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on Labor Markets - Supply, Demand, and Wages |
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Issue of 2024‒08‒19
27 papers chosen by |
| By: | Lipowski, Cäcilia; Salomons, Anna; Zierahn-Weilage, Ulrich |
| Abstract: | We study how new digital technology reshapes vocational training and skill acquisition and its impact on workers' careers. We construct a novel database of legally binding training curricula and changes therein, spanning the near universe of vocational training in Germany over five decades, and link curriculum updates to breakthrough technologies using Natural Language Processing techniques. Our findings reveal that technological advances drive training updates, with curriculum content evolving towards less routine intensive tasks, and greater use of digital and social skills. Using administrative employer-employee data, we show that educational updates help workers adapt to new demands for their expertise, and earn higher wages compared to workers with outdated skills. These findings highlight the role of changes in withinoccupational skill supply in meeting evolving labor market demands for non-college educated workers. |
| Keywords: | Technological Change, Vocational Training, Skill Updating |
| JEL: | J23 J24 J31 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:300271 |
| By: | Bonacini, Luca; Patriarca, Fabrizio; Santoni, Edoardo |
| Abstract: | This paper investigates the relationship between intergenerational inequality and differences in pay policies among firms. We examine whether the effects of parental background in firm selection contribute to the persistence of income inequality across generations, and particularly how this can enhance the understanding of transmission mechanisms beyond the traditional role of education. We first apply a two-way fixed-effects wage estimation, a' la AKM, to the Italian private sector. Our results indicate that the allocation of workers to firms with different wage policies is significantly influenced by the economic background of their parents. This influence on wages is significant and relatively greater than the impact of individual worker characteristics. Furthermore, the background effect amplifies from initial jobs to job changes and negatively affects the sorting between firm and worker types. |
| Keywords: | Firm effect, Intergenerational inequality, Labor market, Unobservable abilities, Wage inequality |
| JEL: | I24 J21 J24 J31 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:glodps:1459 |
| By: | Cattaneo, Maria Alejandra (Swiss Co-ordination Center for Research in Education); Gschwendt, Christian (University of Bern); Wolter, Stefan C. (University of Bern) |
| Abstract: | Advances in technology have always reshaped labor markets. Automating human labor has lead to job losses and creation but most of all, for an increasing demand for highly skilled workers. However, emerging AI innovations like ChatGPT may reduce labor demand in high skilled occupations previously considered "safe" from automation. While initial studies suggest that individuals adjust their educational and career choices to mitigate automation risk, it is unknown what people would be willing to pay for a reduced automation risk. This study quantifies this value by assessing individuals' preferences for occupations in a discrete-choice experiment with almost 6'000 participants. The results show that survey respondents are willing to accept a salary reduction equivalent to almost 20 percent of the median annual gross wage to work in an occupation with a 10 percentage point lower risk of automation. Although the preferences are quite homogeneous, there are still some significant differences in willingness to pay between groups, with men, younger people, those with higher levels of education, and those with a higher risk tolerance showing a lower willingness to pay for lower automation risk. |
| Keywords: | artificial intelligence, automation, willingness to pay, survey experiment |
| JEL: | J24 O33 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17097 |
| By: | Caroline Klein; Jonathan Smith |
| Abstract: | The Danish labour market is strong, but tensions have increased since the pandemic. The post-pandemic recovery boosted labour demand, but structural factors, such as late labour market entry by the young, changing skills requirements and obstacles to the recruitment of migrants, contribute to persistent shortages and impact the wider economy. Lowering the effective tax rate on labour income could reduce disincentives to higher working hours and to moving from part-time to full-time employment. Adapting the workplace to an ageing population and adjusting early retirement schemes could help to extend working lives. Targeting the tenth grade to students with greater learning needs, reducing student allowances and introducing an income-contingent loan system for master’s students could also encourage faster entry into the labour market. There is room to increase the recruitment of foreign-born workers, as well as improving their integration. The demographic, digital and green transitions will transform jobs and skills requirements, demanding an agile education and training system throughout the working life. Encouraging vocational education and training, notably by facilitating mobility between vocational and academic tracks, would ensure strong skills in areas where workers are lacking. |
| Keywords: | Denmark, education, gender, labour market, migration, pension, skills, taxation |
| JEL: | I28 J16 J20 J24 J26 J60 M53 |
| Date: | 2024–07–25 |
| URL: | https://d.repec.org/n?u=RePEc:oec:ecoaaa:1811-en |
| By: | Oriana Bandiera; Lindenlaub Ilse; Ananya Kotia; Christian Moser; Andrea Prat |
| Abstract: | Are labor markets in higher-income countries more meritocratic, in the sense that worker-job matching is based on skills rather than idiosyncratic attributes unrelated to productivity? If so, why? And what are the aggregate consequences? Using internationally comparable data on worker skills and job skill requirements of over 120, 000 individuals across 28 countries, we document that workers’ skills better match their jobs’ skill requirements in higher-income countries. To quantify the role of worker-job matching in development accounting, we build an equilibrium matching model that allows for cross-country differences in three fundamentals: (i) the endowments of multidimensional worker skills and job skill requirements, which determine match feasibility; (ii) technology, which determines the returns to matching; and (iii) idiosyncratic matching frictions, which capture the role of nonproductive worker and job traits in the matching process. The estimated model delivers two key insights. First, improvements in worker-job matching due to reduced matching frictions account for only a small share of cross-country income differences. Second, however, improved worker-job matching is crucial for unlocking the gains from economic development generated by adopting frontier endowments and technology. |
| Keywords: | Multidimensional heterogeneity; Skills; Gender; Development accounting; Sorting; Matching; Migration; Wage inequality |
| JEL: | C78 E24 J24 J31 O11 O12 |
| Date: | 2024–05–02 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedmoi:98572 |
| By: | Axana Dalle; Toon Wybo; Stijn Baert; Dieter Verhaest (-) |
| Abstract: | In many countries, age discrimination appears to be driven by negative perceptions that recruiters stereotypically hold about older candidates’ technological skills, trainability, and flexibility. Based on human capital, signalling, and screening theories, we hypothesise that training programmes might both compensate for and mitigate these ageist stereotypes and thereby improve these candidates’ hiring chances. We test this pathway out of age discrimination by designing a scenario experiment in which professional recruiters assess the recruitability and human capital perceptions of fictitious candidates varying in age and (willingsness for) participation in apprenticeship training at older ages. Our results demonstrate that candidates indicating their (willingness for) participation in such training to obtain relevant work experience are more likely to be recruited than candidates without such experience, regardless of their age. Although apprenticeship training can compensate for age discrimination, it cannot mitigate this as the premium it yields is not higher for older workers. |
| Keywords: | Hiring discrimination, Older workers, Labour market programmes, Apprenticeships, Signalling, Scenario experiment |
| JEL: | J14 J24 J71 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:rug:rugwps:24/1092 |
| By: | Manudeep Bhuller; Philipp Eisenhauer; Moritz Mendel |
| Abstract: | Using detailed Norwegian data on earnings, education and work histories, we estimate a dynamic structural model of education and sector choices that captures rich life-cycle patterns by ability. We validate the model against variation in education choices induced by a compulsory schooling reform. Our approach allows us to estimate the ex-ante returns to different education tracks across the lifecycle by individual ability and quantify the contribution of option values. We find substantial heterogeneity in returns and establish crucial roles for option values and re-enrollment in determining education choices and the impact of schooling policies. |
| Keywords: | sequential decisions, ex-ante returns, option values, reform evaluation |
| JEL: | J24 J31 D80 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2024_575 |
| By: | Michal Burzynski |
| Abstract: | Automation of labor tasks is one of the most dynamic aspects of recent technological progress. This paper aims at improving our understanding of the way that automation affects labor markets, analyzing the example of European countries. The quantitative theoretical methodology proposed in this paper allows to focus on automation-induced migration of workers, occupation switching and income inequality. The key findings include that automation in the first two decades of the 21st century had a significant impact on job upgrading of native workers and generated gains in many local labor markets. Even though net migration of workers was attenuated due to convergence in incomes across European regions, mobility at occupation levels had a sizeable impact on transmitting welfare effects of automation. |
| Keywords: | automation; migration; technological progress; inequality |
| JEL: | J24 O33 R12 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:irs:cepswp:2024-04 |
| By: | Melih Firat; Can Sever |
| Abstract: | In this paper, we theoretically and empirically explore the role of firm labor market power in the wage-output relationship. We start by laying out a theoretical model with imperfect labor mobility between firms and sectors, which implies upward-sloping labor supply curves that firms face, allowing firms to have labor market power (i.e., wage markdown). Assuming firm heterogeneity under oligopsony, markdowns can be represented as a function of firm labor market share. The model implies that firms with higher labor market share, indicated by a higher payroll share in their respective sectors, exhibit a weaker relationship between the changes in wages and output. We test the model’s prediction using data from the European subsample of the ORBIS dataset spanning from 2000 to 2018. We find that: (i) the pass-through of firm value added growth to wage growth is lower for firms with a higher payroll share in their sectors, with about one-fifth of the pass-through disappearing in firms at the top 1 percentile of the payroll share distribution, relative to an atomic firm; (ii) this pattern holds across various subsamples and timeframes, and also after accounting for several alternative explanations; and (iii) the weakening in the link between value added and wages growth due to firm labor market power intensifies during the downturns in the labor market or in the overall economy. |
| Keywords: | Wage-output disconnect; wageless growth; labor share; labor market power; ORBIS |
| Date: | 2024–07–09 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2024/136 |
| By: | Ghorpade, Yashodhan (World Bank); Jasmin, Alyssa (World Bank); Rahman, Amanina Abdur (World Bank) |
| Abstract: | The changing nature of work, accelerated by the experience of the COVID-19 pandemic has resulted in several fundamental shifts in the terms and conditions of work. Overlain with a clear trend of increased non-standard employment, including through the gig economy and platform work, this poses critical questions for policies and practices of the organization of work arrangements, and about who may bear the costs of emerging arrangements. We attempt to understand whether workers in freelancing and in standard work arrangements in Malaysia view a trade-off between flexibility and income and are willing to forgo a share of earnings for greater flexibility. We deploy a novel discrete choice experiment in which respondents are asked to choose their preferred job from two hypothetical job descriptions with randomly assigned attributes viz. flexibility, and associated earnings. We find substantial but not overwhelming preference for greater flexibility, especially among freelancers, and a clear trade-off between measures of flexibility and income. We also find considerable variation in the preference for flexibility, much of which is not explained by worker demographics and other observable characteristics but is consistent with other measures of the importance attached to flexibility and earning income. Our analysis outlines pathways through which offering even a modicum of flexibility can enhance workers' utility without necessarily increasing costs for employers and provide evidence of considerable preference heterogeneity and warns against imposing uniform approaches to (in)flexible work arrangements. |
| Keywords: | flexibility, flexible work arrangements, gig work |
| JEL: | J30 J32 M52 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17093 |
| By: | Findeisen, Sebastian; Dauth, Wolfgang; Schlenker, Oliver |
| Abstract: | New technologies drive productivity growth but the distribution of gains might be unequal and is mediated by labor market institutions. We study the role that organized labor plays in shielding incumbent workers from the potential negative consequences of automation. Combining German individual-level administrative records with information on plant-level robot adoption and the presence of works councils, a form of shop-floor worker representation, we find positive moderating effects of works councils on retention for incumbent workers during automation events. Separations for workers with replaceable task profiles are significantly reduced. When labor markets are tight and replacement costs are high for firms, incumbent workers become more valuable and the effects of works councils during automation events start to disappear. Older workers, who find it more challenging to reallocate to new employers, benefit the most from organized labor in terms of wages employment. Concerning mechanisms we find that robot-adopting plants with works councils employ not more but higher quality robots. They also provide more training during robot adoption and have higher productivity growth thereafter. |
| Keywords: | automation, organized labor, work councils, labor market tightness, worker re-training |
| JEL: | J20 J30 J53 O33 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:cexwps:300230 |
| By: | Ashenfelter, Orley (Princeton University); Jurajda, Štepán (CERGE-EI) |
| Abstract: | Thanks to standardized work protocol and technology of McDonald's restaurants, the hourly wage of McDonald's Basic Crew enables wage comparisons under near-identical skill inputs and hedonic job conditions. McWages capture labor costs in entry-level jobs, while the Big Macs (earned) Per Hour (BMPH) index measures corresponding purchasing power of wages. We document large and growing geographical wage differences in standardized jobs using data covering most U.S. counties during 2016-2023. Before the Covid-19 pandemic, there was no BMPH growth where minimum wages stayed constant, but the pandemic wage increase, which diminished the importance of minimum wages, was stronger in these areas. |
| Keywords: | McWages |
| JEL: | J31 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17142 |
| By: | Joyce P. Jacobsen (Hobart and William Smith Colleges, and Wesleyan University); Melanie Khamis (Department of Economics, Wesleyan University and IZA); Mutlu Yuksel (Dalhousie University and IZA) |
| Abstract: | Can the demographic trends of increased life expectancy and decreasing birth rates, along with the labor market patterns of returns to human capital investment and changes in real hourly earnings, account for changes in women’s and men’s lifetime earnings? Using a Vector Error Correction Model to analyze annual US CPS data from 1964 to 2019, we find patterns linking these factors and demonstrating that they have significant roles to women's lifetime earnings but not to men's. These findings are consistent with the convergence of gender earning gap has occurred mainly due to women’s responses to changing demographic and socioeconomic factors. |
| Keywords: | life expectancy, lifetime earnings, human capital investment, VECM |
| JEL: | J3 J16 J24 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:wes:weswpa:2024-008 |
| By: | Pawel Doligalski; Luis Rojas |
| Abstract: | We characterize the welfare effects of the informal sector by proposing a decomposition into efficiency and redistribution components. We focus on an economy where a planner wants to redistribute income with taxation and sets the optimal tax scheme. Since the informal sector can limit the taxation possibilities for the government but at the same time provide a shelter against tax distortions for individuals we show that the net welfare effect can be positive or negative. We show that the relative advantage between informal and formal employment across different income levels is the key dimension that shapes the welfare costs of the informal sector. Using the model estimated with Colombian microdata, we show that, conditional on the optimal tax policy, the Colombian shadow economy benefits efficiency at the expense of redistribution. Consequently, the presence of the informal sector reduces welfare only when preferences for redistribution are strong. |
| Keywords: | shadow economy, informal labor market, income taxation, redistribution |
| JEL: | H21 H26 J46 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:bge:wpaper:1452 |
| By: | Bruno Bosco (Department of Economics, Management and Statistics, University of Milano-Bicocca); Carlo Federico Bosco (University of Pavia); Paolo Maranzano (Department of Economics, Management and Statistics, University of Milano-Bicocca and Fondazione Eni Enrico Mattei) |
| Abstract: | This paper uses the Italian income tax treatment of 2006/7 as a quasi-natural tax experiment to offer some fresh empirical evidence on how labour supply responds to exogenous income tax hikes. We adopt the identification strategy based on TWFE panel data Difference-in-Differences (DID) model to define the correct statistical framework of the study, and to benefit from the specific features of the above tax experiment, namely homogeneity and contemporaneity of the treatment. Results show that the extensive negative adjustments of various response variables measuring the supply of labour services offered by treated taxpayers are statistically significant, rapid, and strong but not long-time lasting. Not surprisingly, we also find that that treated families reduce in a similar manner their consumption with respect to families in the control groups. Analogous adjustment responses to tax hikes characterise the growth of per-capita regional GDP. The estimated aggregate effects of tax hikes are further compared with the spatial-temporal patterns observed for every response variable in treated and untreated regions. |
| Keywords: | Income Taxation, extensive labour supply change, TWFE Panel Data DID, convergence tests, taxation and regional growth |
| JEL: | C10 C18 C21 H2 E2 E32 E62 C23 C26 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:fem:femwpa:2024.16 |
| By: | Ashley Ward; Belen Zinni |
| Abstract: | Composition Adjusted-Labour Input (CALI) measures account for workers’ differences in skills and productive capacity. This study reviews the most relevant literature to have produced CALI estimates to date and presents a generic approach to produce CALI measures for 21 countries. It finds that education and age (proxy for work experience) are two key workers’ characteristics to be included in CALI measures, with additional workers characteristics having a more limited impact. Replacing a traditional measure of labour input, such as hours worked, with a measure of CALI in the growth accounts leads to a significant downward revision in multifactor productivity (MFP) growth in countries that experience large changes in the composition of labour. |
| Keywords: | growth accounts, hours worked, labour input, multifactor productivity (MFP), productivity |
| JEL: | E1 E24 J21 |
| Date: | 2024–08–06 |
| URL: | https://d.repec.org/n?u=RePEc:oec:stdaaa:2024/06-en |
| By: | Kathrin Ellieroth; Amanda M. Michaud |
| Abstract: | We develop a time series of quits and layoffs using the Current Population Survey, and analyze their relationship with labor supply decisions over the business cycle. Our findings challenge the assumption that most labor force exits from employment are voluntary quits. Instead, we show that 40% of these exits are precipitated by layoffs. With this distinction, we find both quits to non-participation and the share of workers exiting after a layoff falls during recessions. A workhorse search model is used to frame how these facts add nuance to our understanding of business cycles. Additional results explore regularities of these patterns in the cross section of workers, in the COVID-19 recovery, and in comparison to the JOLTS series on quits and layoffs. |
| Keywords: | Labor supply; Quits; Business cycles; Layoffs |
| JEL: | E32 J21 E24 |
| Date: | 2024–07–18 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedmoi:98594 |
| By: | Sztachera, Maciej |
| Abstract: | The quantitative HANK model, incorporating the coordination of hours worked in production, yields an improved empirical fit along two dimensions: a more concentrated steady-state distribution of hours worked and lower marginal propensities to earn (MPEs) with positive but moderate fiscal multipliers for separable preferences. In the model, failing to coordinate work hours with coworkers leads to wage penalties, and labor earnings display decreasing returns to hours. Consequently, households prefer working hours closer to the average and adjust their hours less in response to idiosyncratic shocks than in the standard model. Aggregate shocks increase optimal hours for all employees, and the coordination friction does not bind. The model matches the empirical estimates of the idiosyncratic and aggregate Frisch elasticities. |
| Keywords: | Coordination, fiscal multipliers, HANK trilemma, hours |
| JEL: | E24 E62 H31 H32 |
| Date: | 2024–07–25 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:121556 |
| By: | Ariela Micha (Universidad Nacional de General Sarmiento); Martín Trombetta (FUNDAR, CONICET-Universidad Nacional de General Sarmiento); Francisca Pereyra (Universidad Nacional de General Sarmiento) |
| Abstract: | The COVID-19 pandemic has highlighted the importance and fragility of care systems globally, resulting in multiple new challenges for women, who comprise the majority ofworkers in this sector. In particular, domestic work is the main source of employment for vulnerable women in Argentina, a sector globally characterized by high degrees ofinformality, low pay, and precarious working conditions. In this context, digital labor platforms are emerging as new contracting intermediaries, thus raising questions on their impact in terms of the generation of new labor and income opportunities for women. This article inspects the role of platforms in the definition of working conditions for domestic workers, by considering their influence in the formalization of the sector.Empirical evidence is provided to evaluate the contribution of platforms to the establishment of formal employment contracts for domestic workers. Based on surveydata from 300 women working through the sector's leading platform in the Metropolitan Area of Buenos Aires (transformed into 1048 worker-job observations), a fixed-effects model is estimated at the job level to measure the formalization effect of the platform. Results show that working through the platform almost triples the probability of landing a formal job, controlling for both observable and unobservable attributes of workers. |
| Keywords: | paid domestic work; digital labor platforms; formalization; Argentina |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:aoz:wpaper:330 |
| By: | Taylor, Karl (University of Sheffield); Bhadury, Soumya (2Asian Infrastructure Investment Bank (AIIB)); Binner, Jane (University of Birmingham); Mandal, Anandadeep (University of Birmingham) |
| Abstract: | In this paper we consider the predictors of the business cycle in Great Britain, where the claimant count and unemployment rate are found to be key indicators associated with turning points. Next, we consider at a micro-economic level, using disaggregated local authority level data, a number of local labour market issues: (i) the determinants of the claimant count and unemployment rate (both highly correlated with the cycle); (ii) local level economic resilience; and (iii) the likelihood of different states of regional vulnerability. Benefit generosity, unit labour costs and state dependence (hysteresis) are key drivers of local labour market performance. |
| Keywords: | business cycle dating, local labour markets, resilience, regional vulnerability |
| JEL: | E24 E32 J20 R10 R23 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17153 |
| By: | Fabian Eckert; Sharat Ganapati; Conor Walsh |
| Abstract: | After 1980, larger US cities experienced substantially faster wage growth than smaller ones. We show that this urban bias mainly reflected wage growth at large Business Services firms. These firms stand out through their high per-worker expenditure on information technology and disproportionate presence in big cities. We introduce a spatial model of investment-specific technical change that can rationalize these patterns. Using the model as an accounting framework, we find that the observed decline in the investment price of information technology capital explains most urban-biased growth by raising the profits of large Business Services firms in big cities. |
| Keywords: | Urban Growth, High-skill Services, Technological Change |
| JEL: | J31 O33 R11 R12 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:cen:wpaper:24-33 |
| By: | Serdar Birinci; Miguel Faria-e-Castro; Kurt See |
| Abstract: | Between 2020 and 2023, the fraction of retirees in the working-age population in the U.S. increased above its pre-pandemic trend. Several explanations have been proposed to rationalize this gap, such as the rise in net worth due to higher asset returns, the labor market's deterioration due to higher unemployment risk, the expansion of fiscal support programs, and increased mortality risk. We quantitatively study the interaction of these factors and decompose their relative contribution to the recent rise in retirements using an incomplete markets, overlapping generations model with a frictional labor market. We find that all of these channels contribute to excess retirements, with labor market conditions being a more important driver in 2020-2021 and fiscal programs playing a larger role in 2022-2023. We show that our model's predictions on aggregate labor market moments and cross-sectional moments on retirement patterns across the wealth distribution are in line with the data. |
| Keywords: | retirement; labor supply; labor flows; financial markets |
| JEL: | E24 G11 J21 J22 J26 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedlwp:98578 |
| By: | Alberto Rivera-Padilla (Tulane University) |
| Abstract: | I document how the importance of structural transformation for spatial convergence of labor income varies across countries. I use microdata to show that in recent decades structural change accounts for a much larger share of income convergence in developing countries than in rich countries. Convergence in sectoral composition of employment accounts for most of the contribution of structural change. Using a quantitative general equilibrium model, I find that the increase in educational attainment has been a key determinant of income convergence in developing countries. The results of the model imply that unbalanced productivity growth in agriculture is mostly relevant for convergence in sectoral composition of employment, but not for income convergence. |
| Keywords: | structural transformation, spatial convergence, productivity, human capital |
| JEL: | E24 J24 O11 O18 R11 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:tul:wpaper:2410 |
| By: | Yi Chen (ShanghaiTech University); Hanming Fang (University of Pennsylvania); Yi Zhao (Tsinghua University); Zibo Zhao (ShanghaiTech University) |
| Abstract: | Categorical variables have no intrinsic ordering, and researchers often adopt a fixed-effect (FE) approach in empirical analysis. However, this approach has two significant limitations: it overlooks textual information associated with the categorical variables; and it produces unstable results when there are only limited observations in a category. In this paper, we propose a novel method that utilizes recent advances in large language models (LLMs) to recover overlooked information in categorical variables. We apply this method to investigate labor market mismatch. Specifically, we task LLMs with simulating the role of a human resources specialist to assess the suitability of an applicant with specific characteristics for a given job. Our main findings can be summarized in three parts. First, using comprehensive administrative data from an online job posting platform, we show that our new match quality measure is positively correlated with several traditional measures in the literature, and we highlight the LLM’s capability to provide additional information beyond that contained in the traditional measures. Second, we demonstrate the broad applicability of the new method with a survey data containing significantly less information than the administrative data, which makes it impossible to compute most of the traditional match quality measures. Our LLM measure successfully replicates most of the salient patterns observed in a hard-to-access administrative dataset using easily accessible survey data. Third, we investigate the gender gap in match quality and explore whether there exists gender stereotypes in the hiring process. We simulate an audit study, examining whether revealing gender information to LLMs influences their assessment. We show that when gender information is disclosed to the LLMs, the model deems females better suited for traditionally female-dominated roles. |
| Keywords: | Large Language Models, Categorical Variables, Labor Market Mismatch |
| JEL: | C55 J16 J24 J31 |
| Date: | 2024–07–23 |
| URL: | https://d.repec.org/n?u=RePEc:pen:papers:24-017 |
| By: | Joanna Tyrowicz (Group for Research in Applied Economics (GRAPE); University of Warsaw; Institute of Labor Economics (IZA); Group for Research in Applied Economics (GRAPE)) |
| Abstract: | While women constitute 25% of the board members in private European corporations, firms with no women are dominant and merely 10% of firms report more than one woman in the boardroom. We leverage new data, covering 5 million companies from 29 European countries spanning 1986-2020. Using this data, we provide novel stylized facts about the phenomenon of token women in European corporate boardrooms. We emphasize the differences between two types of situation when the corporate boardroom hosts a singular woman: the appointment of the first woman and the barriers to further rise in diversity. We thus contribute to improving our understanding of the conflict between the tokenism hypothesis and diversity spillover hypothesis. |
| Keywords: | gender, board, diversity |
| JEL: | C81 J16 M12 M51 J24 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:fme:wpaper:97 |
| By: | Paolo Maranzano (Department of Economics, Management and Statistics, University of Milano-Bicocca and Fondazione Eni Enrico Mattei); Matteo Pelagatti (Department of Economics, Management and Statistics, University of Milano-Bicocca) |
| Abstract: | The Hodrick-Prescott filter is a popular tool in macroeconomics for decomposing a time series into a smooth trend and a business cycle component. The last few years have witnessed global events, such as the Global Financial Crisis, the COVID-19 pandemic, and the war in Ukraine, that have had abrupt structural impacts on many economic time series. Moreover, new regulations and policy changes generally lead to similar behaviours. Thus, those events should be absorbed by the trend component of the trend-cycle decomposition, but the Hodrick-Prescott filter does not allow for jumps. We propose a modification of the Hodrick-Prescott filter that contemplates jumps and automatically selects the time points in which the jumps occur. We provide an efficient implementation of the new filter in an R package. We use our modified filter to assess what Italian labour market reforms impacted employment in different age groups. |
| Keywords: | Trend, State-space form, Unobserved component model, Structural change, LASSO, Business cycle, Employment |
| JEL: | C22 C63 E32 J21 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:fem:femwpa:2024.18 |
| By: | Guaitoli, Gabriele (University of Warwick); Pancrazi, Roberto (University of Warwick) |
| Abstract: | The widening income gap between older and younger individuals is a key topic in political and academic discussions. Research often focuses on labor earnings, neglecting other income sources and cross-country comparisons. This paper fills these gaps by analyzing disposable income trends in 2004-2018 across 32 countries using the Luxembourg Income Study Database. Key findings : (1) The age-income gap has increased in richer countries but decreased in poorer ones ; (2) Higher employment rates among older individuals drive this disparity in richer countries; (3) Increased female labor market participation mildly affected the employment margin, while rising education and later retirement did not. JEL Codes: E24, J31, O57 |
| Keywords: | Age group income ; growth decomposition ; income distribution ; cross-country comparison |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:wrk:warwec:1504 |