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on Labour Economics |
| By: | Eriksson, Stefan (Department of Economics); Lagerström, Jonas (Åbo Akademi University) |
| Abstract: | This paper studies the determinants and labor market consequences of unemployed workers’ wage demands using direct data on the workers’ actual wage requests. Our results show that most workers want a wage close to what they earned in their previous jobs, and thus much more than they get in unemployment benefits. However, our results also show that some groups, such as women, tend to systematically demand lower wages. Also, we find that workers with high wage demands are contacted by firms less often than otherwise similar workers with lower wage demands. Thus our results indicate that too high wage demands may contribute to high unemployment. |
| Keywords: | Unemployment; Job Search; Wage Demands; Gender Differences |
| JEL: | J31 J64 |
| Date: | 2010–11–22 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:uunewp:2010_026&r=lab |
| By: | Angel-Urdinola, Diego F.; Semlali, Amina |
| Abstract: | Analysis in this policy note indicates a rapid deterioration in employment opportunities for young individuals transitioning from school to work in Egypt. Despite substantial improvements in labor market outcomes in recent years (in raising employment and participation and in lowering unemployment), unemployment rates in Egypt remain exceedingly high among youth entering the labor market for the first time. A slow school-to-work transition remains the main reason behind high unemployment rates. Young entrants to the labor market have become more educated than ever before: the share of the working-age-population with university education in Egypt has increased significantly between the years 1998 and 2006 (from 14% to 19% among men and from 9% to 14% among women). However, youth are unable to capitalize the time and resources invested in their education as the labor market is not providing enough good-quality jobs for them. To cope with scarce formal jobs, young-educated workers are opting to work in the informal sector and/or withdraw from the labor force, which is contributing to a deadweight loss of recent investments in education. There are three key factors that seem to explain why school-to-job transition remains low in Egypt: investments in the private sector remain low and capital intensive, new graduates are not equipped with the skills demanded by the private sector, and the public sector still provides incentives for educated individuals (mainly women) to queue for private sector jobs. There are several policy options used in the international context to further enhance the performance of the labor market; such as removing obstacles in regulation, enhancing employability of new entrants, reforming the civil service, and designing targeted programs aiming to boost labor demand. |
| Keywords: | Labor markets; Egypt; unemployment; training; labor regulation; school-to-job transition |
| JEL: | J01 J24 J30 |
| Date: | 2010–08 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:27674&r=lab |
| By: | Carola Grün (University of Göttingen); Helmut Mahringer (Austrian Institute of Economic Research); Thomas Rhein (Institute for Employment Research) |
| Abstract: | Does the low wage sector serve as a stepping stone towards integration into better-paid jobs or at least towards integration of jobless people into employment? There is evidence for a "low-wage trap" and for a high risk of low-wage earners to get unemployed, but this may also be due to sorting effects and not to low-wage work itself. The present paper contributes to this debate analysing employment spells of male low-wage earners who had been unemployed before, with methods of continuous-time event history analysis. The present data have been retrieved from two large administrative micro-data sources: the IAB employment sample (IABS) for Germany, and a combination of social security data from the Austrian Social Insurance Institutions. Two possible exits of low-wage spells are focused on: exits to higher-paid employment (upward mobility vs. persistence), and exits to unemployment ("no pay-low pay cycle"). The results show shorter spell durations in Austria, pointing to a considerably higher fluctuation and labour turnover in the Austrian labour market. The influence of individual and firm-related characteristics and of the individual unemployment history on exit probabilities and the role of duration dependence in both countries is investigated. With regard to upward mobility, no convincing evidence for "true" duration dependence is found, at least for Germany. As to the risk of falling back into unemployment, the results suggest that even low-wage workers can accumulate job-related human capital favouring employment integration over time. |
| Keywords: | unemployment dynamics, low wage, duration analysis |
| Date: | 2010–12–22 |
| URL: | http://d.repec.org/n?u=RePEc:wfo:wpaper:y:2010:i:383&r=lab |
| By: | Ana María iregui; Ligia Alba Melo B.; María Teresa Ramírez G. |
| Abstract: | This paper uses a survey on wage formation that was applied to 1,305 Colombian firms to study wage-setting decisions with respect to newly hired employees. The Colombian case is interesting, since the country’s labour market performance, especially its unemployment rate and level of informality, differs not only from the developed countries, where studies of this type are concentrated, but also from most Latin American countries. The replies to the survey indicate wages for the newly hired are based mainly on a predefined wage structure. This may help to explain, in part, the presence of downward nominal wage rigidities in Colombia, since firms are unwilling to differentiate the pay of new hires from the wages of existing workers. Using logit models, we find that the probability of wages being bargained between the employee and the employer is less in the case of larger firms. On the contrary, the larger firms are more likely to determine wages according to a predefined wage structure. In general, the presence of flexible benefits and variable pay reduces the probability of wages being determined pursuant to a predefined wage structure. The results also indicate the worker’s educational level, experience and job duties are the main determinants of the wages of newly hired employees. |
| Date: | 2010–12–19 |
| URL: | http://d.repec.org/n?u=RePEc:col:000094:007808&r=lab |
| By: | Marianna Kudlyak |
| Abstract: | I conduct an empirical investigation of the cyclicality of the price of labor. Firms employ workers up to the point where workers' marginal revenue product equals the price of labor. If the labor market is a spot market, then the price of labor is the wage. But often workers are contracted for more than one period. The price of labor captures both the wage at the time of hiring and the impact of labor market conditions at the time of hiring on future wages. The price of labor and not wage is allocational for employment. Because it is not directly observed in the data, I construct the price of labor based on the behavior of individual wages and turnover. I find that a one percentage point increase in unemployment generates more than a 4.5% decrease in the price of labor. This cyclicality is three times higher than the cyclicality of individual wages and also noticeably higher than the cyclicality of the wages of newly hired workers. I conclude that the price of labor is very procyclical. |
| Keywords: | Business cycles ; Labor supply ; Unemployment ; Wages |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedrwp:10-13&r=lab |
| By: | Caliendo, Marco (IZA); Uhlendorff, Arne (University of Mannheim) |
| Abstract: | The transition process from unemployment to employment is determined by the reservation wage and the search effort of the unemployed worker. The optimal search strategy depends on labour market institutions like the generosity of unemployment benefits and "classical" characteristics like age and education as well as often not observed determinants like personality traits and subjective expectations. The IZA Evaluation dataset allows us to analyse the impact of these factors on the search behaviour and the transition process into employment. The data-set consists of a large inflow sample into unemployment based on administrative information and a unique survey of individuals who became unemployed between mid 2007 and mid 2008. This data-set allows us to observe individual job search intensity, reservation wages and job offers at different points in time as well as realised transitions into employment. Personality traits, ethnicity and social networks are part of the rich information. Our results indicate that differences in the potential duration of unemployment benefit receipt as well as differences in personality traits and in subjective expectations about participation probabilities in active labour market policy programs lead to a heterogeneity in the search behaviour and in the transition probabilities into employment. |
| Keywords: | Subjektive Erwartungen, Arbeitslosigkeitsdauer, Arbeitslosengeld, Persönlichkeitseigenschaften, Evaluation |
| JEL: | J64 J65 J68 D84 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5379&r=lab |
| By: | Haegeland, Torbjørn (Statistics Norway); Kirkebøen, Lars Johannessen (Statistics Norway); Raaum, Oddbjørn (Ragnar Frisch Centre for Economic Research); Salvanes, Kjell G. (Norwegian School of Economics and Business Administration) |
| Abstract: | Massive cross-sectional evidence exists indicating that children of more educated parents outperform their schoolmates. However, evidence for causal interpretation of this association is weak. We examine a causal relationship using two approaches for identification within the same data: cousins with twin parents and adopted children. We find no effect of mothers' education on children's school performance using the children-of-twins approach. However, for adopted children, mother's education has a small positive effect. Tracking the work experience of parents during offspring childhood, we find no support that this effect can be explained by a higher labor force participation among more educated mothers. |
| Keywords: | intergenerational mobility, education, twin parents, adoptees |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5369&r=lab |
| By: | TENIKUE Michel |
| Abstract: | In Cameroon, only 1/3 of children progress to secondary education. This paper estimates a sequential model of school attainment to investigate the role played by family background and individual characteristics in keeping children at school up to the end of secondary school. Using data of the 2001 Cameroon Household survey, we find that while parental wealth has no effect on the probability to enter primary school. It is however a good predictor of completing primary and secondary education. The lack of schools supply reduces school progression, particularly the lack of secondary schools hinders primary school entry. Finally, we find that male children are more likely to stay at school up to the end of secondary education. |
| Keywords: | Schooling; Sequential |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:irs:cepswp:2010-45&r=lab |
| By: | Gabor Kertesi (Institute of Economics of the Hungarian Academy of Sciences); Gabor Kezdi (Central European University, Institute of Economics of the Hungarian Academy of Sciences) |
| Abstract: | We analyze the magnitude and the causes of the low formal employment rate of the Roma in Hungary between 1993 and 2007. The employment rate of the Roma dropped dramatically around 1990. The ethnic employment gap has been 40 percentage points for both men and women and has stayed remarkably stable. Differences in education are the most important factor behind the gap, the number of children is important for female employment, and geographic differences play little role once education is controlled for. Conditional on employment, the gap in earnings is 0.3, and half of it is explained by educational differences. |
| Keywords: | Roma minority, employment, education, Hungary |
| JEL: | J15 J21 J70 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:has:bworkp:1009&r=lab |
| By: | Ian Schmutte |
| Abstract: | Referral networks may affect the efficiency and equity of labor market outcomes, but few studies have been able to identify earnings effects empirically. To make progress, I set up a model of on-the-job search in which referral networks channel information about high-paying jobs. I evaluate the model using employer-employee matched data for the U.S. linked to the Census block of residence for each worker. The referral effect is identified by variations in the quality of local referral networks within narrowly defined neighborhoods. I find, consistent with the model, a positive and significant role for local referral networks on the full distribution of earnings outcomes from job search. |
| Keywords: | Social Interactions, Informal Hiring Networks, Wage Variation, Neighborhood Effects |
| JEL: | J31 J64 R23 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:cen:wpaper:10-40&r=lab |
| By: | Ge, Suqin (Virginia Tech); Yang, Dennis (Chinese University of Hong Kong) |
| Abstract: | This paper assesses the applicability of two alternative theories in understanding labor market developments in China: the classical view featuring a Lewis turning point in wage growth versus a neoclassical framework emphasizing rational choices of individuals and equilibrating forces of the market. Empirical evidence based on multiple data sources fails to validate the arrival of the Lewis turning point in China, showing continuous and coordinated wage growth across rural and urban sectors instead. Consistent with the neoclassical view, we find that rural workers expanded off-farm work when mobility restrictions were lifted, interprovincial migration responded to expected earnings and local employment conditions, and returns to education converged gradually to the international standard. These findings suggest major progresses in the integration of labor markets in China. |
| Keywords: | labor markets, rural-urban migration, wage growth, schooling returns, Lewis turning point, China |
| JEL: | J31 J21 O11 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5377&r=lab |
| By: | Kahanec, Martin (Central European University and IZA); Zaiceva, Anzelika (IZA and University of Bologna); Zimmermann, Klaus F. (IZA, DIW Berlin and Bonn University) |
| Abstract: | This paper sheds light on the labor market situation of ethnic minorities in the European Union. Facing a serious measurement challenge and lacking adequate data, we apply several measures of ethnicity and examine various data sources as well as secondary evidence. We find significant gaps between ethnic minority and majority populations in terms of labor market outcomes. In particular, ethnic minorities appear to face disproportional difficulties in finding a job. Although experience in the host country improves the status of immigrant minorities, we do not find any clear assimilation of further immigrant generations. Roma people seem to face particularly grave integration barriers in European labor markets. |
| Keywords: | labor force participation, unemployment, migration, ethnic minority, ethnicity, labor market |
| JEL: | F22 J15 J61 J71 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5397&r=lab |
| By: | Gartner, Hermann; Schank, Thorsten; Schnabel, Claus |
| Abstract: | Since there is scant evidence on the role of industrial relations in wage cyclicality, this paper analyzes the effect of collective wage contracts and of works councils on real wage growth. Using linked employer-employee data for western Germany, we find that works councils affect wage growth only in combination with collective bargaining. Wage adjustments to positive and negative economic shocks are not always symmetric. Only under sectoral bargaining there is a (nearly symmetric) reaction to rising and falling unemployment. In contrast, wage growth in establishments without collective bargaining adjusts only to falling unemployment and is unaffected by rising unemployment. -- |
| Keywords: | wage cyclicality,wage bargaining,works council,Germany |
| JEL: | J31 E32 J53 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:faulre:70&r=lab |
| By: | Brown, Clair (University of California, Berkeley); Lane, Julia (National Science Foundation); Sturgeon, Timothy (MIT) |
| Abstract: | Although public policy is influenced by the perception that workers worry about the impact of trade on their jobs, there is little empirical evidence on what shapes such views. This paper uses new data to examine how workers’ perceptions of the impact of trade are related to their career paths, job characteristics, and local labor market conditions. Surprisingly, given prior literature, we find that workers’ perceptions primarily reflect local labor market conditions and education rather than labor market experiences or job characteristics. |
| Keywords: | globalization, trade, job characteristics, local labor markets, job loss, job security |
| JEL: | J21 J08 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5368&r=lab |
| By: | Charles Kenny |
| Abstract: | There has been considerable progress in school construction and enrollment worldwide. Paying kids to go to school can help overcome remaining demand-side barriers to enrollment. Nonetheless, the quality of education appears very poor across the developing world, limiting development impact. Thus we should measure and promote learning not schooling. Conditional cash transfers to students on the basis of attendance and scores, school choice, decentralization combined with published test results, and teacher pay based on attendance and performance may help. But learning outcomes are primarily affected by the broader environment in which students live, suggesting a learning agenda that stretches far beyond education ministries. [Working paper no. 236]. |
| Keywords: | teachers, enrollment, conditional transfers, developing world, ministries, performance, students, education, decentralization, learning, schooling, attendance, environment, Education policy, development, |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:ess:wpaper:id:3386&r=lab |
| By: | Martin Kahanec; Anzelika Zaiceva; Klaus F. Zimmermann |
| Abstract: | This paper sheds light on the labor market situation of ethnic minorities in the European Union. Facing a serious measurement challenge and lacking adequate data, we apply several measures of ethnicity and examine various data sources as well as secondary evidence. We find significant gaps between ethnic minority and majority populations in terms of labor market outcomes. In particular, ethnic minorities appear to face disproportional difficulties in finding a job. Although experience in the host country improves the status of immigrant minorities, we do not find any clear assimilation of further immigrant generations. Roma people seem to face particularly grave integration barriers in European labor markets. |
| Keywords: | ethnicity, ethnic minority, migration, unemployment, labor force participation, labor market |
| JEL: | F22 J15 J61 J71 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1090&r=lab |
| By: | Borghans, Lex (Maastricht University); Golsteyn, Bart (Maastricht University) |
| Abstract: | Evidence about job mobility outside the U.S. is scarce and difficult to compare cross-nationally because of non-uniform data. We document job mobility patterns of college graduates in their first three years in the labor market, using unique uniform data covering 11 European countries and Japan. Using the NLSY, we replicate the information in this survey to compare the results to the U.S. We find that (1) U.S. graduates hold more jobs than European graduates. (2) Contrasting conventional wisdom, job mobility in Japan is only somewhat lower than the European average. (3) There are large differences in job mobility within Europe. |
| Keywords: | Europe, graduates, job mobility, Japan, U.S. |
| JEL: | J24 J31 I2 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5386&r=lab |
| By: | Mireille Bruyère (CERTOP - Université Toulouse Le Mirail); Laurence Lizé (Centre d'Economie de la Sorbonne) |
| Abstract: | The article analyses how the changes in firm's human resources practices shaped the dynamics of labour market segmentation in France. The survey FQP 2003 contains a rich information to describe jobs. It offers standard information as the sector or the size of the company and also more original information on the concrete conditions of job as the use of the TIC, the rate of work, the contact with the public, the type of hierarchical control… Our approach focused on the permanent contracts. We exploit this information to analyze the link between job characteristics and security of the careers. This work refers to people in salaried employment in 1998, notably on the nature and content of the workstation, enabling to better characterize their trajectories over a five-year period. These movements of mobility could have reflected a transformation of internal labor markets rather than their decline. |
| Keywords: | Mobility, security of the careers, employment, France. |
| JEL: | J62 J81 J24 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:mse:cesdoc:10099&r=lab |
| By: | Constant, Amelie F. (DIW DC, George Washington University); Krause, Annabelle (IZA); Rinne, Ulf (IZA); Zimmermann, Klaus F. (IZA, DIW Berlin and Bonn University) |
| Abstract: | This paper analyzes the reservation wages of first and second generation migrants. Based on recently collected and rich survey data of a representative inflow sample into unemployment in Germany, we empirically test the hypothesis that reservation wages increase from first to second generation migrants. Two extensions of the basic job search model, namely an unknown wage offer distribution and different reference standards, provide theoretical justifications for this conjecture. In both extensions, changing frames of reference are identified as a channel through which the phenomenon of increasing reservation wages may arise. In as far as language skills or self-evaluated returns to characteristics reflect a person's frames of reference, we find empirical support for this mechanism to be present. |
| Keywords: | migration, ethnic identity, ethnosizer, Germany, unemployment, job search, reservation wages |
| JEL: | F22 J15 J61 J64 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5396&r=lab |
| By: | Chiappori, Pierre-André (Columbia University); Oreffice, Sonia (Universidad de Alicante); Quintana-Domeque, Climent (Universidad de Alicante) |
| Abstract: | We develop a matching model on the marriage market, where individuals have preferences over the smoking status of potential mates, and over their socioeconomic quality. Spousal smoking is bad for non-smokers, but it is neutral for smokers, while individuals always prefer high socioeconomic quality. Furthermore, there is a gender difference in smoking prevalence, there being more smoking men than smoking women for all education levels, so that smoking women and non-smoking men are in short supply. The model generates clear cut conditions regarding matching patterns. Using CPS data and its Tobacco Use Supplements for the years 1996 to 2007 and proxing socioeconomic status by educational attainment, we find that these conditions are satisfied. There are fewer "mixed" couples where the wife smokes than vice-versa, and matching is assortative on education among couples with identical smoking habits. Among non-smoking wives those with smoking husbands have on average 0.14 fewer years of completed education than those with non-smoking husbands. Finally, and somewhat counterintuitively, we find that among smoking husbands those who marry smoking wives have on average 0.16 more years of completed education than those with non-smoking wives. |
| Keywords: | smoking, education, matching, marriage market |
| JEL: | D1 J1 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5392&r=lab |
| By: | Røed, Knut (Ragnar Frisch Centre for Economic Research); Skogstrøm, Jens Fredrik (Ragnar Frisch Centre for Economic Research) |
| Abstract: | We examine the impact of job loss on entrepreneurship behavior in Norway. Our identification strategy relies on the use of mass layoffs caused by bankruptcies as indicators of exogenous displacement. We find that working in a company which is going to close down due to bankruptcy during the next four years raises the subsequent entrepreneur rate by 3.7 percentage points (155 %) for men and 1.8 percentage points (180 %) for women, compared to working in a stable firm. These estimates are much larger than what has previously been reported in the literature. Taking into account that many workers lose their jobs in the comparison group of stable firms also, we reckon that the full effects of displacement are even larger. |
| Keywords: | entrepreneurship, self-employment, unemployment |
| JEL: | L26 J65 M13 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5373&r=lab |
| By: | Fang, Zheng; Sakellariou, Chris |
| Abstract: | We extend the Burdett and Coles (2003) search model with wage-tenure contracts to two types of workers and firms and derive the equilibrium earnings distributions for both types of workers, by means of which we succeed in predicting many stylized facts found in empirics. For example, we find that at the same wage level, majority workers almost always experience a faster wage increase than the minority workers; minority workers have a higher unemployment rate; discriminating firms make lower profit than non-discriminating firms and offers to minority workers by non-discriminating firms are consistently superior to those provided by discriminating firms etc. Besides, we find a similar result to the classical discrimination theory that the average wage of the majority workers, though higher in most cases, can be smaller than their counterpart’s wage when the fraction of discriminating firms is small and the degree of recruiting discrimination and disutility are mild. We also show that in a special case of CRRA utility function with the coefficient of relative risk aversion approaching infinity, our model degenerates to Bowlus and Eckstein (2002). |
| Keywords: | discrimination; wage gap; equilibrium search; wage-tenure |
| JEL: | J41 J31 J71 |
| Date: | 2010–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:27515&r=lab |
| By: | Alessandro Barattieri; Susanto Basu; Peter Gottschalk |
| Abstract: | Nominal wage stickiness is an important component of recent medium-scale macroeconomic models, but to date there has been little microeconomic evidence supporting the assumption of sluggish nominal wage adjustment. We present evidence on the frequency of nominal wage adjustment using data from the Survey of Income and Program Participation (SIPP) for the period 1996–1999. The SIPP provides high-frequency information on wages, employment, and demographic characteristics for a large and representative sample of the U.S. population. The main results of the analysis are as follows: (1) After correcting for measurement error, wages appear to be very sticky. In the average quarter, the probability that an individual will experience a nominal wage change is between 5 and 18 percent, depending on the samples and assumptions used. (2) The frequency of wage adjustment does not display significant seasonal patterns. (3) There is little heterogeneity in the frequency of wage adjustment across industries and occupations. (4) The hazard of a nominal wage change first increases and then decreases, with a peak at 12 months. (5) The probability of a wage change is positively correlated with the unemployment rate and with the consumer price inflation rate. |
| Keywords: | Wages |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedbwp:10-11&r=lab |
| By: | Adireksombat, Kampon; Fang, Zheng; Sakellariou, Chris |
| Abstract: | Using unconditional quantile regression combined with Oaxaca-Blinder decomposition, we study the gender wage differentials over the whole distribution in Thailand from 1991 to 2007. A V-shape pattern of the overall gender gap is observed in each year, most attributable to the wage structure effect (“discrimination”), and persistent sticky floors are documented. We also develop a “double decomposition” method to analyze the over-time changes in gender wage gaps, and find that the degree of gender inequality in the Thai labor market has improved compared to the 1990s, while relative changes in characteristics explained only very small part of the total changes. |
| Keywords: | Southeast Asia; Thailand; unconditional quantile regression; sticky floors; discrimination |
| JEL: | J71 C31 J16 |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:27516&r=lab |
| By: | Nicolas E Magud; David O Coble Fernandez |
| Abstract: | Using Chilean data, we document that for resource-rich small open economies the effects of terms of trade shocks on the wage gap (between skilled and unskilled workers) depend on factor intensities in the non-tradable sector, following the model in Galiani, Heymann, and Magud (2010). For a skilled-intensive non-tradable sector we show that improvements in the terms of trade benefit skilled workers. We also show that this relation holds at the industry level: the wage gap widens in skilled-intensive sectors while it shrinks in unskilled-intensive ones, the more so as terms of trade volatility decreases. |
| Keywords: | Chile , Developing countries , Economic models , Labor markets , Skilled labor , Terms of trade , Wages , |
| Date: | 2010–12–06 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:10/279&r=lab |
| By: | Basit Zafar |
| Abstract: | At least a quarter of college students in the United States graduate with more than one undergraduate major. This paper investigates how students decide on the composition of their paired majors? In other words, whether the majors chosen are substitutes or complements. Since students use both their preferences and their expectations about major-specific outcomes when choosing their majors, I collect innovative data on subjective expectations, drawn from a sample of Northwestern University sophomores. Despite showing substantial heterogeneity in beliefs, the students seem aware of differences across majors and have sensible beliefs about the outcomes. Students believe that their parents are more likely to approve majors associated with high social status and high returns in the labor market. I incorporate the subjective data in a choice model of double majors that also captures the notion of specialization. I find that enjoying the coursework and gaining approval of parents are the most important determinants in the choice of majors. The model estimates reject the hypothesis that students major in one field to pursue their own interests and in another for parents’ approval. Instead, I find that gaining parents’ approval and enjoying a field of study both academically and professionally are outcomes that students feel are important for both majors. However, I do find that students act strategically in their choice of majors by choosing ones that differ in their chances of completion and difficulty and in finding a job upon graduation. |
| Keywords: | Universities and colleges ; Education - Economic aspects ; Social choice ; Uncertainty |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:478&r=lab |
| By: | Sakellariou, Chris; Fang, Zheng |
| Abstract: | The Vietnam ―renovation‖ reforms were implemented during the 1990s, but their full effect was only felt many years later. We present evidence on the developments in real wage growth and inequality in Vietnam from 1998 to 2008. For men, wage growth was underpinned by both increases in endowments of productive characteristics (mainly education) as well as changes in the wage structure (mainly associated with experience) and residual changes. For women, the wage structure effect was the main contributor to wage growth and the most important determinant was the change in the pattern of the returns to experience: younger, less experienced workers enjoyed a premium compared to more experience workers, reversing the previous, opposite pattern. Conventional measures of inequality as well as background analysis show that wage inequality decreased sharply through the 1990s until 2006, but increased subsequently. Over the entire 10-year period, wage inequality increased slightly and more so for women. |
| Keywords: | Wage inequality; counterfactual decompositions; Asia; Vietnam |
| JEL: | D31 J31 |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:27518&r=lab |
| By: | Le, Anh T. (Curtin University of Technology); Miller, Paul W. (Curtin University of Technology); Slutske, Wendy S. (University of Missouri-Columbia); Martin, Nicholas G. (Queensland Institute of Medical Research) |
| Abstract: | This paper examines the links between gender differences in attitudes towards economic risk and the gender pay gap. Consistent with the literature on the socio-economic determinants of attitudes towards economic risk, it shows that females are much more risk averse than males. It then extends this research to show that workers with more favorable attitudes towards risk are associated with higher earnings, and that gender differences in attitudes towards economic risk can account for a small, though important, part of the standardized gender pay gap. |
| Keywords: | wages, gender, risk, wage gap |
| JEL: | J31 J71 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5393&r=lab |
| By: | Alison L Booth; Pamela Katic |
| Abstract: | In this paper we estimate the elasticity of the labour supply to a firm, using data from the Household, Income and Labour Dynamics in Australia (HILDA) Survey. Estimation of this elasticity is of particular interest not only in its own right but also because of its relevance to the debate about the competitiveness of labour markets. The essence of monopsonistically competitive labour markets is that labour supply to a firm is imperfectly elastic with respect to the wage rate. The intuition is that, where workers have heterogeneous preferences or face mobility costs, firms can offer lower wages without immediately losing their workforce. This is in contrast to the perfectly competitive extreme, in which the elasticity is infinite. Therefore a simple test of whether labour markets are perfectly or imperfectly competitive involves estimating the elasticity of the labour supply to a firm. We find that the Australian wage elasticity of labour supply to a firm is around 0.71, only slightly smaller than the figure of 0.75 reported by Manning (2003) for the UK. These estimates are so far from the perfectly competitive assumption of an infinite elasticity that it would be difficult to make a case that labour markets are perfectly competitive. |
| JEL: | J42 J21 J71 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:acb:camaaa:2010-35&r=lab |
| By: | Böckerman, Petri; Haapanen, Mika |
| Abstract: | A polytechnic, higher education reform took place in Finland in the 1990s. It gradually transformed former vocational colleges into polytechnics and expanded higher education to all Finnish regions. We implement instrumental variables estimators that exploit the exogenous variation in the regional availability of polytechnic education together with matriculation exam scores. Our IV results show that polytechnic graduates have a higher migration probability than those of vocational college graduates. However, a master’s degree did not increase migration propensity in comparison with a polytechnic degree. We also find that an increase in the availability of polytechnic education did not reduce migration. |
| Keywords: | Migration; higher education; polytechnic reform; IV estimation |
| JEL: | I20 J10 J61 R23 |
| Date: | 2010–12–21 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:27629&r=lab |
| By: | Paolo Ghinetti (Università del Piemonte Orientale); Simone Moriconi (Università del Piemonte Orientale and Université du Luxembourg) |
| Abstract: | In this paper we use a representative sample drawn from the `Indagine Statistica sull' Inserimento Professionale dei Laureati' by the Italian National Statistical Institute and data by the Italian Ministry of Education to look at the wage returns from attendance to a regional university (i.e. not located in a metropolitan area) three years after graduation. Our results show that, after accounting for observed characteristics of individuals and colleges, a wage premium is associated to graduating in a regional university. This finding may be interpreted as regional universities enhancing the local human capital stock or creating specific skills needed by the local economic environment. |
| Keywords: | University graduates’ labour market, regional university, wage differentials |
| JEL: | J31 I21 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:luc:wpaper:10-23&r=lab |
| By: | Adrián De la Garza; Giovanni Mastrobuoni; Atsushi Sannabe; Katsunori Yamada |
| Abstract: | This article uses survey data of workers in Japan to study the effects of own and self-reported reference wages on subjective well-being. Higher wages lead to higher life and job satisfaction. When workers perceive that their peers earn higher wages, they report lower well-being. We compare our results with relative utility tests in the literature and develop a generalized version of the classical measurement error model to show that the estimated bias of the reference wage effect can go in both directions. We propose an IV strategy when the self-reported reference wage is not available that does not eliminate the bias but delivers a lower bound of the "true" effect. |
| Keywords: | Subjective well-being, relative utility, reference wages |
| JEL: | D00 J28 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:bdm:wpaper:2010-19&r=lab |
| By: | Hendrik van Broekhuizen (Department of Economic, University of Stellenbosch); Dieter von Fintel (Department of Economic, University of Stellenbosch) |
| Abstract: | Both South Africa’s labour market and education system were directly influenced by the separate development policies of the apartheid regime. To this day, great inequalities persist in both domains. South Africa’s performance in standardized international test scores (such as TIMMS) is poor even relative to most developing countries. Furthermore, the better quality of outcomes in former white schools still leaves learners from former black schools at a disadvantage that feeds through to severe labour market inequalities. This study is the first in a series of papers that attempts to understand the role of school quality on labour market outcomes. Here we scrutinize the measurement of numeracy test scores in the National Income Dynamics Survey (NIDS) of 2008, particularly in light of potential sample selection issues. While this survey measures standard welfare and labour market indicators, it is one of the first in South Africa to also ask respondents to complete a concurrent numeracy test. Response rates on this module were particularly low, given that the test was taken on a voluntary basis. We develop a basic empirical model to understand who is likely to take the test. We postulate that discouraged workers’ low propensity to take the test is correlated with their reduced motivation to undertake job search, that the searching unemployed are highly motivated to take the test (as they wish to gauge their ability or practice assessments while embarking on the job search process), the poorest among the self-employed face severe time opportunity costs (as their low incomes are less secure than those of salaried workers) and the richest amongst the employed exhibit an income effect (in that the time opportunity costs of their high incomes reduce their willingness to respond to the numeracy test). Furthermore, locational effects suggest that those residing in geographical “points of entry” into the labour market are also more likely to take the test. The young (who are still in education) and the most educated (in the whole population) also tend to answer the test more readily. The latter observations indicate that some form of confidence in respondents’ own abilities drives their response patterns. To explain these observed features, we construct composite indices of motivation/emotional well-being and individuals’ confidence in their writing abilities using multiple correspondence analysis. While each of these psychological and behavioural factors is a strong predictor of test response, they do not entirely eliminate the independent contributions of each of the observed influences mentioned above. Coefficient magnitudes of each of the sociodemographic variables are, however, reduced, indicating that the particular behavioural influences introduced in later models tell some of the story. Additional uncaptured behavioural and motivational factors are therefore investigated. Firstly, we investigate the role of survey fatigue (by controlling for the time it took to complete the survey before the test was administered), which plays an important role in the black and coloured subpopulations. It furthermore explains why the wealthiest amongst the formally employed are less likely to complete the numeracy test. However, surprisingly, “pseudoaltruistic” effects appear amongst the (wealthier) white population, in that the longer the duration of the preceding questions, the more likely they are to care about answering the test. However, this result cannot be generalized to the whole white population, as response rates were very low among this group. Secondly, (household) peer effects are strong throughout the population, suggesting that a culture of learning is pivotal in understanding response patterns. The results of this paper suggest that broad sociodemographic and labour market features remain important determinants of test response, even after controlling for behavioural features. This suggests that subsequent labour market work must take these drivers into account to avoid the risk of sample selection bias. |
| Keywords: | education, behavioural economics, survey design, voluntary assessment, numeracy, survey non-response, sample selection bias, respondent confidence, motivation, culture of learning, South Africa |
| JEL: | C81 I21 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:sza:wpaper:wpapers126&r=lab |
| By: | Machin Stephen; Marie Olivier; Vujić Sunčica (METEOR) |
| Abstract: | In this paper, we study the crime reducing potential of education, presenting causal statistical estimates based upon a law that changed the compulsory school leaving age in England and Wales. We frame the analysis in a regression-discontinuity setting and uncover significant decreases in property crime from reductions in the proportion of people with no educational qualifications and increases in the age of leaving school that resulted from the change in the law. The findings show that improving education can yield significant social benefits and can be a key policy tool in the drive to reduce crime. |
| Keywords: | public economics ; |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:umamet:2010061&r=lab |
| By: | Chaudhuri, Sarbajit |
| Abstract: | The paper develops a three-sector, specific factor, general equilibrium model with two high-skill sectors and unemployment of skilled labour. One of the two high-skill sectors produces a non-traded commodity whose aggregate demand consists of both domestic demand and an exogenously given foreign demand. The consequences of a decline in the foreign demand for the non-traded good resulting from worldwide economic recession on the skilled and unskilled labour markets in a developing economy have been examined. The analysis finds that the effects on the labour markets crucially hinge on the relative factor intensities of the two high-skill sectors and that through adoption of appropriate fiscal measures; the country can shield its workforce from the rage of global economic downturn. |
| Keywords: | Economic recession; skilled labour; unskilled labour; skilled unemployment; informal wage; Sen’s (1974) welfare measure; general equilibrium |
| JEL: | F13 J31 |
| Date: | 2010–12–12 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:27433&r=lab |
| By: | Alexey Levkov |
| Abstract: | This paper proposes a novel explanation for the decline in unions in the United States since the late 1970s: state-by-state removal of geographical restrictions on branching of banks. Bank branch deregulation reduces union membership in the non-banking sectors by intensifying entry of new firms, especially in sectors with high dependence on external finance. New firm entry, in turn, is associated with a reduction in union wage premium, and subsequently leads to adverse union voting. I provide empirical evidence for these channels using repeated cross-sectional and panel data of U.S. workers and union representation election outcomes. |
| Keywords: | Branch banks ; Labor unions |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedbqu:qau10-7&r=lab |
| By: | Bo Chen (Department of Economics, Southern Methodist University); Satoru Fujishige (Research Institute for Mathematical Sciences, Kyoto University); Zaifu Yang (Department of Economics and Related Studies, University of York) |
| Abstract: | We analyze a decentralized trading process in a basic labor market where heterogeneous firms and workers meet directly and randomly, and negotiate salaries with each other over time. Firms and workers may not have a complete picture of the entire market and can thus behave myopically in the process. Our main result establishes that, starting from an arbitrary initial market state, there exists a finite sequence of successive myopic (firm-worker) pair improvements, or bilateral trades, leading to a stable matching between firms and workers with a scheme of competitive salary offers. An important implication of this result is that a general random process where every possible bilateral trade is chosen with a positive probability converges with probability one to a competitive equilibrium of the market. |
| Keywords: | Decentralized market, job matching, random path, competitive salary, stability. |
| JEL: | C62 D72 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:kyo:wpaper:749&r=lab |
| By: | Francesco Bogliacino (European Commission, JRC-IPTS); Marco Vivarelli (Università Cattolica) |
| Abstract: | In this study we use a unique database covering 25 manufacturing and service sectors for 16 European countries over the period 1996-2005, for a total of 2,295 observations, and apply GMM-SYS panel estimations of a demand-for-labour equation augmented with technology. We find that R&D expenditures have a job-creating effect, in accordance with the previous theoretical and empirical literature discussed in the paper. Interestingly enough, the labour-friendly nature of R&D emerges in both the flow and the stock specifications. These findings provide further justification for the European Lisbon-Barcelona targets. |
| Keywords: | Technological change, corporate R&D, employment, product innovation, GMMSYS |
| JEL: | O33 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:ieb:wpaper:2010/12/doc2010-55&r=lab |
| By: | Claudia Kwapil (Economic Analysis Division, Oesterreichische Nationalbank) |
| Abstract: | This article is based on the results of two company surveys - the first was conducted in 2007, before the recession 2008/2009 hit Austria, and the second was conducted in 2009 shortly after the trough of it. We analyse firms' reactions to the crisis and focus on their labour market relevant decisions. Although base wages were cut more frequently than in economically calm times, wage reductions continued to be the exception rather than the rule. This indicates the existence of nominal wage rigidities in Austria. Instead of wage cuts, firms preferred to reduce working hours and to dismiss employees. We find that firm specific characteristics as well as characteristics of the workforce help explaining a firm's probability of dismissing employees. However, the force of the shock by which an individual firm is hit (during the 2008/2009 recession) does not in fluence the likelihood of dismissals. JEL classification: C25, E24, J30 |
| Keywords: | Wage Rigidity, Demand Shock, Micro Survey Data |
| Date: | 2010–12–14 |
| URL: | http://d.repec.org/n?u=RePEc:onb:oenbwp:166&r=lab |
| By: | Matías Tapia |
| Abstract: | This paper develops a one-to-one matching model to analyze how different education funding regimes affect incentives and equilibrium allocations in competitive markets served by heterogeneous private providers. The main result is that alternative funding schemes change the relative incentives faced by schools with different productivities, dramatically altering equilibrium allocations and outcomes. The paper also explicitly characterizes equilibrium in markets served by for-profit and non-profit schools, an analysis that has not been made in previous literature. The basic version of the model is calibrated using data from Chile´s education market and used to simulate the impact of alternative policy scenarios. |
| Keywords: | Education funding, school competition, heterogeneous firms, for-profit and non-profit firms. |
| JEL: | I21 I22 L33 D40 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:ioe:doctra:387&r=lab |
| By: | Bertoli, Simone (European University Institute); Brücker, Herbert (IAB, Nürnberg) |
| Abstract: | Destination countries are progressively shifting towards selective immigration policies. These can effectively increase migrants' average education even if one allows for endogenous schooling decisions and education policies at origin. Still, more selective immigration policies reduce social welfare at origin. |
| Keywords: | international migration, selective immigration policies, education policies, social welfare |
| JEL: | F22 J24 H52 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5395&r=lab |
| By: | Grady, Patrick |
| Abstract: | This paper examines the impact of immigration on labour productivity in Canada. Immigration is a factor that has been largely ignored in the literature on Canadian productivity growth. A simplified growth accounting approach is utilized to estimate the reduction in labour productivity in Canada (as measured by GDP per worker) that can be attributed to the poor performance of post-1990 cohorts of immigrants in the labour market (as measured by average earnings as reported in the 2006 census). It is estimated that immigration accounts for 2.23 percentage points, or about a fifth, of the 10.96 percentage point post-1990 increase in the Canada-US labour productivity gap. |
| Keywords: | productivity; recent immigrants to Canada; immigration policy; immigrant labour; human capital |
| JEL: | O47 J24 |
| Date: | 2010–11–28 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:27454&r=lab |
| By: | Akcomak, I. Semih (CPB Netherlands Bureau for Economic Policy Analysis, UNU-MERIT, and Maastricht University); Borghans, Lex (Maastricht University); Weel, Bas ter (CPB Netherlands Bureau for Economic Policy Analysis, UNU-MERIT, and Maastricht University) |
| Abstract: | This paper introduces indicators about the division of labour to measure and interpret recent trends in employment in the Netherlands. We show that changes in the division of labour occur at three different levels: the level of the individual worker, the level of the industry and the spatial level. At each level the current organisation of work is determined by an equilibrium of forces that glue tasks together and unbundled tasks. Communication costs are the main force for clustering or gluing together tasks; comparative advantage stimulates unbundling and specialisation. Our results show that on average the Netherlands has witnessed unbundling in the period 1996-2005. So, on average the advantages of specialisation have increased. These developments can explain to a considerable extent changes in the structure of employment. Especially at the spatial level our approach explains a substantial part of the increase in offshoring during this period. |
| Keywords: | offshoring, tasks, technology, trade, labour market |
| JEL: | F16 J23 J24 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:unumer:2010060&r=lab |
| By: | Juan Yang (School of Economics and Business Administration, Beijing Normal University, 19, Xinjiekouwai Dajie, Beijing 100875, China); Sylvie Démurger (Université de Lyon, Lyon, F-69003, France; CNRS, GATE Lyon St Etienne, UMR 5824, 93, chemin des Mouilles, Ecully, F-69130, France; ENS-LSH, Lyon, France ; CNRS, CEFC, USR 3331 Asie Orientale, Hong Kong); Shi Li (School of Economics and Business Administration, Beijing Normal University, 19, Xinjiekouwai Dajie, Beijing 100875, China) |
| Abstract: | This paper analyzes the changes in public-private sector earnings differentials for local residents in urban China between 2002 and 2007. We find that earnings gaps across ownership have been reducing during this period and that the convergence trend has been in favor of the private and semi-public sectors as opposed to the public sector. This is in sharp contrast to what occurred at the turn of the century, when employees of public administration and enterprises were found to enjoy a very much privileged situation. On the one hand, differences in endowments are found to play a growing role in explaining earnings differentials. On the other hand, although starting to become less an issue, segmentation across ownership remains important, especially for high-wage earners. |
| Keywords: | labor market, earnings differentials, segmentation, enterprise ownership, China |
| JEL: | J31 J42 P23 O53 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:gat:wpaper:1032&r=lab |
| By: | M. Conti; Giovanni Sulis |
| Abstract: | Using data for 51 manufacturing and service sector for the period 1970-2005 in 14 countries, this paper show that employment protection legislation has a negative and significant effect on growth of value added and hours of work in more human capital intensive sectors. We argue that labour market regulation has a negative impact on the technology adoption mechanism through its heterogeneous impact on firms workforce adjustment requirements. In fact, technology adoption depends both on the skill level of the workforce and the capacity of firms to optimally adjust their employment levels as technology changes. As a consequence, firing costs have a relatively stronger impact in sectors in which technology adoption is more important. Our empirical results are robust to various sensitivity checks such as interactions of human capital intensity with other country level variables, of employment protection with other sector level variables and endogeneity of firing restrictions. We also show that the negative effect of EPL is stronger the smaller the distance from the technology frontier and after the 1990s. |
| Keywords: | Growth; Human Capital; Technology Adoption; Employment Protection Legislation; Sectors |
| JEL: | J24 J65 O47 O52 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:cns:cnscwp:201028&r=lab |
| By: | Jens Mohrenweiser (Zentrum für Europäische Wirtschaftsforschung Mannheim (ZEW) (Centre for European Economic Research)); Thomas Zwick (LMU Munich); Uschi Backes-Gellner (Institute for Strategy and Business Economics, University of Zurich) |
| Abstract: | A series of seminal theoretical papers argues that poaching may hamper company sponsored training. Extent, determinants and consequences of poaching remain an open empirical question, however. We address the empirical challenge of identifying poaching and its consequences using the unique institutional framework of the German apprenticeship training system. The Vocational Training Act provides an unambiguous and transparent definition of visible, measurable and transferable training across firms. We identify those establishments that cannot keep their best apprenticeship graduates. For these graduates in addition the poaching enterprise pays a wage above the wage of those who stay in the training establishment. We show that a small number of training establishments in Germany are poaching victims. These establishments train more apprentices than firms which can attract their apprenticeship graduates. |
| Keywords: | poaching, company-sponsored training, recruiting, apprenticeship |
| JEL: | J24 M51 M53 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:iso:educat:0051&r=lab |
| By: | Marco Corsino; Roberto Gabriele; Sandro Trento |
| Abstract: | The paper proposes an empirical investigation of job flows for continuing manufacturing firms in Italy from 1996 to 2004 using high quality data on work forces and other characteristics of the firm. The magnitude of the job flows for small and medium-sized limited liability companies in Italy is lower than what observed in Anglo-Saxon countries, but it is still in line with evidence for firms in the Euro area. Second, the magnitude of job flows significantly shrunk in the aftermath of the economic downturn in 2001. Firms fared worse than in the late nineties and the labour market became less efficient in allocating job flows. Third, gross job creation and gross job destruction decrease as firm get larger, but when added to compute an indicator of net employment growth, size does not seem to affect firms' expansion. On the contrary, age significantly hinges on the growth opportunities of small and medium-sized enterprises. The econometric analysis corroborates the major findings of our descriptive investigation referring to the role of size and age. In particular, it shows that classification methods used to define size classes strongly influence the estimated relationship between growth and size industrial regimes play a role in shaping job flows. Our result show that firms in supplier dominated industries fared significantly lower than enterprises in other sectors during the sample period. |
| Keywords: | job creation; job destruction; persistence of jobs; firm growth |
| JEL: | J62 L60 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:trt:disawp:1008&r=lab |
| By: | d'Albis, Hippolyte; Lau, Paul; Sanchez-Romero, Miguel |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:ler:wpaper:10.21.327&r=lab |
| By: | Constant, Amelie F. (DIW DC, George Washington University); Krause, Annabelle (IZA); Rinne, Ulf (IZA); Zimmermann, Klaus F. (IZA, DIW Berlin and Bonn University) |
| Abstract: | In this paper we study the economic effects of risk attitudes, time preferences, trust and reciprocity while we compare natives and second generation migrants. We analyze an inflow sample into unemployment in Germany, and find differences between the two groups mainly in terms of risk attitudes and positive reciprocity. Second generation migrants have a significantly higher willingness to take risks and they are less likely to have a low amount of positive reciprocity when compared to natives. We also find that these differences matter in terms of economic outcomes, and more specifically in terms of the employment probability about two months after unemployment entry. We observe a significantly lower employment probability for individuals with a high willingness to take risks. Some evidence suggests that this result is channeled through reservation wages and search intensity. |
| Keywords: | unemployment, migration, personality traits, risk attitudes, time preferences, trust, reciprocity |
| JEL: | F22 J15 J61 J64 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5380&r=lab |
| By: | Servaas van der Berg (Department of Economics, University of Stellenbosch); Debra Shepherd (Department of Economics, University of Stellenbosch) |
| Abstract: | Economists regard information and feedback as important ways for self-correction in a system. This study analyses one aspect of information and feedback in the South African education system. Continuous assessment (CASS) carries a 25% weight in the final matriculation (Grade 12) mark and, more importantly, provides feedback on performance that affects examination preparation and effort. Weak assessment in schools means that pupils are getting wrong signals that may have important consequences for the way they approach the final examination. Moreover, similarly wrong signals earlier in their school careers may also have affected their subject choice and career planning. This study analyses data on CASS and compares it to the externally assessed matric exam marks for three years for a number of subjects. There are two signalling dimensions to inaccurate assessments: (i) Inflated CASS marks give students a false sense of security that they are well-prepared for the matric exams, thereby leading to unrealistic expectations and diminished effort. (ii) A weak correlation between CASS and the exam marks means poor signalling in another dimension: Relatively good students may get relatively low CASS marks. This indicates poor reliability of assessment, as the examination and continuous assessment should both be testing the same mastery of the national curriculum. The paper analyses the extent of each of these two dimensions of weak signalling in South African schools, by subject, province, socio-economic background of schools, and public versus independent schools. The analysis draws disturbing conclusions for a large part of the school system. |
| Keywords: | Economics of Education, assessment, asymmetric information, South Africa |
| JEL: | I21 D82 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:sza:wpaper:wpapers127&r=lab |
| By: | Fisher, Jonathan (New York Census Research Data Center); Marchand, Joseph (University of Alberta, Department of Economics) |
| Abstract: | Previous research has repeatedly found a puzzling one-time drop in consumption at retirement at the mean or median. This study expands upon the previous work by examining these same retirement changes across the entire consumption distribution through the application of quantile regression techniques on data from the 1990-2007 Consumer Expenditure Survey. The evidence indicates gradually larger decreases in consumption across the distribution using several measures of consumption, with insignificant changes shown at lower deciles and the greatest drops occurring at the higher deciles. |
| Keywords: | retirement; life-cycle model; household consumption |
| JEL: | D12 D91 J26 |
| Date: | 2010–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:ris:albaec:2010_020&r=lab |
| By: | Grech, Aaron George |
| Abstract: | Spurred by the ageing transition, many governments have made wide-ranging reforms, dramatically changing Europe's pensions landscape. Nevertheless there remain concerns about future costs, while unease about adequacy is growing. This study develops a comprehensive framework to assess pension system sustainability. It captures the effects of reforms on the ability of systems to alleviate poverty and maintain living standards, while setting out how reforms change future costs and relative entitlements for different generations. This framework differs from others, which just look at generosity at the point of retirement, as it uses pension wealth - the value of all transfers during retirement. This captures the impact of both longevity and changes in the value of pensions during retirement. Moreover, rather than focusing only on average earners with full careers, this framework examines individuals at different wage levels, taking account of actual labour market participation. The countries analysed cover 70% of the EU’s population and include examples of all system types. Our estimates indicate that while reforms have decreased generosity significantly, in most, but not all, countries the poverty alleviation function remains strong, particularly where minimum pensions have improved. However, moves to link benefits to contributions have made some systems less progressive, raising adequacy concerns for women and those on low incomes. The consumption smoothing function of state pensions has declined noticeably, suggesting the need for longer working lives or additional private saving for individuals to maintain pre-reform living standards. Despite the reforms, the size of entitlements of future generations should remain similar to that of current generations, in most cases, as the effect of lower annual benefits should be offset by longer retirement. Though reforms have helped address the financial challenge faced by pension systems, in many countries pressures remain strong and further reforms are likely. |
| Keywords: | Social Security and Public Pensions; Retirement; Poverty; Retirement Policies |
| JEL: | H55 I38 J26 |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:27407&r=lab |
| By: | Pflüger, Michael P. (University of Passau); Blien, Uwe (IAB, Nürnberg); Möller, Joachim (IAB, Nürnberg); Moritz, Michael (IAB, Nürnberg) |
| Abstract: | This paper pursues three aims. First, we provide a review of current theoretical advances which pertain to the relationship between trade, FDI and labor markets. We do so under the following (not mutually exclusive) headings: (1) slicing-up the value added chain and the turn to a task-based approach, (2) firm heterogeneity and labor markets, (3) complex offshoring (integration) and sourcing strategies and (4) location of firms and labor markets. Second, we overview existing empirical work covering the labor market effects of trade and FDI. Finally, we identify and summarize the existing research gaps and thereby we highlight promising avenues for future research. |
| Keywords: | offshoring, outsourcing, FDI, trade, labor markets, agglomeration |
| JEL: | F16 F23 R12 J60 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5385&r=lab |
| By: | Arantxa Jarque; Edward S. Prescott |
| Abstract: | We present a sequence of two-period models of incentive-based compensation in order to understand how the properties of optimal compensation structures vary with changes in the model environment. Each model corresponds to a different occupation within a bank, such as credit line managers, loan originators, or traders. All models share a common trait: the effects of hidden actions are persistent, and hence are revealed over time. We characterize the corresponding optimal contracts that are consistent with prudent risk taking. We compare the contracts by ranking them according to the average wage, the proportion of deferred compensation, and the structure and importance of variable pay (bonuses). We also compare these characteristics of the models with persistence with those of a standard repeated moral hazard. We find that small changes in the structure of asymmetric information have important implications for the characteristics of optimal pay, and that persistence does not necessarily imply a higher proportion of deferred pay. |
| Keywords: | Financial institutions ; Financial markets ; Labor market ; Moral hazard |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedrwp:10-16&r=lab |
| By: | Morris A. Davis; Jonas D. M. Fisher; Marcelo Veracierto |
| Abstract: | This paper builds a dynamic general equilibrium model of cities and uses it to analyze the role of local housing markets and moving costs in determining the character and extent of labor reallocation in the US economy. Labor reallocation in the model is driven by idiosyncratic city-specific productivity shocks, which we measure using a dataset that we compile using more than 350 U.S. cities for the years 1984 to 2008. Based on this measurement, we find that our model is broadly consistent with the city-level evidence on net and gross population flows, employment, wages and residential investment. We also find that the location-specific nature of housing is more important than moving costs in determining labor reallocation. Absent this quasi-fixity of housing, and under various assumptions governing population flows, population and employment would be much more volatile than observed. |
| Keywords: | Housing - Econometric models ; Labor market |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedhwp:wp-2010-18&r=lab |
| By: | Shing-Yi Wang |
| Abstract: | The analysis focuses on immigrants and native-born individuals because employers are likely to have less reliable signals of productivity for an immigrant than a native-born individual. Using multiple data sets, the paper presents a robust empirical finding that the wage gains associated with height are almost twice as large for immigrants than for native-born individuals. [Working Paper No. 289]. |
| Keywords: | statistical discrimination, native-born, employers, productivity, immigrants, wage, height, individuals, data sets, economic research, |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:ess:wpaper:id:3344&r=lab |
| By: | A. Arrighetti; A. Lasagni |
| Abstract: | Firm growth is a selective and non-homogeneous phenomenon. In fact, “Most firms start small, live small and die small” (Davidsson et al. 2005). Few firms seem to grow in a rapid way, but their contribution to employment growth is often impressive. The main purpose of this paper is to analyze both external and internal factors which can affect the probability of being a high-growth firm (henceforth HGF) in Italy. We found that HGFs are on average young firms and are present in different sectors, but the role of demand is important to understand their performance. The most original results of this paper regard endogenous determinants of fast growth. First, we found that the concentration of ownership is important for HGFs that grow in sales. Second, the quality of human capital is a strong point for firms experiencing rapid employment growth. |
| Keywords: | : high-growth firms, firm growth, human capital, rapid firm growth |
| JEL: | D24 L25 L26 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:par:dipeco:2010-ep07&r=lab |
| By: | Chiswick, Barry R. (University of Illinois at Chicago); Larsen, Nicholas (University of Illinois at Chicago); Pieper, Paul (University of Illinois at Chicago) |
| Abstract: | This paper is concerned with the production of PhDs in the United States and Canada in the post-WW II period, overall and by gender and major discipline. The effects of the explanatory variables lagged six years are consistent with the model. Military conscription with educational exemptions and the Vietnam War increased male PhD production in the U.S., but have no effect for U.S. females or in Canada. Government expenditures on research and development enhanced PhD production, especially for males and in the physical sciences in the U.S. A higher rate of growth of non-farm productivity encouraged PhD production in the U.S., but not in Canada. The cyclical indicator, the adult male unemployment rate, has a weak positive effect for males in both the U.S. and Canada, suggesting that the negative effect of the opportunity cost of time was stronger than the positive wealth effect. Other variables the same, there has been an increase over time in PhD production for females, but there is no such trend for males. The result has been an increase over time in PhD production for both males and females, but the faster increase for females has narrowed the gender gap. |
| Keywords: | PhD, educational attainment, conscription, Korean War, Vietnam War, research funding |
| JEL: | I21 J24 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5367&r=lab |
| By: | Gustafsson, Björn (Göteborg University); Li, Shi (Beijing Normal University); Nivorozhkina, Ludmila (Rostov State Economic University) |
| Abstract: | Harmonised microdata show a Gini coefficient for per capita total income of 45.3 percent in China 2002 and 33.6 percent in Russia 2003. A much larger urban to rural income gap in combination with a much smaller proportion of people living in urban areas in China are important reasons for this cross-country difference in inequality. Wage is a more non-equalising income source in China than in Russia. While Russian public transfers reduce income inequality, Chinese public transfers increase income inequality. Cross-country differences in the process of transition are also found to be significant. A relatively large non-agriculture self-employment sector is non-equalising in rural China, but is also narrowing the urban to rural income gap. In contrast to the many cross-country differences revealed, we report income inequality among urban residents in China and in urban Russia to be very similar. |
| Keywords: | income distribution, inequality, China, Russia, public transfers |
| JEL: | D31 P25 P52 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5383&r=lab |
| By: | Gyorgy Molnar (Institute of Economics Hungarian Academy of Sciences); Zsuzsa Kapitany (Institute of Economics Hungarian Academy of Sciences) |
| Abstract: | There are two fairly widespread economic beliefs in Hungary that we investigate in this study and try to confirm or reject. People mostly see poverty and marginal labour market status as indicators of laziness and own tax evasion behaviour. People believe that the actual income of the poor and of people with disadvantageous labour market status is considerably more than that they declare. Analogous belief among highly educated people is that people with diploma have relatively less undeclared income than the others. In this study we make an attempt to identify relative unreported income of different social groups, using survey information on subjective well-being. In this attempt we apply the connection between reported satisfaction and actual income. We cannot exactly prove that the unreported income of the poor is relatively not higher than the unreported income of others, but our results make this statement very plausible. What we can show is that taking part in informal activity is not an option, but a forced choice for the majority of the poor. Unemployed, day-workers, public workers, and people living on welfare do not have considerable undeclared income, or if they had some this is accompanied by such self-exploitation that this offsets the effect of undeclared income on subjective well-being. We can also prove that people with diploma are in a much better and more advantageous situation than the others. Their economic, social and financial status has a considerable and positive effect on their subjective well-being. It is suggested and likely true that they have relatively more undeclared income than people without diploma. After controlling for income, activity, employment status, health state, social inclusion and relationships the education differences do not have an effect on subjective well-being, except higher education has a further, significant and considerable effect on subjective well-being. |
| Keywords: | subjective well-being, unreported income, informal income, education, unemployment, non-employment, subjective health |
| JEL: | D1 D12 D31 I10 I20 I30 J20 J60 |
| Date: | 2010–11 |
| URL: | http://d.repec.org/n?u=RePEc:has:discpr:1027&r=lab |
| By: | Amelie Constant; Bienvenue N. Tien |
| Abstract: | Leaders are critical to a country's success. They can influence domestic policy via specific measures that they enforce, and they can also influence international public opinion towards their country. Foreign Direct Investments are also essential for a country's economic growth. Our hypothesis is that foreign-educated leaders attract more FDI to their country. Our rationale is that education obtained abroad encompasses a whole slew of factors that can make a difference in FDI flows when this foreign-educated individual becomes a leader. We test this hypothesis empirically with a unique dataset that we constructed from several sources, including the Library of Congress and the World Bank. Our analysis of 40 African countries employs the robust technique of conditional quantile regression. Our results reveal that foreign education is a significant determinant of FDI inflows, beyond other standard characteristics. While intuitive, this result does not necessarily indicate sheepskin effects or superior human capital obtained abroad. Rather, it indicates the powerful role of the social capital, networks, and connections that these leaders built while they were abroad that they in turn mobilize and utilize when they become leaders. |
| Keywords: | FDI, Leaders' Educational level, return migration, Africa |
| JEL: | C31 C33 F21 I21 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1087&r=lab |