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Research related to:  Labor Markets

Financial development and occupational choice: Evidence from India

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Theory suggests that capital market frictions might inhibit entrepreneurship, and that financial market development is likely to be associated with an increase in self-employment. But what are the effects of increasing access to finance in developing countries where the bulk of the self-employed work in micro-enterprises? Evidence from a large survey of over one million randomly selected Indian households suggests that opposite effects may be observed . . . 
By: Rajeev Dehejia, and Nandini Gupta

Substitution Bias and External Validity: Why an innovative anti-poverty program showed no net impact

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The net impact of development interventions can depend on the availability of close substitutes to the intervention. We analyze a randomized trial of an innovative anti-poverty program in South India which provides “ultra-poor” households with inputs to create a new, sustainable livelihood. We find no statistically significant evidence of lasting net impact on consumption, income or asset accumulation. Instead, income from the new livelihood substituted for earnings from wage labor. A very similar intervention made a large difference elsewhere in South Asia, however, where wage labor alternatives were less compelling. The analysis highlights the roles of substitution bias and dropout bias in shaping evaluation results and delimiting external validity.
Jonathan Morduch, Shamika Ravi, and Jonathan Bauchet

Credit Constraints, Job Mobility and Entrepreneurship: Evidence from a Property Reform in China

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This paper provides new evidence on the impact of private property rights and employer-provided housing on entrepreneurship. I find an increase in self-employment following a reform in urban China that allowed state employees who were renting state-owned housing the opportunity to buy their homes at subsidized prices. I develop a model of job choice to test two mechanisms that might explain how the reform increased entrepreneurship. I find evidence that the reform reduced labor mobility costs and alleviated credit constraints by allowing households to capitalize on the value of the real estate.
Shing-Yi Wang

Marriage Networks, Nepotism and Labor Market Outcomes in China

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This paper considers the potential role of marriage in improving labor market outcomes through the expansion of an individuals' networks. I focus on the impact of a father-in-law on a young man's career using panel data from China. Particular features of the Chinese context allows for an identification strategy that isolates the network effects related to a man's father-in-law by comparing the post-marriage death of a father-in-law with the death of a mother-in-law. The estimates suggest that the loss of the father-in-law translates into a decrease in a man's earnings by 20%. Furthermore, the evidence indicates that the decline in wages can be attributed to nepotism rather than a decline in job information.
Shing-Yi Wang

Ethnic Identity and Labor Market Outcomes of Immigrants in Europe

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We study the relationship between ethnic identity and labour market outcomes of non-EU immigrants in Europe. Using the European Social Survey, we find that there is a penalty to be paid for immigrants with a strong identity. Being a first generation immigrant leads to a penalty of about 17% while second- generation immigrants have a probability of being employed that is not statistically different from that of natives. However, when they have a strong identity, second-generation immigrants have a lower chance of finding a job than natives. Our analysis also reveals that the relationship between ethnic identity and employment prospects may depend on the type of integration and labour market policies implemented in the country where the immigrant lives. More flexible labour markets help immigrants to access the labour market but do not protect those who have a strong ethnic identity.
Alberto Bisin, Eleonora Patacchini, Thierry Verdier, and Yves Zenou.

Statistical Discrimination, Productivity and the Height of Immigrants

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Building on the economic research that demonstrates a positive relationship between height and worker ability, this paper considers whether employers use height as a tool for statistical discrimination. The analysis focuses on immigrants and native-born individuals because employers are likely to have less reliable signals of productivity for an immigrant than a native-born individual. Using multiple data sets, the paper presents a robust empirical finding that the wage gains associated with height are almost twice as large for immigrants than for native-born individuals . . . 
Shing-Yi Wang

Occupational Choice and Development

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We study an economy in which firms use labor and various vintages of capital in a CES production function for the final good. We explicitly solve for the investment in capital of a given vintage as a function of its age, and for the resulting stocks of capital. We show that for reasonable parameter values, inverted-U- shaped dynamics of investment and S-shaped dynamics for capital arise in equilibrium. We view the model as an explanation of intra-firm adoption lags, i.e., the observation that firms adopt innovations over time and not instantaneously.
Boyan Jovanovic and Jan Eeckhout

Credit Constraints, Job Mobility and Entrepreneurship: Evidence from a Property Reform in China.

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This paper provides new evidence on the impact of private property rights on entrepreneurship. I explore this issue in the context of a housing reform in urban China that allowed state employees renting state-owned housing the opportunity to buy their homes at subsidized prices. Using the reform as an exogenous change in the capital constraints and mobility costs that influence individuals’ entry into entrepreneurship, my estimates suggest that the property reform increased self-employment . . . 
Shing-yi Wang