nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2024‒02‒19
twenty papers chosen by
Joseph Marchand, University of Alberta

  1. Automatability of Occupations, Workers' Labor-Market Expectations, and Willingness to Train By Lergetporer, Philipp; Wedel, Katharina; Werner, Katharina
  2. Does Dual Vocational Education and Training Pay Off? By Bentolila, Samuel; Cabrales, Antonio; Jansen, Marcel
  3. AI Unboxed and Jobs: A Novel Measure and Firm-Level Evidence from Three Countries By Engberg, Erik; Görg, Holger; Lodefalk, Magnus; Javed, Farrukh; Längkvist, Martin; Monteiro, Natália Pimenta; Kyvik Nordås, Hildegunn; Schroeder, Sarah; Tang, Aili
  4. Do Alternative Work Arrangements Substitute Standard Employment? Evidence from Worker-Level Data By Bernardo Fanfani; Filippo Passerini
  5. How Do Firms Respond to Unions? By Samuel Dodini; Anna Stansbury; Alexander Willén; Alexander L.P. Willén
  6. The Dynamics of Product and Labor Market Power: Evidence from Lithuania By Ziran Ding; Jose Garcia-Louzao; Valentin Jouvanceau
  7. Measuring Job Risks When Hedonic Wage Models Do Not Do the Job By Ferreira, Susana; Martinez-de-Morentin, Sara; Erro-Garcés, Amaya
  8. Teachers and the Evolution of Aggregate Inequality By Anson Zhou
  9. The aggregate effects of the decline of disruptive innovation By Bräuer, Richard
  10. Making the invisible hand visible: managers and the allocation of workers to jobs By Minni, Virginia Magda Luisa
  11. Taking Back Control? Quasi-Experimental Evidence on the Impact of Retirement on Locus of Control By Clark, Andrew E.; Zhu, Rong
  12. Labour market power: New evidence on Non-Compete Agreements and the effects of M&A in the UK By Julian Alves; Jason Greenberg; Yaxin Guo; Ravija Harjai; Bruno Serra; John Van Reenen
  13. Too Much of a Good Thing? Using Tax Incentives to Stimulate Dual-Earner Couples By de Boer, Henk-Wim; Jongen, Egbert L. W.; Koot, Patrick
  14. The role of regional languages in the integration of migrants in the Spanish labour market By Joan Martín-Montaner; Francisco Requena; Guadalupe Serrano
  15. Defusing leverage: liquidity management and labor contracts By Acabbi, Edoardo; Alati, Andrea
  16. Pay-for-Performance Contracts in the Lab and the Real World: Evidence from Nigeria By Sebastian Bauhoff; Eeshani Kandpal
  17. Female Classmates, Disruption, and STEM Outcomes in Disadvantaged Schools: Evidence from a Randomized Natural Experiment By Sofoklis Goulas; Rigissa Megalokonomou; Yi Zhang
  18. Adapting or compounding? The effects of recurring labour shocks on stated and revealed preferences for redistribution By Cotofan, Maria; Matakos, Konstantinos
  19. Multigenerational Effects of Smallpox Vaccination By Volha Lazuka; Peter Sandholt Jensen
  20. Nursing before and after COVID-19: outflows, inflows and self-employment By Guyonne Kalb; Jordy Meekes

  1. By: Lergetporer, Philipp (Technical University of Munich); Wedel, Katharina (Ifo Institute for Economic Research); Werner, Katharina (Ifo Institute for Economic Research)
    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
  2. By: Bentolila, Samuel (CEMFI, Madrid); Cabrales, Antonio (University College London); Jansen, Marcel (Universidad Autónoma de Madrid)
    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. The control group is composed of individuals who graduated in the same fields and years in school-based VET. Selection into dual VET is dealt with using a distance-based instrumental variable. Dual VET is found to generate sizeable improvements in employment and earnings, but no significant impact on job quality. The results are not driven by pre-reform differences in the quality of the schools that adopted dual VET and the higher retention rate of dual VET graduates only partly explains the dual premium.
    Keywords: dual vocational education and training, school-to-work transi- tion, Spain
    JEL: D92 G33 J23
    Date: 2023–12
  3. By: Engberg, Erik (Örebro University); Görg, Holger (Kiel Institute for the World Economy); Lodefalk, Magnus (Örebro University); Javed, Farrukh (Örebro University); Längkvist, Martin (Örebro University); Monteiro, Natália Pimenta (University of Minho); Kyvik Nordås, Hildegunn (Council on Economic Policies); Schroeder, Sarah (Aarhus University); Tang, Aili (Örebro University)
    Abstract: We unbox developments in artificial intelligence (AI) to estimate how exposure to these developments affect firm-level labour demand, using detailed register data from Denmark, Portugal and Sweden over two decades. Based on data on AI capabilities and occupational work content, we develop and validate a time-variant measure for occupational exposure to AI across subdomains of AI, such as language modelling. According to the model, white collar occupations are most exposed to AI, and especially white collar work that entails relatively little social interaction. We illustrate its usefulness by applying it to near-universal data on firms and individuals from Sweden, Denmark, and Portugal, and estimating firm labour demand regressions. We find a positive (negative) association between AI exposure and labour demand for high-skilled white (blue) collar work. Overall, there is an up-skilling effect, with the share of white-collar to blue collar workers increasing with AI exposure. Exposure to AI within the subdomains of image and language are positively (negatively) linked to demand for high-skilled white collar (blue collar) work, whereas other AI-areas are heterogeneously linked to groups of workers.
    Keywords: artificial intelligence, labour demand, multi-country firm-level evidence
    JEL: E24 J23 J24 N34 O33
    Date: 2024–01
  4. By: Bernardo Fanfani; Filippo Passerini
    Abstract: This study analyses the impact of an Alternative Work Arrangement (AWA) called "voucher" on earnings of atypical workers and on their alternative income sources using Italian administrative data. Specifically, we investigate whether this form of very flexible work substitutes income from more standard labor contracts and welfare transfers related to employment insurance (sick and parental leave and unemployment benefits). We estimate cross-income elasticities using fixed effects and diff-in-diff specifications that correct for sample selection of individuals in the labor market. Results show that vouchers increase overall labor income, but they also substitute earnings derived from other labor contracts. We do not find relevant associations between vouchers and welfare transfers. The positive effect of vouchers on total income is smaller in specifications that correct for sample selection bias, and the substitution effect with other labor income sources is substantially larger. Overall, our findings show that AWAs tend to substitute standard employment, with small positive net effects on earnings, which are larger for intensive users of vouchers, and in geographic regions with a more sizable informal sector.
    JEL: J24 J22 D12 C13 C21
    Date: 2024–02
  5. By: Samuel Dodini; Anna Stansbury; Alexander Willén; Alexander L.P. Willén
    Abstract: This paper provides a comprehensive assessment of the margins along which firms in Norway respond to increased union density, using legislative changes in the tax deductibility of union dues as a quasi-exogenous shock to firm-level unionization rates. Despite higher personnel costs driven by a union wage premium, the average manufacturing firm increases employment and scales up production, charges higher prices in the product market, enjoys higher nominal value added per worker, and experiences no decrease in profits. We show that this result is a direct implication of the labor- and product-market power that the average manufacturing firm possesses, in combination with a reallocation of inputs and industry revenue shares from smaller and less unionized firms to larger and more unionized firms. Larger firms are, therefore, increasing employment and output at the same time their ability to mark up prices is growing, thereby preventing negative profit effects. For the broader private sector in which firms do not hold much price- or wage-setting power, we observe the opposite result: the average firm reduces employment and profit falls. We synthesize these findings through a partial-equilibrium model of firm decision-making that incorporates union bargaining, product-market price-setting power, and labor market monopsony power.
    Keywords: unions, price pass-through, firms, market power, labor costs
    JEL: J51 J30 D22 J42
    Date: 2023
  6. By: Ziran Ding; Jose Garcia-Louzao; Valentin Jouvanceau
    Abstract: This paper characterizes the power dynamics of firms in both product and labor markets in Lithuania between 2004 and 2018. We first show that both markets are not perfectly competitive, as both price markups and wage markdowns are far from unitary and homogeneous. Interestingly, we unveil that the dynamics of these margins followed different patterns. On the one hand, both the dispersion and the economy-wide markup have increased, indicative of an increase in product market power. On the other hand, we document a decline in monopsony power, as both the heterogeneity and the aggregate level of markdowns have declined. Altogether, our results underline the importance of jointly analyzing product and labor markets when assessing firms’ market power.
    Keywords: firm heterogeneity, monopoly, markups, monopsony, markdowns
    JEL: D40 E20 J30 L10
    Date: 2024
  7. By: Ferreira, Susana (University of Georgia); Martinez-de-Morentin, Sara (Universidad Pública de Navarra); Erro-Garcés, Amaya (Universidad Pública de Navarra)
    Abstract: Hedonic wage regressions show little evidence that European workers facing larger job risks and other workplace disamenities receive higher wages. On the other hand, workers in more risky or unpleasant jobs are less satisfied with their jobs, ceteris paribus. If labor markets were perfectly competitive and workers fully informed of their working conditions ex ante, according to the theory of compensating differentials, there should be no relationship between on-the-job risk and job satisfaction because wages would fully adjust to compensate for differences in job characteristics. We show that when wages do not fully compensate for on-the-job risks, the willingness to pay to reduce mortality risks estimated from hedonic regressions needs to be complemented with a residual effect of job risks on utility which is not capitalized on wages. We explore the potential of job satisfaction regressions as an additional valuation approach to estimate the tradeoffs between wages and risks that keep job satisfaction constant.
    Keywords: on-the-job risk, experienced preference, job satisfaction, hedonic wages, stated preference, value of a statistical life
    JEL: Q51 I12 I18 J17 J31 K32
    Date: 2024–01
  8. By: Anson Zhou (The University of Hong Kong)
    Abstract: Teachers account for less than 5% of the workforce but have disproportionate impacts on the achievements of future generations. This paper studies how the reward structure of teachers affects income inequality at the aggregate level. I show that, in a dynamic environment, there is a two-way relationship between teacher quality and population-wide human capital distribution. On the one hand, the dispersion of human capital governs the occupation selection effect on teacher quality. On the other hand, deteriorating teacher quality elevates the dispersion itself through children’s human capital formation. Exploiting empirical evidence on duty-to-bargain laws, I identify the model in closed form and quantify the proposed mechanism. Counterfactual results suggest that rewarding teachers’ human capital, e.g., through performance-based compensations, has large dynamic spillover effects such as reducing aggregate income inequality and boosting intergenerational mobility.
    Keywords: teachers, human capital, inequality
    JEL: I24 J24 J31 J45
    Date: 2024–01
  9. By: Bräuer, Richard
    Abstract: This paper proposes a model that explains both recently documented facts about the decline of disruptive innovation and the decline in productivity growth as the result of large firms trying to monopolize technologies by poaching inventors from disruptive activities. To come to this conclusion, the paper builds an endogenous growth model with inventor labor markets on which firms can interact strategically. To inform this model, I perform an event study of the effect of disruptive inventions on their technology fields using PATSTAT (1980-2010). I document that technology classes without disruption slowly trend towards incrementalism and that after a disruption, more patents get registered and research becomes less incremental.
    Keywords: disruptive innovation, general equilibrium, general purpose technology, innovation strategies, inventor labor markets, microeconometrics
    JEL: J24 J42 J44 O12 O33 O41
    Date: 2023
  10. By: Minni, Virginia Magda Luisa
    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: 2023–10–05
  11. By: Clark, Andrew E. (Paris School of Economics); Zhu, Rong (Flinders University)
    Abstract: We use nationally representative panel data from Australia to consider the impact of retirement on individual locus of control, a socio-emotional skill that has substantial explanatory power for a broad range of life outcomes. We establish causality via cohort-specific eligibility age for the Australian Age Pension. We show that retirement leads to increased internal locus of control. This greater sense of internal control can explain around one-third and one-fifth of the positive effects of retirement on health and subjective well-being, respectively. The impact of retirement on control beliefs varies along the distribution of locus of control, with the positive influence being most pronounced for men with a relatively high sense of internal control and for women with a relatively high sense of external control. Last, we provide evidence that locus of control is much more malleable at retirement than the other socio-emotional skills of the Big-Five personality traits, risk and time preferences, and trust.
    Keywords: retirement, locus of control, socio-emotional skills, public pension
    JEL: H55 J24 J26
    Date: 2023–12
  12. By: Julian Alves; Jason Greenberg; Yaxin Guo; Ravija Harjai; Bruno Serra; John Van Reenen
    Abstract: Monopsony power is an important feature of modern labour markets. We examine its impact on workers. We report the first representative survey of Non-Compete-Agreements (NCA) in the UK and find that about 26% of workers appear to be covered, a higher fraction than in comparable surveys in the US (18%) and Italy (16%). Although NCAs are more prevalent for skilled workers, a large number of low skilled workers are also subject to NCAs (e.g. over a fifth of plant operators). Moreover, although NCAs are associated with higher training (conditional on other measures of skills), we argue that such benefits are unlikely to justify their high prevalence. Finally, we examine the impact of over 2, 000 M& UK panel data between 1997 and 2022 (over 900, 000 observations). The data suggests that M&A tends to reduce employment growth in the merged entity (from 3% a year prior to the merger to about zero in the subsequent five years), particularly in target firms. However, there is no evidence of any falls in average wage growth (in acquirer or target) as monopsony would predict - if anything, average wages are higher. Nor does profitability or productivity change post-merger.
    Keywords: management practices, productivity, competition
    Date: 2024–01–29
  13. By: de Boer, Henk-Wim (Independent Researcher); Jongen, Egbert L. W. (Leiden University); Koot, Patrick (Dutch Tax and Customs Administration)
    Abstract: Following major tax-benet reforms over the past decades, the Netherlands is the international front-runner in stimulating dual-earner couples via the tax system. In this paper we consider whether or not it has perhaps gone too far, using the inverse-optimal method of optimal taxation to recover the implicit social welfare weights for single- and dual-earner couples over time. Our results indicate that the reforms may have gone too far, leading to social welfare weights that are no longer monotonically declining in household income and even negative for some groups (suggesting Pareto-improving reforms are possible). We also consider optimal tax systems for dierent social preferences.
    Keywords: optimal taxation, revealed social preferences, dual earners
    JEL: C63 H21 H31
    Date: 2023–12
  14. By: Joan Martín-Montaner (Universitat Jaume I and Instituto de Economía Internacional); Francisco Requena (Universitat de València); Guadalupe Serrano (Universitat de València)
    Abstract: We analyze the determinants of the internal and foreign migrants’ decision regarding their employment status and examine the importance of second-language proficiency in bilingual language economies. When arriving at a bilingual territory, migrants must decide which languages to learn. If one of the languages predominates in economic activity, there are less incentives for migrants to make the effort of learning the second language. However, if a local language contributes to build or strengthen a regional identity, learning it could help immigrants’ immersion in the receiving region. We use the Spanish Census in 2001, which exceptionally asked all participants about their knowledge of the co-official language in the bilingual regions. Our results show that second-language proficiency reduces the probability of being unemployed and stimulates self-employment. The impact becomes stronger among foreign migrants without Spanish as a first language and migrants arriving after primary school and living in non-urban areas.
    Keywords: Immigrant's assimilation, languages proficiency, labor market, self-employment, sequential logit
    JEL: J21 J22 J61
    Date: 2024–01
  15. By: Acabbi, Edoardo (Universidad Carlos III de Madrid); Alati, Andrea (Bank of England)
    Abstract: This study employs Italian administrative data to investigate how the use of permanent and fixed-term labor contracts influences the transmission of aggregate shocks to firms’ fundamentals. We explore how firms strategically manage their labor-induced operating leverage by adjusting the composition of contracts in their workforce. Our findings reveal two key insights. First, a higher labor share is associated with increased volatility in cash flows following unexpected real shocks, indicating the presence of operating leverage through labor costs. Second, firms with a greater proportion of temporary contracts exhibit lower variability in cash flows and profits. This smoothing effect is more pronounced in firms with a higher labor share attributed to the permanent workforce. We complement our analysis by examining the 2001 labor market reform that lifted restrictions on the creation of temporary contracts. Our results demonstrate that firms, following the staggered implementation of the reform, increased their utilization of temporary contracts while reducing average labor compensation. Furthermore, we find that, only among firms with an ex-ante more rigid labor cost structure and in more concentrated labor markets, the earlier transition to a more flexible workforce composition led to a sizable increase in profit margins and a decrease in the cross-sectional standard deviation of profits.
    Keywords: Leverage; labor share; dual labor markets; liquidity; event-study
    JEL: E23 G12 J23
    Date: 2023–11–17
  16. By: Sebastian Bauhoff (Department of Global Health and Population, Harvard T.H. Chan School of Public Health); Eeshani Kandpal (Center for Global Development)
    Abstract: A two-stage experiment disentangles the effect of various aspects of pay-for-performance contracts. The first is a lab-in-the-field experiment where 1, 359 health workers are primed with a checklist of salient clinical tasks, then randomized within 690 clinics to receive no incentives, rewards, or penalties for treating hypothetical patients. Both rewards and penalties improve performance by 20 percent and generate spillovers on unincentivized tasks, but small incentives capture most gains. In the second stage, lab impacts translate into the real world: lab PFP exposure improves by 20 percent the care provided to real-world patients even after the lab experiment.
    Keywords: Pay-for-performance; Health workers; Lab-in-the-field experiment
    JEL: C93 I11 I15 J41 J45 M52 O15
    Date: 2024–01–29
  17. By: Sofoklis Goulas; Rigissa Megalokonomou; Yi Zhang
    Abstract: Recent research has shown that females make classrooms more conducive to effective learning. We identify the effect of a higher share of female classmates on students’ disruptive behavior, engagement, test scores, and major choices in disadvantaged and non-disadvantaged schools. We exploit the random assignment of students to classrooms in early high school in Greece. We combine rich administrative data with hand-collected student-level data from a representative sample of schools that feature two novel contributions. Unlike other gender peer effects studies, a) we use a rich sample of schools and students that contains a large and diverse set of school qualities, and household incomes, and b) we measure disruption and engagement using misconduct-related (unexcused) teacher-reported and parent-approved (excused) student class absences instead of self-reported measures. We find four main results. First, a higher share of female classmates improves students’ current and subsequent test scores in STEM subjects and increases STEM college participation, especially for girls. Second, a higher share of female classmates is associated with reduced disruptive behavior for boys and improved engagement for girls, which indicates an increase in overall classroom learning productivity. Third, disadvantaged students—those who attend low-quality schools or reside in low-income neighborhoods—drive the baseline results; they experience the highest improvements in their classroom learning productivity and their STEM outcomes from a higher share of female classmates. Fourth, disadvantaged females randomly assigned to more female classmates in early high school choose college degrees linked to more lucrative or prestigious occupations 2 years later. Our results suggest that classroom interventions that reduce disruption and improve engagement are more effective in disadvantaged or underserved environments.
    Keywords: gender peer effects, natural experiment, classroom learning productivity, STEM careers, quasi-random variation, disadvantaged students
    JEL: J16 J24 I24 I26
    Date: 2023
  18. By: Cotofan, Maria; Matakos, Konstantinos
    Abstract: The evidence on the impact of employment shocks on preferences for redistribution is mixed on stated outcomes and sparse on revealed ones. We conduct a survey of US workers to measure the impact of repeated labour market shocks on both stated and revealed redistributive preferences. We measure the former by support on seven different policies and the latter through donations. We look at experiences of both mild shocks (having to reduce working hours) and hard shocks (unemployment), as well as past unemployment during formative years. We find evidence of adaptation to unemployment on policy preferences and compounding for milder shocks on donations, suggesting that the effects of repeated shocks on preferences for redistribution are not independent. Our results show that unemployment impacts preferences in a self-interested way, while milder shocks lead to broader support for redistribution.
    Keywords: labour market shocks; scarring; redistribution; donations
    JEL: D9 I3 J2 M5
    Date: 2023–11–10
  19. By: Volha Lazuka (University of Southern Denmark, Lund University, IZA); Peter Sandholt Jensen (Linnaeus University)
    Abstract: Can the effect of a positive health shock, such as childhood vaccination, transmit across three generations? To answer this question, we estimate the impact of smallpox vaccination in childhood on the longevity and occupational achievements of three generations using unique individual-level data from Sweden, covering the last 250 years. We apply different estimation strategies based on linear and non-linear probability models. To address endogeneity concerns, we construct a shift-share instrumental variable, utilizing the fact that vaccination in Sweden was administered by the low-skilled clergy, who otherwise did not perform public health duties. Overall, our results show that a positive shock to the health of the first generation, such as smallpox vaccination, operating through various channels, enhances both health and socio-economic outcomes for at least two more generations.
    Keywords: intergenerational transmission of health, smallpox vaccination, shift-share instrumental-variables
    JEL: I18 J24 J62
    Date: 2024–01
  20. By: Guyonne Kalb (Melbourne Institute: Applied Economic & Social Research, The University of Melbourne); Jordy Meekes (Department of Economics, Leiden University, Netherlands)
    Abstract: We study nurses’ labour dynamics in light of continuing nurse shortages and the COVID-19 pandemic. Using Dutch monthly administrative microdata, all nursing-qualified persons observed in January 2016 and/or in January 2020 are compared and followed for one year before and three years after both baseline months. Compared to the 2016 Cohort, women and men in the 2020 Cohort who were employed in the healthcare sector at baseline were 0.3 and 1 percentage point more likely to have left employment; and, conditional on still being employed, 0.8 and 1.2 percentage points more likely to have left healthcare employment after three years. The 2020 Cohort women and men were also 1 and 1.7 percentage points more likely to transition from salaried employment to self-employment, and they reduced working hours by 0.6% and 1.5% more by December 2022. Except during COVID outbreaks, there is no higher inflow into healthcare employment by nursing-qualified women and men who were not employed in healthcare at baseline. Finally, other healthcare professionals fared better, with similar healthcare sector retention rates in 2019-2022 compared with 2015-2018. Overall, the pandemic accelerated nurse shortages through reduced retention and increased self-employment, and its impact is still felt at the end of 2022.
    Keywords: nurses, labour dynamics, self-employment, healthcare, gender, COVID-19
    JEL: I11 J16 J20 J44 J62
    Date: 2024–01

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