|
on Labor Markets - Supply, Demand, and Wages |
|
Issue of 2024‒07‒22
thirty-one papers chosen by |
| By: | DeVaro, Jed (California State University, East Bay) |
| Abstract: | In a new model of work schedules, employers choose the number of working hours and either dictate the exact hours to be worked or delegate that decision to workers via flextime. Workers' preferences over schedules influence their productivities. An inverted-U-shaped hours-output profile arises; flextime policies shift its peak to the right. Long hours are found to go hand-in-hand with flextime, and the employer finds flextime less appealing when wages exogenously increase. Analysis of a worker-employer matched panel of British workplaces surveyed in 2004 and 2011 reveals that flextime and other flexible work practices mitigate the productivity-eroding consequences of long hours. |
| Keywords: | work hours, labor productivity, human resources management practices, flextime, work-life flexibility, workplace flexibility, work schedules, scheduling, working from home, flexible work practices, diminishing returns |
| JEL: | J20 J23 J24 J32 M52 M50 M59 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17061&r= |
| By: | Arntz, Melanie; Findeisen, Sebastian; Maurer, Stephan; Schlenker, Oliver |
| Abstract: | This study quantifies the relationship between workplace digitalization, i.e., the increasing use of frontier technologies, and workers' health outcomes using novel and representative German linked employer-employee data. Based on changes in individual-level use of technologies between 2011 and 2019, we find that digitalization induces similar shifts into more complex and service-oriented tasks across all workers, but exacerbates health inequality between cognitive and manual workers. Unlike more mature, computer-based technologies, frontier technologies of the recent technology wave substantially lower manual workers' subjective health and increase sick leave, while leaving cognitive workers unaffected. We provide evidence that the effects are mitigated in firms that provide training and assistance in the adjustment process for workers. |
| Keywords: | health, inequality, technology, machines, automation, tasks, capital-labor substitution |
| JEL: | I14 J21 J23 J24 O33 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:300006&r= |
| By: | Rafael Lopes de Melo (University of Edinburgh); Theodore Papageorgiou (Boston College) |
| Abstract: | This paper introduces a model of worker matching at the occupation level. In our setup, young workers, while employed in an occupation, accumulate human capital and also learn about their underlying productivity in that occupation. Human capital is partially transferable to other occupations and similarly, the information acquired in one occupation is useful for the worker’s productivity elsewhere. Workers with low tenure levels, as well as low-paid workers, are the ones most likely to switch occupations, consistent with our empirical findings. Though the model is quite general, we show that Gittins indices can be used in this setup to preserve tractability. We discuss potential applications ranging from assessing the impact of AI and automation to the evaluation of policies such as unemployment benefits, sector-specific subsidies, or minimum wages. |
| Keywords: | Human Capital, Occupations, Multi-armed Bandits, Worker Mobility, Learning, Information and Human Capital Spillovers, Wage Inequality, Gittins Index. |
| JEL: | J24 J31 J62 |
| Date: | 2024–06–10 |
| URL: | https://d.repec.org/n?u=RePEc:boc:bocoec:1076&r= |
| By: | Baktash, Mehrzad B.; Heywood, John S.; Jirjahn, Uwe |
| Abstract: | Using German survey data, we show that performance pay is associated with a substantially lower gender hours gap. While performance pay increases the work hours of both men and women, the increase is much larger for women than for men. This finding persists in worker fixed effects estimates. We argue our finding likely reflects differences in household production and specialization by gender. Thus, we show that performance pay is not associated with increased hours for men with children in the household. Yet, performance pay is associated with a very large increase in hours for women with children in the household. |
| Keywords: | Performance Pay, Contracted Hours, Actual Hours, Gender |
| JEL: | D10 J22 J33 M52 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:glodps:1450&r= |
| By: | Jonathan G. Conzelmann (The University of North Carolina at Chapel Hill); Steven W. Hemelt (The University of North Carolina at Chapel Hill); Brad J. Hershbein (W.E. Upjohn Institute for Employment Research); Shawn M. Martin (University of Michigan); Andrew Simon (The University of Chicago and Australian National University Research School of Economics); Kevin M. Stange (University of Michigan) |
| Abstract: | How does postsecondary human capital investment respond to changes in labor market skill demand? We quantify the magnitude and nature of this response in the U.S. 4-year sector. To do so, we develop a new measure of institution-major-specific labor demand, and corresponding shift-share instrument, that combines job ads with alumni locations. We find that postsecondary human capital investments meaningfully respond. We estimate elasticities for degrees and credits centered around 1.3, generally increasing with time horizon. We provide evidence that both student demand and institutional supply-side constraints matter. Our findings illuminate the nature of educational production in higher education. |
| Keywords: | labor demand, skill demand, college major, educational investment |
| JEL: | J23 J24 I23 |
| Date: | 2024–04 |
| URL: | https://d.repec.org/n?u=RePEc:upj:weupjo:24-400&r= |
| By: | Adamopoulou, Effrosyni; Díez-Catalán, Luis; Villanueva, Ernesto |
| Abstract: | This paper studies the impact of downward wage rigidity on wage and employment dynamics after the outbreak of major recessions in Spain. Downward wage rigidity stems from collective agreements, which set province-sector-skill specific minimum wage floors for all workers. By exploiting variation in the renewal of collective contracts, we find that agreements signed before the onset of recessions settle on higher nominal negotiated wage growth than agreements signed after. Leveraging Social Security data and the distribution of the worker-level bite of minimum wage floors, we document that the negotiated wage rigidity translated into higher wage growth mainly among workers with wages close to the floors. Consequently, these workers experienced a substantial and highly persistent increase in the probability of non-employment but only if they were covered by collective agreements of long duration. Our findings highlight the interplay between rigidity at different parts of the wage distribution and labor market institutions and identify conditions under which collective contract staggering and the inability to renegotiate may amplify aggregate shocks. |
| Keywords: | Employment, Job Separation, Collective Bargaining, Wage Rigidity, Staggering, Social Security Data |
| JEL: | J23 J31 J50 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:300008&r= |
| By: | Jaime Arellano-Bover; Nicola Bianchi; Salvatore Lattanzio; Matteo Paradisi |
| Abstract: | This paper studies the interaction between the decrease in the gender pay gap and the stagnation in the careers of younger workers, analyzing data from the United States, Italy, Canada, and the United Kingdom. We propose a model of the labor market in which a larger supply of older workers can crowd out younger workers from top-paying positions. These negative career spillovers disproportionately affect the career trajectories of younger men because they are more likely than younger women to hold higher-paying jobs at baseline. The data strongly support this cohort-driven interpretation of the shrinking gender pay gap. The whole decline in the gap originates from (i) newer worker cohorts who enter the labor market with smaller-than-average gender pay gaps and (ii) older worker cohorts who exit with higher-than-average gender pay gaps. As predicted by the model, the gender pay convergence at labor-market entry stems from younger men's larger positional losses in the wage distribution. Younger men experience the largest positional losses within higher-paying firms, in which they become less represented over time at a faster rate than younger women. Finally, we document that labor-market exit is the sole contributor to the decline in the gender pay gap after the mid-1990s, which implies no full gender pay convergence for the foreseeable future. Consistent with our framework, we find evidence that most of the remaining gender pay gap at entry depends on predetermined educational choices. |
| JEL: | J11 J16 J31 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32612&r= |
| By: | Amaral, Pedro; Rivera-Padilla, Alberto |
| Abstract: | Countries with high levels of human capital also tend to be technologically advanced. We study whether modeling technology adoption can significantly amplify the importance of human capital differences in accounting for cross-country income gaps. We document that schooling is positively and robustly correlated with measures of technology adoption and usage, and negatively correlated with the prevalence of traditional forms of production, where technology adoption is limited, and productivity is lower. Motivated by this, we build a general equilibrium model with human capital investment, endogenous occupational choices, and technology adoption. Production takes place either in a traditional sector, where technology adoption is absent, or in a modern sector, where managers hire a workforce and optimally choose technology. Economies differ in terms of schooling levels by occupation and in the size of barriers to technology adoption. These differences, working together, result in a factor of 6 between US income and that of the bottom quartile of countries. Schooling differences on their own result in a factor of 3.5, compared to a factor of 2 in a one-sector version of the model where technology choices are absent. |
| Keywords: | Human capital; Technology adoption; Cross-country income differences |
| JEL: | J24 O11 O33 O41 |
| Date: | 2024–04 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:121157&r= |
| By: | Annika Nivala (VATT Institute for Economic Research) |
| Abstract: | Finland had a large regional wage subsidy for hiring the first employee in 2007–2011. In this paper, I show that the take-up of the subsidy was very low: only 2% firms that became employers used the subsidy. The subsidy was restricted to hiring a full-time employee, which reduced the take-up. However, even among full-time employers the take-up rate was only 6%. Hence, a large majority of firms left thousands of euros on the table by not using the subsidy. Based on the descriptive evidence, the low take-up seems to be explained by low awareness in addition to costs of using the subsidy. Using a regional difference-in-differences identification strategy, I estimate the effect of the subsidy on the probability of becoming an employer and other firm outcomes. As a consequence of the low take-up, the estimated effect is zero. |
| Keywords: | Business subsidies, Wage subsidies, Firm behavior, Labor demand, Entrepreneurship, Small Business |
| JEL: | H25 H32 J23 J38 M51 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:fit:wpaper:23&r= |
| By: | Bustos, Emil (Research Institute of Industrial Economics (IFN)) |
| Abstract: | This paper studies how a special wage increase for assistant nurses in Sweden affected income and employment. Workers in the public sector receive wages based on negotiations between unions and employers. These agreements usually provide the same wage increase for all covered workers. In 2016, an agreement was reached in the local public sector to provide special wage increases for assistant nurses and regular increases for other workers. I study the effects of this agreement using administrative data on Swedish workers, covering their occupation, income, and collective bargaining coverage. I do a difference-in-differences analysis comparing assistant nurses and attendants covered by the same agreement. The two groups had similar employment and income levels before the agreement was reached. Assistant nurses see higher increases in labor income compared to attendants in the years following the agreement, peaking at SEK 8, 700 (USD 870), or 2.7%. In contrast, I find no robust effects on separation or working time, suggesting that the changes in labor income come from changes in hourly wages. Moreover, there is no effect on benefits usage or sickness payments. |
| Keywords: | Collective Bargaining; Trade Unions; Wages; Employment |
| JEL: | J23 J31 J50 J52 J63 |
| Date: | 2024–06–25 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:iuiwop:1494&r= |
| By: | Christian Moser; Farzad Saidi; Benjamin Wirth; Stefanie Wolter |
| Abstract: | We study the distributional consequences of monetary policy-induced credit supply in the German labor market. Firms in relationships with banks that are more exposed to the introduction of negative interest rates in 2014 experience a relative contraction in credit supply, associated with lower average wages and employment. Within firms, initially lower-paid workers are more likely to leave employment, while initially higher-paid workers see a relative decline in wages. Between firms, wages fall by more at initially higher-paying employers. Our results suggest that credit affects the distribution of pay and employment both within and between firms. |
| Keywords: | Wages, Employment, Worker and Firm Heterogeneity, Credit Supply, Monetary Policy |
| JEL: | J31 E24 J23 E51 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2024_558&r= |
| By: | Salla Kalin (University of Helsinki); Tomi Kyyrä (VATT Institute for Economic Research); Tuomas Matikka (VATT Institute for Economic Research) |
| Abstract: | We use detailed, population-wide data from Finland to provide evidence of the impact of earnings disregard policies on part-time work during unemployment spells, and describe the longer-run trends in combining part-time work and social benefits. We find that part-time work while receiving unemployment benefits is strongly concentrated in the service and social and health care sectors, and that women participate in part-time work much more commonly than men (25% vs. 12% of benefit recipients). The share of part-time workers among benefit recipients increased sharply from 10% to 18% over a few years after the implementation of earnings disregards in unemployment benefits and housing allowances, which allowed individuals to earn up to 300 euros per month without reductions in their benefits. Using variation in the impact of the reforms on incentives between individuals eligible for different types of benefits, we estimate a 16–28% increase in participation in part-time work due to the implementation of earnings disregards. However, we find no evidence of economically significant positive or negative effects of increased participation in part-time work on transitions to full-time employment. |
| Keywords: | labor supply; social benefts; part-time work; earnings disregards |
| JEL: | H24 J21 J22 |
| Date: | 2024–04 |
| URL: | https://d.repec.org/n?u=RePEc:fit:wpaper:21&r= |
| By: | Randall Akee; Leah R. Clark |
| Abstract: | We use an admissions lottery to estimate the effect of a non-means tested preschool program on students’ long-run earnings, employment, family income, household formation, and geographic mobility. We observe long-run outcomes by linking both admitted and non-admitted individuals to confidential administrative data including tax records. Funding for this preschool program comes from an Indigenous organization, which grants Indigenous students admissions preference and free tuition. We find treated children have between 5 to 6 percent higher earnings as young adults. The results are quite large for young women, especially those from the lower half of the initial parental household income distribution. There is also some evidence that children, regardless of gender, from households with below median parental incomes realize the largest average increases in earnings in adulthood. Finally, we find that increased earnings start at ages 21 and older for the treated students. Likely mechanisms include high-quality teachers and curriculum. |
| JEL: | I20 I21 I24 I26 J31 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32570&r= |
| By: | Bustos, Emil (Research Institute of Industrial Economics (IFN)) |
| Abstract: | Aging populations strain pension systems, prompting policymakers to introduce partial retirement schemes to incentivize workers to retire later. I study the impact of introducing partial retirement within collective bargaining agreements in Sweden’s manufacturing sector in 2013. Merging collective bargaining data with administrative records, I employ a difference-in-differences methodology to analyze the labor market trajectories of eligible and ineligible cohorts around the introduction year. The results reveal a nuanced picture: while eligible workers are more likely to work and claim pension benefits simultaneously, this comes at the expense of a 10% decline in employment rates and a SEK 50, 000 reduction in labor earnings. In summary, partial retirement fails to extend working lives, thus undermining its utility as a one-size-fits-all solution to the future of pension systems. |
| Keywords: | Partial Retirement; Pension; Labor Supply |
| JEL: | D15 J26 J32 |
| Date: | 2024–06–26 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:iuiwop:1495&r= |
| By: | John de New (Melbourne Institute: Applied Economic & Social Research, The University of Melbourne); Sonja C. de New (Centre for Health Economics, Monash University); Danusha Jayawardana (Centre for Health Economics, Monash University); Clement Wong (Deakin University) |
| Abstract: | This study examines how non-cognitive skills contribute to the limited mobility of occupational choice across generations within families. We explore this by investigating desired occupational choices of adolescents of an Australian nationally representative panel survey. The main contribution of this study is that we highlight the central role of the non-cognitive skill of ‘persistence’, linking childhood socioeconomic status (SES) inequalities to occupational ambitions. We identify that persistence is a crucial skill that develops in childhood, diverges by SES over time and is heavily rewarded in the labour market. It is also linked to occupational aspirations of children, potentially setting low and high SES children on different occupational paths for life. Our results show that children from high-SES backgrounds effectively pre-sort themselves into desired occupations requiring high levels of persistence. They do so by (a) preferring to have jobs later in life requiring high levels of persistence, regardless of their own level of persistence, and (b) actually acquiring higher levels of persistence throughout their childhood and adolescence, aligning with desired jobs based on both their own and required levels of persistence. There is a clear policy window at the age of 10/11, when high-SES and low-SES children start to systematically acquire different levels of persistence. |
| Keywords: | human capital, sills, occupational choice, labour productivity, education and inequality |
| JEL: | J24 I24 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:iae:iaewps:wp2024n10&r= |
| By: | Fatih Guvenen; Gueorgui Kambourov; Burhan Kuruscu; Sergio Ocampo-Diaz |
| Abstract: | When is a wealth tax preferable to a capital income tax? When is the opposite true? More generally, can capital taxation be structured to improve productivity, incentivize innovation, and ultimately increase welfare? We study these questions theoretically in an infinite-horizon model with entrepreneurs and workers, in which entrepreneurial firms differ in their productivity and are subject to collateral constraints. The stationary equilibrium features heterogeneous returns and misallocation of capital. We show that increasing the wealth tax increases aggregate productivity. The gains result from the “use-it-or-lose-it” effect of wealth taxes when returns are heterogeneous, which causes a reallocation of capital from entrepreneurs with low productivity to those with high productivity. Furthermore, if the capital income tax is adjusted to balance the government's budget, aggregate capital, output, and wages also increase. We then study the welfare maximizing combination of wealth and capital income taxes and show that the optimal mix shifts towards a higher wealth tax and a lower capital income tax as the capital intensity of production increases. For a range of plausible parameter values, the optimal wealth tax is positive, whereas the capital income tax can be positive or negative (a subsidy). We then endogenize the entrepreneurial productivity distribution by introducing either ex ante innovation or entrepreneurial effort in production and show that this strengthens our results: by allowing entrepreneurs to keep more of the upside relative to a capital income tax, a wealth tax incentivizes more innovation and entrepreneurial effort, leading to larger increases in productivity, output, and welfare. |
| JEL: | E21 E25 E60 H21 H24 J31 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32585&r= |
| By: | Christopher Jepsen (University College Dublin, CES-Ifo, and IZA); Peter Mueser (University of Missouri and IZA); Kenneth Troske (University of Kentucky and IZA); Kyung-Seong Jeon (University of Missouri) |
| Abstract: | This paper provides novel evidence on the labor-market returns to for-profit postsecondary school and community college attendance. We link administrative records on college attendance with quarterly earnings data for nearly 400, 000 students in one state. Five years after enrollment, quarterly earnings conditional on employment exceed earnings in the absence of schooling by 20-29 percent for students attending for-profit schools and 16-27 percent for students attending community colleges. In aggregate, the benefits of attendance generally exceed the costs in both for-profit schools and community colleges. Our analyses suggest the two types of schools serve very different markets, both in terms of the characteristics of students and the fields they study. When we perform matching analyses with comparable students in comparable fields, we do not find that returns are consistently higher in for-profit schools or community colleges. |
| Keywords: | postsecondary education, labor-market returns, for-profit schools |
| JEL: | J24 I26 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:umc:wpaper:2407&r= |
| By: | Georgiadis, Andreas; Kornelakis, Andreas |
| Abstract: | Extant literature documents a relationship between human resource management (HRM) practices and performance, but the mechanisms underlying this relationship are still not well understood. We develop a theoretical framework of the HRM-performance relationship fusing an employment systems approach with human capital theory and articulating the mechanisms and temporal pathways linking HRM bundles and service quality. We use a unique and large panel dataset from the English social care sector to test our framework. The results highlight the significant role of collective human capital and voluntary turnover in the dynamic relationship between bundles of HRM practices and service quality. |
| Keywords: | Human Capital, HR Management, Firm Performance, Turnover, Training |
| JEL: | J24 M12 L25 J63 M53 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:glodps:1452&r= |
| By: | Hammarstedt, Mats (Linnaeus University); Skedinger, Per (Research Institute of Industrial Economics (IFN)) |
| Abstract: | We examine immigrant self-employment in Sweden during 2011–2021 – a turbulent decade with a large influx of refugees into the country and the outbreak of the global COVID-19 pandemic. Four outcome variables are investigated: the probability of self-employment, the probability of entry into and exit from this state and earnings of the self-employed. This is done for different cohorts of immigrants from Africa and Asia and for different types of businesses, unincorporated and incorporated firms. We find that immigrants have lower business earnings and higher exit rates from self-employment than natives, which is in line with previous research. It also turns out that the period in which the immigrants arrived to Sweden and the type of business they are engaged in have important implications for outcomes. In most cases, outcomes are more favorable for the earliest of the three cohorts we study, those who came to Sweden up to the turn of the millennium, and less so for the latest arrivals during the turbulent decade. Moreover, immigrants in incorporated self-employment who arrived during 2011–2021 fared less badly, relative to earlier cohorts, in terms of business earnings than their counterparts in unincorporated businesses, while results concerning exits from self-employment are mixed in this respect. |
| Keywords: | Self-employment; Immigrants; COVID-19; Refugee crisis |
| JEL: | J15 J24 J71 |
| Date: | 2024–06–27 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:iuiwop:1497&r= |
| By: | Ahmad, Khalil; Shahid, Muhammad; Bhatti, Muhammad Kashif; Ali, Amjad |
| Abstract: | In macroeconomic literature, fiscal policy is considered a powerful tool to achieve sustainable development, full employment, and social well-being in developed and developing societies. For this, public authority uses expansionary and contractionary tax policies to achieve stable growth and employment environment for the stable labor market. This study theoretically and empirically investigates the problem of inference on income-leisure labor preference. Also, it considers the impact of tax and expenditure structure on labor choices, regarding working hours under the assumption of neoclassical theory. We use quantile regression analysis to investigate the data set for worldwide, high, and lowincome countries from 2000 to 2022, for the macro-level analysis based on the empirical investigation of 123 countries cross-section panel. The outcomes show that, when the fiscal authorities impose a regressive form of taxes, it may hurt the labor wages and distribution of income-leisure preferences or the welfare of labor. Similarly, non-labor income hurts labor utility through a large volume of development expenditure. However, when the progressive form of taxes is imposed it may improve the labor utility, while on the other side, when fiscal authority disburses the development expenditure it may support the non-labor income through the provision of public goods and services. For practice, the empirical results of quantile regression show that government expenditure has a positive while tax hurts labor supply. Fiscal policy in low-income countries has provided an alternative outcome. |
| Keywords: | Expenditures, Taxes, Labor Choices, Method of Moments Quantile Regression |
| JEL: | E62 H24 J22 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:121283&r= |
| By: | Carl-Christian Groh |
| Abstract: | This paper studies the distributional consequences of the increasing importance of (big) data in modern economies. I consider a simple theoretical model in which firms produce output using capital and labor. Firms can hire labor on the spot market, but must choose their capital stock for a given period in advance and under uncertainty regarding their future profitability. Access to data resolves this uncertainty, thereby primarily increasing the aggregate demand for and the remuneration of capital. Furthermore, the increased demand for capital crowds out labor demand by reducing the price of the output goods, which reduces aggregate labor income. By an analogous logic, the rising availability of data can also increase the skill premium, given that firms can adjust their unskilled labor input more easily than their skilled labor input. |
| Keywords: | inequality, big data, uncertainty, wages |
| JEL: | D21 D81 E24 J24 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2024_555&r= |
| By: | Adam Bee; Irena Dushi; Joshua Mitchell; Brad Trenkamp |
| Abstract: | Research has shown that household survey estimates of retirement income (defined benefit pensions and defined contribution account withdrawals) suffer from substantial underreporting which biases downward measures of financial well-being among the aged. Using data from both the redesigned 2016 Current Population Survey Annual Social and Economic Supplement (CPS ASEC) and the Health and Retirement Study (HRS), each matched with administrative records, we examine to what extent underreporting of retirement income affects key statistics such as reliance on Social Security benefits and poverty among the aged. We find that underreporting of retirement income is still prevalent in the CPS ASEC. While the HRS does a better job than the CPS ASEC in terms of capturing retirement income, it still falls considerably short compared to administrative records. Consequently, the relative importance of Social Security income remains overstated in household surveys—53 percent of elderly beneficiaries in the CPS ASEC and 49 percent in the HRS rely on Social Security for the majority of their incomes compared to 42 percent in the linked administrative data. The poverty rate for those aged 65 and over is also overstated—8.8 percent in the CPS ASEC and 7.4 percent in the HRS compared to 6.4 percent in the linked administrative data. Our results illustrate the effects of using alternative data sources in producing key statistics from the Social Security Administration’s Income of the Aged publication. |
| Keywords: | measurement error, household surveys, retirement income; Social Security; poverty, aging |
| JEL: | H31 H55 I32 J14 J26 R29 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:cen:wpaper:24-32&r= |
| By: | Zarek Brot-Goldberg; Zack Cooper; Stuart V. Craig; Lev R. Klarnet; Ithai Lurie; Corbin L. Miller |
| Abstract: | We analyze the economic consequences of rising health care prices in the US. Using exposure to price increases caused by horizontal hospital mergers as an instrument, we show that rising prices raise the cost of labor by increasing employer-sponsored health insurance premiums. A 1% increase in health care prices lowers both payroll and employment at firms outside the health sector by approximately 0.4%. At the county level, a 1% increase in health care prices reduces per capita labor income by 0.27%, increases flows into unemployment by approximately 0.1 percentage points (1%), lowers federal income tax receipts by 0.4%, and increases unemployment insurance payments by 2.5%. The increases in unemployment we observe are concentrated among workers earning between $20, 000 and $100, 000 annually. Finally, we estimate that a 1% increase in health care prices leads to a 1 per 100, 000 population (2.7%) increase in deaths from suicides and overdoses. This implies that approximately 1 in 140 of the individuals who become fully separated from the labor market after health care prices increase die from a suicide or drug overdose. |
| JEL: | I11 J30 L4 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32613&r= |
| By: | Sonia B. Di Giannatale (Division of Economics, CIDE); Itza Tlaloc Quetzalcoatl Curiel-Cabral (Division of Economics, CIDE); Genaro Basulto (Tepper School of Business, Carnegie Mellon) |
| Abstract: | This article empirically identifies changes in CEOs’ bargaining power using data from ExecuComp and Annual Snapshot databases. It employs a Pareto Weights representation of the agency model to bridge managerial power theory and standard agency theory, proposing an empirical equation to track changes in bargaining power over time. Findings reveal the pivotal role of salary and stock grants in CEO compensation, aligning with both managerial power and agency theories. Analysis also uncovers a significant relationship between CEO age and bargaining power stability. Differences in bargaining power estimates across sectors indicate a multifaceted nature of CEO compensation, influenced by organizational factors and company size. Specifically, in large-cap companies, future compensation instances, like option grants, significantly influence changes in bargaining power, while in mid-cap companies, both present and future compensation factors contribute. Small-cap companies, however, show changes in bargaining power primarily linked to salary, bonus, and stock grants. |
| Keywords: | Dynamic Analysis, Contract Theory, Executive Compensation |
| JEL: | C61 D86 J33 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:emc:wpaper:dte633&r= |
| By: | Yoichi Ueno (Bank of Japan) |
| Abstract: | This paper investigates changes in the linkage between wages and prices in Japan by using a dynamic factor model of disaggregated wages and prices with heteroscedasticity- and autocorrelation-robust inference. The empirical results show that the model is better at identifying the underlying trends in wage and price inflation than models using only aggregate data. In addition, the trend component of services price inflation is the best indicator to gauge the underlying trend in price inflation among indicators examined in this paper. Further, wages and prices decoupled around 1998, but they have recoupled to some extent in the post-COVID-19 era. Lastly, the volatility of the common trend component of wage and price inflation determines the strength of the linkage between wages and prices, and it closely tracks an indicator which shows importance on price inflation when firms revise wages in negotiations. |
| Keywords: | Price Inflation; Wage Inflation; Unobserved Components Model; Factor Model |
| JEL: | E31 E37 J31 |
| Date: | 2024–06–28 |
| URL: | https://d.repec.org/n?u=RePEc:boj:bojwps:wp24e07&r= |
| By: | Katarzyna Saczuk (SGH Warsaw School of Economics; University of Warsaw; Narodowy Bank Polski); Olga Zajkowska (University of Warsaw, Faculty of Economy; Narodowy Bank Polski) |
| Abstract: | In 2020-2021, several methodological changes were introduced in the Labour Force Survey (LFS), which caused disruptions in data analysis and inference: the Covid-19 pandemic forced a change in the data collection method, and from the beginning of 2021, planned changes related to the harmonisation of social surveys in the EU were introduced (changes in the subject and object coverage of the survey). The aim of this paper is to examine the impact of the methodological changes on the measurement of labour force participation in Poland. Based on the analysis of quarterly LFS data over the period Q1 2019. - Q4 2021, it is shown that the change in the recruitment and interviewing method to CATI and the change in the rotation scheme had a significant impact on survey selection, attrition, propensity to participate in person and thus also on the sample structure, and that the problems of survey selection are not fully compensated for in the process of generalising the results from the sample to the general population. By treating the change in survey method as a natural experiment, it has been shown that the method of recruitment affects the underlying results of the survey. Over the period Q3 2020 - Q3 2021, the changes introduced to the LFS together increased the estimates of the participation rate by around 0.6 percentage points, the employment rate by around 0.1 percentage points and the unemployment rate by around 0.9 percentage points relative to the pre-pandemic measures. If the effect of the inconsistent classification of some people as working in subsistence agriculture is also taken into account, the overestimation of the participation rate under the new methodology would be around 0.9 percentage points. |
| Keywords: | labour force participation, BAEL, surveys, methodological changes, panel attrition, non-response, rotational panels, measurement errors, LFS |
| JEL: | C81 C83 J21 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:war:wpaper:2024-11&r= |
| By: | Katherine Michelmore; Anna Wiersma Strauss; Emily E. Wiemers |
| Abstract: | Families provide substantial care to older adults with functional limitations. Policies that incentivize work have the potential to reduce this valuable care. This study uses the Health and Retirement Study (HRS) and a simulated instrument approach to examine the consequences of increases in the generosity of the Earned Income Tax Credit (EITC), a work-contingent cash benefit, for the care that parents receive from their EITC-eligible daughters. We find that increases in EITC generosity reduce the care that parents receive from their EITC-eligible daughters, especially older parents and those with functional limitations. To assess the full effect of this reduction in caregiving, we examine whether financial transfers increase as a substitute for reduced care, whether other adult children fill the care gap left by EITC-eligible daughters, and whether paid caregiving increases in response to declines in family care. We find no evidence of increased financial transfers and care gaps remain for older parents that are not filled by other children or paid care providers. We conclude that an unintended consequence of the EITC is that the older parents of EITC recipients receive less care from their children overall in response to increased EITC benefit generosity. |
| JEL: | H24 I38 J22 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32583&r= |
| By: | Santosh Anagol; Allan Davids; Benjamin B. Lockwood; Tarun Ramadorai |
| Abstract: | We incorporate a general model of frictions into the bunching-based elasticity estimator. This model relies on fewer parameters than the conventional approach, replacing bunching window bounds with a single “lumpiness parameter, ” while matching rich observed bunching patterns such as sharp-peaked diffusion around tax kinks and depressed density in the dominated region above a notch. Simulations suggest that in the presence of frictions, conventional methods may underestimate elasticities with overstated confidence. Our method draws information from the spread of bunching mass around kinks and asymmetry around notches, revealing the size of frictions, unobserved costs, and kink vs. notch misperceptions. Estimating this model on South African administrative tax data, we find that individuals and firms appear to treat the bottom zero-to-positive tax kink like a notch, and we uncover differences in lumpiness between wage earners vs. the self-employed and between firms with vs. without paid tax practitioners. |
| JEL: | H30 J20 O12 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32597&r= |
| By: | Mendolicchio, Concetta; Pietra, Tito |
| Abstract: | We consider Roy’s economies with perfectly competitive labor markets and uncertainty. Firms choose their investments in physical capital before observing the characteristics of the workers that they will hire. We provide conditions under which equilibrium allocations are constrained Pareto efficient, i.e., such that it is impossible to improve upon the equilibrium allocation by changing agents’ investments in human and physical capital and letting the other endogenous variables adjust to restore market clearing. We also provide a robust example of a class of economies where equilibria are constrained Pareto inefficient due to overinvestments in high skills. |
| Keywords: | Roy’s model, human capital, constrained Pareto efficiency |
| JEL: | D60 D82 J24 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:121150&r= |
| By: | Ken-ichi Hashimoto (Graduate School of Economics, Kobe University); Kaz Miyagiwa (Department of Economics, Florida International University); Yoshiyasu Ono (Institute of Social and Economic Research, Osaka University; Osaka University of Economics); Matthias Schlegl (Department of Economics, Sophia University, Tokyo, Japan) |
| Abstract: | This paper first presents a dynamic model that features both real and monetary aspects of international trade and is capable of dealing with both full employment and secular unemployment. The model is then utilized to examine the effect of a tariff on the terms of trade, the trade pattern, real consumption and employment of labor. It is shown that with full employment in both countries, a tariff by the home country improves its terms of trade and increases its national welfare at the expense of the foreign country. These results however are reversed in the presence of unemployment in both countries. We also examine the asymmetric cases and calibrate our model to evaluate numerically the effect of large tariff changes. The main ï¬ nding is that the tariff only worsens the economy when it is already stagnant. |
| Keywords: | demand shortage, unemployment, tariffs, secular stagnation |
| JEL: | E24 E31 F13 F41 J20 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:fiu:wpaper:2409&r= |
| By: | Hirofumi Takikawa (Faculty of Economics and Business Administration, Goethe University Frankfurt, GERMANY and Junior Research Fellow, Research Institute for Economics & Business Administration (RIEB), Kobe University, JAPAN) |
| Abstract: | The United Nations' "2030 Agenda for Sustainable Development" highlights the importance of formalizing the informal economy, which could potentially increase tax revenues in developing countries. This paper investigates the impact of formalization on optimal tax schedules, emphasizing the need for redistributive incentives alongside formalization. Extending the Mirrlees model to incorporate government intervention against the informal economy, we propose an optimal tax formula. Quantitative analysis shows that aligning the tax schedule with formalization increases tax revenue and income transfers while maintaining social welfare. The result can be interpreted as an implicit cost of welfare-neutral formalization in terms of tax revenues and income transfers. Conversely, leaving the tax schedule unchanged undermines these benefits. This research provides insights into the design of optimal tax policies that incorporate formalization. |
| Keywords: | Informal economy; Formalization; Income tax; Redistribution |
| JEL: | E26 H21 H26 J46 O17 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:kob:dpaper:dp2024-18&r= |