Parental education and wages: Evidence from China

This paper investigates the relationship between parents’ education and children’s wage using two nationally representative data sets in China. Controlling for other things, both father’s and mother’s education are positively correlated with children’s wage. Nevertheless, returns to father’s education are lower in more market-oriented segments of the economy, including coastal regions, the non-state sector, and the later period of the reform era (post-1992), while the opposite is true for mother’s education. We argue that this new empirical evidence is consistent with the story that father’s education mainly indicates family connections useful for locating a better-paying first job, while mother’s education primarily captures unmeasured ability.     

Economic geography and wages in Brazil: Evidence from micro-data

This paper estimates the impact of market and supplier access on wage disparities across Brazilian states, incorporating the control for individual characteristics into the new economic geography methodology. We estimate market and supplier access disaggregated by industry, and we compute access to local, national and international markets separately. We find a strong correlation between market access and wage differentials, even after controlling for individual characteristics, market access level (international, national or local), and using instrumental variables.     

Effort and wages: Evidence from the payroll tax

I show that under a canonical efficiency-wage model, a per capita employment tax levied on the employer raises the wage. In contrast, under market clearing, wages fall regardless of whether effort is contractible. I examine the effect of increases in the earnings base for the payroll tax in the United States on wages of high-wage workers for whom the change represents an increase in a per capita tax. In most specifications, the results suggest that wages rose, consistent with the efficiency-wage model, but they are generally too imprecise to rule out large effects of wages on non-contractible productivity that are insufficient to prevent market clearing. Provided labour demand is inelastic, the results are inconsistent with a model of contractible effort.     

Union coverage and sectoral wages: Evidence from the Netherlands

This paper investigates the impact of union coverage on sectoral wages in the Netherlands. The semi-elasticity of the wage rate with respect to union coverage appears to be around 0.05; it is higher in the industrial than in the other sectors. The impact of union coverage on wages appears to be lower in the Netherlands than in the US and the UK. Union coverage increases the weight of internal (sector-specific) factors in wage determination and decreases the weight of external (labour market) factors. Apparently, unions increase the role of rent sharing in wage formation and stabilize employment.     

The Export Promoting Effect of Emigration: Evidence from Denmark

Ethnic networks exhibit the potential to lower barriers to trade. The paper identifies the export‐promoting effect of emigration on the firm‐level using Danish data for the year 2001. Accounting for taste similarity, self‐selection and unobserved heterogeneity, three main findings are established. First, the elasticity of manufacturing exports to emigration is robust and of similar size as the effect of immigration. Secondly, only immigration encourages market entry but not emigration, suggesting that variable cost reductions and demand for home‐country products are the driving force of emigrant network effects. Thirdly, benefits from emigration accrue exclusively to low‐productivity firms.     

Age-differentiated minimum wages in developing countries

The fact that minimum wages seem especially binding for young workers has led some countries to adopt age-differentiated minimum wages. We develop a dynamic competitive two-sector labor market model where workers with heterogeneous initial skills gain productivity through experience. We compare two equally binding schemes of single and age-differentiated minimum wages, and find that although differentiated minimum wages result in a more equal distribution of income, such a scheme creates a more unequal distribution of wealth by forcing less skilled workers to remain longer in the uncovered sector. We also show that relaxing minimum wage solely for young workers reduces youth unemployment but harms the less skilled ones.     

Age-differentiated minimum wages in developing countries

The fact that minimum wages seem especially binding for young workers has led some countries to adopt age-differentiated minimum wages. We develop a dynamic competitive two-sector labor market model where workers with heterogeneous initial skills gain productivity through experience. We compare two equally binding schemes of single and age-differentiated minimum wages, and find that although differentiated minimum wages result in a more equal distribution of income, such a scheme creates a more unequal distribution of wealth by forcing less skilled workers to remain longer in the uncovered sector. We also show that relaxing minimum wage solely for young workers reduces youth unemployment but harms the less skilled ones.     

Establishment size and task-specific wages: Evidence from historical contract data

This study examines whether task-specific jobs are rewarded differently across establishments of different sizes and whether these rewards vary across distinct technologies. We found that the aggregate premium estimates on the impact of size on wages conceal significant differences between tasks and technologies and that these differences reflect unobserved individual heterogeneity. The role of self-selection of more productive workers into larger establishments is particularly substantial in the case of abstract tasks.     

Crime and growth convergence: Evidence from Mexico

Scholars have often argued that crime hinders growth, but the empirical literature assessing such an effect is scarce. By exploiting cross-municipal income and crime data for Mexico, in this study we find evidence indicating that drug-related crime indeed deters growth.     

Economic transition and gender differentials in wages and productivity: Evidence from Chinese manufacturing enterprises

We use firm-level data to analyze male–female wage differences in Chinese industry in the late 1990s. Our estimates indicate that employers' discrimination against women was not a significant source of the gender wage gap in Chinese state-owned enterprises. Instead, we find that the relative wage of unskilled female to male workers was higher than their relative productivity. This result indicates that unskilled female workers in the state sector had historically received wage premiums and consequently accounted for a disproportionate share of the sector's labor surplus.     

Risk attitudes and reservation wages of unemployed workers: Evidence from panel data

This paper studies risk attitudes of unemployed job seekers and their relationship to self-reported reservation wages. We find that risk aversion is prevalent, and that reservation wages decrease slightly over time. Furthermore, risk aversion and reservation wages are negatively correlated.     

Human capital aggregation and relative wages across countries

Most of the growth accounting literature relies on an aggregate production function to determine the contribution of factors of production relative to that of total factor productivity (TFP) in explaining differences in incomes across countries. I show that the importance of TFP in accounting for cross-country income differences depends crucially on how skilled and unskilled labor are aggregated. Further, cross-country evidence on the relationship between relative wages and relative endowments of skilled and unskilled labor suggests that the two types of labor should not be aggregated into a single factor of production. Growth accounting decomposition using a commonly used nested-CES aggregate production function that allows skilled and unskilled labor to be used as separate factors of production results in a significantly greater role for TFP in accounting for income differences across countries than that found by past studies. The finding that different aggregate production functions lead to significantly different conclusions about the role of TFP in accounting for cross-country income differences calls for a more general approach to understanding such differences.     

Human capital accumulation: Evidence from immigrants in low-income countries

This paper offers new evidence on the theory of human capital accumulation. The current findings in developed countries have documented that immigrants' earnings growth exceeds that of natives and that immigrants upgrade their occupations over time. Three possible explanations for these observations are suggested in the literature: 1) immigrants accumulate more human capital than natives, 2) immigrants are not able to fully transfer their skills, so over time, they restore the value of source-country human capital, and 3) immigrants are more productive than natives because they are positively selected on ability. This study investigates the labor market outcomes of immigrants in low-income countries and finds that immigrants earn more than comparable natives and work in better-paid occupations. Over time the gap in earnings and occupational distribution between immigrants and natives narrows. This observation is more consistent with the predictions of human capital accumulation theory than with skill transferability and selection theories.     

Creative accounting and electoral motives: Evidence from OECD countries

Using an unbalanced panel of 27 OECD countries over the period 1970–2011, I examine whether electoral motives influenced creative accounting. Governments engage in “below-the-line” operations, such as transactions in financial assets, that do not show up in the deficit figures but give rise to changes in debt. I use the difference between the change in public debt and the deficit (stock-flow adjustment) to measure creative accounting. The results suggest that governments strategically engaged in creative accounting before regular elections so as to sugarcoat the budget balance. I also provide an overview of government interventions that gave rise to large stock-flow adjustments.     

Remittances and banking sector breadth and depth: Evidence from Mexico

Despite the importance of remittances to developing countries, their impact on banking sector breadth and depth in recipient countries has been largely unexplored. We examine this topic using municipality-level data on the fraction of households receiving remittances and on measures of banking breadth and depth for Mexico. We find that remittances are strongly associated with greater banking breadth and depth, increasing the number of branches and accounts per capita and the amount of deposits to GDP. These effects are significant both statistically and economically, and are robust to the potential endogeneity of remittances, inclusion of a wide range of controls and even municipal fixed effects specifications using an alternative panel data set from a sample of municipalities.     

Bribery environments and firm performance: Evidence from CEE countries

We examine the relation between bureaucratic corruption and firm performance in CEE countries. We show that divergent consequences of corruption found in previous studies can be explained by the specifics of the local bribery environment in which firms operate. A higher mean bribery is associated with lower firm performance, while higher dispersion of individual firm bribes appears to facilitate it. We also conduct a detailed analysis by firm sector and size, and countries' institutional environments.     

Coattails and the forces that drive them: Evidence from Mexico

Coattails and the forces behind them have important implications for the understanding of electoral processes and their outcomes. By focusing our attention on neighboring electoral sections that face the same local congressional election, but different municipal elections, and assuming that political preferences for local legislative candidates remain constant across neighboring electoral sections, we exploit variation in the strength of the municipal candidates in each of these electoral sections to estimate coattails from municipal to local congressional elections in Mexico. A one percentage increase in vote share for a municipal candidate translates, depending on his or her party, into an average of between 0.45 and 0.78 percentage point increase in vote share for the legislative candidates from the same party (though this effect may not have been sufficient to affect an outcome in any electoral district in our sample). In addition, we find that a large fraction of the effect is driven by individuals switching their vote decision in the legislative election, rather than by an increase in turnout.     

Causality between consumer price and producer price: Evidence from Mexico

We examine the relationship between two inflation indices, consumer price index (CPI) and producer price index (PPI) for Mexico, a case study country which has successfully implemented inflation targeting after the economic crisis and high inflationary situation in 1995. Since the causality running from PPI to CPI exemplifies the cost push nature of inflation and the opposite is the indicator of demand pull inflation, this analysis could provide significant policy implications. We contribute to the literature by decomposing the time–frequency relationship between CPI and PPI through continuous wavelet approach. Our results indicate a bidirectional relationship between CPI and PPI. In short periods (1 to 7 months scale) CPI is leading PPI, while for longer periods (8 to 32 months scale) PPI is the leading variable.     

Voting on social security: Evidence from OECD countries

We test the subset of models of public choice of social security that have empirical predictions. The data, collected for this paper from the OECD countries for the years 1960, 1970, 1980, and 1990, provide some support for each of the theories. Higher median voter age, more income heterogeneity, greater similarity in family size, and variables that make a public pension program more profitable are all associated with a larger program. However, none of the theories explains why the shape of the age distribution and the time trend are so important. The results are robust under both fixed effects and random effects estimation.