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on Labor Markets - Supply, Demand, and Wages |
| By: | Francesco Roncone |
| Abstract: | Both the demand for skilled labor and the skill wage premium have become increasingly dispersed across the United States. This paper examines how technological change within occupations drives these uneven local developments. Combining a novel measure of technological change - capturing shifts in task intensities within 430 detailed occupations - with patent data and microdata, I demonstrate that innovation reallocates labor toward cognitive-intensive tasks, especially in densely populated areas. Motivated by this, I show that greater exposure to technological change increases the relative employment of college-educated workers while causing within-occupation wage declines for less-educated workers, widening the college wage premium. |
| JEL: | J23 J24 J31 O33 R12 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:bol:bodewp:wp1208 |
| By: | Egana-delSol, Pablo (Adolfo Ibanez University); Vargas-Faulbaum, Luis (Adolfo Ibanez University) |
| Abstract: | This article offers a comprehensive review of Artificial Intelligence's (AI) effects on global labour markets, with a particular focus on developing economies. Drawing on an extensive body of evidence, it demonstrates that AI's disruptive potential diverges markedly from earlier waves of automation, extending its reach into occupations once deemed insulated—especially those demanding advanced education and complex cognitive abilities. The analysis reveals significant heterogeneity in AI exposure across countries at different development stages and among workers distinguished by skill sets, educational attainment, age, and gender, underscoring its unequal distributional consequences. To harness AI's benefits while safeguarding vulnerable groups, we propose four strategic policy levers: bolstering digital infrastructure, expanding vocational training and lifelong upskilling programmes, formalising labour markets, and integrating AI tools within social protection delivery. Collectively, these measures foster a human centred adoption of AI, bridge the digital divide, and promote inclusive growth, thereby mitigating adverse impacts on employment and wages. |
| Keywords: | artificial intelligence, labour market, inequality, automation, social protection |
| JEL: | J23 J24 J31 O1 O33 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izapps:pp216 |
| By: | Ignacio Belloc (University of Zaragoza); José Ignacio Gimenez-Nadal1 (University of Zaragoza); José Alberto Molina (Departamento de Análisis Económico, Universidad de Zaragoza) |
| Abstract: | Understanding the determinants of worker effort is central to Economics, as even small changes in productivity can have significant implications for economic growth and labor market performance. This study examines the relationship between extreme temperatures and work effort—proxied by non-work time while at the workplace—using data from the American Time Use Survey (ATUS) for the period 2003–2019. Results indicate that extremely hot days (≥ 100ºF) are related to increased time spent at work not working, particularly among women in non-supervised occupations. On these days, women in non- supervised occupations spend 6.79 more minutes at work not working compared to comfortable temperature days. Men, by contrast, do not exhibit significant changes in non-work time at work. Furthermore, the results align with increased worker bargaining power during economic expansions, which facilitates labor supply adjustments on extremely hot days, and with hypotheses regarding adaptation and acclimation to high temperatures in warmer countries. These findings underscore the relevance of temperature as a determinant of worker effort, reveal a previously overlooked margin of labor adjustment, and highlight the moderating role of occupational supervision in shaping behavioral responses to environmental stressors. |
| Keywords: | Climate change, temperature, non-work time at work, supervision, ATUS |
| JEL: | J16 J22 J24 Q54 |
| Date: | 2025–07–29 |
| URL: | https://d.repec.org/n?u=RePEc:boc:bocoec:1092 |
| By: | Liu, K.; Mogstad, M.; Salvanes, K. G. |
| Abstract: | We measure the returns to education in the presence of earnings uncertainty and employment risk over the life cycle. The context of our study is Norway, offering a credible instrument for schooling and population panel data with nearly career long earnings histories. We first characterize the causal relationship between schooling, earnings, and employment over the life cycle. This relationship allows us draw conclusions about how additional schooling affects the probability of having a job as well as the level and dispersion of earnings over the life cycle. To disentangle uncertainty from heterogeneity, we next model the underlying earnings process, targeting the estimated causal relationship between schooling, earnings, and employment over the life cycle. We then fit a life-cycle model with precautionary saving motive to the estimated earnings process and observed consumption profiles. The estimated model allows us to quantify how earnings uncertainty and employment risk affect the incentives to invest in education, and to examine the extent to which the progressive tax-transfer system distorts these incentives. |
| Keywords: | Returns to Education, life-Cycle Earnings, Income Uncertainty, Employment Risk, Precautionary Savings |
| JEL: | I26 J24 J31 D91 |
| Date: | 2025–06–30 |
| URL: | https://d.repec.org/n?u=RePEc:cam:camdae:2549 |
| By: | Papps, Kerry L. (University of Bradford) |
| Abstract: | The effects on criminal behaviour of raising the minimum wage for those aged 25 and over in the United Kingdom are analysed, using data on police stop and search activities. A 1% increase in the minimum wage raises the fraction of people stopped by the police by 2.96%, the fraction of people caught with an incriminating item by 1.43%, and the fraction of people arrested as a consequence by 1.27%. This effect is almost entirely driven by drug searches made outside business hours, suggesting that the minimum wage raises crime principally by raising disposable income – and drug consumption – among workers. |
| Keywords: | stop and search, crime, minimum wage |
| JEL: | K42 J22 J31 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17989 |
| By: | Daron Acemoglu (MIT); Fredric Kong (MIT); Pascual Restrepo (Yale University) |
| Abstract: | This chapter reviews recent advances in the task model and shows how this framework can be put to work to understand trends in the labor market in recent decades. Production in each industry requires the completion of various tasks that can be assigned to workers with different skills or to capital. Factors of production have well-defined comparative advantage across tasks, which governs substitution patterns. Technological change can: (1) augment a specific labor type—e.g., increase the productivity of labor in tasks it is already performing; (2) augment capital; (3) automate work by enabling capital to perform tasks previously allocated to labor; (4) create new tasks. The task model clarifies that these different technologies have distinct effects on labor demand, factor shares, and productivity and their full impact depends on the substitution patterns between workers that arise endogenously in the task framework. We explore the implications of the task framework using reduced-form evidence, highlighting the central role of automation and new tasks in recent labor market trends. We also explain how the general equilibrium effects ignored in these reduced-form approaches can be estimated structurally. |
| Keywords: | automation, productivity, technology, inequality, wages, rents |
| JEL: | J23 J31 O33 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:crm:wpaper:2535 |
| By: | Eleanor W. Dillon; Lisa B. Kahn; Joanna Venator; Michael Dalton |
| Abstract: | Most U.S. states have workforce development programs that offer firms grants to train their own workers. We create unique data linkages between participating firms, employment, and vacancies to explore the determinants and consequences of such programs. Training grants are more prevalent in markets where firms face greater employee poaching risk, suggesting these programs help overcome a market failure in updating worker skills. After training, firms experience prolonged employment growth and down-skilling in their job posts, relative to a matched control group. Training appears to help firms move toward optimal scale and expand opportunities for less skilled workers. |
| JEL: | J24 J42 J68 M53 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34012 |
| By: | Héctor Juan Villarreal Páez (School of Government and Public Transformation, Tecnológico de Monterrey); Diego Vázquez-Pimentel (School of Government and Public Transformation, Tecnológico de Monterrey) |
| Abstract: | This paper explores the dynamics of labor informality in Mexico by developing a discrete choice mixed logit model to explain the transitions between labor states—namely, not employed, formal employment, and informal employment—among individuals aged 18 to 65. The study offers critical insights into the informal sector’s heterogeneity, with particular focus on voluntary versus involuntary informality, while also contributing a novel estimation strategy that combines supply- and demand-side constraints within the informal labor market. The results highlight the persistent barriers to formal employment for a significant segment of the labor force, despite policy efforts aimed at reducing informality in Mexico. |
| Keywords: | informality, restricted choices, microsimulations, labor policies |
| JEL: | J24 J31 C54 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:gnt:wpaper:5 |
| By: | David Autor (MIT); David Dorn (University of Zurich); Gordon Hanson (Harvard University); Maggie Jones (US Census Bureau); Bradley Setzler (Pennsylvania State University) |
| Abstract: | This chapter analyzes the distinct adjustment paths of U.S. labor markets (places) and U.S. workers (people) to increased Chinese import competition during the 2000s. Using comprehensive register data for 2000-2019, we document that employment levels more than fully rebound in trade-exposed places after 2010, while employment-to population ratios remain depressed and manufacturing employment further atrophies. The adjustment of places to trade shocks is generational: affected areas recover primarily by adding workers to non-manufacturing who were below working age when the shock occurred. Entrants are disproportionately native-born Hispanics, foreign-born immigrants, women, and the college-educated, who find employment in relatively low-wage service industries in healthcare, education, retail, and hospitality. Using the panel structure of the employer-employee data, we decompose changes in the employment composition of places into trade-induced shifts in the gross flows of people across sectors, locations, and non-employment status. Contrary to standard models, trade shocks reduce geographic mobility, with both in- and out-migration remaining depressed through 2019. The employment recovery stems almost entirely from young adults and foreign-born immigrants taking their first U.S. jobs in affected areas, with minimal contributions from cross-sector transitions of former manufacturing workers. Although worker inflows into non-manufacturing more than fully offset manufacturing employment losses in trade-exposed locations after 2010, incumbent workers neither fully recover earnings losses nor predominantly exit the labor market, but rather age in place as communities undergo rapid demographic and industrial transitions. |
| Keywords: | China trade shock, Local labor markets, Sectoral reallocation, Manufacturing decline, Worker mobility |
| JEL: | F16 J23 J31 J62 L6 R12 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:crm:wpaper:2537 |
| By: | Patrick Kline (University of California-Berkeley) |
| Abstract: | This chapter reviews the theory of monopsonistic wage setting, its empirical implications, and some puzzles the framework has struggled to explain. We begin by examining the fundamentals of monopsonistic wage determination. The core of the theory is a mapping from the distribution of worker outside options to wages. We study non-parametric shape restrictions that ensure this mapping is unique. Building on these results, we introduce a menu of tractable parametrizations of labor supply to the firm, some of which are shown to emerge naturally from equilibrium search models. Next, we review why wage markdowns do not necessarily signal inefficiency and discuss some criteria for assessing misallocation in a monopsony model with search frictions. Turning to the model’s empirical implications, we examine how the magnitude of productivity-wage passthrough depends on the super-elasticity of labor supply to the firm and establish that compensating differentials for firm amenities depend on the curvature of the outside option distribution. We show that firm-specific shifts in either productivity or amenities can be used as instruments to identify labor supply elasticities and review strategies for estimating non-constant elasticities. We then consider extensions of the basic model involving third-degree wage discrimination and examine their ability to rationalize patterns of worker-firm sorting. Monopsony models traditionally assume that firms commit to posted wages. Relaxing this assumption, we develop a connection between the first-order conditions of the monopsony model and models of bargaining with incomplete information. These models explain why bilateral inefficiencies may persist in the presence of negotiation, yield predictions about the response of within-firm wage dispersion to productivity shocks, and suggest reasons why some productivity shifters may not constitute excludable instruments. Next, we endogenize productivity by allowing for efficiency wages, non-constant returns to scale, and price-cost markups. Empirical monopsony estimates often suggest that firms enjoy implausibly large profit margins. We argue that allowing for non-constant labor supply elasticities and firm adjustment costs can potentially resolve this difficulty. Finally, we review why the strong passthrough of minimum wages to product prices presents a challenging puzzle for standard monopsony models and discuss potential reconciliations to this puzzle involving firm heterogeneity, quality upgrading, and lumpy price adjustment. |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:crm:wpaper:2536 |
| By: | Ajay K. Agrawal; Joshua S. Gans; Avi Goldfarb |
| Abstract: | Steve Jobs described computers as “bicycles for the mind, ” a tool that allowed people to dramatically leverage their capabilities. This paper presents a formal model of cognitive tools and technologies that enhance mental capabilities. We consider agents engaged in iterative task improvement, where cognitive tools are assumed to be substitutes for implementation skills and may or may not be complements to judgment, depending on their type. The ability to recognise opportunities to start or improve a process, which we term opportunity judgment, is shown to always complement cognitive tools. The ability to know which action to take in a given state, which we term payoff judgment, is not necessarily a complement to cognitive tools. Using these concepts, we can synthesise the empirical literature on the impact of computers and artificial intelligence (AI) on productivity and inequality. Specifically, while both computers and AI appear to increase productivity, computers have also contributed to increased inequality. Empirical work on the impact of AI on inequality has shown both increases and decreases, depending on the context. We also apply the model to understand how cognitive tools might influence incentives to automate processes and allocate decision-making authority within teams. |
| JEL: | D83 J24 L23 O33 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34034 |
| By: | Jorge Casanova; David Catalán; Florentino Felgueroso; Marcel Jansen |
| Abstract: | This paper estimates the effects of a sharp rise in the Spanish minimum wage on firm-level employment and worker flows. Our analysis uses a novel dataset of linked employer-employee data and exploits the variation in the share of workers of each establishment who were directly affected by the increase in the minimum wage using a difference-in-differences design. We find that the 22% minimum wage hike caused an increase in wage growth of approximately 11 percentage points and a reduction in employment growth of around 5 percentage points at establishments where all workers were affected relative to firms where no workers were affected, resulting in an own-wage elasticity of -0.39. The negative effects on employment are concentrated in small establishments with up to five employees, but we show that the minimum wage had much broader implications as it caused a simultaneous increase in inflows and worker outflows for affected establishments with up to 250 employees. The resulting increase in gross flows almost doubles the net effects on employment leading to a deterioration of job quality. We link these novel findings to the dual structure of the Spanish labor market. |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:fda:fdaeee:eee2025-10 |
| By: | Laura Conti (Bank of Italy); Marco Francesconi (University of Essex); Giulio Papini (Bank of Italy); Michel Serafinelli (King’s College London) |
| Abstract: | This paper documents how the local labor market (LLM) responds to a change in touristic attractiveness. Leveraging largely underutilized data from several sources, we exploit a unique classification of Italian localities based on their main touristic assets and aggregate trends in foreign tourists' choices in a shift-share research design. Looking at all LLMs, we find a positive relationship between changes in attractiveness and changes in the local tourism-related economic activity, with a positive impact on tourism expenditure and tourism employment, but no effect on total employment. In high-unemployment LLMs, however, we find evidence of sizable total employment effects and indirect effects generated through industries related to tourism and firms in the nontradable sector and the manufacturing sector. |
| Keywords: | local economic activity; tourism; job growth; unemployment; heterogeneity; natural resource curse. |
| JEL: | R11 J21 R12 R23 Z30 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:crm:wpaper:2532 |
| By: | Laguinge, Luis; Gasparini, Leonardo; Neidhöfer, Guido |
| Abstract: | Conditional Cash Transfers (CCTs) have become a key antipoverty policy in Latin America in the last 25 years. The ultimate goal of this kind of programs is to break the intergenerational transmission of poverty through the promotion of human capital accumulation of children in vulnerable households. In this paper, we explore this issue by estimating the long-run effects of the largest CCT in Latin America: the Brazilian Bolsa Familia. Through a combination of the two-stage-two-sample method and a difference-in-differences approach, we find evidence consistent with a positive long-run impact of Bolsa Familia among former beneficiaries. In particular, we find a significant positive effect on education and labor income, and a negative effect on the likelihood of being a current beneficiary of this social transfer. |
| Keywords: | Conditional cash transfers, long term effects, human capital formation, Bolsa Familia, Brazil, Latin America |
| JEL: | D04 I38 J24 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:319892 |
| By: | Helena Manger |
| Abstract: | Despite extensive literature on incentives to increase employees’ work performance, economic research on employer-provided non-monetary benefits remains rare. This study investigates the relationship between benefits and employees’ work effort utilizing data from the German Socio-Economic Panel. The analysis is based on data from eleven survey waves from 2006 to 2022 and considers five benefit types: meal stipends, firm cars, phones and computers for personal use, as well as expense payments exceeding minimum costs. The results reveal a modest positive association between benefit receipt and employees’ work effort, measured as the difference between actual and contractual working hours per week. On average, benefit receipt is associated with 13 minutes additional work per week. Furthermore, receiving a greater variety of benefit types is linked to even higher work effort, with two to five or more benefit types associated with an average increase of 27 to 97 minutes of extra work per week. However, the effectiveness of benefits does not seem to be universal but varies depending on the type of benefit as well as individual and organizational characteristics. Notably, the positive association of benefits with work effort appears significantly higher for males than for females, and sectoral differences are evident. These findings underscore the importance of further research to better understand the specific conditions under which benefits can effectively enhance employee work effort. |
| Keywords: | Non-monetary incentives, benefits, work effort, motivation, productivity, SOEP, overtime |
| JEL: | C83 J32 M52 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:diw:diwsop:diw_sp1228 |
| By: | Diego Ascarza-Mendoza (School of Government and Public Transformation, Tecnológico de Monterrey); Christian Velasquez (Central Reserve Bank of Peru) |
| Abstract: | This paper studies the dynamics of mental health over the life cycle and introduces a parsimonious statistical model suitable for structural economic applications. Using data from the Panel Study of Income Dynamics (PSID), we document new facts on mental health dynamics: mental health generally improves with age, though it has worsened in more recent cohorts. Recovery rates are high and increase with age, and individuals are likely to remain in good mental health, with transitions depending on duration in the current state. Mental health is strongly correlated with fixed labor productivity and with the presence of depression early in life, suggesting that ex-ante conditions play a key role in shaping its evolution. Inequality in mental health remains stable across age. We estimate the model using the Simulated Method of Moments and show it replicates key empirical patterns. We then incorporate the statistical model into a life-cycle framework with endogenous labor supply decisions, calibrated to match observed differences in labor supply—both at the extensive and intensive margins—by mental health status. We find large monetary and welfare losses from depression symptoms, with significant heterogeneity by ex-ante conditions |
| Keywords: | Mental health, recovery, depression, physical health |
| JEL: | D91 E21 I13 I18 J22 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:gnt:wpaper:7 |
| By: | Hall, Jonathan D.; Thiele, Derek |
| Abstract: | Holt and Vinopal (2023) investigate whether there is inequality in how much time people spend waiting for services using the American Time Use Survey (ATUS). They find that (1) high-income people are both less likely to wait and spend less time waiting than low-income people, and that (2) this is true even after conditioning on observable differences. Further, they find that (3) income has heterogeneous effects on waiting time by race and ethnicity. First, we successfully computationally reproduce the paper's main claims, but uncover two minor coding errors. However, we find five parts of Holt and Vinopal (2023) where the description in the paper differs from what is implemented in the code. Fixing these impacts their results. We also conduct several robustness tests, including calculating standard errors using the replication weights provided by ATUS, updating the outcome variables to use all waiting time for services recorded in the ATUS, and using weekly earnings as an alternative measure to household income. Between fixing the differences between the code and the paper, and our robustness tests, we conclude that Claim (1) is robust, Claim (2) is robust in some specifications, and Claim (3) is not robust. |
| Keywords: | time use, inequality, waiting time, replication |
| JEL: | J22 D31 J15 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:i4rdps:243 |
| By: | Nicole Black (Centre for Health Economics, Monash Business School, Monash University); Danusha Jayawardana (Centre for Health Economics, Monash Business School, Monash University); Gawain Heckley (Health Economics Unit, Department of Clinical Science, Lund University) |
| Abstract: | Recent research shows that birth order affects human capital outcomes, yet there is limited empirical evidence on the underlying mechanisms. This study examines the effect of birth order on children’s time use across activities that are important for human capital development. Using detailed time-use diaries of Australian children aged 2-15, we find that within families with two or three children, later-born children spend less time on enrichment activities and more on digital media, compared to first-born children. We obtain the same findings when we repeat the analysis using detailed time-use diaries of US children. Further investigation reveals that part of the birth order effect is driven by parents spending less time with later-born children compared to first-borns. However, later-borns also independently devote less of their own time to enrichment activities, suggesting that personal time use may be an important mechanism behind the well-documented impact of birth order on human capital development. We find evidence that later-born children experience more lenient parenting, which may help explain this pattern of own time use. |
| Keywords: | Birth order, Children’s time use, Human capital development |
| JEL: | J12 J13 J22 J24 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:mhe:chemon:2025-12 |
| By: | Itzhak Ben-David; Alex Chinco |
| Abstract: | To increase a company’s earnings, a project must generate enough income next year to pay for its own financing. Hence, a manager who wants to maximize her EPS (earnings per share) should only invest in accretive projects that have income yields above the firm’s cheapest financing option. This is the max EPS analog to the positive-NPV (net present value) rule. Maximizing EPS ≠ minimizing investment. EPS maximizers use real investment to arbitrage between asset and capital markets. This framework rationalizes the pervasive use of IRRs (internal rates of return) and payback periods. An IRR effectively measures how accretive a project will be. A payback period expresses the project’s income yield as a multiple. Empirically, a simple max EPS model explains M&A payment method and investment-cash flow sensitivity. It also predicts which firms have higher proportions of convertible debt and capitalized |
| JEL: | D03 D21 D22 D92 G02 G31 G32 G34 G35 J33 L21 M41 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34061 |