Skills,Tasks and the Scarcity of Talent in a Global Economy

The scarcity of talent is a tremendous challenge for firms in the globalized world. This paper investigates the role of labor market imperfection in open economies for the usage of talent in the production process of firms. For this purpose, I set up a heterogeneous firms model, where production consists of a continuum of tasks that differ in complexity. Firms hire low‐skilled and high‐skilled workers to perform these tasks. How firms assign workers to tasks depends on factor prices for the two skill types and the productivity advantage of high‐skilled workers in the performance of complex tasks. I study the firms’ assignment problem under two labor market regimes, which capture the polar cases of fully flexible wages and a binding minimum wage for low‐skilled workers. Since the minimum wage lowers the skill premium, it increases the range of tasks performed by high‐skilled workers, which enhances the stock of knowledge within firms to solve complex tasks and reduces the mass of active firms. In a setting with fully flexible wages trade does not affect the firm‐internal assignment of workers to tasks. On the contrary, if low‐skilled wages are fixed by a minimum wage, trade renders high‐skilled workers a scarce resource and reduces the range of tasks performed by this skill type with negative consequences for the human capital stock within firms. In this case, trade leads to higher per‐capita income for both skill types and thus to higher welfare in the open than in the closed economy, whereas – somewhat counter‐intuitive – inequality between the two skill types decreases, as more low‐skilled workers find employment in the production process.     

Equilibrium Wage Dispersion,Firm Size,and Growth

This paper analyzes a model of equilibrium wage dynamics and wage dispersion across firms. It considers a labor market where firms set wages and workers use on-the-job search to look for better paid work. It analyzes a perfect equilibrium where each firm can change its wage paid at any time, and workers use optimal quit strategies. Firms trade off higher wages against a lower quit rate, and large firms (those with more employees) always pay higher wages than small firms. Non-steady-state dispersed price equilibria are also analyzed, which describe how wages vary as each firm and the industry as a whole grow over time. Journal of Economic Literature Classification Numbers: D43, J41.     

The exceptional performance of exporters and labour market outcomes: evidence from Egyptian firms

ABSTRACT

This paper examines the manufacturing export market in Egypt after the Arab Spring using a novel firm-level census dataset from 2013. Export is very rare in Egypt. The conventional export premia are very high, except for total factor productivity. Exporters have stark effects on labour market outcomes, including wages, employment, demand for skilled and female workers, wage inequality, and job security. These findings have two important implications: (1) Manufacturing exports might be monopolized by large firms, and (2) promoting exports could improve labour market outcomes, especially for skilled and female workers.     

Trade,Wage Gaps,and Specific Human Capital Accumulation*

We develop a new framework for the analysis of the impact of trade liberalization on the wage structure and on welfare. Our model focuses on the decision of workers to accumulate firm‐specific skills, by “on‐the‐job” training, knowing that this means their future wages will have to be negotiated, and that the outcome of negotiation will depend on the profitability prospect of firms operating in a new trading environment. We show that trade liberalization may reduce the welfare of a developing country because of its adverse effect on skill accumulation. We also explore the effects of trade liberalization on the wage gap between skilled and unskilled workers.     

Wage,foreign-owned firms,and productivity spillovers via labour turnover: a non-linear analysis based on Chinese firm-level data

Using firm-level panel data from Chinese manufacturing firms over the period 2004–2007, this article investigates the impact of the wage gap between local and foreign-owned firms on foreign direct investment (FDI) spillovers in terms of total factor productivity (TFP). We find a non-linear threshold effect that: a low-level wage gap threshold exists, below which FDI spillovers are significantly negative. This is because FDI spillovers via labour turnover are blocked due to the low wages of local firms, which jeopardizes the flow of skilled workers from foreign firms to local firms. In contrast, when the wage gap reaches a high-level threshold, local firms can get benefits from FDI spillovers. The reason is that high wages of local firms attract skilled employees to leave foreign firms, which yields a large magnitude of worker mobility from foreign firms to local firms. Our article provides evidence that labour turnover as the channel of FDI spillovers only works when the wage gap is beyond some threshold. Also, these thresholds vary across regions and firm ownerships.     

Keynesian Economics, Monetary Policy and the Business Cycle - New and Old

After a brief review of the main differences between New andOld Keynesian economics from the sixties this paper focuseson a tension between traditional sluggish measures of potentialoutput commonly used by policymakers and the New Keynesian (NK)notion of this variable which conceptualizes it as the levelof output that would have been produced under perfect competitionhad all prices and wages been flexible. The paper shows that,under monopolistic competition, NK potential output is oftenmore volatile than the level of output produced under stickyprices and wages implying either of the following. Real lifepolicymakers mistakenly target smooth versions of output or(since actual economies are monopolistically rather than perfectlycompetitive) the flexible price and wage equilibrium does notnecessarily maximize welfare. The paper shows, that dependingon the shape of the utility function and of the distributionof productivity shocks either case is possible and proposesa criterion for discriminating between them. (JEL E3, E4, E5,E6)     

Unobserved Heterogeneity,Job Training and the Employer Size–Wage Effect in Australia

This study attempts to clarify the nature of the employer size–wage effect in Australia by determining the extent to which it can be explained by observed and unobserved quality differences of workers. Our empirical results show that, for men, quality‐adjusted employer size–wage effects are quite small and are mostly driven by lower wages for workers in the smallest firms (fewer than 20 workers). For women, size–wage effects disappear when unobserved quality differences are accounted for. We also find that accounting for differences in the incidence of job training has no effect on the structure of wage differences by employer size.     

Unobserved Individual and Firm Heterogeneity in Wage and Job‐Duration Functions: Evidence from German Linked Employer–Employee Data

Abstract. We analyse the correlations between individual and firm fixed effects, and wage and job‐duration functions. Our results for large firms suggest that low‐wage firms tend to be stable firms, suggesting that lower wages can buy job stability. Furthermore, high‐wage workers sort into the stable low‐wage firms. Our interpretation is that high‐wage workers have a higher wage to insure against job loss and can afford more easily to forgo wages in favour of job stability. This may provide an explanation of the puzzle identified in previous literature that high‐wage workers are matched to low‐wage firms.     

Female labour force participation in an era of organizational and technological change

Abstract The supply of skilled female labour increased significantly at the beginning of the twentieth century as women assumed positions in the newly created clerical workforce. Evidence suggests that despite this increase in labour supply, the wage paid to female clerical workers increased over the period and that the ratio of female clerical wages to male manufacturing wages was roughly constant. These labour market facts can be accounted for in a dynamic general equilibrium model in which an exogenous increase in human capital induces an increase in demand for skilled clerical workers. While induced technological change that favours skilled workers may account for the observed increase in female real wages, explaining the stagnate relative weekly wages paid to female clerical workers requires a framework that includes organizational change.     

Two Tales on the Returns to Education: The Impact of Trade on Wages

This paper uses micro data from the Current Population Survey combined with data from the US International Trade Commission and Bureau of Economic Analysis to evaluate the impacts of international trade (import penetration and export intensiveness) on wages with a special focus on the returns to education. Consistent with the literature, our empirical analysis provides evidence that the wage rates of similarly skilled workers differ across net‐exporting, net‐importing, and nontradable industries. Our results add to the literature by showing that the wage gap usually found across importing and exporting industries vanishes for highly skilled workers (workers with college degree and beyond) when we control for the cross‐effect between international trade and education, but the wage gap due to international trade still persists for low‐skilled workers. This finding supports the view that education serves as an equalizer and counterbalances the adverse impact from import penetration on wages of highly skilled workers.     

Worker flows, job flows and firm wage policies

Like many transition economies, Slovenia is undergoing profound changes in the workings of the labour market with potentially greater flexibility in terms of both wage and employment adjustment. To investigate the impact of these changes, we use unique longitudinal matched employer‐employee data that permits measurement of employment transitions and wages for workers and enables links of the workers to the firms in which they are employed. We can thus measure worker flows and job flows in a comprehensive and integrated manner. We find a high pace of job flows in Slovenia especially for young, small, private and foreign‐owned firms and for young, less educated workers. While job flows have approached the rates observed in developed market economies, the excess of worker flows above job flows is lower than that observed in market economies. A key factor in the patterns of the worker and job flows is the determination of wages in Slovenia. A base wage schedule provides strict guidelines for minimum wages for different skill categories. However, firms are permitted to offer higher wages to an individual based upon the success of the worker and/or the firm. Our analysis shows that firms deviate from the base wage schedule significantly and that the idiosyncratic wage policies of firms are closely related to the observed pattern of worker and job flows at the firm. Firms with more flexible wages (measured as less compression of wages within the firm) have less employment instability and are also able to improve the match quality of their workers. JEL Classifications: J23, J31, J41, J61, P23, P31.     

Unionization,international integration,and selection

Abstract We study how unionization affects competitive selection between heterogeneous firms when wage negotiations can occur at the firm or at the profit‐centre level. With productivity specific wages, an increase in union power has: (i) a selection‐softening; (ii) a counter‐competitive; (iii) a wage‐inequality; and (iv) a variety effect. In a two‐country asymmetric setting, stronger unions soften competition for domestic firms and toughen it for exporters. With profit‐centre bargaining, we show how trade liberalization can affect wage inequality among identical workers both across firms (via its effects on competitive selection) and within firms (via wage discrimination across destination markets).     

Equipment Investment and the Relative Demand for Skilled Labor: International Evidence

The effects of equipment investment on relative wages and employment of skilled labor are estimated. The basic hypothesis is that such effects are positive, because of the presence of either equipment–skill complementarity or skill advantage in technology adoption. Using a panel data set for a wide range of countries, the relative wage and relative employment of skilled workers are regressed on lagged investment in machinery and other relevant variables. The results indicate a positive and strong effect of machinery investment on the relative demand for skilled labor, with the relative wage responding much sooner and for a much shorter time than relative employment. Journal of Economic Literature Classification Number: E24.     

Service outsourcing: The home,the host and the provider

Although offshoring service providers have grown meteorically in the last two decades, the phenomenon is still primarily analyzed through the lens of a home country and its firms. This paper presents a framework for explaining some of the stylized facts of the offshore service provider industry. The model characterizes the service choice of offshore service providers under alternative skill distribution and also explains why complex service providers employ more skilled workers, pay higher wages, and have a lower scale of provision. Finally, it sheds light on the relationship between partnering country sizes and wage inequality.     

Corporate Tournaments, Human Capital Acquisition, and the Firm Size–Wage Relation

This paper provides a possible explanation for the empirically observed size–wage effect and inter-industry wage differences. It develops a model in which incentives for workers to accumulate general human capital are provided by corporate tournaments, where workers with the highest level of general human capital win promotions. Given that the prizes in such tournaments are determined by outside market conditions, the investment and the equilibrium wages depend on firm and industry characteristics. The model implies that workers in bigger firms and in more technology intensive and profitable firms and industries acquire more human capital and receive higher wages and benefits.     

Wage posting without full commitment

Wage posting models of job search typically assume that firms can commit to paying workers exactly the posted wage. We relax this assumption and impose “downward” commitment; firms can commit only to paying at least their advertised wage. As each firm can only commit to pay at least their advertised wage, workers may demand that the firm pay more than the advertised wage. In labor markets with a finite number of workers and firms, the strategic interaction between firms makes it costly for firms to provide applicants the incentive not to demand wages in excess of the advertised wage. In equilibrium, firms may settle for running job auctions at the cost of losing control of the number of applicants that they can attract. When this strategic interaction between firms vanishes, workers never choose to demand more than the advertised wage.     

Firm-sponsored training in regulated labour markets: evidence from Spain

Using data from the 1994 European Community Household Panel Survey, the author examines who receives formal firm-sponsored training in Spain. The author finds that the distribution of firm-sponsored training in the work force is uneven and concentrated among more skilled workers in the upper deciles of the wage distribution. The data show that the likelihood of receiving firm-sponsored training for a low education employee is much lower. Also, the better-educated employees in high wage occupations of the largest establishments have higher probabilities of receiving specific training. Spain has a highly regulated labour market, and the labour market frictions and institutions compress and distort the structure of wages. However, the results suggest that the highly compressed wage structure do not provide firms with the incentive to invest in general training.     

Effect of cognitive abilities and non-cognitive abilities on labor wages: empirical evidence from the Chinese Employer-Employee Survey

ABSTRACT

The existing literature suggests that worker’s cognitive and non-cognitive abilities have a significant impact on wages. However, presently there is little research in this area of ??China’s labor force, due to scanty data. To this end, this Paper conducted a CEES-based data research, which found that, the cognitive and non-cognitive abilities of male, skilled workers have a greater impact on their wages, as compared with those of the female, unskilled workers. The OLS regression based on the Mincer Wage Equation found that, the impact of non-cognitive abilities on wages is generally larger than that of the cognitive abilities. All cognitive abilities have a positive impact on wages, wherein English proficiency has the greatest elasticity of wages, which is 12.1%. Of all non-cognitive abilities, Conscientiousness has the highest wage elasticity, which is 13.6%, whereas Agreeableness has a negative wage elasticity of ?6.32%.

Abbreviations: CEES: Chinese Employer-Employee Survey OLS: Ordinary least squares     

Spillovers of Equal Treatment in Wage Offers

We analyse a labour‐matching model with wage posting, where – reflecting institutional constraints – firms cannot differentiate their wage offers within certain subsets of workers. Inter alia, we find that the presence of impersonal wage offers leads to wage compression, which propagates to the wages for high productivity workers who receive personalized offers.     

Wage differentials, discrimination and efficiency

I analyze a large labor market where homogeneous firms post wages to direct the search of workers who differ in productivity. I show that the model has a unique equilibrium. The wage differential depends positively on the workers’ productivity differential only when the latter is large. When the productivity differential is small, high-productivity workers get a lower wage than low-productivity workers. This reverse wage differential remains even when the productivity differential shrinks to zero. However, the equilibrium is socially efficient. High-productivity workers always get the employment priority and higher expected wages than low-productivity workers. Although discrimination in terms of expected wages does not exist, conventional measures are likely to incorrectly find discrimination in the model.