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on Labor Markets - Supply, Demand, and Wages |
| By: | César Urquizo Ubillús |
| Abstract: | This paper explores the effect of hours worked on lifetime earnings inequality, a factor often overshadowed by the focus of the literature on wages. I argue that hours dispersion arises from individuals with heterogenous learning ability and leisure preferences selecting into occupations that reward hours worked with future wage growth at different rates. Using empirical evidence, I demonstrate strong correlations between occupational wage growth, cognitive test scores, and hours worked. Informed by this evidence, I develop and calibrate a life-cycle model of endogenous labor supply and occupational choice to disentangle the role of leisure preferences and learning ability in explaining hours worked and earnings dispersion. I find that cognitive ability is responsible for about one fourth of the variance in log hours at age 23, and leisure preferences are responsible for the remaining three fourths. Despite its seemingly small contribution to hours dispersion, cognitive ability accounts for three times as much of the variance of earnings at age 55 (31%) compared to leisure preferences (10%). Finally, I look into the normative implications of these findings, showing that when incorporating learning ability as a driver of hours dispersion, increases in tax progressivity are more effective at reducing inequality and less costly in terms of lifetime welfare. |
| Keywords: | Labor Supply, Occupational Choice, Life Cycle, Inequality |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:apc:wpaper:208 |
| By: | Lodefalk, Magnus (Örebro University School of Business); Engberg, Erik (Örebro University School of Business); Lidskog, Rolf (School of Humanities, Education and Social Sciences); Tang, Aili (Örebro University School of Business) |
| Abstract: | This paper investigates the economic and societal impacts of Artificial Intelligence (AI) in the public sector, focusing on its potential to enhance productivity and mitigate labour shortages. Employing detailed administrative data and novel occupational exposure measures, we simulate future scenarios over a 20-year horizon, using Sweden as an illustrative case. Our findings indicate that advances in AI development and uptake could significantly alleviate projected labour shortages and enhance productivity. However, outcomes vary substantially across sectors and organisational types, driven by differing workforce compositions. Complementing the economic analysis, we identify key challenges that hinder AI’s effective deployment, including technical limitations, organisational barriers, regulatory ambiguity, and ethical risks such as algorithmic bias and lack of transparency. Drawing from an interdisciplinary conceptual framework, we argue that AI’s integration in the public sector must address these socio-technical and institutional factors comprehensively. To unlock AI’s full potential, substantial investments in technological infrastructure, human capital development, regulatory clarity, and robust governance mechanisms are essential. Our study thus contributes both novel economic evidence and an integrated societal perspective, informing strategies for sustainable and equitable public-sector digitalisation. |
| Keywords: | Artificial intelligence; Implementation of technology; Productivity; Labour demand |
| JEL: | E24 J23 J24 N34 O33 |
| Date: | 2025–04–02 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:oruesi:2025_006 |
| By: | Eric Schuss |
| Abstract: | This study examines the impact of increased access to higher education on labor demand, wages, and labor market structure. I focus on the quasi-experimental increase in the number of universities and universities of applied sciences in Bavaria since the 1970s and establishment of such higher education institutes under the "Future of Bavaria Offensive" program in the 1990s. I use administrative establishment-level data and find a positive but statistically insignificant effect on median wages resulting from expansion of higher education. While there is a negative but insignificant impact on wages of highly skilled workers, those without academic or vocational degree experience an increase in wages. I also find that training activities decline immediately after establishment of a new higher education institution. Further empirical analyses indicate that this decline is driven by changes in educational choices of school graduates rather than by labor demand of establishments. |
| Keywords: | Expansion of higher education, Labor demand, Wages, Event-study design |
| JEL: | I23 J23 J31 C21 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:iso:educat:0239 |
| By: | Martin Ruckes; Konrad Stahl |
| Abstract: | A worker’s productivity is only imperfectly revealed when employed to perform a particular task: the match could be imperfect, and her productivity dependent on that of other workers in the team she is working in. We embed both elements of informational imperfection in combination, within a parsimonious parametric model that involves horizontally differentiated skills, as well as firms varying in size and structure of tasks from specialized to diversified. The typical worker’s productivity is revealed only via that of her team, the firm. The team’s productivity can be improved upon by frictionless re-matching within the internal labor market. Any misalignment between the distribution of skills and tasks can be removed only by external labor market actions constrained by informational frictions. There are two parts. In part 1, we analyze internal market equilibrium, but assume for the external market that firms can realize their desired demand. In part 2, we realistically consider labor supply in the external market as furnished by separations, and structured by signals involving the typical worker’s employment history. We demonstrate generic opposite effects involving internal and external market activities. In the internal market, constrained efficient re-matching yields the average productivity of firms to increase in size and diversity of structure. Beyond that, the cumulative distributions of firms by productivity are stochastically dominant across firms by increasing degree of diversification. While with the satisfaction of desired demand in the external market the firms improve in expected productivity, the strength of improvement decreases in firm size and diversity of structure. Productivity gains via re-matching in the internal market may be overturned by the losses due to imprecise matches of hires from the external market: The more internal rematching leads to leftward skewness in the distribution of firms towards higher productivity, the less informative is the specification of desired demand (and, as we show in part 2: in the supply) in the external market. |
| Keywords: | Internal Labor Markets, Horizontal Differentiation of Labor |
| JEL: | J21 J23 J62 L23 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_679 |
| By: | Jesus Fernandez-Villaverde; Yang Yu; Francesco Zanetti |
| Abstract: | Defensive hiring of researchers by incumbent firms with monopsony power reduces creative destruction. This mechanism helps explain the simultaneous rise in R&D spending and decline in TFP growth in the US economy over recent decades. We develop a simple model highlighting the critical role of the inelastic supply of research labor in enabling this effect. Empirical evidence confirms that the research labor supply in the US is indeed inelastic and supports other model predictions: incumbent R&D spending is negatively correlated with creative destruction and sectoral TFP growth while extending incumbents’ lifespan. All these effects are amplified when ideas are harder to find. An extended version of the model quantifies these mechanisms’ implications for productivity, innovation, and policy. |
| Keywords: | productivity growth, innovation, R&D, patents, creative destruction |
| JEL: | E22 L11 O31 O33 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:een:camaaa:2025-15 |
| By: | Evelyn Vezza; Zunino, Gonzalo; Laguinge, Luis; Harry Edmund Moroz; Ignacio Raul Apella; Marla Hillary Spivack |
| Abstract: | This paper explores how job vacancy data can enhance labor market information systems (LMISs) in Argentina and Uruguay where, as in many countries, data on in-demand skills is lacking. By analyzing job postings collected over four years in Argentina and Uruguay, this study assesses the potential of vacancy data to fill labor market data gaps. The findings reveal that vacancy data capture labor market dynamics across time and geography, showing a strong correlation with traditional labor market indicators such as employment and unemployment. However, the data are biased towards higher-skilled occupations. Despite these limitations, the large volume of postings allows for robust inferences and provides valuable insights into skills demand. The study presents three key applications of the data: 1) using postings as a leading indicator of labor market health; 2) identifying in-demand skills; and 3) mapping similarities between occupations to improve the information available to job counselors to provide advice about job transitions. Finally, the paper contributes methodologically by developing both a manually created skills taxonomy and an experimental machine learning approach to classifying skills. The machine learning method, while less comprehensive, highlights in-demand skills and can complement the manual approach by keeping it up to date with minimal input. Overall, the paper demonstrates the potential of job vacancy data to improve LMISs and inform labor market policies in Argentina and Uruguay with immediate practical applications for labor market analysis, skills development, and workforce training. |
| Date: | 2025–03–17 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:11086 |
| By: | Westrich, Zarah |
| Abstract: | Standard economic models view labour supply decisions as individual utility maximisation balancing the trade-off between income and leisure. In contrast, we focus on the social context as a central determinant and analyse how colleagues' working hours shape individual working hours preferences. Our analysis is based on a representative survey of employees in Germany that we conducted in October 2024 (N = 4, 450). Combining novel survey experiment with a quantitative text analysis of an open-ended survey question enables us to identify a causal mechanism and to provide contextual insights into the role of social context for the formation of working hours preferences. We show that colleagues' working hours causally affect working hours preferences. The reasons given by the respondents for choosing the stated working hours, by contrast, are primarily personal. This shows that preferences are socially determined, even if they are rationalised in individualistic terms. Our findings emphasise the importance of collective action for working time policy and highlight methodological challenges that need to be considered when analysing and interpreting working time preferences. |
| Keywords: | working hours, social comparisons, preference formation |
| JEL: | B55 D9 J22 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:ifsowp:315193 |
| By: | Kory Kroft; Yao Luo; Magne Mogstad; Bradley Setzler |
| Abstract: | Existing work on imperfect competition typically focuses on either the labor market or the product market in isolation. In contrast, we analyze imperfect competition in both markets jointly, showing theoretically and empirically that focusing on one market in isolation may result in a limited or misleading picture of the degree and impacts of market power. Our empirical setting is the US construction industry. We develop, identify and estimate a model where construction firms imperfectly compete with one another for workers in the labor market and for projects in both the private market and the government market, where government projects are procured through auctions. Our analyses combine the universe of business and worker tax records with newly collected records from government procurement auctions. We use the estimated model to quantify the markdown of wages and the markup of prices, to show that the impacts of an increase in market power in one market are attenuated by the existence of market power in the other market, and to quantify the rents, rent-sharing, and incidence of procurements in the US construction industry. |
| Keywords: | Imperfect Competition; Monopsony; Wage setting; Rent sharing; Procurement auctions; Construction industry |
| JEL: | D44 J31 J42 L11 |
| Date: | 2025–04–15 |
| URL: | https://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-799 |
| By: | Stöcker, Alexander |
| Abstract: | This study examines the determinants of female labour force participation (FLFP) and female wage employment (FWE) of urban women in four SSA countries: Benin, Senegal, Uganda and Zambia. Using extensive micro-level data and a unified empirical framework, we investigate the multitude of constraints women face in both these dimensions. The methodology tries to bridge the drawbacks of typical macro-level cross-country studies and detailed country case studies, enabling direct comparisons over time and across countries. Key findings highlight substantial cross-country heterogeneity in barriers to female employment, including education, household wealth, motherhood, and male breadwinner norms. While higher education consistently enhances FLFP and FWE, motherhood negatively affects wage employment more persistently than labour force participation. Interaction effects between barriers, such as motherhood and male breadwinner norms, underscore their compounded impact. Additionally, local labour market conditions, namely the variety of occupations available, moderate these barriers, amplifying disadvantages for women in labour markets with higher levels of occupational variety. The study emphasises the importance of context-specific policy interventions. Recommendations include vocational training in Benin, advocacy for shifting restrictive norms in Senegal, targeted support for labour market transitions in Uganda, and addressing male breadwinner norms in Zambia. Future research should delve deeper into how labour market transitions influence female employment and how negative consequences can be remedied. |
| Keywords: | Female Labour Force Participation, Wage Employment, Gender Equality, Sub-Saharan Africa, Employment Barriers, Context-Specific Policies |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:diedps:313625 |
| By: | Eduardo Levy Yeyati; Virginia Robano; Emiliano Pereiro; Camila Porto; Víctor Koleszar |
| Abstract: | Generative Artificial Intelligence (AI) has the potential to help educators tackle persistent challenges—such as complex problem-solving and personalized mentoring—while preserving the essential human elements of judgment and empathy. Focusing on Latin American classrooms, this study explores how AI-powered chatbots can complement teachers in elementary and secondary education. Drawing on quantitative and qualitative evidence, we identify strategies to minimize gender gaps, strengthen teacher preparedness, and maximize student engagement. The study proposes actionable policies, including targeted teacher training, gender-inclusive AI adoption strategies, and scalable hybrid teaching models, as well as a blueprint for testing chatbot effectiveness. By incorporating a gender lens and a phased AI adoption strategy, our study not only outlines best practices for AI deployment but also offers empirical insights into how chatbots impact learning engagement, teacher preparedness, and student equity. Our framework serves as a guide for policymakers aiming to integrate AI tools in a way that supports—not replaces—educators while addressing disparities in access and usage. |
| Keywords: | artificial intelligence, education, ChatGPT, complementarity, LLM, automated tutor, chatbot, classroom, teaching |
| JEL: | C9 I21 J24 O33 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:udt:wpgobi:202050327 |
| By: | Bertoli, P.;; Grembi, V.; |
| Abstract: | In many countries, public healthcare systems are facing the unprecedented challenge of attracting new physicians and retaining existing physicians. Given that the role of non economic factors in responding to such a challenge is as important as the role played by economic factors, we use outbreaks of healthcare scandals from 2000 to 2020 in approximately 100 Italian provinces to address the impact of perceived corruption on the density of public hospital physicians. The outbreak of a scandal is associated with a 3.6% decrease in the presence of public hospital physicians. The effect is explained mainly by so-called supply-side drivers, such as ethical concerns(i.e., a scandal related to a malpractice case), a lack of motivation in the workplace, concerns about the high salience of the scandal(e.g. more media coverage), and more outside options. Demand-side drivers, such as a lower level of trust on the patient side, which affects the patient distribution and, indirectly, the physician distribution, do not seem to play a crucial role within the institutional setting analyzed. Our results are robust to different staggered DID estimators, the inclusion of trends to capture potential time-varying attitudes toward corrupt behaviours, and the inclusion of variables that are expected to affect both the density of public hospital physicians and the occurrence of scandals. Healthcare scandals do not seem to affect the density of other types of civil servants, such as teachers or firefighters. |
| Keywords: | healthcare; corruption; staggered Di-in-Di; physicians' supply; |
| JEL: | D7 I19 J24 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:yor:hectdg:25/03 |
| By: | Michel Grosz; Tomás Monarrez |
| Abstract: | We study the long-term effect of the Great Recession on federal student loan borrowing and repayment. Using detailed longitudinal data on federal student loan borrowers, we compare labor markets that faced varying degrees of unemployment severity during the economic downturn. On average, a one percentage point increase in Great Recession unemployment rates caused a 7% rise in total outstanding debt and 6% percent rise in defaulted borrowers. Across institutional sectors, the Great Recession accounted on average for between 19-32% of the total increase in undergraduate student debt and 10 25% of the total increase in defaults. Borrowers who were students at the onset of the recession saw the largest effects on accrued debt, due to delayed graduation and lengthened enrollment spells |
| Keywords: | student loans; Great Recession; unemployment; higher education finance |
| JEL: | I22 G51 H81 J24 |
| Date: | 2025–04–14 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedpwp:99848 |
| By: | Sandra Eickmeier |
| Abstract: | Economists recently have pointed to a critical disconnect between economic value and ethical values as a key societal issue. Using a survey of 2, 000 German households this paper reveals a misalignment between earnings and the values attributed to professions. Households prioritize professions addressing basic needs and benefiting society and nature over those offering personal utility, high remuneration, or economic growth, highlighting the importance of ethical considerations. This paper argues that values require a solid foundation rather than mere discussion or imposition. Linking values (and value) to awareness, it shows that more aware (along with more educated and informed) households favor professions supporting ethical values such as societal and environmental contributions, creativity, and beauty. Lastly, 60% of households support shifting societal values toward shared responsibility, though responses vary across households. |
| Keywords: | economic value, ethical values, earnings, prices, mindset, awareness, consciousness, surveys, direction of growth, quality of growth |
| JEL: | D9 E3 E7 I3 J3 Z1 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:een:camaaa:2025-14 |