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on Labor Markets - Supply, Demand, and Wages |
| By: | Haanwinckel, Daniel (University of California, Berkeley); Soares, Rodrigo R. (Sao Paulo School of Economics) |
| Abstract: | We develop a search model of informal labor markets with worker and firm heterogeneity, intra-firm bargaining with imperfect substitutability across types of workers, and a comprehensive set of labor regulations, including minimum wage. Stylized facts associated with the informal sector, such as smaller firms and lower wages, emerge endogenously as firms and workers decide whether to comply with regulations. Imperfect substitutability across types of workers and decreasing returns to scale enable the model to reproduce empirical patterns incompatible with existing frameworks in the literature: the presence of skilled and unskilled workers in the formal and informal sectors, the rising share of skilled workers by firm size, and the declining formal wage premium by skill level. These features also allow us to analyze the equilibrium responses to changes in the demand and supply of different types of labor. We estimate the model using Brazilian data and show that it closely reproduces the decline in informality observed between 2003 and 2012. The change in the composition of the labor force appears as the main driving force behind this phenomenon. We illustrate the use of the model for policy analysis by assessing the effectiveness of a progressive payroll tax in reducing informality. |
| Keywords: | informality, labor market, search, minimum wage, compensating differentials, Brazil |
| JEL: | J24 J31 J46 J64 O17 |
| Date: | 2016–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp9951&r=lma |
| By: | Carlos Dobkin; Amy Finkelstein; Raymond Kluender; Matthew J. Notowidigdo |
| Abstract: | We examine some economic impacts of hospital admissions using an event study approach in two datasets: survey data from the Health and Retirement Study, and hospital admissions data linked to consumer credit reports. We report estimates of the impact of hospital admissions on out-of-pocket medical spending, unpaid medical bills, bankruptcy, earnings, income (and its components), access to credit, and consumer borrowing. The results point to three primary conclusions: non-elderly adults with health insurance still face considerable exposure to uninsured earnings risk; a large share of the incremental risk exposure for uninsured non-elderly adults is borne by third parties who absorb their unpaid medical bills; the elderly face very little economic risk from adverse health shocks. |
| JEL: | D14 I10 I13 |
| Date: | 2016–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:22288&r=lma |
| By: | Nicoletti, Cheti (University of York); Salvanes, Kjell G. (Norwegian School of Economics); Tominey, Emma (University of York) |
| Abstract: | The documented historical rise in female labour force participation has flattened in recent decades, but the proportion of mothers working full-time has steadily increased. We provide the first empirical evidence that the increase in mothers' working hours is amplified through the influence of family peers. Using Norwegian administrative data we study the long-run influence of the family network on mothers' labour decisions up to seven years post birth. For identification, we exploit partially overlapping peer groups and assume that a mother interacts with her neighbours and family but not with her family's neighbours. We explore mechanisms including information and imitation. |
| Keywords: | peer effects, family network, sibling spillover effects, cousins spillover effects, instrumental variable estimation |
| JEL: | D85 C21 C26 |
| Date: | 2016–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp9927&r=lma |
| By: | James J. Heckman; John Eric Humphries; Gregory Veramendi |
| Abstract: | This paper estimates returns to education using a dynamic model of educational choice that synthesizes approaches in the structural dynamic discrete choice literature with approaches used in the reduced form treatment effect literature. It is an empirically robust middle ground between the two approaches which estimates economically interpretable and policy-relevant dynamic treatment effects that account for heterogeneity in cognitive and non-cognitive skills and the continuation values of educational choices. Graduating college is not a wise choice for all. Ability bias is a major component of observed educational differentials. For some, there are substantial causal effects of education at all stages of schooling. |
| JEL: | C32 C38 I12 I14 I21 |
| Date: | 2016–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:22291&r=lma |
| By: | Rodney J. Andrews; Scott A. Imberman; Michael F. Lovenheim |
| Abstract: | We study two interventions in Texas that were designed to overcome multiple hurdles faced by low-income, high-ability college students. The Longhorn Opportunity Scholars (LOS) and Century Scholars (CS) programs recruited at specified low-income high schools, provided additional financial aid, and enhanced support services once enrolled in college if students attended University of Texas - Austin or Texas A&M - College Station, respectively. These flagship institutions are widely regarded as the top public universities in Texas. Using administrative data that links K-12, postsecondary, and earnings records for Texas public college students, we find via difference-in-differences estimates that the LOS program had a large, positive effect on high-achievers: attendance at UT-Austin increased by 2.2 percentage points (81%), and the likelihood of graduating from UT-Austin increased by 1.7 percentage points (87%). Twelve or more years post-high school, earnings of those exposed to LOS rose by 4.0%. These results entirely come from women, who saw enrollment at UT-Austin increase by 4.0 percentage points, graduation from UT-Austin increase by 2.6 percentage points and earnings increase by 6.1%. We find no evidence that the CS program affected any postsecondary or labor market outcomes. These results indicate that targeted recruitment combined with adequate supports and financial aid can substantially increase enrollment of low-income students in higher quality colleges and improve labor market outcomes. However, the differences in the LOS and CS program effects highlight the importance of understanding how to design these programs to maximize their impact on students. |
| JEL: | H75 I23 J24 |
| Date: | 2016–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:22260&r=lma |
| By: | Krebs, Tom (University of Mannheim); Kuhn, Moritz (University of Bonn); Wright, Mark L. J. (Federal Reserve Bank of Chicago) |
| Abstract: | This paper develops a tractable human capital model with limited enforceability of contracts. The model economy is populated by a large number of long-lived, risk-averse households with homothetic preferences who can invest in risk-free physical capital and risky human capital. Households have access to a complete set of credit and insurance contracts, but their ability to use the available financial instruments is limited by the possibility of default (limited contract enforcement). We provide a convenient equilibrium characterization that facilitates the computation of recursive equilibria substantially. We use a calibrated version of the model with stochastically aging households divided into 9 age groups. Younger households have higher expected human capital returns than older households. According to the baseline calibration, for young households less than half of human capital risk is insured and the welfare losses due to the lack of insurance range from 3 percent of lifetime consumption (age 40) to 7 percent of lifetime consumption (age 23). Realistic variations in the model parameters have non-negligible effects on equilibrium insurance and welfare, but the result that young households are severely underinsured is robust to such variations. |
| Keywords: | human capital risk, limited enforcement, insurance |
| JEL: | E21 E24 D52 J24 |
| Date: | 2016–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp9948&r=lma |
| By: | Goel, Deepti (Delhi School of Economics); Lang, Kevin (Boston University) |
| Abstract: | In this paper we highlight a specific mechanism through which social networks help in job search. We characterize the strength of a network by its likelihood of providing a job offer. Using a theoretical model we show that the wage differential in jobs found using networks versus those found using formal channels, decreases as the network becomes stronger. We verify this result for recent immigrants to Canada for whom a strong network is captured by the presence of a 'close tie.' Furthermore, structural estimates confirm that the presence of a close tie operates by increasing the likelihood of generating a job offer from the network rather than by altering the wage distribution from which an offer is drawn. |
| Keywords: | job search, migration, networks |
| JEL: | J3 |
| Date: | 2016–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp9942&r=lma |
| By: | Eva Dettmann; Matthias Brachert; Mirko Titze |
| Abstract: | The German government provides discretionary investment grants to structurally weak regions to reduce regional disparities. We use a regression discontinuity design that exploits an exogenous discrete jump in the probability of receiving investment grants to identify the causal effects of the investment grant on regional outcomes. We find positive effects for regional gross value-added and productivity growth, but no effects for employment and gross wage growth. |
| Keywords: | evaluation, industrial policy, regression discontinuity design |
| JEL: | A11 D61 H20 Z00 |
| Date: | 2016–05 |
| URL: | http://d.repec.org/n?u=RePEc:iwh:dispap:18-16&r=lma |
| By: | Phadera, Lokendra |
| Abstract: | This paper analyzes the differential impact of migration on labor supply of the left-behind household members in Nepal, where international migration for employment, predominantly a male phenomenon, increased substantially between 2001 and 2011. Using the NLSS III data, this paper extends the analysis further by incorporating the impacts on both extensive and intensive margins and answering the question of if they are not wage-employed, what the remaining members in the household engaging in instead. The paper finds that, in response to outmigration of some family members, women realign their priorities and reallocate their time from market employment to self-employment and home production, possibly filling in the roles vacated by the migrants. In contrast, the income effect dominates the impact of migration on the left-behind men; that is, men value their leisure more because of the remittances from abroad and decrease their overall supply of labor. |
| Keywords: | International Migration, Migration, Labor Supply, International Development, Labor and Human Capital, F220, O150, J220, |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea16:235968&r=lma |
| By: | Kai-Uwe Müller; Michael Neumann |
| Abstract: | We estimate economic incidence of social security contributions (SSC) on the basis of cross-sectional earnings distributions. The approach exploits discontinuities in earnings distributions at kinks in the budget set which are informative about tax incidence. Contrary to most research on SSC incidence, it does not rely on policy reforms, panel data, or hours information. When the location of kinks does not change significantly, estimates represent equilibrium incidence and are less affected by short-run adjustment frictions than results based on policy reforms. We refine the framework proposed by Alvaredo and Saez (2007), discuss identifying assumptions and related problems in empirical applications. We also suggest parametric and non- parametric estimators. The approach is applied to earnings caps of SSC in Germany where the marginal SSC rate drops to zero. The linked employer-employee data used provide precise measures of gross and net earnings. Utilizing two separate earnings distributions improves identification in the presence of measurement error. We find substantial negative discontinuities at most earnings caps of SSC in the distribution of observed net earnings. Together with smooth gross earnings distributions around the caps this provides consistent empirical evidence that legal and economic incidence of SSC coincide. |
| Keywords: | Incidence, social security contributions, discontinuities, linked employer-employee data |
| JEL: | H22 J38 H55 J20 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1578&r=lma |
| By: | Bhalotra, Sonia R. (University of Essex); Chakravarty, Abhishek (University of Essex); Mookherjee, Dilip (Boston University); Pino, Francisco J. (University of Chile) |
| Abstract: | While land reforms are typically pursued in order to raise productivity and reduce inequality across households, an unintended consequence may be increased within-household gender inequality. We analyse a tenancy registration programme in West Bengal, and find that it increased child survival and reduced fertility. However, we also find that it intensified son preference in families without a first-born son to inherit the land title. These families exhibit no reduction in fertility, an increase in the probability that a subsequent birth is male, and a substantial increase in the survival advantage of subsequent sons over daughters. |
| Keywords: | land reform, property rights, gender, infant mortality, sex ratio, fertility |
| JEL: | I14 I24 J71 O15 |
| Date: | 2016–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp9930&r=lma |
| By: | Gibson, John; Burton-McKenzie, Ethan-John |
| Keywords: | Academic salary, Citations, Journal rankings, Research quality, Productivity Analysis, Teaching/Communication/Extension/Profession, A14, J44, Q00, |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea16:235483&r=lma |
| By: | Miyazaki, Koichi |
| Abstract: | The cost of attaining higher education is growing in some developed countries. More young people borrow larger amounts than before to finance their higher education. Several media reports indicate that student loans might affect young people's decision making regarding important life events such as marriage, childbirth, purchasing a house, and so on. Specifically, this paper focuses on how the burden of student loans affects young people's decision making with regard to the number of children to have, and studies the fertility rate, gross domestic product (GDP) growth rate, and growth rate of GDP per capita using a three-period overlapping generations model. A young agent needs to borrow to accumulate his/her human capital, although for some reason, s/he faces the borrowing constraint. In the next period, the agent repays his/her debt as well as determines the number of children to have. Under this setting, this paper analyzes how the tightness of the borrowing constraints affects the growth rates of the population, GDP, and GDP per capita. The paper finds that when rearing children is time-consuming, the population growth rate decreases as the borrowing constraints are relaxed. Moreover, the paper shows a case in which the GDP growth rate decreases as the borrowing constraints are relaxed, whereas the growth rate of GDP per capita still increases. In addition, I show that if the cost of rearing children is mainly monetary, then the population growth rate is not necessarily decreasing as the borrowing constraints are relaxed. The paper also calibrates the model using U.S. data. |
| Keywords: | Student loans, human capital accumulation, fertility, growth rate of GDP, growth rate of GDP per capita, overlapping generations model |
| JEL: | E44 I25 J13 J24 |
| Date: | 2016–05–24 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:71604&r=lma |
| By: | José Gabriel Palma |
| Abstract: | This paper aims to re-examine inequality in the current era of neo-liberal globalisation, with an emphasis on both highly unequal middle-income countries that have already implemented full-blown economic reforms (like Latin America and South Africa), and on OECD countries (like the US) now intent on replicating the inequality heights of the former. i) How do those middle-income countries end up having such unequal distributional outcomes? ii) Since oligarchies all over the world would gladly reproduce the same conditions, why until recently have only a few been able to get away with this degree of inequality? And iii) Why are there suddenly so many new entrants to the high-inequality club, especially from the OECD? In other words, how did Reagan and Thatcher and the fall of the Berlin Wall trigger a new process of "reverse catching-up", by which now it is the highly-unequal middle-income countries showing the advanced ones the shape of things to come? One might even argue that in the US not only is the 1% catching up with their Latin counterparts (who are used to appropriating between a quarter and a third of overall income), but that new developments such as Trump may be part of the same phenomenon: it is now the South that seems to show the North 'the image of their own future'. And regarding that future, it is tempting to say "welcome to the Third World"! We are all indeed converging in this neo-liberal era but, somehow unexpectedly, this convergence is towards features that so far have characterised a number of middle-income countries - e.g. huge inequalities due to mobile élites creaming off the rewards of economic growth, and 'magic realist' politics (that may lack self-respect but not originality). I also discuss why Piketty's persistence with the neo-classical theory of factor shares - a pretty much obsolete 1950s-style approach to the distribution of income - prevents him from bringing our understanding of current distributive affairs forward as much as he might. His neo-classical analysis not only does not 'fit the facts' (he has to resort to questionable parameters), but also leads him into a methodology and social ontology that assumes that particularly complex and over-determined processes (like the distribution of income) are just the simple sum of their parts. Therefore, their account can be reduced to the algebraic description of individual constituents (e.g., inequality as basically an endogenous outcome of r>g - and that would be all). I also outline an alternative narrative regarding why inequality is becoming so extreme in formerly more enlightened affluent societies. I conclude that in order to understand current distributive dynamics what really matters is to comprehend the forces determining the share of the rich — and in terms of growth, what they choose to do with it! |
| Keywords: | income distribution; inequality; ‘Palma Ratio’; homogeneous middle; ideology; neoliberalism; ‘new left’; institutional persistence; Latin America; Chile; South Africa; United States. |
| JEL: | D31 E11 E22 E24 E25 I32 J31 N16 N30 N36 O50 P16 |
| Date: | 2016–05–03 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:1627&r=lma |