we documented that countries have undertaken numerous reforms of their social security programs, disability programs, and other public benefit programs available to older workers. We found that these reforms substantially reduced the implicit tax on work at older ages and that stronger financial incentives to work were positively correlated with labor force participation at older ages. In this volume, the third step of our analysis, we exploit the time-series and cross-national variation in the timing and extent of reforms of retirement incentives and employ micro-econometric methods in order to study whether the correlation between financial incentives and work at older ages is causal.
    JEL: J14 J26
    Date: 2023–12
  26. By: Sabrina Herzog; Hannah Schildberg-Hörisch; Chi Trieu; Jana Willrodt
    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 favouritism and socio-demographic characteristics play a much smaller role.
    Keywords: support for affirmative action, self-serving motives, in-group favoritism, altruism, efficiency, fairness, discrimination
    JEL: C99 D01 D63 J78
    Date: 2023
  27. By: Viral V. Acharya; Abhishek Bhardwaj; Tuomas Tomunen
    Abstract: How do firms mitigate the impact of rising temperatures on employment? Using establishment-level data, we show that firms operating in multiple counties in the United States respond to heat shocks by reducing employment in the affected locations and increasing it in unaffected locations, whereas single-location firms simply downsize. Workforce reallocation, aimed at preventing heat-related decline in labor productivity, is stronger among larger, financially stable firms with more ESG-oriented investors. The scale of this response increases with the severity of climate disasters and is aided by credit availability and competitive labor markets. Climate risk management by firms mitigates the impact of heat shocks on aggregate employment but induces a spatial redistribution of economic activity.
    JEL: D22 E24 G31 J21 L23 Q54
    Date: 2023–12
  28. By: Costanza Naguib
    Abstract: We analyze the impact of an inflow of foreign workers on the wage distribution of residents in a small open economy like Switzerland. We exploit the fact that Swiss mobility regions were differently affected by the intensity and the timing of the Agreement on the Free Movement of Persons, depending on their distance from the national border. We extend the results by Beerli, Ruffner, Siegenthaler and Peri (2021) by analyzing heterogeneity in treatment effect via causal forests. We find statistically significant evidence that the treatment effect of opening the borders has been heterogeneous across age, education, and type of activity groups.
    Keywords: wage distribution, Bilateral Agreements, causal forest, Conditional Average Treatment Effect
    JEL: C14 J31
    Date: 2023–12

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