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on Labour Economics |
| By: | Iñaki Iriondo (Complutense University of Madrid and Queen Mary, University of London); Teodosio Pérez-Amaral (Complutense University of Madrid) |
| Abstract: | This paper analyzes the effect of educational mismatch on wages, using a rich panel dataset of workers in the major euro area countries from 2006 to 2009, drawn from the <i>European Union Statistics on Income and Living Conditions</i> (Eurostat). We use a consistent estimator to address the two econometric problems faced by the empirical literature: the omitted variable bias and measurement error. In principle, our fixed effect estimates confirm that overeducated workers suffer a wage penalty of similar magnitude to the return on each year of schooling attained. Interestingly, when we split the sample by age, we find that the wages of people aged under 35 basically depend on the level of education attained, while those of workers aged over 35 depend on job educational requirements. These results are interpreted taking into account the impact of the depreciation of skills on human capital. The main policy implication of the paper is that overeducation constitutes a waste of resources. Therefore public authorities should seek to reduce the negative impact of overeducation on the labor market. |
| Keywords: | Overeducation, Educational mismatch, Wages, Ability bias, Measurement error, Panel data |
| JEL: | I21 J24 J31 |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:qmw:qmwecw:wp700&r=lab |
| By: | Kamila Cygan-Rehm; Miriam Maeder |
| Abstract: | This paper investigates the effect of education on fertility under inflexible labor market conditions. We exploit exogenous variation from a German compulsory schooling reform to deal with the endogeneity of education. By using data from two complementary data sets, we examine different fertility outcomes over the life cycle. In contrast to evidence for other developed countries, we find that increased education causally reduces completed fertility. This negative effect operates through a postponement of first births away from teenage years, and no catch-up later in life. We attribute these findings to the particularly high opportunity costs of child-rearing in Germany. |
| Keywords: | fertility, education, childlessness, timing of births, educational reform |
| JEL: | I21 J13 J24 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwsop:diw_sp528&r=lab |
| By: | Thibault Darcillon (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris) |
| Abstract: | This article analyzes the linkages between financial liberalization, labor market institutions and wage inequality for 17 OECD countries over the 1989 to 2005 period. With the help of a fixed effect model with an interacted term, one crucial contribution of this article is to analyze the interacted impact of labor market institutions (i.e., workers' bargaining power and employment protection legislation) on the one hand and financial liberalization on the other hand on wage distribution. Our results indicate that changes in workers' bargaining power and in employment protection affect wage distribution (p9/p1 ratio). Estimates of the marginal effects show that by increasing labor markers regulation (i.e., reinforcing workers' bargaining power and increasing employment protection legislation) one also weakens the impact of financial liberalization on the increase in wage inequality. |
| Keywords: | Wage inequality; financial liberalization; corporate governance; employment protection; political economy |
| Date: | 2012–12 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:halshs-00768908&r=lab |
| By: | Coen N. Teulings (CPB Netherlands Bureau for Economic Policy Analysis); Pieter Gautier (VU University Amsterdam) |
| Abstract: | We analyze a general search model with on-the-job search and sorting of heterogeneous workers into heterogeneous jobs. This model yields a simple relationship between (i) the unemployment rate, (ii) the value of non-market time, and (iii) the max-mean wage differential. The latter measure of wage dispersion is more robust than measures based on the reservation wage, due to the long left tail of the wage distribution. We estimate this wage differential using data on match quality and allow for measurement error. The estimated wage dispersion and mismatch for the US is consistent with an unemployment rate of 5%. Finally, we find that without search frictions, output would be 6.6% higher |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed012:292&r=lab |
| By: | Bingley, Paul (SFI - Danish National Centre for Social Research); Cappellari, Lorenzo (Università Cattolica del Sacro Cuore); Westergård-Nielsen, Niels C. (Aarhus University) |
| Abstract: | We investigate the relationship between life cycle wages and individual membership of unemployment insurance schemes in Denmark. We separate permanent from transitory wages and characterise them using membership of unemployment insurance funds. We find that unemployment insurance is associated with lower wage growth heterogeneity over the life cycle and greater wage instability, changing the nature of wage inequality from permanent to transitory. While we are in general unable to formally test for moral hazard against adverse selection into unemployment insurance, robustness checks suggest that moral hazard is the relevant interpretation. |
| Keywords: | unemployment insurance, wage dynamics, wage inequality, wage instability |
| JEL: | J31 J65 |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp7128&r=lab |
| By: | RanÄ‘elovicÌ, SasÌŒa; RakicÌ, Jelena ZÌŒarkovicÌ |
| Abstract: | Inactivity and unemployment rates as well as informal employment rates in Serbia are particularly high among low-paid labor. Labour tax wedge is average at higher wage levels, but high at lower wage levels. The relatively high labour tax burden for low-paid employees is due to several reasons. The most important one is the existence of mandatory minimum base for social security contribution (SSC). This paper uses the tax and benefit micro-simulation model for Serbia (SRMOD), which is based upon EUROMOD platform, in order to evaluate the effects of the abolishment of mandatory minimum SSC base on labour supply incentives. We found that this policy reform would reduce effective average tax rates by more than it would reduce marginal tax rates implying a larger participation response than hours-of-work response. A decrease in both tax rates is most pronounced for lower income groups. |
| Date: | 2012–12–20 |
| URL: | http://d.repec.org/n?u=RePEc:ese:emodwp:em11-12&r=lab |
| By: | Michael Bognanno (Department of Economics, Temple University); Eduardo Melero (Department of Business Administration, Universidad Carlos III de Madrid) |
| Abstract: | This paper examines whether more informative job promotions carry larger wage increases. In job assignment models with asymmetric information, unexpected promotions send a signal to the external labor market to revise upward their assessment of a worker’s ability. The employing firm must then increase wages to prevent the worker from being bid away. Less educated workers are assumed to come from a group with lower average ability. Their promotion is hypothesized to signal a larger positive assessment of their ability than for more highly educated workers for whom promotion is expected. Promotions for younger workers, with less known about their abilities, should also result in strong signaling effects. We find results in accordance with our hypotheses regarding the effect of both age and education on the gains to promotion. However, the statistical significance of the estimates hinges on the promotion definition. Younger workers receive statistically significantly higher wage increases upon promotion only when promotion is defined by the attainment of managerial responsibilities not previously held. Less educated workers obtain statistically significantly larger wage increases upon promotion at a weak level of significance (10%) across definitions of promotion but at a high level of significance (5%) only when the subjective definition of promotion is used. We interpret the sensitivity to the definition of promotion to suggest that promotions may be heterogeneous in the information they reveal about the employee in way that depends on the characteristics of the employee. |
| Keywords: | promotion, signaling, internal labor markets |
| JEL: | J3 |
| Date: | 2012–11 |
| URL: | http://d.repec.org/n?u=RePEc:tem:wpaper:1205&r=lab |
| By: | Dickson, Matt (University of Bath); Gregg, Paul (University of Bath); Robinson, Harriet (University of Bristol) |
| Abstract: | We study the intergenerational effects of parents' education on their children's educational outcomes. The endogeneity of parental education is addressed by exploiting the exogenous shift in education levels induced by the 1972 Raising of the School Leaving Age (RoSLA) from age 15 to 16 in England and Wales. Using data from the Avon Longitudinal Study of Parents and Children – a rich cohort dataset of children born in the early 1990s in Avon, England – allows us to examine the timing of impacts throughout the child's life, from pre-school assessments through the school years to the final exams at the end of the compulsory schooling period. We also determine whether there are differential effects for literacy and numeracy. We find that increasing parental education has a positive causal effect on children's outcomes that is evident at age 4 and continues to be visible up to and including the high stakes exams taken at age 16. Children of parents affected by the reform gain results approximately 0.1 standard deviations higher than those whose parents were not impacted. The effect is focused on the lower educated parents where we would expect there to be more of an impact: children of these parents gaining results approximately 0.2 standard deviations higher. The effects appear to be broadly equal across numeracy and literacy test scores. |
| Keywords: | intergenerational mobility, schooling, child development |
| JEL: | I20 J62 J24 |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp7123&r=lab |
| By: | Røed, Knut (Ragnar Frisch Centre for Economic Research); Skogstrøm, Jens Fredrik (Ragnar Frisch Centre for Economic Research) |
| Abstract: | Based on administrative registers from Norway, we examine how unemployment insurance (UI) and active labor market programs (ALMP) affect the transition rates from unemployment to regular employment and entrepreneurship. We find that the entrepreneurship hazard is highly responsive with respect to UI incentives, and that the probability of starting up a new business increases sharply around the time of UI exhaustion. We also find that while participation in ALMP has a positive impact on the employment hazard, it has no effect on entrepreneurship. We speculate that this reflects the programs' one-sided focus on job search rather than job creation. |
| Keywords: | entrepreneurship, self-employment, unemployment |
| JEL: | L26 J65 M13 |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp7121&r=lab |
| By: | Jennifer Hunt |
| Abstract: | Using the American Community Surveys of 2009 and 2010, I examine the wages of immigrants compared to natives among engineering workers. Among workers in engineering occupations, immigrants are the best and brightest thanks to their high education level, enjoying a wage distribution shifted to the right of the native distribution. Among workers with an engineering degree, however, immigrants underperform natives, despite somewhat higher education. The gap is particularly large in the lower tail, where immigrants work in occupations not commensurate with their education. In the upper tail, immigrants fail to be promoted out of technical occupations to management, handicapped by imperfect English and their underrepresentation among older age groups. In both samples, immigrants from the highest income countries are the best and brightest workers. |
| JEL: | J61 |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:18696&r=lab |
| By: | Carrillo-Tudela, Carlos; Visschers, Ludo |
| Abstract: | We build an analytically and computationally tractable stochastic equilibrium model of unemployment in heterogeneous labor markets. Facing search frictions within markets and reallocation frictions between markets, workers endogenously separate from employment and endogenously reallocate between markets, in response to changing aggregate and local conditions. Empirically, using the 1986-2008 SIPP panels, we document the occupational mobility patterns of the unemployed, finding notably that occupational change of unemployed workers is procyclical. The heterogeneous-market model yields highly volatile countercyclical unemployment, and is simultaneously consistent with procyclical reallocation, countercyclical separations and a negatively-sloped Beveridge curve. Moreover, the model exhibits unemployment duration dependence, which (when calibrated to long-term averages) responds realistically to the business cycle, creating substantial longer-term unemployment in downturns. Finally, the model is also consistent with different employment and reallocation outcomes as workers gain experience in the labor market, on average and over the business cycle. |
| Keywords: | Unemployment; Business Cycle; Search; Endogenous Separations; Reallocation; Occupational Mobility |
| JEL: | J62 E32 J64 |
| Date: | 2012–12–31 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:43702&r=lab |
| By: | Francine D. Blau; Lawrence M. Kahn |
| Abstract: | In 1990, the US had the sixth highest female labor participation rate among 22 OECD countries. By 2010, its rank had fallen to 17th. We find that the expansion of “family-friendly” policies including parental leave and part-time work entitlements in other OECD countries explains 28-29% of the decrease in US women’s labor force participation relative to these other countries. However, these policies also appear to encourage part-time work and employment in lower level positions: US women are more likely than women in other countries to have full time jobs and to work as managers or professionals. |
| JEL: | J16 J22 |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:18702&r=lab |
| By: | Mirella Damiani; Fabrizio Pompei; Andrea Ricci |
| Abstract: | Liberalisation of temporary contracts has become an important component of recent labour reforms but up to now available research has not paid attention to the impacts of these institutional changes on functional income distribution. The present paper intends to fill this gap by focussing on the reduction in strictness of employment protection of temporary jobs and analysing its effects on factor shares. We have estimated labour share, as well as its components, worker pays and employment, by considering country-sector evidence for 14 EU economies and the sample period 1995-2007. We have found that these legislative changes, that have favoured the extensive use of temporary contracts, have contributed to instability of working conditions and caused negative effects on workers’ pays. These impacts have more than counterbalanced the scanty positive effects on employment (due to greater access to the labour market of additional workers, likely young and women), thus leading to a decrease in income share accruing to workers. |
| Keywords: | factor income distribution, labour regulation. |
| JEL: | E25 J50 |
| Date: | 2012–11–05 |
| URL: | http://d.repec.org/n?u=RePEc:pia:wpaper:111/2012&r=lab |
| By: | Ann-Sofie Kolm; Mirco Tonin |
| Abstract: | Welfare benefits in the Nordic countries are often tied to employment. We argue that this is one of the factors behind the success of the Nordic model, where a comprehensive welfare state is associated with high employment. In a general equilibrium setting, the underlining mechanism works through wage moderation and job creation. The benefits make it more important to hold a job, thus lower wages will be accepted, and more jobs created. Moreover, we show that the incentive to acquire higher education improves, further boosting employment in the long run. These positive effects help counteracting the negative impact of taxation. |
| Date: | 2012–12–14 |
| URL: | http://d.repec.org/n?u=RePEc:ceu:econwp:2013_1&r=lab |
| By: | Cullinan, John; Flannery, Darragh; Walsh, Sharon; McCoy, Selina |
| Abstract: | While a number of international studies have attempted to assess the influence of geographic accessibility on the decision to participate in higher education, this issue has not been addressed in detail in an Irish context. The aim of this paper is to fill this gap and to present a higher education choice model that estimates the impact of travel distance on the decision of school leavers to proceed to higher education in Ireland, while also controlling for a range of individual level characteristics and school related variables. To do so we use data from the 2007 wave of the School Leavers' Survey. We find that, on average, travel distance is not an important factor in the higher education participation decision, when factors such as student ability are accounted for. However, further analysis shows that travel distance has a significantly negative impact on participation for those from lower social classes and that this impact grows stronger as distance increases. We also find that the distance effects are most pronounced for lower ability students from these social backgrounds. This has important implications for higher education policy in Ireland, especially in relation to equity of access and the design of the maintenance grant system. |
| Keywords: | data/education/equity/higher education/Ireland/Policy/Social class |
| Date: | 2012–12 |
| URL: | http://d.repec.org/n?u=RePEc:esr:wpaper:wp444&r=lab |
| By: | Murphy, Gavin; Siedschlag, Iulia; McQuinn, John |
| Abstract: | We examine the impact of the strictness of employment protection legislation on innovation intensity. To this purpose, we use a panel of annual data from OECD countries over the period 1990-1999 and estimate difference-in-difference models to explain the variation of innovation intensity between industries within countries. Our estimates indicate that stricter employment protection legislation led to significantly lower innovation intensity in industries with higher job reallocation rates or higher layoff propensities. Further, we find that the strictness of employment regulations on the use of temporary contracts had a stronger impact on innovation intensity than the strictness of employment protection for regular contracts. Our findings are robust to additional industry covariates and to other labour market institutions that may affect innovation performance and industry job reallocation propensity. In addition, our sensitivity analysis indicates that our results are not driven by the particular measures of employment protection legislation and industry layoff propensity that we use or by any country in our sample. |
| Keywords: | data/employment/labour market/protection/reallocation/regulation |
| Date: | 2012–12 |
| URL: | http://d.repec.org/n?u=RePEc:esr:wpaper:wp445&r=lab |
| By: | Nuno Crespo; Nádia Simões; José Castro Pinto |
| Abstract: | We analyze the determinants of job quality in Europe based on an individual level approach. Using data from the Fourth European Working Conditions Survey, covering 31 countries, we propose a multidimensional indicator of job quality based on eight objective and three subjective dimensions and evaluate the influence of worker and firm characteristics on the overall job quality level as well as on each of its constituent dimensions. Our results confirm the influence of worker and firm characteristics on the quality of jobs. Among worker characteristics, the factors that most strongly influence job quality are education and whether the worker is self-employed or a wage earner. The economic sector is the most important firm-related characteristic. |
| Keywords: | Job quality, Europe, determinant factors, twice-censored Tobit model dimensional analysis. |
| JEL: | J01 J21 J81 |
| Date: | 2013–01–11 |
| URL: | http://d.repec.org/n?u=RePEc:isc:iscwp2:bruwp1301&r=lab |
| By: | Fevang, Elisabeth (Ragnar Frisch Centre for Economic Research); Hardoy, Inés (Institute for Social Research, Oslo); Røed, Knut (Ragnar Frisch Centre for Economic Research) |
| Abstract: | We investigate the impacts of economic incentives on the duration and outcome of temporary disability insurance (TDI) spells. The analysis is based on a large quasi-experiment in Norway, with a complete overhaul of the TDI benefit system. Our findings show that the labor supply of TDI claimants responds to both the benefit-level and to the level of local labor demand. The estimated elasticity of the employment hazard with respect to the benefit-level is – 0.3. We also find that the level of TDI benefits significantly affects the transition rate to alternative social insurance programs such as permanent disability and unemployment. |
| Keywords: | temporary disability, rehabilitation, hazard rate models, labor supply |
| JEL: | H55 I38 J22 |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp7137&r=lab |
| By: | Sushanta K. Mallick (Queen Mary University of London, School of Business and Management, United Kingdom); Ricardo M. Sousa (Universidade do Minho - NIPE) |
| Abstract: | This paper analyses the neutrality of technology using data from the NBER-CES Manufacturing industry database. We show that technology has a positive effect on the skilled-to-unskilled labour and wage ratios, offering a skill-premium for these skilled workers. We also find that technology has become more favourable towards skilled labour since the eighties, thereby, explaining the rise in the relative abundance of skilled workers. Finally, differences in productivity among the two labour inputs are important when they are relatively poor substitutes, despite the increase in the elasticity of substitution between unskilled and skilled labour that occurred over the past decades. |
| Keywords: | Technological progress, skill premium, industry-level data. |
| JEL: | O12 O47 D24 J24 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:nip:nipewp:26/2012&r=lab |
| By: | James M. Poterba; Steven F. Venti; David A. Wise |
| Abstract: | This paper explores the relationship between education and the evolution of wealth after retirement. Asset growth following retirement depends in part on health capital and financial capital accumulated prior to retirement, which in turn are strongly related to educational attainment. These “initial conditions” for retirement can have a lingering effect on subsequent asset evolution. Our aim is to disentangle the effects of education on post-retirement asset evolution that operate through health and financial capital accumulated prior to retirement from the effects of education that impinge directly on asset evolution after retirement. We consider the indirect effect of education through financial resources—in particular Social Security benefits and defined benefit pension benefits—and through health capital that was accumulated before retirement. We also consider the direct effect of education on asset growth following retirement, emphasizing the correlation between education and the returns households earn on their post-retirement investments. Households with different levels of education invest, on average, in different assets, and they may consequently earn different rates of return. Finally, we consider the additional effects of education that are not captured through these pathways. Our empirical findings suggest a substantial association between education and the evolution of assets. For example, for two person households the growth of assets between 1998 and 2008 is on average much greater for college graduates than for those with less than a high school degree. This difference ranges from about $82,000 in the lowest asset quintile to over $600,000 in the highest. |
| JEL: | E21 I14 I24 |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:18695&r=lab |
| By: | Mathias Huebener |
| Abstract: | This paper analyses the role of family risk attitudes in intergenerational mobility in incomes and education. Based on 1984-2009 data of sons and fathers from the German Socio-Economic Panel Survey, there is evidence suggesting that sons with risk taking fathers have a significantly higher educational mobility and persistently higher income mobility than peers with risk averse fathers. They obtain significantly higher levels of education, which would be justified by modest evidence on higher returns to education. The relationship seems more complex for sons’ own risk attitudes. Risk taking sons experience higher educational mobility, but there is no difference in income mobility to risk averse sons. There are no considerable differences in the levels of education, but modest evidence suggesting lower returns to education for risk taking sons. The findings improve the understanding of the intergenerational transmission mechanism of economic status and show that family risk attitudes impact economic mobility. The study suggests an important intergenerational link between fathers’ risk attitudes and sons’ levels of education, which has not received much attention in the literature. |
| Keywords: | Risk preferences, intergenerational mobility, educational mobility, social mobility, returns to education, intergenerational income elasticity, educational choice under uncertainty, SOEP |
| JEL: | D1 D8 I24 J13 J24 J62 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwsop:diw_sp529&r=lab |
| By: | Brindusa Anghel (FEDEA); Antonio Cabrales (Univers. Carlos III de Madrid); Jesus M. Carro (Univers. Carlos III de Madrid) |
| Abstract: | We evaluate a program that introduced bilingual education in English and Spanish in primary education in some public schools of the Madrid region in 2004. Under this program students not only study English as a foreign language but also some subjects (at least Science, History and Geography) are taught in English. Spanish and Mathematics are taught only in Spanish. The first class receiving full treatment finished Primary education in June 2010 and they took the standardized test for all 6th grade students in Madrid on the skills considered \indispensable" at that age. This test is our measure of the outcome of primary education to evaluate the program. We have to face a double self-selection problem. One is caused by schools who decide to apply for the program, and a second one caused by students when choosing school. We take several routes to control for these selection problems. The main route to control for self-selected schools is to take advantage of the test being conducted in the same schools before and after the program was implemented in 6th grade. To control for students self-selection we combine the use of several observable characteristics (like parents' education and occupation) with the fact that most students were already enrolled at the different schools before the program was announced. Our results indicate that there is a clear negative effect on learning the subject taught in English for children whose parents have less than upper secondary education, and no clear effect for anyone on mathematical and reading skills, which were taught in Spanish. |
| Keywords: | Bilingual education, program evaluation, teaching in English |
| JEL: | H40 I21 I28 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:ieb:wpaper:2012/6/doc2012-30&r=lab |
| By: | Richard J. Murnane |
| Abstract: | I survey the evidence on patterns in U.S. high school graduation rates over the period 1970-2010 and report the results of new research conducted to fill in holes in the evidence. I begin by pointing out the strengths and limitations of existing data sources. I then describe six striking patterns in graduation rates. They include stagnation over the last three decades of the twentieth century, significant race-, income-, and gender-based gaps, and significant increases in graduation rates over the first decade of the twenty-first century, especially among blacks and Hispanics. I then describe the models economists use to explain the decisions of individuals to invest in schooling, and examine the extent to which the parameters of the models explain recent patterns in graduation rates. I find that increases in the nonmonetary costs of completing high school and the increasing availability of the GED credential help to explain stagnation in the face of substantial gaps between the wages of high school graduates and school dropouts. I point out that there are several hypotheses, but to date, very little evidence to explain the increases in high school graduation rates over the first decade of the twenty-first century. I conclude by reviewing the evidence on effective strategies to increase high school graduation rates, and explaining why the causal evidence is quite modest. |
| JEL: | C81 I21 I24 J15 J16 J24 J31 |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:18701&r=lab |
| By: | Alina Sorgner (School of Economics and Business Administration, Friedrich-Schiller-University Jena); Michael Fritsch (School of Economics and Business Administration, Friedrich-Schiller-University Jena) |
| Abstract: | Often, a person will become an entrepreneur only after a period of dependent employment, suggesting that occupational choices precede entrepreneurial choices. We investigate the relationship between occupational choice and self-employment. The findings suggest that the occupational choice of future entrepreneurs at the time of labor market entry is partly guided by a taste for skill variety, the prospect of high earnings, and occupational earnings risk. Entrepreneurial intentions may also emerge after gaining work experience in a chosen occupation. We find that occupations characterized by high levels of unemployment and earnings risk, relatively many job opportunities, and high self-employment rates foster the founding of an own business. Also, people who fail to achieve an occupation-specific income have a tendency for self-employment. |
| Keywords: | Entrepreneurial choice, occupation-specific determinants of entrepreneurship, risk preferences, taste for variety |
| JEL: | L26 J24 D01 |
| Date: | 2013–01–08 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2013-001&r=lab |
| By: | Claudia Goldin; Claudia Olivetti |
| Abstract: | The most prominent feature of the female labor force across the past hundred years is its enormous growth. But many believe that the increase was discontinuous. Our purpose is to identify the short- and long-run impacts of WWII on the labor supply of women who were currently married in 1950 and 1960. We use mobilization rates for various groups of men (by age, race, fatherhood) to see whether there was a wartime impact. We find that an aggregate mobilization rate produces the largest and most robust impacts on both weeks worked and the labor force participation of married white (non-farm) women. The impact, moreover, was experienced primarily by women in the top half of the education distribution. Women who were married but without children during WWII were the group most impacted by the mobilization rate in 1950, although by 1960 WWII still influenced the labor supply decisions of them as well as those with children during WWII. We end the paper with a resolution between the watershed and revisionist views of the role of WWII on female labor supply. |
| JEL: | J16 J2 N3 |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:18676&r=lab |
| By: | Olivier Bargain; Kristian Orsini; Andreas Peichl |
| Abstract: | We suggest the first large-scale international comparison of labor supply elasticities for 17 European countries and the US, separately by gender and marital status. Measurement differences are netted out by using a harmonized empirical approach and comparable data sources. We find that own-wage elasticities are relatively small and much more uniform across countries than previously thought. Differences exist nonetheless and are found not to arise from different tax-benefit systems or demographic compositions across countries. Thus, we cannot reject that countries have genuinely different preferences. Three other results, important for welfare analysis, are consistent over all countries: the extensive (participation) margin dominates the intensive (hours) margin; for singles, this leads to larger labor supply responses in low-income groups; income elasticities are extremely small everywhere. Finally, the results for cross-wage elasticities in couples are opposed between regions, consistent with complementarity in spouses’ leisure in the US versus substitution in spouses’ household production in Europe. |
| Keywords: | household labor supply, elasticity, taxation, Europe, US |
| JEL: | C25 C52 H31 J22 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwsop:diw_sp525&r=lab |
| By: | Pedro S. Amaral; Murat Tasci |
| Abstract: | We show that the inability of a standardly-calibrated stochastic labor search-and-matching model to account for the observed volatility of unemployment and vacancies extends beyond U.S. data to a set of OECD countries. We also argue that using cross-country data is helpful in evaluating the relative merits of the alternatives that have appeared in the literature. In illustrating this point, we take the solution proposed in Hagedorn and Manovskii (2008) and show that its ability to match the labor market volatility magnitudes seen in the data depends crucially on how persistent the estimated productivity process is. |
| Keywords: | Unemployment ; Wages ; Business cycles ; Human capital |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedcwp:1236&r=lab |
| By: | Hosny Zoabi (Tel Aviv University); Moshe Hazan (Hebrew University) |
| Abstract: | Conventional wisdom suggests that in developed countries income and fertility are negatively correlated. We present new evidence that between 2001 and 2009 the cross-sectional relationship between fertility and women's education in the U.S. is U-shaped. At the same time, average hours worked increase monotonically with women's education. This pattern is true for all women and mothers to newborns regardless of marital status. In this paper, we advance the marketization hypothesis for explaining the positive correlation between fertility and female labor supply along the educational gradient. In our model, raising children and home-making require parents' time, which could be substituted by services bought in the market such as baby-sitting and housekeeping. Highly educated women substitute a significant part of their own time for market services to raise children and run their households, which enables them to have more children and work longer hours. |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed012:276&r=lab |
| By: | Ronny Freier; Johanna Storck |
| Abstract: | This paper studies the effect of attending a high-quality secondary school on subsequent educational outcomes. The analysis is based on data from the German Socio-Economic Panel Study in which we observe children when they make their secondary school choice (between ages 10-12) and later when they self-report on their intentions with regard to their further educational path (between ages 16-17). To identify the treatment effect, we use a regression-control framework as well as an instrumental variable approach (based on local supply of schools). In a second step, we carefully examine the influence of unobservable characteristics, using the new technique proposed by Altonji, Elder, and Taber (2005b). Our findings suggest that unobservable characteristics are indeed crucial to the validity of the research design. While we find large positive and significant effects of attending a high-quality school, we cannot rule out that the estimates are not in fact driven by selection on unobservables. |
| Keywords: | secondary school choice, school quality, instrumental variable estimation, selection on unobservables |
| JEL: | I20 I21 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwsop:diw_sp530&r=lab |
| By: | Elsner, Benjamin (IZA); Zimmermann, Klaus F. (IZA and University of Bonn) |
| Abstract: | We study how the EU enlargement in 2004 and the Great Recession in the late 2000s have shaped the scale and composition of migration flows from the New Member States to Germany. We demonstrate that immigration increased substantially despite the restrictions on the German labor market, and that net flows decreased to zero at the outset of the recession. The cohorts arriving after 2004 had on average a lower education than the previous arrival cohort, but the wage gap compared to Germans became narrower over time. Almost 10 years after EU enlargement, we re-assess the transitional arrangements, and argue that Germany would have been better off, had it immediately opened its labor market. Finally, the Great recession allows us to study how effective migration within the EU is as an adjustment mechanism. Our data clearly show an increase in immigration from countries that were hit by the crisis, although the annual net flows are still too small to significantly reduce unemployment in the countries hit by the crisis. |
| Keywords: | EU enlargement, migration, Germany |
| JEL: | F22 |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp7130&r=lab |
| By: | Jason Fletcher |
| Abstract: | While several types of mental illness, including substance abuse disorders, have been linked with poor labor market outcomes, no current research has been able to examine the effects of childhood ADHD. As ADHD has become one of the most prevalent childhood mental conditions, it is useful to understand the full set of consequences of the illness. This paper uses a longitudinal national sample, including sibling pairs, to show important labor market outcome consequences of ADHD. The employment reduction is between 10-14 percentage points, the earnings reduction is approximately 33%, and the increase in social assistance is 15 points, which are larger than many estimates of the black-white earnings gap and the gender earnings gap. A small share of the link is explained by education attainments and co-morbid health conditions and behaviors. The results also show important differences in labor market consequences by family background and age of onset. These findings, along with similar research showing that ADHD is linked with poor education outcomes and adult crime, suggest that treating childhood ADHD can substantially increase the acquisition of human capital. |
| JEL: | I1 I12 I18 J22 J24 J3 J31 |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:18689&r=lab |
| By: | Verónica Amarante (ECLAC/CEPAL); Andrea Vigorito (Universidad de la República, Uruguay) |
| Abstract: | During the first half of the 20th century, Uruguay was able to establish an institutional system of universal social policies in the areas of education, labour and health which involved the coverage of most of the population (Filgueira, 1994). In the context of social protection, a system of contributory cash-based transfers was created which aimed to protect workers in the formal sector?and through them their families?and to provide them with an adequate retirement to replace their income. With regard to non-contributory transfers, in 1919 a social pension scheme for elderly and disabled people was created, targeting those people over 70 years of age considered socially vulnerable. In 1942 the system of contributory Family Allowances (Asignaciones Familiares) came into force, consisting of monthly cash benefits to workers in the formal sector with children. (...) |
| Keywords: | The Expansion of Non-Contributory Transfers in Uruguay in Recent Years |
| Date: | 2012–08 |
| URL: | http://d.repec.org/n?u=RePEc:ipc:pbrief:29&r=lab |
| By: | David Neumark; J.M. Ian Salas; William Wascher |
| Abstract: | We revisit the minimum wage-employment debate, which is as old as the Department of Labor. In particular, we assess new studies claiming that the standard panel data approach used in much of the “new minimum wage research” is flawed because it fails to account for spatial heterogeneity. These new studies use research designs intended to control for this heterogeneity and conclude that minimum wages in the United States have not reduced employment. We explore the ability of these research designs to isolate reliable identifying information and test the untested assumptions in this new research about the construction of better control groups. Our evidence points to serious problems with these research designs. We conclude that the evidence still shows that minimum wages pose a tradeoff of higher wages for some against job losses for others, and that policymakers need to bear this tradeoff in mind when making decisions about increasing the minimum wage. |
| JEL: | J23 J38 |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:18681&r=lab |
| By: | Belo, Frederico (University of MN); Lin, Xiaoji (OH State University) |
| Abstract: | We show that heterogeneity in the composition of the labor force affects asset prices in financial markets in important ways. Theoretically, we combine a standard model of labor heterogeneity (Acemoglu, 2002) with a standard neoclassical q-theory model with labor adjustment costs. We then show that the negative expected return-hiring rate relation documented in previous studies is steeper in industries with higher labor adjustment costs. Using the overall industry level of labor skill as a proxy for the industry specific size of labor adjustment costs, we provide empirical support for this prediction. The negative expected return-hiring rate relation is twice as large among industries with higher labor skills than in industries with lower labor skills. In addition, we uncover a novel unconditional labor skill return spread. Firms in industries with more skilled labor have on average higher stock returns than firms in industries with low skilled labor, but this difference is only large across small firms. According to this result, firms with higher labor skills labor tend to be more risky because skilled labor is more costly to adjust, which in turn affects the firm's sensitivity to aggregate shocks in the economy. |
| JEL: | E22 E23 E44 G12 |
| Date: | 2012–11 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:ohidic:2012-25&r=lab |
| By: | Malchow-Møller, Nikolaj (University of Southern Denmark); Munch, Jakob R. (University of Copenhagen); Seidelin, Claus Aastrup (University of Southern Denmark); Skaksen, Jan Rose (Copenhagen Business School) |
| Abstract: | Many developed countries have recently experienced a significant inflow of immigrants in the agricultural sector. At the same time, the sector is still in a process of structural transformation resulting in fewer but bigger and presumably more efficient farms. In this paper, we exploit detailed matched employer-employee data for the entire population of Danish farms in the period 1980-2008 to analyze the micro-level relationship between these two developments. We find that farms that employ immigrants tend to be both larger and at least as productive as other farms. Furthermore, an increased use of immigrants is found to be associated with an improvement in farm performance as measured by job creation and revenue, and this seems at least in part to reflect a causal effect of the immigrants. |
| Keywords: | immigration, agriculture, matched employer-employee data |
| JEL: | J61 J43 |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp7133&r=lab |
| By: | François Rycx; Stephan Kampelmann |
| Abstract: | This paper aims to provide a comprehensive, evidence-based, and up-to-date assessment of minimum wages in a range of European countries. A first step towards a better understanding of where Europe stands today on this issue requires to grasp the diversity of European minimum wage systems, a key objective of the paper at hand. The second objective is to document international differences in the so-called "bite" of the minimum wage. This leads to questions such as "how do national minimum wages compare to the overall wage distribution?" and "how many people earn minimum wages in each country?" that are assessed for a set of nine countries from Western, Central and Eastern Europe: Belgium, Bulgaria, Germany, Hungary, Ireland, Poland, Romania, Spain, and the United Kingdom. This sample was designed to include countries for which recent evidence has been missing prior to this paper. What is more, the study also overcomes the narrow focus of extant overviews that have typically focussed only on full-time employment. Crucially, the study improves on existing work by looking beyond aggregate numbers; it provides a detailed panorama of the population of minimum wage earners in each country under investigation, notably by describing their composition in terms of a range of socio-demographic characteristics. |
| Keywords: | Minimum wage systems; Europe; Socio-economic consequences |
| JEL: | J51 J58 J83 |
| Date: | 2013–01–10 |
| URL: | http://d.repec.org/n?u=RePEc:dul:wpaper:2013/137078&r=lab |
| By: | Elena Stancanelli (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Arthur Van Soest (Tilburg University - Netspar) |
| Abstract: | The economic litterature on retirement argues that individuals in a couple tend to retire at a choice time because of externalities in leisure. Ealier studies dit not investigate the extent to which partners actually spend more leisure time together upon retiring. Exploiting the law on early retirement age in France, we use a regression discontinuity approach to identify the causal effect of retirement on hours of leisure, separate and together, of the man and woman in a couple. We use a sample of couples drawn from a French Time Use Survey for the analysis. Using four different definitions of joint leisure, we conclude that generally both separate and joint leisure hours of partners increase significantly upon own retirement. In particular, the hours of leisure spent together by the couple increase on average by about an hour and a half per day upon wife's retirement and by less than an hour upon husband's retirement. The positive effect of partners' retirement on joint leisure is close in size to that on separate leisure or house work hours of partners. |
| Keywords: | Regression discontinuity; retirement, leisure |
| Date: | 2012–12 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:halshs-00768901&r=lab |
| By: | Bénabou, Roland; Tirole, Jean |
| Abstract: | This paper analyzes the impact of labor market competition and skill-biased technical change on the structure of compensation. The model combines multitasking and screening, embedded into a Hotelling-like framework. Competition for the most talented workers leads to an escalating reliance on performance pay and other high-powered incentives, thereby shifting effort away from less easily contractible tasks such as long-term investments, risk management and within-firm cooperation. Under perfect competition, the resulting efficiency loss can be much larger than that imposed by a single firm or principal, who distorts incentives downward in order to extract rents. More generally, as declining market frictions lead employers to compete more aggressively, the monopsonistic underincentivization of low-skill agents first decreases, then gives way to a growing overincentivization of high-skill ones. Aggregate welfare is thus hill-shaped with respect to the competitiveness of the labor market, while inequality tends to rise monotonically. Bonus caps and income taxes can help restore balance in agents' incentives and behavior, but may generate their own set of distortions. |
| Date: | 2012–12 |
| URL: | http://d.repec.org/n?u=RePEc:ide:wpaper:26676&r=lab |
| By: | Chang-Tai Hsieh; Erik Hurst; Charles I. Jones; Peter J. Klenow |
| Abstract: | Over the last 50 years, there has been a remarkable convergence in the occupational distribution between white men, women, and blacks. We measure the macroeconomic consequences of this convergence through the prism of a Roy model of occupational choice in which women and blacks face frictions in the labor market and in the accumulation of human capital. The changing frictions implied by the observed occupational convergence account for 15 to 20 percent of growth in aggregate output per worker since 1960. |
| JEL: | J70 O40 |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:18693&r=lab |
| By: | Norma B. Coe; Mashfiqur Khan; Matthew S. Rutledge |
| Abstract: | When Social Security’s Full Retirement Age (FRA) increased to age 66 for recent retirees, the peak retirement age increased with it. However, a large share of people continue to claim their Social Security benefits at age 65. This paper explores two potential explanations for the “stickiness” of age 65 as a claiming age: Medicare eligibility and workers’ lack of knowledge about their future Social Security benefits. First, we analyze the impact of Medicare eligibility by comparing two groups – one has an FRA of exactly 65; the other, between age 65 and 2 months and age 66. We find that the group with later FRAs who do not have access to retiree health benefits through their employer are more likely to claim Social Security at age 65. We interpret this finding as evidence that Medicare eligibility persuades more people to retire, because they can begin receiving federal health coverage. Individuals without access to retiree health insurance at work are 7.5 percentage points more likely to retire soon after their 65th birthdays and are 5.8 percentage points less likely to delay retirement until the FRA than those with that insurance. This result fits into extensive research showing that access to health insurance is an important component of the retirement decision. On the question of whether misinformation about Social Security benefits may drive individuals to claim at age 65, we find that some individuals are unable to accurately forecast their retirement benefits. However, our analysis suggests that there is no relationship between this confusion and the age 65 peak for claiming Social Security. |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:crr:crrwps:wp2013-2&r=lab |
| By: | Fang, Hai (University of CO, Denver); Eggleston, Karen N. (Walter H Shorenstein Asia-Pacific Research Center, Stanford University); Rizzo, John A. (Stony Brook University, SUNY); Zeckhauser, Richard J. (Harvard University) |
| Abstract: | Data on 2,355 married women from the 2006 China Health and Nutrition Survey are used to study how female employment affects fertility in China. China has deep concerns with both population size and female employment, so the relationship between the two should be better understood. Causality flows in both directions. A conceptual model shows how employment prospects affect fertility. Then a well-validated instrumental variable isolates this effect. Female employment reduces a married woman's preferred number of children by 0.35 on average and her actual number by 0.50. Ramifications for China's one-child policy are discussed. |
| JEL: | J13 J18 O15 |
| Date: | 2012–11 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:harjfk:rwp12-054&r=lab |
| By: | Cho, In Soo |
| Abstract: | We investigate the stability of measured risk attitudes over time, using a 13-year longitudinal sample of individuals in the NLSY79. We find that an individual’s risk aversion changes systematically in response to personal economic circumstances. Risk aversion increases with lengthening spells of employment and time out of labor force, and decreases with lengthening unemployment spells. However, the most important result is that the majority of the variation in risk aversion is due to changes in measured individual tastes over time and not to variation across individuals. These findings that measured risk preferences are endogenous and subject to substantial measurement errors suggest caution in interpreting coefficients in models relying on contemporaneous, one-time measures of risk preferences. |
| Keywords: | risk aversion; stability; variance decomposition; within; measurement error; between; fixed effects |
| JEL: | C23 D81 |
| Date: | 2013–01–10 |
| URL: | http://d.repec.org/n?u=RePEc:isu:genres:35751&r=lab |
| By: | Naoki Aizawa; Hanming Fang |
| Abstract: | We present and empirically implement an equilibrium labor market search model where risk averse workers facing medical expenditure shocks are matched with firms making health insurance coverage decisions. Our model delivers a rich set of predictions that can account for a wide variety of phenomenon observed in the data including the correlations among firm sizes, wages, health insurance offering rates, turnover rates and workers' health compositions. We estimate our model by Generalized Method of Moments using a combination of micro data sources including Survey of Income and Program Participation (SIPP), Medical Expenditure Panel Survey (MEPS) and Robert Wood Johnson Foundation Employer Health Insurance Survey. We use our estimated model to evaluate the equilibrium impact of the 2010 Affordable Care Act (ACA) and find that it would reduce the uninsured rate among the workers in our estimation sample from 20.12% to 7.27%. We also examine a variety of alternative policies to understand the roles of different components of the ACA in contributing to these equilibrium changes. Interestingly, we find that the uninsured rate will be even lower (at 6.44%) if the employer mandate in the ACA is eliminated. |
| JEL: | G22 I11 J32 |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:18698&r=lab |
| By: | Christian Belzil (Economics Department, Ecole Polytechnique); Michael Bognanno (Department of Economics, Temple University); Francois Poinas (Toulouse School of Economics) |
| Abstract: | This article estimates a dynamic reduced-form model of intra-firm promotions using an employer-employee panel of over 300 of the largest corporations in the U.S. in the period from 1981 to 1988. The estimation conditions on unobserved individual heterogeneity and allows for both an endogenous initial condition and sample attrition linked to individual heterogeneity in demonstrating the relative importance of variables that influence promotion. The role of the executive's functional area in promotion is considered along with the existence and source of promotion fast tracks. We find that while the principal determinant of promotions is unobserved individual heterogeneity, functional area has a high explanatory power, resulting in promotion probabilities that differ by functional area for executives at the same reporting level and firm. No evidence is found that an executive's recent speed of advancement in pay grade has a causal impact on in- sample promotions after conditioning on the executive’s career speed of advancement. For high-level executives, fast tracks appear to result from heterogeneity in persistent individual characteristics, not from an inherent benefit in recent advancement itself. |
| Keywords: | promotion, fast track, functional area, dynamic discrete choice |
| JEL: | C33 M5 M51 |
| Date: | 2012–11 |
| URL: | http://d.repec.org/n?u=RePEc:tem:wpaper:1206&r=lab |