nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2024‒03‒11
thirteen papers chosen by
Joseph Marchand, University of Alberta

  1. Will robot replace workers? Assessing the impact of robots on employment and wages with meta-analysis By Guarascio, Dario; Piccirillo, Alessandro; Reljic, Jelena
  2. Gender Differences in Early Occupational Choices: Evidence from Medical Specialty Selection By Agnès Charpin; Josep Amer-Mestre; Noémi Berlin; Magali Dumontet
  3. External Pay Transparency and the Gender Wage Gap By Wolfgang Frimmel; Bernhard Schmidpeter; Rene Wiesinger; Rudolf Winter-Ebmer
  4. Outsourcing Policy and Worker Outcomes: Causal Evidence from a Mexican Ban By Alejandro Estefan; Roberto Gerhard; Joseph P. Kaboski; Illenin O. Kondo; Wei Qian
  5. Global Labor Market Power By Francesco Amodio; Emanuele Brancati; Peter Brummond; Nicolas de Roux; Michele Di Maio
  6. On household labour supply in sticky-wage HANK models By Gerke, Rafael; Giesen, Sebastian; Lozej, Matija; Röttger, Joost
  7. Discrete Choice, Complete Markets, and Equilibrium By Simon Mongey; Michael E. Waugh
  8. The vicious entanglement of labour-market and income inequalities in Europe By Wiemer Salverda;; Veerle Rook;
  9. Which Migrant Jobs are Linked with the Adoption of Novel Technologies, Robotisation, and Digitalisation? By Antea Barišić; Mahdi Ghodsi; Robert Stehrer
  10. Earnings Dynamics and Firm-Level Shocks By Benjamin Friedrich; Lisa Laun; Costas Meghir; Luigi Pistaferri
  11. Trade and Domestic Distortions: The Case of Informality By Rafael Dix-Carneiro; Pinelopi Koujianou Goldberg; Costas Meghir; Gabriel Ulyssea
  12. Biased expectations and labor market outcomes: Evidence from German survey data and implications for the East-West wage gap By Balleer, Almut; Duernecker, Georg; Forstner, Susanne; Goensch, Johannes
  13. Explaining benefit take-up behavior – the role of incentives and habits By Rosenqvist, Olof; Selin, Håkan

  1. By: Guarascio, Dario; Piccirillo, Alessandro; Reljic, Jelena
    Abstract: This study conducts a meta-analysis to assess the effects of robotization on employment and wages, compiling data from 33 studies with 644 estimates on employment and a subset of 19 studies with 195 estimates on wages. We identify a publication bias towards negative outcomes, especially concerning wages. After correcting for this bias, the actual impact appears minimal. Thus, concerns about the disruptive effects of robots on employment and the risk of widespread technological unemployment may be exaggerated or not yet empirically supported. While this does not preclude that robots will be capable of gaining greater disruptive potential in the future or that they are not already disruptive in specific contexts, the evidence to date suggests their aggregate effect is negligible.
    Keywords: robots, employment, wages, meta-analysis, publication bias
    JEL: J21 J23 J24 J31 O33
    Date: 2024
  2. By: Agnès Charpin; Josep Amer-Mestre; Noémi Berlin; Magali Dumontet
    Abstract: This paper analyses gender differences in occupational choices in a setting in which observed matches are solely determined by supply-side factors: the French centralised medical residency selection mechanism. We show that men and women facing the same occupational choice set make drastically different occupational choices. Medical specialties selected by women pay less, have lower time requirements, and are less competitive. To understand these differences and estimate how much of the gender gap in specialty sorting can be explained by individual preferences for job attributes, we administer a survey to prospective medical residents just before their specialty choice. Using both a hypothetical job choice framework and stated preferences, we show that while “hard” job characteristics (earnings, time requirements) only slightly reduce the gender gap in sorting, “soft” characteristics (daily tasks, contact with patients, willingness to help others) play a larger role in reducing the gap. We also find suggestive evidence of an anticipation effect of fertility on women’s career choices. Our results suggest that individual preferences play a determinant role in explaining gender-based occupational segregation.
    Keywords: Occupational segregation, Gender, Labour market, Job attributes, Willingness to pay
    JEL: J16 J22 J24 J31
    Date: 2024
  3. By: Wolfgang Frimmel (Johannes Kepler University Linz); Bernhard Schmidpeter (Johannes Kepler University Linz); Rene Wiesinger (; Rudolf Winter-Ebmer (Johannes Kepler University Linz)
    Abstract: We show that providing publicly available wage information in vacancies, so-called external pay transparency, can reduce the gender gap in entry wages. There is an increasing interest in pay transparency policies as a tool to combat unequal pay. We exploit a reform of Austria’s Equal Treatment Law to evaluate how providing wage information in vacancies affects the gender wage gap. To take into account that the value of providing such external pay information is likely to be heterogeneous along the wage distribution, we implement a Quantile Difference-in-Difference model. The reform led to a small overall reduction of the gender wage gap. Our main results highlight that reductions in the wage gap are larger in circumstances where women are likely to hold misspecified beliefs about their labor market options and when they have to make job acceptance decisions under pressure. The reduction in the gender wage gap was caused by an increase in women’s earnings, particularly at the lower part of the distribution. Earnings of men, on the other side, remained largely constant. Our results lend support to policy proposals aimed at increasing external pay transparency.
    Keywords: mandatory wage posting, pay transparency law, gender wage gap, job postings, quantile DiD.
    JEL: J31 J23 J63
    Date: 2024–02
  4. By: Alejandro Estefan; Roberto Gerhard; Joseph P. Kaboski; Illenin O. Kondo; Wei Qian
    Abstract: A weakening of labor protection policies is often invoked as one cause of observed monopsony power and the decline in labor’s share of income, but little evidence exists on the causal impact of labor policies on wage markdowns. Using confidential Mexican economic census data from 1994 to 2019, we document a rising trend over this period in on-site outsourcing. Then, leveraging data from a manufacturing panel survey from 2013 to 2023 and a natural experiment featuring a ban on domestic outsourcing in 2021, we show that the ban drastically reduced outsourcing, increased wages, and reduced measured markdowns without lowering output or employment. Consistent with the presence of monopsony power, we observe large markdowns for the largest firms, with the decline in markdowns in response to the ban concentrated among high-markdown firms. However, we also find that the reform reduced capital investment and increased the probability of market exit.
    Keywords: Markdowns; Outsourcing; Monopsony; Developing countries
    JEL: J38 O15 J81 M55 J42
    Date: 2024–01–17
  5. By: Francesco Amodio (McGill University); Emanuele Brancati (Sapienza University); Peter Brummond (University of Alabama); Nicolas de Roux (Universidad de Los Andes, Colombia); Michele Di Maio (Sapienza University)
    Abstract: We estimate the labor market power of over 13, 000 manufacturing establishments across 82 low and middle-income countries around the world. Within local labor markets, larger and more productive firms have higher wage markdowns and pay lower wages. Labor market power across countries exhibits a mild non-linear relationship with GDP per capita, entirely driven by a strong hump-shaped relationship with the share of self-employed workers. Labor market institutions fully account for the hump shape: in countries with unemployment protection, wage markdowns increase with the share of self-employment while the opposite is true in countries without it. We explain this finding through the lens of a simple oligopsonistic labor market model with frictions. Self-employment prevalence correlates with the elasticity of labor supply to the wage paid, and labor market institutions can change the sign of this relationship.
    Keywords: labor market power, self-employment, development, labor market institutions
    JEL: J20 J30 J42 L11
    Date: 2024–02
  6. By: Gerke, Rafael; Giesen, Sebastian; Lozej, Matija; Röttger, Joost
    Abstract: Heterogeneous-agent New Keynesian models with sticky nominal wages usually assume that wage-setting unions demand the same amount of hours from all households. As a result, unions do not take account of the fact that (i) households are heterogeneous in their willingness to work, and that (ii) some households might have to work more hours than they would like to. In this paper, we consider two departures from the standard modelling approach. First, we consider a model version in which unions can demand different hours from different households, directly taking household heterogeneity into account. In this case, we show that unions find it optimal to ration hours worked for all households, such that nobody works more than desired. Compared to the standard case in which all households work the same amount by assumption, the response of output, wages and inflation to monetary policy shocks becomes notably less pronounced. This attenuation reflects that hours worked respond differently across the income distribution. The second model version we consider maintains the assumption that all households work the same amount but prohibits unions from requiring any household to work more than it would like to. This modification substantially lowers the effective stickiness of nominal wages, resulting in markedly different wage and inflation dynamics.
    Keywords: Heterogeneous households, HANK, labour supply, nominal wage rigidity, monetary policy
    JEL: D31 E21 E24 E31 E52 E58 J22
    Date: 2024
  7. By: Simon Mongey; Michael E. Waugh
    Abstract: This paper characterizes the allocations that emerge in general equilibrium economies populated by households with preferences of the additive random utility type that make discrete consumption, employment or spatial decisions. We start with a complete markets economy where households can trade claims contingent upon the realizations of their preference shocks. We (i) establish a first and second welfare theorem, (ii) illustrate that in the absence of ex-ante trade, discrete choice economies are generically inefficient, (iii) show that complete markets are not necessary and a much smaller set of securities decentralizes the efficient allocation. We illustrate the relevance of these results in several canonical settings and for measuring how welfare changes in response to changes in prices.
    JEL: D5 D52 E2 F1 R13
    Date: 2024–02
  8. By: Wiemer Salverda;; Veerle Rook;
    Abstract: Though labour-market earnings are the most important component of household incomes, the relationship between the two distributions remains underresearched. This contribution aims to examine this association with a descriptive analysis. We focus particularly on low-wage and high-wage employment which define two different but still interlinked types of the vicious entanglement. We present the results for the average EU country, as all 27 countries appear to largely share the same fundamentals (Annex 2). Thereto we examine how ‘labour households’ (who depend primarily on wage earnings), are spread over the income distribution of all households and how the individuals providing those earnings are distributed over the overall distribution of hourly wages. Their household incomes appear to crowd towards the top while a significant share of those individuals crowd towards low wages. Thus, low pay is found all over the income distribution. This contrasts with the single-earner world and depends predominantly on ‘Additional earners’ (persons earning less than the main ‘Primary earners’ in their households), who are the defining constituent of the dual-earner world. Note though that the dual-earner world has much more progressed in the labour market, as three quarters of earners share a household with one or more other earners, than in the income distribution as single-earner households still make up close to half of all labour households. Additional earners’ personal characteristics differ significantly but they sort almost identical effects on hourly pay – suggesting that the earner’s position in the household overrides all characteristics. Their low wages spread also over the entire wage distribution of corresponding Primary earners. Consequently, the first element of mutually increasing inequalities is that middle- and high-educated Additional earners make up a large majority of low-wage employment. They mount strong job competition to the low educated based on qualifications, working time and the leeway offered by higher household incomes. A brief country comparison suggests a growing exclusion of the low-educated from employment as a result. As the second element of inequality is that high-educated homogamy drives a modest share of households towards the very top of the income distribution, especially when these earners are also jointly high paid. Another country comparison suggests that the rapid expansion of tertiary educational attainment reinforces both the second and the first type of entanglement. Clearly, the two distributions in incomes and wages should be considered in conjunction in analysis as well as policy making. We conclude with a short discussion of the implications for wage formation as well as the role of education.
    Date: 2023–02
  9. By: Antea Barišić; Mahdi Ghodsi (The Vienna Institute for International Economic Studies, wiiw); Robert Stehrer (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: In recent decades, the development of novel technologies has intensified due to globalisation, prompting countries to enhance competitiveness through innovation. These technologies have significantly improved global welfare, particularly in sectors like healthcare, where they have facilitated tasks and boosted productivity, for example playing a crucial role in combating the COVID-19 pandemic. However, certain technologies, such as robots, can negatively impact employment by replacing workers and tasks. Additionally, the emergence of artificial intelligence as digital assets not only replaces specific tasks but also introduces complexities that may displace employees who are unable to adapt. While the existing literature extensively explores the heterogeneous effects of these technologies on labour markets, studies of their impact on migrant workers remain scarce. This paper presents pioneering evidence on the effects of various novel technologies on migrant employment in the European Union. The analysis covers 18 EU member states from 2005 to 2019 focusing on the impact of novel innovations, robot adoption, three types of digital assets, and total factor productivity, on migrant employment. The key findings reveal that innovations measured by the number of granted patents increase both the number and proportion of migrant workers relative to the overall workforce. While robots do replace jobs, their impact on native workers surpasses that of migrant workers, resulting in a higher share of migrant workers following robot adoption. Total factor productivity positively influences migrant workers, while the effects of digital assets are heterogeneous. Moreover, the impacts of these technologies on migrant workers vary significantly across different occupation types and educational levels.
    Keywords: Robot adoption, digitalisation, novel innovation, migrant workers
    JEL: O33 F22 D24
    Date: 2024–02
  10. By: Benjamin Friedrich (Northwestern University); Lisa Laun (The Institute for Evaluation of Labour Market and Education Policy (IFAU)); Costas Meghir (Yale University); Luigi Pistaferri (Stanford University)
    Abstract: We use matched employer-employee data from Sweden to study the role of the Þrm in affecting the stochastic properties of wages. Our model accounts for endogenous participation and mobility decisions. We find that firm-specific permanent productivity shocks transmit to individual wages, but the effect is mostly concentrated among the high- skilled workers. The pass-through of temporary shocks is smaller in magnitude and similar for high- and low-skilled workers. The updates to worker-Þrm specific match effects over the life of a Þrm-worker relationship are small. Substantial growth in earnings variance over the life cycle for high-skilled workers is driven by Þrms. In particular, cross-sectional wage variances by age 55 are roughly one- third higher relative to a scenario with no pass-through of Þrm shocks onto wages.
    Date: 2024–02
  11. By: Rafael Dix-Carneiro (Duke University); Pinelopi Koujianou Goldberg (Yale University); Costas Meghir (Yale University); Gabriel Ulyssea (University College London)
    Abstract: We examine the effects of international trade in the presence of a set of domestic distortions giving rise to informality, a prevalent phenomenon in developing countries. In our quantitative model, the informal sector arises from burdensome taxes and regulations that are imperfectly enforced by the government. Consequently, smaller, less productive firms face fewer distortions than larger, more productive ones, potentially leading to substantial misallocation. We show that in settings with a large informal sector, the gains from trade are significantly amplified, as reductions in trade barriers imply a reallocation of resources from initially less distorted to more distorted firms. We confirm findings from earlier reduced-form studies that the informal sector mitigates the impact of negative labor demand shocks on unemployment. Nonetheless, the informal sector can exacerbate the adverse welfare effects of economic downturns, amplifying misallocation. Last, our research sheds light on the relationship between trade openness and cross-firm wage inequality.
    Date: 2024–02
  12. By: Balleer, Almut; Duernecker, Georg; Forstner, Susanne; Goensch, Johannes
    Abstract: We measure individual bias in labor market expectations in German survey data and find that workers on average significantly overestimate their individual probabilities to separate from their job when employed as well to find a job when unemployed. These biases vary significantly between population groups. Most notably, East Germans are significantly more pessimistic than West Germans. We find a significantly negative relationship between the pessimistic bias in job separation expectations and wages, and a significantly positive relationship between optimistic bias in job finding expectations and reservation incomes. We interpret and quantify the effects of (such) expectation biases on the labor market equilibrium in a search and matching model of the labor market. Removing the biases could substantially increase wages and expected lifetime income in East Germany. The difference in biases in labor market expectations explains part of the East-West German wage gap.
    Abstract: Diese Studie misst individuelle Verzerrungen von Arbeitsmarkterwartungen auf Basis deutscher Umfragedaten und stellt fest, dass beschäftige Arbeitnehmer ihre individuelle Wahrscheinlichkeit, den Arbeitsplatz zu verlieren, signifikant überschätzen. Ebenso überschätzen arbeitslose Arbeitnehmer ihre individuelle Wahrscheinlichkeit, einen Arbeitsplatz zu finden, signifikant. Diese Verzerrungen variieren erheblich zwischen Bevölkerungsgruppen, so sind z.B. ostdeutsche Arbeitnehmer deutlich pessimistischer als westdeutsche Arbeitnehmer. Die Studie dokumentiert einen signifikant negativen Zusammenhang zwischen der pessimistischen Erwartungshaltung beim Arbeitsplatzverlust und Löhnen sowie einen signifikant positiven Zusammenhang zwischen der optimistischen Erwartungshaltung bei der Arbeitssuche und dem Reservationseinkommen. Wir interpretieren und quantifizieren die Auswirkungen von Erwartungsfehlern auf das Arbeitsmarktgleichgewicht in einem Such- und Matching-Modell des Arbeitsmarktes. Eine Beseitigung der Verzerrungen könnte Löhne sowie das erwartete Lebenseinkommen in Ostdeutschland deutlich erhöhen. Der Unterschied in den Verzerrungen der Arbeitsmarkterwartungen erklärt einen Teil des Ost-West-Lohngefälles in Deutschland.
    Keywords: Labor market risk, biased beliefs, wages, reservation wages
    JEL: E24 J31 D84
    Date: 2024
  13. By: Rosenqvist, Olof (IFAU - Institute for Evaluation of Labour Market and Education Policy); Selin, Håkan (IFAU - Institute for Evaluation of Labour Market and Education Policy)
    Abstract: Take-up of social benefits is a central issue in poverty alleviation and fis cal evaluations of policy reforms. However, it is difficult t o fi nd exogenous variation in the benefit level, and little is therefore known about take up responses to basic financial i ncentives. We exploit large and plausibly random variation in levels of ”flat rate parental leave benefits”, which all Swedish parents are entitled to. There are no financial r easons t o leave money on the table, but take-up is nevertheless imperfect. Higher benefits substantially increase claiming across the income d istribution. We fur ther detect sizeable spill-over effects on subsequent take-up of low-income earners.
    Keywords: Parental benefits; incomplete take-up; after-tax benefits;
    JEL: H24 J22
    Date: 2023–12–20

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