Inter-industry gender wage gaps by knowledge intensity: discrimination and technology in Korea

A new gender wage gap decomposition methodology is introduced, which does not suffer from identification problems caused by unobserved nondiscriminatory wage structure. The methodology is used to measure the relative size of Korean gender wage gaps, from 1994 to 2000 across industries, differentiated by industrial knowledge intensity, where knowledge intensity is the extent to which industries produce or employ high-technology products. Korea represents an important case study, since it possesses one of the fastest growing knowledge-intensive economies among industrialized countries. Empirical results indicate that over this period, discrimination (the unexplained portion of the gender wage gaps) in Korea was statistically smaller in knowledge-intensive industries than in industries with low knowledge intensity. Also, discrimination was declining on average over the period. This suggests that continued growth in knowledge-intensive industries in Korea may lead to further declines in the overall gender gap.     

Wage Rigidity,Inflation, and Institutions

We study the possible existence of downward nominal wage rigidity (DNWR) at wage growth rates different from zero in aggregate data. Even if DNWR prevails at zero for individual workers, compositional effects might lead to falling aggregate wages, while changes in relative wages combined with DNWR might lead to positive aggregate wage growth. We explore industry data for 19 OECD countries, over the 1971–2006 period. We find evidence for a floor on nominal wage growth at 6 percent in the 1970s and 1980s, at 1 percent in the 1990s, and at 0.5 percent in the 2000s. Furthermore, we find that DNWR is stronger in country‐years with strict employment protection legislation, high union density, centralized wage setting, and high inflation.     

Economic growth, skill-biased technical change and wage inequality: A model and estimations for the US and Europe

In recent literature skill-biased technical change has been viewed as a major cause for wage inequality. Some modelling and presentation of stylized facts have been undertaken for US time series data. A preliminary study of wage inequality in a model with knowledge as input in an aggregate production function has been presented by Riddell and Romer [General Purpose Technologies and Economic Growth, 1998, MIT Press]. Although some important forces determining wage inequality are widely accepted we know little about the quantitative impact of each source and differences across countries. We present a growth model of the Romer type with innovation-based technical change and two skill groups where the growth of knowledge, the relative supply of the two skill groups, externalities and substitution effects among the two groups are the driving forces for wage inequality. We undertake estimates for US time series data and contrast those estimates with results from some European countries. In particular, we compare parameter estimations for US and German time series data. The paper concludes that there is less wage inequality across skills in Europe in contrast to the US on the macroeconomic level. But, considering disaggregated data we observe some increases in inequality for Germany, too. Although our model reveals important variables for the explanation of wage inequality there may, however, also be other factors, such as trade unions, which have impacted the wage spread.     

EARNINGS DIFFERENCES BETWEEN CHINESE AND INDIAN WAGE EARNERS, 1987–2004

This paper is one of the first comprehensive attempts to compare earnings in urban China and India over the recent period. While both economies have grown considerably, we illustrate significant cross-country differences in wage growth since the late 1980s. For this purpose, we make use of comparable datasets, estimate Mincer equations and perform Oaxaca–Blinder decompositions at the mean and at different points of the wage distribution. The initial wage differential in favor of Indian workers, observed in the middle and upper part of the distribution, partly disappears over time. While the 1980s Indian premium is mainly due to higher returns to education and experience, a combination of price and endowment effects explains why Chinese wages have caught up, especially since the mid-1990s. The price effect is only partly explained by the observed convergence in returns to education; the endowment effect is driven by faster increase in education levels in China and significantly accentuates the reversal of the wage gap in favor of this country for the first half of the wage distribution.     

Trends in employment and the employment elasticity in manufacturing, 1971-92: an international comparison

Employment growth in manufacturing is limited by output growthin this sector, but the elasticity of employment with respectto output has varied widely in different regions and economies.This paper focuses attention on the idea that a major determinantof employment elasticity is the way the fruits of output growthare divided between employment growth and wage growth. But beforewe are able to determine the quantitative dimension of the trade-off,we have to allow for two other factors which affect the sizeof the cake available to labour in real terms. These are: (i)the elasticity of the wage bill with respect to output, whichdetermines the trend in the share of labour; and (ii) the priceeffect, depending partly on the rate of inflation and partlyon the movements of producer prices relative to consumer prices.A simple decomposition procedure is outlined in the paper whichallows us to quantify the relative importance of these factors,and hence give a clearer idea of the labour market outcome leaningto one or other of the two interests, employment growth andreal wage growth. The empirical analysis for different regionsof the world is carried out on time series data for the manufacturingsector collected by UNIDO from the national surveys of membercountries for the decades of the 1970s and the 1980s.     

A MACROECONOMIC PERSPECTIVE ON SKILL SHORTAGES AND THE SKILL PREMIUM IN NEW ZEALAND*

Qualification and occupation‐based measures of skilled labour are constructed to explain the skill premium – the wage of skilled labour relative to unskilled labour in New Zealand. The data exhibit a more rapid growth in the supply of skilled labour than the skill premium, and a very large increase in the real minimum wage over the period from 1986 to 2005. We estimate the rate of increase in the relative demand for skills and the elasticity of substitution. The data are consistent with skill shortages and a skill‐bias technical change. We examine the effects of the minimum wage, capital complementarity, and the exchange rate on the skill premium. We also test whether the demand for skills and the elasticity of substitution varied across industries and over time.     

Labor market dynamics when effort depends on wage growth comparisons

We present an efficiency wage model in which workers' disutility of effort depends on the level and on the growth rate of their wage relative to an alternative wage. Using data for four countries (US, UK, FR, GY), the implications of the model are examined and are found to be in accordance with the information in the non-stationary data. The restrictions implied by the model dynamics are not rejected by the data and the structural parameters are found to be constant through time. One interesting result is that the workers' disutility of effort depends less on relative wages growth and more on relative wage levels in the US than in the three European countries analyzed. First version received: September 1998 / Final version accepted: November 1999     

SHORT- AND LONG-RUN DECOMPOSITIONS OF UK WAGE INEQUALITY CHANGES

This paper focuses on the decomposition of observed increases in UK wage inequality since 1979 into the component factors of competition from low‐wage imports and technological change. Building on recent work by Abrego and Whalley, we argue that the length of production run and degree of fixity of factors is crucial in such analyses. If the response of labour markets to date is a short‐run response, in which factors and output have not adjusted fully, then analysis of the causes of increased inequality is substantially altered relative to a long‐run factors mobile world.     

WAGES AND EMPLOYMENT IN THE U.S. APPAREL INDUSTRY

This article uses individual-level data from the U.S. Census, Public Use Microdata Sample (PUMS), to examine wages and employment in the U.S. apparel industry. Total employment in this sector has been falling since 1970, and its overall average wage is the lowest of 25 industry aggregates. But disaggregation by gender, education, and nativity reveals that groups of highly educated male native workers earn higher average wages in apparel than in other industries. Moreover, after adjusting for observed individual differences in human capital (in addition to the three characteristics used to form worker subsets), highly educated male natives earn positive wage premiums in this sector. In contrast, most categories of immigrants and female natives earn relatively low average wages and experience negative wage premiums in apparel. This variation in the adjusted industry wage premiums across worker groups may be related to apparel's relative exposure to imports and immigrant workers.     

Investment-specific technological change, skill accumulation, and wage inequality

Wage inequality between education groups in the United States has increased substantially since the early 1980s. The relative number of college-educated workers has also increased dramatically in the postwar period. This paper presents a unified framework where the dynamics of both skill accumulation and wage inequality arise as an equilibrium outcome driven by measured investment-specific technological change. Working through equipment–skill complementarity and endogenous skill accumulation, the model does well in capturing the steady growth in the relative quantity of skilled labor during the postwar period and the substantial rise in wage inequality after the early 1980s. Based on the calibrated model, we examine the quantitative effects of some hypothetical tax-policy reforms on skill accumulation, wage inequality, and welfare.     

Testing the great decoupling: a long memory approach

The disconnection between productivity and workers’ compensation after 1980 is a fact not only for the U.S., Canada, Japan but also for Europe. The level of the decoupling between labor productivity and real hourly compensation is highest in the U.S. and Japan and lowest in Norway and Germany. This study investigates the great decoupling phenomena between 1950 and 2014 for eight economies with available time series data. The results should assist policy makers in developing efficient wage-setting mechanisms and help researchers in the field of wage moderation policy and the great decoupling. For this purpose we use fractional integration and cointegration techniques. Countries with stagnating minimum wages, rigid wage moderation policy and a high level of technological progress (strong total factor productivity growth) register higher wage stagnation in relation to labor productivity. Policy makers should be extremely careful when using wage moderation policy to improve a country’s competitiveness and should monitor the wage stagnation behind labor productivity (great decoupling) since workers have been producing more but receiving significantly less since 1980. The great decoupling is more prominent today and it is constantly increasing not just in the U.S. and Japan but worldwide.     

NON‐SCALE EFFECTS OF INTERNATIONAL TECHNOLOGICAL‐KNOWLEDGE DIFFUSION ON SOUTHERN GROWTH AND WAGES

We develop a dynamic, general equilibrium non‐scale endogenous growth model of North–South technological‐knowledge diffusion by imitation. Countries differ in levels of exogenous productivity, human‐capital levels and R&D capacity. Growth is driven by Northern innovative R&D and the South converges towards the North. Growth is also driven by human‐capital accumulation, scale effects are removed, imitation is only feasible once a threshold distance to the frontier has been attained and is dependent on the South's relative level of employed human capital and on domestic policies promoting R&D. Imitation promotes partial convergence of inter‐country wages and governs the path of intra‐South wage inequality.     

INTERNATIONAL COMPARISONS OF INTER-INDUSTRY WAGE DIFFERENTIALS

We use OECD data to examine inter-industry wage differentials (relative wages among industries) for 14 OECD countries over the period 1970–85. We find, first, that the industrial wage structures have shown remarkable stability over time in terms of rank order for all the countries in the sample. Second, despite their rank order stability, wage structures show a tendency to expand or contract. While the U.S. has shown increasing industry wage dispersion between 1970 and 1985, the pattern is very mixed for other countries. Unionization is a significant factor in explaining cross-country differences. Third, industry wage rankings show some evidence of becoming increasingly similar across nations over time, and this movement is associated with a convergence of per capita incomes. Fourth, industry wage differentials are positively related to an industry's productivity growth, output growth, capital intensity, and export orientation.     

Has the Canadian labour market polarized?

We use Census and Labour Force Survey (LFS) data for the period from 1971 to 2012 to investigate whether the Canadian wage and employment structures have polarized, that is, whether wages and employment have grown more in high‐ and low‐ than in middle‐paying occupations. We find that there has been faster growth in employment in both high‐ and low‐paying occupations than those in the middle since 1981. However, up to 2005, the wage pattern reflects a simple increase in inequality with greater growth in high‐paid than middle‐paid occupations and greater growth in middle than low‐paid occupations. Since 2005, there has been some polarization but this is present only in some parts of the country and seems to be related more to the resource boom than technological change. We present results for the US to provide a benchmark. The Canadian patterns fit with those in the US and other countries apart from the 1990s when the US undergoes wage polarization not seen elsewhere. We argue that the Canadian data do not fit with the standard technological change model of polarization developed for the US.     

HIGH‐TECH AND HIGH CAPABILITY IN A GROWTH MODEL*

A growth model is developed to substantiate the conventional wisdom that regards high‐tech high‐capability firms as an engine of sustained technological progress. High‐tech industries are characterized by abounding technological opportunities, which promote endogenous high capability firms due to a competitive escalation mechanism. While high‐tech high‐capability firms capitalize on and discharge the existing innovation potentials, they also contribute to recharge (due to knowledge spillovers). They are a source of growth and high wage rate. An inquiry into the reasons why the high‐tech/high‐capability growth mechanism is not widely adoptable across countries points to the role of the underlying corporate governance systems.     

NON‐RIGID WAGES AND MERGER PROFITABILITY REVERSAL UNDER CONVEX COSTS AND CENTRALIZED UNIONIZATION

Can a merger from duopoly to monopoly be detrimental for profits? This paper deals with this issue by focusing on the interaction between decreasing returns to labour (which imply firms’ convex costs) and centralized unionization. First, it is highlighted that a wage ‘non‐rigidity’ result applies: the post‐merger wage is higher than in the pre‐merger equilibrium. Second, it is shown that a ‘reversal result’ in relation to merger profitability actually realizes when the union is sufficiently oriented towards wages. Moreover, the higher the reservation wage, the degree of product differentiation, and the union's relative bargaining power, the higher the probability that a merger reduces profits.     

Sustained Comparative Advantage and Semi-Endogenous Growth

This paper constructs a two-country (Home and Foreign) general-equilibrium model of Schumpeterian growth without scale effects. The scale effects property is removed by introducing a distinct specification in the knowledge production function which generates semi-endogenous growth. In this model of semi-endogenous growth, an increase in the rate of population growth rate raises Home's relative wage and lowers its range of goods exported to Foreign. An increase in the size of innovations increases Home's relative wage but with an ambiguous effect on its comparative advantage. The model generates a unique steady-state equilibrium in which there is complete specialization in both goods and R&D production within each country.     

Goods market responses to trade shocks and trade and wages decompositions

Abstract.  Trade and wages literature asks whether trade or technology has been the major factor behind increases in wage inequality in OECD countries since the 1980s. In this literature, little attention has been paid to how goods market responses to trade shocks affect conclusions. Using an Armington heterogeneous goods trade model we capture demand side effects, and show how trade shocks affecting the price of unskilled‐intensive importable goods can be absorbed on the demand side of goods markets, with little or no impact on relative wage rates. No wage impact occurs if the elasticity of substitution in preferences between imports and import substitutes is one. As this elasticity increases, trade plays an ever larger role in explaining wage inequality changes, and as the elasticity goes below one the sign of the effect changes. We present some results of general equilibrium decompositions of total wage change into trade and technology components using UK data. We suggest that since many import demand elasticity estimates are in the neighbourhood of one, there is a prima facie case that goods market considerations further lower the significance of trade as an explanation of recent trends in OECD wage inequality beyond that claimed in the literature.     

Does the Choice between Wage Inequality and Unemployment Affect Productivity Growth?

Abstract. We present a non-scale continuous-time overlapping-generations growth model that provides an explanation for why economies with relative wage rigidity feature higher unemployment, but not slower productivity growth, than economies with flexible wages. The compression of the wage distribution associated with relative wage rigidity slows down human capital accumulation and growth ceteris paribus . But unemployment among the low-skilled workers strengthens the incentives to invest in human capital and, hence, growth. The two effects are offsetting, and growth is independent of the prevailing degree of relative wage rigidity. This knife-edge result is robust with respect to some modifications of the model.