Changes In Labor Supply Research Articles

The Phenomenon of Population Aging: Major Economic Effects (Ending)

Today most countries are experiencing fast population aging, which is going to last the entire 21st century. Its economic effects are multifarious and will in large part shape further dynamics of the global economy not only in the short or medium but also in the long run. Unfortunately, Russian economists and politicians are hardly aware of how diverse economic consequences of population aging are since their attention is focused on its narrow, purely pragmatic, dimensions (such as the raising of pension age, the deficit of the Russian Pension Fund etc.). The paper provides a broad overview of major economic effects of population aging from both theoretical and empirical perspectives. It examines the place of aging in the process of demographic transition, and forecasts its expected trends in subsequent decades for a few countries including Russia. Next, it critically reviews different versions of dependency/support ratios: demographic and economic; chronological and prospective; non-adjusted and adjusted for differences by age in labor income and per capita consumption. Special attention is paid to a basic scheme of relationships between key demographic and macroeconomic variables that highlights how population aging might affect employment, labor productivity, capital intensity, wages, returns to capital, investment and savings. Some additional effects are also analyzed, such as prospective changes in labor supply, human capital accumulation, technological change, real interest, and inflation. A general conclusion is that population aging is not per se a fundamental economic challenge that should endanger society’s welfare. Real dangers arise from existing institutions providing support for the elderly, which were established in the early to mid 20th century under completely different demographic and economic conditions.

Credit Where it's Due: Investigating Pathways from EITC Expansion to Maternal Mental Health

While Earned Income Tax Credit (EITC) expansions are typically associated with improvements in maternal mental health, little is known about the mechanisms through which the program affects this outcome. The EITC could affect mental health through direct tax credit, changes in labor supply and changes in health insurance coverage of participants. To disentangle these mechanisms, we assess the effects of state and federal EITC expansion on mental health, employment and health insurance by maternal marital status. We find that federal EITC expansions are associated with 1) large positive effects on employment for unmarried mothers and 2) improved self-reported mental health for all mothers. State EITC expansion, which generate smaller changes in the effective wage rate, are associated with improvements in mental health for married mothers only and have no effect on employment for married or unmarried mothers. We find no impact of EITC expansions on health insurance coverage for married or unmarried mothers. These findings suggest that while EITC expansions improved mental health for unmarried mothers through a combination of the credit and employment, for married mothers, improved mental health is driven through the direct credit alone.

Health Dynamics Shape Life-Cycle Incomes

This paper empirically investigates the long-run effects of major health improvements on income growth in the United States. To isolate exogenous changes in health, the econometric model uses quasi-experimental variation in cardiovascular disease mortality across states over time. The results show that there is a causal link between health and income per person, and they provide novel evidence that health dynamics shape life-cycle incomes. Compared to previous generations, life-cycle income profiles slope more strongly at the beginning and at the end of work life, such that age becomes a more prominent determinant of income dynamics. The channels for this transformation include better health, higher educational attainment, and changing labor supply.

What Should the Optimal Income Tax Rate Be?

In this paper, we present a model that enables us to calculate the optimal income tax rate, given a specific utility function from leisure and consumption of private and public goods. The main contribution of our paper is presenting a new approach for determining the optimal tax rate: instead of focusing on the social planner’s point of view, we focus on the private agent’s point of view. We assume a given labor supply function and calculate the loss of income which equals increased government supply following tax imposition. Taking into consideration the loss of utility following decreased private consumption as well as increased public utility following increased leisure and public consumption, we calculate the income tax rate that would maximize an agent’s benefit. We examined our model by gradually changing labor supply elasticity, wage per hour, and the parameter of marginal utility from public consumption. We find that as labor supply elasticity increases, the optimal tax rate should be lower. On the other hand, as wage per hour increases, the optimal tax rate should be higher. Finally, as the parameter increasing utility from public consumption is lower, the optimal tax is lower.

The Impact of Snap Work Requirements on Labor Supply

This study explores the impact of work requirements for the Supplemental Nutrition Assistance Program (SNAP) on the labor supply of able-bodied adults without dependents, exploiting unique features of SNAP work requirements. First, states can exempt individuals living in certain areas from work requirements. Second, the work requirements apply only to adults aged below 50. Using a triple difference model that compares the time-series changes in labor supply for age groups on either side of the age threshold in areas before and after the exemption, I find that suspending work requirements does not discourage employment; a decrease in employment of more than 1.4 percentage points among people who are potentially affected by the exemption can be ruled out with a 95% confidence interval. I also find evidence of a reduction in hours of work among older prime-age workers due to the work exemption. Further analysis uncovers two reasons why the work exemption has little effect on employment. First, many new SNAP participants who enrolled due to the exemption are the long-term non-employed who have no labor supply to reduce. Second, the generous income deductions in benefit calculation act as work incentives by significantly lowering the effective benefit reduction rate at very low income ($0–600). These findings indicate that the SNAP work requirement is unlikely to achieve the intended goal of promoting employment; instead it may increase the risk of disadvantaged individuals failing to receive the assistance they need.

Interprovincial differences in labour force distribution and utilization based on educational attainment in Indonesia, 2002–2015

AbstractIntroducing an employment variable with five levels of educational attainment per capita and employing inequality decomposition, this study addresses three questions. How does labour force vary by education and provinces? How does labour force utilization vary by education and provinces? What are the potential causes of differences? We find that the no‐primary‐education group is more endowed in less‐developed provinces and allocated most unequally among education groups across provinces, despite past universal primary education policies. The senior‐secondary‐education group with the largest labour share is a growing concern due to the lower employment rate and largest interprovincial inequality.

Emerging Challenges of Rural Labour Market: Insights from Indian Villages

This article has examined the labour market behaviour of rural India, with the objective to assess the changes taking place in the structure of the workforce and attempts to identify the factors affecting the changes in rural labour supply. In particular, this article tries to address the inconsistency between absolute declines in labour force, particularly rural females at national level, with the micro-level evidences of feminisation in farm work through the estimation of labour supply function. Empirical findings indicate an increasing trend in female participation, particularly aged in rural India. The significant positive association of occupation dummy with male labour supply and negative association with female labour supply, in one way, explains the greater participation of male workers in non-farm work and higher concentration of females in farm activities. Therefore, attention needs to be paid to promote initiatives such as youth entrepreneurship in agriculture to retain youth in farming, encourage innovations in designing appropriate location-specific machineries and tools which are female-friendly, and also organise capacity-building programmes for skill augmentation focusing rural female workers. JEL: J21, J43, J42, J16

Skill premium, labor supply, and changes in the structure of wages in Latin America

After a decade of increasing wage inequality, this paper documents a sharp compression in the distribution of wages in Argentina and Chile during the 2000s. In Brazil, wage inequality has steadily declined since the early 1990s. Counterfactual exercises show that the evolutions of the schooling and experience premiums are key determinants of the decline in inequality. The 2000s witnessed a rapid decline in the schooling and experience premiums, at the same time as the working population was aging and becoming more educated. To understand these changes, the paper develops a model of imperfect substitution across experience and education groups and estimates the relevant elasticities of substitution. Changes in labor supply contributed significantly to the decline of the experience and education premiums, but are not enough to account fully for the observed changes. The demand for experience shifted in favor of younger workers, while the relative demand for college graduates declined during the 2000s.

The impact of technological progress on labour markets: policy challenges

This paper gives an overview of current thinking by economists about the consequences of ongoing technological progress for labour markets, and discusses policy implications. In economics, the impact of technological progress on labour markets is understood by the following two channels: (i) the nature of interactions between differently skilled workers and new technologies affecting labour demand and (ii) the equilibrium effects of technological progress through consequent changes in labour supply and product markets. The paper explains how the ongoing Digital Revolution is characterized by a complex interplay between worker skills and digital capital in the workplace, and consequent changes in job mobility for workers and in output prices affecting consumer demand for goods and services. In particular, it explains how current worker–technology interactions and the equilibrium effects they entail combine to create economy-wide job polarization with winners and losers from ongoing technological progress. The paper therefore concludes by discussing a set of policy interventions to ensure that the benefits of the Digital Revolution are broadly shared.

Job polarization and labour supply changes in the UK

This paper investigates the effect of technological exposure on UK employment polarization during 1993–2014. The identification strategy exploits variation across local labour markets in the historical specialization in routine-intensive activities. The Routine Biased Technical Change hypothesis is tested and only partly corroborated. Strikingly, I find no effect of technological exposure on the growth of high-skilled non-routine cognitive jobs. I claim that the rapid educational upgrading of the 1990s may help explain this result. This is supported by evidence of a marked increase in outflows of both graduates and non-graduates from the top moving down the occupational ladder since 1991.

Labor Market Effects of the Affordable Care Act: Evidence from a Tax Notch

We investigate whether taxpayers respond to a large, ACA-induced upward tax notch at the Federal Poverty Level. Using administrative tax data, we document bunching in the income distribution and provide estimates of the taxable income elasticity. Our estimates are the only ones using US data that are identified by panel variation in budget constraints rather than functional form assumptions (Blomquist and Newey 2017), a feature of our novel longitudinal estimator. Consistent with Saez (2010), we find bunching only among the self-employed. Analysis of linked tax and survey data suggests that bunching is likely not representative of changes in labor supply.

: (The Russian Labor Market: The Impact of Crises)

Russian Abstract: В работе основной фокус исследования направлен на анализ влияния именно кризисов на рынок труда, а не подъемов, потому что динамика рынка труда во время кризиса и подъема существенно различается. Спад в экономике обычно более резкий и быстрый и приводит к снижению спроса на рабочую силу и через это и на другие характеристики рынка труда. Во время экономического подъема динамика основных характеристик рынка труда определяется общими структурными изменениями и спроса, и предложения труда. English Abstract: In the work, the main focus of the research is aimed at analyzing the impact of crises on the labor market, rather than on the upswings, because the dynamics of the labor market during the crisis and recovery are significantly different. The recession in the economy is usually sharper and faster and leads to a decline in demand for labor and through this and other characteristics of the labor market. During the economic recovery, the dynamics of the main characteristics of the labor market are determined by general structural changes in both demand and labor supply.

Effects of Minimum Wages on Absence from Work Due to Illness

Abstract Using longitudinal data from the Panel Study of Income Dynamics for 1997–2013 and difference-in-differences (DD) and difference-in-difference-in-differences (DDD) techniques, we estimate the effects of minimum wages on absence from work due to own and others’ (such as children’s) illnesses. We use person fixed effects within both linear and two-part models, the latter to explore changes at extensive and intensive margins. A lower educated group (likely affected by minimum wages) is compared with higher educated groups (likely unaffected). Within the lower educated group, we find higher minimum wages are associated with lower rates of absence due to own and others’ illness combined and due to own illness alone, but not associated with absence due to others’ illness. A $1 increase in the real minimum wage results in 19 % (in DD model) and 32 % (DDD) decreases in the absence rate due to own illness evaluated at the mean. These findings are strongest for persons who are not employed year-round and among the lowest wage earners. In additional analysis, we show that these effects are likely not due to changes in labor supply or job-related attributes. Instead, we find a possible mechanism: higher minimum wages improve self-reported health for lower educated workers.

Effects of Minimum Wages on Absence from Work Due to Illness

Using longitudinal data from the Panel Study of Income Dynamics for 1997-2013 and difference-in-differences (DD) and difference-in-difference-in-differences (DDD) techniques, we estimate the effects of minimum wages on absence from work due to own and others’ (such as children’s) illnesses. We use person fixed effects within both linear and two-part models, the latter to explore changes at extensive and intensive margins. A lower educated group (likely affected by minimum wages) is compared with higher educated groups (likely unaffected). Within the lower educated group, we find higher minimum wages are associated with lower rates of absence due to own and others’ illness combined and due to own illness alone, but not associated with absence due to others’ illness. A $1 increase in the real minimum wage results in 19% (in DD model) and 32% (DDD) decreases in the absence rate due to own illness evaluated at the mean. These findings are strongest for persons who are not employed year-round and among the lowest wage earners. In additional analysis, we show that these effects are likely not due to changes in labor supply or job-related attributes. Instead, we find a possible mechanism: higher minimum wages improve self-reported health for lower educated workers.

Inheritance Taxation and Wealth Effects on the Labor Supply of Heirs

The taxation of bequests can have a positive impact on the labor supply of heirs through wealth effects. This leads to an increase in future labor income tax revenue on top of direct bequest tax revenue. We first show in a theoretical model that a simple back-of-the-envelope calculation, based on existing estimates for the reduction in earnings after wealth transfers, fails: the marginal propensity to earn out of unearned income is not a sufficient statistic for the calculation of this effect because (i) heirs anticipate the reduction in net bequests and adjust their labor supply already prior to inheriting, and (ii) when bequest receipt is stochastic, even those who ex post end up not inheriting anything respond ex ante to the implied change in their distribution of net bequests. We quantitatively elaborate the size of the overall revenue effect due to labor supply changes of heirs by using a state of the art life-cycle model that we calibrate to the German economy. Besides the joint distribution of income and inheritances, quasi-experimental evidence regarding the size of wealth effects on labor supply is a key target for this calibration. We find that for each Euro of bequest tax revenue the government mechanically generates, it obtains an additional 9 Cents of labor income tax revenue (in net present value) through higher labor supply of (non-)heirs.

Long-Term Changes in Married Couples' Labor Supply and Taxes: Evidence from the US and Europe Since the 1980s

Long-Term Changes in Married Couples' Labor Supply and Taxes: Evidence from the US and Europe Since the 1980s

Long-Term Changes in Married Couples' Labor Supply and Taxes: Evidence from the Us and Europe Since the 1980s

We document the time-series of employment rates and hours worked per employed by married couples in the US and seven European countries (Belgium, France, Germany, Italy, the Netherlands, Portugal, and the UK) from the early 1980s through 2016. Relying on a model of joint household labor supply decisions, we quantitatively analyze the role of non-linear labor income taxes for explaining the evolution of hours worked of married couples over time, using as inputs the full country- and year-specific statutory labor income tax codes. We further evaluate the role of consumption taxes, gender and educational wage premia, and the educational composition. The model is quite successful in replicating the time series behavior of hours worked per employed married woman, with labor income taxes being the key driving force. It does however capture only part of the secular increase in married women’s employment rates in the 1980s and early 1990s, suggesting an important role for factors not considered in this paper. We will make the non-linear tax codes used as an input into the analysis available as a user-friendly and easily integrable set of Matlab codes.

The effects of Mega-Regional Trade Agreements on Vietnam

While most studies conclude that Vietnam would have benefited greatly from the now suspended Trans-Pacific Partnership, the country nevertheless stands to gain from participation in other still promising regional frameworks, including the EU-Vietnam Free Trade Agreement, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, the Regional Comprehensive Economic Partnership, and the Free Trade Area of the Asia-Pacific. This paper analyzes how Vietnam's economy is likely to be affected by these regional frameworks. We apply a static CGE model, incorporating the effects of capital accumulation, labor supply changes, and productivity growth stemming from trade liberalization. We also analyze “middle income trap” scenarios, in which Vietnam's growth factors fall below the full-potential level and draw policy implications.

A structural explanation of recent changes in life-cycle labor supply and fertility behavior of married women in the United States

This study documents and explains important changes in the life-cycle labor supply and fertility behavior of married women in the United States from the 1950s to more recent cohorts. The younger cohorts, relative to the 1950s, supply more labor at earlier stages of the life-cycle, delay motherhood to later stages without reducing the fertility rate, and upon childbearing, show a greater tendency to stay out of the labor force. In a life-cycle model for married couples in which a household makes decisions on fertility as well as labor supply, consumption, and savings, all the behavioral changes are jointly and quantitatively explained by a combination of changes in various labor supply/fertility determinants, with the increased returns (penalties) to work (non-work) experience being the dominant contributor. The results survive a series of robustness tests, including endogenizing education choice and assortative marriage.

Labour demand and supply changes in Norway following an imposed harmonization of geographically differentiated payroll‐tax rates

AbstractThe payroll tax is an important source for public financial revenues. Utilizing Norwegian population‐wide linked‐employer‐employee register‐data for 2001–12 while exploiting the harmonizing of the geographically differentiated payroll tax imposed by the EU, I show that payroll tax increases are shifted onto workers’ hourly wages thus reducing these. Annual earnings also drop as the payroll tax grows. Neither unemployment nor employment levels are affected in the short‐run, but the payroll‐tax levels and the number of sick leave days appear positively correlated. In the long run, entry into retirement and DI rolls increase. Thus the tax hike induces the withdrawal of workers from the labour force.