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on Labor Markets - Supply, Demand, and Wages |
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Issue of 2024‒07‒08
twenty papers chosen by |
| By: | Joaquin Garcia-Cabo; Rocio Madera |
| Abstract: | This paper documents the role of unemployment and earnings risk in reconciling evidence in payoff differentials between self-employment and paid-employment. Using Spanish administrative data, we characterize the distribution and dynamics of earnings and document lower and less dispersed earnings in self-employment. We consider alternative hypotheses and highlight the role of lower unemployment risk in self-employment. We decompose earnings risk dynamics by estimating a life-cycle earnings process. Indeed, the self-employed experience lower returns but also face lower volatility and persistence of shocks throughout their life-cycle. Our results challenge the conventional view that self-employment necessarily entails higher risk and highlight that accounting for differences in labor earnings risk is important to reconcile the payoff differentials between self-employment and paid-employment. |
| Keywords: | self-employment, segmented labor markets, earnings risk, income process |
| JEL: | J24 J31 J41 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11136&r= |
| By: | Daron Acemoglu; Pascual Restrepo |
| Abstract: | This paper studies the effects of automation in economies with labor market distortions that generate worker rents—wages above opportunity cost—in some jobs. We show that automation targets high-rent tasks, dissipating rents and amplifying wage losses from automation. It also reduces within-group wage dispersion for exposed groups. Automation-driven rent dissipation is inefficient and reduces (and could even negate) the productivity gains from automation. Using data for the US from 1980 to 2016, we find evidence of sizable rent dissipation and reduced within-group wage dispersion due to automation. Using these estimates and accounting for equilibrium effects, we estimate that automation accounts for 52% of the increase in between-group inequality in the US since 1980, with rent dissipation being responsible for a fifth of this contribution. We also estimate that inefficient rent dissipation offset 60–90% of the productivity gains from automation since 1980. |
| JEL: | J23 J31 O33 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32536&r= |
| By: | Fatih Guvenen; Serdar Ozkan; Rocio Madera |
| Abstract: | Recent empirical studies document that the distribution of earnings changes displays substantial deviations from lognormality: in particular, earnings changes are negatively skewed with extremely high kurtosis (long and thick tails), and these non-Gaussian features vary substantially both over the life cycle and with the earnings level of individuals. Furthermore, earnings changes display nonlinear (asymmetric) mean reversion. In this paper, we embed a very rich “benchmark earnings process” that captures these non-Gaussian and nonlinear features into a lifecycle consumption-saving model and study its implications for consumption dynamics, consumption insurance, and welfare. We show four main results. First, the benchmark process essentially matches the empirical lifetime earnings inequality—a first-order proxy for consumption inequality—whereas the canonical Gaussian (persistent-plus-transitory) process understates it by a factor of five to ten. Second, the welfare cost of idiosyncratic risk implied by the benchmark process is between two-to-four times higher than the canonical Gaussian one. Third, the standard method in the literature for measuring the pass-through of income shocks to consumption—can significantly overstate the degree of consumption smoothing possible under non-Gaussian shocks. Fourth, the marginal propensity to consume out of transitory income (e.g., from a stimulus check) is higher under non-Gaussian earnings risk. |
| Keywords: | idiosyncratic earnings risk, higher-order earnings risk, non-Gaussian shocks, incomplete markets models, consumption insurance |
| JEL: | E24 J24 J31 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11135&r= |
| By: | Ronald Bachmann; Myrielle Gonschor |
| Abstract: | We analyze if technological progress and the change in the occupational structure have improved women’s position in the labour market. We show that women increasingly work in non-routine manual and in interactive occupations. However, the observed narrowing of the gender wage gap is entirely driven by declining gender wag gaps within, rather than between, occupations. A decomposition exercise reveals that while explained factors have become more important contributors to the gender wage gap, the importance of unexplained factors factors has strongly declined. Therefore, unequal treatment based on unobservables, i.e. discrimination, is likely to have declined over time. Finally, technological change as measured by job tasks plays an ambiguous role. Institutional factors, and in particular part-time employment, are still a major driver of the gender wage gap. |
| Keywords: | Technological progress, job tasks, occupational structure, gender gaps, gender wage gap |
| JEL: | J24 J31 O33 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:diw:diwsop:diw_sp1207&r= |
| By: | Gueyon Kim; Cassandra Merritt; Giovanni Peri |
| Abstract: | The evolution of work is of emerging importance to advanced economies' growth. In this study, we develop a new semantic-distance-based algorithm to identify “new work, ” namely the new types of jobs introduced in the US. We characterize how “new work” relates to task content of jobs and skill characteristics of workers and document its geographic distribution and association with employment growth. Then, we analyze whether local factors associated in the previous literature with agglomeration economies and productivity growth as well as local exposures to global shocks—technology, trade, immigration, and population aging—predict the creation of “new work.” We find local supply of college educated in 1980 as the strongest predictor of “new work.” Using the historical location of 4-year colleges, a strong instrument for local college share, we find a positive and significant causal effect of local supply of human capital on “new work.” |
| JEL: | F1 J11 J14 J23 J24 J61 O33 |
| Date: | 2024–05 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32526&r= |
| By: | Enzo Brox; Maddalena Davoli; Maurizio Strazzeri |
| Abstract: | We study the impact of a student's classroom rank in math on subsequent educational and occupational choices, as well as labor market outcomes. Using the Swiss PISA-2012 student achievement data linked to administrative student register data and income information from tax records, we exploit differences in math achievement distributions across classes to estimate the effect of students' ordinal rank in the classroom. We find that students with a higher classroom rank in math are more likely to select into occupations that require a higher share of math and science skills. We then show this has lasting effects on earnings in the labor market several years after completing compulsory school and is associated with a higher willingness to invest in occupation specific further education. We use detailed subject specific survey information to show that students rank in math is associated with an increase in perceived ability in math and with increasing willingness to provide effort in math. The latter channel may offset potential consequences for occupation mismatch if occupational choices are based on perceived rather than actual ability, as we do not find that rank based decisions lead to increases in occupational changes. |
| Keywords: | Ordinal rank, peer effects, occupational choices, earnings, human capital investments |
| JEL: | I21 I24 J24 J31 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:iso:educat:0222&r= |
| By: | Ellora Derenoncourt; David Weil |
| Abstract: | Recent wage growth at the bottom of the earnings distribution in the U.S. has reversed a decades-long trend of widening wage inequality. Numerous state and local minimum wage increases have overtaken an effectively non-binding federal minimum, and robust labor demand in the post-pandemic recovery drove wage growth in the low-wage sector. An increasingly pervasive phenomenon over this same period (2014-2023) is the use of company-wide, voluntary minimum wages (VMWs) by private employers, including some of the largest U.S. retailers. We use anonymized payroll data for thousands of firms collected by a major credit bureau to study the effects of these policies on large retailers’ own wages and employment, as well as spillover effects onto other employers in shared labor markets, variously defined. Using stacked event studies centered around multiple VMW events and a continuous treatment variable defined as the gap between local area wages and the company minimum, we find that VMWs result in sizable wage increases and reductions in turnover at the companies that implemented them. Turning to wages at other companies, including those connected to the large retailer by worker flows, we estimate precise, economically negligible spillover effects. Despite the decline in separations from companies with voluntary minimums, overall hiring rates at connected employers do not decline, consistent with substitutability across new hires. Although voluntary minimum wage policies have affected over 3 million jobs among the largest retailers, their impact on the broader labor market is limited. |
| JEL: | J31 J42 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32546&r= |
| By: | Rowena Gray; Siobhan M. O'Keefe; Sarah Quincy; Zachary Ward |
| Abstract: | We present new evidence on the long-run trend of occupational task content by race in the United States, 1900-2021. Black workers began the transition to better paid, cognitive-intensive modern jobs at least a generation after white workers; substantial convergence only occurred from 1960 onwards. Longitudinal data suggests that transitions to new task content were racially biased: Black men moved to jobs with lower rewarded task content than white men, conditional on initial task content, though gaps decreased after World War II. Routine-intensive Black workers were less likely to move up into non-routine analytic work compared to white workers in both historical and modern periods. The results suggest that task-displacement shocks, such as automating routine-manual work, widen Black-white inequality |
| JEL: | J24 J62 N31 N32 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32545&r= |
| By: | Claudio Daminato; Luigi Pistaferri |
| Abstract: | A recent literature argues that persistent heterogeneity in wealth returns ("type dependence") as well as a positive association with wealth levels ("scale dependence") play an important role for explaining features of the wealth distribution, especially its extreme concentration at the top. In contrast, traditional models of wealth accumulation emphasize the role of persistent differences in labor earnings. Using panel data from the PSID, we first document that a common unobserved component (which we interpret as the endowment of cognitive and non-cognitive skills of an individual) drives persistent heterogeneity in both wealth returns and labor earnings. We embed these features of the joint wealth return-earnings process in a life-cycle model of consumer behavior and show that ignoring them would dramatically understate average returns for people at the top of the wealth distribution as well as the level and rise of consumption inequality over the life cycle. |
| JEL: | E21 G51 J24 |
| Date: | 2024–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:32490&r= |
| By: | Gilbert Cette; Jimmy Lopez; Jacques Mairesse; Giuseppe Nicoletti |
| Abstract: | Business environments dominated by information flows and autonomous tasks, typical of knowledge-intensive industries, are likely to require enough social capital to be viable and productive. In this paper, we use new EUKLEMS-INTANProd industry-level data (Bontadini et al., 2023a) covering a panel of 19 countries and 20 industries over the 1995-2018 period to investigate the influence of a key element of social capital – trust – on labour productivity in intangible-intensive industries, controlling for hiring and firing regulations that can constrain the ability of managers to implement best practices productively. We find that in such industries, productivity gains from high levels of trust are stronger than elsewhere, while too strict hiring and firing regulations are more damaging for productivity. Using a more limited sample for which data on management quality are available, we show that the positive impact of high trust on productivity in intangible-intensive industries is channeled by the ability to benefit from good management, a key element of organizational capital. Productivity gains from relatively high levels of trust in knowledge-rich environments are estimated to be sizeable and our estimates survive a number of robustness checks. |
| JEL: | J24 L25 O50 |
| Date: | 2024–05 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32513&r= |
| By: | Bo Cowgill; Patryk Perkowski |
| Abstract: | Firms increasingly delegate job screening to third-party recruiters, who must not only satisfy employers’ demand for different types of candidates, but also manage yield by anticipating candidates’ likelihood of accepting offers. We study how recruiters balance these objectives in a novel, two-sided field experiment. Our results suggest that candidates’ behavior towards employers is very correlated, but that employers’ hiring behavior is more idiosyncratic. Workers discriminate using the race and gender of the employer’s leaders more than employers discriminate against the candidate’s race and gender. Black and female candidates face particularly high uncertainty, as their callback rates vary widely across employers. Callback decisions place about two thirds weight on employer’s expected behavior and one third on yield management. We conclude by discussing the accuracy of recruiter beliefs and how they impact labor market sorting. |
| Keywords: | hiring, recruiting, discrimination, field experiments |
| JEL: | M51 C93 J71 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11129&r= |
| By: | Patrick Arni (University of Bristol, United Kingdom); Pether H. Egger (ETH Zurich, Switzerland); Katharina Erhardt (University of Düsseldorf, Germany); Matthias Gubler (SNB, Switzerland); Philip Sauré (Johannes Gutenberg University) |
| Abstract: | This paper identifies the causal effects of trade shocks on worker outcomes. We exploit a unique setting based on three pillars: (i) a large, unanticipated appreciation of the Swiss franc in 2015, (ii) detailed data with firm-level exposure to trade via output markets (both domestic and foreign) and imported inputs (distinguished by their foreign labor content), which we match to (iii) worker-level panel data with rich information on labor-market outcomes. We find that increased competition in output markets induces negative effects on earnings for workers of affected firms. Conversely, a price drop of foreign inputs generates positive effects for workers of importing firms, but less so the higher the labor content of these imported inputs. All these patterns are consistent with a parsimonious model of task-based production. Moreover, positive and negative earnings effects are especially strong for workers in the lower tail of the within-firm wage distribution and, in particular, for workers who change their employer, pointing at involuntary (voluntary) job separations from firms that are negatively (positively) affected by the exchange rate appreciation. |
| Keywords: | Trade and labor, Exchange rate shock, Matched employer-employee data |
| JEL: | F14 F16 J46 |
| Date: | 2024–03–28 |
| URL: | https://d.repec.org/n?u=RePEc:jgu:wpaper:2409&r= |
| By: | Wadho, Waqar; Chaudhry, Azam |
| Abstract: | New processes significantly affect firms and workers; however, due to a lack of quantitative indicators, our understanding of the measures, determinants, and impacts of new processes remains limited. Drawing on unique data from Pakistan, we analyzed five different measures of process innovation output: cost reductions, defect rate reductions, reductions in production cycle time, increases in production capacity, and improvement in product quality. We find that the breadth and depth of innovative capabilities, level of competition, and availability of market sources of knowledge are important inducers of process innovation and that smaller firms are more likely to introduce new processes and are better able to transform them into higher output. All five process innovation outputs are associated with higher labor productivity and higher sales. We do not find that adopting new processes led to labor displacement; however, there is suggestive evidence that new processes led to the increased employment of skilled workers. |
| Keywords: | Technology, Innovation, Process innovation, Cost-reduction, Labor productivity, Developing countries, Textiles & Apparel, Pakistan |
| JEL: | O31 O32 O33 J23 J24 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:glodps:1443&r= |
| By: | Suzanne Bellue; Lukas Mahler |
| Abstract: | We study the long-run aggregate, distributional, and intergenerational effects of school tracking—the allocation of students to different types of schools—by incorporating school track decisions into a general-equilibrium heterogeneous-agent overlapping generations model. The key innovation in our model is the skill production technology during school years with tracking. School tracks endogenously differ in their pace of instruction and the students’ average skills. We show analytically that this technology can rationalize reduced-form evidence on the effects of school tracking on the distribution of end-of-school skills. We then calibrate the model using representative data from Germany, a country with a very early school tracking policy by international standards. Our calibrated model shows that an education reform that postpones the tracking age from ten to fourteen generates improvements in intergenerational mobility but comes at the cost of modest losses in aggregate human capital and economic output, reducing aggregate welfare. This efficiency-mobility trade-off is rooted in the effects of longer comprehensive schooling on learning and depends crucially on the presence of general equilibrium effects in the labor market. Finally, counterfactual analyses suggest that policies that reduce the parental influence in the school track choice can increase both social mobility and aggregate economic output, improving aggregate welfare. |
| Keywords: | Intergenerational Mobility, Education Tracking, Inequality, Efficiency |
| JEL: | E24 I24 J24 |
| Date: | 2024–05 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2024_546&r= |
| By: | Samuel Muehlemann; Gerard Pfann; Harald Pfeifer |
| Abstract: | For centuries, the flexibility to hire and train apprentices has been an important source of successful implementation of innovations in production technologies. This paper shows that the input flexibility of apprenticeships in German firms is associated with product innovation. Even though R&D firms face higher costs to set up training facilities and are therefore less likely to start up apprenticeship training than non-R&D firms, conditional on having invested set up costs, R&D firms train more than non-R&D firms. R&D firms that train apprentices are more responsive to cyclical fluctuations. Against the trend of a 0.5 percentage points annual decline of new products introduced in the market, firms that train and expand their training activities through time are primarily responsible for an increase in product innovation. R&D firms also renew products 2.7 times more than non-R&D firms. All this emphasizes the prime role of firms that train apprentices in reinvigorating the economy. |
| Keywords: | Apprenticeship market, business climate, R&D, apprenticeship demand |
| JEL: | J23 J24 M53 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:iso:educat:0223&r= |
| By: | Flagner, Stefan (Maastricht University); Meissner, Thomas (Maastricht University); Künn, Steffen (Maastricht University); Eichholtz, Piet (Maastricht University); Kok, Nils (Maastricht University); Kramer, Rick (Eindhoven University of Technology); van Marken-Lichtenbelt, Wouter (Maastricht University); Ly, Cynthia (Maastricht University); Plasqui, Guy (Maastricht University) |
| Abstract: | This study provides novel evidence on the isolated effect of carbon dioxide on cognition, economic decision-making, and the physiological response in healthy office workers. The experiment took place in an air-tight respiration chamber fully controlling the environmental conditions. In a single-blind, within-subject study design, 20 healthy participants were exposed to carbon dioxide concentrations of 3, 000 ppm and 900 ppm in randomized order, with each exposure lasting for 8 hours. We do not find evidence on a statistically significant effect on either cognitive or physiological outcome variables. Thus, the evidence shows that the human body appears to be able to deal with exposure to indoor carbon dioxide concentration of 3, 000 ppm without suffering significant cognitive decline, changes in decision-making or showing any physiological response. |
| Keywords: | carbon dioxide, indoor air quality, cognition, economic decision-making, physiological response |
| JEL: | D87 J24 Q54 |
| Date: | 2024–05 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17019&r= |
| By: | Arash Nekoei; Jósef Sigurdsson; Dominik Wehr |
| Abstract: | We study the economic consequences of stress-related occupational illnesses (burnout) using Swedish administrative data. Using a mover design, we find that high-burnout firms and stressful occupations universally raise burnout risk yet disproportionately impact low-stress-tolerance workers. Workers who burn out endure permanent earnings losses regardless of gender—while women are three times more susceptible. Repercussions of burnout extend to the worker’s family, reducing spousal income and children’s educational achievements. Through sick leaves, earnings scars, and spillovers, burnout reduced the national labor income by 2.3% in 2019. We demonstrate how estimated costs, combined with a prediction model incorporating workers’ self-reported stress, can improve the design of prevention programs. |
| Keywords: | amenities, mental health, employment, misallocation, fiscal cost |
| JEL: | E24 J21 J28 I18 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11128&r= |
| By: | Nivala, Annika |
| Keywords: | Business subsidies, Wage subsidies, Firm behavior, Labor demand, Entrepreneurship, Small Business, Business taxation and regulation, H25, H32, J23, J38, M51, fi=Elinkeinopolitiikka|sv=Näringspolitik|en=Industrial and economic policy|, fi=Työmarkkinat|sv=Arbetsmarknad|en=Labour markets|, |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:fer:wpaper:166&r= |
| By: | Pascaline Dupas; Marcel Fafchamps; Laura Hernandez-Nunez |
| Abstract: | We investigate the potential welfare cost of relative rank considerations using a series of vignettes and lab-in-the-field experiments with over 2, 000 individuals in Abidjan, Ivory Coast. We show that: (1) individuals judged to be of a lower rank are perceived as more likely to be sidelined from beneficial opportunities in many aspects of life; and (2) in response, individuals distort their appearance and consumption choices in order to appear of higher rank. These effects are strong and economically significant. As predicted by a simple signaling model, the distortion is larger for individuals with low (but not too low) socio-economic status. |
| JEL: | C90 D91 J70 |
| Date: | 2024–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:32491&r= |
| By: | Banerjee, Swapnendu; Saha, Soumyarup |
| Abstract: | We explore a power relationship between a ‘corrupt’ politician and a political worker where the politician can order an illegal corrupt effort to be performed by the worker. Using a moral hazard structure we show that when the politician’s power is sufficiently high the politician optimally uses power and relies less on wage incentives. But when the power is low, the politician optimally shuns power and relies more on wage incentives. We also talk about optimal bolstering of power through threats depending on the level of power of the politician. This model has implications on the larger principal-agent structure, although we model it as a political corruption game. |
| Keywords: | Power, Corruption, Hidden Action, Perception, Bolstering |
| JEL: | D86 J47 K42 |
| Date: | 2024–05–30 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:121109&r= |