IZA World of Labor

Evidence-based policy making

IZA World of Labor provides policymakers and society with relevant and succinct information based on sound empirical evidence to help in formulating good policies and best practices. It provides expert know-how in an innovative structure, and a clear and accessible style.

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Who benefits from return migration to developing countries?

Despite returnees being a potential resource, not all developing countries benefit from their return

Return migration can have multiple benefits. It allows migrants who have accumulated savings abroad to ease credit constraints at home and set up a business. Also, emigrants from developing countries who have invested in their human capital may earn higher wages when they return. However, whether the home country benefits from return migrants depends on the migrant’s success in accumulating savings and human capital and on the home country’s ability to make use of returnees’ skills and investment. To benefit from returnees, home countries need policies that encourage returnees’ investment and labor market reintegration.
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  • The value of hiring through employee referrals in developed countries

    Firms can benefit by hiring employee referred candidates; however, there are potential drawbacks that must be considered

    Mitchell Hoffman, June 2017
    Companies frequently hire new employees based on referrals from existing employees, who often recommend friends or family members. There are numerous possible benefits from this, such as lower turnover, possibly higher productivity, lower recruiting costs, and beneficial commonalities related to shared employee values. On the other hand, hiring through employee referrals may disadvantage under-represented minorities, entail greater firm costs in the form of higher wages, lead to undesirable commonalities, and reflect nepotism. A growing body of research explores these considerations.
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  • Relative pay, effort, and labor supply

    Comparisons to others’ pay and to one’s own past earnings can affect willingness to work and effort on the job

    Anat Bracha, June 2017
    Recent studies show that even irrelevant relative pay information—earnings compared to the past or to others—significantly affects workers’ willingness to work (labor supply) and effort. This effect stems mainly from those whose pay compares unfavorably; accordingly, earning less compared to others or less than in the past significantly reduces one’s willingness to work and effort exerted on the job. Comparing favorably, however, has mixed effects—with usually no effect on effort, but positive or no effects on labor supply. Understanding when relative pay increases labor supply and effort can thus help firms devise optimal payment structures.
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  • Relative deprivation in the labor market

    The choice of reference group crucially determines subjective deprivation and thus affects labor market behavior

    Paolo Verme, June 2017
    Why do different population groups (e.g. rural vs. urban, youth vs. elderly and men vs. women) experience the same objective labor status differently? One hypothesis is that people are more concerned with relative deprivation than objective deprivation and they value their own status relative to the status of their peers—the reference group. One way to test this hypothesis in the labor market is to measure individual differences in labor status while controlling for characteristics that define population groups. This measure is called “relative labor deprivation” and can help policymakers to better understand how labor claims are generated.
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  • Does education strengthen the life skills of adolescents?

    Secondary and higher education are windows of opportunity for boosting students’ life skills

    Stefanie Schurer, June 2017
    Life skills, sometimes referred to as noncognitive skills or personality traits (e.g. conscientiousness or locus of control—the belief to influence events and their outcomes), affect labor market productivity. Policy makers and academics are thus exploring whether such skills should be taught at the high school or college level. A small portfolio of recent studies shows encouraging evidence that education could strengthen life skills in adolescence. However, as no uniform approach exists on which life skills are most important and how to best measure them, many important questions must be answered before life skill development can become an integral part of school curricula.
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