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  5. Career Shocks, Mobility, and Labor Market Outcomes
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Career Shocks, Mobility, and Labor Market Outcomes

Paper Session

Sunday, Jan. 9, 2022 3:45 PM - 5:45 PM (EST)

Hosted By: American Economic Association & Committee on the Status of Women in the Economics Profession
  • Chair: Abigail Wozniak, Federal Reserve Bank of Minneapolis and Opportunity and Inclusive Growth Institute

Firm Investment, Labor Supply, and the Design of Social Insurance: Evidence from Accommodations for Workplace Injuries

Corina Mommaerts
,
University of Wisconsin-Madison
Stephanie Rennane
,
RAND Corporation
Naoki Aizawa
,
University of Wisconsin-Madison

Abstract

Work-limiting disabilities have large consequences for health spending and labor market outcomes.
While many factors influence labor market outcomes after the onset of disability, a
relatively unexplored dimension is the role of firms in accommodating workers with disabilities.
This paper studies the impact of firm accommodation decisions on labor market outcomes for
individuals with workplace disabilities, and assesses the implications for optimal social insurance
against workplace disability. Our empirical context is the workers’ compensation program
in the state of Oregon, where we leverage detailed administrative data and a unique policy that
provides wage subsidies to firms that provide workplace accommodation after workplace injury.
We exploit a policy change to the wage subsidy rate to identify the effect of wage subsidy
incentives on accommodation rates, and find that a five percentage point decrease in the wage
subsidy rate led to a substantive decrease in firm accommodation decisions as well as decreases
in longer run employment and earnings outcomes. We then use these estimates to identify
parameters of a dynamic bargaining model between workers and firms in which labor market
frictions, worker turnover, and imperfect experience rating can lead to under-accommodation
and inefficient labor market outcomes after workplace disability. Counterfactual analyses show
that all three of these features lead to under-accommodation, and wage subsidies help correct
these inefficiencies, particularly for workers with low disutility of work during injury and in
imperfectly insured firms. Overall, our findings show that incentives targeted to employers can
have non-trivial effects on the retention of disabled workers in the labor force, and that these
incentives can be a useful tool for correcting otherwise inefficiently low accommodation rates.

Firm Market Power, Worker Mobility, and Wages in the United States Labor Market

Sadhika Bagga
,
University of Texas-Austin

Abstract

A recent body of literature has documented evidence of increasing employer market power in the US. I develop an equilibrium model of the labor market to explain its effect on aggregate outcomes such as wage growth and job-to-job transitions. The model has two main ingredients: (i) there exists a finite number of employers that differ in productivity, and (ii) employers exert market power by excluding their vacancies from the set of outside offers faced by their employees. The combined effect of both features of the model is to reduce the value of workers' outside options, thereby reducing wages and worker mobility in equilibrium. I calibrate the model and evaluate its performance in generating key labor market moments for the US economy. Finally, I examine the central predictions of the model using public-use data from the Longitudinal Employer-Household Dynamics (LEHD), Business Dynamics Statistics (BDS), and the Survey of Income and Program Participation (SIPP). I document that less competitive labor markets, measured by a lower number of firms per worker, are associated with reduced measures of labor market dynamism and average wages.

Dual-Earner Migration, Earnings, and Unemployment Insurance

Joanna Venator
,
University of Rochester

Abstract

Dual-earner couples’ decisions of where to live and work often result in one spouse — the trailing spouse — experiencing earnings losses at the time of a move. This paper examines how married couples’ migration decisions differentially impact men’s and women’s earnings and the role that policy can play in improving post-move outcomes for trailing spouses. I use panel data from the NLSY97 and a generalized difference-in-differences design to show that access to unemployment insurance (UI) for trailing spouses increases long-distance migration rates by 1.9-2.3 percentage points (38-46%) for married couples. I find that women are the primary beneficiaries of this policy, with higher UI uptake following a move and higher annual earnings of $4,500-$12,000 three years post-move. I then build and estimate a structural model of dual-earner couples’ migration decisions to evaluate the effects of a series of counterfactual policies. I show that increasing the likelihood of joint distant offers substantively increase migration rates, increases women’s post-move employment rates, and improves both men and women’s earnings growth at the time of a move. However, unconditional subsidies for migration that are not linked to having an offer in hand at the time of the move reduce post-move earnings for both men and women, with stronger effects for women.

The Career Costs of Children's Health Shocks

Ana Costa-Ramon
,
University of Zurich
Anne-Lise Breivik
,
Norwegian Tax Authority

Abstract

We provide novel evidence on the impact of a child’s health shock on parental labor market outcomes. To identify the causal effect, we leverage long panels of high-quality Finnish and Norwegian administrative data and exploit variation in the exact timing of the health shock. We do this by comparing parents across families in similar parental and child age cohorts whose children experienced a health shock at different ages. We show that these families are comparable and were following very similar trends before the shock. This allows us to use a simple difference-in-differences model: we construct counterfactuals for treated households with families who experience the same shock a few years later. We also exploit this variation in an event study framework. We find a sharp break in parents’ earnings trajectories that becomes visible just after the shock. The effect is stronger for mothers than for fathers and is driven by health shocks that need persistent care after the event. We also document a strong impact on parents’ mental well-being.

Discussant(s)
Mark Duggan
,
Stanford University
Ioana Marinescu
,
University of Pennsylvania
Abigail Wozniak
,
Federal Reserve Bank of Minneapolis and Opportunity and Inclusive Growth Institute
Maya Rossin-Slater
,
Stanford University
JEL Classifications
  • J1 - Demographic Economics
  • J2 - Demand and Supply of Labor