|
on Labour Economics |
| By: | Naercio Filhoz (Universidade de Sao Paulo); Marc-Andreas Muendler (University of California, San Diego and CESifo); Garey Ramey (University of California, San Diego) |
| Abstract: | We employ a comprehensive matched employer-employee data set for Brazil to analyze wage determinants and compare results to Abowd, Kramarz, Margolis and Troske (2001) for French and U.S. manufacturing. Returns to education and experience in Brazilian manufacturing exceed those of the other countries, while occupation differentials are similar. The gender differential in Brazilian and U.S. manufacturing coincides, and is considerably smaller than in France. Estimates are unaffected by selectivity of Brazilian workers into formal employment. The links between firm performance and wage components in Brazil resemble those of France. Worker characteristics have comparable explanatory power for manufacturing wage variability in the three countries but establishment-fixed effects explain relatively less of the Brazilian wage variation. Despite the inclusion of establishment effects, regressors predict at most sixty percent of wage variability in any Brazilian sector, suggesting that explanations for earnings variability ought to focus on worker characteristics, not establishment wage policies. |
| Keywords: | Wage structure; wage inequality; matched employer-employee data; formal and informal employment; selectivity; Brazil, |
| Date: | 2005–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:ucsdec:2005-01r&r=lab |
| By: | Anna Batyra (Currently: Eitan Berglas School of Econ. IRES/ECON/Catholic University of Louvain); Henri R. Sneessens |
| Abstract: | Significant differences in unemployment incidence in Europe have been observed across skill groups, with the least skilled suffering the highest and most persistent unemployment rates. To identify policies alleviating this problem, we study the impact of reductions in employer social security contributions. We construct a general equilibrium model with three types of heterogeneous workers and firms, matching frictions, wage bargaining and a rigid minimum wage. We find evidence in favour of narrow tax cuts targeted at the minimum wage but we argue that it is most important to account for the effects of such reductions on both job creation and job destruction. The failure to do so may explain the gap between macro- and microeconometric evaluations of such policies in France and Belgium. Policy impact on welfare and inefficiencies induced by job competition, ladder effects and on-the-job search are discussed. |
| Keywords: | Skill Bias, Minimum Wage, Job Creation, Job Destruction, Job Competition, Search Unemployment, Taxation |
| JEL: | E24 J64 |
| Date: | 2006–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed006:142&r=lab |
| By: | Christian Haefke; Marcus Sonntag; Thijs van Rens |
| Abstract: | Shimer (2005) and Hall (2005) have documented the failure of standard labor market search models to match business cycle fluctuations in employment and unemployment. They argue that it is likely that wages are not adjusted as regularly as suggested by the model, which would explain why employment is more volatile than the model predicts. We explore whether this explanation is consistent with the data. The main insight is that the relevant wage data for the search model are not aggregate wages, but wages of newly hired workers. Preliminary results show that wages for those workers are much more volatile than aggregate wages, suggesting that other (real) frictions might be more important than wage stickiness |
| Keywords: | search model, cyclical properties, wage rigidities, volatility, wages |
| JEL: | E32 J30 |
| Date: | 2006–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed006:773&r=lab |
| By: | Tushar Kanti Nandi |
| Abstract: | This paper analyzes the relationship between employee participation in work teams, profit sharing and consultation between employees and management, and wages. It uses matched employeeestablishment data from the British economy. It takes explicit account of selectivity that arises from self-selection of employees into their preferred establishments and selective adoption of participatory practices by employers. The estimates indicate wage premium for the employees who work in establishments with participatory practices. The selectivity appears to be an important factor in the relationship between employee participation and wages. The estimates without selectivity correction suggest a lower wage premium than that suggested by selectivity corrected estimates. The selectivity corrected estimates show that employees in establishment with any one, two or all of the participatory practices earn a wage premium of 18%, 32.7% and 55.1%, respectively. The estimates of the interaction model of participation and education indicate that an extra year of education earns lower wage premium in establishments with participatory practices than in establishments with no participatory practice. This finding suggests that the equalizing effect of employee participation can reduce wage inequality between high and low educated employees |
| Keywords: | Work teams; Profit sharing; Employee participation; Selectivity; Wage |
| JEL: | C21 C25 J31 J24 J41 J53 L22 |
| Date: | 2006–07 |
| URL: | http://d.repec.org/n?u=RePEc:usi:wpaper:483&r=lab |
| By: | Alok Kumar (Economics University of Victoria) |
| Abstract: | This paper analyzes the general equilibrium effects of capital tax when there is a mandated minimum wage. The analysis is conducted in an inter-temporal search model in which firms post wages as in Burdett and Mortensen (1998). A(binding) minimum wage provides alower support for the distribution of wages. A decrease in capital tax leads to an increase in wage dispersion. In contrast, when the minimum wage is not binding, a lower capital tax reduces the dispersion in wages. A binding minimum wage also magnifies the positive effects of a lower capital tax on labor supply, employment, and output. The analysis suggests that a policy change which involves an increase in minimum wage and a fall in capital tax such that unemployment rate remains constant reduces dispersion of wages |
| Keywords: | Labor market search, capital tax, minimum wage, labor supply, wage dispersion, wage posting, general equilibrium |
| JEL: | E2 E6 J3 J4 |
| Date: | 2006–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed006:345&r=lab |
| By: | Donghoon Lee (Economics NYU); Kenneth I. Wolpin |
| Abstract: | This paper presents a unified treatment of and explanation for the evolution of wages and employment in the U.S. over the last 30 years. Specifically, we account for the pattern of changes in wage inequality, for the increased relative wage and employment of women, for the emergence of the college wage premium and for the shift in employment from the goods to the service-producing sector. The underlying theory we adopt is neoclassical, a two-sector competitive labor market economy in which the supply of and demand for labor of heterogeneous skill determines spot market skill-rental prices. The empirical approach is structural. The model embeds many of the features that have been posited in the literature to have contributed to the changing U.S. wage and employment structure including skill-biased technical change, capital-skill complementarity, changes in relative product-market prices, changes in the productivity of labor in home production and demographics such as changing cohort size and fertility. |
| Keywords: | gender wage differential, college wage premium, sectoral changes |
| JEL: | J31 J62 |
| Date: | 2006–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed006:172&r=lab |
| By: | Luigi Guiso; Luigi Pistaferri; Fabiano Schivardi (Research Bank of Italy) |
| Abstract: | We use matched employer-employees data for Italy to study the joint response of wages and employment to firm-level shocks. We construct a simple dynamic general equilibrium model of labor demand and supply that allows us to identify separately firing (or internal) and mobility (or external) adjustment costs. We show that the two type of costs cannot be discriminated empirically by looking at labor or wage adjustment separately. Mobility costs have distinctive implications on wage response to firm-level employment changes but they can only be identified with worker-level information on wages. We find that both types of costs are present, but the internal component accounts for a large share of total adjustment costs. Our results are consistent with a labor market where workers are fairly mobile within locations but scarcely mobile across them |
| Keywords: | Adjustment costs, mobility costs, matched employer-employees data |
| JEL: | C33 D21 J63 |
| Date: | 2006–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed006:536&r=lab |
| By: | Jeremy Lise |
| Abstract: | In this paper, I develop and estimate a model of the labor market that can account for both the inequality in earnings and the much larger inequality in wealth observed in the data. I show that an equilibrium model of on-the-job search, augmented to account for saving decisions of workers, provides a direct and intuitive link between the empirical earnings and wealth distributions. The mechanism that generates the high degree of wealth inequality in the model is the dynamic of the ``wage ladder'' resulting from the search process. There is an important asymmetry between the incremental wage increases generated by on-the-job search (climbing the ladder) and the drop in income associated with job loss (falling off the ladder). This feature of the model generates differential savings behavior at different points in the earnings distribution. The wage growth expected by low wage workers, combined with the fact that their earnings are not much higher than unemployment benefits, causes them to dis-save. As a worker's wage increases, the incentive to save increases: the potential for wage growth declines and it becomes increasingly important to insure against the large income reduction associated with job loss. The fact that high wage and low wage workers have such different savings behavior generates an equilibrium wealth distribution that is much more unequal than the equilibrium wage distribution. I estimate the structural parameters of the model by simulation-based methods using the 1979 youth cohort of the NLSY. The estimates indicate that the micro-level search and savings behavior---estimated from the dynamics of individuals' labor market histories and wealth accumulation decisions---aggregates to replicate the cross-sectional inequality in earnings and wealth for this cohort. |
| Keywords: | labor search, savings, consumption, wealth inequality |
| JEL: | J64 E21 E24 |
| Date: | 2006–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed006:137&r=lab |
| By: | Damien Gaumont; Martin Schindler (IMF); Randall Wright |
| Abstract: | Search models with posting and match-specific heterogeneity generate wage dispersion. Given K values for the match-specific variable, it is known that there are K reservation wages that could be posted, but generically never more than two actually are posted in equilibrium. What is unknown is when we get two wages, and which wages are actually posted. For an example with K = 3, we show equilibrium is unique; may have one wage or two; and when there are two, the equilibrium can display any combination of posted reservation wages, depending on parameters. We also show how wages, profits, and unemployment depend on productivity |
| Keywords: | Search equilibrium, wage posting, wage dispersion, labor theory |
| JEL: | D83 E24 J31 |
| Date: | 2006–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed006:147&r=lab |
| By: | Éva Nagypál (Economics Northwestern University) |
| Abstract: | The rate of job-to-job transitions is twice as large today as the rate at which workers move from employment to unemployment. I demonstrate that, under plausible specifications, the basic job-ladder model --- the workhorse model of the literature on on-the-job search --- has no chance of matching the extent of job-to-job transitions. Moreover, it cannot account for the low search effort exerted by most employed workers and the observation that on-the-job search is a means to ``escape'' unemployment: it is undertaken exactly by those workers who are facing the threat of becoming unemployed. I develop an alternative theoretical framework that can quantitatively match salient features of job-to-job transitions. The model incorporates a stochastic process that causes the value of a job to the worker to decrease at times, predicting that workers with a lower job value have a higher probability of entering unemployment. This natural feature is not in standard models. A second important element of the model is endogenous search effort, explaining the low search effort exerted by many employed workers and the correlation between search effort and the probability of becoming unemployed observed in the data. Calculating the equilibrium of the model shows that it can successfully account for the stylized facts on job-to-job transitions. I also demonstrate that the model can account for observed differences in the extent of job-to-job transitions across demographic groups |
| Keywords: | On-the-job search, labor-market transitions |
| JEL: | J60 J63 |
| Date: | 2006–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed006:10&r=lab |
| By: | Marc-Andreas Muendler (University of California, San Diego); Sascha Becker (University of Munich) |
| Abstract: | Multinational labor demand responds to wage differentials at the extensive margin, when a multinational enterprise (MNE) expands into foreign locations, and at the intensive margin, when an MNE operates existing affiliates across locations. We derive conditions for parametric and nonparamtric identification of an MNE model to infer elasticities of labor substitution at both margins, controlling for location selectivity. Prior studies rarely found foreign wages or operations to affect employment. Our strategy detects salient adjustments for German MNEs. With a one-percent increase in German wages, German MNEs add 2,000 manufacturing jobs in Eastern Europe at the extensive margins and 4,000 jobs overall; a converse one-percent drop in Eastern European wages is associated with an overall withdrawal of 730 MNE jobs from Germany. |
| Keywords: | Multinational enterprise, location choice, multiple sample selectivity, labor demand, translob cost function, nonparametric estimation, |
| Date: | 2006–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:ucsdec:2006-04r&r=lab |
| By: | Uta Schoenberg (University of Rochester); Christina Gathmann |
| Abstract: | Previous studies assume that labor market skills are either fully general or specific to a firm. This paper uses patterns in mobility and wages to the transferability of specific skills across occupations. The empirical analysis combines information on tasks performed in different occupations with a large panel on complete work histories and wages. Our results demonstrate that labor market skills are partially transferable across occupations. We find that individuals move to occupations with similar task requirements, and that the distance of moves declines with time in the labor market. Further, tenure in the last occupation affects current wages, and the effect is stronger if the two occupations are similar. We calculate that task-specific human capital is an important source of wage growth, especially for university graduates |
| Keywords: | Human Capital |
| JEL: | J24 |
| Date: | 2006–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed006:598&r=lab |
| By: | Silke Anger; Michael Kvasnicka |
| Abstract: | Empirical studies on the earnings effects of tobacco use have found significant wage penalties attached to smoking. We produce evidence that suggests that these estimates are significantly upward biased. The bias arises from a general failure in the literature to control for the past smoking behavior of individuals. 2SLS earnings estimates show that the smoking wage penalty is reduced by as much as a third, if past smoking of individuals is controlled for. Our results also point to significant wage gains for individuals that quit smoking, a finding that is of substantial interest, given the lack of evidence on the earnings effects of smoking cessation. |
| Keywords: | Smoking, wages, earnings regressions |
| JEL: | J31 I19 C51 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp654&r=lab |
| By: | Bruno Falcão; Rodrigo Soares (Department of Economics University of Maryland) |
| Abstract: | This paper presents a theory where increases in female labor force participation and reductions in the gender wage-gap are generated as part of the same process of demographic transition that leads to reductions in fertility. There have been significant increases in the labor supply of women in the last decades, both in developed and developing countries. Traditional views explain this trend through the effects of reduced fertility and/or increased women's wages. The paper suggests that all these changes can be understood as part of a single process of demographic change, triggered by reductions in mortality. Mortality reductions affect the incentives of individuals to invest in human capital and to have children. Particularly, gains in adult longevity reduce fertility, increase investments in market human capital, increase female labor force participation, and reduce the wage differential between men and women. Child mortality reductions cannot generate this same pattern of changes. The model reconciles the increase in female labor market participation with the timing of age-specific mortality reductions observed during the demographic transition. The paper presents the first model to link the change in the role of women in society to, ultimately, the reductions in mortality that characterize the demographic transition |
| Keywords: | gender wage gap, demographic transition, female labor force participation |
| JEL: | J11 J16 J22 J24 |
| Date: | 2006–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed006:49&r=lab |
| By: | Stephen L. Ross (University of Connecticut); Yves Zenou (Research Institute of Industrial Economics, Stockholm) |
| Abstract: | Recent theoretical work has examined the spatial distribution of unemployment using the efficiency wage model as the mechanism by which unemployment arises in the urban economy. This paper extends the standard efficiency wage model in order to allow for behavioral substitution between leisure time at home and effort at work. In equilibrium, residing at a location with a long commute affects the time available for leisure at home and therefore affects the trade-off between effort at work and risk of unemployment. This model implies an empirical relationship between expected commutes and labor market outcomes, which is tested using the Public Use Microdata sample of the 2000 U.S. Decennial Census. The empirical results suggest that efficiency wages operate primarily for blue collar workers, i.e. workers who tend to be in occupations that face higher levels of supervision. For this subset of workers, longer commutes imply higher levels of unemployment and higher wages, which are both consistent with shirking and leisure being substitutable. |
| Keywords: | Efficiency wage, leisure, urban unemployment |
| JEL: | J41 R14 |
| Date: | 2006–11 |
| URL: | http://d.repec.org/n?u=RePEc:uct:uconnp:2006-21&r=lab |
| By: | Pietro Garibaldi |
| Abstract: | This paper proposes a matching model that distinguishes between job creation by existing firms and job creation by firm entrants. The paper argues that vacancy posting and job destruction on the extensive margin, i.e. from firms that enter and exit the labour market, represents a potentially viable mechanism for understanding the cyclical properties of vacancies and unemployment. The model features both hiring freeze and bankruptcies, where the former represents a sudden shut down of vacancy posting at the firm level with labour downsizing governed by natural turnover. A bankrupt firm, conversely, shut down its vacancies and lay offs its stock of workers. Recent research in macroeconomics has shown that a calibration of the Mortensen and Pissarides matching model account for 10 percent of the cyclical variability of the vacancy unemployment ratio displayed by U.S. data. A calibration of the model that explicitly considers hiring freeze and bankruptcy can account for 20 to 35 percent of the variability displayed by the data |
| Keywords: | unemployment dynamics, matching models |
| JEL: | E32 J20 |
| Date: | 2006–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed006:227&r=lab |
| By: | Tateshi Mori (Faculty of Economics, University of Tokyo) |
| Abstract: | This paper tries to trace the way in which various methods were used in the payment of wages in Yawata Steel Works from 1900s to 1930s. The widely held idea behind the wage payment in the post WW‡U Japanese society has required companies to pay wages which not only guarantee the amount of money sufficient to lead a family life according to his/her social status but also reflect the ability and performance of each employee. The predecessors of this idea will be found in the personnel practices of companies before the WW‡U. The development of wage system in Yawata Steel Works, along with those implemented in the National Railways and ship-building works, will represent the case which will show how a wage policy which gave employees both the guarantee of standard life style and the incentives for higher efficiency was developed at an enterprise level. By the rule of the Steel Works, all the workers were supposed to receive wages calculated on a fixed daily wage rate which varied among workers corresponding to his experience and skill. This wage system resembled the time wages dominant in U.S.A in that wages were paid for the days workers were engaged in operations, but differed from the American system in that no hourly wage rate was fixed. A day rate fixed for each worker was reviewed occasionally, and in some times managers granted an increase in the rate. The daily wage rate was quite effectual in giving workers the stability of daily life but rather weak in making them work harder. The weakness of the daily wage rate system in giving work incentives became apparent soon after the Works started the system in 1900. The Russo-Japanese War of 1904-1905 created an opportunity for the Works to expand its production. To meet the growing demand, the managers of some rolling mills felt it necessary to use incentive plans to increase production. Under the condition where the maintenance of daily wage rate was mandatory, they had recourse to a method which combined the daily wage rate with premium bonus. Ten years later, another war necessitated the adoption of various kinds of incentives and benefits along with the daily wage rate. After years of implementing incentive plans in various mills, incentive wage system gradually became an integral part of the wage system of the Works. Some times a group piece rate system with the minimum guarantee of the daily wage rate was implemented, and in other cases the combination of the daily wage rate system and group incentive systems was preferred. In this way, the need to guarantee the standard life and the call for incentives were met in the payment of wages. |
| Date: | 2006–01 |
| URL: | http://d.repec.org/n?u=RePEc:tky:jseres:2006cj148&r=lab |
| By: | Francois Gourio; Pierre-Alexandre Noual (Department of Economics University of Chicago) |
| Abstract: | This paper attempts to reconcile the high apparent aggregate elasticity of labor supply with small micro estimates. We elaborate on Rogerson's seminal work (1988) and show that his results rely neither on complete markets nor on lotteries, but rather on the indivisibility and the fact that the workforce is homogeneous at the margin. We derive two robust implications of a setup with indivisible labor but without lotteries, using either a complete markets model or an incomplete markets model (solved numerically). (1) Agents with reservation wages far above or below the market wage are less responsive (in labor supply) to the business cycle than agents whose reservation wage is around the market wage. (2) The aggregate elasticity is given by the marginal homogeneity of the workforce. We test implication (1) using the PSID and find support for it. We build an incomplete markets model and calibrate it to cross-sectional moments of hours worked. We show that it can reproduce the feature (1). This allows us to use the model to evaluate the importance of feature (2), i.e. to estimate the aggregate elasticity of labor supply implied by the marginal homogeneity. |
| Keywords: | indivisible labor, reservation wage distribution, labor supply, business cycles |
| JEL: | E24 E32 |
| Date: | 2006–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed006:509&r=lab |
| By: | Garey Ramey (UC San Diego); |
| Abstract: | We study the cyclical behavior of job loss and hiring using CPS worker flow data, adjusted for margin error and time aggregation error. The band pass filter is used to isolate cyclical components. We consider both total worker flows and transition hazard rates within a unified framework. Our results provide overwhelming support for a "separation-driven" view of employment adjustment whereby total job loss and hiring rise sharply during economic downturns, initiated by increases in job loss hazard rate. Worker flows and transition hazard rates are highly volatile at business cycle frequencies. These patterns are especially strong among prime-age workers. For young workers, job loss and hiring adjust procyclically due to movements into and out of the labor force. |
| Keywords: | Job Loss, Hiring, CPS worker flows, |
| Date: | 2006–09–25 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:ucsdec:2008-08&r=lab |
| By: | Verner, Dorte |
| Abstract: | This paper addresses three areas of the rural labor market-employment, labor wages, and agriculture producer incomes. Findings show that the poor allocate a lower share of their labor to farm sectors than the nonpoor do, but still around 70 percent work in agriculture, and the vast majority of rural workers are engaged in the informal sector. When examining nonfarm employment in rural Argentina, findings suggest that key determinants of access to employment and productivity in nonfarm activities are education, skills, land access, location, and gender. Employment analyses show that women have higher probability than men to participate in rural nonfarm activities and they are not confined to low-return employment. Moreover, workers living in poorer regions with land access are less likely to be employed in the nonfarm sector. There is strong evidence that educated people have better prospects in both the farm and nonfarm sectors, and that education is an important determinant of employment in the better-paid nonfarm activities. Labor wage analyses reveal that labor markets pay lower returns to poorer than to richer women and returns to education are increasing with increased level of completed education and income level. And nonfarm income and employment are highly correlated with gender, skills, household size, and education. This analysis also shows a rather heterogeneous impact pattern of individual characteristics across the income distribution, but education is important for all levels of income. Agricultural producer income analyses reveal that producers ' income monotonically increases with land size and with completed education level, and positively correlates with road access and use of electricity, fertilizer, and irrigation. Finally, farms operated by women are slightly more productive than farms operated by men. |
| Keywords: | Rural Poverty Reduction,Labor Markets,Population Policies,Work & Working Conditions |
| Date: | 2006–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:4095&r=lab |
| By: | Murat Tasci |
| Abstract: | This paper studies amplification of productivity shocks in labor markets through on-the-job-search. There is incomplete information about the quality of the employee-firm match which provides persistence in employment relationships and the rationale for on-the-job search. Amplification arises because productivity changes not only affect firms' probability of contacting unemployed workers but also of contacting already employed workers. Since higher productivity raises the value of all matches, even low quality matches become productive enough to survive in expansions. Therefore the measure of workers in low quality matches is greater when productivity is high, implying a higher probability of switching to another match. In other words, firms are more likely to meet employed workers in expansions and those they meet are more likely to accept firm's job offer because they are more likely to be employed in a low quality match. This introduces strongly procyclical labor market reallocation through procyclical job-to-job transitions. Simulations with a productivity process that is consistent with average labor productivity in the U.S. show that standard deviations for unemployment, vacancies and market tightness (vacancy-unemployment ratio) match the U.S. data. The model also reconciles the presence of endogenous separation with the negative correlation of unemployment and vacancies over business cycle frequencies (i.e. it is consistent with the Beveridge curve) |
| Keywords: | On-the-Job Search; Amplification; Business Cycles; Job-to-Job Flows |
| JEL: | E24 E32 J41 |
| Date: | 2006–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed006:333&r=lab |
| By: | Julien Prat (Economics Vienna University) |
| Abstract: | We construct and estimate by maximum likelihood an equilibrium search model where wages are set by Nash bargaining and idiosyncratic productivity follows a geometric Brownian motion. The proposed framework enables us to endogenize job destruction and to estimate the rate of learning-by-doing. Although the range of the observations is not independent of the parameters, we establish that the estimators satisfy asymptotic normality. The structural model is estimated using Current Population Survey data on accepted wages and employment durations. We show that it captures almost perfectly the evolution through tenure of the crosssectional distribution of wages. We find that the returns to tenure are slightly higher for workers without tertiary education than for tertiary educated workers |
| Keywords: | Job Search, Uncertainty, Structural Estimation |
| JEL: | J31 J64 |
| Date: | 2006–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed006:647&r=lab |
| By: | Arnaud Cheron; Jean-Olivier Hairault; Francois Langot |
| Abstract: | This paper originally incorporates life-cycle features into the job creation - job destruction framework. Once a finite horizon is introduced, this workhorse labor market model naturally delivers the empirically uncontroversial prediction that the employment rate of workers decreases with age due to lower hirings and higher firings of older workers. This age profile of hirings and firings is in addition found to be optimal in a competitive search equilibrium context. If search externalities are not internalized and unemployment benefits distort equilibrium, there is a room for labor market policy differentiated by age. This lastly allows us to debate the incidence of labor demand policies which have been introduced in many countries to favor the older worker employment. We show that hiring subsidies and firing costs should be decreasing with age when unemployment benefits are sufficiently high, as in the Europe. On the contrary, if unemployment benefits are low, as in the US, optimal hiring subsidies and firing taxes should be increasing with age. In this latter case, the introduction of anti-discrimination laws is a good proxy of this first best policy. |
| Keywords: | Job creations and destructions, Life cycle, Older workers |
| JEL: | J20 J63 J71 |
| Date: | 2006–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed006:641&r=lab |
| By: | Petro Peretto (Duke University) |
| Abstract: | I study a model where firms bargain with unions over wages and employment levels. This interaction generates unemployment. Households take unemployment risk as given in making their participation decisions. I am thus able to study the interactions of product and labor market institutions in a three-states representation of the labor market. Unemployment matters because is inserts a wedge between labor supply (participation) and employment. Employment matters because it determines output. I uncover two feedback mechanisms, each reinforced by endogenous participation. The firt exploits the endogeneity of the number of firms to amplify the adverse effects on output of regulations and frictions that raise labor costs, work practice rigidities and the bargaining power of workers. The second exploits the endogeneity of market size to amplify the adverse effects of product market frictions that raise the costs of entry or of operation for firms. The multiplier effects due to these feedback mechanisms have interesting implications for the current policy debate. Labor market reforms that reduce the cost of labor are actually more attractive when one considers the endogenous structure of the product market. Similarly, pro-competitive product market reforms are more attractive when one considers the positive feedback on market structure that runs through the labor market |
| Keywords: | product market, labor market, employment, unemployment |
| JEL: | E6 J23 |
| Date: | 2006–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed006:280&r=lab |
| By: | John K. Dagsvik and Zhiyang Jia (Statistics Norway) |
| Abstract: | In this paper, we discuss aspects of a particular framework for modeling labor supply and the application of this approach in practical policy simulation experiments. This modeling framework differs from the standard models of labor supply in that the notion of job choice is fundamental. Specifically, the worker is assumed to have preferences over a latent worker-specific choice set of jobs from which he or she chooses his or her preferred job. A job is characterized with fixed (job-specific) working hours and other non-pecuniary attributes. As a result, observed hours of work are interpreted as the job-specific (fixed) hours of work that is associated with the chosen job. We then show that our framework is practical with respect to applications in empirical analysis and simulation experiments, and is able to produce satisfactory out-of-sample predictions by estimating the model on Norwegian microdata from 1997 and predicting the corresponding microdata from 2003. |
| Keywords: | Labor supply; non-pecuniary job attributes; non-convex budget sets; latent choice sets; random utility models. |
| JEL: | J22 C51 |
| Date: | 2006–10 |
| URL: | http://d.repec.org/n?u=RePEc:ssb:dispap:481&r=lab |
| By: | Silke Anger; Guido Heineck |
| Abstract: | We contribute to the literature on the relationship between cognitive abilities and labour market outcomes providing first evidence for Germany. In particular, cross-sectional data from the German Socio-Economic Panel (SOEP) are used, which include two measures of cognitive ability, one test of fluid mechanics (speed test) and another test of crystallised pragmatics (word fluency test). We find a positive relationship between cognitive abilities and economic activity, as workers with high ability test scores are less likely to be unemployed. In addition, results from Mincer-type OLS and 2SLS regressions suggest that mechanics abilities are correlated with wages in a significantly positive way for West German workers, even when educational attainment is controlled for, whereas pragmatics of cognition do not affect earnings significantly. However, we also find that ability and education are inseparable determinants of earnings, which confirms findings of recent studies for other countries. |
| Keywords: | Cognitive ability, earnings regressions, returns to education, ability bias, unemployment probability |
| JEL: | J24 J31 I21 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp655&r=lab |
| By: | Masayuki Tanimoto (Faculty of Economics, University of Tokyo) |
| Abstract: | It is the common knowledge that the modern textile factories, cotton spinning and silk reeling, which led the Japan's industrialization, based their labor foundation on the juvenile female workers. These female workers, however, might have made only a slight impact on the indigenous development based on the household economy as they had withdrawn from factories in their late twenties at the latest and tended to be embedded afterwards in the households of peasants' or urban non-agricultural occupations'. To consider the impact of the industrialization on the indigenous society in Japan, we should pay the special attention to the life courses of the male labor force. The aim of this paper is to give an example of the factory life of the male workers in the middle scale factory, by analyzing the primary source of the firm. The analysis of the archives revealed that the life course as a lifetime factory worker, though the mobility rate between factories was rather high, emerged even in the middle scale factory circa 1910. However, the wage for the worker over the age of twenty was irrelevant to the age, varied just with attendance and the wage level was relatively low in the local labor market. These fact findings indicate that the emergence of the fulltime and lifetime factory workers can not be fully accounted for by the explanation of existing literatures that emphasize the role of the skilled and high wage workers. |
| Date: | 2005–07 |
| URL: | http://d.repec.org/n?u=RePEc:tky:jseres:2005cj134&r=lab |
| By: | John Knowles (University of Pennsylvania) |
| Abstract: | We document a negative trend in the leisure of men married to women aged 25-45, relative to that of their wives, and a positive trend in relative housework. We develop a simple bargaining model of marriage, divorce and allocations of leisure-time and housework. Calibration to US data shows the trend in the wage gender gap explains most of the trend in relative leisure, but has little effect on married women's labor supply, which appears to be due mainly to the trend in the price of home equipment. |
| Keywords: | Marriage; Marital Dissolution; Economics of Gender; Time Allocation and Labor Supply |
| JEL: | E13 J12 J16 |
| Date: | 2006–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed006:445&r=lab |
| By: | Taryn Ann Galloway (Statistics Norway) |
| Abstract: | Out of necessity, the earliest studies of immigrants' performance in the labor market in Western countries focused solely on men. However, as the employment rates of women in Western countries rise and approach those of men, questions about the labor market adjustments of immigrant women also become increasingly relevant. Furthermore, studies of earnings assimilation have typically analyzed only those individuals actually employed (full-time) in the labor market. Hence, they are unable to provide valuable insights into the extent to which the participation rates of immigrants – men or women – increase over time in the host country. This study analyzes explicitly the extent to which non-Western immigrants – both men and women – enter the labor market in Norway. |
| Keywords: | Employment; Immigration; Integration; Assimilation |
| JEL: | J20 |
| Date: | 2006–10 |
| URL: | http://d.repec.org/n?u=RePEc:ssb:dispap:483&r=lab |
| By: | Davis, Steven J. (The University of Chicago Graduate School of Business); Henrekson, Magnus (Research Institute of Industrial Economics) |
| Abstract: | Following a severe contraction in the early 1990s, the Swedish economy accumulated a strong record of output growth coupled with a disappointing performance in the labor market. As of 2005, hours worked per person 20–64 years of age are 10.5 percent below the 1990 peak and a mere one percent above the 1993 trough. Employment rates tell a similar story. Our explanation for Sweden’s weak performance with respect to market work activity highlights the role of high tax rates on labor income and consumption expenditures, wage-setting arrangements that compress relative wages, business tax policies that disfavor labor-intensive industries and technologies, and a variety of policies and institutional arrangements that disadvantage younger and smaller businesses. This last category includes tax policies that penalize wealth accumulation in the form of owner-operated businesses, a pension system that steers equity capital and loanable funds to large incumbent corporations, and legally mandated job-security provisions that weigh more heavily on smaller and younger businesses. We describe these features of the Swedish institutional setup and provide evidence of their consequences based largely on international comparisons. |
| Keywords: | Business taxation; Industry structure; Swedish economic performance; Tax effects; Time allocation; Wage-setting institutions; Work activity |
| JEL: | D13 H30 J20 L52 O52 |
| Date: | 2007–01–03 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:0687&r=lab |
| By: | Philip Oreopoulos (University of California at Berkeley) |
| Abstract: | Many social scientists presume that the quality of the neigborhood to which children are exposed affects a variety of long-run social outcomes. I examine the effect on the long-run labor market outcomes of adults who were assigned, when young, to substantially different public housing projects in Toronto. Administrative data are matched to public housing addresses to track children from the program for over 15 years. The main finding is that neighborhood quality plays little role in determining a youth's adult earnings, education attainment, or welfare participation, but does affect exposure to crime. While living in contrasting housing projects cannot explain large variances in labor market outcomes, family differences, as measured by sibling outcome correlations, account for up to 30 percent of the total variance in the data. |
| Date: | 2006–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1041&r=lab |
| By: | Uschi Backes-Gellner (Institute for Strategy and Business Economics, University of Zurich); Stephan Veen (Institute for Strategy and Business Economics, University of Zurich) |
| Abstract: | Central exams have been discussed as an incentive to improve educational outcomes. In our paper we study the impact of central exams on labor market outcomes. We explain the quality choice of schools under central and non-central exams and model the resulting students’ schooling decisions and employers’ wage decisions. We use the German Abitur and the variation among the German federal states with respect to central exams as a quasi experimental design. We expect the ratio of Abitur holders to increase in states without central exams and their wage premiums to decrease at the same time. In states with central exams these effects should not occur. We test our implications with official statistics on education and with the GSOEP. The first two implications are born out in the data. Finally, explanations and policy recommendations are discussed. |
| Keywords: | Educational Economics, School choice, Incentives for Schools, Central Exams, Economic impact, Labor Market Outcome |
| JEL: | M51 J31 |
| Date: | 2006–06 |
| URL: | http://d.repec.org/n?u=RePEc:iso:wpaper:0061&r=lab |
| By: | Bjoern Bruegemann (Yale University); Giuseppe Moscarini |
| Abstract: | Shimer (2005) showed that a standard search and matching model of the labor market fails to generate fluctuations of unemployment and vacancies of the magnitude observed in US data in response to shocks to average labor productivity of plausible magnitude. He also suggested that wage determination through Nash bargaining may be the culprit. In this paper we pursue two objectives. First, we identify those properties of Nash bargaining that limit the ability of the model to generate a large response of unemployment and vacancies to a shock to average labor productivity. In light of these properties, cast in terms of a general model of wage determination, we reinterpret some of the specific solutions proposed so far to this problem. Second, we examine whether asymmetric information may help to violate those properties and to provide amplification. We assume that the firm has private information about the job's productivity, the worker about the amenity of the job, and aggregate labor productivity shocks do not change the distribution of private information around their mean. In this environment, we consider the monopoly (or monopsony) solution, namely a take-it-or-leave-it offer, and the constrained efficient allocation. We find that our key properties are satisfied for the first model essentially under all circumstances. They frequently (for commonly used specific distributions of beliefs) also apply to the constrained efficient allocation |
| Keywords: | Unemployment, Vacancies, Business Cycle, Asymmetric Information |
| JEL: | E24 J41 J63 |
| Date: | 2006–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed006:215&r=lab |
| By: | Julian Betts (UCSD and The Public Policy Institute of California); John Roemer (Departments of Political Science and Economics Yale University) |
| Abstract: | We analyze the reallocations of educational expenditures required to equalize opportunities (taken to be wage income), according to the theory of Roemer (1998). Using the NLSYM data set, we find that implementing an equal-opportunity policy across men of different races, by using educational finance as the instrument, and ensuring that no race received less than the average observed nationally, would require spending nine times as much on black students, per capita, as on white students. Even the lower bound of bootstrapped confidence intervals for the policy estimates suggests large reallocations between races. The equal-opportunity policy across men from different socio-economic backgrounds that ignores race does almost nothing to equalize wages across races. For inter-racial allocations, we find evidence of a tradeoff between equity and total product, with reallocation lowering the wage bill by about 5%. In contrast, for reallocations based on parental education, equalization increases the wage bill by about 2% because the impact of school spending appears to be slightly higher for those with less highly educated parents. |
| Date: | 2005–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:ucsdec:2005-14&r=lab |
| By: | Pierre-Andre Chiappori; Yoram Weiss (Economics University of Colorado); Murat Iyigun; Yoram Weiss |
| Abstract: | We produce a model with pre-marital schooling investment, endogenuos marital matching and spousal specialization in homework and market production. Schooling investments generate two kinds of returns in our framework: a labor-market return due to the education premium and a marriage-market return because education can improve the intra-marital share of the surplus one can extract from marriage. When the returns to education are gender neutral, men and women educate in equal proportions and there is pure positive assortative matching in the marriage markets. But if the returns are not gender neutral, then there is mixing in equilibrium where some educated individuals marry uneducated spouses and those who educate less because their labormarket return is lower extract a relatively larger share of the marital surplus. Conditional on the choice of schooling, couples’ career decisions affect the size of their marital surplus, but the existence of large and frictionless marriage markets can still produce efficient household specialization where the higher-wage spouse specializes in market production and the lower-wage spouse engages in homework. Even when cultural and social norms or the time requirements of homework dictate that wives devote relatively more time to homework, women can acquire more schooling than men if a gender wage gap exists but narrows with the level of education |
| Keywords: | Pre-Marital Investments, Intra-Household Allocations, Assortative Matching. |
| JEL: | C78 D61 D70 |
| Date: | 2006–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed006:43&r=lab |
| By: | Karen A. Kopecky (Economics University of Rochester) |
| Abstract: | A model with leisure production and endogenous retirement is used to explain the declining labor-force participation rates of elderly males. Using the Health and Retirement Study, the model is calibrated to cross-sectional data on the labor-force participation rates of elderly US males by age and their average drop in market consumption in the year 2000. Running the calibrated model for the period 1850 to 2000, a prediction of the evolution of the cross-section is obtained and compared with data. The model is able to predict both the increase in retirement since 1850 and the observed drop in market consumption at the moment of retirement. The increase in retirement is driven by rising real wages and a falling price of leisure goods over time |
| Keywords: | retirement, leisure, home production, consumption-drop, technological progress |
| JEL: | E13 J26 O11 |
| Date: | 2006–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed006:187&r=lab |
| By: | Giovanni Mastrobuoni |
| Abstract: | In response to a "crisis" in Social Security financing two decades ago Congress implemented an increase in the Normal Retirement Age (NRA) of two months per year for cohorts born in 1938 and after. These cohorts began reaching retirement age in 2000. This paper studies the effects of these benefit cuts on recent retirement behavior. The evidence strongly suggests that the mean retirement age of the affected cohorts has increased by about half as much as the increase in the NRA. If older workers continue to increase their labor supply in the same way, there will be important implications for the estimates of Social Security trust fund exhaustion that have played such a major role in recent discussions of Social Security reform. |
| Keywords: | normal retirement age, retirement behavior, social security reform |
| JEL: | H55 J26 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:cca:wpaper:33&r=lab |
| By: | Xavier Gabaix (Massachusetts Institute of Technology); Augustin Landier |
| Abstract: | This paper develops a simple competitive model of CEO pay. It appears to explain much of the rise in CEO compensation in the US economy, without assuming managerial entrenchment, mishandling of options, or theft. CEOs have observable managerial talent and are matched to assets in a competitive assignment model. The marginal impact of a CEO's talent is assumed to increase with the value of the assets under his control. Under very general assumptions, using results from extreme value theory, the model determines the level of CEO pay across firms and over time, and the pay-sensitivity relations. We predict that the level of CEO compensation should increase one for one with the average market capitalization of large firms in the economy. Therefore, the eight-fold increase of CEO pay between 1980 and 2000 can be fully attributed to the increase in market capitalization of large US companies. The model predicts the cross-section Cobb-Douglass relation between pay and firm size and can be used to study other large changes at the top of the income distribution, and offers a benchmark for calibratable corporate finance |
| Keywords: | Executive compensation, wage distribution, Pareto distribution, wage inequality, assignment, incentives, pay performance sensitivity |
| JEL: | D2 D3 G34 J3 |
| Date: | 2006–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed006:518&r=lab |
| By: | Bart Hobijn; Aysegul Sahin (Research and Statistics Group Federal Reserve Bank of New York) |
| Abstract: | We introduce a joint model of labor market search and firm size dynamics to explain the differential in labor market and productivity outcomes between the U.S. and the European Union. At the core, our model is a hybrid of the labor market search model by Mortensen and Pissarides (1994) and the model of the size distribution firms by Lucas (1978). Around this core, however, we add several layers that we use to add rigidities that affect the `flexibility' with which resources are allocated in our model economy. The first layer that we add is creative destruction. That is, we relate the need for job reallocations to the growth rate of the economy. In each period better firms enter while inferior firms exit, in the spirit of Jovanovic (1982). Hence, contrary to Mortensen and Pissarides (1994), exit of firms, and the destruction of the jobs that they offer, is thus endogenous in our model. The second layer that we add is the occupational choice of workers that are without a job. That is, in equilibrium workers endogenously decide whether to look for a job or to become an entrepreneur based on the quality of a business idea that they have. The third layer is the dynamic hiring and firing decisions of firms. Similar to Hopenhayn and Rogerson (1993), the firm dynamics in our model economy are in large part driven by the dynamic hiring and firing decisions made by the existing firms. We use this model to identify which types of rigidities have the biggest distortionary effect on the allocation of resources both in terms of labor as well as in terms of productivity |
| Keywords: | Search, Firm Size Dynamics, Productivity |
| JEL: | L11 D24 J64 |
| Date: | 2006–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed006:737&r=lab |
| By: | Mary C. Daly; Robert G. Valletta |
| Abstract: | Changes in inequality of yearly earnings can arise from changes in the distribution of lifetime earnings (permanent changes) and changes in the stability of earnings (transitory changes). Past research has found increases in both components in the United States over the past several decades. We extend this literature by comparing the United States with Germany and Great Britain. We use data from the Cross-National Equivalent Files (Cornell University) to document trends in cross-sectional and long-run earnings inequality. These data enable us to examine earnings dynamics during the years 1979-1996 for the United States, 1983-1997 for Germany, and 1990-1997 for Great Britain. Despite differences in labor market structure, our descriptive models reveal similar basic patterns of earnings mobility and dynamics in these countries. We then apply a method of moments approach to estimate the parameters of a heterogeneous growth model of permanent and transitory earnings. The results indicate that although there are substantial differences in overall cross-sectional inequality across these countries, the persistent component of earnings inequality was quite similar in each in the 1990s |
| Keywords: | earnings mobility, inequality, comparative |
| JEL: | J31 P52 |
| Date: | 2006–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed006:746&r=lab |
| By: | Das, Jishnu; Sohnesen, Thomas Pave |
| Abstract: | To examine the relationship between patient satisfaction and doctor performance, the authors observed 2,271 interactions between 292 doctors and their patients in 98 clinics and hospitals in Paraguay and conducted an exit-survey with the same patients as they left the clinic. For a subsample of 64 facilities they also interviewed patients who visited the facility within the last week. There are three patterns in the data: (1) Patient satisfaction is positively correlated with doctor effort, measured as a combination of time spent, questions asked, and examinations performed after controlling for observed doctor and patient characteristics; (2) However, accounting for unobserved doctor characteristics dramatically reduces the level of significance and size of correlation between effort and satisfaction, showing that much of the positive relationship is driven by these unobserved doctor-specific factors; and (3) Reported satisfaction is significantly lower for patients interviewed at home compared with those interviewed at the clinic. This leads the authors to conclude that even if patient satisfaction reflects some aspects of the doctor ' s performance, unobserved heterogeneity combined with survey biases limit the widespread applicability of patient satisfaction as an indicator of doctor performance. |
| Keywords: | Health Monitoring & Evaluation,Health Systems Development & Reform,Health Law,Educational Sciences,Gender and Health |
| Date: | 2006–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:4086&r=lab |
| By: | George-Levi Gayle (Carnegie Mellon University public); Robert A. Miller |
| Abstract: | This paper develops and implements a semiparametric estimator for investigating, with panel data, the importance of human capital accumulation, non-separable preferences of females and child care costs on females life-cycle fertility and labor supply behaviors. It presents a model in which the agents' expectations are correlated with their future choices and provides a set of conditions under which statistical inferences are possible from a short panel. Under the assumption that observed allocations are Pareto optimal or that the utility function is quasi linear, a dynamic model of female labor supply, labor force participation and fertility decisions is estimated. In that model, experience on the job raises future wages, time spent nurturing children affects utility, while time spent off the job in the past directly affects current utility(or, indirectly through productivity in the non-market sector). This paper then uses the estimates from the model to conduct different policy simulations which shows that human capital accumulation is the most important determinant of life-cycle fertility behavior. This result is due to the nonlinearity in returns to experience and the fraction of time require for nurturing a new birth. These two effects works in opposite directions, significantly increasing the cost of having a child. The cost of having a child now is not only the foregone wages but more importantly the cost of breaking the career path of the woman when she leaves the labor force or reducing her hours worked in order to have a child. In our simulations many proposed public policies aim at increasing the fertility rate( e.g. maternity leave or free day care services) have little or no effect on the fertility rate and only result in changes in the labor-leisure trade-off. However, when we were able to compensated women for the foregone wage trajectory the fertility rate significantly increases |
| Keywords: | Human Capital, Fertility, Labor Supply, Complete Markets. Semiparametric |
| JEL: | J10 J11 J13 |
| Date: | 2006–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed006:784&r=lab |