Institutional barriers in labor markets: Examples, impacts, and policies

This paper examines the institutional biases that impede the competitive functioning of labor markets. Two contexts are considered. The first relates to Moroccan labor migrants in The Netherlands, where institutional bias distorts the competitive functioning of the labor market by downgrading the educational returns to migrant workers and acting as a disincentive for further investment in human capital. The second relates to labor markets in Indonesia and Pakistan. Institutional bias in these two countries leads to an exaggeration of labor returns to certified education, and to over-investment in university education. We argue that such biases are fed by misinformed beliefs and group interests, and stand in the way of achieving higher growth and equity.     

Job hopping, earnings dynamics, and industrial agglomeration in the software publishing industry

This paper investigates the implications of industrial clustering for labor mobility and earnings dynamics in one large and increasingly important high-technology sector. Taking advantage of longitudinal employee-employer matched data, I exploit establishment-level variation in agglomeration to explore how clustering in the software publishing industry affects labor market outcomes. The results show that clustering makes it easier for workers to job hop within the sector. Higher earnings levels in more agglomerated areas are partly attributable to sorting across locations among workers and firms in the industry on the basis of observable and unobservable characteristics. Controlling for this heterogeneity, workers in clusters have relatively steep earnings-tenure profiles, accepting lower wages early in their careers in exchange for stronger earnings growth and higher wages later. These findings are consistent with theoretical models in which agglomeration improves labor market coordination and facilitates greater learning and human capital formation.     

Cross-sectional earnings risk and occupational sorting: The role of risk attitudes

This paper investigates to what extent individuals' risk preferences are correlated with the cross-sectional earnings risk of their occupation. We exploit data from the German Socio-Economic Panel, which contains a direct survey question about willingness to take risks that has been shown to be a behaviorally valid measure of risk aversion. As a measure of earnings risk, we use the cross-sectional variation in earnings that is left unexplained by human capital variables in Mincerian wage regressions. Our evidence shows that individuals with low willingness to take risks are more likely to work in occupations with low earnings risk. This pattern is found regardless of the level of occupation categories, region, gender and labor market experience.     

Outsourcing, labor market pooling, and labor contracts

This paper considers the interaction between input sharing and labor market pooling in urban areas. In particular, it examines the impact of the size of a city and business risks on the organizational structures of firms located in urban agglomerations, and it also discusses the impact of organizational structure on incentives to insure workers against income risks. It is shown that manufacturing firms suffer from a coordination game in their decision to outsource production. The existence of idiosyncratic risks causes manufacturers to refrain from outsourcing. The incentives to offer wage and employment protection to workers are more pronounced when manufacturers outsource the production of their inputs to a local market, which mitigates the impact of labor market pooling.     

Neighborhood quality and labor market outcomes: Evidence from quasi-random neighborhood assignment of immigrants

Settlement in a socially deprived neighborhood may hamper individual labor market outcomes because of lack of employed or highly skilled contacts. I investigate this hypothesis by exploiting a unique natural experiment that occurred between 1986 and 1998 when refugee immigrants to Denmark were assigned to municipalities quasi-randomly, which successfully addresses the methodological problem of endogenous neighborhood selection. I show that individuals sort into neighborhoods. Taking account of location sorting, living in a socially deprived neighborhood does not affect labor market outcomes of refugee men. Their labor market outcomes are also not affected by the overall employment rate and the overall average skill level in the neighborhood. However, an increase in the average skill level of non-Western immigrant men living in the neighborhood raises their employment probability, while an increase in the employment rate of co-national men living in the neighborhood raises their real annual earnings. This provides quasi-experimental evidence that residence-based job information networks are ethnically stratified.     

Hiring,firing, and relocation under employment protection

We analyze how hiring and firing costs as well as firing regulatory delays affect firms’ hiring, firing, and relocation policy with a stochastic control model. These frictions are substantial; e.g. the firing delay can be almost a year. In the model hiring and firing costs depend on the firm size and the number of people hired or fired. Based on our simulations, hiring and firing elasticities without relocation are highest with respect to demand and productivity volatility and the hiring and firing variable costs. The elasticity of firing due to relocation is highest with respect to the firm-sized firing cost.     

Organizational achievement values,high‐involvement work practices,and business unit performance

This study examines the relationships among organizational achievement values, high‐involvement work practices (HIWP), and business unit performance. Specifically, we examine whether HIWP mediate or moderate the effect of achievement values on retail store performance. Using data collected at three points in time from more than 1,000 employees, we found support for the mediation model. The article concludes with directions for future research and implications for management practice. © 2011 Wiley Periodicals, Inc.