Empirical essays on wage setting and immigrant labor market opportunities

Transcription

1 Empirical essays on wage setting and immigrant labor market opportunities Tove Eliasson DISSERTATION SERIES 2014:3 Presented at Department of Economics, Uppsala University

2 The Institute for Evaluation of Labour Market and Education Policy (IFAU) is a research institute under the Swedish Ministry of Employment, situated in Uppsala. IFAU s objective is to promote, support and carry out scientific evaluations. The assignment includes: the effects of labour market and educational policies, studies of the functioning of the labour market and the labour market effects of social insurance policies. IFAU shall also disseminate its results so that they become accessible to different interested parties in Sweden and abroad. IFAU also provides funding for research projects within its areas of interest. The deadline for applications is October 1 each year. Since the researchers at IFAU are mainly economists, researchers from other disciplines are encouraged to apply for funding. IFAU is run by a Director-General. The institute has a scientific council, consisting of a chairman, the Director-General and five other members. Among other things, the scientific council proposes a decision for the allocation of research grants. A reference group including representatives for employer organizations and trade unions, as well as the ministries and authorities concerned is also connected to the institute. Postal address: P O Box 513, Uppsala Visiting address: Kyrkogårdsgatan 6, Uppsala Phone: Fax: ifau@ifau.uu.se This doctoral dissertation was defended for the degree of Doctor in Philosophy at the Department of Economics, Uppsala University, September 5, Essay 1 is a revised version of IFAU Working paper 2013:7, Essay 2 is published as IFAU Working Paper 2014:19 and Essay 3 is published as IFAU Working paper 2014:10. ISSN

3 Dissertation presented at Uppsala University to be publicly examined in Hörsal 2, Ekonomikum, Uppsala, Friday, 5 September 2014 at 10:15 for the degree of Doctor of Philosophy. The examination will be conducted in English. Faculty examiner: Professor Tor Eriksson (Aarhus university). Abstract Eliasson, T Empirical Essays on Wage Setting and Immigrant Labor Market Opportunities. 134 pp. Uppsala: Department of Economics, Uppsala universitet. ISBN This thesis consists of three self-contained essays. Essay 1: This essay estimates wage assimilation among non-western immigrants in Sweden, controlling for selection into employment by including individual fixed effects. Furthermore, using matched employer-employee panel data covering the complete Swedish labor market, this essay decomposes wage catch-up into relative wage growth within and between workplaces and occupations. The results show that failing to control for selection into employment is likely to underestimate relative wage growth of immigrants, as early entrants in the labor market differ from later entrants along unobservable dimensions. Even after 30 years in the country, the group of non-western immigrants still earns substantially lower wages than natives. Wages catch up mainly within workplaces and occupations, suggesting that improved signals of productivity, rather than improved knowledge of job options, are of importance for the wage growth of nonwestern immigrants. Essay 2: Earlier research has shown that immigrant- and minority entrepreneurs have difficulties accessing capital through the formal financial markets. This essay studies what role immigrant employees within the local bank sector have for the probability of immigrants to run their own businesses. I use linked employer-employee data covering the whole Swedish labor market for the years 1987 to 2003 and utilize a nationwide refugee dispersal policy to get exogenous variation in the exposure to co-ethnic bank employees. Results suggest that there is a positive relation between co-ethnic bank employees and the probability of being self-employed. This effect is most pronounced for immigrants who arrived with low education, for males and for those residing in metropolitan regions. The effects are substantial and robust to a wide set of controls for labor market characteristics of the ethnic group at the local level. These results provide evidence of an ethnic component in the formal credit markets. Essay 3 (with Oskar Nordström Skans): This essay investigates the impact of a collective agreement stipulating a one shot increase in establishment-specific wage levels in a publicsector setting where wages otherwise are set according to individualized wage bargaining. The agreement stipulated that wages should increase in proportion to the number of low-paid females within each establishment. We find that actual wages among incumbents responded to the share of females with a wage below the stipulated threshold, conditional on the separate effects of the share of low wage earners, and the share of females. We find clear evidence of path-dependence in wages, covered workers remained on higher wage levels 4 years after the agreement took effect. The increase in wages resulted in a reduced probability of exit among young workers with relatively good grades and a lower frequency of new hires at the establishment level. Keywords: Firm sorting, mobility, wage assimilation, host country specific human capital, employer learning, self-employment, immigrant entrepreneurs, capital access, information asymmetry, minority representation, collective bargaining, turnover, hours of work, labor input, labor costs Tove Eliasson, Department of Economics, Box 513, Uppsala University, SE Uppsala, Sweden. Institute for Housing and Urban Research, Box 514, Uppsala University, SE Uppsala, Sweden. Tove Eliasson 2014 ISBN urn:nbn:se:uu:diva (

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17 Handbook of Labor Economics The Quarterly Journal of Economics Spreading the burden? A review of policies to disperse asylum seekers and refugees The Journal of Political Economy The Economics of Discrimination The American Review of Public Administration Labour Economics Invandrare som företagareför lika möjligheter och ökad tillväxt- Betänkande av Utredningen om företagande för personer med utländsk bakgrund The Structure of Wages: An International Comparison International Small Business Journal

18 Review of Income and Wealth Labour The Scandinavian Journal of Economics Journal of Economic Literature Handbook of Population and Family Economics The Structure of Wages: An International Comparison Labour American Sociological Review Journal of Economic Literature Minimum wages Settling In: OECD Indicators of Immigrant Integration 2012

19 Journal of Labor Economics The American Economic Review Ethnic and Racial Studies The Quarterly Journal of Economics The Scandinavian Journal of Economics The Quarterly Journal of Economics

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26 Wage catch-up relative wage growth

27 Table 1: < > < > < > < > < < > < < < > Note:

28 Figure 1:

29 Figure 2:

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31 + + it = δ I it + θ I it + µ i + ε it it = δ N it + µ i + ε it i t I N µ i +

32 θ I the differential return to aging plus the return to spending time in the host country I it = δ it + θ I it I + µ i + ε it ψ k µ i ψ k

33 ψ k = it = δ it + θ I it I + ψ k + ε it

34 Figure 3:

35 Figure 4:

36 it = δ it + θ I it I + µ i + ε it it = δ it + θ I it I + µ i + ψ j + ε it it = δ it + θ I it I + γ ij + ε it Total catch-up Double FE catch-up ψ j

37 γ ij Match FE catchup Double FE catch-up Total catch-up Match FE catch-up Total catch-up Match FE catch-up Double FE catch-up

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39 Figure 5:

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41 Table 2: BL BU BL BU BL BU BL BU Less than high school High school More than high school Note:

42 θ I it = δ N it + µ i + ψ N j + ε it ( it δ N it ) = θ I it + µ i + ψ I j + ε it

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44 Figure 6:

45 Table 3: B L B U B L B U B L B U Less than high school High school More than high school Note:

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49 Handbook of Labor Economics Econometrica Swedish Economic Policy Review Industrial and Labor Relations Review Industrial and Labor Relations Review The Review of Economics and Statistics Labour Economics The Economics of Discrimination Journal of Labor Economics Handbook of Labor Economics

50 The Quarterly Journal of Economics Sociological Perspectives Journal of Political Economy The Structure of Wages: An International Comparison Journal of the Royal Statistical Society: Series A (Statistics in Society) Labour Journal of Population Economics International Journal of Manpower Handbook of Population and Family Economics The Structure of Wages: An International Comparison

51 Labour Journal of Political Economy American Sociological Review Settling In: OECD Indicators of Immigrant Integration 2012 Journal of Labor Economics Journal of Business and Economic Statistics The American Economic Review The Scandinavian Journal of Economics Applied Economics

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53 Table 4: Note:

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55 Table 5: < > < > < > < > < < > < < < > Note:

56 Figure 7:

57 Figure 8:

58 Figure 9:

59 Figure 10: Figure 11:

60 Table 6: B L B U B L B U B L B U Less than high school High school More than high school Less than high school High school More than high school Note:

61 Table 7: Age 2 Age 3 Age 2 Age 3 Age 2 Age 3 Note: < < <

62 Table 8: Age 2 Age 3 Age 2 Age 3 Age 2 Age 3 Note: < < <

63 Table 9: Age 2 Age 3 Age 2 Age 3 Age 2 Age 3 Note: < < <

64 Table 10: Age 2 Age 3 Age 2 Age 3 Age 2 Age 3 Note: < < <

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72 co-ethnic banker co-ethnic banker

73 co-ethnic banker i c m t X it

74 Table 1: Municipal group level covarariates Note:

75 θ c ψ m ρ t0 π t pr( ) it =α + β it + γx it + µv cmt + θ c + ψ m + ρ t0 + π t + ε it co-ethnic banker V cmt co-ethnic banker

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78 Table 2: Note: β < < <

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81 it =β it0 + γx it + µv cmt0 + θ c + ψ mt0 + ρ t0 + π t + ε it co-ethnic banker co-ethnic banker

82 co-ethnic banker it =β it0 + γx it + µv cmt0 + θ c + ψ mt0 + ρ t0 + π t + ε it t 0

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84 Table 3: Panel A. t0 Panel B. Panel C. t0 Note: β it < < <

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86 Table 4: Panel A. Panel B. Note: β < < <

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88 negative Being self-employed Becoming self-employed Leaving selfemployment

89 Table 5: Panel A. Panel B. Panel C. Panel D. Note: β < < <

90 Table 6: Note: β < < <

91 Share of local co-ethnics employed in bank

92 Table 7: Panel A. Panel B. Note: β < < <

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95 Journal of Urban Economics International Business Research International Migration Review Labour Urban Studies Spreading the burden? A review of policies to disperse asylum seekers and refugees Quarterly Journal of Economics American Economic Journal: Applied Economics Journal of Human Resources Journal of Labor Economics

96 Journal of Economic Geography The Review of Black Political Economy The Review of Economics and Statistics Journal of Labor Economics Journal of Population Economics The American Review of Public Administration Journal of Money, Credit and Banking The Journal of Business Invandrare som företagare- för lika möjligheter och ökad tillväxt- Betänkande av Utredningen om företagande för personer med utländsk bakgrund Journal of Political Economy The American Economic Review

97 International Small Business Journal The Economic Journal Review of Income and Wealth The American Economic Review Ethnic and Racial Studies Sverige, framtiden och mångfalden Individuell mångfald: Invandrarverkets utvärdering och analys av det samordnade flyktingmottagandet

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99 Table 8:

100 Table 9: Variables defined by those individuals from the own country who share the individual s municipality of residence Variables defined by mean values of workplaces where the local own-group members work (WP):

101 Variables defined by those individuals fron the own country who work in the individual s municipality of residence (W): Table 10: Note:

102 Figure 1: Table 11:

103 Figure 2: Figure 3:

104 Figure 4:

105 Table 12: Panel A. t 0 Panel B. Panel C. t 0 Note: β β it β < < <

106 Table 13: Note: β < < <

107 Table 14: Note: β < < <

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115 Table 1: Note:

116 within female

117 Table 2: Panel A. Within large occupations Panel B. Within large occupations Note:

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120 Figure 2: (a) (b)

121 T w i Di F emale

122 π p w i = 96 p=75 ϕ p π p i + δdf emale i + γt i + βx i + ε i, T i = I[π p i < 91; DF emale i = 1] X i average

123 Table 3: lnw t+1 w t lnw t+1 w t lnw t+1 w t lnw t+1 w t Note: < < < ET I F S LW S

124 100 w i = ϕ p π p i p=1 +δdf emale i +βx i +µw j +γ e ET I j +Ψ[F S E j, LW S E j ]+ε i. X i w j Table 4: lnw t+1 w t lnw t+1 w t lnw t+1 w t Note: < < <

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127 Table 5: Panel A. lnw t+1 w t lnw t+2 w t lnw t+3 w t lnw t+4 w t Panel B. Note: < < <

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129 Table 6: h C t+1 h C t h C t+2 h C t h C t+3 h C t h C t+4 h C t Mean individually contracted hours as a fraction of full-time (2007): Note: < < <

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131 Table 7: Note: < < <

132 Y j = γet I j + Ψ[F S j, LW S j, X j, w j, j ] + ε j.

133 Table 8: Note: < < < trajectories

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135 Table 9: lnw t+1 w t lnw t+3 w t h C t+1 h C t Panel A. Mean values Panel B. Mean values Panel C. Mean values Note: < < <

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137 Youth Employment and Joblessness in Advanced Countries Journal of Political Economy Labour Economics British Journal of Industrial Relations Journal of Labor Economics Industrial and Labor Relations Review Labour Economics The Scandinavian Journal of Economics Journal of Public Economics

138 Journal of Public Economics Minimum wages The Quarterly Journal of Economics Labour Economics International Journal of Manpower.

139 Table 10: Note:

140 Table 11: After imposed restriction: < Note: Figure 4:

141 Figure 5: Figure 6:

142 Table 12: h C t+1 > h C t h C t+1 < h C t Note: < < <