nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2024‒03‒18
seventeen papers chosen by
Joseph Marchand, University of Alberta

  1. The Subsidy Trap: Explaining the Unsatisfactory Effectiveness of Hiring Subsidies for the Senior Unemployed By Dalle, Axana; Verhofstadt, Elsy; Baert, Stijn
  2. Wage Cyclicality and Labour Market Institutions By Pereira, João; Ramos, Raul; Martins, Pedro S.
  3. Effect of Informal Employment on Overeducation in Developing Countries with a focus on the Democratic Republic of Congo (DRC) By Cedrick Kalemasi Mosengo; Christian Zamo Akono
  4. Demographics, labor market power and the spatial equilibrium By Furbach, Nina
  5. Labor Migration, Capital Accumulation, and the Structure of Rural Labor Markets By Taryn Dinkelman; Grace Kumchulesi; Martine Mariotti
  6. Favorable tax treatment of older workers in general equilibrium By Gustafsson, Johan
  7. Monopsony Power, Offshoring, and a European Minimum Wage By Hartmut Egger; Udo Kreickemeier; Jens Wrona
  8. Impact of Minimum Wage Standard on Occupational Income Inequality and Common Prosperity in China By Jing Yuan; Xiaomin Liu; Yinghui Wang; Zongwu Cai
  9. Picking winners: Managerial ability and capital allocation By Benz, Andreas; Demerjian, Peter R.; Hoang, Daniel; Ruckes, Martin E.
  10. Moving apart: job-driven residential mobility and the gender pay gap Evidence from a large industrial firm. By Matthieu Bunel; Dominique Meurs; Élisabeth Tovar
  11. Overeducation and Economic Mobility By Markussen, Simen; Nareklishvili, Maria; Røed, Knut
  12. New Technology and Business Dynamics By Hvide, Hans K.; Meling, Tom
  13. Interview Sequences and the Formation of Subjective Assessments By Jonas Radbruch; Amelie Schiprowski
  14. Impact of Retirement and Re-employment on the Life Satisfaction of Older Adults in Korea By Do Won Kwak; Jong-Wha Lee
  15. Innovation and employment in sub-Saharan Africa: New evidence from the World Bank Enterprise Survey By Keraga, Mezid N.; Lööf, Hans; Stephan, Andreas
  16. Estimating the returns to occupational licensing: evidence from regression discontinuities at the bar exam By Omar Bamieh; Andrea Cintolesi; Mario Pagliero
  17. Do Women Fare Worse When Men Are Around? Quasi-Experimental Evidence By Gomez-Ruiz, Marcela; Cervini-Plá, María; Ramos, Xavier

  1. By: Dalle, Axana (Ghent University); Verhofstadt, Elsy (Ghent University); Baert, Stijn (Ghent University)
    Abstract: To extend the labour market participation of seniors, numerous countries provide subsidies to incentivise their recruitment or employment. Prior research demonstrates that the effectiveness of such subsidies is rather unsatisfactory, although the reasons for this inadequacy remain unclear. Therefore, we examined negative employer perceptions triggered by eligibility for such subsidies that might explain this disappointing effectiveness. To this end, we set up a vignette experiment in which 292 genuine recruiters assessed fictitious candidates on their hireability and underlying productivity estimations. These candidates differed experimentally in their eligibility for a hiring subsidy targeted at the unemployed aged 58 or over. Our results indicate that the subsidy has a negative effect on their hiring outcomes. This adverse effect is explained by negative perceptions that counteract the financial incentive. Specifically, the subsidised candidates signal lower physical and technological skills along with an augmented difficulty in hiring and labour inspection.
    Keywords: hiring discrimination, senior workers, labour market programmes, hiring subsidy, signalling effect, vignettes
    JEL: J14 J38 J71
    Date: 2024–02
  2. By: Pereira, João (University of Évora); Ramos, Raul (University of Barcelona); Martins, Pedro S. (Nova School of Business and Economics)
    Abstract: Do labour institutions influence how wages respond to the business cycle? Such responsiveness can then shape several economic outcomes, including unemployment. In this paper, we examine the role of two key labour market institutions - collective bargaining and temporary contracts - upon wage cyclicality. Our evidence is drawn from rich, 2002-2020 matched data from Portugal. We find that workers not covered by collective agreements exhibit much higher wage cyclicality, especially if new hires, compared to covered workers. In contrast, workers under fixed-term contracts do not exhibit sizable differences in cyclicality compared to counterparts under open-ended contracts. Our findings highlight a novel angle through which labour institutions influence the labour market and the economy.
    Keywords: real wages, business cycles, collective bargaining, temporary contracts, matched data
    JEL: J31 J52
    Date: 2024–02
  3. By: Cedrick Kalemasi Mosengo (University of Kinshasa, the DRC); Christian Zamo Akono (University of Yaoundé 2, Cameroon)
    Abstract: The aim of this study is to assess the effect of informal employment on the occurrence of overeducation in developing countries, focusing on the specific case of the DRC. Using employment data, we determine the incidence of overeducation and we isolate the role of informal employment as a determinant of overeducation. To measure overeducation, we mainly use the normative (adequationist) approach. We find an incidence of overeducation in the order of 33.3% in the DRC labor market. The econometric results based on recursive bivariate Probit suggest a positive and significant effect of informal employment. The results found are robust even when using the statistical approach as an alternative measure of overeducation. These findings suggest a set of measures likely to reduce the incidence of overeducation on the labor market. These should focus on the formalization of informal sector employment and policies to improve labor market matches.
    Keywords: Skills mismatch, Overeducation, Undereducation, Informal employment
    JEL: E26 E24 I21 J24
    Date: 2024–01
  4. By: Furbach, Nina
    Abstract: This paper studies how demographics affect aggregate labor market power, the urban wage premium and the spatial concentration of population. I develop a quantitative spatial model in which labor market competitiveness depends on the demographic composition of the local workforce. Using highly disaggregated administrative data from Germany, I find that firms have more labor market power over older workers: The labor supply elasticity decreases from more than 2 to 1 from age 20 to 64. Calibrating the model with the reduced-form elasticity estimates, I find that differences in labor supply elasticities across age groups can explain 4% of the urban wage premium and 2% of the spatial concentration of population. Demographics and skill together account for 10% of the urban wage premium and 2% of agglomeration. JEL Classification: J11, J31, J42, R23
    Keywords: demographics, Germany, monopsonistic competition, spatial equilibrium, urban wage premium
    Date: 2024–02
  5. By: Taryn Dinkelman; Grace Kumchulesi; Martine Mariotti
    Abstract: Between 1967 and 1974, a bilateral treaty increased circular labor migration from Malawi to South Africa by 200%, bringing over 53 million USD in earnings into origin communities. A deadly migrant worker plane crash in 1974 ended these flows and led to migrant repatriation. We study how this shock affected local labor markets. In regions receiving more migrant capital after the crash, workers, particularly women, shifted from farming into non-farm work over thirty years. Investments in non-farm physical and human capital contribute to these sectoral changes. This natural experiment shows that temporary capital inflows can permanently reshape rural labor markets.
    JEL: J21 J24 O15 O55
    Date: 2024–02
  6. By: Gustafsson, Johan (Department of Economics, Umeå University)
    Abstract: The present paper studies how to encourage longer careers by reducing labor income taxes for older workers. The analysis relies on numerical experiments within a general equilibrium overlapping generations model that is calibrated to an average OECD economy. I find that the policy can delay retirement and increase tax revenue if treatment occurs close to, and before, the preferred retirement age. A non-trivial share of the increased post-treatment labor supply can be explained by the substitution of hours worked from the pre-treatment career to the post-treatment career. Lowering the treatment age only leads to small changes in the aggregate labor supply, but is increasingly costly for the government in terms of forgone revenue. Tax shifting toward higher consumption taxes always increases welfare, while tax shifting toward higher capital or labor income taxes paid by younger workers only increases welfare if treatment occurs sufficiently late in the career.
    Keywords: age-dependent taxation; OLG model; retirement
    JEL: E21 H24 J22
    Date: 2024–03–04
  7. By: Hartmut Egger; Udo Kreickemeier; Jens Wrona
    Abstract: This paper sets up a two-country model of offshoring with monopolistically competitive product and monopsonistically competitive labour markets. In our model, an incentive for offshoring exists even between symmetric countries, because shifting part of the production abroad reduces local labour demand and allows firms to more strongly execute their monopsonistic labour market power. However, offshoring between symmetric countries has negative welfare effects and therefore calls for policy intervention. In this context, we put forward the role of a common minimum wage and show that the introduction of a moderate minimum wage increases offshoring and reduces welfare. In contrast, a sizable minimum wage reduces offshoring and increases welfare. Beyond that, we also show that a sufficiently high common minimum wage cannot only eliminate offshoring but also inefficiencies in the resource allocation due to monopsonistic labour market distortions in closed economies.
    Keywords: offshoring, minimum wage, welfare effects
    JEL: F12 F16 F23 J42
    Date: 2024
  8. By: Jing Yuan (School of Statistics, Shandong Technology and Business University, Yantai, Shandong 264005, China); Xiaomin Liu (School of Statistics, Shandong Technology and Business University, Yantai, Shandong 264005, China; School of Statistics, Shandong Technology and Business University, Yantai, Shandong 264005, China); Yinghui Wang (School of Statistics, Shandong Technology and Business University, Yantai, Shandong 264005, China); Zongwu Cai (Department of Economics, The University of Kansas, Lawrence, KS 66045, USA)
    Abstract: To achieve the common prosperity is an inevitable goal for the Chinese-style modernization. As an important policy tool for regulating income distribution in the labor market, it is greatly significant to see whether it can effectively lowering and cover the bottom. Using micro-data from the China Household Dynamics Tracking Survey, this paper measures the degree of inequality within occupations in China and explores the impact of the China's minimum wage standard on residents' occupational income inequality. Our empirical results show that for every 100 RMB yuan increase in the minimum wage standard, the Gini coefficient, which measures the level of income inequality among residents, drops by 0.318, which has an obvious economic effect. Income effect analysis results show that for every 100 RMB yuan increase in the minimum wage standard, income inequality for people in the high unequal income group falls remarkably by 0.362. The middle group has the weakest impact effect, and income inequality for people in the low unequal income group falls by only 0.126. This finding shows that the income effect brought about by the increase in the minimum wage standard is mainly reflected in the truncation effect on low-income people. By directly raising their income levels, the wage gap between low- and middle-income people has been reduced, and the level of income inequality has been reduced. Therefore, the improvement of the China's minimum wage standard in the future should be based on priority employment policies, starting with the goal of lowering the minimum wage standard and safeguarding the lives of low-income groups, and steadily promoting the common prosperity and making the substantial progress.
    Keywords: Inter-occupational Income inequality;, Pareto distribution; Minimum wage standard; Common prosperity
    JEL: C10 D63 D30 J30
    Date: 2024–02
  9. By: Benz, Andreas; Demerjian, Peter R.; Hoang, Daniel; Ruckes, Martin E.
    Abstract: We examine how division managers' human capital affects internal capital allocation using a hand-collected data set of divisional managers at S&P 1, 500 firms. Based on a novel measure of division-manager ability, we show that more able division managers receive substantially larger capital allocations. This effect is robust to controlling for the possibility of assortative matching and more pronounced for firms with better governance. We also find that the allocation of extra capital to higher-ability managers creates firm value. These findings suggest efficient fund transfers to high-productivity managers and provide support for a largely unexplored bright side of internal capital markets.
    Keywords: Managerial Ability, Managerial Efficiency, Human Capital, Capital Budgeting, Investment, Internal Capital Markets
    JEL: G31 G32 G34 J24
    Date: 2024
  10. By: Matthieu Bunel; Dominique Meurs; Élisabeth Tovar
    Abstract: This article uses a 15-year panel data set from a large French industrial firm to investigate the role of intra-firm job-driven residential mobility on the gender pay gap of executives. We find that job-driven residential mobility is highly profitable for both male and female workers due to a generous mobility bonus policy, but that it does not affect their careers. We also find that female executives are less likely than males to experience job-driven residential mobility, and that it brings higher gains to male relative to female executives. However, these differences between men and women linked to the mobility allowance make limited contribution to the total gender pay gap, which is almost entirely due to other bonuses linked to the positions held.
    Keywords: insider econometrics, personnel economics, gender pay gap, job mobility, residential mobility
    JEL: J16 J31 M12 R23
    Date: 2024
  11. By: Markussen, Simen (Ragnar Frisch Centre for Economic Research); Nareklishvili, Maria (Ragnar Frisch Centre for Economic Research); Røed, Knut (Ragnar Frisch Centre for Economic Research)
    Abstract: We assess the hypothesis that declining intergenerational economic mobility in Norway is attributable to a rising signaling value of education accompanied by more overeducation particularly among upperclass offspring. We identify five empirical facts that together point in this direction: • The educational earnings premium has risen, but only through the extensive (employment) margin. • The earnings premium has increased more when education is measured as years corresponding to completed degrees than when measured as time actually invested. • Both educational attainment and the labor market's skill-requirements (as predicted by the occupational distribution) have increased, but attainment has risen faster than requirements such that the incidence of overeducation has increased. • There is a steep positive social gradient in overeducation: Overeducation is more frequent and has risen faster among offspring in upper-class families. • There is a steep negative social gradient in non- employment: Non-employment is more frequent and has risen faster among offspring in lower-class families.
    Keywords: overeducation, intergenerational mobility, returns to education, signaling
    JEL: I21 I26 J24 J62
    Date: 2024–02
  12. By: Hvide, Hans K. (U of Bergen and U of Aberdeen); Meling, Tom (Ohio State U)
    Abstract: How does the economy adapt to new technologies? While existing literature focuses on the response by established firms, we highlight the response by entrepreneurs. The context is a natural experiment: the staggered rollout of broadband internet in Norway. We find that the new technology had small effects on the survival, employment, and asset growth of established firms, but led to a sustained 25% increase in startup rates. Startup quality did not decline. Our findings support ideas from Schumpeter (1934) and Arrow (1962) that startups play an important role in adapting the economy to new technologies.
    JEL: D21 D24 G39 J23 L11 L25
    Date: 2023–12
  13. By: Jonas Radbruch (HU Berlin); Amelie Schiprowski (University of Bonn)
    Abstract: Interviewing is a decisive stage of most processes that match candidates to firms and organizations. This paper studies how and why a candidate’s interview outcome depends on the other candidates interviewed by the same evaluator. We use large-scale data from high-stakes admission and hiring processes, where candidates are quasi-randomly assigned to evaluators and time slots. We find that the individual assessment decreases as the quality of other candidates assigned to the same evaluator increases. The influence of the previous candidate stands out, leading to a negative autocorrelation in evaluators’ votes of up to 40% and distorting final admission and hiring decisions. Our findings are in line with a contrast effect model where evaluators form a benchmark through associative recall. We assess potential changes in the design of interview processes to mitigate contrasting against the previous candidate.
    Keywords: hiring; interviewing; contrast effect; memory;
    JEL: D91 J20 M51
    Date: 2024–02–16
  14. By: Do Won Kwak; Jong-Wha Lee
    Abstract: An aging workforce has adversely impacted the economy in Korea, amid growing fiscal challenges associated with providing pension and healthcare for older people. The increasing elderly population has raised concerns about the diminishing quality of life among seniors. This study explores the impact of retirement and re-employment on the life satisfaction of older individuals, utilizing longitudinal data from 2008 to 2020. To address endogeneity concerns, we use statutory eligibility ages for retirement pension benefits and the expected monetary value of these benefits as instrumental variables for retirement and re-employment status. Our findings suggest that retirement leads to a significant reduction in overall life satisfaction among older individuals. Conversely, life satisfaction improves significantly when retired individuals are re-employed. This study examines the dynamic effects of retirement on life satisfaction by employing the event study framework and investigating the reversal of retirement through re-employment. The findings emphasize that the life satisfaction of older individuals can be enhanced through policies that enable them to extend their employment or pursue new opportunities after retirement.
    Keywords: aging, retirement, re-employment, life satisfaction, longitudinal study, pension
    JEL: I31 J14 J21 J26
    Date: 2024–02
  15. By: Keraga, Mezid N. (Ethiopian Civil Service University); Lööf, Hans (Royal Institute of Technology); Stephan, Andreas (Linnaeus University)
    Abstract: This paper presents new insights into the relationship between innovation and employment in low-income countries. We use firm-level data sourced from the World Bank Enterprise Survey (ES) and focus on six sub-Saharan African (SSA) economies over the period 2003-2019. The econometric results from difference-in-differences (DiD) estimations, in conjunction with propensity score matching show a positive influence of product innovation on both permanent and total firm-level employment. The evidence for employment impact of process innovations is weak. Considering relations between firms, we find a positive intra-industry spillover effect from both product and process innovation on employment in firms operating within the same two-digit industry, while the results for inter-industry spillovers are non-significant or negative.
    Keywords: Innovation; Employment; Sub-Saharan; Spillover effects; DID; Matching approach
    JEL: J20 O30
    Date: 2024–02–21
  16. By: Omar Bamieh (University of Vienna); Andrea Cintolesi (Bank of Italy); Mario Pagliero (University of Turin and Collegio Carlo Alberto)
    Abstract: We estimate the monetary returns to occupational licensing of Italian lawyers. To enter the legal profession in Italy, lawyers must pass a written and an oral exam featuring sharp discontinuities in the passing grade. Focusing on a subgroup of Italian law graduates taking the bar exam in Turin (a city in Northwest Italy), we exploit the sharp discontinuity generated by the bar exam to compare individuals who marginally pass and fail the bar exam and compare their earnings up to 19 years since their first attempt at the bar exam. We find that individuals with a licence to practice law earn, on average, euro 21, 000 gross more per year than individuals without a license. These returns are positive in each year of the analysis, increase up to the tenth year and then decrease.
    Keywords: labour market regulation, occupational licensing, earnings, legal market, bar exam
    JEL: J08 J44 L84 L50
    Date: 2024–02
  17. By: Gomez-Ruiz, Marcela (Autonomous University of Barcelona); Cervini-Plá, María (Universitat de Girona); Ramos, Xavier (Universitat Autònoma de Barcelona)
    Abstract: We investigate the impact of a change in the gender composition of the pool of candidates on the academic performance of women in an entrance exam. We use data from a natural experiment that altered the gender composition of the candidates for a nation-wide admission exam to a coding educational program. Our identification strategy exploits the fact that both men and women were accepted for the admission exam in all years except for 2019, when only women were allowed to take it. Our results reveal that in the absence of men, women exhibit enhanced performance, particularly in subjects where men do traditionally better, such as mathematics and logical reasoning. Conversely, we observe no significant effects in verbal tasks, where men do not typically outperform. The improvement in performance stems from both increased attempts at questions and a higher rate of correct answers. Women improve their academic performance by exerting greater effort when men are not present. Our findings are consistent with the hypothesis that the stereotype threat is deactivated in the absence of men, highlighting the nuanced impact of gender composition on women's performance in high-stakes exams.
    Keywords: gender, performance, effort, stereotype threat, competition
    JEL: I20 I24 J16 J24
    Date: 2024–02

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