Increase In Labor Supply Research Articles

Labor Supply Shocks and Capital Accumulation: The Short- and Long-Run Effects of the Refugee Crisis in Europe

European countries experienced a large increase in labor supply due to the influx of Ukrainian refugees after the 2022 Russia invasion of Ukraine. We study its dynamic effects in a spatial model with forward-looking households of different skills, trade, and endogenous capital accumulation. We find that real GDP increases in Europe in the long term, with large distributional effects across countries and skill groups. In the short run, an increase in the supply of labor strains the use of capital structures that takes time to build. Over time, countries that build capital structures increase output, resulting in potential long-run benefits.

Global and Local Spatial Spill-Overs: What Matters Most for the Diffusion of Organic Agriculture in Australia?

Australia has the largest area of certified organic agricultural land in the world, yet to date there has been no studies conducted on its diffusion. This study used local area census data from 2010/11 and 2015/16 across Australia with a SLX Tobit model to investigate what drove a three-fold increase in organic land area during this time-period. Overall, stronger evidence was found for local spatial spill-overs than global spill-overs, which is perhaps reflective of the difference between Australian and European agriculture. The results also found that community area attributes (e.g., larger farms with low stocking rates, higher irrigation, higher grazing and horticultural land, increased labour supply); environmental factors (located in drought affected areas, increased vegetation, good quality soil and high altitude); and socio-economic characteristics (rural areas characterised by low human population density, higher community income and proximity to urban centres) significantly increased the intensity of the diffusion process.

Demographic pressures on the Egyptian labour market

Demographic pressures on the Egyptian labour market Ragui Assaad, Professor from Humphrey School of Public Affairs at the University of Minnesota, explores the upcoming resumption of demographic pressures on the Egyptian labour market and what can be done about it. Although unemployment rates have been falling in Egypt in recent years, this trend will likely reverse in the next five to ten years as the “echo” generation comes of age and starts entering the labor market and substantially increasing labor supply.

The economic impacts of house screening against malaria transmission: Experimental evidence from eastern Zambia

Malaria imposes an economic burden for human populations in many African countries, and this burden may be reduced through house screening initiatives. We use a randomized controlled trial to measure the economic impacts of house screening against malaria infection. We use a sample of 800 households from 89 villages in rural and peri-urban Zambia to collect baseline data in August 2019 and endline data in August 2020. The main outcome variables are (self-reported) malaria prevalence rates, labor supply, and income, and consider individual and household-level outcomes. House screening reduces malaria prevalence, the number of sick days due to malaria, and the number of malaria episodes. Impacts on adults are more pronounced than on children. In terms of economic impacts, house screening increases labor supply and (household) income. We find particularly large effects on labor supply for women household members. A cost-benefit analysis, based on estimated benefits and measured costs, suggests that the private benefits of house screening exceed the costs. While not all houses are suitable for house screening, we conclude that screening is a promising and cost-effective approach to reduce malaria infections.

The impact of the relaxation of the One-Child Policy on employment

Abstract This paper examines how number of siblings affects employment under the relaxation of the One-Child Policy in China. We explore the One-and-A-Half-Child Policy in 1980s and examine its long-term impact on siblings and employment. With the data from 2010–2018 China Family Panel Studies, we find that individuals tend to have a larger number of siblings and have a higher probability of working in the places where the One-and-A-Half-Child Policy was implemented earlier. Using the degree of the impact of this policy as an instrumental variable for number of siblings, we find that one more sibling would increase the likelihood of working by 9.0 percentage points and increase the likelihood of working in the non-agricultural sector by 5.1 percentage points. Females are more affected by the relaxation than males. We also discuss the major mechanisms through which siblings affect employment. We find that the care-sharing effect of siblings increases labor supply and the social network effect of siblings brings more job opportunities and increases employment. The One-and-A-Half-Child Policy improves the labor market outcomes through both the channel of sharing care and the channel of social network.

The Effects of Rohingya Refugees from Myanmar on Low-Skilled Wages in the Chittagong Division of Bangladesh

On the 25th of August 2017, the military of Myanmar initiated a large-scale genocide of Rohingya Muslims living in the country’s Rakhine region. Over 650,000 Rohingya fled Myanmar and sought refuge in Southern Bangladesh in August and September of 2017, with over 90% of them settling in the latter nation’s Chittagong division (UNHRC, 2021). This constituted an approximately 3% rise in the population of Chittagong, with the figure being over 30% for districts within Chittagong with particularly high refugee populations such as Cox’s Bazaar (IFPRI, 2019). This paper employs difference-in-differences regression analysis to investigate how this influx – and the associated increase in labour supply – impacted the wages of low-skilled workers in Chittagong. It is found that the crisis did not depress wages in the region.

How Much Does Migration Affect Labor Supply in Europe? Methodological Insights and Contemporary Evidence from the European Union and Selected European Countries

In Europe, the slowdown in working-age population growth and population aging pose challenges, particularly vis-à-vis the current and future volume of labor supply. Throughout the 2010s, these demographic transformations took place against a backdrop of increasing migration flows and stocks. This IMR Research Note aims to enrich the discussion of the aforementioned issues and to provide methodological and empirical evidence on the role of migration stocks in shaping changes over time in two main aspects of the European labor supply: the size of the labor force and aggregate labor force participation rates from 2006 to 2018. Based on annual LFS data, we use a mixed standardization and decomposition method to determine to what extent trends in the European labor supply are driven over time by changes in population or in labor force participation rates within specific groups selected on the basis of age, gender, birth country (native- versus foreign-born), and origin country (European Union versus non-European Union). Our Research Note points out that, despite the upward trend in the labor force participation rates of native-born women and of native-born persons aged 55 years and over, the increase in labor supply in the European Union and in the 10 European countries under study in this article between 2006 and 2018 was driven by foreign-born persons. These developments suggest that, in a context of political desire for less migration, international migration has become a structural feature of European labor markets.

The Economic Impact of Public Capital: Evidence from Chinese Prefectures and Firms

This study estimates the economic impact of public capital by constructing the public capital stock of 214 prefectures in China from 1999 to 2006 and combining the data of both prefectural economies and manufacturing firms. Using an instrumental variable estimation strategy, the empirical results show that public capital increases aggregate output in the economy, specifically in the secondary and tertiary sectors. Such growth mainly comes from the increased labor supply and reduced labor costs and, hence, more firms emerge.

Sanitation and work time: Evidence from the toilet revolution in rural China

In 2020, 46% of the global population lacked safely managed sanitation services. Poor sanitation may lead to health problems and restrict economic activities. This study is the first to focus on the government-subsided Toilet Revolution in rural China and empirically investigates the causal effects of sanitation coverage increase on labor supply in developing countries. Using the China Health and Nutrition Survey data, we exploit the temporal and regional variation during the revolution and employ a difference-in-differences methodology. Our study finds that rural households with access to clean flush toilets significantly increase their work time by 0.253–0.431 h/day, and the effects are more prominent among women than men. As for the mechanism, clean toilets significantly decrease housework related to cleaning the house and raising livestock and poultry, allowing people to reallocate their time and invest more into work, which is more salient for women. Our findings highlight the importance of sanitation coverage in improving the economic outcomes in the rural areas of China. For policymakers concerned with the provision of sanitary facilities and the supply of labor force in developing countries, this study indicates that improved sanitation facilities also unexpectedly increase labor supply, particularly for women.

Early childhood education and care: effects after half a century and their mechanisms

The effects of early childhood education and care (ECEC) have been widely researched, but most studies focus on targeted or relatively short-term programmes. This paper investigates the long-term effects of a universal ECEC programme and underlying mechanisms. By exploiting differences in expansion rates of childcare institutions across Japan from the 1960s to the 1980s, I find a positive effect of ECEC on income at up to age 50. The overall effect is driven by a significant impact among women, who were disadvantaged at that time, while there are no adverse effects on others. Mediation analysis shows that an increase in wages leads to an increase in income, which is triggered by improved educational attainment and not an increase in labour supply. The results imply that a universal childcare system has the potential to reduce income inequality.

Homeownership, Labor Supply, and Neighborhood Quality

This paper provides evidence on the external benefits of homeownership among low-income populations. A natural experiment in Israel generated large changes in neighborhood homeownership rates while holding fixed the residents and housing stock, two primary sources of bias in traditional estimates. When public housing tenants are given the opportunity to buy their units, buyers increase labor supply. Effects are felt in the neighborhood: when homeownership rises by 10 pp, neighborhood home prices rise 1.5–2 percent. Instrumenting for purchases using government discounts generates similar results. Results are relevant for policies using financial incentives to increase homeownership among low-income populations. (JEL H24, I38, J22, R21, R23, R31, R38)

Credit and income mobility in Russia

This paper investigates the microeconomic drivers of short-term income mobility in Russia over the period 1994–2018, focusing on the role of access to credit in triggering household income growth. Controlling for a large set of household-level characteristics and accounting for endogeneity, we provide robust evidence on the positive and significant impact of credit on income growth. We also find that the pro-mobility effect of access to credit is heterogeneous both over time and across household characteristics. Our empirical evidence corroborates the idea that the beneficial impact of credit on income mobility mainly occurs through channels related to the labour market, particularly an increase in labour supply at the intensive margin in the short run and at both the extensive and intensive margins in the longer run.

A Stall Only on the Surface? Working Hours and the Persistence of the Gender Wage Gap in Western Germany 1985–2014

AbstractTo what extent has the closing of the gender gap in hourly wages (‘gender wage gap’; GWG) in Western Germany stalled due to an increasing supply of non-standard working hours? We use descriptive trend analyses and Juhn–Murphy–Pierce decompositions of German Socio-Economic Panel data for the last 30 years (1985–2014) to analyse the extent to which the expansion of part-time and marginal work, as well as overwork, may have contributed to the dynamics of the GWG in Western Germany. We find that the large increase in part-time work among women in combination with increasing wage gaps between part-time and full-time work substantially widened the GWG (by about one-sixth). Working hour effects were large enough to offset the equalizing effects of declining gender gaps in human capital, and they existed even in the public sector. In contrast to the United States, trends in overwork did not have a meaningful impact on the GWG. In an add-on, we find a widening of the gender gap in monthly earnings, but also an important closing of the gender earnings gap unconditional on employment due to an increased labour supply of women. Our results suggest that working hours should be given more consideration in research on family–work conflict and gender earnings inequalities.

Micro and Macro Determinants of Precarious Employment in Indonesia: An Empirical Study of Paid Workers using Multilevel Binary Logistic Regression

Decent work for all is one of the goals stated in the Sustainable Development Goals (SDGs). One indicator that can represent proper work conditions is the precarious employment rate (PER). In recent periods, the precarious employment rate in Indonesia has shown an increasing trend. It indicates a decent work deficit in Indonesia. In addition, the PER among provinces has a different figure. This study aims to analyze the micro and macro factors that influence the status of precarious employees in Indonesia. The analytical method used in this study is multilevel binary logistic regression. The results show that micro factors; namely the worker's characteristics, including age, education level, employment sector, previous work status, and urban-rural area; have a significant effect on the precarious status of employees. In terms of macro factors, it is found that an increase in the output of the industrial and construction sectors can reduce the tendency of a worker to become a precarious employee. Meanwhile, an increase in labour supply increases the likelihood of workers becoming precarious employees. Various parties, including society and government, have to put extra efforts to reduce the precarious employment rate by improving the quality of human capital and domestic products demand.

Inequality and income dynamics in Germany

We provide a comprehensive analysis of income inequality and income dynamics for Germany over the last two decades. Combining personal income tax and social security data allows us—for the first time—to offer a complete picture of the distribution of annual earnings in Germany. We find that cross‐sectional inequality rose until 2009 for men and women. After the Great Recession, inequality continued to rise at a slower rate for men and fell slightly for women due to compression at the lower tail. We further document substantial gender differences in average earnings and inequality over the life cycle. While for men earnings rise and inequality falls as they grow older, many women reduce working hours when starting a family such that average earnings fall and inequality increases. Men's earnings changes are on average smaller than women's but are substantially more affected by the business cycle. During the Great Recession, men's earnings losses become magnified and gains are attenuated. Apart from recession years, earnings changes are significantly right‐skewed reflecting the good overall state of the German labor market and increasing labor supply. In the second part of the paper, we study the distribution of total income including incomes of self‐employed, business owners, and landlords. We find that total inequality increased significantly more than earnings inequality. Regarding income dynamics, entrepreneurs' income changes are more dispersed, less skewed, less leptokurtic, and less dependent on average past income than workers' income changes. Finally, we find that top income earners have become less likely to fall out of the top 1 and 0.1%.

Does children’s marriage matter for parents' mental health？Evidence from China

How to effectively alleviate mental disorders among elderly individuals is an important issue. Children are important financial and spiritual supporters of parents. However, whether there are upward spillovers from children to parents remains understudied. Using the instrumental variable (IV) method and data from the China Health and Retirement Longitudinal Study, this paper estimates the causal effect of children's marriage on the mental health of older parents. The IV estimation results demonstrate that having unmarried children is associated with a significant deterioration in parental mental health, especially in older, less educated, poor and male groups. Further evidence suggests that having unmarried children leads to significant changes in parents' economic behaviors, including labor supply, consumption, and savings; this indicates that parents are more likely to actively respond to their children’s unmarried status by increasing labor supply, reducing consumption and increasing savings rather than by engaging in negative behaviors.

THEORETICAL AND METHODOLOGICAL PRINCIPLES OF EMPLOYMENT REGULATION

The article considers the problems of employment in the theoretical and methodological context. Under current conditions, the interpretation of the labor market's essence, methods, reasons, and characteristics are worked out and given. The central state levers of employment regulation are noted. The peculiarities of the theoretical and methodological approach to employment regulation are specified, where the leading place belongs to legal, organizational and managerial, economic, socially-oriented, analytical, negotiable, innovative, and popularizing. The role of the state in the process of regulating employment, which performs a distributive function (providing tax benefits to enterprises, taxation of the wage fund), macroeconomic, which consists in increasing labor supply and limiting the adverse defects of the economic system (inflation, unemployment, economic downturn), stimulating function, which allows to revive innovation and investment activity and affects the whole market situation (employment promotion, public investment, subsidies, grants, subventions, and subsidies). Special attention in the article is paid to synthesizing existing works of scientists and researchers on the generalization of the critical theoretical and methodological approaches to the essential understanding of employment. Further scientific interpretation was given to legal, organizational, and managerial methods, economic, socially-oriented, analytical, favorable, innovative, and polarization. A certain consonance of theoretical and methodological principles of employment with the peculiarities of regional development of socio-economic processes is proved. Therefore, when developing a strategy to increase employment in the region, one should consider the existing proportions between workers and employers, staff turnover, labor supply, placement of labor resources, etc. Measures are proposed that are designed not only to regulate employment processes in the theoretical sense but also to increase economic activity, solving the problem of accommodation and rational use, taking into account the specifics of a particularly territorial and regional grouping. Methods of regulation of direct and indirect action are offered. The conclusions of the conducted theoretical research are concretized. Keywords: employment, labor market, macroeconomic factors, state regulation, full employment.

Does receiving a cash grant improve individual earnings in a war-torn country? Evidence from a randomized experiment in Afghanistan

Background: In this study, the effect of receiving a non-trivial cash grant and mentorship for business practice on individual earnings in Afghanistan was assessed. Methods: This randomized control trial (RCT) included 2177 individuals (n=2177), with the age range of 18-35 years. The amount of cash grant (500 USD) was approximately equal to the gross domestic product (GDP) per capita in the country. By a process of lottery, eligible applicants were equally divided into the group that received the grant (treatment group) and the group that did not (control group). Results: Almost two years after this study, the percentage of increased annual income to the size of this cash grant was approximately 173 % and 69 % for males and females, respectively. This result was much higher than the estimated percentage reported in previous literature assessing the effect of microfinance loans and cash grants in other countries. The treatment group had 7% higher probability of having an officially registered business than the control group. The treatment group also increased labor supply and employed additional workers, compared to the control group. The male treatment group bought more capital equipment (e.g., trike and commercial carts) than the male control group, while the female treatment group bought more domestic animals. Conclusion: A non-trivial cash grant has a strong positive effect on the earnings of the recipient of the cash grant in Afghanistan. If the state of increased income continues for the next few years, the sum of increased income will be more than the sum of the administration cost, the interest cost and the amount of cash grant given. This implies that the project passes the standard criteria to determine the appropriateness of government program. Additionally, we did not find any economically and statistically significant positive effect of mentorship on income.

A liquidity crunch in an endogenous growth model with human capital

AbstractThere is by now reasonable evidence that supports the notion of a trend break in the U.S. GDP since the Great Recession. To explain this phenomenon, I construct a version of the Lucas endogenous growth model, amplified with financial frictions and financial disruptions in the firms' sector. I then show how a transitory liquidity crunch is capable, at least qualitatively, of producing a similar pattern of a persistent downward shift in the GDP trend as one could infer happened in the United States since 2008. The main mechanism by which such a result is found relies on workers' decisions on providing labor to firms versus accumulating human capital. I show that a transitory liquidity crunch reduces the demand of labor. Workers anticipating a phase of depressed wages make the decision of accumulating more human capital in the short run, thereby reducing labor supply to firms. In the long run, however, incentivized by a strong recovery, workers decrease human capital accumulation and increase labor supply. Under plausible parameterizations of the model, this situation produces a net effect of a decrease in overall productivity that permanently reduces the trend at which the economy was growing prior to the crisis.

A Split Decision: Welche Auswirkungen hätte die Abschaffung des Ehegattensplittings auf das Arbeitsangebot und die Einkommensverteilung?

Abstract In this paper, we use a microsimulation model to examine the labor supply implications of switching from joint taxation (“Ehegattensplitting”) to individual taxation. We show that the switch to individual taxation would increase labor supply by more than half a million full-time equivalents. However, such a reform also leads to financial losses for some groups of the population, which should be taken into account by economic policy makers.