Labour Empirics 2 Flashcards
Spence 1973
Signalling model. Explains how educ is merely a signal of high productivity, rather than causing it.
Altonji and Pierret, 2001
Marginal effect of educ falls with experience and marginal effect of innate ability rises with experience.
Aligns with Spence: Power of signal down over time as abil is understood by employers
Arcadino et al, 2010
Split into groups (HS vs college). Find for college grads, marginal effect of abil does not rise with exp. Because college grads have already successfully signalled abil?
Sheepskin effects?
Jaeger and Page, 1996: Controlling for years of schooling, still a 22% wage premia for BA
Curriculum effects should be zero if signalling?
Quality of educ shouldn’t matter if signalling. These face self selection issues.
Empirics on curriculum effects?
Altonji, 1995: Returns to extra HS courses small
Rose and Betts, 2001: Large math effects on earnings
Kane and Rouse, 1995: If you fail a degree, number of credits matters!
GED
High school equivalent qualification for dropouts (assume it is a good ability measure).
Tyler, Murrane, Willet, 2000
Exploit variation in passing standards. Use DiD to find variation in identically abled students. Find GED has a 19% impact on wages
Challenge to TMW 2000
Jepsen et al, 2016As individuals can retake, it is not a valid abil control. If we only allow first try, no effect!
Compulsory school attendace laws. If pure HC, only marginals affected. If Spence, all affected as value of signal down. Appears pos effect, but stat not significant
Hysteresis
Kahn, 2010: Graduating in a weak economy leads to wage loss as high as 2.5% 15 years later.
Card, Chetty, Weber 2007
Regression discontinuity. Extension of potential duration of benfits lowers finding rate in first 20 weeks by 5-9%
Katz and Meyer, 1990
Far higher chance of finding a job the week benefits expire
Card and Krueger 1994
DiD for changes to min wage Pennsylvania vs New Jersey. Assume parallel trends. Suggests Ld elasticity of +0.7
Critiques of CK 1994
- Measurement errors: Phone survey vs actual administrative data.
- Fast food not representative? (hungry teenager theory) (Keenan, 1995). Teenagers employed and stim demand.
- Adjustment takes time! (Baker et al, 1999)
Seattle min wage
We see politicised debate! UC Berkeley study backed by mayor’s office so incentive to support min wage.
Key of debate is elasticity of Ld close to min wage barrier
Cain, 1986 on discrimination
Must consider wage differentials given same vector of productivity characteristics
Becker, 1957
Taste based discrimination
Employer has a discrim coefficient and acts as if wage = (1+a)w
1 - If a is common, then B members pay a ‘discrimination tax’ and so wage down.
2 - If a is from a distribution, then the a at which there is indifference rules wage differential.
Implies discrim will be driven out
Phelps (1972)
Statistical discrimination. Observable (eg race) is corr with performance (via unobservables).
Set up using a noisy evaluation process.
Implies return to training is lower for B types! Self fulfilling?
Empirics on race differentials are generated how?
Correspondence: Fictitious paper applications.
Audits: Trained auditors for job interviews
Audit: Pager, Western, Bonikowski (2009)
Blacks less likely to get a callback offer. B roughly equal to Whites with 18 month drug felony
Critique of audit
Heckmann Siegelmann, 1992. Assumes unobservables identical across groups and not double blind so unconcious actions by auditors? Sample sizes inevitably small due to cost
Correspondence:
Bertrand and Mullaithan (2004). Random characteristics and change name. Roughly 50% gap in B/W callback rate!
Fryer and Levitt (2004)
Investigate and find no compelling reln between black names and life outcomes after controlling for background. Thus, black names perhaps used as a signal at resume stage, but not later?
Doleac and Stein (2013)
iPod sales with hand visible. Black sellers: Fewer and lower offers. Particularly poor in thin markets / more racial isolation so appears consistent with this channel
Oaxaca - Blinder
Decompose differences in wages into due to discrimination and due to skills gap
Card and Krueger 1992
Return to educ lower for blacks due to school quality, not discrimination?
Should we control for industry / occupation?
No? Choices are at least partly endogenous!
B/W wage ration over time
US
Men: 1940=0.4, 1967=0.65, 2009=0.77
Sig closer for women
Reasons for closing gap in B/W wage ratio?
Closing gap in educ: E.g. end of seg Brown v Board of Educ 1954.
Biased employment tests abolished?
Affirmative action?
Labour force participation?
Unobserved skill differences?
Biased employment tests abolished?
Affirmative action?
Black police wages up 10% following abolished tests
CRA (1964): Strengthened by executive order mandating blind treatment.
Labour force participation?
Unobserved skill differences?
- Roughly equal 1960s to 6% gap 2015. Wr up leads to avg w up no change in discrim (1/3 of differential)
- Neal and Johnson 1996: 3/4 of wage difference is due to human capital, following work by Arrow, 1973: stat discrim
Oaxace Blinder leads to same result of Neal and Johnson.
OVB? AFQT is not a pure abil measure. Childhood educ and race! - Household income?
Gender wage gap UK
39% 1978 / 14% 2022
Manning and Swaffield, 2008: Gender pay gap on entry = 0, but 25% 10 years after entry. 17% is characteristics, 8% discrim.
Characteristics and gender wage gap. Manning Swaffield 2008
Human capital: 11% / Occupational crowding 1.5% / Psychology 4.5%
Human capital and gender pay gap
Mincer and Polachek, 1974:
- Div of labour in family means women gain less experience.
- Women: anticipate shorter / less cont. work lives so less incentive to invest in training.
- Also, employers E(leave) is higher so less willing to higher
Occupational crowding and gender pay gap
- In female dominated fields, all wages 14% lower.
- Manning and Petrolongo, 2008: ‘Part time pay penalty’: 14% to 28% 1975-95. Disappears when controlling for occupation.
- Connolly and Gregory (2009): FT to PT. ‘hidden brain drain’, with many women moving to lower skill
Psychology and gender pay gap
Gneeze, Niederle, Rustichini (2003): Women vs men compete. Women perform worse if mixed!
Negotiations:
- Babcock, 2002: 7% of women vs 57% of men negotiate wage (Carnegie Mellon MBA students)
- Babcock and Laschever, in lab: 9x as many men vs women asked to be paid more
Income pooling?
Lundberg, Pollack, Wales (1997): Change of child benefit from father to mother. Ratio of children’s clothes to men’s up (but time trend?)
Duflo, 2003
Black SA can receive pensions 1993. Both weight for height and height for age significantly up for girls if Grandmother pension, not if grandfather
Thomas, 1997
Brazil 1974/75: Effect of maternal income on nutrition demand is 4-7x larger vs paternal!
Tinbergen, 1974
Canonical model of skills.
Leads to skill premium: Log(Wh/WL)= ((theta-1)/theta)*log(Ah/AL) - (1/theta)log(H/L).
Supply and demand side!!
Test Tinbergen
Katz and Murphy 1992: Data in period: 1963-87. theta hat = 1.6 and annual 2.7% increase in rel demand for college labour.
Acemoglu and Autor, 2012. KM breaks down since 2000! Extend to 2008. theta hat = 2.4, annual increase = 1.6
Breakdown of Tinbergen
Cannot explain fall in real wage as Ah up and cannot explain the U shaped changes in wage dist since 1990s.
Non-cognitive skill measures
‘Big 5’ personality dimensions: Extraversion, agreeablenesss etc
Non-cognitives important?
Bottom quartile are only 1/3 as likely to complete degree vs top
Team production model
Deming, 2017.
If costless trade: Result similar to Acemoglu, Autor (2012): Workers trade tasks, with I* by normal task based model
Costs of trade
Uses Krugman, 1991: Iceberg transport costs! Trading one unit leaves S<1 unit remaining.
Empirics of non-cognitives
Comparing change from 1979 to 1997 NSLY: 1 SD cognitive on wage 20.3% to 15.1% and 1SD social: 2% to 3.7%
Cognitives and non. Sub or complements?
Generally, returns higher in both so support for com
