nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2024‒04‒15
nineteen papers chosen by
Joseph Marchand, University of Alberta

  1. Work Organization and High-Paying Jobs By Dylan Nelson; Nathan Wilmers; Letian Zhang
  2. Scenarios for the Transition to AGI By Anton Korinek; Donghyun Suh
  3. Strategic Behaviours in a Labour Market with Mobility-Restricting Contractual Provisions: Evidence from the National Hockey League By Fumarco, Luca; Longley, Neil; Palermo, Alberto; Rossi, Giambattista
  4. Labor Demand on a Tight Leash By Bossler, Mario; Popp, Martin
  5. Estimating the Wage Premia of Refugee Immigrants: Lessons from Sweden By Baum, Christopher F.; Lööf, Hans; Stephan, Andreas; Zimmermann, Klaus F.
  6. The Causal Effect of Parents’ Education on Children’s Earnings By Sang Yoon (Tim) Lee; Nicolas A. Roys; Ananth Seshadri
  7. Air Pollution, Wildfire Smoke, and Worker Health By Marika Cabral; Marcus Dillender
  8. Language Proficiency and Hiring of Immigrants: Evidence from a New Field Experimental Approach By Carlsson, Magnus; Eriksson, Stefan; Rooth, Dan-Olof
  9. Employer Market Power in Silicon Valley By Matthew Gibson
  10. The Capital Advantage: Comparing Returns to Ability in the Labor and Capital Markets By Bastani, Spencer; Karlsson, Kristina; Kolsrud, Jonas; Waldenström, Daniel
  11. Regulating Manufacturing FDI: Local Labor Market Responses to a Protectionist Policy in Indonesia By Gehrke, Esther; Genthner, Robert; Kis-Katos, Krisztina
  13. The Long-Run Impacts of Public Industrial Investment on Local Development and Economic Mobility: Evidence from World War II By Andrew Garin; Jonathan Rothbaum
  14. The Diversity of Informal Employment: a survey of drivers, outcomes, and policies By Duman, Anil
  15. Corporate taxes and labor market informality evidence from China By Deng, Guoying; Du, Pengcheng; Hernandez, Manuel A.; Xu, Shu
  16. The Impact of Municipal Broadband Restrictions on COVID-19 Labor Market Outcomes By Saket S. Hegde; Jessica Van Parys
  17. Outlook and Policy Options for Philippine Employment towards 2040 By Philip Arnold P. Tuano; Joselito T. Sescon; Rolly Czar Joseph T. Castillo; Cymon Kayle Lubangco; Biran Jason H. Ponce; Prezatia Moseska Maria H. Vicario; Christopher P. Monterola
  18. Did industrialization improve the skill composition of the population? Evidence from Sweden, 1870 to 1930 By Heikkuri, Suvi
  19. Improved Inter-Island Transport Connectivity, Local Employment and Job Quality By Kris Francisco; Neil Irwin Moreno; Aniceto Orbeta, Jr.

  1. By: Dylan Nelson (Massachusetts Institute of Technology Sloan School of Management); Nathan Wilmers (Massachusetts Institute of Technology Sloan School of Management); Letian Zhang (Harvard Business School)
    Abstract: High-paying factory jobs in the 1940s were an engine of egalitarian economic growth for a generation. Are there alternate forms of work organization that deliver similar benefits for frontline workers? Work organization varies by type of complexity and degree of employer control. Technical and tacit knowledge tasks receive higher pay for signaling or developing human capital. Higher-autonomy tasks elicit efficiency wages. To test these ideas, we match administrative earnings to task descriptions from job postings. We then compare earnings for workers hired into the same occupation and firm, but under different task allocations. When jobs raise task complexity and autonomy, new hires’ starting earnings increase and grow faster. However, while half of the earnings boost from complex, technical tasks is due to shifting worker selection, worker selection changes less for tacit knowledge tasks and very little for adding high-autonomy tasks. We also study which employers provide these jobs: frontline tacit knowledge tasks are disproportionately in larger, profitable manufacturing and retail firms; technical tasks are in newer health and business services; and higher-autonomy jobs are in smaller and fast-growing firms. These results demonstrate how organization-level allocations of tasks can undergird high-paying jobs for frontline workers.
    Keywords: Wage level and structure, wage differentials, human capital, skills, occupational choice, labor productivity, labor management
    JEL: J24 J31 M54
    Date: 2024–03
  2. By: Anton Korinek; Donghyun Suh
    Abstract: We analyze how output and wages behave under different scenarios for technological progress that may culminate in Artificial General Intelligence (AGI), defined as the ability of AI systems to perform all tasks that humans can perform. We assume that human work can be decomposed into atomistic tasks that differ in their complexity. Advances in technology make ever more complex tasks amenable to automation. The effects on wages depend on a race between automation and capital accumulation. If automation proceeds sufficiently slowly, then there is always enough work for humans, and wages may rise forever. By contrast, if the complexity of tasks that humans can perform is bounded and full automation is reached, then wages collapse. But declines may occur even before if large-scale automation outpaces capital accumulation and makes labor too abundant. Automating productivity growth may lead to broad-based gains in the returns to all factors. By contrast, bottlenecks to growth from irreproducible scarce factors may exacerbate the decline in wages.
    JEL: E24 J23 J24 O33 O41
    Date: 2024–03
  3. By: Fumarco, Luca (Masaryk University); Longley, Neil (Nevada State University); Palermo, Alberto (University of Roehampton); Rossi, Giambattista (Birkbeck, University of London)
    Abstract: We follow workers' performance along an unbalanced panel dataset over multiple years and study how performance varies at the end of fixed-term contracts, in a labour market where some people face a mobility restricting clause (i.e., a noncompete clause). Focusing on the labour market of the National Hockey League, we analyse players' performance data and contracts with a fixed effect estimator to address empirical limitations in previous studies. We find that, on average, NHL players' performance does not vary. However, our estimations detect substantially heterogeneous behaviours, depending on tenure, perceived expected performance and mobility. Only younger players (i.e., restricted free-agents) with high expected mobility but low expected performance tend to behave strategically and perform better. Differently, older players (i.e., unrestricted free-agents) with high expected mobility tend to underperform, as the option of moving back to European tournaments is more appealing.
    Keywords: strategic behaviour, mobility, noncompete clauses
    JEL: D82 J24 J33 M52 Z22
    Date: 2024–02
  4. By: Bossler, Mario (Institute for Employment Research (IAB), Nuremberg); Popp, Martin (Institute for Employment Research (IAB), Nuremberg)
    Abstract: We develop a labor demand model that encompasses pre-match hiring cost arising from tight labor markets. Through the lens of the model, we study the effect of labor market tightness on firms' labor demand by applying novel shift-share instruments to the universe of German firms. In line with theory, we find that a doubling in tightness reduces firms' employment by 5 percent. Taking into account the resulting search externalities, the wage elasticity of firms' labor demand reduces from -0.7 to -0.5 through reallocation effects. In light of our results, pre-match hiring cost amount to 40 percent of annual wage payments.
    Keywords: labor demand, labor market tightness, wages, hiring cost, reallocation effects
    JEL: J23 J60 J31 D23
    Date: 2024–03
  5. By: Baum, Christopher F. (Boston College, DIW Berlin and CESIS); Lööf, Hans (Royal Institute of Technology, Stockholm); Stephan, Andreas (Linnaeus University and DIW Berlin); Zimmermann, Klaus F. (UNU-MERIT, Maastricht University, CEPR and GLO)
    Abstract: This paper examines the wage earnings of fully-employed refugee immigrants in Sweden. Using administrative employer-employee data from 1990 and onwards, about 100, 000 refugee immigrants who arrived between 1980 and 1996 and were granted asylum are compared to a matched sample of native-born workers. Employing recentered influence function (RIF) quantile regressions for the period 2011–2015 to wage earnings, the occupational task-based Oaxaca–Blinder decomposition approach shows that refugees perform better than natives at the median wage, controlling for individual and firm characteristics. This overperformance is due to female refugee immigrants, who have higher wages than comparable native-born female peers up to the 8th decile of the wage distribution. Refugee immigrant females perform better than native females across all occupational tasks studied, including non-routine cognitive tasks. A remarkable similarity exists in the relative wage distributions among various refugee groups, suggesting that cultural differences and the length of time spent in the host country do not significantly affect their labor market performance.
    Keywords: refugees; wage earnings gap; occupational sorting; employer-employee data; recentered influence function; Oaxaca–Blinder decomposition
    JEL: C23 F22 J24 O15
    Date: 2024–02–09
  6. By: Sang Yoon (Tim) Lee; Nicolas A. Roys; Ananth Seshadri
    Abstract: We present a model of endogenous schooling and earnings to isolate the causal effect of parents’ education on children’s education and earnings outcomes. The model suggests that parents’ education is positively related to children’s earnings, but its relationship with children’s education is ambiguous. Identification is achieved by comparing the earnings of children with the same length of schooling, whose parents have different lengths of schooling. The model also features heterogeneous preferences for schooling, and is estimated using HRS data. The empirically observed positive OLS coefficient obtained by regressing children’s schooling on parents’ schooling is mainly accounted for by the correlation between parents’ schooling and children’s unobserved preferences for schooling. This is countered by a negative, structural relationship between parents’ and children’s schooling choices, resulting in an IV coefficient close to zero when exogenously increasing parents’ schooling. Nonetheless, an exogenous one-year increase in parents’ schooling increases children’s lifetime earnings by 1.2 percent on average.
    JEL: J24
    Date: 2024–03
  7. By: Marika Cabral; Marcus Dillender
    Abstract: Little is known about how pollution impacts worker health and workplace safety. This paper leverages high-frequency, plausibly exogenous variation in wildfire smoke to estimate the impact of pollution on workplace injuries. Our analysis draws on unique data we construct through linking information on smoke plumes and pollution to comprehensive administrative data on workers’ compensation injury claims from Texas. We first document that wildfire smoke increases ambient air pollution—with our estimates indicating that a day of smoke coverage is associated with an average increase in PM₂.₅ of 18.6%. We find that an additional day of smoke coverage leads to a 2.8% increase in workplace injury claims. Similar percent increases in workplace injuries are found across different types of injuries and workers. However, because of large variation in baseline injury risk, the incidence of these pollution-induced injuries is concentrated among workers in high-risk occupations, and supplemental analysis illustrates potential opportunities for improving the targeting of costly mitigation. Our estimates indicate that pollution—and wildfire smoke in particular—substantially harms worker health, even at pollution levels well below current and proposed regulatory standards. Overall, our findings suggest workers face unique risks from pollution and provide insights for policy aiming to address these risks.
    JEL: I18 J28 J3 Q53
    Date: 2024–03
  8. By: Carlsson, Magnus (Department of Economics and Statistics); Eriksson, Stefan (Department of Economics, Uppsala University); Rooth, Dan-Olof (The Swedish Institute for Social Research, Stockholm University)
    Abstract: Labor markets in advanced economies have undergone substantial change in recent decades due to globalization, technological improvements, and organizational changes. Due to these developments, oral and written language skills have become increasingly important even in less skilled jobs. Immigrants – who often have limited skills in the host country language upon arrival – are likely to be particularly affected by the increase in language requirements. Despite this increase in literacy requirements, little is known about how immigrants’ language proficiency is rewarded in the labor market. However, estimating the causal effect of immigrants’ language skills on hiring is challenging due to potential biases caused by omitted variables, reverse causality, and measurement error. To address identification problems, we conduct a large-scale field experiment, where we send thousands of fictitious resumes to employers with a job opening. With the help of a professional linguist, we manipulate the cover letters by introducing common second-language features, which makes the resumes reflect variation in the language skills of real-world migrants. Our findings show that better language proficiency in the cover letter has a strong positive effect on the callback rate for a job interview: moving from the lowest level of language proficiency to a level similar to natives almost doubles the callback rate. Consistent with the recent development that language proficiency is also important for many low- and medium- skilled jobs, the effect of better language skills does not vary across the vastly different types of occupations we study. Finally, the results from employer surveys suggest that it is improved language skills per se that is the dominant explanation behind the language proficiency effect, rather than language skills acting as a proxy for other unobserved abilities or characteristics.
    Keywords: Labor migrants; Language proficiency; Language skills; Human capital; Field experiment
    JEL: F22 J15 J24
    Date: 2023–02–09
  9. By: Matthew Gibson (Williams College and IZA)
    Abstract: Adam Smith alleged that employers often secretly combine to reduce labor earnings. This paper examines an important case of such behavior: illegal no-poaching agreements through which information-technology companies agreed not to compete for each other’s workers. Exploiting the plausibly exogenous timing of a U.S. Department of Justice investigation, I estimate the effects of these agreements using a difference-in-difference design. Data from Glassdoor permit the inclusion of rich employer- and job-level controls. On average the no-poaching agreements reduced salaries at colluding firms by 5.6 percent, consistent with considerable employer market power. Stock bonuses and job satisfaction were also negatively affected.
    Keywords: No-poach agreement, employer market power, Silicon Valley, tech companies, Glassdoor, compensation
    JEL: J42 K42 L41 K21
    Date: 2024–03
  10. By: Bastani, Spencer (IFAU - Institute for Evaluation of Labour Market and Education Policy); Karlsson, Kristina (Department of Economics, Uppsala University); Kolsrud, Jonas (Department of Economics and Statistics); Waldenström, Daniel (IFN - Research Institute of Industrial Economics)
    Abstract: Using administrative tax and military records, we show that cognitive ability is more strongly associated with capital income than with labor income. This result holds across intensive and extensive margins, across different income types, and after controlling for education, occupation, inheritance, and parental background. Higher ability individuals save more, are better at selecting high-return stocks, hold more risky assets, and are less likely to live hand-to-mouth. Capital market returns are higher for cognitive ability than for non-cognitive skills, and the difference is stable over time. Rising capital shares, fueled by technological progress, could therefore exacerbate cognitive ability-based economic inequality.
    Keywords: Ability; Skills; Labor Earnings; Capital income; Wealth; Taxation
    JEL: D31 G11 H20 J24
    Date: 2024–01–15
  11. By: Gehrke, Esther (University of Wageningen); Genthner, Robert (University of Göttingen); Kis-Katos, Krisztina (University of Goettingen)
    Abstract: We analyze the effect of rising protectionism towards foreign direct investment (FDI) on domestic employment, exploiting revisions in Indonesia’s highly-granular negative investment list, and spatial variation in the exposure of the manufacturing sector to these investment restrictions. Rising FDI restrictions caused employment gains at the local level, explaining about one-tenth of the aggregate employment increases observed between 2006 and 2016 in Indonesia. These employment gains went along with a reorganization of the local production structure, and new firm entries in the manufacturing sector that are concentrated among micro and small enterprises. While our results are consistent with an increase in the labor-to-capital ratio and reduced productivity among regulated firms (which allowed smaller and less productive firms to enter the market), we also document that at least half of the employment gains are driven by spillover-effects along the local value chain and into the service sector.
    Keywords: FDI regulation, Indonesia, local labor markets
    JEL: F16 F21 F23 J23 J31 L51
    Date: 2024–02
  12. By: Johan Saeverud (Dept. of Economics, University of Copenhagen)
    Abstract: I investigate a Danish policy reform that postpones social security eligibility tied to an increase in life expectancy. The reform creates sharp discontinuities based on exact birth dates, allowing for the identification of causal effects. Using both administrativeand survey data, I document a substantial increase in labor force participation of 20 percentage points as a result of postponing social security eligibility. The effect isstrongest among individuals with low pension wealth. This pattern is consistent across multiple retirement age thresholds and cohorts, including both individuals who havealready retired and in expectation for younger cohorts who are not yet retired. This research offers new insights into the impacts of life expectancy-based adjustments tosocial security eligibility. Welfare assessments show overall gains, but also that welfare effects are unequally distributed. Individuals with low pension wealth show the largestincreases in labor supply, but also face the largest personal costs in terms of foregone consumption smoothing.
    Keywords: retirement, social security, labor supply
    JEL: J26 H55
    Date: 2024–01–30
  13. By: Andrew Garin (Carnegie Mellon University and NBER); Jonathan Rothbaum (U.S. Census Bureau)
    Abstract: This paper studies the long-run effects of government-led construction of manufacturing plants on the regions where they were built and on individuals from those regions. Specifically, we examine publicly financed plants built in dispersed locations outside of major urban centers for security reasons during the United States’ industrial mobilization for World War II. Wartime plant construction had large and persistent impacts on local development, characterized by an expansion of relatively high-wage manufacturing employment throughout the postwar era. These benefits were shared by incumbent residents; we find men born before WWII in counties where plants were built earned $1, 200 (in 2020 dollars) or 2.5 percent more per year in adulthood relative to those born in counterfactual comparison regions, with larger benefits accruing to children of lower-income parents. The balance of evidence suggests that these individuals benefited primarily from the local expansion of higher-wage jobs to which they had access as adults, rather than because of developmental effects from exposure to better environments during childhood.
    Keywords: public investment, industrial mobilization, counties, manufacturing, local development, long-run earnings, intergenerational effects, WWII
    JEL: J31 J62 H56 R11 R53 O25 N42
    Date: 2024–03
  14. By: Duman, Anil
    Abstract: Informal employment is widespread across many developing countries and remains to be the source of livelihood for billions of workers and their families. Even though diverse forms of informal employment can be seen globally, the paper mainly focuses on developing countries due to high share and endurance of the informal sector. The aim of the paper is to provide a comprehensive overview of the drivers and outcomes of informal employment by distinguishing between wage labor and self-employment. Additionally, the paper reviews potential policies that could incentivize workers and informal firms to transition to the formal sector. Given that the impact of informal employment on workers’ well-being is closely tied to individual characteristics and job status, the paper also examines the various types of informal employment that exist across different working groups. This includes informal employment among women, youth, and vulnerable groups such as migrant workers. Finally, the paper briefly discusses potential policies aimed at formalizing informal enterprises and offering greater protections to informal employees. This includes measures such as improving access to social protection benefits, promoting skills development, and training for informal workers, and creating more flexible and adaptable regulatory frameworks that can better accommodate the needs of informal firms.
    Date: 2024–03–11
  15. By: Deng, Guoying; Du, Pengcheng; Hernandez, Manuel A.; Xu, Shu
    Abstract: This paper examines the association between corporate income taxes and labor market informality. We present a theoretical framework showing that a higher tax enforcement can push firms to pass on the burden to workers by reducing their social security compliance as well as downsizing and lowering wages. The model propositions are tested using a regression discontinuity design that exploits a national corporate tax reform in China. We find that for every one percentage point increase in the effective tax rate, firms reduce their probability of making basic social security contributions by 0.8%, their compliance rate by 1.4 percentage points, and the probability of making supplementary contributions by 0.6%, while the number of workers and wages fall by 4.4% and 0.7%, respectively. We observe that the effects are more salient among firms privately owned and controlled, large businesses, and in locations where social security contributions are directly collected by the social security administration. The findings suggest that workers not only bear part of the higher corporate taxes faced by firms, but an increase in firms’ tax burden contributes to social security evasion and informality in labor markets.
    Keywords: taxes; labour market; social security; remuneration; China; Asia; Eastern Asia
    Date: 2024
  16. By: Saket S. Hegde; Jessica Van Parys
    Abstract: The COVID-19 pandemic initiated a trend in “work-from-home (WFH), ” but workers need reliable and fast internet connections (e.g., broadband) to work from home. Yet, as of January 2020, 18 states had legally restricted local governments and cooperatives from building their own broadband infrastructure and/or providing broadband internet to their communities. Such policies reduced broadband access and competition in states with restrictions compared to states without restrictions leading up to the pandemic (Whitacre and Gallardo 2020). We use CPS data from 2018-2023 to estimate a dynamic difference-in-differences model that shows how labor force participation (LFP) rates changed in states with and without broadband restrictions, before and after the COVID-19 pandemic. We focus on married women with children, a population with more elastic labor supply that may especially value the flexibility that WFH offers (Dettling 2017). We find that married mothers’ LFP and employment decreased by 1.7% and 2.2%, respectively, in states with restrictions after the pandemic compared to states without restrictions. Labor force outcomes for women without children and married men with children were unaffected by broadband restrictions. The results suggest that married women with children were less able to remain in the workforce in states where their ability to WFH was limited by broadband restrictions.
    JEL: J2 K2 L86
    Date: 2024–03
  17. By: Philip Arnold P. Tuano (Ateneo de Manila University); Joselito T. Sescon (Ateneo de Manila University); Rolly Czar Joseph T. Castillo (Labor, Education and Research Network, Ateneo de Manila University); Cymon Kayle Lubangco (Ateneo de Manila University); Biran Jason H. Ponce (Ateneo de Manila University); Prezatia Moseska Maria H. Vicario (Ateneo de Manila University); Christopher P. Monterola (Asian Institute of Management)
    Abstract: We reviewed the context and trends of Philippine labor and employment along with its challenges. The labor market in the Philippines is characterized by a large and growing workforce with varied skills, but there are also significant labor and employment issues together with the importance to address the effects of continuing global technological changes in production. These issues must be addressed by current and future Philippine government administrations in crafting policies that target vital strategic industries for sustainable transformation and quality job creation to fulfill its ambitions for the Filipino people in 2040. We then simulate the economic structure of the Philippines from 2024 to 2040 through a computable general equilibrium (CGE) model, assuming growth targets are achieved with modest capital and technological (TFP) changes. Then we link with a microsimulation model at the bottom to simulate changes in the labor market. Analyzing the trends in terms of labor market outcomes it appears that the economy stimulated an increase in employment shares and presumably the share of value added overall. Both skilled and unskilled labor need to increase. On this note, along with the PDP 2023-2028, our pointed recommendation is to conduct multi sectoral employment planning summits from national to regional levels as mandated by the Trabaho Act or RA 11961 to formulate the national employment plan with short-term and long-term targets sector by sector.
    Keywords: Labor, employment, skills, wages, computable general equilibrium, microsimulation, skills
    JEL: C68 J18 J21 L52
    Date: 2024–03
  18. By: Heikkuri, Suvi (Unit for Economic History, School of Business, Economics and Law, Göteborg University)
    Abstract: This paper documents the changing skill composition during industrialization in Sweden using population censuses and HISCO/HISCLASS scheme. The results reveal a general shift from unskilled to more-skilled occupations, though the trend differs by gender and sector. First, the skill upgrading was more pronounced for women, who left agriculture for better job opportunities elsewhere. Second, within manufacturing, there was a shift from medium-skilled to low- and unskilled occupations, consistent with the workshop-to-factory shift. However, this trend is mirrored by skill upgrading within services, where the expansion of trade and transport introduced new more-skilled jobs. Finally, I show that skill distribution in Sweden exhibited similar trends to the United States, though with greater deskilling and slower increase in white-collar employment.
    Keywords: Industrialization; Technological change; Structural change; Occupational structure; Skills; Sweden
    JEL: J21 J22 N33 N34
    Date: 2024–03–28
  19. By: Kris Francisco (Philippine Insttute of Development Studies); Neil Irwin Moreno (ACERD); Aniceto Orbeta, Jr. (Philippine Insttute of Development Studies)
    Abstract: This paper exploits the timing of the implementation of the Roll-on/Roll-off policy to assess the impact of improved inter-island transport connectivity on local employment and job quality. While not a direct goal of the policy, this paper seeks to demonstrate the mechanism by which improvement in the transport system affects local economies in the Philippines. Using the difference-in-differences strategy, we compared the employment outcomes in municipalities hosting the ports included in the RORO network against those municipalities with ports that are excluded from the network. Our results show that female workers with middle and high skill level largely benefitted from access to the RORO network. We also found that the increase in employment was driven by the services sector, particularly the finance and insurance industries.
    Keywords: Roll-on/Roll-off transport, Local employment, Job quality, Philippines
    JEL: O18 L91 J40
    Date: 2024–03

This nep-lma issue is ©2024 by Joseph Marchand. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.