• The role of cognitive and socio-emotional skills in labor markets

    Cognitive skills are more relevant in explaining earnings, socio-emotional skills in determining labor supply and schooling

    Common proxies, such as years of education, have been shown to be ineffective at capturing cross-country differences in skills acquisition, as well as the role they play in the labor market. A large body of research shows that direct measures of skills, in particular cognitive and socio-emotional ones, provide more adequate estimations of individuals’ differences in potential productive capacity than the quantity of education they receive. Evidence shows that cognitive skills in particular are quite relevant to explain wages, while socio-emotional skills are more associated with labor force and education participation decisions.
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  • Employment and wage effects of extending collective bargaining agreements Updated

    Sectoral collective contracts reduce inequality but may lead to job losses among workers with earnings close to the wage floors

    In many countries, the wage floors and working conditions set in collective contracts negotiated by a subset of employers and unions are subsequently extended to all employees in an industry. Those extensions ensure common working conditions within the industry, mitigate wage inequality, and reduce gender wage gaps. However, little is known about the so-called bite of collective contracts and whether they limit wage adjustments for all workers. Evidence suggests that collective contract benefits come at the cost of reduced employment levels, though typically only for workers earning close to the wage floors.
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  • The consequences of trade union power erosion Updated

    Declining union power would not be an overwhelming cause for concern if not for rising wage inequality and the loss of worker voice

    John T. Addison , February 2020
    The micro- and macroeconomic effects of the declining power of trade unions have been hotly debated by economists and policymakers, although the empirical evidence does little to suggest that the impact of union decline on economic aggregates and firm performance is an overwhelming cause for concern. That said, the association of declining union power with rising earnings inequality and the loss of an important source of dialogue between workers and their firms have proven more worrisome if no less contentious. Causality issues dog the former association and while the diminution in representative voice seems indisputable any depiction of the non-union workplace as an authoritarian “bleak house” is more caricature than reality.
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  • Managerial quality and worker productivity in developing countries

    Business consulting and supervisory skills training can improve firm productivity and labor relations

    Achyuta Adhvaryu , February 2018
    Productivity differences across firms and countries are surprisingly large and persistent. Recent research reveals that the country-level distributions of productivity and quality of management are strikingly similar, suggesting that management practices may play a key role in the determination of worker and firm productivity. Understanding the causal impacts of these practices on productivity and the effectiveness of various management interventions is thus of primary policy interest.
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  • Language and culture as drivers of migration

    Linguistic and cultural barriers affect international migration flows

    Alicía Adserà , July 2015
    As migration flows to developed countries have increased in recent decades, so have the number of countries from which migrants arrive. Thus, it is increasingly important to consider what role differences in culture and language play in migration decisions. Recent work shows that culture and language may explain migration patterns to developed countries even better than traditional economic variables, such as income per capita and unemployment rates in destination and origin countries. Differences in culture and language may create barriers that prevent the full realization of the potential economic gains from international mobility.
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  • Do institutions matter for entrepreneurial development? Updated

    In post-Soviet countries, well-functioning institutions are needed to foster productive entrepreneurial development and growth

    Ruta Aidis , August 2023
    Since the collapse of the Soviet Union, the differing impact of institutions on entrepreneurship development is undeniable. Several post-Soviet countries benefitted from early international integration by joining the EU, adopting the euro, and becoming OECD members. This process enabled entrepreneurship to develop within institutional contexts where democratic and free market principles were strengthened. In general, however, post-Soviet economies continue to be characterized by higher levels of corruption, complex business regulations, weak rule of law, uncertain property rights and often, lack of political will for institutional change.
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  • Using instrumental variables to establish causality Updated

    Even with observational data, causality can be recovered with the help of instrumental variables estimation

    Randomized control trials are often considered the gold standard to establish causality. However, in many policy-relevant situations, these trials are not possible. Instrumental variables affect the outcome only via a specific treatment; as such, they allow for the estimation of a causal effect. However, finding valid instruments is difficult. Moreover, instrumental variables (IV) estimates recover a causal effect only for a specific part of the population. While those limitations are important, the objective of establishing causality remains; and instrumental variables are an important econometric tool to achieve this objective.
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  • Tax evasion, market adjustments, and income distribution Updated

    Market adjustments to tax evasion alter factor and product prices, which determine the true impacts and beneficiaries of tax evasion

    How does tax evasion affect the distribution of income? In the standard analysis of tax evasion, all the benefits are assumed to accrue to tax evaders. However, tax evasion has other impacts that determine its true effects. As factors of production move from tax-compliant to tax-evading (informal) sectors, these market adjustments generate changes in relative prices of products and factors, thereby affecting what consumers pay and what workers earn. As a result, at least some of the gains from evasion are shifted to consumers of goods produced by tax evaders, and at least some of the returns to tax evaders are competed away via lower wages.
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  • Eliminating discrimination in hiring isn’t enough

    Firms interested in workplace diversity should consider the post-hiring stage and why some minority employees choose to leave

    While many firms have recognized the importance of recruiting and hiring diverse job applicants, they should also pay attention to the challenges newly hired diverse candidates may face after entering the company. It is possible that they are being assessed by unequal or unequitable standards compared to their colleagues, and they may not have sufficient access to opportunities and resources that would benefit them. These disparities could affect the career trajectory, performance, satisfaction, and retention of minority employees. Potential solutions include randomizing task assignments and creating inclusive networking and support opportunities.
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  • Refugee children’s earnings in adulthood

    Refugee status and country of origin shape the economic outcomes of newcomer children later in life

    The number of refugees has increased worldwide, and about half of them are children and youth. These refugee children arrive in resettlement countries with a unique set of challenges caused by, for instance, extreme stress and trauma that call for specific policies to address their needs. Yet, the long-term effect of refugee status on newcomer children's economic trajectories varies by country of origin, signaling the need for effective resettlement support and initiatives to tackle broader systemic barriers for newcomer children, beyond refugees. Such findings challenge the commonly held notion of refugees as a distinctive, relatively homogeneous group with similar trajectories.
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