|
on Labor Markets - Supply, Demand, and Wages |
| By: | Fatih Guvenen; Rocio Madera; Serdar Ozkan |
| Abstract: | CORRECT ORDER OF AUTHORS: Fatih Guvenen, Serdar Ozkan, and Rocio Madera. The order of coauthors has been assigned randomly using AEA’s Author Randomization Tool. 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: | 2024–04–01 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedlwp:98700 |
| By: | Thomas Dohmen; Melanie Khamis; Hartmut Lehmann; Norberto Pignatti |
| Abstract: | Using data from the four waves of the Ukrainian Longitudinal Monitoring Survey - ULMS (2003, 2004, 2007 and 2012), we analyze whether workers with a higher willingness to take risks are more likely to select into informal employment contracts. The data permit us to distinguish between five employment states: formal and informal self-employment, formal salaried employment, voluntary informal salaried employment, and involuntary informal salaried employment. The empirical evidence reveals risk attitudes as a strong causal determinant of the incidence of all types of informal employment but involuntary informal salaried employment. We also provide evidence that our results are not driven by reverse causality: risk attitudes impact on the choice of employment state whilst this latter does not influence risk attitudes. Linking risk attitudes with selection into employment states, we also can establish that along the formal-informal divide the Ukrainian labor market is predominantly segmented for salaried workers whilst it is integrated for the self-employed. |
| Keywords: | Risk attitudes, informal employment, labor market segmentation, Ukraine |
| JEL: | D91 J42 J46 P23 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2024_588 |
| By: | Stephen Yeaple; Carsten Eckel |
| Abstract: | A growing empirical literature attributes much of the productivity advantages of large, "superstar" firms to their adoption of best practice management techniques that allow them to better identify and use talented workers. The reasons for the incomplete adoption of these "structured management practices" (SMPs) and their welfare implications are not well understood. This paper provides a positive and normative analysis of these issues in a theoretical framework in which SMPs induce sorting of talent across firms. Incomplete adoption arises because SMPs are costly and worker talent is in limited supply. In equilibrium there is excessive adoption of SMPs and too much sorting of talented workers into large firms. In this second-best environment, policy changes that favor large firms, such as trade liberalization, have the potential to lower welfare. |
| JEL: | F12 F16 J31 J33 J42 M51 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32797 |
| By: | Wenting Ma |
| Abstract: | Large firms in the U.S. financial system achieve substantial economic gains. Their dominance sets them apart while also raising concerns about the suppression of worker earnings. Utilizing administrative data, this study reveals that the largest financial firms pay workers an average of 30.2% more than their smallest counterparts, significantly exceeding the 7.9% disparity in nonfinance sectors. This positive size-earnings relationship is consistently more pronounced in finance, even during the 2008 crisis or compared to the hightech sector. Evidence suggests that large financial firms� excessive gains, coupled with their workers� sought-after skills, explain this distinct relationship. |
| JEL: | G20 J31 J42 L11 L12 L13 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:cen:wpaper:24-41 |
| By: | Key, Tomas (Bank of England); Lenney, Jamie (Bank of England) |
| Abstract: | In this paper, we examine the response of earnings and employment to fluctuations in aggregate economic activity (GDP) across the income distribution. Using data from the UK’s Labour Force Survey, we present evidence that aggregate fluctuations have economically significant but heterogeneous impacts across the income distribution. Sensitivity is greatest at the very bottom (first decile) of the income distribution and smallest in the upper middle (seventh and eight deciles) of the distribution. The transmission of GDP fluctuations also differs across the income distribution. Changes to hours worked and employment explain the majority of the labour earnings response in the bottom half of the distribution, whereas changes to the hourly wage are more important in the top half. In a further decomposition, we show that the changes to employment are largely due to fluctuations in the employment to unemployment transition rate. We also find that GDP fluctuations are positively correlated with job switching in the bottom half of the distribution. |
| Keywords: | Distributional effects; business cycles; income dynamics; labour markets |
| JEL: | E24 E32 J31 |
| Date: | 2024–08–06 |
| URL: | https://d.repec.org/n?u=RePEc:boe:boeewp:1083 |
| By: | Andy Chung; Daniel S. Hamermesh; Carl Singleton; Zhengxin Wang; Junsen Zhang |
| Abstract: | We investigate the relationship between physical attractiveness and the time people devote to video/computer gaming. Average American teenagers spend 2.6% of their waking hours gaming, while for adults this figure is 2.7%. Using the American Add Health Study, we show that adults who are better-looking have more close friends. Arguably, gaming is costlier for them, and they thus engage in less of it. Physically attractive teens are less likely to engage in gaming at all, whereas unattractive teens who do game spend more time each week on it than other gamers. Attractive adults are also less likely than others to spend any time gaming; and if they do, they spend less time on it than less attractive adults. Using the longitudinal nature of the Add Health Study, we find supportive evidence that these relationships are causal for adults: good looks decrease gaming time, not vice-versa. |
| JEL: | J22 J71 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32809 |
| By: | Livia Alfonsi; Vittorio Bassi; Imran Rasul; Elena Spadini |
| Abstract: | The Covid-19 pandemic represents one of the most significant labor market shocks to the world economy in recent times. We present evidence from a field experiment to understand whether and why skilled and unskilled workers were differentially impacted by the shock, in the context of a low-income economy, Uganda. We leverage a panel of workers and firms, tracked from 2012 to 2022, including high frequency surveys over the pandemic. In 2013, workers were randomly assigned to receive six months of sector-specific vocational training, in one of eight high productivity sectors. We document that over the pandemic, employment and earnings margins follow V-shaped dynamics, whereby the outcomes of treated (skilled) workers are more severely impacted by lockdowns, they recover more quickly between lockdowns, and remain resilient to the shock as the economy recovers. Cumulatively over the pandemic, skilled workers spend 61% more time than controls employed in one of our study sectors, and their total earnings are 17% higher. We explore supply- and demand-side mechanisms through which the returns to skills are maintained through the crisis. We document that skilled workers are more exposed to the shock because they are more likely to be laid off during the first lockdown as firms respond to the rapid, severe and uncertain shock by immediately laying off higher earning workers. However, skilled workers recover quickly because of their greater accumulation of sector-specific experience pre-pandemic, and the certifiability of their skills that allows them to switch employers in the same sector during the crisis. Our findings have implications for understanding the returns to skills acquired through vocational training in good economic times and times of crisis. |
| JEL: | J24 O12 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32785 |
| By: | Mabel Andalón; Catherine de Fontenay; Donna K. Ginther; Kwanghui Lim |
| Abstract: | Teamwork has become more important in recent decades. We show that larger teams generate an unintended side effect: individuals who finish their PhD when the average team in their field is larger have worse career prospects. Our analysis combines data on career outcomes from the Survey of Doctorate Recipients with publication data that measures team size from ISI Web of Science. As average team size in a field increased over time, junior academic scientists became less likely to secure research funding or obtain tenure and were more likely to leave academia relative to their older counterparts. The team size effect can fully account for the observed decline in tenure prospects in academic science. The rise in team size was not associated with the end of mandatory retirement. However, the doubling of the NIH budget was associated with a significant increase in team size. Our results demonstrate that academic science has not adjusted its reward structure, which is largely individual, in response to team science. Failing to address these concerns means a significant loss as junior scientists exit after a costly and specialized education in science. |
| JEL: | I23 J24 J4 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32827 |
| By: | Nicola Gagliardi; Elena Grinza; François Rycx |
| Abstract: | In this paper, we investigate the impact of rising temperatures on firm productivity using longitudinal firm-level balance-sheet data from private sector firms in 14 European countries, combined with detailed weather data, including temperature. We begin by estimating firms’ total factor productivity (TFP) using control-function techniques. We then apply multiple-way fixed-effects regressions to assess how higher temperature anomalies affect firm productivity – measured via TFP, labor productivity, and capital productivity. Our findings reveal that global warming significantly and negatively impacts firms’ TFP, with the most adverse effects occurring at higher anomaly levels. Labor productivity declines markedly as temperatures rise, while capital productivity remains unaffected – indicating that TFP is primarily affected through the labor input channel. Our moderating analyses show that firms involved in outdoor activities, such as agriculture and construction, are more adversely impacted by increased warming. Manufacturing, capital-intensive, and blue-collar-intensive firms, compatible with assembly-line production settings, also experience significant productivity declines. Geographically, the negative impact is most pronounced in temperate and mediterranean climate areas, calling for widespread adaptation solutions to climate change across Europe. |
| Keywords: | Climate change; Global warming; Firm productivity; Total factor productivity (TFP); Semiparametric methods to estimate production functions |
| JEL: | D24 J24 Q54 |
| Date: | 2024–08–22 |
| URL: | https://d.repec.org/n?u=RePEc:sol:wpaper:2013/377135 |
| By: | Diehl, Claudia; Lang, Julia; Strauß, Susanne; Brüggemann, Ole |
| Abstract: | This paper examines gender differences in perceptions of the fairness of one's own pay. Theoretically, we draw on two so far separate strands of literature, on women's alleged greater tolerance for lower wages ("contented female worker paradox"), and on perceived discrimination among ethnic minorities ("integration paradox"). Empirically, we depart from previous studies by not simply assessing whether women are as likely as men to perceive their pay as unfair. Instead, we use an innovative methodology based on linked employer-employee data from about 500 German firms. This makes it possible to validate subjective perceptions of (un)fair pay by comparing them to the actual (un)fairness of someone's pay. The latter is measured as the difference between one's own pay and the predicted pay of comparable others with the same individual, job, and firm-related characteristics. Overall, women are as likely as men to perceive a fair wage as unfair - or an unfair wage as fair. However, university-educated women are somewhat less likely than men to perceive their pay as fair when they earn less than comparable employees. They might be more aware of the societal debate about gender discrimination and "aim higher" in setting their aspirations for appropriate rewards for their skills. |
| Keywords: | gender inequality, discrimination, women, income, work |
| JEL: | J16 J31 J71 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:cexwps:300840 |
| By: | Adam Bloomfield; Lucas Goodman; Manita Rao; Sita Slavov |
| Abstract: | Several states have recently attempted to boost retirement saving by adopting “auto-IRA” policies that require employers not currently offering an employer-sponsored retirement plan (ESRP) to either (1) establish an ESRP or (2) enroll employees in state-facilitated Individual Retirement Accounts (IRAs). We identify the effect of these state retirement plan mandates on firm decisions to offer ESRPs, treating the gradual rollout of these policies across states and employer size categories as a series of “experiments.” Using U.S. tax microdata, we estimate that at least 30, 000 firms have been induced to offer an ESRP by these policies, although there is substantial heterogeneity in these effects across firm and worker characteristics. This effect is large considering that, for employers, establishing and maintaining an ESRP is more costly than utilizing the state-facilitated IRAs. We explore both rational and behavioral explanations for why firms might choose the higher-cost approach to complying with auto-IRA policies. |
| JEL: | D14 H75 J26 J32 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32817 |
| By: | William J. Collins; Ariell Zimran |
| Abstract: | We study the impacts of WWII service and access to GI Bill benefits on the educational and labor market outcomes of individuals of various ethnic and racial groups. We address selection into military service directly by linking veterans and nonveterans from 1950’s census records to the complete-count 1940 census. We find that veterans were positively selected on the basis of education, and neutrally or negatively selected on the basis of their own or their fathers’ labor market characteristics. We show that selection can be dramatically reduced by using 1940 controls. Controlling for these characteristics, we find modest positive impacts in 1950 of WWII service and the GI Bill on educational attainment of those with the least pre-war education, and on the school attendance of those with the most pre-war education, with no effect evident for college completion. These effects are relatively large for black men. We find mixed effects on labor market outcomes: young veterans enjoyed slight gains in income and occupational status; older veterans did not. We do not find systematic racial or ethnic differences in labor market impacts. These findings are important given the continued salience of the GI Bill and its potentially disparate outcomes in political discourse. |
| JEL: | H52 I24 I28 J31 J61 N32 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32774 |
| By: | Axel H. Börsch-Supan; Johannes Rausch; Luca Salerno |
| Abstract: | Germany, like many other countries, has undergone a series of pension reforms since the 1980s which generally decreased benefit generosity and increased the retirement age due to demographic pressures. This paper investigates whether these reforms have increased income and wealth inequality among retirees. In order to answer this question, we employed counterfactual simulations in which we predict how the income and social security wealth distributions would have developed if these reforms had not taken place, compared to the actual development of the income and social security wealth distributions. Our analysis reveals that the pension reforms has led to an increase in inequality in terms of social security wealth between the 1990s and 2000s and decreased inequality thereafter. The decrease in inequality is mainly driven by social assistance as it represents a lower bound for benefit size and thus mitigates the effect of benefit-reducing reforms for lower income groups. We further divided the total effect of the pension reforms into two components. The first component is the mechanical effect, which keeps retirement probabilities constant and only considers changes in benefit calculation. The second component is the behavioral effect, which describes how SSW differs because of altered retirement probabilities. Our findings indicate that in the German context the behavioral effect is statistically significant but economically small. |
| JEL: | H55 J23 J26 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32796 |
| By: | Cronin, C.J.;; Harris, M. C.;; Ziebarth, N. R.; |
| Abstract: | We study how public school teachers use paid leave. Most U.S. sick leave schemes operate as individualized credit accounts—paid leave is earned and unused leave accumulates, producing an employee-specific leave balance. We construct an administrative data set containing the daily balances and leave behavior of 982 teachers from 2010-2018. We find that ick leave use increases during flu season. We do not find evidence that the average teacher uses sick leave for leisure; however, there is evidence of such behavior among certain sub -sets of teachers (e.g., young, inexperienced teachers). Usage increases with leave balance; the elasticity is between 0.38-0.45. Further, higher balances reduce the likelihood that teachers work sick, particularly during flu season. |
| Keywords: | sick leave; teacher absence; presenteeism; moral hazard; labor supply ; |
| JEL: | I12 I13 I18 I28 J22 J28 J32 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:yor:hectdg:24/10 |
| By: | Chiara Belletti; Elizaveta Pronkina; Michelangelo Rossi |
| Abstract: | Do rating systems provide incentives to sellers when they are about to exit a market? Using data from Airbnb, this paper examines how end-of-game considerations affect hosts’ effort decisions. We take advantage of a regulation on short-term rentals in the City of Los Angeles to identify hosts who anticipated their imminent exit from the platform due to non-compliance with new eligibility rules. We focus on hosts who left the platform as a result of the regulation and measure their effort with listing’s ratings in effort-related categories such as check-in, communication and cleanliness. With a Difference-in-Differences and Event Study approach, we compare how listing’s effort-related ratings changed, compared to ratings on location, after the regulation announcement and during its implementation. We document a statistically significant decrease in effort in the last periods of the hosts’ career. Our findings provide insights for platform managers, highlighting the adverse effects of end-of-game considerations on how rating systems affect sellers’ incentives for the provision of high-quality services. |
| Keywords: | rating systems, online reputation, digital platforms |
| JEL: | D82 L14 L86 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11253 |
| By: | Stefano Castaldo (University of Padova) |
| Abstract: | I study household investment decisions to shed light on how people approach and plan for retirement. To address this topic I exploit a particular institutional context. In Italy, private and public sector employees receive a lump sum upon retirement. This exogenous shock to liquidity presents an opportunity to see how people re-balance their portfolios for retirement. Studying data from the Survey on Household Income and Wealth (SHIW) in the period 1993-2016, and comparing people marginally above and below the labor pension eligibility threshold, I find that new retirees increased investments in stocks and in housing. This result is determined by the receipt of the liquidity infusion and is robust to testing against a number of alternative explanations, including stock market entry costs and the increase in leisure time. These results suggest that newly retired have a long-term investment horizon. |
| Keywords: | household investment decisions, retirement |
| URL: | https://d.repec.org/n?u=RePEc:pad:wpaper:0313 |
| By: | Yao Lu; Gordon M. Phillips; Jia Yang |
| Abstract: | We examine the rise of cloud computing and AI in China and their impacts on industry dynamics after the shock to the cost of Internet-based computing power and services. We find that cloud computing is associated with an increase in firm entry, exit and the likelihood of M&A in industries that depend more on cloud infrastructure. Conversely, AI adoption has no impact on entry but reduces the likelihood of exit and M&A. Firm size plays a crucial role in these dynamics: cloud computing increases exit rates across all firms, while larger firms benefit from AI, experiencing reduced exit rates. Cloud computing decreases industry concentration but AI increases concentration. On the financing side, firms exposed to cloud computing increase equity and venture capital financing, while only large firms increase equity financing when exposed to AI. |
| JEL: | D25 G3 G34 L20 L23 L25 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32811 |
| By: | W. Bentley MacLeod; Roman Rivera |
| Abstract: | Theories of crime in economics focus on the roles of deterrence and incapacitation in reducing criminal activity. In addition to deterrence, a growing body of empirical evidence has shown that both income support and employment subsidies can play a role in crime reduction. This paper extends the Becker-Ehrlich model to a standard labor supply model that includes the notion of a consumption need (Barzel and McDonald (1973)) highlights the role of substitution vs income effects when an individual chooses to engage in crime. Second, we show that whether the production of criminal activity is a substitute or a complement with the production of legitimate activity is central to the design of optimal policy. We find that both individual responsiveness to deterrence and optimal policy vary considerably with context, which is consistent with the large variation in the effect of deterrence on crime. Hence, optimal policy is a combination of deterrence, work subsidies and direct income transfers to the individual that vary with both income and location. |
| JEL: | D6 H20 J20 K14 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32805 |
| By: | Victor Lavy; Rigissa Megalokonomou |
| Abstract: | A recent critique of using teachers’ test score value-added (TVA) is that teacher quality is multifaceted; some teachers are effective in raising test scores, others are effective in improving long-term outcomes This paper exploits an institutional setting where high school teachers are randomly assigned to classes to compute multiple long-run TVA measures based on university schooling outcomes and high school behavior. We find substantial correlations between test scores and long-run TVA but zero correlations between these two TVA measures and behavior TVA. We find that short-term test-score TVA and long-run TVA are highly correlated and equally good predictors of long-term outcomes. |
| Keywords: | teacher quality, quasi-experimental random assignment, university quality, choice of university study, panel information on teachers, teacher value added |
| JEL: | J24 J21 J16 I24 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11216 |
| By: | Amanda Dahlstrand; Nestor Le Nestour; Guy Michaels |
| Abstract: | Online delivery of one-to-one services offers potential cost savings and increased convenience, yet relatively little is known about its impacts on providers and consumers. This paper studies the online delivery of healthcare, focusing on primary care doctor consultations. We use novel data from Sweden and an effectively random assignment of patients to nurses, who differ in their propensity to direct patients to online versus in-person consultations. Our findings reveal that online consultations are delivered sooner, are shorter, and yield similar in-consultation outcomes, including rates of diagnosis, prescriptions, and specialist referrals, as well as patient satisfaction. However, in the short term, online consultations lead to more emergency department (ED) visits and additional in-person primary care visits, though no significant medium-term health effects are observed. We discuss the extent to which follow-ups reduce online’s cost savings, as well as online’s advantages for different patients and how to improve hybrid organizations’ cost effectiveness. |
| Keywords: | telehealth, remote work, online services |
| JEL: | J44 I11 O33 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11250 |
| By: | Bøje-Kovács, Bence János (Aalborg University, Department of the Built Environment); Mulalic, Ismir (Department of Economics, Copenhagen Business School); Schultz-Nielsen, Marie Louise (ROCKWOOL Foundation Research) |
| Abstract: | In this paper, we investigate the impact of municipal mergers on residential mobility in a quasi-natural experiment setting by examining how local economic environment and neighborhood composition respond to the loss of local public administration. Utilizing comprehensive neighborhood-level data from Denmark spanning 1996 to 2015, we find that the loss of the town-hall triggers emigration, leading to a re-duction in locally supplied public goods. This affects the local housing market and job availability, leading to lower housing prices, higher wages, and longer com-mutes. Ultimately, the loss of the town-hall bears major negative consequences for inhabitants. |
| Keywords: | Municipal amalgamation; Regional migration; Neighborhood characteristics; Local labor markets |
| JEL: | H75 J23 R23 R53 |
| Date: | 2024–08–04 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:cbsnow:2024_012 |