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on Labour Economics |
| By: | Bernd Görzig; Martin Gornig; Axel Werwatz |
| Abstract: | East German wages have been below the West German wage level since unification. Moreover, the East-West wage gap implied by the contractual wages specified in collective wage agreements is drifting ever further apart from the wage gap in terms of effective wages. This paper looks at the role of establishment-specific factors — such as sectoral affiliation and size of the labour force — in this process. A non-parametric decomposition that has played a prominent role in the gender wage-gap literature is applied to breakdown the East-West wage gap into its constituent components. Using establishment data from the German employment statistics, the paper demonstrates that the divergence between wage agreements and effective wages is probably not a consequence of a massive escape from collective wage agreements, or the intense use of opt-out clauses in such agreements in East Germany. Rather, the shift of East Germany’s economic structure towards lower-paying types of companies has caused the lagging behind in the adjustment of wages. |
| Keywords: | Regional Wage Gap, Decomposition, Nonparametric Regression |
| JEL: | J31 L16 C14 C31 |
| Date: | 2006–05 |
| URL: | http://d.repec.org/n?u=RePEc:hum:wpaper:sfb649dp2006-044&r=lab |
| By: | Bernd Görzig; Martin Gornig; Axel Werwatz |
| Abstract: | The purpose of this paper is to sort out firm-related differences from effects that result from different economic structures. A non-parametric decomposition is used to analyse firm level difference between the wage spread in the two major regions of unified Germany. If firm-specific effects explain wage dispersion between firms, a decomposition of the wage dispersion between firms is necessary. The decomposition can help to find out, whether the economy-wide results for different regions are due to the composition of the regional economies by industries and firm-size, or whether the differences are due to firm-specific influences, like distinctions in market power. For Germany, a considerable part of the difference in the wage spread between the East and the West can be explained by different economic structures. However, by far the greater part of the difference in the wage spread between firms in the two parts of the country results from lower wages paid by firms of the same type in East Germany compared with their counterparts in West Germany. |
| Keywords: | Productivity, Wage Differentiation, Wage Spread, Firm Wage Levels, Wage Sharing, Non Parametric Analysis, Decomposition |
| JEL: | L16 C14 J30 |
| Date: | 2006–05 |
| URL: | http://d.repec.org/n?u=RePEc:hum:wpaper:sfb649dp2006-045&r=lab |
| By: | Anders Frederiksen (Hoover Institution, Stanford University, Aarhus School of Business and IZA Bonn) |
| Abstract: | I analyze the job separation process to learn about gender differences in job separation rates and employment stability. An essential finding is that employer-employee data are required to identify gender differences in job separation probabilities because of labor market segregation. Failure to recognize this may potentially lead to statistical discrimination. Three important empirical results are obtained from the analysis. First, women have higher unconditional job separation probabilities. Second, there are no gender differences in job separation probabilities for employees working in similar workplaces. Finally, women’s employment stability is relatively low because they are more likely to move from a job and into unemployment or out of the labor force, and less likely to make job-to-job transitions. |
| Keywords: | job separations, employment stability, labor reallocation, employer-employee data |
| JEL: | C23 E24 J63 |
| Date: | 2006–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2147&r=lab |
| By: | Gabriele, CARDULLO (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics); Bruno, VANDERLINDEN (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics) |
| Abstract: | This search-matching model is well suited for an equilibrium evaluation of labor market policies. When those policies are targeted on some groups, the usual juxtaposition of labor markets is however a shortcoming. There is a need for a setting where workers’ productivity depends on employment levels in all markets. This paper provides such a theoretical setting. We first develop a streamlined model and then show that it can be extended to deal with interactions among various labor market and fiscal policies. Simulation results focus on the effects of employment subsidies and in-work benefits and on their interactions with the profile of unemployment benefits and with active labor market programs. |
| Keywords: | Unemployment; search-matching equilibrium; wage bargaining; reductions of social security contributions; unemployment insurance; labor market programs |
| JEL: | E24 J3 J41 J64 J65 J68 |
| Date: | 2006–03–28 |
| URL: | http://d.repec.org/n?u=RePEc:ctl:louvec:2006010&r=lab |
| By: | Donggyun Shin; Gary Solon |
| Abstract: | In the most thorough study to date on wage cyclicality among job stayers, Devereux’s (2001) analysis of men in the Panel Study of Income Dynamics produced two puzzling findings: (1) the real wages of salaried workers are noncyclical, and (2) wage cyclicality among hourly workers differs between two alternative wage measures. We examine these puzzles with additional evidence from other sources. Devereux’s finding of noncyclical real wages among salaried job stayers is not replicated in the National Longitudinal Survey of Youth data. The NLSY data, however, do corroborate his finding of a discrepancy for hourly workers between the cyclicality of the two alternative wage measures. Evidence from the PSID Validation Study contradicts Devereux’s conjecture that the discrepancy might be due to a procyclical bias from measurement error in average hourly earnings. Evidence from the Bureau of Labor Statistics establishment survey supports his hypothesis that overtime work accounts for part (but not all) of the discrepancy. We conclude that job stayers’ real average hourly earnings are substantially procyclical and that an important portion of that procyclicality probably is due to compensation beyond base wages. |
| JEL: | E3 J3 |
| Date: | 2006–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12262&r=lab |
| By: | Erling Barth (Institute for Social Research, University of Oslo and IZA Bonn); Bernt Bratsberg (Frisch Centre for Economic Research and Kansas State University); Torbjørn Hægeland (Statistics Norway and Frisch Centre for Economic Research); Oddbjørn Raaum (Frisch Centre for Economic Research) |
| Abstract: | Using Norwegian establishment surveys from 1997 and 2003, we show that performancerelated 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. |
| Keywords: | performance related pay, agency problems, compensation methods |
| JEL: | J33 M52 |
| Date: | 2006–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2142&r=lab |
| By: | Kevin Lang; Michael Manove |
| Abstract: | We propose a model that combines statistical discrimination and educational sorting that explains why blacks get more education than do whites of similar cognitive ability. Our model explains the difference between blacks and whites in the relations between education and AFQT and between wages and education. It cannot easily explain why, conditional only on AFQT, blacks earn no more than do whites. It does, however, suggest, that when comparing the earnings of blacks and whites, one should control for both AFQT and education in which case a substantial black-white wage differential reemerges. We explore and reject the hypothesis that differences in school quality between blacks and whites explain the wage and education differentials. Our findings support the view that some of the black-white wage differential reflects the operation of the labor market. |
| JEL: | J7 |
| Date: | 2006–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12257&r=lab |
| By: | Sinn, Hans-Werner |
| Abstract: | This paper discusses how an industrialized country could defend the wages and social benefits of its unskilled workers against wage competition from immigrants. It shows that fixing social standards harms the workers and that fixing social replacement incomes implies migration into unemployment. Defending wages with replacement incomes brings about first-order efficiency losses that outweigh the budget cost to the government. By contrast, wage subsidies involve much smaller welfare losses. While the exclusion of migrants from a national replacement program does not improve the situation, the (temporary) exclusion of migrants from a national subsidy program makes it possible to avoid a distortion of the migration pattern. |
| Keywords: | migration; unemployment; welfare |
| JEL: | F15 F22 I38 H5 J61 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:lmu:muenec:937&r=lab |
| By: | Kamil Galuscak; Daniel Munich |
| Abstract: | We explain movements in the UV space, i.e. the relationship between stocks of unemployment and vacancies known as the Beveridge curve, in the Czech Republic during 1995-2004. While the Beveridge curve is described by labour market stocks, we explain shifts in the Beveridge curve using gross labour market flows by estimating the matching function. We interpret parameter changes in the matching function during the business cycle, distinguishing cyclical and structural changes in the unemployment rate. We find that labour market flows are very good coincidence predictors of turning points in the business cycle. We show that the Czech economy already suffers from the labour market hysteresis common in many other developed market economies in the EU. |
| Keywords: | Beveridge curve, Czech Republic, matching function, panel data, structural unemployment. |
| JEL: | E24 E32 J41 J64 C23 |
| Date: | 2005–08 |
| URL: | http://d.repec.org/n?u=RePEc:cnb:wpaper:2005/02&r=lab |
| By: | Giorgio Brunello (University of Padua); Daniela Sonedda (Universita' del Piemonte Orientale) |
| Abstract: | In a multisector economy with unionized labor markets, the interdependence of union wage claims - typical of industrial bargaining - affects the relationship between tax progressivity and wage pressure, which varies in a nonlinear fashion with the nature of the wage bargain, and can be hump-shaped. Our empirical analysis of 20 OECD countries for the period 1997-2004 shows that higher tax progressivity increases pre-tax wages (and unemployment) in countries characterized by industry level wage bargaining, and reduces them in countries with local or fully centralized bargaining. |
| JEL: | H24 |
| Date: | 2006–05 |
| URL: | http://d.repec.org/n?u=RePEc:pad:wpaper:0017&r=lab |
| By: | Andrea Ichino (University of Bologna, EUI, CEPR, CESifo and IZA Bonn); Fabrizia Mealli (University of Florence); Tommaso Nannicini (Universidad Carlos III de Madrid) |
| Abstract: | The diffusion of Temporary Work Agency (TWA) jobs originated a harsh policy debate and ambiguous empirical evidence. Results for the US, based on quasi-experimental evidence, suggest that a TWA assignment decreases the probability of finding a stable job, while results for Europe, based on the Conditional Independence Assumption (CIA), typically reach opposite conclusions. Using data for two Italian regions, we use a matching estimator to show that TWA assignments can be an effective springboard to permanent employment. We also propose a simulation-based sensitivity analysis, which highlights that only for one of these two regions our results are robust to specific failures of the CIA. We conclude that European studies based on the CIA should not be automatically discarded, but should be put under the scrutiny of a sensitivity analysis like the one we propose. |
| Keywords: | matching estimation, temporary employment |
| JEL: | C2 C8 J6 |
| Date: | 2006–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2149&r=lab |
| By: | Alexis, PARMENTIER (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics) |
| Abstract: | This paper analyzes the effects of the marginal tax rate on unemployment and economic efficiency in a matching model with homogenous agents when wages and working hours are bargained over. I show that the theoretical impact of a higher marginal tax rate on unemployment is ambiguous whatever the instantaneous utility in unemployment i.e. for an utility in unemployment that is either fixed or perfectly indexed on net wages. These results are in sharp contrast with the literature. Numerical simulations applied to France suggest that a higher marginal tax rate generally reduces the unemployment rate but at the expense of lower economic efficiency. The simulations point also out that the relation between the optimal marginal tax rate and the elasticity of labor supply is not monotonic. |
| Keywords: | Matching model; Marginal Tax Rate; Labor supply; Utility in unemployment |
| JEL: | D82 H21 H24 J64 |
| Date: | 2006–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:ctl:louvec:2006011&r=lab |
| By: | James Albrecht (Georgetown University and IZA Bonn); Lucas Navarro (Queen Mary, University of London); Susan Vroman (Georgetown University and IZA Bonn) |
| Abstract: | In many economies, there is substantial economic activity in the informal sector, beyond the reach of government policy. Labor market policies, which by definition apply only to the formal sector, can have important spillover effects on the informal sector. The relative sizes of the informal and formal sectors adjust, the skill composition of the workforce in the two sectors changes, etc. In this paper, we build an equilibrium search and matching model to analyze the effects of labor market policies in an economy with an informal sector. Our model extends Mortensen and Pissarides (1994) by allowing for ex ante worker heterogeneity with respect to formal-sector productivity. We analyze the effects of labor market policy on informal- and formal-sector output, on the division of the workforce into unemployment, informal-sector employment and formal-sector employment, and on wages. Finally, our model allows us to examine the distributional implications of labor market policy; specifically, we analyze how labor market policy affects the distributions of wages and productivities across formal-sector matches. |
| Keywords: | search, matching, informal sector |
| JEL: | E26 J64 J65 O17 |
| Date: | 2006–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2141&r=lab |
| By: | Öster, Anna (Konjunkturinstitutet) |
| Abstract: | This study investigates the effect of parental unemployment on children’s school performance. We use individual level data for all children completing lower secondary school in Sweden in 1990 directly moving on to three years of upper secondary school. We control for family and individual heterogeneity by means of lower secondary school GPA. The huge variation in Swedish unemployment during the beginning of the 1990s provides an ideal setting for testing the hypothesis that parental unemployment affects children’s school performance. Our results indicate that having an unemployed father has a negative effect on children’s school performance while having an unemployed mother has a positive effect. |
| Keywords: | School performance; unemployment |
| JEL: | E24 I21 J12 |
| Date: | 2006–05–22 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:ifauwp:2006_005&r=lab |
| By: | Giorgio Brunello (University of Padua); Francesca Gambarotto (University of Padua) |
| Abstract: | In this paper we use British data to ask whether local employment density - which we take as a proxy of labor market competition - affects employer - provided training. We find that training is less frequent in economically denser areas. We interpret this result as evidence that the balance of poaching and local agglomeration effects on training is negative. The effect of density on training is not negligible: when evaluated at the average firm size in the local area, a 1 percent increase in density reduces the probability of employer - provided training by 0.014, close to 4 percent of the average incidence of this type of training in the UK. |
| JEL: | J24 R12 |
| Date: | 2006–05 |
| URL: | http://d.repec.org/n?u=RePEc:pad:wpaper:0018&r=lab |