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Lecture 5: More on Labor Supply. Part 1: CPS Data.

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Presentation on theme: "Lecture 5: More on Labor Supply. Part 1: CPS Data."— Presentation transcript:

1 Lecture 5: More on Labor Supply

2 Part 1: CPS Data

3 Wage, Income and Hours Data: Current Population Survey (CPS) Continue our theme of introducing you to major U.S. data. Current Population Survey: High quality data extends back to the 1960s. Large samples of U.S. households. Panel Dimension (4 months in, 8 months out, 4 months in). Detailed information about labor market status (every month). Detailed information about hours asked every month. Detailed information about hours/earnings – asked less frequently. Large sample sizes allow for analysis by U.S. states.

4 Part 2: Trends in The Natural Rate of Unemployment

5 Trends in The Natural Rate In Unemployment Did labor market conditions improve during the 1980s and 1990s? -Unemployment rates fell substantially Related concept: Do income or substitution effects dominate with respect to labor supply decisions? Must reads: Juhn, Murphy, and Topel “

6 Juhn, Murphy, Topel: Evolution of Wage Inequality

7 Real Wages Over Time

8 Trends in Unemployment and Nonemployment

9 Breakdown of the Nonemployed

10 Breakdown of the Non-Participators: Rising Disability

11 Rising Disability Among the Persistently Unemployed

12 Autor and Duggan For a detailed analysis of the intersection of the role of disability and labor supply, see: “The Rise in the Disability Rolls and the Decline in Unemployment” David Autor and Mark Duggan (QJE 2003) Show that during recessions, the disability margin is much more relevant now than it was during the 1980s (the benefits to the disabled are now more comparable to unemployment benefits than before).

13 Autor and Duggan

14 More Juhn, Murphy, Topel

15 Does the Unemployment Rate Tell the Whole Story?

16 Increase in Long Term Non-employment Duration

17 Increase in Long Term Unemployment Duration

18 Unemployment Trends Throughout the Wage Distribution

19 Nonparticipation Trends Throughout the Wage Distribution

20 Non-employment Trends Throughout the Wage Distribution

21 Income or Substitution Effects?

22 Nonparticipation Trends Throughout the Wage Distribution

23 Longterm Nonparticipation Trends Throughout the Wage Distribution

24 Conclusions Decline in unemployment rate may not represent accurately the trends in labor market performance. Large decline in participation rates for men. Non employment has declined much less than unemployment. The decline is much more pronounced for low wage men. Does it tell us substitution effects are important? What about changes in transfers?

25 Part 3: Rug Rat Race and Time Investments in Children

26 Parental Time With Children By Education From Guryan, Hurst, and Kearney (JEP 2008) “Parental Education and Parental Time With Children”

27 Parental Time With Children By Education

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30 More Facts Richer countries spend more time with children than poorer countries. Within countries, high educated parents spend more time with children relative to low education parents.

31 Ramey and Ramey Facts

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33 Part 4: Regional Dynamics

34 How Do Locations Respond to Local Shocks? Continue our theme about thinking about regional economics (house prices are one part of that). The direct mechanism:Mobility. What implications do mobility have on the response of labor supply, wages, and unemployment to local economic shocks? Some work: Blanchard/Katz (Brookings, ) Topel “Local Labor Markets” (JPE, 1986)

35 Consider the Following Labor Market (Inelastic Labor Supply) Labor Demand Labor Supply

36 Consider the Following Labor Market (Inelastic Labor Supply) Labor Demand Labor Supply In short run, adjustment takes place on wages (labor supply is less elastic in short run)

37 Consider the Following Labor Market (Inelastic Labor Supply) Labor Demand Labor Supply In long run, adjustment takes place on N (labor supply is more elastic in long run)

38 What is the Mechanism? In/out migration of workers…..

39 Blanchard/Katz Facts: Persistence of Growth Rates

40 Blanchard/Katz Facts: Cumulative Declines (relative to trend)

41 Blanchard/Katz Facts: : Cumulative Declines (relative to trend)

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45 Blanchard/Katz Facts: Persistence of Unemployment Rate?

46 Blanchard/Katz Facts: Convergence of Wages

47 Blanchard/Katz Facts: Unemployment vs. Growth

48 Blanchard/Katz Facts: Growth vs. Wages

49 Blanchard/Katz Facts: Unemployment vs. Wages

50 Blanchard/Katz Facts: VAR of Negative Regional Shock

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55 Blanchard/Katz Facts VAR of Negative Regional Shock

56 Blanchard/Katz Facts: VAR of Negative Regional Shock

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58 Conclusions of Blanchard/Katz Regional Adjustments Take Place In short run, response occurs on unemployment and wage margins. In long run, it occurs on labor supply margin (via migration). Spatial equilibrium model has to make individuals indifferent to move across regions.

59 Part 5: Cross State Convergence

60 Cross State Convergence in Income Per Capita See a full discussion in Barro/Sali-Martin (Brookings, xxxx)

61 Convergence By Decades: 1940 – 1960

62 Convergence By Decades: 1960 – 1980

63 Convergence By Decades: 1980 – 2000?

64 Why Has Convergence Stopped? A great research question to think about Change in the skill premium? Chang-Tai Hseih and I are starting to put structure on this question How does changes in discrimination affect economic growth?

65 Inequality in Racial Occupational Choice Black Men vs. White Men White Men Decile1940196019802000 1 0.2980.4540.2200.179 2 0.2860.1000.1300.171 3 0.1550.1680.100 40.055 0.0920.147 50.095 0.0510.0700.094 60.032 0.075 0.092 70.022 0.0290.0580.052 80.019 0.0230.0570.078 9 0.0110.0130.0350.056 10 0.0120.0090.0410.030 Occupational Distribution Gini 0.5430.5450.3100.253

66 Inequality in Racial Occupational Choice Black Men vs. White Men White Men Decile1940196019802000 Wage Gap -0.877 (0.006)-0.621 (0.005)-0.352 (0.003)-0.263 (0.003) Wage Gap | Education -0.515 (0.006)-0.423 (0.005)-0.256 (0.003)-0.182 (0.002) Wage Gape | Education and Occ. -0.341 (0.006)-0.222 (0.005)-0.189 (0.003)-0.113 (0.002) Wage Gap (Ed = 12) -0.476 (0.024)-0.207 (0.004) Wage Gap | Occ (Ed = 12) -0.285 (0.024)-0.140 (0.004) Wage Gap (Ed = Some College) -0.668 (0.027)-0.161 (0.004) Wage Gap | Occ (Ed = Some College) -0.427 (0.027)-0.087 (0.004) Wage Gap (Ed = 16+) -0.492 (0.007)-0.206 (0.006) Wage Gap | Occ (Ed = 16+) -0.330 (0.007)-0.114 (0.005)

67 Inequality in Racial Occupational Choice White Women vs. White Men White Men Decile1940196019802000 1 0.1390.1240.2350.149 2 0.0470.1710.0410.074 3 0.0610.1020.1230.068 4 0.1810.0500.0800.082 5 0.0170.1310.1420.156 6 0.1210.1380.1570.121 7 0.2170.0480.0700.101 8 0.1730.1840.0550.110 9 0.0190.0260.0420.076 10 0.0240.0250.0550.062 Occupational Distribution Gini 0.0450.1490.2000.053

68 Inequality in Racial Occupational Choice White Women vs. White Men White Men Decile1940196019802000 Wage Gap -0.424 (0.004)-0.641 (0.003)-0.509 (0.002)-0.240 (0.002) Wage Gap | Education -0.484 (0.003)-0.676 (0.003)-0.512 (0.002)-0.283 (0.002) Wage Gape | Education and Occ. -0.468 (0.004)-0.613 (0.003)-0.440 (0.002)-0.225 (0.002) Wage Gap (Ed = 12) -0.421 (0.006) Wage Gap | Occ (Ed = 12) -0.464 (0.008) Wage Gap (Ed > 12) -0.452 (0.008) Wage Gap | Occ (Ed > 12) -0.420 (0.010) Wage Gap (Ed < 12) -0.524 (0.005) Wage Gap | Occ (Ed < 12) -0.479 (0.006)

69 Inequality in Racial Occupational Choice Black Women vs. White Men White Men Decile1940196019802000 1 0.7800.5170.3850.245 2 0.0210.2040.0500.098 3 0.077 0.1500.095 4 0.0320.0050.0620.085 5 0.0090.0490.1200.144 6 0.0130.0850.1010.093 7 0.0090.0200.0350.076 8 0.0540.0320.0470.078 9 0.0020.0070.0250.052 10 0.004 0.0260.036 Occupational Distribution Gini 0.7310.6140.4030.239

70 Inequality in Racial Occupational Choice Black Women vs. White Men White Men Decile1940196019802000 Wage Gap -1.350 (0.009)-1.190 (0.008)-0.613 (0.003)-0.359 (0.003) Wage Gap | Education -1.078 (0.009)-1.088 (0.007)-0.568 (0.003)-0.331 (0.002) Wage Gap | Education and Occ. -0.783 (0.014)-0.718 (0.009)-0.409 (0.003)-0.232 (0.003) Wage Gap (Ed = 12) -1.018 (0.026) Wage Gap | Occ (Ed = 12) -0.688 (0.035) Wage Gap (Ed > 12) -1.012 (0.033) Wage Gap | Occ (Ed > 12) -0.750 (0.034) Wage Gap (Ed < 12) -1.076 (0.010) Wage Gap | Occ (Ed < 12) -0.800 (0.007)

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