Labor Market Responses Research Articles

Motherhood and the allocation of talent

ABSTRACT In this paper we show that motherhood triggers changes in the allocation of talent in the labour market beyond the well-known effects on gender gaps in employment and earnings. Based on an event study approach around the birth of the first child and retrospective panel data for 28 European countries and Israel, we assess the labour market responses to motherhood across ‘talent’ groups–i.e. groups with different educational attainment, Math performance at age 10, and personality traits associated to entrepreneurial ability. We show that even the most talented women–both in absolute terms and relative to their husbands–leave the labour market or uptake part-time jobs after the birth of the first child. We also find that motherhood induces a negative selection of female talents into self-employment. Overall, our results suggest relevant changes in the allocation of talent associated to gender differences in non-market responsibilities that can have sizable impacts on aggregate market productivity.

Fatherhood and men’s working hours in a part-time economy

Abstract How do fathers adjust their working hours after the birth of their first child? Though the impact of childbirth on women’s employment is well-established, less is known about its effect on fathers. We investigate this question in the Netherlands (2006–2017), a country characterized by high prevalence of part-time work. We focus on two contexts that might shape the extent to which first-time fathers reduce their working hours after childbirth: the household and the organization. For this purpose, we use detailed longitudinal register data. The results reveal that men’s employment displays a high degree of stability around childbirth: even in the Dutch “part-time economy,” the vast majority of fathers remain full-time employed. We do find substantial heterogeneity in labor market responses after childbirth. Fathers earning relatively less than their partner pre-childbirth are more likely to scale down their working hours. The organizational gender composition is also associated with work hours reductions following childbirth. Although we find that fathers’ employment is contingent on both the household and organizational context, the substantial stability in men’s labor supply remains an obstacle to a more equal division of (un)paid labor.

Application of Dynamic Structural Model to Identify Factors That Influence Capital Adjustments in The National Manufacturing Industry

This research aims to determine the costs of capital adjustments and company dynamics. Company panels comprise the database. The main advantage of analyzing the nature of adjustment costs at the plant level is that the data contain information for purchases and sales of capital goods. Panel data, including information from many plants and long periods, allows for a more comprehensive analysis of firms' investment behavior in the face of capital adjustment costs. The estimation results allow for the recovery of companies' frictions in adjusting their capital stock. The estimation results for capital adjustment costs are consistent with other studies using similar methodologies. Estimates show that there are significant, unchangeable fixed costs, as well as moderate quadratic costs. Researchers then use the estimated parameters in a counterfactual simulation to analyze the impact of a decline in average firm profitability on the labor market. The results show a significant labor market response to the shock, with the transition to the new stable state being slow and taking several years to complete the adjustment. The simulations highlight the importance of not only modeling capital mobility but also considering and estimating its frictions to evaluate the impact of policies or shocks on the economy. The mobility and capital adjustment costs influence the speed of the economy's adjustment to shocks and their effects on factor allocation and remuneration in the short and long term.

Import Shocks and Gendered Labor Market Responses: Evidence from Mexico

This paper studies gender differences in labor market responses of workers in Mexico to trade liberalization with China. To measure exposure to import competition, I exploit variation in the initial industry structure of Mexican local labor markets. I show that aggregate outcomes mask heterogeneous responses based on gender. Both women and men experience lower growth in employment shares but the change in the labor force participation rate is negatively affected for men and positively affected for women. Further analysis shows that women move into self-employment and that informal employment acts as a “buffer” to attenuate negative employment effects, especially for male workers.

Working, yet not working: Assessing labour underutilization in India

Labour market responses to past business downturns across countries have been ambiguous and paradoxical, including both pro‐ and counter‐cyclical reactions. In the absence of adequate social safety nets, including unemployment insurance, counter‐cyclical employment rates could signal distress rather than productive employment opportunities. Juxtaposing household employment‐ unemployment data with the recommendations of the 19th International Conference of Labour Statisticians on labour underutilization, this article critiques existing data on underemployment in India and calls for the review of data collection methods to better inform labour market policies.

Regulating Manufacturing FDI: Local Labor Market Responses to a Protectionist Policy in Indonesia

Regulating Manufacturing FDI: Local Labor Market Responses to a Protectionist Policy in Indonesia

Less Work, More Labor: School Closures and Work Hours During the COVID-19 Pandemic in Austria

This article explores the gendered impact of school closures on paid work hours during the COVID-19 pandemic in Austria. Using data from the Austrian Corona Panel Project (ACPP) covering generalized school closures from March 2020 to April 2021, the study examines adjustments in work hours by gender and parental status. The descriptive data show general reductions in work time, especially in the first months. From July 2020 onward, however, mothers reduced work hours more than fathers when schools were closed – and they increased time spent on childcare, while fathers reduced theirs. Using OLS and fixed effects models, the study confirms that mothers reduced their work hours during school closures more than any other group. In contrast, fathers reduced their work hours the least – even less than individuals without children. Finally, there is some evidence that school closures capture policy stringency in high-incidence phases of the COVID-19 pandemic. HIGHLIGHTS In Austria, mothers reduced paid work time more than fathers in response to pandemic school closures. In contrast, fathers reduced their work time even less than individuals without children. School closures thus triggered a gendered labor market response among parents. The additional unpaid care work burden on women is a potential mechanism for these effects. COVID-19 policy responses may have exacerbated existing gender differences in the labor market.

Health and labor market effects of an unanticipated rise in retirement age. Evidence from the 2012 Italian pension reform.

As retirement ages increase around the world, not all workers may be equally able to extend their working lives. In this article, we examine the health and labor market effects of an Italian pension reform that suddenly increased the normal retirement age up to 7years for women and up to 2years for men. To do this, we use linked labor and healthcare administrative data, jointly with survey data and difference-in-difference methods. Our results show that the reform was effective in postponing retirement among both genders, as pension claiming dropped substantially for older workers. However, there were also side effects as the reform significantly pushed previously employed men and women into unemployment and disability pension. Among women only, the reform also increased sick leave and hospitalizations related to mental health and injuries. These effects were driven by women with previously low health status, suggesting that undifferentiated and abrupt increases in pension age might harm more vulnerable workers. Coherently with the milder tightening of retirement age experienced by men, labor market responses were smaller in size, and they did not suffer any significant health effects.

Household donations of time and money in response to a health shock

Donations play a critical role in supporting the provision of public goods, yet how donating behaviour changes in response to health shocks is poorly understood. We investigate how the household's joint decision to donate time (volunteer) and money changes following a health shock. Using data from the United States Panel Study of Income Dynamics, and a within-household design that captures the dynamics of a post-health shock response, we find no overall change in the probability of households donating money but an overall reduction in the probability of donating time following a health shock. This is driven by a significant shift from donating both money and time to donating only money after a health shock. The shift away from donating time occurs for both the individual who experienced the health shock and their spouse, though the reduction is greater for the spouse. We examine the role of labour market responses to health shocks in explaining donating behaviour and find that consistent with the added worker effect, spouses of those who experience a health shock increase their work hours, constraining their time available for volunteering.

Gender Inequality Reinforced: The Impact of a Child's Health Shock on Parents' Labor Market Trajectories.

This article employs a couple-level framework to examine how a child's severe illness affects within-family gender inequality. We study parental labor market responses to a child's cancer diagnosis by exploiting an event-study methodology and rich individual-level administrative data on hospitalizations and labor market variables for the total population in Finland. We find that a child's cancer negatively affects the mother's and the father's labor income. The effect is considerably larger for women, increasing gender inequality beyond the well-documented motherhood penalty. We test three potential moderators explaining the more negative outcomes among mothers: (1) breadwinner status, (2) adherence to traditional gender roles and conservative values, and (3) the child's care needs. We find that mothers who are the main breadwinner experience a smaller reduction in their household income contribution than other mothers. Additionally, working in a gender-typical industry and a child's augmented care needs reinforce mothers' gendered responses. These findings contribute to the literature by providing new insights into gender roles when a child falls ill and demonstrating the effects of child health on gender inequality in two-parent households.

The dynamics of labor force participation: Is all quiet on the Appalachian front?

This study examines the divergence and synchronicity of labor force participation rate (LFPR) dynamics across the USA. Using a dynamic factor model with time-varying stochastic volatility, we decompose each state’s LFPR into a national, regional, and state-specific latent factor. We find significant time variation in our factors and heterogeneous labor market responses and relative sensitivities. Our results show that, save for West Virginia, there is no strong Appalachian regional component, and instead, the national and state-specific components explain much of the variation in state LFPRs. Our results suggest the need for more targeted and localized labor market policies during periods of divergence in LFPRs (i.e., recessions and shocks) and federal policies during national economic booms or periods of recovery.

Labor Market Responses to Unemployment Insurance: The Role of Heterogeneity

We document considerable scope of heterogeneity within the unemployed, especially when they are divided along eligibility for and receipt of unemployment insurance (UI). We study the implications of this heterogeneity on UI’s insurance-incentive trade-off using a heterogeneous-agent job search model capable of matching the wealth and income differences that distinguish UI recipients from nonrecipients. Insurance benefits are larger for UI recipients who are predominantly wealth poor. Meanwhile, incentive costs are nonmonotonic in wealth because the poorest individuals, who value employment, exhibit weak responses. Differential elasticities imply that accounting for the composition of recipients is material to the evaluation of UI’s insurance-incentive trade-off. (JEL D91, E24, E32, J64, J65)

Labor reallocation and the regional greenhouse gas initiative

ABSTRACT Policies intended to reduce the amount of greenhouse gas emissions are among the most hotly debated policy problems of our time. Among the concerns raised are that costs will be passed on to consumers and jobs will be lost. We use the introduction and eventual tightening of the Regional Greenhouse Gas Initiative (RGGI), a regional carbon permit system in the Northeastern United States, to measure labor market responses and dynamics following the implementation of a carbon pricing system. We find that implementation of the RGGI and the subsequent tightening of the emissions cap has had no effect on employment or earnings in the utilities sector but increased the rate at which workers flow in and out of jobs. In particular, within the utilities sector, we observe some job destruction and worker separation combined with increased labor reallocation across establishments. This is complemented with small spillover effects yielding positive increases in hiring, worker reallocation and job creation in industries outside of utilities. Furthermore, when we account for the endogeneity of electricity prices we find increased hiring, job creation and worker reallocation rates and a decline in job destruction rates across industries.

Labor market impact of China’s cross-regional environmental regulation on pollution-intensive firms

The relationship between environmental regulation and labor demand has been mixed. Few research studies have considered the impact of cross-regional environmental regulations on the labor market, even though this is notable. We adopted a geographic regression discontinuity (RD) approach to investigate the labor market impact of the cross-regional environmental regulation “2 + 26” Cities Special Emission Limit Program for Air Pollutants. We found that the policy significantly boosts the labor demand of polluting firms rather than a simple inter-industry transfer, mainly through increasing investment in fixed assets and cost offset mechanisms. Further analysis of the structure of labor demand shows that the increasing workforce is primarily low-quality labor accompanied by wage loss. The government should recognize the risks of welfare loss from low-quality work due to environmental regulation and direct polluting firms to innovate rather than reduce costs by increasing demand for low-quality labor. This facilitates a better understanding of the labor market response to environmental policy from the perspective of cross-regional environmental regulation.

Banking Market Structure and Trade Shocks

The structure of the local banking market, characterized by bank specialization and bank concentration, can affect credit and labor market responses to an import shock to the local economy. During the surge in U.S. imports from China from 1998 to 2006, small business loans (SBL) decline in counties that face a larger import shock. Bank geographical specialization positively affects banks’ SBL origination in response to the import shock. Consistent with these results, average employment declines in counties hit by the import shock, while higher bank specialization attenuates this negative labor outcome. Furthermore, in the face of import competition, credit support by specialized banks helps small businesses to respond to the heightened competition through firm innovation. We find little evidence for such stabilizing effects for bank concentration.

Women’s Fertility and Labor Market Responses to a Health Innovation

Abstract We investigate women’s fertility, labor, and marriage market responses to a health innovation that led to reductions in mortality from treatable causes, and especially large declines in child mortality. We find delayed childbearing, with lower intensive and extensive margin fertility, a decline in the chances of ever having married, increased labor force participation, and an improvement in occupational status. Our results provide the first evidence that improvements in child survival allow women to start fertility later and invest more in the labor market. We present a new theory of fertility that incorporates dynamic choices and reconciles our findings with existing models of behavior.

Long-lasting effects of a depressed labor market: Evidence from Mexico after the great recession

This paper investigates the magnitude of employment and earnings losses in Mexico induced by the Great Recession. Using longitudinal social security data and exploiting regional variation in local shocks, we identify a variety of labor market responses during the recession. We find that the costs of the recession were substantial and unequal. In the short run, a local shock of one standard deviation above the average reduced the probability of employment by 0.53% and daily wages by 0.86% in the formal sector, compared to pre-recession levels. In the long run, formal employment and wages for affected workers never returned to pre-recession levels. The effects of the recession were heterogeneous across workers, and they were disproportionately negative for men and younger workers. We also estimate the different dimensions of workers’ adjustment in response to the recession: we find that a shock that is one standard deviation above the mean reduced employment by the end of the recession, while increasing unemployment, informality, the economically inactive population, and migration to the U.S.

Трансформация рынка труда в условиях неопределенности: новые формы, факторы и перспективы

The relevance of the study lies in the need to analyze the transformations of the Russian labor market in conditions of uncertainty for the subsequent justification of measures to ensure its adaptability to changing conditions. The purpose of the study is to analyze the impact of uncertainty factors on the labor market, identify positive trends and threats, as well as to substantiate the mechanisms of adaptation of the labor market to changing conditions. The objectives of the study are to study the factors determining the growth of uncertainty at the present stage of socio-economic development and to identify the nature of the labor market's response to them; to substantiate the vector of development of labor relations in order to ensure the adaptation of the labor market to changing conditions. Methodology. The study was carried out using methods of theoretical analysis, systematization, economic analysis, comparing indicators in different time periods, morphological analysis, and graphical method. Results. The article analyzes the indicators of labor market development in dynamics, identifies negative trends in 2020. It is proved that in 2020 the labor market reacted to the challenges of uncertainty by changing the employment structure. The authors propose ways to maintain the adaptability of the Russian labor market to changes by implementing a set of state policy measures. Conclusions. The authors identified the traditional forms of labor market response to crisis manifestations in the economy (price and time adjustments), established the emergence of new forms of labor based on the transformation of models of interaction between participants.

The importance of labour market responses, competitiveness impacts, and revenue recycling in determining the political economy costs of broad carbon taxation in the UK

Despite broad acceptance of the need to drastically reduce carbon emissions and limit global warming, political debates persist regarding the acceptability of actions to internalise carbon costs given potential impacts on the cost-of-living and income generation. We present fundamental macroeconomic and more complex computable general equilibrium analyses to consider how introducing broad carbon taxation might impact key macroeconomic indicators, taking the UK as an applied example. One key insight is that, with no other policy intervention, such a move introduces contractionary pressure through increases in consumer prices that reduces GDP, employment, and household spending, and erodes government revenue gains. The extent of contraction depends on the degree of resistance in labour markets to real wage rate reductions alongside substitutability away from taxed energy in determining prices, and on consequent export demand responses. A second is that where government prioritises balancing its budget, partial recycling of carbon tax revenues aimed at moderating negative impacts on firm costs and household real spending power can reduce wider economy losses. However, this is limited by wage bargaining and domestic consumption responses in a labour supply constrained and very open economy, with income tax recycling minimising macroeconomic losses at the cost of increasingly regressive outcomes.

Impact of Employment De-Standardisation on its Quality: Reflections on Academic Discussion at the VI St. Petersburg International Labour Forum

The transformation of traditional models and forms of employment raises questions both about the impact of such processes on the quality of employment and about the mainstreaming of these issues into contemporary academic discourse. The purpose of the article is to analyze and assess the impact of de-standardisation of employment on its quality based on the materials - digests of participants' presentations - of the academic discussion held as part of the VI St. Petersburg International Labour Forum in March 2022. During the discussion, employment quality was at the intersection of approaches and principles shaping it (decent work, work-life balance); megatrends ((anti)globalisation of economy, digitalisation, population ageing); macro development conditions (quality of growth, quality of life of population); short- and medium-term consequences of the COVID-19 pandemic; initial labour market response to geopolitical tensions, significantly increased in 2022; and employment precarisation. The variety of angles in this discussion enabled the authors to form a general idea of the current debate on the quality of employment and its perspectives. Objective of the article is employment quality. Subject is employment de-standardization, understood as a shift of employment from the model of direct relations between the employee and the employer on the terms of a standard employment contract with appropriate rights and guarantees. The first result of the article is that it captures the most prominent issues of the recent academic debate on employment quality. The second result is the conclusion about the fragmented theoretical concepts of employment quality in Russia, limiting their application in public policies. The third resultis recommendations on the content of systemic approaches to measuring employment quality to assess its impact on living standards and include in the system of macroeconomic development indicators.