Oddbjørn Raaum

DO BUSINESS CYCLE CONDITIONS AT THE TIME OF LABOR MARKET ENTRY AFFECT FUTURE EMPLOYMENT PROSPECTS

Labor market conditions at the time and place of potential entry into the labor market are shown to have a substantial and persistent effect on adult employment prospects. Individuals who face particularly depressed local labor markets when they graduate from secondary education, areother things equalsubject to relatively high rates of nonemployment during their whole prime-age work career. Building on a unique combination of micro and macro data from Norway, we show that these effects are robust with respect to model specification and conditioning variables, and that they are not limited to individuals with a particularly disadvantaged background.

When Minority Labor Migrants Meet the Welfare State

Life cycle employment of minority labor migrants who entered Norway in the early 1970s diverges from that of natives. Immigrant employment was nearly complete during early years but declined to 50% by the year 2000 (compared to 87% for a native comparison group). We find that immigrant employment is particularly sensitive to the business cycle and that economic downturns of the 1980s and 1990s accelerated their labor market exit. We trace part of the decline to migrants being overrepresented in shrinking industries. But we also identify welfare disincentives that contribute to poor life cycle employment performance of immigrants with many dependent family members.

Earnings assimilation of immigrants in Norway – A reappraisal

Abstract. The relative earnings growth for immigrants in Norway is computed. Unlike Hayfron (1998, this journal) we define immigrants by country of origin rather than citizenship and perform separate studies of immigrants from inside and outside the OECD region. Replicating Hayfron op.cit. we find that the earnings assimilation is considerably weaker. Further, we find that the earnings of OECD immigrants are comparable to those of natives, while Non-OECD immigrants earn considerably less than natives at the time of entry, but that their relative earnings improve gradually over time. Earnings of different immigrant cohorts converged from 1980 to 1990, indicating a non-linear rate of assimilation.

The Neighbourhood is Not What it Used to be

Parents influence their children’s adult outcomes through economic and genetic endowments, transmission of cultural values and social skills, and through choice of residential location. Using a variance decomposition framework which provides bounds on the effect of families and neighbourhoods, we find important effects of family characteristics as well as residential location on educational attainment and adult earnings in Norway. Families are more important than neighbourhoods as the correlations among siblings are significantly higher than among children growing up in the same local community. Sibling correlations are estimated to be a little lower than for the US, while correlations between neighbourhood children in Norway are found to be significantly weaker than in the US. Unlike previous studies, we also assess changes over time by studying children growing up around 1960 and 1970. While family effects are permanent over time, the impact of neighbourhoods is reduced by half in size from 1960 to 1970 and we link this result to several policy changes in the 1960s aimed at increasing equality of opportunity in Norway. Our results differ from previous US studies, suggesting that the role of families and neighbourhoods in explaining the degree of equality of opportunity and social mobility depends on labour market institutions and redistributive policies.

Labour market training in Norway—effect on earnings

Abstract By means of a 6-year panel of annual earnings data, we estimate the impact of a labour market training programme (LMT) targeted at unemployed adults. Unlike most nonexperimental studies, we use an internal comparison group of rejected applicants to measure the counterfactual outcome of trainees. For a subsample of applicants, rejections were randomised on a course-by-course basis. Following Heckman and Hotz [J. Am. Stat. Assoc. 84 (1989) 862] we test alternative estimators. All models report positive effects of being offered training, though the effects are not always significantly different from zero. The linear control estimator reports significantly positive effects of training. Analysing courses with ordinary assignment, the pre-training test indicates a positive selection bias. Turning to applicants for courses with random assignment, the linear control model is not rejected by the pre-training test. The fixed effect, random growth and modified random growth models are rejected by the model restriction test; this is the case for courses with ordinary assignment as well as random assignment. We illustrate the value of an internal comparison group in estimating the counterfactual outcome of participants, by comparing the post-training outcomes of rejected applicants and unemployed nonapplicants. Rejected applicants have significantly higher post-training earnings than eligible nonapplicants, which indicates that self-selection into the programme is influenced by unobservables. In general, the results clearly support the view that reliable studies of training effects should be based on internal comparison groups. Moreover, the assumptions motivating nonexperimental estimators should be explicitly tested.

Who Pays for Performance

Using Norwegian establishment surveys from 1997 and 2003, we show that performance-related pay is more prevalent in firms where workers of the main occupation have a high degree of autonomy in how to organize their work. This observation supports an interpretation of incentive pay as motivated by agency problems. Performance-related pay is also more widespread in large firms. Traditionally, wage setting in the Norwegian labor market has been dominated by negotiations between trade unions and employer associations at the central and local levels, with a fixed hourly wage as a predominant element of the wage scheme. Our results show that performance-related pay is less common in highly unionized firms and in firms where wages are determined through centralized bargaining. Nevertheless, the evidence presented in this paper reveals that performance pay is on the rise in Norway, even after accounting for changes in industry structure, bargaining regime, and union density. Finally, we find that the incidence of performance-related pay relates positively to product-market competition and foreign ownership.

Do Labour Market Programmes Speed Up the Return to Work

We evaluate the impact of labour market programmes on unemployment durations in Norway, by means of a distribution-free mixed proportional competing risks hazard rate model. We find that programme participation, once completed, improves employment prospects, but that there is often an opportunity cost in the form of a lock-in effect during participation. The average net effect of programme participation on the length of the job search period is found to be around zero. For participants with poor employment prospects, the favourable post-programme effects outweigh the negative lock-in effects.

Immigration and Wages: Evidence from Construction*

To identify relative wage impacts of immigration, we make use of certification and licensing requirements in the Norwegian construction sector that give rise to exogenous variation in immigrant employment shares across trades. Individual panel data reveal substantially lower wage growth for workers in trades with rising immigrant employment than for other workers. Selective attrition from the sector masks the causal wage impact unless accounted for by individual fixed effects. For low and semi-skilled workers, effects of new immigration are comparable for natives and older immigrant cohorts, consistent with perfect substitutability between native and immigrant labor within trade. Finally, we present evidence that immigration reduces price inflation, as price increases over the sample period were significantly lower in activities with growth in the immigrant share than in activities with no or small change in immigrant employment.

Does unemployment cause unemployment? Micro evidence from Norway

The way that unemployment duration affects employment prospects, is investigated using Norwegian micro transition data encompassing detailed accounts of 14 807 unemployed adults. A generalized non-proportional Weibull model is estimated, with two possible exits from the unemployment pool: a job or a labour force exit. On average the probability of obtaining a job is fairly constant at the individual level, while the probability of exiting the labour force increases significantly as unemployment duration is prolonged. For some particular groups of unemployed, there is also a marked negative duration dependence in the probability of obtaining a job.

Interindustry Wage Differentials and Unobserved Ability: Siblings Evidence from Five Countries

We examine the role of unobserved ability in explaining interindustry wage differentials. By using data on brothers, we account for unmeasured abilities shared by siblings. The data came from four Nordic countries and the United States. In the Nordic countries, only a moderate proportion of the variability in industry wages can be attributed to unobserved ability, while unmeasured factors explain as much as half of the U.S. industry-wage variation. Accounting for such differences, we show that the U.S. interindustry wage dispersion is similar with that in the Nordic countries.