INFLATION DYNAMICS AND LABOR MARKET SPECIFICATIONS: A BAYESIAN DYNAMIC STOCHASTIC GENERAL EQUILIBRIUM APPROACH FOR JAPAN'S ECONOMY

Which labor market specification is better able to describe inflation dynamics, a widely used sticky wage model or a recently investigated labor market search model? Using a Bayesian likelihood approach, we estimate these two models with Japan's data. This article shows that the labor market search model is superior to the sticky wage model in terms of both marginal likelihood and out‐of‐sample forecast performance, particularly regarding inflation. The labor market search model is better able to replicate the cross‐correlation among inflation, real wages, and output in the data. Moreover, in this model, real marginal cost is determined by both hiring cost and unit labor cost that varies with employment fluctuations, which gives rise to a high contemporaneous correlation between inflation and real marginal cost as represented in the New Keynesian Phillips curve. (JEL E24, E32, E37)     

AN OPEN‐ECONOMY MODEL WITH MONEY,ENDOGENOUS SEARCH,AND HETEROGENEOUS FIRMS

This paper describes a new monetary open‐economy model where firms have market power due to search frictions in the goods market, and endogenous search effort by consumers mitigates this market power. The optimal inflation rate generally depends positively on the cost of search effort, the cost of firm entry, and the cost of trade. Higher inflation always improves a country's terms‐of‐trade against its trading partners. I also characterize a general class of matching processes which offer a novel approach to modeling firm sales. (JEL D43, E40, F12)     

INFLATION AND WAGE RIGIDITY/FLEXIBILITY IN THE SHORT RUN

A recent literature uses accurate wage data from payroll records and provides compelling evidence against the conventional belief that nominal wages are downward sticky. This paper provides a unique contribution to this literature by conducting a formal analysis of the role of inflation in cyclical wage rigidity/flexibility. Analysis of payroll‐based wage data from the Korean labor market for the period 1971–2014 finds that the degree of downward nominal wage flexibility is countercyclical, and the countercyclicality becomes stronger during a deflationary, relative to inflationary, recession. This serves as a counter‐example to the conventional theory of cyclical wage rigidity. (JEL E24, E32, J30, J64)     

INFORMAL LABOR MARKETS AND ON‐THE‐JOB TRAINING: EVIDENCE FROM WAGE DATA

This study examines whether informal sector jobs are a source of training for young less‐educated workers. Controlling for worker and job characteristics, it is found that, in the early years of workers' careers in Mexico, wage growth in the informal sector is higher than in the formal sector. This result is consistent with general human capital investment on‐the‐job if the informal labor market is more competitive than the formal labor market due to frictions generated by labor regulations. (JEL O17, J24, J310)     

THE U.S. LABOR INCOME SHARE AND AUTOMATION SHOCKS

The causes and consequences of the 1964–2016 swings in the U.S. labor income share/labor share (LS) are parsed through the lens of a structural model estimated on aggregate and LS series jointly. Where conventional models fall short, the present model yields a counter-cyclical LS unconditionally and in response to demand and monetary policy shocks, as well as a small wage pro-cyclicality, via moderate wage indexation. Shifts in automation, workers' market power, investment efficiency, and the relative price of investment account for 54%, 24%, 6%, and 4% of LS fluctuations, respectively. Automation shocks explain the lion's share of the post-2007 cyclical LS tumble and 11% of output cycles, and generate a distinctive counter-cyclical labor response. (JEL E32, E25, E52)     

Household job search: A theoretical and empirical model

This article links the literature on family decision making and the economics of job search by examining job search by an unemployed individual within a household context. A theoretical model was developed which demonstrates the interdependence of the utility of household members when one is searching for work. The costs of search are borne by all household members while the benefits are captured in the searcher's expected future wage. A reservation wage was shown to be determined by household financing options, and the perception of relevant labor market parameters. An empirical model of the reservation wage for a sample of unemployment insurance recipients was estimated using two-stage least squares. Results, reported for male and female subgroups, support the hypotheses derived from the household job search model. In particular, the reservation wage was shown to depend on unemployment duration, labor market conditions, increased labor force participation of other household members, use of household assets to finance search, existence of dependents, and unemployment insurance benefits.     

THE CONSEQUENCES OF (DE)REGULATION ON EMPLOYMENT DURATION AND EFFICIENCY: AN EXPERIMENTAL STUDY

If the future market wage is uncertain, engaging in long‐term employment is risky, with the risk depending on how regulated the labor market is. In our experiment long‐term employment can result either from offering long‐term contracts or from repeatedly and mutually opting for rematching. Treatments differ in how regulations restrict the employer's flexibility in adapting the employment contract. All treatments allow for longer contract duration as well as for mutually opting to be rematched. Effort is chosen by employees after a contract is concluded. Treatments vary from no contract flexibility to no restriction at all. Will more (downward) flexibility be used in ongoing employment but reduce labor market efficiency? And will regulation crowd out long‐term employment, in the form of long‐term contracts or voluntary rematching? (JEL C72, C90, F16, J21, J24, L10)     

Do Children's Behavior Problems Limit Poor Women's Labor Market Success?

Economically disadvantaged mothers face numerous barriers to stable, quality employment opportunities. One barrier that has received limited attention in previous research is having a child with significant psychological or behavioral problems. Using a representative sample of low‐income mothers and early adolescent children from the Three‐City Study (N = 717), we assessed whether adolescents' behavior problems prospectively predicted mothers' employment status, consistency, and quality. Lagged random‐effects regression models suggested that adolescents' psychological distress and delinquency inhibited the labor market success of disadvantaged mothers, although school problems were related to greater work effort among mothers. Links between labor market success and both psychological distress and delinquency differed across mothers with male and female adolescents.     

SKILLED‐UNSKILLED WAGE INEQUALITY AND URBAN UNEMPLOYMENT

The impact of trade liberalization on the labor market in the North has drawn tremendous attention in the face of the growing skilled‐unskilled wage gap but in the South it has been somewhat neglected. One of the key structural differences between the North and the South is that the South experiences a pronounced rural‐urban migration in the presence of urban unemployment. We introduce this feature in the structure of a simple general equilibrium model to analyze the effects of trade liberalization and fragmentation on employment and the skilled‐unskilled wage differential in the South. In particular, we show that while fragmentation necessarily improves the unskilled wage and the skilled wage, more lucrative global opportunities for the skilled final product, in the absence of fragmentation, can reduce the rural wage and increase urban unemployment. The effect of fragmentation, ceteris paribus, on the skilled‐unskilled wage gap is sensitive to the degree of substitutability between land and unskilled labor. As such, fragmentation can magnify the increase in the skilled‐unskilled wage gap resulting from an improvement in the terms of trade. It is also shown that a technological progress in the intermediate goods sector increases the skilled‐unskilled wage gap and raises urban unemployment. (JEL F1, O1, F11, F12)     

THE LABOR MARKET IN THE ART SECTOR OF BAROQUE ROME

We analyze the labor market for painters in Baroque Rome using unique data on primary sales of portraits, still lifes, genre paintings, landscapes, and figurative paintings. In line with the traditional artistic hierarchy of genres, average price differentials between them were high. The matched painter‐patron nature of the dataset allows us to evaluate the extent to which price heterogeneity is related to unobservable characteristics of painters and patrons. We find that the market allocated artists between artistic genres to the point of equalizing the marginal return of each genre. Residual price differences at the employer level can be explained in terms of incentive mechanisms to induce effort in the production of artistic quality and compensating wage differentials. (JEL C23, D8, J3, Z11)     

INTERMARRIAGE AND THE LABOR MARKET OUTCOMES OF ASIAN WOMEN

The impact of intermarriage with natives, on labor market outcomes of immigrants, is not homogeneous across ethnic groups. Wages of Asian women are compared with non‐Asians. Both ordinary least squares and instrumental variables estimates of the effects of intermarriage on the wages of Asian women are negative and significant. Non‐Asian women earn a wage premium that becomes insignificant when controls for selection into marriage are introduced. One possible explanation for the intermarriage penalty for Asians is an income effect of having a high‐earning native husband. Intermarriage penalties rise with husband's education. Assimilation patterns of intermarried Asians indicate that they have lower initial wages, market hours, and employment, but exhibit faster rates of growth over their years of stay. The results are robust across Asian subgroups and husband's ethnicity. (JEL J16, J12, J31, J61)     

Marriage and the Motherhood Wage Penalty Among African Americans,Hispanics, and Whites

This study draws on data from the National Longitudinal Survey of Youth (N = 5,929) to analyze the moderating effects of race and marriage on the motherhood wage penalty. Fixed‐effects models reveal that for Hispanic women, motherhood is not associated with a wage penalty. For African Americans, only married mothers with more than 2 children pay a wage penalty. For Whites, all married mothers pay a wage penalty, as do all never‐married mothers and divorced mothers with 1 or 2 children. These findings imply that racial differences in the motherhood wage penalty persist even for women with similar marital statuses, and they suggest that patterns of racial stratification shape women’s family experiences and labor market outcomes.     

How to Succeed in a Transnational Labor Market: Job Search and Wages among Hungarian,Slovak, and Czech Commuters in Austria

This paper deals with job search strategies and wages among cross‐border commuters residing in the Central European Region (CENTROPE). Our main aim is to investigate the role of social networks as constitutive for job searching and for successful labor market integration. We build upon a theoretical framework developed by Aguilera and Massey, reflecting on the nexus of social networks, job search methods, and related labor market outcomes. Methodologically, we use a new quantitative survey on the employment careers of cross‐border commuters residing in the regions of the Czech Republic, Slovakia, and Hungary bordering on Austria, conducted in the winter/spring of 2012/2013 (N = 2,573). Our results corroborate the hypothesis that human and social capital resources as well as labor market characteristics serve as key factors for job search and labor market integration among cross‐border commuters in the CENTROPE transnational labor market.     

Income taxation and the allocation of market labor

The allocation of work effort within the market economy will be unaffected by taxation if all returns from labor market activity are taxed equally. However, if the earnings from certain types of market employment are taxed at relatively lower rates, labor will shift into these areas until after-tax earnings are equal across all types of employment. This paper presents evidence suggesting that income taxation induces labor to move from high- to low-tax geographic areas and from wage and salaried jobs into self-employment activities. By affecting the allocation of market labor, the income tax generates a welfare loss in addition to that resulting from the tax’s effect on total work effort.     

Wives' Relative Wages,Husbands' Paid Work Hours,and Wives' Labor‐Force Exit

Economic theories predict that women are more likely to exit the labor force if their partners' earnings are higher and if their own wage rate is lower. In this article, I use the National Longitudinal Survey of Youth (N = 2,254) and discrete‐time event‐history analysis to show that wives' relative wages are more predictive of their exit than are their own or their husbands' absolute wages. In addition, I show that women married to men who work more than 45 hours per week are more likely to exit the labor force than are wives whose husbands' work approximately 40 hours per week. My findings highlight the need to examine how women's partners affect women's labor‐force participation.     

The changing importance of white women's economic prospects for assortative mating

Given recent changes in the labor force participation and economic standing of women, we ask whether a woman's position in the labor market has become a more important determinant of her position in the marriage market. Unlike much prior research on trends over time in assortative mating, we take an individual‐level approach to the analysis and rely on improved measures of labor market position, such as measuring wives' wages before marriage and considering multiple indicators of husbands' longer term economic standing. Our analysis relies on data from the National Longitudinal Survey of Young Women (N = 759) and the National Longitudinal Survey of Youth (N = 767). Our results are consistent with growth over time in the importance of women's earnings potential in determining their marriage prospects.     

LABOR'S SHARE,THE FIRM'S MARKET POWER,AND TOTAL FACTOR PRODUCTIVITY

We investigate the relationship between labor's share, firm's market power, and the elasticity of output with respect to labor input using an approach based on an unobserved components model. The approach yields time‐varying estimates of market power and the elasticity. Evidence on the market power of firms (which we find to be rising since 2000) gives a deeper understanding of movements in labor's share and the labor wedge. The generated values of the elasticity yield revised estimates of total factor productivity growth which is informative about the extent of the downward bias inherent in traditional estimates which use labor's share as a proxy for the elasticity. (JEL O47, C32, E25)     

PAYING MORE TO HIRE THE BEST? FOREIGN FIRMS,WAGES, AND WORKER MOBILITY

In the context of the debate on the labor‐market consequences of globalization, we adopt an original approach toward the identification of the wage differences between foreign and domestic firms: worker mobility. Using matched employer‐employee panel data for Portugal, we consider virtually all spells of interfirm mobility over a period of 10 yr. We find that foreign firms offer significantly more generous wage policies, although there is also a (smaller) selection effect. The results are robust to the consideration of displaced workers, wage growth differences in the new firms, and different subsets of workers. (JEL J31, J63, F23)     

Paternity Leave and the Motherhood Penalty: New Causal Evidence

Objective: The objective of this study was to test how a father's paternity leave affects the within‐household gender wage gap among heterosexual couples. Background: Previous studies focus on the actual number of days of leave the father takes, but if an important driver of the gender wage gap is the effect of parental leave on gender‐specific household specialization, absolute variations in the father's leave should not be the key interest. Instead, this article tests the effect of the extent of the father's leave relative to that of the mother's leave because it is this variation that plausibly affects the division of household labor and through this the within‐household gender wage gap. Method: Full sample, administrative data are from Statistics Denmark. Causal inference was facilitated by exploiting 5 Danish parental leave reforms on 5 separate samples of all households who become first‐time parents within the year before and after each reform (N₁ = 2,304; N₂ = 45,683; N₃ = 16,668; N₄ = 42,328; N₅ = 38,978). Results: Father's leave reduces the within‐household gender wage gap through increasing mother's wages. Father's leave furthermore causes an increase in total household wage incomes. Conclusion: Father's stronger involvement in the household may be one route to more gender equality, but more so to increased financial well‐being among families.     

Estimating sex discrimination in professional occupations with the dictionary of occupational titles

Although women have gained entrance into some of the top professional occupations, they appear to have achieved few economic gains from this progress. The extensive occupational segregation existing between men and women in all occupations handicaps investigations of the sources of this persistent inequality. This article proposes an exploratory method for identifying occupations containing comparable work and presents an analysis of male‐female wage differences within a subset of the highly skilled professional occupations. Using a cluster analysis of the characteristics of jobs available in the 1977 Dictionary of Occupational Titles, three clusters of high‐skill occupations are identified. Next, a sample of labor‐force participants, aged 25 to 35 years and employed in these occupations, is used in an ordinary least squares (OLS) regression of hourly wages on a standard set of labor market traits. These results are used to decompose the male‐female wage gap. A liberal interpretation of the decomposition estimates is that between 39.9% and 58.8% of the gap is attributed to comparable‐worth discrimination.