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Working Paper
Occupation-level income shocks and asset returns: their covariance and implications for portfolio choice
This paper develops and applies a simple graphical approach to portfolio selection that accounts for covariance between asset returns and an investor's labor income. Our graphical approach easily handles income shocks that are partly hedgeable, multiple risky assets, multiple risky assets, many periods, and life cycle considerations.
AUTHORS: Davis, Steven J.; Willen, Paul S.
DATE: 2013-10-24
Working Paper
Lending to women in microfinance: influence of social trust and national culture Lending to women in microfinance: influence of social trust and national culture
The preference of microfinance institutions for women borrowers is generally attributed to two reasons: women borrowers are more trustworthy and have greater social impact. However, the role of social trust with regard to this gender preference has not been adequately investigated. Controlling for the social outreach goals of MFIs, we document that MFIs favor women more in low trust countries, suggesting that women are targeted to offset low social trust. We also examine how the nature of trust formation affects this relationship between gender targeting and trust. Our results should be of considerable interest to policymakers and scholars.
AUTHORS: Goodell, John; Aggarwal, Raj
DATE: 2013-12-01
Working Paper
Minimum Wage Increases and Vacancies
We estimate the impact of minimum-wage increases on the quantity of labor demanded as measured by firms’ vacancy postings. We use propriety, county-level vacancy data from the Conference Board’s Help Wanted Online database. Our identification relies on the disproportionate effects of minimum-wage hikes on different occupations, as the wage distribution around the binding minimum wage differs by occupation. We find that minimum-wage increases during the 2005-2018 period have led to substantial declines in vacancy postings in at-risk occupations, occupations with a larger share of employment around the prevailing minimum wage. Our estimate implies that a 10 percent increase in the binding minimum- wage level reduces vacancies by 2.4 percent in this group. The negative effect is concentrated not exclusively in the routine jobs, but more in the manual occupations.
AUTHORS: Kudlyak, Marianna; Tasci, Murat; Tuzemen, Didem
DATE: 2019-12-23
Working Paper
Inflation and the Gig Economy: Have the Rise of Online Retailing and Self-Employment Disrupted the Phillips Curve?
During the recovery from the Great Recession, inflation did not reach the central bank?s 2 percent objective as quickly as many models had predicted. This coincided with increases in online shopping, which arguably made retail markets more contestable and damped retail inflation. This hypothesis is tested using data on the online share of retail sales, which are incorporated into an econometric model. Results imply that the rise of online retail has flattened the Phillips Curve, reducing the sensitivity of inflation to unemployment rate changes. Improvement in fit from just including the online share is tiny?so far. Other results indicate that market-based price indexes are more sensitive to unemployment than measures such as core PCE, which puts a sizable weight on items with imputed prices that may slowly adjust to market conditions. Further, measures of online sales that internalize substitution between online and traditional mail order sales better help track the impact of online sales on inflation dynamics. {{p}} A complementary factor is the ?gig? economy and the rise of self-employment, which by reducing the bargaining power of labor, could lower the natural rate of unemployment. Model performance and fits are improved using a hybrid approach in which the rise of online sales can flatten the slope of the Phillips Curve by reducing retail pricing power and the prevalence of gig or self-employment can lower the natural rate of unemployment. {{p}} By omitting important structural changes in both goods and labor markets, conventional Phillips Curve models have failed to track how the rise of online retailing has flattened the Phillips Curve and how the rise of the gig economy (self-employment) has lowered the natural rate of unemployment. One notable difference between the price-price and wage-price results is that the combined effects of online shopping and self-employment are more notable on wage inflation than on price inflation. This could plausibly reflect that improvements in information technology may have undermined the pricing power of workers in labor markets to a greater degree than they have affected the pricing power of producers in goods markets.
AUTHORS: Duca, John V.
DATE: 2018-11-16
Working Paper
Measuring Heterogeneity in Job Finding Rates among the Non-Employed Using Labor Force Status Histories
We introduce a novel approach to studying heterogeneity in job finding rates by classifying the non-employed, the unemployed and those out of the labor force (OLF), according to their labor force status (LFS) histories using four-month panels in the CPS. Respondents? LFS histories outperform current-month responses to survey questions about duration and reason for unemployment, desire to work, or reasons for not searching in predicting future employment. We find that the best predictor of future employment for the non-employed is their duration since last employment. For those OLF, the duration since last employment is only available via LFS histories and cannot be inferred from current-month responses. Those who were recently employed are twice as likely to find a job as those who report wanting a job. For the unemployed, the duration since last employment is a better predictor of future employment than the self-reported duration of unemployment is, as the two duration measures often disagree. The disagreement is not caused by classification error but rather arises because self-reported durations reflect individuals? in short-term jobs either temporarily suspending their search or continuing search while working. Recent employment breaks negative duration dependence in unemployment exits and the unemployed who report long durations after recent employment have similar job finding rates as those who report short durations. Using our proposed approach, we reexamine the unemployment duration distribution and current approach to misclassification error in the CPS.
AUTHORS: Lange, Fabian; Kudlyak, Marianna
DATE: 2017-09-26
Working Paper
The intensive and extensive margins of real wage adjustment
Using 35 years of data from the Current Population Survey we decompose fluctuations in real median weekly earnings growth into the part driven by movements in the intensive margin-wage growth of individuals continuously full-time employed-and movements in the extensive margin-wage differences of those moving into and out of full-time employment. The relative importance of these two margins varies significantly over the business cycle. When labor markets are tight, continuously full-time employed workers drive wage growth. During labor market downturns, the procyclicality of the intensive margin is largely offset by net exits out of full-time employment among workers with lower earnings. This leads aggregate real wages to be largely acyclical. Most of the extensive margin effect works through the part-time employment margin. Notably, the unemployment margin accounts for little of the variation or cyclicality of median weekly earnings growth.
AUTHORS: Hobijn, Bart; Daly, Mary C.
DATE: 2016-03-31
Working Paper
Firm Dynamics and the Minimum Wage: A Putty-Clay Approach
We document two new facts about the market-level response to minimum wage hikes: firm exit and entry both rise. These results pose a puzzle: canonical models of firm dynamics predict that exit rises but that entry falls. We develop a model of firm dynamics based on putty-clay technology and show that it is consistent with the increase in both exit and entry. The putty-clay model is also consistent with the small short-run employment effects of minimum wage hikes commonly found in empirical work. However, unlike monopsony-based explanations for small short-run employment effects, the model implies that the efficiency consequences of minimum wages are potentially large.
AUTHORS: Aaronson, Daniel; French, Eric; Sorkin, Isaac
DATE: 2013-12-14
Working Paper
Understanding Declining Fluidity in the U.S. Labor Market
We document a clear downward trend in labor market fluidity that is common across a variety of measures of worker and job turnover. This trend dates to at least the early 1980s if not somewhat earlier. Next we pull together evidence on a variety of hypotheses that might explain this downward trend. It is only partly related to population demographics and is not due to the secular shift in industrial composition. Moreover, the decline in labor market fluidity seems unlikely to have been caused by an improvement in worker-firm matching, the formalization of hiring practices, or an increase in land use regulation or other regulations. Plausible avenues for further exploration include changes in the worker-firm relationship, particularly with regard to compensation adjustment; changes in firm characteristics such as firm size and age; and a decline in social trust, which may have increased the cost of job search or made both parties in the hiring process more risk averse.
AUTHORS: Molloy, Raven S.; Smith, Christopher L.; Trezzi, Riccardo; Wozniak, Abigail
DATE: 2016-03-02
Working Paper
The Labor Market Effects of Offshoring by U.S. Multinational Firms: Evidence from Changes in Global Tax Policies
Estimating the causal effect of offshoring on domestic employment is difficult because of the inherent simultaneity of multinational firms? domestic and foreign affiliate employment decisions. In this paper, we resolve this identification problem using variation in Bilateral Tax Treaties (BTTs), which reduce the effective cost of offshore activity by mitigating double taxation. We derive a panel difference-in-differences research design from a standard model of multinational firms, demonstrating the simultaneity problem and showing how to resolve it using BTTs as an instrument for offshore employment. We confirm that new treaty implementation is uncorrelated with existing employment trends, and use Bureau of Economic Analysis data on U.S. multinational firms to measure the domestic employment effects of offshore activity. {{p}} Overall, we find modest positive effects of offshore activity on domestic employment. A 10 percent BTT induced increase in affiliate employment drives a 1.8 percent increase in employment at the U.S. parent firm, with smaller effects at the industry and regional levels. Underlying these results is substantial heterogeneity based on offshoring margin and firm organizational structure. For example, increased foreign affiliate activity in vertically oriented multinational firms drives declining employment among non-multinationals in the same industry, and multinational firms opening new affiliates exhibit much smaller domestic employment growth than those expanding existing affiliates. Throughout the analysis, OLS estimates are much larger than the IV estimates, consistent with upward simultaneity bias. Overall, our results indicate that greater offshore activity raises net employment by U.S. firms, albeit with underlying job loss and reallocation of workers.
AUTHORS: Kovak, Brian K.; Oldenski, Lindsay; Sly, Nicholas
DATE: 2017-12-20
Journal Article
Wage Leaders and Laggards: Decomposing the Growth in Average Hourly Earnings
Wage growth has accelerated gradually over the past two years, largely due to a pickup in wage growth in a few industries ? the wage leaders. {{p}} Another, larger group of industries ? the wage laggards ? has not contributed at all to the acceleration. But the wage laggards have seen relatively strong growth in hours worked over the past two years, indicating rising labor demand that could lead to a further acceleration in overall wage growth.
AUTHORS: Van Zandweghe, Willem
DATE: 2017-02