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on Labor Markets - Supply, Demand, and Wages |
| By: | Jaime Arellano-Bover; Carolina Bussotti; John M. Nunley; R. Alan Seals |
| Abstract: | We analyze the initial job-market matching of new US college graduates with a large-scale audit study conducted during 2016 and 2017, in which 36, 880 résumés of college seniors were submitted to online job postings for business-related positions. We simulate the experience of US college students by incorporating variation in curricular and extracurricular activities. Our analysis reveals significant variation in callback rate returns to majors, with Biology and Economics majors receiving the highest rate, particularly in occupations involving high intensity of analytical and interpersonal skills. However, minors in History and Mathematics have precisely estimated zero effects on callback rates. Internship experiences that are social skills-oriented positively influence callbacks, yet this is not the case for analytical internships. Study abroad experiences enhance callback rates, predominantly in high interpersonal skill-intensive occupations. Listing both programming and data analysis skills significantly boosts callback rates. Our study provides a comprehensive characterization of which features of the college experience are more and less valuable during the high-stakes, first-job matching process. |
| Keywords: | college, returns to majors, returns to minors, returns to extracurriculars, audit study, first job |
| JEL: | J23 J24 I26 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12188 |
| By: | Hanna Brosch; Philipp Lergetporer; Florian Schoner |
| Abstract: | Firm training is key to meeting changing skill demands, yet little is known about the role of workers’ beliefs in shaping training participation. In a survey of 3, 701 workers in Germany, we document that they expect substantial returns to firm training – both in terms of earnings and non-pecuniary outcomes such as promotion chances, job task complexity, or enjoyment. These beliefs predict actual and intended training participation. Lower-skilled workers anticipate smaller non-pecuniary returns, partly explaining their lower uptake. An information treatment addressing return beliefs significantly increases training intentions among lower-skilled workers, suggesting that targeting beliefs may help narrow participation gaps between lower- and higher-skilled workers. |
| Keywords: | beliefs, firm training, skill mismatch, human capital, survey |
| JEL: | J24 J31 D83 I21 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12183 |
| By: | Raquel Fonseca; Etienne Lalé; François Langot; Thepthida Sopraseuth (CY Cergy Paris Université, THEMA) |
| Abstract: | We develop a general-equilibrium OLG model of human capital to study the dynamics of the U.S. college premium and lifetime wage profiles between 1940 and 2020. The model features endogenous education and on-the-job training, along with exogenous aggregate (skill-neutral and skill-biased) shocks and cohort-specific trends in initial human capital endowments and learning capabilities. The estimated model replicates the W-shaped evolution of the college premium and the flattening then steepening of lifetime wage profiles. We show that changes in labor efficiency, rather than changes in relative skill prices, are the main driver of these dynamics. We quantify the contribution of estimated exogenous drivers and find a key role for the deterioration of human capital endowments and learning abilities among more recent cohorts. Crucially, endogenous adjustments in educational attainment and skill prices serve as powerful equalizing forces. Without these market mechanisms, the gap between the lifetime wage profiles of skilled and unskilled workers would widen and the college premium double. |
| Keywords: | College premium, Life-cycle wage profile, On-the-job training, Human capital, Technological progress |
| JEL: | E24 E25 J24 J31 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ema:worpap:2025-12 |
| By: | Bäckström, Peter (Department of Economics, Umeå University) |
| Abstract: | Successfully finding and maintaining civilian employment is crucial for military veterans' reintegration into civilian society. This paper examines how formerly deployed Swedish military veterans are treated in civilian hiring situations using data from a stated-choice experiment. Approximately 1, 000 survey respondents were asked to imagine advising on recruitment for a job similar to their own and to choose repeatedly between two hypothetical job applicants, some of whom were described as military veterans. The results indicate that former military deployment can be both an advantage and a disadvantage in job applications, depending on the occupational field and recruiter characteristics. Military veterans who served as infantry soldiers face obstacles when applying for jobs in social professions, especially if the recruiter is female or lacks personal experience with military veterans. Conversely, veterans who served in military staff positions are more likely to be called for an interview, particularly if the recruiter is male, has personal experience with military veterans, or if the job is for a managerial position. These findings suggest that the impact of military deployment on job prospects is highly context-dependent. |
| Keywords: | military veterans; hiring; choice experiment; hiring bias |
| JEL: | C91 H56 J24 J71 |
| Date: | 2025–10–02 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:umnees:1037 |
| By: | Maré David (Motu Economic and Public Policy Research); Richard Fabling (Motu Economic and Public Policy Research) |
| Abstract: | We examine the contribution to ethnic earnings gaps of differences in the firms where different ethnic groups work. We use linked employer-employee data to estimate worker and firm pay premiums (fixed effects), adapting existing methods to deal with multiple-response ethnicities and weighting. The sorting of workers across firms contributes 10-26 percent of within-ethnicity gender gaps but affects average earnings for men or women within ethnic groups by less than 1 percent, in the face of average ethnic earnings gaps of up to 14 percent. We conclude that within-firm earnings differences are the dominant source of ethnic earnings gaps. |
| Keywords: | Earnings; ethnicity; sorting; two-way fixed effects; linked employer employee data |
| JEL: | J30 J15 J71 J42 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:mtu:wpaper:25_07 |
| By: | Anton A. Cheremukhin; Paulina Restrepo-Echavarria |
| Abstract: | We develop a tractable model of monopsony power based on information frictions in job search. Workers and firms choose probabilistic search strategies, with information costs limiting how precisely they can target matches. Firms post wages strategically, anticipating application behavior and exploiting a first-mover advantage. The model nests both directed and random search as limiting cases and yields a closed-form wage equation that shows the effects on wage-setting power of search frictions, labor market tightness, and sorting. Wage markdowns in equilibrium arise not only from limited labor supply elasticity but also from sorting patterns and demand-side frictions. In highly assortative environments, the absence of wage competition allows firms to capture nearly the full surplus, even when labor supply is elastic. Numerical results replicate markdowns of 30-40% and suggest that constrained-efficient wages would be approximately 20% higher. Our framework unifies the analysis of monopsony, sorting, and wage posting, and provides a computationally efficient method for evaluating directed search equilibria. |
| Keywords: | monopsony |
| JEL: | J42 |
| Date: | 2025–09–30 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedlwp:101867 |
| By: | Mehrzad B. Baktash; John S. Heywood; Uwe Jirjahn |
| Abstract: | Using German survey data, we show conflicting influences of performance pay on overall life satisfaction. The overall influence reflects a strong positive influence through domains of life satisfaction associated with the job (job satisfaction, individual earnings satisfaction and household earning satisfaction) and a strong negative influence through domains away from the job (health satisfaction, sleep satisfaction and family life satisfaction). This trade-off between work and home generalizes and helps explain many previous studies examining much more specific consequences of performance pay. Finally, controlling for the mediating role of the domains, the direct influence on life satisfaction is positive for women and insignificantly different from zero for men. |
| Keywords: | Performance Pay, Life Satisfaction, Well-Being, Satisfaction Domains, Gender |
| JEL: | D10 J22 J33 M52 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:trr:wpaper:202509 |
| By: | Klaus Desmet; Dávid Krisztián Nagy; Esteban Rossi-Hansberg |
| Abstract: | This paper studies how human capital shapes the economic geography of development. We develop a model in which the cost of acquiring human capital varies across space, and regions with higher human capital innovate more. Locations are spatially connected through migration and trade. There are localized agglomeration economies, and human-capital-augmenting technology diffuses across space. Using high-resolution data on income and schooling, we quantify and simulate the model at the 1° x 1° resolution for the entire globe. Over the span of two centuries, the model predicts strong persistence in the spatial distribution of development — unlike spatial dynamic models without human capital, which predict convergence. Proportionally lowering the cost of education in sub-Saharan Africa or Central and South Asia raises local outcomes but reduces global welfare, whereas the same policy in Latin America improves global outcomes. An alternative policy equalizing educational costs across sub-Saharan Africa generates relatively worse outcomes, as population reallocates within the region toward less productive areas. Central to these results is the estimated negative correlation between the education costs and local fundamentals, as well as inefficiencies in the spatial allocation due to externalities. |
| JEL: | E24 F10 I24 J24 O11 O18 O33 R12 R23 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34310 |
| By: | R. Maria del Rio-Chanona; Ekkehard Ernst; Rossana Merola; Daniel Samaan; Ole Teutloff |
| Abstract: | Generative AI is altering work processes, task composition, and organizational design, yet its effects on employment and the macroeconomy remain unresolved. In this review, we synthesize theory and empirical evidence at three levels. First, we trace the evolution from aggregate production frameworks to task- and expertise-based models. Second, we quantitatively review and compare (ex-ante) AI exposure measures of occupations from multiple studies and find convergence towards high-wage jobs. Third, we assemble ex-post evidence of AI's impact on employment from randomized controlled trials (RCTs), field experiments, and digital trace data (e.g., online labor platforms, software repositories), complemented by partial coverage of surveys. Across the reviewed studies, productivity gains are sizable but context-dependent: on the order of 20 to 60 percent in controlled RCTs, and 15 to 30 percent in field experiments. Novice workers tend to benefit more from LLMs in simple tasks. Across complex tasks, evidence is mixed on whether low or high-skilled workers benefit more. Digital trace data show substitution between humans and machines in writing and translation alongside rising demand for AI, with mild evidence of declining demand for novice workers. A more substantial decrease in demand for novice jobs across AI complementary work emerges from recent studies using surveys, platform payment records, or administrative data. Research gaps include the focus on simple tasks in experiments, the limited diversity of LLMs studied, and technology-centric AI exposure measures that overlook adoption dynamics and whether exposure translates into substitution, productivity gains, erode or increase expertise. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2509.15265 |
| By: | Ajay K. Agrawal; Joshua S. Gans; Avi Goldfarb |
| Abstract: | This paper examines how the emergence of transformative AI systems providing ``genius on demand" would affect knowledge worker allocation and labour market outcomes. We develop a simple model distinguishing between routine knowledge workers, who can only apply existing knowledge with some uncertainty, and genius workers, who create new knowledge at a cost increasing with distance from a known point. When genius capacity is scarce, we find it should be allocated primarily to questions at domain boundaries rather than at midpoints between known answers. The introduction of AI geniuses fundamentally transforms this allocation. In the short run, human geniuses specialise in questions that are furthest from existing knowledge, where their comparative advantage over AI is greatest. In the long run, routine workers may be completely displaced if AI efficiency approaches human genius efficiency. |
| JEL: | D24 J24 O33 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34316 |
| By: | Agustina Colonna; Lorenzo Aldeco Leo |
| Abstract: | This paper studies the use of domestic outsourcing to circumvent labor benefits and its consequences for firms and workers. Drawing on longitudinal establishment data and employer-employee data from Mexico, we provide evidence that many firms were outsourcing their entire workforce to avoid mandatory profit-sharing. A model shows that the incentive for this practice arises when firms face a labor supply curve that is less elastic to profit-sharing than to wages. We then leverage a reform that restricted outsourcing to assess the model predictions. The reform caused previously-outsourcing establishments to insource their workers and comply with profit-sharing, with no evidence of an effect on total employment. Treated plants partially offset the profit-sharing increase through lower wage growth, yet total worker compensation increased, consistent with our model. Self-collected survey evidence suggests that inelasticity to profit-sharing is partly explained by information frictions among workers, implying that they benefited from the reform. |
| Keywords: | Outsourcing;Profit-sharing;Labor Market;Market Power |
| JEL: | J08 J41 O12 O14 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:bdm:wpaper:2025-15 |
| By: | Banze, Amanda Alexandra (Monash University) |
| Abstract: | Skill mismatches between university education and labour market demand impose substantial costs on individuals and the wider economy, yet systematic evidence for Australia is scarce. Using nationally representative data from the HILDA Survey, the Australian Bureau of Statistics, and the Quality Indicators for Learning and Teaching, this study examines the impact of vertical mismatches, where workers are overeducated for their roles, and horizontal mismatches, where their field of study does not align with their occupation. Regression models, informed by the labor economic literature, indicate that mismatched workers earn between 10 and 21 percent less than well-matched peers, report lower job satisfaction, and are concentrated in sectors with weaker productivity performance. These findings are consistent with international evidence and highlight mismatches as a structural inefficiency in the labour market. Building on these estimates, policy simulations suggest that curriculum alignment, stronger industry-academic collaboration, and reskilling programs could reduce mismatch rates by 3 to 4 percentage points, translating into measurable gains in wages and productivity, especially in fast-evolving industries. By combining empirical estimates with forward-looking simulations, the study provides new evidence on the economic implications of skill mismatch in Australia and offers a framework for evaluating the potential impact of education and labour market policy interventions. |
| Keywords: | Skill mismatch ; field-of-study mismatch ; overeducation ; human capital ; labor ; market efficiency JEL classifications: I23 ; I26 ; J24 ; J31 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:wrk:wrkesp:87 |
| By: | Selidji Caroline Tossou |
| Abstract: | In this paper, I investigate the 2017 labor market reform in Benin, which reduced firing costs and allowed firms to renew short-term contracts indefinitely. Using micro-data from the Harmonized Household Living Standards Surveys and a two-way fixed effect approach with nearby countries as the control group, I assess the reform's impact on employment, worker tenure, contract types, and wages. My empirical results reveal a 2.6 percentage point (24.5 percent) increase in formal sector employment and a 2.8 percentage point (3.2 percent) reduction in informal employment. Formal sector tenure decreased by 0.23 months for short-term contract workers, reflecting higher turnover, while long-term contract tenure increased by 0.15 months. The likelihood of securing a permanent contract rose by 23.2 percentage points (41.6 percent) in the formal sector, indicating that firms used long-term contracts to retain high-productivity workers. Wages in the formal sector increased by 33.6 USD per month on average, with workers on short-term contracts experiencing a wage increase of 19.6 USD and those on long-term contracts seeing an increase of 23.4 USD. I complement these findings with a theoretical job search model, which explains the mechanisms through which lowered firing costs affected firm hiring decisions, market tightness, and the sorting of workers across sectors. This study provides robust evidence of labor market reallocation and highlights the complex trade-offs between flexibility, employment stability, and wages in a developing country context. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.03668 |