|
on Labour Economics |
| By: | Bryan Engelhardt (Department of Economics, College of the Holy Cross); David L. Fuller (Carnegie Mellon University) |
| Abstract: | A fixed wage is inefficient in a standard search model when workers endogenously separate from employment. We derive an efficient employment contract that involves agents paying a hiring fee (or bond) upon the formation of a match. We estimate the fixed wage and efficient contract assuming the hiring fee is unobservable and find evidence to reject the efficient contract in favor of the fixed wage rule. A counterfactual experiment reveals the current level of labor force participation to be 13% below the efficient level, and a structural shift to the efficient contract improves welfare by 22%. |
| Keywords: | labor supply, unemployment, matching, efficiency wages |
| JEL: | J0 J41 J64 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:hcx:wpaper:0909&r=lab |
| By: | Chzhen, Yekaterina (University of York); Mumford, Karen A. (University of York) |
| Abstract: | This paper investigates gender differences between the log wage distributions of full-time British employees in the public and private sectors. After allowing for positive selection into full-time employment by women, we find significant and substantial gender earnings gaps, and evidence of glass ceilings, in both sectors. The earnings gaps amongst the higher income earners are found to be related to there being a scarcity of senior women in high skilled, white-collar occupations, especially in the public sector. |
| Keywords: | gender, earnings, wage-gap, selection, distribution |
| JEL: | J3 J7 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp4331&r=lab |
| By: | Philip Du Caju (National Bank of Belgium, Research Department, Boulevard de Berlaimont 14, B-1000 Brussels, Belgium.); Catherine Fuss (National Bank of Belgium, Research Department, Boulevard de Berlaimont 14, B-1000 Brussels, Belgium.); Ladislav Wintr (Central Bank of Luxembourg, Economics and Research Department, 2 boulevard Royal, L–2983 Luxembourg, Luxembourg.) |
| Abstract: | This paper examines whether differences in wage rigidity across sectors can be explained by differences in workforce composition, competition, technology and wage-bargaining institutions. We adopt the measure of downward real wage rigidity (DRWR) developed by Dickens and Goette (2006) and rely on a large administrative matched employer-employee dataset for Belgium over the period 1990-2002. Firstly, our results indicate that DRWR is significantly higher for white-collar workers and lower for older workers and for workers with higher earnings and bonuses. Secondly, beyond labour force composition effects, sectoral differences in DRWR are related to competition, firm size, technology and wage bargaining institutions. We find that wages are more rigid in more competitive sectors, in labour-intensive sectors, and in sectors with predominant centralised wage setting at the sector level as opposed to firm-level wage agreements. JEL Classification: J31. |
| Keywords: | wage rigidity, matched employer-employee data, wage-bargaining institutions. |
| Date: | 2009–02 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20091006&r=lab |
| By: | Gregory de Walque (National Bank of Belgium, Boulevard de Berlaimont 14, B-1000 Brussels, Belgium.); Olivier Pierrard (Central Bank of Luxembourg, 2 boulevard Royal, L–2983 Luxembourg, Luxembourg.); Henri Sneessens (Central Bank of Luxembourg, Economics and Research Department, 2 boulevard Royal, L–2983 Luxembourg, Luxembourg.); Raf Wouters (National Bank of Belgium, Boulevard de Berlaimont 14, B-1000 Brussels, Belgium.) |
| Abstract: | We consider a model with frictional unemployment and staggered wage bargaining where hours worked are negotiated every period. The workers’ bargaining power in the hours negotiation affects both unemployment volatility and inflation persistence. The closer to zero this parameter, (i) the more firms adjust on the intensive margin, reducing employment volatility, (ii) the lower the effective workers’ bargaining power for wages and (iii) the more important the hourly wage in the marginal cost determination. This set-up produces realistic labor market statistics together with inflation persistence. Distinguishing the probability to bargain the wage of the existing and the new jobs, we show that the intensive margin helps reduce the new entrants wage rigidity required to match observed unemployment volatility. JEL Classification: E31, E32, E52, J64. |
| Keywords: | DSGE, Search and Matching, Nominal Wage Rigidity, Monetary Policy. |
| Date: | 2009–02 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20091007&r=lab |
| By: | Niebuhr, Annekatrin (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]); Granato, Nadia (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]); Haas, Anette (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]); Hamann, Silke (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]) |
| Abstract: | "Differences in regional labour market conditions are still pronounced in Germany, especially between the Eastern and the Western part. Traditional neoclassical models imply that labour mobility should reduce disparities. In contrast, models that include externalities or selective migration suggest that regional differences might well increase due to interregional migration of workers. We investigate the impact of labour mobility on regional disparities in Germany between 1995 and 2005. Considering the impact of migration as well as commuting, effects on regional wages and unemployment are estimated. Our results suggest that labour mobility tends to reduce disparities; however, we find significant effects only on unemployment dispari-ties." (Autorenreferat, IAB-Doku) |
| JEL: | C23 J61 R23 |
| Date: | 2009–07–30 |
| URL: | http://d.repec.org/n?u=RePEc:iab:iabdpa:200915&r=lab |
| By: | Anna Lov sz (Institute of Economics Hungarian Academy of Sciences); Mariann Rig¢ (Central European University) |
| Abstract: | In this paper we seek to provide new empirical evidence on the relative productivities and wages of various worker groups (by gender, age, and education), based on longitudinal matched employer-employee data from Hungary covering 1986-2005. We estimate the productivity and wage gaps from firm-level production functions and wage equations, using firm-level data on productive inputs and output, wage costs, and the demographic composition of the work force obtained from the linked worker data. This methodology allows us to assess whether productive differences can account for the wage gaps between worker groups, as well as the evolution of these gaps following the transition to a free market. We take firm fixed effects into account to assess the role of selection at the firm level, and estimate the production function via the method of Levinson and Petrin to account for endogeneity of input choice. The results show that while there may be significant differences in productivities and wages between groups in the OLS specification, these mostly become insignificant within firms. We find that much of the fall in the value of skills obtained prior to the transition is due to selection of workers at the firm level. |
| Keywords: | relative wage, relative productivity, quality of labor, production function, earnings equation |
| JEL: | J24 J31 J71 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:has:bworkp:0902&r=lab |
| By: | Mavromaras, Kostas G. (University of Melbourne); McGuinness, Seamus (Economic and Social Research Institute, Dublin); Fok, Yin King (University of Melbourne) |
| Abstract: | This paper uses panel data and econometric methods to estimate the incidence and the dynamic properties of overskilling among employed individuals. The paper begins by asking whether there is extensive overskilling in the labour market, and whether overskilling differs by education pathway. The answer to both questions is yes. The paper continues by asking whether overskilling is a self-perpetuating labour market state (state dependence), and whether state dependence differs by education pathway. The paper uses a dynamic random effects probit which includes Mundlak corrections and it models the initial conditions following Heckman's method. It finds that there is extensive overskilling state dependence in the workplace, and to the degree that overskilling can be interpreted as skills underutilisation and worker-job mismatch, this is an important finding. Overskilled workers with a higher degree show the highest state dependence, while workers with vocational education show none. Workers with no post-school qualifications are somewhere between these two groups. The finding that higher degree graduates suffer the greatest overskilling state dependence, combined with the well-established finding that they also suffer the highest overskilling wage penalty, offers an alternative and useful perspective to compare the attributes of vocational and degree qualifications. |
| Keywords: | overskilling, education pathways, state dependence, dynamic estimation |
| JEL: | J24 J31 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp4321&r=lab |
| By: | Hensen Maud M.; Vries M. Robert de; Cörvers Frank (ROA rm) |
| Abstract: | In this article we investigate the relationship between geographic mobility andeducation-job mismatch in the Netherlands. We focus on the role of geographicmobility in reducing the probability of graduates working (i) jobs below theireducation level; (ii) jobs outside their study fi eld; (iii) part-time jobs; (iv) fl exiblejobs; or (v) jobs paid below the wage expected at the beginning of the career. For thispurpose we use data on secondary and higher vocational education graduates in theperiod 1996–2001. We show that graduates who are mobile have higher probabilityof fi nding jobs at the acquired education level than those who are not. Moreover,mobile graduates have higher probability of fi nding full-time or permanent jobs.Th is suggests that mobility is sought to prevent not only having to take a job belowthe acquired education level, but also other education-job mismatches; graduates arespatially fl exible particularly to ensure full-time jobs. |
| Keywords: | education, training and the labour market; |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:umaror:2009012&r=lab |
| By: | van den Berg, Gerard J. (VU University Amsterdam); Vikström, Johan (Uppsala University) |
| Abstract: | Unemployment insurance systems include monitoring of unemployed workers and punitive sanctions if job search requirements are violated. We analyze the effect of sanctions on the ensuing job quality, notably on wage rates and hours worked, and we examine how often a sanction leads to a lower occupational level. The data cover the Swedish population over 1999-2004. We estimate duration models dealing with selection on unobservables. We use weighted exogenous sampling maximum likelihood to deal with the fact the data register is large whereas observed punishments are rare. We also develop a theoretical job search model with monitoring of job offer rejection versus monitoring of job search effort. The observation window includes a discontinuous policy change in which the punishment severity was reduced. We find that the hourly wage and the number of hours are lower after a sanction, and that individuals move more often to a lower occupational level, incurring human capital losses. Monitoring offer rejections is less effective than monitoring search effort. |
| Keywords: | case worker, weighted exogenous sampling maximum likelihood, hours worked, wage, sanction, duration, unemployment, job offer, offer rejection, search effort |
| JEL: | J64 C41 C21 J31 J44 J65 J62 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp4325&r=lab |
| By: | Lozano, Fernando A. (Pomona College) |
| Abstract: | I analyze the length of the workweek of foreign-born workers in the U.S. I concentrate on workers supplying long hours of work − 50 or more weekly hours and document that immigrants are less likely than natives to work long hours. Surprisingly, these differences are greatest among highly educated and salary paid workers, and persists even after conditioning for demographic characteristics. I explain these differences with two within occupation characteristics. First, relative to natives, immigrants are less likely to supply long work weeks if they work in occupations where the immigrant-native earnings differential is big. Second, immigrants are also less likely to supply long work weeks when they work in occupations with a wide dispersion of earnings. This second result is important, because the occupation dispersion of earnings has been used to characterize changes of the worker's earnings over the worker life cycle (Bell and Freeman, 2001; Kuhn and Lozano, 2008), and a good measure of the incentives to supply long hours of work. |
| Keywords: | immigrants, hours of work |
| JEL: | J22 J61 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp4317&r=lab |
| By: | Danziger, Leif (Ben Gurion University) |
| Abstract: | The minimum wage rate has been introduced in many countries as a means of alleviating the poverty of the working poor. This paper shows, however, that an imperfectly enforced minimum wage rate causes small firms to face an upward-sloping labor supply schedule. Since this turns these firms into endogenous monopsonists, the minimum wage rate has the perverse effect of reducing employment in small firms as well as what these firms offer their workers. Thus, if there are only small firms, the minimum wage rate makes all workers that would be employed in the absence of a minimum wage rate worse off. |
| Keywords: | endogenous monopsony, minimum wage, noncompliance, small firms |
| JEL: | J38 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp4320&r=lab |
| By: | Asadul Islam; Dietrich K. Fausten |
| Abstract: | This paper addresses the implications of the increasing skill intensity of cross-border migration flows for labour market outcomes in host countries. Specifically, we investigate the impact of the relative growth of skilled migrants on domestic wages in Australia over the last quarter century (1980-2006). We use instrumental variable (IV) estimation techniques to deal with the potential endogeneity of immigration. Unlike most of the previous literature, we use macro data to allow for the adjustment of wages and aggregate demand to immigration flows. However, the limited time span of such data raises problems of small sample bias. We address the small sample bias problem by using Jackknife IV estimation. Our basic finding challenges popular presumptions about the adverse wage implications of immigration. However, our examination of the skill composition of migration flows supports the many prevailing empirical findings that immigration need not cause labour market outcomes to deteriorate. Specifically, we do not find any robust evidence that a relative increase in arrivals of skilled immigrants exerts discernible adverse consequences on wages in Australia. |
| Keywords: | Immigration, wage, endogeneity, instrumental variable. |
| JEL: | J61 J31 C31 C59 |
| Date: | 2009–08 |
| URL: | http://d.repec.org/n?u=RePEc:mos:moswps:2007-36&r=lab |
| By: | Oguzoglu, Umut (University of Manitoba) |
| Abstract: | This paper analyzes the effect of severity of disability on labour force participation by using a self-reported work limitation scale. A dynamic labour force participation model is used to capture the feedback effect of past participation on current participation. The results suggest that net of persistence and unobserved heterogeneity, differences in severity levels explain a significant portion of the variance in the participation rates among disabled individuals. Moreover, the disability is shown to have longer lasting adverse effects on female participation and work limited women will be more likely to benefit from the work requirements imposed on Disability Support Pension recipients. |
| Keywords: | severity, work disability, labour force participation |
| JEL: | J28 I12 C81 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp4328&r=lab |
| By: | Prosper F. Bangwayo-Skeete (Portfolio of Finance and Economics, Government of Cayman Islands); Afaf H. Rahim (Center for Near and Middle Eastern Studies, Philipps- Universität Marburg, Germany); Precious Zikhali (Centre for World Food Studies, VU University Amsterdam, The Netherlands) |
| Abstract: | What makes workers consider it fair for wages to be indexed on job performance or efficiency? In this paper we attempt to answer this question using the 2005 wave of the World Values Survey data for 43 countries to investigate what socio-economic characteristics condition employees’ preference for efficiency over equity wages. Our results suggest that employees’ preference for efficiency wages increases with education and globalization while it decreases with unemployment, income inequality and income tax rates. Given that conventional economic theory demonstrates the importance of labour efficiency, which improves when workers are remunerated according to their efficiency, for economic growth; our results suggest that institutions and specifically public policies that promote education, and globalization, along with policies that reduce unemployment, income inequality and income tax rates could be used to promote efficiency-based wages. |
| JEL: | D02 I21 O15 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:mar:magkse:200933&r=lab |
| By: | Myck, Michal (DIW Berlin); Nicinska, Anna (Warsaw University); Morawski, Leszek (Warsaw University) |
| Abstract: | We show how significant may be the difference in the estimated returns to education in Poland conditional on the measure of wages used and the estimation approach applied. Combining information from two different Polish surveys from 2005 and taking advantage of the Polish microsimulation model (SIMPL) we demonstrate how different the results can be depending on whether we use net or gross, and monthly or hourly wages, and show how important selection correction is for the conclusion. While there are several papers examining the wage equation in Poland, so far none of them has provided a comprehensive analysis of the effects of using different methods and the issue of selection-correction in the estimation of the wage equation in Poland has not been examined in detail. Annual rates of return to university education for men vary from 6.7% to 9.7% and for women from 8.0% to 13.4% when we compare results using net monthly wages without correcting for labor market selection to those from a selection corrected specification using gross hourly wages. We also demonstrate that simple linear estimation performs relatively well for men in comparison to our preferred selection corrected estimation, while using family demographics as exclusion restrictions seems to be the "second best" in the case of the wage equation estimation for women. |
| Keywords: | returns to education, wage equation, selection models, instrumental variables |
| JEL: | J31 J21 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp4332&r=lab |
| By: | Kai Christoffel (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.); James Costain (Banco de España, Alcalá 50, E-28014 Madrid, Spain.); Gregory de Walque (Banque Nationale de Belgique, Boulevard de Berlaimont 14, B-1000 Brussels, Belgium.); Keith Kuester (Federal Reserve Bank of Philadelphia, Ten Independence Mall, Philadelphia, PA 19106-1574, USA.); Tobias Linzert (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.); Stephen Millard (Bank of England, Threadneedle Street, London EC2R 8AH, UK.); Olivier Pierrard (Banque Centrale du Luxembourg, 2 boulevard Royal, L-2983 Luxembourg, Luxembourg.) |
| Abstract: | This paper reviews recent approaches to modeling the labour market and assesses their implications for inflation dynamics through both their effect on marginal cost and on price-setting behaviour. In a search and matching environment, we consider the following modeling setups - right-to-manage bargaining vs. efficient bargaining, wage stickiness in new and existing matches, interactions at the firm level between price and wage-setting, alternative forms of hiring frictions, search on-the-job and endogenous job separation. We find that most specifications imply too little real rigidity and, so, too volatile inflation. Models with wage stickiness and right-to-manage bargaining or with firm-specific labour emerge as the most promising candidates. JEL Classification: E31, E32, E24, J64. |
| Keywords: | Inflation Dynamics, Labour Market, Business Cycle, Real Rigidities. |
| Date: | 2009–05 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20091053&r=lab |
| By: | Véronique Genre (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.); Karsten Kohn (KfW Bankengruppe Frankfurt, Palmengartenstraße 5-9,D-60325 Frankfurt am Main, Germany.); Daphne Momferatou (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main.) |
| Abstract: | This paper focuses on the euro area wage structure and its potential determinants from a sectoral viewpoint. Merging information from the OECD Structural Analysis database with data from the EU Labour Force Survey, we construct a cross-country panel of 22 industries in 8 euro area countries for 1991-2002. Data inspection confirms the existence of a fairly stable inter-industry wage structure that is similar across countries. We then apply panel data techniques to identify factors explaining inter-industry wage differentials in the euro area. Both workforce characteristics (e.g., human capital variables) and firm-related characteristics (e.g., capital intensity, productivity) contribute significantly. However, considerable wage heterogeneity across sectors remains. Idiosyncratic sector and country specifics, reflecting different sociocultural and institutional backgrounds, appear to bear a major role. While our paper only uses direct evidence from workforce and firm-related characteristics, we also try to relate the remaining heterogeneity to institutional characteristics, based on available relevant literature. JEL Classification: J31, J24, J51. |
| Keywords: | euro area, inter-industry wage differentials, panel estimation, firm and workforce characteristics, labour market institutions. |
| Date: | 2009–03 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20091022&r=lab |
| By: | Fabio Rumler (Oesterreichische Nationalbank, Economic Analysis Division, Otto-Wagner-Platz 3, POB 61, A-1011 Vienna, Austria.); Johann Scharler (Department of Economics, University of Linz, Altenbergerstrasse 69, A-4040 Linz, Austria.) |
| Abstract: | In this paper we analyze empirically how labor market institutions influence business cycle volatility in a sample of 20 OECD countries. Our results suggest that countries characterized by high union density tend to experience more volatile movements in output, whereas the degree of coordination of the wage bargaining system and strictness of employment protection legislation appear to play a limited role for output volatility. We also find some evidence suggesting that highly coordinated wage bargaining systems have a dampening impact on inflation volatility. JEL Classification: E31, E32. |
| Keywords: | Business Cycles, Inflation, Labor Market Institutions. |
| Date: | 2009–02 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20091005&r=lab |
| By: | Andreas Koch; Jochen Spaeth |
| Abstract: | The present contribution addresses the question whether and how qualitative aspects of employment---like weekly hours of work, wages or qualification---differ between new and established firms. Although a wide strand of literature in entrepreneurship research analyses the employment effects of start-ups vs. incumbent firms, our knowledge about differences in these qualitative aspects of employment is rather poor. Labour market research, on the other hand, has been thoroughly accounting for the consequences of technological and organisational change on the characteristics and turnover of jobs, but it rarely has been attempting to consider the relevance of firm entry. Based on the Establishment History Panel, a plant-level dataset constructed from employment information and comprising nearly the entire German economy, we find significant differences between new and incumbent firms with respect to employment quality. Surprisingly, the difference regarding the share of high-qualified labour is---though highly significant---not as high as commonly expected. |
| Keywords: | Start-ups, Employment, Quality of Employment, Germany, Entrepreneurship, Qualification, Wages, Part-Time, Marginal Employment |
| JEL: | J24 J31 J82 M13 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:iaw:iawdip:50&r=lab |
| By: | Almut Balleer (Universität Bonn, D-53012 Bonn, Germany.); Ramon Gomez-Salvador (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.); Jarkko Turunen (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.) |
| Abstract: | We use a cohort based model to analyse determinants of labour force participation for disaggregated groups of workers in the euro area and the five largest euro area countries. The model captures age and cohort effects as indicators of (unobserved) determinants of participation behaviour. We use these effects and observed determinants to construct trends and projections of labour supply. Our results suggest that age and cohort effects can account for a substantial part of the recent increase in participation. Cohort effects are particularly relevant for women with those born in the late 1960s and early 1970s more likely to participate over the life-cycle. There is substantial variation in the estimated age and cohort effects across countries. Looking forward, positive cohort effects for women are not large enough to compensate for the downward impact of population ageing on participation rates in the euro area. JEL Classification: J11, J21. |
| Keywords: | labour force participation, cohort analysis, labour market institutions. |
| Date: | 2009–05 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20091049&r=lab |
| By: | Catherine Fuss (National Bank of Belgium, Research Department, 14, bd. de Berlaimont, 1000 Brussels, Belgium.); Ladislav Wintr (Central Bank of Luxembourg, Economics and Research Department, 2 boulevard Royal, L – 2983 Luxembourg, Luxembourg.) |
| Abstract: | Using firm-level data for Belgium over the period 1997-2005, we evaluate the elasticity of firms' labour and real average labour compensation to microeconomic total factor productivity (TFP). Our results may be summarised as follows. First, we find that the elasticity of average labour compensation to firm-level TFP is very low contrary to that of labour, consistent with real wage rigidity. Second, while the elasticity of average labour compensation to idiosyncratic firm-level TFP is close to zero, the elasticity with respect to aggregate sector-level TFP is high. We argue that average labour compensation adjustment mainly occur at the sector level through sectoral collective bargaining, which leaves little room for firm-level adjustment to firm-specific shocks. Third, we report evidence of a positive relationship between hours and idiosyncratic TFP, as well as aggregate TFP within the year. JEL Classification: J30, J60. |
| Keywords: | labour compensation, employment, hours, Total Factor Productivity. |
| Date: | 2009–03 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20091021&r=lab |
| By: | Carrillo-Tudela, Carlos (University of Leicester); Menzio, Guido (University of Pennsylvania); Smith, Eric (University of Essex) |
| Abstract: | This paper revisits the no-recall assumption in job search models with take-it-or-leave-it offers. Workers who can recall previously encountered potential employers in order to engage them in Bertrand bidding have a distinct advantage over workers without such attachments. Firms account for this difference when hiring a worker. When a worker first meets a firm, the firm offers the worker a sufficient share of the match rents to avoid a bidding war in the future. The pair share the gains to trade. In this case, the Diamond paradox no longer holds. |
| Keywords: | job search, recall, wage determination, Diamond paradox |
| JEL: | J24 J42 J64 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp4319&r=lab |
| By: | Patrick Lünnemann (Banque centrale du Luxembourg; 2, boulevard Royal; L-2983 Luxembourg, Luxembourg.); Ladislav Wintr (Banque centrale du Luxembourg; 2, boulevard Royal; L-2983 Luxembourg, Luxembourg.) |
| Abstract: | This paper assesses the degree of wage flexibility in Luxembourg using an administrative data set on individual base wages covering the entire economy over the period 2001-2006 with monthly frequency. We find that the wage flexibility at the discretion of the firm is rather low once we limit measurement error and remove wage changes due to institutional factors (indexation, changes in statutory minimum wage, age and marital status). The so adjusted frequency of wage change lies between 5% and 7%. On average, wages change less often than consumer prices. Less than one percent of (nominal) wages are cut both from month to month and from year to year. Due to automatic wage indexation, wages appear to be subject to substantial downward real wage rigidity. Finally, wage changes tend to be highly synchronised as they are concentrated around the events of wage indexation and the month of January. JEL Classification: J31. |
| Keywords: | wage flexibility, wage rigidity. |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20091074&r=lab |
| By: | Julián Messina (University of Girona, Plaça Sant Domènec, 3, E-17071 Girona, Spain.); Chiara Strozzi (Università degli Studi di Modena e Reggio Emilia,Via Università 4, I - 41100 Modena, Italy.); Jarkko Turunen (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.) |
| Abstract: | We study differences in the adjustment of aggregate real wages in the manufacturing sector over the business cycle across OECD countries, combining results from different data and dynamic methods. Summary measures of cyclicality show genuine cross-country heterogeneity even after controlling for the impact of data and methods. We find that more open economies and countries with stronger unions tend to have less pro-cyclical (or more counter-cyclical) wages. We also find a positive correlation between the cyclicality of real wages and employment, suggesting that policy complementarities may influence the adjustment of both quantities and prices in the labour market. JEL Classification: E32, J30, C10. |
| Keywords: | real wages, business cycle, dynamic correlation, labour market institutions. |
| Date: | 2009–02 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20091003&r=lab |
| By: | Michael Fertig; Christoph M. Schmidt; Mathias G. Sinning |
| Abstract: | This paper investigates whether and to what extent demographic change has an impact on human capital accumulation. The effect of the relative cohort size on educational attainment of young adults in Germany is analyzed utilizing data from the German Socio-Economic Panel for West-German individuals of the birth cohorts 1966 to 1986. These are the cohorts which entered the labor market since the 1980's. Particular attention is paid to the effect of changes in labor market conditions, which constitute an important channel through which demographic change may affect human capital accumulation. Our findings suggest that the variables measuring demographic change exert a considerable though heterogeneous impact on the human capital accumulation of young Germans. Changing labor market conditions during the 1980's and 1990's exhibit a sizeable impact on both the highest schooling and the highest professional degree obtained by younger cohorts. |
| Keywords: | Demographic Change, Schooling, Vocational Training |
| JEL: | J11 J24 C25 |
| Date: | 2009–03 |
| URL: | http://d.repec.org/n?u=RePEc:auu:dpaper:608&r=lab |
| By: | Brunello, Giorgio (University of Padova) |
| Abstract: | The existing empirical evidence on the relationship between apprenticeships, initial workplace training and economic downturns, is relatively scarce. The bottom line of this literature is that ratio of apprentices to employees tends to be (mildly) pro-cyclical and to decline during a recession, with the notable exception of the Great Depression, when it rose (at least in England). When broader measures of training are considered, which exclude apprentices, the weight of the evidence is in favour of counter-cyclical training incidence. This paper suggests that a possible reconciliation of these findings is based on recognizing that firms may have incentives to train incumbents during a downturn and at the same time to reduce the recruitment and training of young employees, who are engaged in the transition from school to work. |
| Keywords: | apprenticeship training, economic downturns |
| JEL: | J24 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp4326&r=lab |
| By: | Krisztina Kis-Katos; Robert Sparrow (Department of International Economic Policy, University of Freiburg) |
| Abstract: | We examine the effects of trade liberalization on child work and schooling in Indonesia. Our estimation strategy identifies geographical differences in the effects of trade policy through district and province level exposure to reduction in import tariff barriers. We use seven rounds (1993 to 2002) of the Indonesian annual national household survey (Susenas), and relate workforce participation and school enrolment of children aged 10-15 to geographic variation in relative tariff exposure. Our main findings show that increased exposure to trade liberalization is associated with a decrease in child work and an increase in enrolment among 10 to 15 year olds. The effects of tariff reductions are strongest for children from low skill backgrounds and in rural areas. However, a dynamic analysis suggests that these effects reflect the long term benefits of trade liberalization, through economic growth and subsequent income effects, while frictions and negative adjustment effects may occur in the short term. |
| Keywords: | child labor, trade |
| Date: | 2009–03 |
| URL: | http://d.repec.org/n?u=RePEc:fre:wpaper:8&r=lab |
| By: | Faia, Ester (University of Frankfurt); Lechthaler, Wolfgang (Kiel Institute for the World Economy); Merkl, Christian (Kiel Institute for the World Economy) |
| Abstract: | We study the design of optimal monetary policy in a New Keynesian model with labor turnover costs in which wages are set according to a right to manage bargaining where the firms' counterpart is given by currently employed workers. Our model captures well the salient features of European labor market, as it leads to sclerotic dynamics of worker flows. The coexistence of those types of labor market frictions alongside with sticky prices gives rise to a non-trivial trade-off for the monetary authority. In this framework, firms and current employees extract rents and the policy maker finds it optimal to use state contingent inflation taxes/subsidies to smooth those rents. Hence, in the optimal Ramsey plan, inflation deviates from zero and the optimal volatility of inflation is an increasing function of firing costs. The optimal rule should react to employment alongside inflation. |
| Keywords: | optimal monetary policy, hiring and firing costs, labor market frictions, policy trade-off |
| JEL: | E52 E24 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp4322&r=lab |
| By: | Boeri, Tito (Bocconi University) |
| Abstract: | The process leading to the setting of the minimum wage so far has been fairly overlooked by economists. This paper suggests that this is a serious limitation as the setting regime contributes to explain cross-country variation in the fine-tuning of the minimum wage, hence in the way in which the trade-off between reducing poverty among working people and shutting down low productivity jobs is addressed. There are two common ways of setting national minimum wages: they are either government legislated or are the outcome of collective bargaining agreements, which are extended erga omnes to all workers. We develop a simple model relating the level of the minimum wage to the setting regime. Next, we exploit a new data set on minimum wages in 66 countries that had already or introduced a minimum wage in the period 1981-2005 to test the implications of the model. We find that a Government legislated minimum wage is lower than a wage floor set within collective agreements. This effect survives to several robustness checks and hints at a causal relation between the setting regime and the level of the minimum wage. |
| Keywords: | minimum wages, collective bargaining, statutory minimum |
| JEL: | J31 J41 J42 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp4335&r=lab |
| By: | Stephen Bazen (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales - CNRS : UMR6579); Julie Le Gallo (CRESE - Centre de REcherche sur les Stratégies Economiques - Université de Franche-Comté) |
| Abstract: | The "new economics of the minimum wage" is based on the findings from case studies that minimum wages had no effect on employment and may even have increased it. This conclusion is at odds with the findings of earlier studies and those of a number of more recent studies which find a statistically significant negative effect on teenage employment. These conflicting results constitute a puzzle. We find that this is due to minimum wage hikes implemented at the state-level having no negative effects on teenage employment during the 1980s and 1990s, while the federal hikes of the 1990s did. In states without their own minimum wages, the decline in the relative value of the federal minimum wage during the 1980s gave rise to an increase in low-wage employment that was subsequently checked and reversed by the federal hikes in the early 1990s. |
| Keywords: | Federal Minimum Wages; State Minimum Wages; Teenage Employment |
| Date: | 2009–07–28 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-00408016_v1&r=lab |
| By: | Torben Kuhlenkasper; Göran Kauermann |
| Abstract: | The paper investigates maternity leave behavior in West Germany for females being employed between 1995 and 2006 using data from the German Socio Economic Panel. The observational study focuses on the investigation of individual and family-related covariate effects on the duration of maternity leave following first or second childbirth, respectively. Dynamic duration time models are used in which covariate effects are allowed to vary smoothly with duration of being in maternity leave. The intention of the paper is to demonstrate with state of the art models how effects of covariables change over time and to analyse substantial differences between maternity leaves following first and second childbirth. Particularly the personal income of mothers and the educational attainment influence the decision when to return into employment. The leave period following second birth is influenced by the mothers¿ attachment to the labour market between their two maternity leave periods. As fitting routine penalized spline smoothing effects is employed using available software in R (www.r-project.org). |
| Keywords: | Duration time models, dynamic effects, maternity leave, Panel data, employment transition |
| JEL: | C14 C23 C41 J13 J24 J60 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwsop:diw_sp213&r=lab |
| By: | Jürges, Hendrik (University of Mannheim); Reinhold, Steffen (MEA, University of Mannheim); Salm, Martin (Tilburg University) |
| Abstract: | During the postwar period German states pursued policies to increase the share of young Germans obtaining a university entrance diploma (Abitur) by building more academic track schools, but the timing of educational expansion differed between states. This creates exogenous variation in the availability of higher education, which allows estimating the causal effect of education on health behaviors. Using the number of academic track schools in a state as an instrumental variable for years of schooling, we investigate the causal effect of schooling on health behavior such as smoking and related outcomes such as obesity. We find large negative effects of education on smoking. These effects can mostly be attributed to reductions in starting rates rather than increases in quitting rates. We find no causal effect of education on reduced overweight and obesity. |
| Keywords: | education, smoking, obesity |
| JEL: | I12 I20 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp4330&r=lab |
| By: | Kenneth Hartgen (University of Göttingen); Stephan Klasen (University of Göttingen); Mark Misselhorn (University of Göttingen) |
| Abstract: | Spurred by international commitments and expanded funding at the national and international level, attendance in education and associated years of schooling have expanded substantially in developing countries in recent years. But has this expansion in enrolments reduced existing inequalities in educational access and achievements? This paper analyzes differences in improvements in the access to the education system and in educational outcomes across the welfare distribution between and within countries, and also by gender and regions for a sample of 37 developing countries using Demographic and Health Surveys (DHS). For the analysis, the toolbox of pro-poor growth analysis is applied to several educational indicators. We find drastic inequalities in educational attendance across the income distribution. Interestingly, inequalities in attendance declines with rising average attendance, while inequality in completion rates or schooling years increases with rising completion rates or schooling years. We find great heterogeneity in the distribution of progress of education, with very little pro-poor progress in educational achievement indicators. Also, progress appears to be less pro-poor in countries with low initial educational achievement and high overall educational progress. We find no correlation between pro-poor progress and free education policies or initial inequality in education. At the regional level, educational progress was generally more pro-poor in Asia and Latin America, while in Africa the experience is very heterogeneous. While gender inequality has decreased slightly, large differences by region tend to persist over time. |
| Keywords: | education; human capital; inequality; pro-poor growth |
| JEL: | I20 I29 I31 I32 |
| Date: | 2009–07–15 |
| URL: | http://d.repec.org/n?u=RePEc:got:gotcrc:008&r=lab |
| By: | Zemanek, Holger |
| Abstract: | This paper explores the impact of country size on labor market flexibility in a monetary union with a common monetary policy as conducted in EMU. I apply a Barro-Gordon framework and test its result empirically for EMU. Results confirm that small countries demand higher labor market flexibility than large countries. Small countries use labor market flexibility to be protected against monetary policy in favor of large countries and use flexibility as a substitute for monetary policy. Thereby, national inflation volatilities and unemployment volatility are important determinants. Business cycle synchronization reduces the need of small countries for additional labor market flexibility. |
| Keywords: | Structural reforms; labor market flexibility; European Monetary Union; country size; Barro-Gordon model; business cycle synchronization |
| JEL: | F15 E42 E52 D78 E61 |
| Date: | 2009–07–27 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:16482&r=lab |
| By: | Tsujita, Yuko |
| Abstract: | This paper showed the basic educational status of slum children between 5 and 14 years old. The attendance ratio of slum children is much lower than that of children in Delhi as a whole. Parental perception of education and financing education are the major constraints. Even if children are attending schools, the majority of them are over-aged. There are both demand and supply side reasons for discouraging slum children from attending schooling. As opposed to school-based surveys in previous literature, children in slums are more likely to go to government schools rather than low-fee paying private schools. Some policies are suggested. |
| Keywords: | Education, Slum, India, Children, Poverty |
| JEL: | I20 I21 |
| Date: | 2009–03 |
| URL: | http://d.repec.org/n?u=RePEc:jet:dpaper:dpaper199&r=lab |
| By: | Markus Knell (Oesterreichische Nationalbank, Otto-Wagner-Platz 3, POB-61, A-1011 Vienna, Austria.); Alfred Stiglbauer (Oesterreichische Nationalbank, Otto-Wagner-Platz 3, POB-61, A-1011 Vienna, Austria.) |
| Abstract: | In this paper we present an extension of the Taylor model with staggered wages in which wage-setting is also influenced by reference norms (i.e. by benchmark wages). We show that reference norms can considerably increase the persistence of inflation and the extent of real wage rigidity but that these effects depend on the definition of reference norms (e.g. how backward-looking they are) and on whether the importance of norms differs between sectors. Using data on collectively bargained wages in Austria from 1980 to 2006 we show that wage-setting is strongly influenced by reference norms, that the wages of other sectors seem to matter more than own past wages and that there is a clear indication for the existence of wage leadership (i.e. asymmetries in reference norms). JEL Classification: E31, E32, E24, J51. |
| Keywords: | Inflation Persistence, Real Wage Rigidity, Staggered Contracts, Wage Leadership. |
| Date: | 2009–04 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20091047&r=lab |
| By: | Nattavudh Powdthavee; ; |
| Abstract: | This paper is the first of its kind to estimate the exogenous effect of schooling on reduced blood pressure and the incidence of hypertension. Using the changes of the minimum school-leaving age in the United Kingdom from age 14 to 15 in 1947, and from age 15 to 16 in 1973, as instruments, the IV-probit estimates imply that completing an extra year of schooling reduces the probability of developing subsequent hypertension by approximately 5%-11% points. The correct estimates of the LATE for schooling indicate the presence of a large and negative bias in the least square/probit estimates of schooling-health relationship. |
| Keywords: | blood pressure; compulsory schooling; biomarker; IV; hypertension; health |
| JEL: | H1 I1 I2 |
| URL: | http://d.repec.org/n?u=RePEc:yor:yorken:09/14&r=lab |
| By: | Nicoletti C (Institute for Social and Economic Research); Nandi A (Institute for Social and Economic Research) |
| Abstract: | Using the British Household Panel Survey we examine how the Big Five personality traits – openness to experience, conscientiousness, extroversion, agreeableness, and neuroticism – affect wages. We estimate mean and quantile pay gaps between people with low and high levels of each of the Big Five, and decompose these pay gaps in the part explained by differences in workers’ characteristics and in the residual unexplained part. We find that openness to experience is the most relevant personality trait followed by neuroticism, agreeableness and extroversion. Openness and extroversion are rewarded while agreeableness and neuroticism are penalized. |
| Date: | 2009–08–04 |
| URL: | http://d.repec.org/n?u=RePEc:ese:iserwp:2009-22&r=lab |
| By: | Maltby, Josephine |
| Abstract: | King and Tomkins (2002) in their study of the ‘economy of makeshifts’1 of the poor in Britain in the late eighteenth and early nineteenth centuries identify a network of different ‘sources and benefits’ from which ‘poor households cobbled together incomes’.2 Poor people, they argue, used complementary resources which included wages, self-help and family support, as well as charity and parish benefits and research has not yet adequately explored the strategies by which these resources were combined. More needs to be known, they argue, about the effects on these strategies of a variety of factors, which include different gender roles, and more use needs to be made of a wide variety of sources whose ‘full potential has yet to be explored’,3 such as parish minutes, begging letters, wage accounts, and the records of pawnbrokers. The paper examines the role played in the makeshift economy by workingclass women’s use of the savings banks that were founded in Britain as resources for the poor at the beginning of the nineteenth century. It begins with a brief survey of the history of savings banks and of their relationship with working-class and women savers, and an overview of previous studies of UK savings banks, before outlining the results of surveys of two Yorkshire banks: the Sheffield and Hallamshire Savings bank and the Huddersfield Penny Savings Bank. |
| Date: | 2009–02 |
| URL: | http://d.repec.org/n?u=RePEc:wrc:ymswp1:43&r=lab |
| By: | Nattavudh Powdthavee; ; |
| Abstract: | Using a nationally representative longitudinal data of the British people, this paper explores how different areas of a person's life are affected by unemployment. We find evidence that unemployment is preceded, on average, by a year of dissatisfaction with one's finance and job. Once unemployed, the individuals go through a period of financial worries, social isolation, and health loss, as well as fluctuations in marital quality. While the unemployed fully adapt to the drop in health satisfaction, adaptation in other areas of life is less complete. We also find that it makes virtually no difference to the life satisfaction-path before and after unemployment whether one assumes unemployment to affect life satisfaction directly or indirectly via its impacts on different life domains. Finally, the paper discusses the use of instrumented income to estimate the sums required to compensate individuals for each year that they spend in unemployment. |
| Keywords: | Domain satisfaction; Life satisfaction; Adaptation; Unemployment; Happiness |
| JEL: | I31 J6 |
| URL: | http://d.repec.org/n?u=RePEc:yor:yorken:09/15&r=lab |
| By: | Boris Branisa (University of Göttingen); Stephan Klasen (University of Göttingen); Maria Ziegler (University of Göttingen) |
| Abstract: | In this paper we construct the Social Institutions and Gender Index (SIGI) and its five subindices Family code, Civil liberties, Physical integrity, Son Preference and Ownership rights using variables of the OECD Gender, Institutions and Development database. Instead of measuring gender inequalities in education, health, economic or political participation, these new indices allow a new perspective on gender issues in developing countries. The SIGI and the subindices measure long-lasting social institutions which are mirrored by societal practices and legal norms that might produce gender inequalities. The subindices measure each one dimension of the concept and the SIGI combines the subindices into a multidimensional index of deprivation of women. Methodologically, the SIGI is inspired by the Foster-Greer-Thorbecke poverty measures. It offers a new way of aggregating gender inequality in several dimensions, penalizing high inequality in each dimension and allowing only for partial compensation between dimensions. The SIGI and the subindices are useful tools to identify countries and dimensions of social institutions that deserve attention. Empirical results confirm that the SIGI provides additional information to that of other well-known gender-related indices. |
| Keywords: | SIGI; Composite index; Gender inequality; Social institutions; OECD-GID database |
| JEL: | D63 I39 J16 |
| Date: | 2009–07–29 |
| URL: | http://d.repec.org/n?u=RePEc:got:gotcrc:010&r=lab |
| By: | Frank Neffke; Martin Svensson Henning |
| Abstract: | The concept of "relatedness" between industries plays an increasingly central role in economics and strategic management. However, relatedness has remained rather elusive in empirical terms. In this article, we investigate relatedness between industries in terms of the extent to which the same human capital can be employed in different industries. In particular, we investigate the skill-relatedness among different industries by investigating labor flows between industries. The data used are Swedish employer linked data on individuals. Our statistical framework assesses the degree to which labor flows between pairs of industries are in excess of expected levels and use this as a quantification of Revealed Skill Relatedness. A network picture of 435 4-digit industries and the relatedness linkages between them shows that the relations among industries are far more complex than the industrial classification system suggests. Moreover, when investigating corporate diversification, we find that firms are far more likely to diversify into industries that are strongly skill-related to their core activities industries than into unrelated industries. |
| Keywords: | Length 29 pages |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:esi:evopap:2009-06&r=lab |
| By: | Mita Bhattacharya |
| Abstract: | Child labour is a complex problem basically rooted in poverty. The Government of India has formulated policies since the economic reforms of the early 1990s. Children under fourteen comprise 3.6 per cent of the total labour force in India. Nearly eighty-five per cent are engaged in the traditional agricultural sector, less than nine per cent in manufacturing, services and repairs and only about 0.8 per cent are in factories. The elimination of child labour is a priority and is being implemented at the grass roots level in India. A large number of non-governmental and voluntary organizations are involved in this process along with national and international organisations. This paper reviews the child labour situation in India and analyses the effect of globalisation on child labour. |
| Date: | 2009–08 |
| URL: | http://d.repec.org/n?u=RePEc:mos:moswps:2007-09&r=lab |
| By: | Mina Baliamoune |
| Abstract: | We analyze the interplay of political elites’ de facto power, democracy and education based on a theoretical framework inspired by the model in Acemoglu and Robinson (2006). We identify conditions under which the elite may overcompensate the loss of de jure power (as a result of political reform) by investing too much in de facto power so that the probability to have de facto power is higher under democracy than under non-democracy. The analysis also shows that depending on whether the income effect of education is strong or weak and whether citizens’ education has increasing or decreasing returns, the elite may or may not support education subsidy under democracy. We show that under certain assumptions the political elites may treat democracy and spending on citizens’ education as substitutes. We comment on the implications of the results for understanding why countries that started from comparable initial conditions may follow divergent development paths. |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:icr:wpicer:18-2009&r=lab |