The influence of geographic mobility and gender on Indiana wages

The study examines wage differentials of individuals experiencing unemployment episodes using a multivariate analysis of wage and unemployment records. The focus is the wage effect of small distance geographic mobility (micro-mobility) during job seeking. The results identify limitations on geographic micro-mobility as a source of wage disparity in the re-employment market. The study isolates persistent gender differences in geographic mobility rates and hypothesizes this as a potential source of gender-wage disparity in both the re-employment and greater labor market. The data and methods are unique. The dataset is Indiana administrative wage records over a ten-year period for individuals that experience unemployment episodes. The study assesses unemployment as an exogenous shock on wages to determine underlying influences in the labor market. The novel approach is unconstrained by limitations associated with aggregated or proxy data.

Immigration, Wages and Employment under Informal Labor Markets

This paper studies the labor market impacts of a massive inflow of Venezuelans in Colombia. By comparing areas that received different shares of migrants, I find a negative effect on wages and on local employment for natives. The negative wage effect is driven by a large drop of wages in the informal sector, where migrants are mostly employed, while the negative employment effect is driven by a reduction of employment in the formal sector, where the minimum wage is binding. To explain these results, I develop a model in which firms hire formal and informal workers with different costs. If these workers have a high degree of substitutability, and wages for formal workers are rigid, firms reallocate formal to informal employment as a response to lower informal wages. In settings with informal labor markets migration can therefore lead to asymmetric employment and wage effects across the informal and formal sectors.

The Effect of Job–Education Vertical Mismatch on Wages Among Recent PhD Graduates: Evidence From an Instrumental Variable Analysis

Existing studies suggest that recent PhD graduates with a job vertically mismatched with their education tend to earn lower wages than their matched counterparts. However, by being based on cross-sectional ordinary least squares (OLS) estimates, these studies raise endogeneity concerns and can only be considered evidence of a correlation between vertical mismatch and wages. This paper improves this literature by applying a heteroskedasticity-based instrumental variable estimation approach to analyzing Italian PhD holders’ cross-sectional micro-data. Our analysis suggests that previous empirical studies have provided slightly upward estimates of the impact of vertical mismatch on wages. Nevertheless, our results show that the effect of overeducation on wages is sizeable. However, no wage effect is found for overskilling. The heterogeneity of these findings by field of study and gender are also inspected.

Does studying abroad influence graduates’ wages?

We review quantitative studies that empirically examine whether studying abroad influences graduates’ wages. After describing features of the existing studies, we assess existing evidence on the size of the wage effect of studying abroad. We then examine corresponding effect heterogeneities, before discussing mechanisms mediating the effect of studying abroad on wages. We conclude by highlighting directions for future research. In a nutshell, our review suggests that studying abroad has a moderate positive effect on graduates’ early career wages in various national and institutional settings. However, this effect tends to vary across groups of graduates, employment contexts, and types of stays abroad. An increased likelihood of employer change and of gaining access to large and multinational companies as well as improved access to high-wage labor markets abroad appear to be the empirically most relevant mechanisms mediating the effect of studying abroad on wages. Other assumed explanatory mechansims, such as improved language skills and a greater tendency to pursue further education, turn out to be less relevant. On balance, our review illustrates that the examined research field has made great progress in recent years. It also shows how research can be further advanced by a stronger degree of standardization of study designs, internationally comparative and longitudinal datasets, the analysis of further plausible mediating mechansism, and a focus on new research questions.

How Do Firms Respond to Reduced Labor Costs? Evidence from the 2007 Swedish Payroll Tax Reform

One way for policymakers to reduce labor costs and stimulate the recruitment of marginalized groups of labor in a highly unionized economy is to lower payroll taxes. However, the efficiency of this policy instrument has been questioned, and previous evaluations have mostly found small employment effects for such reforms. We investigate the effects of a payroll tax cut in Sweden that decreased firms’ labor costs in relation to the number of young employees that they had employed when the reform was implemented in 2007. We find that most firms received small labor cost savings as a result of the reform, but those that received larger cost savings increased their number of employees significantly more than firms that received no, or minor, labor cost savings. Our findings also suggest that the payroll tax cut increased the total wages paid to incumbent workers, but the wage effect was too small to offset the positive extensive-margin employment effect of the reform. In total, we find that the Swedish payroll tax reform created 18,100 jobs over the period 2006–2008; most of these jobs were within the targeted group of young employees.

Wages and the Value of Nonemployment*

Nonemployment is often posited as a worker’s outside option in wage-setting models such as bargaining and wage posting. The value of nonemployment is therefore a key determinant of wages. We measure the wage effect of changes in the value of nonemployment among initially employed workers. Our quasi-experimental variation in the value of nonemployment arises from four large reforms of unemployment insurance (UI) benefit levels in Austria. We document that wages are insensitive to UI benefit changes: point estimates imply a wage response of less than $0.01 per $1.00 UI benefit increase, and we can reject sensitivities larger than $0.03. The insensitivity holds even among workers with low wages and high predicted unemployment duration, and among job switchers hired out of unemployment. The insensitivity of wages to the nonemployment value presents a puzzle to the widely used Nash bargaining model, which predicts a sensitivity of $0.24–$0.48. Our evidence supports wage-setting models that insulate wages from the value of nonemployment.

Union Density Effects on Productivity and Wages

We exploit changes in tax subsidies for union members in Norway to identify the effects of changes in firm-level union density on productivity and wages. Increased deductions in taxable income for union members led to higher membership rates and contributed to a lower decline in union membership rates over time in Norway. Accounting for selection effects and the potential endogeneity of unionisation, the results show that increasing union density at the firm level leads to a substantial increase in both productivity and wages. The wage effect is larger in more productive firms, consistent with rent-sharing models.