TRADE LIBERALIZATION,LABOR DEMAND SHIFTS AND EARNINGS INEQUALITY IN SINGAPORE

This article investigates the relative wage between skilled and low skilled labor in a small open economy with traditionally few labor market rigidities. It looks at the role of relative skills demand and supply in determining skills premium and explores the extent to which trade liberalization affects the skills wage gap. Indications are that greater openness is linked to higher labor demand elasticity and/or technological progress. The evidence also suggests that rapid acceleration in labor demand for skills and trade liberalization has widened the wage gap between skilled and low skilled labor. This result persists regardless of industry type.     

Effect of Trade on the Demand for Skilled and Unskilled Workers

We use an input–output model to examine the effects of trade and domestic consumption, technology and labor productivity on skilled and unskilled worker demand. We found that trade was not the major contributor to changes in demand for skilled and unskilled labor during 1972–92, counter to the continuing debate on the trade-widening wage gap linkage. We found that skill intensity, i.e. the ratio of high-skilled to low-skilled workers for exports compared with imports, exceeded one during 1972–92, but did not increase. We explore alternative definitions of skilled and unskilled, and find our results to be robust to these alternative definitions.     

市场潜能加剧了性别工资不平等吗？

本文首先构造了我国338个城市包含海外和国内市场的总市场潜能指标,并利用2005年全国人口抽样调查数据和新经济地理学的基准工资方程,通过Heckman样本选择模型和RIF回归分解方法实证分析了市场潜能对性别工资不平等的影响。研究发现：市场潜能虽然对工资水平具有显著的正向拉动作用,并缩小了高技能劳动力的性别工资不平等,但扩大了低技能劳动力的性别工资不平等,从而加剧了整体的性别工资不平等,其中对低收入群体的加剧作用大于中高收入群体。RIF工资分解结果也证实了这一事实,且收入分布上半部分（90-50分位点）和工资结构效应对此贡献较大,尤其是市场潜能的工资结构效应贡献了总工资结构效应的60%以上,表明从城市间市场潜能及其对性别工资的影响入手,将是破解性别工资不平等难题的有效路径。     

The returns to skill

Since 1975, increases in the return to skill (measured by years of education), in the percentage of the labor force that is skilled, and in the variance of wage income within skill categories have characterized the U.S. labor market. The first two facts point towards an increase in the demand for skilled labor; the third fact establishes that this increase in demand has not been uniform for all members of a particular skill category. Hence, the three stylized facts point toward unobserved skill heterogeneity within education classes. In this paper, we argue that education per se does not measure skill adequately, and we suggest an alternative measure based on the observed skill characteristics of the job. We analyze the return to various dimensions of skill, including formal education. After accounting for other elements of skill, we find that the return to years of education has been constant since 1970. Moreover, variations in direct measures of skill, such as mathematical ability or eye-hand coordination, account for a substantial fraction of the increased dispersion in income among the college educated, and some of the increase in wage dispersion among those who have not earned a college degree.     

Returns to Skills and the Distribution of Wages: Spain 1995–2010

In contrast to the pattern observed in other developed countries, the Spanish wage distribution compressed between 1995 and 2006 and became more disperse afterwards, so that in 2010 wage inequality was roughly similar to 1995. In this paper, we analyze the role of supply and demand factors when accounting for these facts. We start by decomposing observed wage changes into changes in the composition of the labour force and changes in the returns of workers' and jobs' characteristics. The results indicate that the compression of the wage distribution between 1995 and 2006 is largely explained by changes in returns, and particularly, by a decrease in the returns to education. We show that both the increase in the supply of high‐skilled workers and the increasing weight of low‐skilled occupations are related to the decreasing trend in the skill premium over this period. In contrast, the widening of the wage distribution after 2006 is largely explained by an increase in the relative demand for high‐skilled workers generating an increase in the school premium.     

Accounting for wage and employment changes in the US from 1968–2000: A dynamic model of labor market equilibrium

In this article, we present a unified treatment of and explanation for the evolution of wages and employment in the US over the last 30 years. Specifically, we account for the pattern of changes in wage inequality, for the increased relative wage and employment of women, for the emergence of the college wage premium and for the shift in employment from the goods to the service-producing sector. The underlying theory we adopt is neoclassical, a two-sector competitive labor market economy in which the supply of and demand for labor of heterogeneous skill determines spot market skill rental prices. The empirical approach is structural. The model embeds many of the features that have been posited in the literature to have contributed to the changing US wage and employment structure including skill-biased technical change, capital-skill complementarity, changes in relative product-market prices, changes in the productivity of labor in home production and demographics such as changing cohort size and fertility.     

A SURVEY OF TRADE AND WAGE INEQUALITY: ANOMALIES,RESOLUTIONS AND NEW TRENDS

This paper surveys recent studies on trade and wage inequality. We first introduce some trade‐based explanations for increased wage inequality. There are, however, a number of criticisms of this line of thought based on the ‘trade‐wage inequality anomaly’, the ‘price‐wage anomaly’, and the small volume of trade. Mainly due to these criticisms, trade‐based explanations for rising wage inequality have been limited in the economic literature. Rather, the primary explanations for wage inequality have been based on skill‐biased technological change. Some trade models, however, have weakened the above criticisms, and more economists now argue that the effect of trade, though relatively small compared to that of technological change, is more significant than generally believed. Finally, we attempt to link new trends in inequality, such as job polarization and within‐group inequality, to the trade and wage inequality literature.     

The distributive and welfare effects of product and labour market deregulation

This paper studies the effects of product and labour market deregulation on wage inequality and welfare. By constructing an analytically tractable model in which the level of product market competition and the wages are endogenously distributed among sectors, I show that deregulation in goods market has mixed effects on inequality: the wage variance and the Gini index are lower, but the ratio of the highest over the lowest wage paid in the economy increases. Moreover, deregulation in labour markets raises the aggregate level of employment and the average real wage but reduces the welfare of trade unions in sectors with a low level of competition.     

Public infrastructure provision and skilled–unskilled wage inequality in developing countries

In this paper, we develop several static three-sector general equilibrium models with diverse labor market structures to investigate the effects of government provision of public infrastructure on the skilled–unskilled wage inequality in developing countries. The basic full employment model shows that the production sectors' relative dependence on the public infrastructure provision plays a crucial role in determining the skilled–unskilled wage inequality. Different relative dependences on public infrastructure may even result in opposite changes in the skilled–unskilled wage inequality. The above results are robust even when we extend the basic full employment model to three fundamentally different cases.     

Trade Liberalization and Poverty in Ecuador: A CGE Macro-Microsimulation Analysis

Cross-country analysis of the aggregate growth-poverty link is likely to miss important country-specific detail and possible offsetting forces in the underlying labour market adjustment process. This paper combines a CGE model analysis with a microsimulations approach to analyse the effects of trade liberalization on poverty and income distribution in Ecuador. The CGE model enables us to disentangle the general equilibrium effects of various trade policy scenarios on sector output, employment, factor incomes and household consumption. However, as is typical of CGE models, this analysis only provides distribution results for fairly aggregated groups of workers and a reduced number of representative households. The microsimulations approach adds the full distribution to the analysis and allows simulation of the effects of trade reform on the job status and remuneration of individual workers and thereby on household income distribution and poverty. The macro- microsimulation results indicate that the trade opening in Ecuador induced mild aggregate welfare gains, but rising income inequality due to rising wage differentials between skilled and unskilled workers implies virtually no poverty-reducing effect from trade liberalization.     

Wage premia and skill upgrading in Italy: why didn't the hound bark?

This paper presents firm-level evidence on the change of the employment share and the wage premium of non-manual workers in Italian manufacturing during the nineties. We find that the relative stability of the aggregate wage premium and employment share hides offsetting disaggregate forces: technical progress raises the relative demand for skilled labor within firms, whereas demand changes associated with trade reduce the relative demand for skills. Moreover, it is within the class of non-manual workers that most of the action takes place: the wage premium and employment share of executives rise substantially, while those of clerks fall in a similar proportion. Finally, we find that the export status of firms plays a key role in explaining labor market dynamics: exporters account for most of both demand-related and technology-related shifts. Overall, our results for Italy question the conventional view that the labor market is “rigid” due to labor market institutions.     

SKILL FORMATION, CAPITAL ADJUSTMENT COST AND WAGE INEQUALITY

The paper employs a three-sector general equilibrium model for examining the consequences of an infrastructure development scheme to the education sector and an inflow of foreign capital on the skilled-unskilled wage inequality in a developing economy. The education sector faces a capital adjustment cost for which the effective unit cost of capital depends positively on the amount of capital employed. Although both infrastructure development schemes and inflows of foreign capital lead to higher skill formation, the policies produce incongruent effects on the wages of skilled and unskilled labor. Furthermore, the effects of the policies on the skilled-unskilled wage inequality depend crucially on the relative factor intensities of the low-skill and high-skill sectors. Finally, which of the two policies a country should adopt will depend on technological, institutional and trade related factors.     

Workplace heterogeneity and wage inequality in Denmark

Wage inequality is on the rise in most developed economies, and this phenomenon has fostered a growing body of research on its potential drivers. Using German data over the period 1985–2009, Card et al. (The Quarterly Journal of Economics 2013, 128(3), 967-1015) argue that rising workplace heterogeneity has contributed substantially to the rise in wage inequality. I revisit their findings in two ways. First, because the generalization of their findings remains an open question, I apply their methodological approach to Danish register data and test whether rising workplace heterogeneity explains a significant share of the rise in wage inequality in Denmark. I find that, contrary to Germany, workplace heterogeneity remained practically stable over time, and this pattern contributed slightly negatively to the rise in wage inequality. Second, I complement Card et al.'s (2013) methods with the variance decomposition exercise proposed by Song et al. (2019) to identify more precisely the sources of the rise in wage inequality in Denmark. Although the rise in wage inequality is partly a between-establishment phenomenon, I show that the strengthening of assortative matching patterns and the rising heterogeneity of workers within establishments are the main drivers of growing inequality.     

Men's wage inequality in Serbia's transition

Wage inequality is considered to have been quite compressed in socialist economies. In this paper I analyse how men's wage inequality has changed during the period of transition to a market economy in Serbia, a country which has experienced a particularly dramatic transition. Changes in the distribution of earnings are examined using the Lemieux (2002) decomposition methodology and five annual Labour Force Surveys (2001–2005). I find that the change in wage inequality is mostly driven by changes in wage premiums, while the effect of changes in the composition of the labour force is very small. Isolating the effect of the emerging private sector reveals that changes in the private sector size and wage premium account for an average 25 per cent of the changes in inequality during this period. Moreover, the minimum wage is found to exert a dampening effect on wage inequality.     

Can a minimum wage increase employment and reduce prices in a neoclassical perfect information economy?

This paper investigates the possibility that the imposition of a minimum wage increases employment in the affected sector, measured in terms of hours of work, and lowers product prices. Unlike related prior theoretical research, I consider a neoclassical perfect information economy. Both labor and product markets are assumed to be perfectly competitive. Workers choose the number of hours of work and their effort level. Workers can potentially, but not necessarily, differ in their preferences over income, leisure, and effort. Effort is perfectly observable by the employers. The general framework that highlights the channels through which a minimum wage can increase employment and reduce prices is introduced and necessary and sufficient conditions derived. The paper also develops a number of comparative statics and some illustrative examples. The results provide a simple theoretical foundation that explains some recent findings of the empirical literature on minimum wages. Auxiliary results help explain the effects of minimum wage on the entire wage distribution in a way that is consistent with empirical findings. Finally, welfare analysis shows that worker welfare and employment tend to go in opposite directions; in particular, if employment increases after the imposition of the minimum wage, worker welfare will be reduced, though not necessarily vice versa (the opposite is true for consumer welfare). Strikingly, if a minimum wage increases worker welfare, the chief beneficiaries are not the affected workers but those with incomes that exceed the minimum wage.     

Gender gaps across the earnings distribution for full-time employees in Britain: Allowing for sample selection

This paper investigates gender differences across the log wage distributions of British employees working full-time in 2005. The raw gender wage gap shows a tendency to increase across the distribution with a glass ceiling effect indicated. A strong relationship between high skilled, white-collar occupations and carrying out managerial duties with the glass ceiling effect is indicated in the data. After allowing for positive selection into full-time employment by British women, a substantially larger gender earning gap is found: the selection corrected gender wage gap is close to twice the raw gap across most of the earnings distribution. This selection corrected gap is found to be predominantly related to women receiving lower rewards for their characteristics than men. Indeed, the results suggest the gender earnings gap would all but disappear across the earnings distribution if women working full-time received the same returns to their characteristics as men working full-time in Britain do.     

The dynamics of changes in the female wage distribution in the USA: a quantile regression approach

This paper examines the female wage structure focusing on changes at different points in the wage distribution. Newly developed quantile regression methods are used in analysing data from the March Current Population Survey. The results show that while the most significant changes for the less skilled women took place at the bottom of the wage distribution, for the more skilled groups changes occurred at both ends of the distribution. Consequently, wage inequality decreased for the high-school graduates and increased for the younger college graduates. Furthermore, the more highly skilled women experienced the steepest gain in wages regardless of their position in the distribution. © 1998 John Wiley & Sons, Ltd.     

Performance Pay,Union Bargaining and Within‐Firm Wage Inequality*

Theory predicts that performance pay boosts wage dispersion. Workers retain a share of individual productivity shocks and high‐efficiency workers receive compensation for greater effort. Collective bargaining can mitigate the effect of performance pay on wage inequality by easing monitoring of common effort standards and group‐based pay schemes. Analyses of longitudinal employer–employee data show that the introduction of performance‐related pay raises wage inequality in non‐union firms, but not in firms with high union density. Although performance‐related pay appears to be on the rise, the overall impact on wage dispersion is likely to be small, particularly in European countries with influential unions.     

Rising wage inequality,the decline of collective bargaining,and the gender wage gap

This paper investigates the increase in wage inequality, the decline in collective bargaining, and the evolution of the gender wage gap in West Germany between 2001 and 2006. Based on detailed linked employer–employee data, we show that wage inequality is rising strongly — driven not only by real wage increases at the top of the wage distribution, but also by real wage losses below the median. Coverage by collective wage bargaining plummets by 16.5 (19.1) percentage points for male (female) employees. Despite these changes, the gender wage gap remains almost constant, with some small gains for women at the bottom and at the top of the wage distribution. A sequential decomposition analysis using quantile regression shows that all workplace related effects (firm effects and bargaining effects) and coefficients for personal characteristics contribute strongly to the rise in wage inequality. Among these, the firm coefficients effect dominates, which is almost exclusively driven by wage differences within and between different industries. Labor demand or firm wage policy related effects contribute to an increase in the gender wage gap. Personal characteristics tend to reduce wage inequality for both males and females, as well as the gender wage gap.     

Wage inequality and the labor market impact of economic transformation: Croatia, 1970–2008

In this paper, we examine wage inequality and wage differentials in Croatia from 1970 to 2008 using two long aggregate time series on the distribution of income. We focus especially on changing income inequality related to educational and vocational attainment, changing income inequality within those groups, and how these two components of inequality were affected by the economic transformation from socialism to capitalism. We find that income inequality between groups rose moderately post-transformation, while overall inequality increased more sharply. This finding is consistent with a growing importance of individual rather than group productivity in labor market compensation, a change broadly consistent with the economic transformation of the Croatian labor market.