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on Labour Economics |
| By: | Dragana Djurdjevic (Institut für Volkswirtschaftslehre (Department of Economics), Technische Universität Darmstadt (Darmstadt University of Technology)); Sergiy Radyakin (Institut für Volkswirtschaftslehre (Department of Economics), Technische Universität Darmstadt (Darmstadt University of Technology)) |
| Abstract: | In this paper, we investigate the gender wage differentials for Switzerland. Using micro data from the Swiss Labour Force Survey, we apply a matching method to decompose the wage gap in Switzerland. Compared to the traditional Oaxaca-Blinder decomposition, this nonparametric technique does not require any estimation of wage equations and accounts for wage differences that can be due to differences in the support. Our estimation results show that the problem of gender differences in the supports matter in explaining wage differentials. We can interpret these differences as a form of “discrimination” which is reflected in wages because women face “barriers to the entry” in accessing certain individual characteristics that men achieve. As a consequence, accounting for these differences in gender supports may be useful in terms of policy implications in promoting more equality between men and women. |
| Keywords: | discrimination, gender wage gap, matching |
| JEL: | C14 J16 J71 |
| Date: | 2005–11 |
| URL: | http://d.repec.org/n?u=RePEc:tud:ddpiec:155&r=lab |
| By: | Patrick Puhani (Institut für Volkswirtschaftslehre (Department of Economics), Technische Universität Darmstadt (Darmstadt University of Technology)) |
| Abstract: | Rising wage inequality in the U.S. and Britain and rising continental European unemployment have led to a popular view in the economics profession that these two phenomena are related to negative relative demand shocks against the unskilled, combined with flexible wages in the Anglo-Saxon countries, but wage rigidities in continental Europe ('Krugman hypothesis'). This paper tests this hypothesis based on seven large person-level data sets for the 1980s and the 1990s. I use a more sophisticated categorisation of low-skilled workers than previous studies, which highlights the distinction between German workers with and without apprenticeship training. I find evidence for the Krugman hypothesis when Germany is compared to the U.S. However, supply changes differ considerably between countries, with Britain experiencing enormous increases in skill supply explaining the relatively constant British skill premium in the 1990s. |
| Keywords: | wage, earnings, unemployment, non-employment, rigidity, identification |
| JEL: | J21 J31 J64 |
| Date: | 2005–11 |
| URL: | http://d.repec.org/n?u=RePEc:tud:ddpiec:156&r=lab |
| By: | Michael R. Ransom (Brigham Young University and IZA Bonn); Ronald L. Oaxaca (University of Arizona and IZA Bonn) |
| Abstract: | We use a simple framework, adopted from general equilibrium search models, to estimate the extent to which monopsony power (or labor market frictions) can account for gender differences in pay, using data from a chain of regional grocery stores. In this framework, the elasticity of labor supply to the firm can be inferred from estimates of the elasticity of the separation rate with respect to the wage. We identify elasticities of separation from differences in wages and separation rates across job titles and across different years. We estimate elasticities of labor supply to the firm of about 3.5 for men and about 2.7 for women, suggesting significant wage-setting power for the firm. The differences in estimated elasticities of labor supply predict wage differences that are close to the observed male/female wage differences at the firm. |
| Keywords: | monopsony, gender, discrimination |
| JEL: | J42 J71 |
| Date: | 2005–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp1870&r=lab |
| By: | Frederick Guy (School of Management and Organizational Psychology, Birkbeck College); Peter Skottz (Department of Economics, University of Massachusetts) |
| Abstract: | New information and communication technologies, we argue, have been ‘power- biased’: they have allowed firms to monitor low-skill workers more closely, thus reducing the power of these workers. An efficiency wage model shows that ‘power-biased technical change’ in this sense may generate rising wage inequality accompanied by an increase in both the effort and unemployment of low-skill workers. The skill-biased technological change hypothesis, on the other hand, others no explanation for the ob- served increase in effort. |
| Keywords: | power-biased technical change, skill bias, efficiency wages, wage inequality, work intensity. |
| JEL: | J31 O33 |
| Date: | 2005–11 |
| URL: | http://d.repec.org/n?u=RePEc:inq:inqwps:ecineq2005-06&r=lab |
| By: | Kristjan-Olari Leping |
| Abstract: | In this paper the wage differential between the public and private sector is estimated by means of the quantile regression method, which will provide a more complex picture of the distribution of the public-private sector wage differential than can be obtained with ordinary mean regression. The evidence from quantile regression shows that there is a negative wage differential for higher quantiles, but no significant difference in wages for lower quantiles. The other main results are that women benefit more from working in the public sector than men, and that employees with higher educational levels benefit more from working in the public sector than low-educated workers. |
| Keywords: | Public sector, wage differential, quantile regression |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:mtk:febawb:39&r=lab |
| By: | Yves Zenou (IUI, GAINS and IZA Bonn) |
| Abstract: | The Todaro Paradox states that policies aimed at reducing urban unemployment are bound to backfire: they will raise rather than reduce urban unemployment. The aim of this paper is to reexamine this paradox in the context of efficiency wage and search-matching models. For that, we study a policy that consists in decreasing the urban unemployment benefit. In an efficiency wage model, we find that there is no Todaro paradox while this is not always true in a search-matching model since a decrease in the urban unemployment benefit can increase both urban employment and unemployment. |
| Keywords: | efficiency wages, search-matching, rural-urban migration, policy |
| JEL: | D83 J41 J64 O15 |
| Date: | 2005–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp1861&r=lab |
| By: | Bauer, Thomas; Sinning, Mathias |
| Abstract: | In this paper, a decomposition method for Tobit-models is derived, which allows the differences in a censored outcome variable between two groups to be decomposed into a part that is explained by differences in observed characteristics and a part attributable to differences in the estimated coefficients. The method is applied to a decomposition of the gender wage gap using German data |
| Keywords: | Blinder-Oaxaca decomposition; Tobit model; wage gap |
| JEL: | C24 J31 |
| Date: | 2005–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5309&r=lab |
| By: | Pascal Hetze; Carsten Ochsen (University of Rostock) |
| Abstract: | This paper argues that aging of the labor force affects job creation and job destruction. To analyze this, we extend a standard model of equilibrium unemployment and search in the labor market by the distinction between age specific separation risks and a productivity differential between young and elderly workers. Based on the theo- retical model, we identify four regimes of changes in the Beveridge Curve and job creation which can occur if the age structure varies. We also present an econometric model to find out which country relates to which regime. According to the estimates we can identify all four cases. For example, Spain and the US may experience positive effects on employment when the labor force grows older. In contrast to this, the unemployment rate in Germany and Japan will rise as a consequence of the increase in the share of elderly workers. |
| Keywords: | Vacancies and Separations, Unemployment, Job Creation, Aging of the Labor Force, Demographic Change |
| JEL: | J63 J64 J23 J21 J10 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:ros:wpaper:57&r=lab |
| By: | Ljungqvist, Lars; Sargent, Thomas J |
| Abstract: | We use three general equilibrium frameworks with jobs and unemployed workers to study the effects of government mandated unemployment insurance (UI) and employment protection (EP). To illuminate the forces in these models, we study how UI and EP affect outcomes when there is higher 'turbulence' in the sense of worse skill transition probabilities for workers who suffer involuntary layoffs. Matching and search-island models have labour market frictions and incomplete markets. The representative family model with employment lotteries has no labour market frictions and complete markets. The adverse welfare state dynamics coming from high UI indexed to past earnings that were isolated by Ljungqvist and Sargent (1998) are so strong that they determine outcomes in all three frameworks. Another force stressed by Ljungqvist and Sargent (2005), through which higher layoff taxes suppress frictional unemployment in less turbulent times, prevails in the models with labour market frictions, but not in the frictionless representative family model. In addition, the high aggregate labour supply elasticity that emerges from employment lotteries and complete insurance markets in the representative family model makes it impossible to include generous government-supplied unemployment insurance in that model without getting the unrealistic result that economic activity virtually shuts down. |
| Keywords: | discouraged worker; employment protection; job; matching; search; skills; turbulence; unemployment; unemployment insurance |
| JEL: | E24 J64 |
| Date: | 2005–11 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5340&r=lab |
| By: | Puga, Diego; Trefler, Daniel |
| Abstract: | Increasingly, a small number of low-wage countries such as China and India are involved in innovation - not the `big ideas', but the constant incremental innovations needed to stay ahead in business. We provide some evidence of this and develop a model in which there is a transition from old-style product-cycle trade to trade involving incremental innovation in low-wage countries. We explain why levels of involvement in innovation vary across low-wage countries and even across firms in each low-wage country. We then draw out the implications of this for the location of production, trade, capital flows, earnings and living standards. |
| Keywords: | international trade; low-wage country innovation |
| JEL: | F1 |
| Date: | 2005–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5286&r=lab |
| By: | Sascha O. Becker |
| Abstract: | Transition patterns from school to work differ considerably across OECD countries. Some countries exhibit high youth unemployment rates, which can be considered an indicator of the difficulty facing young people trying to integrate into the labor market. At the same time, education is a time-consuming process, and enrolment and dropout decisions depend on expected duration of studies, as well as on job prospects with and without completed degrees. One way to model entry into the labor market is by means of job search models, where the job arrival hazard is a key parameter in capturing the ease or difficulty in finding a job. Standard models of job search and education assume that skills can be upgraded instantaneously (and mostly in the form of on-the-job training) at a fixed cost. This paper models education as a time-consuming process, a concept which we call time-to-educate, during which an individual faces the trade-off between continuing education and taking up a job. |
| Keywords: | job search, education, enrollment, dropouts |
| JEL: | E24 J31 J41 J64 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_1584&r=lab |
| By: | Postel-Vinay, Fabien; Turon, Hélène |
| Abstract: | The existing literature on inequality between private and public sectors focuses on cross-section differences in earnings levels. A more general way of looking at inequality between sectors is to recognize that forward-looking agents will care about income and job mobility too. We show that these are substantially different between the two sectors. Using data from the BHPS, we estimate a model of income and employment dynamics over seven years. We allow for unobserved heterogeneity in the propensity to be unemployed or employed in either job sector and in terms of the income process. We then combine the results into lifetime values of jobs in either sector and carry out a cross-section comparative analysis of these values. We have four main findings. First focusing on cross-sector differences in terms of the income process only, we detect a positive average public premium both in income flows and in the present discounted sum of future income flows. Second, we argue that income inequality is lower but more persistent in the public sector, as most of the observed relative cross-sectional income compression in the public sector is due to a lower variance of the transitory component of income. Third, when taking job mobility into account, the lifetime public premium is essentially zero for workers that we categorize as "high-employability" individuals, suggesting that the UK labor market is sufficiently mobile to ensure a rapid allocation of workers into their "natural" sector. Fourth, we find some evidence of job queuing for public sector jobs among "low-employability" workers. |
| Keywords: | income dynamics; job mobility; public-private inequality; selection effects |
| JEL: | J31 J45 J62 |
| Date: | 2005–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5296&r=lab |
| By: | Xiaolin Xing (Department of Economics, National University of Singapore); Zhenlin Yang (School of Economics and Social Sciences, Singapore Management University) |
| Abstract: | This paper explores both observable and unobservable variables that would affect employed workers’ decisions on job change. We find that age, job satisfaction, satisfaction with working environment or job security, and firm size are among the major factors determining workers’ intentions of job-to-job mobility. Younger workers and workers in smaller firms are more likely to look for other jobs. We also find that men are more likely to consider a change in job than women, but when “actually looking for another job” is concerned, men and women do not differ. Furthermore, monthly income and working sector contribute significantly to looking for other jobs. |
| Keywords: | Voluntary job-to-job mobility; Job satisfaction; Logistic regression model |
| JEL: | J60 J63 C25 |
| URL: | http://d.repec.org/n?u=RePEc:sca:scaewp:0515&r=lab |
| By: | Blundell, Richard William; Chiappori, Pierre-André; Magnac, Thierry; Meghir, Costas |
| Abstract: | We present identification and estimation results for the 'collective' model of labour supply in which there are discrete choices, censoring of hours and non-participation in employment. We derive the collective restrictions on labour supply functions and contrast them with restrictions implied by the usual 'unitary' framework. Using the large changes in the wage structure between men and women in the UK over the last two decades we estimate a collective labour supply model for married couples without children. The implications of the unitary framework are rejected while those of the collective approach are not. The estimates of the sharing rule show that wages have a strong influence on bargaining power within couples. |
| Keywords: | collective models; labour supply |
| JEL: | D11 D12 D13 D70 J22 |
| Date: | 2005–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5287&r=lab |
| By: | Michele Pellizzari (IGIER-Bocconi University, fRDB and IZA Bonn) |
| Abstract: | Unskilled workers in low productivity jobs typically experience higher labour turnover. This paper shows how this empirical finding is related to variation in the efficiency of the matching process across occupations. A simple theoretical model of employers' search shows that firms find it optimal to invest relatively little in advertisement and screening when recruiting for low productivity jobs. This generates more separations and higher turnover at the bottom than at the top of the jobs’ distribution. The analysis of a unique sample of British hirings, containing detailed information about employers' recruitment practices, shows that more intensive recruitment leads to matches of better quality that pay higher wages, last longer and make employers more satisfied with the person taken on. |
| Keywords: | labour turnover, matching, recruitment, hiring |
| JEL: | J63 J64 M51 |
| Date: | 2005–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp1862&r=lab |
| By: | Martin Hoskins |
| Abstract: | This paper presents quantitative estimates of the effects of technological change on the composition of manual and non-manual employment in manufacturing in the United Kingdom for the period 1921 – 1995. The paper separates the effects of relative wage change, biased technological change and changes in sectoral composition and calculates the upward pressure on relative pay exerted by biased technological change. |
| Keywords: | Skill change; United Kingdom; technological change; sectoral composition |
| JEL: | J40 O52 |
| Date: | 2005–11 |
| URL: | http://d.repec.org/n?u=RePEc:lec:leecon:05/31&r=lab |
| By: | Ana Rute Cardoso (IZA Bonn, University of Minho and CEPR); Miguel Portela (Tinbergen Institute, NIPE-University of Minho and IZA Bonn) |
| Abstract: | We evaluate the impact of product market uncertainty on workers wages, addressing the questions: To what extent do firms provide insurance to their workforce, insulating their wages from shocks in product markets? How does the amount of insurance provided vary with firm and worker attributes? We use a longitudinal matched employer-employee dataset of remarkable quality. The empirical strategy is based on Guiso et al. (2005). We first estimate dynamic models of sales and wages to retrieve consistent estimates of shocks to firms' sales and to workers’ earnings. We are then able to estimate the sensitivity of wages to permanent and transitory shocks to firm performance. Results point to the rejection of the full insurance hypothesis. Workers’ wages respond to permanent shocks to firm performance, whereas they are not sensitive to transitory shocks. Managers are not fully insured against transitory shocks, while they receive the same protection against permanent shocks as workers in other occupations. Firms with higher variability in their sales, and those operating in different industries, offer more insurance against permanent shocks. Comparison with Guiso et al. (2005) indicates that Portuguese firms provide less insurance than Italian firms, corroborating evidence on the high degree of wage flexibility in Portugal. |
| Keywords: | product market uncertainty, wage shocks, risk sharing, wage insurance |
| JEL: | C33 D21 J33 J41 |
| Date: | 2005–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp1865&r=lab |
| By: | David Card; Sara de la Rica |
| Abstract: | In many European countries sectoral bargaining agreements are automatically extended to cover all firms in an industry. Employers and employees can also negotiate firm-specific contracts. We use a large matched employer-employee data set from Spain to study the effects of firm-level contracting on the structure of wages. We estimate a series of wage determination models, including specifications that control for individual characteristics, co-worker characteristics, the bargaining status of the workplace, and the probability the workplace is covered by a firm-level contract. We find that firm-level contracting is associated with a 5-10 percent wage premium, with larger premiums for more highly paid workers. Although we cannot decisively test between alternative explanations for the firm-level contracting premium, workers with firm-specific contracts have significantly longer job tenure, suggesting that the premium is at least partially a non-competitive phenomenon. |
| JEL: | J31 J50 |
| Date: | 2005–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:11829&r=lab |
| By: | Amelie Constant (The Institute for the Study of Labor (IZA), Bonn); Yochanan Shachmurove (Departments of Economics, City College of The City University of New York and University of Pennsylvania) |
| Abstract: | This paper attempts to compare the economic success of immigrants and natives in Germany. Employing data from German Socioeconomic Panel, the paper investigates the factors affecting self-employment as well as compares the income of self-employed and employed workers among four groups – West Germans, East Germans, guest workers and ethnic immigrants. Increasing age, higher education and self-employed parents increases probability of an individual’s self-employment, with the last two applying only to West Germans. The self-employed earn more than their salaried counterparts, except for East Germans. Despite self-employed immigrants having the highest earnings of all groups, self-employment rates remain low among immigrants. |
| Keywords: | Entrepreneurship,self-employment,Occupational Choice,immigrants,Wage Differentials |
| JEL: | J23 M13 J24 J61 J31 |
| Date: | 2005–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:pen:papers:05-030&r=lab |
| By: | John Knowles (Department of Economics, University of Pennsylvania) |
| Abstract: | We document a negative trend in the leisure of men married to women aged 25-45, relative to that of their wives, and a positive trend in relative housework. Taken together, these trends rule out a popular class of labor supply models in which unitary households maximize the sum of the spouse’s utility. We develop a simple bargaining model of marriage, divorce and allocations of leisure-time and housework. According to the model, a rise in women’s relative wage will reduce husband’s leisure and marriage rates when the quality of single life is relatively high for women. Calibration to US data shows the trend in relative wages explains most of the trend in relative leisure and about a third of the trend in housework, while the simultaneous trend in home-durables prices explains the balance of the housework trend. |
| Keywords: | General Aggregative Models, Neoclassical, Marriage, Marital Dissolution, Family Structure, Economics of Gender, Non-labor Discrimination, Time Allocation, Work Behavior, Employment Determination and Creation, Human Capital, Time Allocation and Labor Supply |
| JEL: | E13 J12 J16 J20 J22 |
| Date: | 2005–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:pen:papers:05-031&r=lab |
| By: | Svaleryd, helena (The Research Institute of Industrial Economics) |
| Abstract: | Based on a two-million-observation panel dataset that matches public firms with detailed data on their employees, we find that entrenched managers pay their workers more. For example, our estimates show that CEOs with more control rights (votes) than all other blockholders together, pay their workers about 6%, or $2,200 per year, higher wages. Since cash flow rights ownership by the CEO and better corporate governance are found to mitigate such behavior, we interpret the higher pay as evidence of agency problems between shareholders and managers affecting workers’ pay. The findings do not appear to be driven by endogeneity of managerial ownership and are robust to a series of robustness checks. These results are consistent with an agency model in which entrenched managers pay high wages because they come with private benefits, such as lower-effort wage bargaining and better CEO-employee relations, and suggest more broadly an important link between the corporate governance of large public firms and labor market outcomes. |
| Keywords: | Corporate Governance; Agency Problems; Private Benefits; Matched Employer-Employee Data; Wages |
| JEL: | G32 G34 J31 J33 |
| Date: | 2005–11–28 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:0654&r=lab |
| By: | Gautier, Pieter A; Teulings, Coen N |
| Abstract: | This paper shows that we can normalize job and worker characteristics such that without frictions there exists a linear relationship between wages on the one hand and worker and job type indices on the other. However, for five European countries and the US we find strong evidence for a systematic concave relation. An assignment model with search frictions provides a parsimonious explanation for our findings. This model yields two restrictions on the coefficients that fit the data well. Allowing for unobserved heterogeneity and measurement error we find that reservation wages are 25% lower than they would be in a frictionless world. Our results relate to the literature on industry wage differentials and on structural identification in hedonic models. |
| Keywords: | assignment; search; wage differentials |
| JEL: | J21 J23 J30 |
| Date: | 2005–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5229&r=lab |