The modern corporation as a safe haven for taste-based discrimination: An agency model of hiring decisions

This paper proposes a principal-agent model of labour market discrimination. In this model, the firm manager is a taste-based discriminator and has to make unobservable hiring decisions that determine the shareholder's profits, because workers differ in skill. The model shows that performance-based contracts may moderate the manager's propensity to discriminate, but that they are unlikely to fully eliminate discrimination. Moreover, the model predicts that sectors with high skill leverages discriminate less. Finally, the impacts of a wage gap between groups and of a diversity premium are investigated.     

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.     

Search frictions,real wage rigidities and the optimal design of unemployment insurance

In this paper, we study the optimal unemployment benefits financing scheme when the economy is subject to labor market imperfections characterized by real wage rigidities and search frictions. The US unemployment insurance financing is such that firms are taxed proportionately to their layoffs to finance unemployment benefits. Using DSGE methodology, we investigate how policy instruments should interact with labor market imperfections. It is shown that wage rigidities in a search and matching environment cause welfare costs, especially in the absence of an incentive-based unemployment insurance. This cost is mainly due to the distorting effect of wage rigidities which generate inefficient separations. We show that the optimal unemployment benefits financing scheme – corresponding to the Ramsey policy – offsets labor market imperfections and allows implementation of the Pareto allocation. The second-best allocation brings the economy close to the Ramsey allocation. The implementation of the optimal policies clearly highlights the role of labor market institutions for short-run stabilization.     

The effect of housing and stock market wealth on consumption in emerging and developed countries

This study examines the long- and short-run relationship between private consumption, housing wealth, stock market wealth and income. In order to asses this relationship empirically, we use pooled mean group estimators of dynamic heterogeneous panel data on a sample of 30 developed and emerging economies. The sample countries are segmented into three separate panels: a developed bank-based panel, a developed market-based panel, and an emerging bank-based panel. Empirical estimates support the existence of long- and short-run stock market wealth effects in both groups of developed countries, with the effect being particularly strong in the developed market-based countries. A moderate long-run housing wealth effect is confirmed only for the developed bank-based countries, while a very strong short-run housing wealth effect is present in the developed market-based countries. As far as the emerging countries are concerned, the evidence is somewhat inconclusive, but it does seem to suggest that both wealth effects are effective in the long run, with housing wealth being more dominant.     

Skill supply and biased technical change

This article contributes to the debate on skill-biased technical change by studying the dynamics of skill supply and wage inequality in an endogenous growth model with ability-biased technical progress. Due to a discouragement effect, rising within groups inequality reduces incentives to become educated for ordinary-ability workers. This mechanism generates a non-monotonic relationship between the growth rate and skill supply driving wage inequality upward during periods of accelerating technical change. This theoretical explanation is consistent with the apparent ambiguous relationship between the relative skill supply and inequality in the last decades in several OECD countries.     

NOMINAL AND REAL WAGE RIGIDITIES IN NEW KEYNESIAN MODELS: A CRITICAL SURVEY

Abstract The labour market is receiving increasing attention in the New Keynesian literature. In this paper, I critically survey this literature in order to highlight the role played by wage rigidities in the explanation of fluctuations caused by technology shocks. To this aim, I present a dynamic stochastic general equilibrium model with sticky prices, nominal wage rigidities and hiring costs. The comparison between this model and that of Blanchard and Gali highlights the non‐trivial differences which exist in the way nominal wage and real wage rigidities drive the economy's dynamics. My conclusion is that models incorporating nominal wage rigidities and some degree of price stickiness provide a better account of macroeconomic dynamics than models with real wage rigidities.     

Equal-treatment policy in a random search model with taste discrimination

We consider a search model of the labor market with two types of equally productive workers and two types of firms, discriminators and non-discriminators. Without policy intervention, there is wage dispersion between and within the two worker groups, but all wage differences become negligible when the taste for discrimination is small. We analyze the effect of an equal-pay policy, both in combination with affirmative action and without. When equal opportunity of hiring cannot be enforced, wage dispersion increases and wages for minority workers fall substantially relative to laissez faire. Sometimes also the wage gap between worker groups widens in response to the policy.     

Do unions redistribute income from capital to labour? Union density and wage shares since 1960

The income distribution between capital and labour is understudied within industrial relations. This article investigates the relationship between union density, taken as an indicator of the bargaining power of unions, and the wage share of national income in 16 advanced capitalist economies since 1960. It is shown that overall there is a positive relationship between union density and the wage share, as one would expect. But the relationship is weak or non‐existent in the Nordic countries, and in some specifications in Germany and Anglo‐Saxon countries, and overall it is weak in the 1980s and early 1990s. The article discusses the differences between countries in relationship to the literature on corporatism and wage moderation, and the decreasing effect over time with reference to increased global competition and conservatism of monetary policy from about 1980 on, increasing unions' incentives for wage moderation policies.     

Estimating the effects of the minimum wage in a developing country: A density discontinuity design approach

This paper proposes a framework to identify the effects of the minimum wage on the joint distribution of sector and wage in a developing country. I show how the discontinuity of the wage distribution around the minimum wage identifies the extent of noncompliance with the minimum wage policy, and how the conditional probability of sector given wage recovers the relationship between latent sector and wages. I apply the method in the “PNAD,” a nationwide representative Brazilian cross‐sectional dataset for the years 2001–2009. The results indicate that the size of the informal sector is increased by around 39% compared to what would prevail in the absence of the minimum wage, an effect attributable to (i) unemployment effects of the minimum wage on the formal sector and (ii) movements of workers from the formal to the informal sector as a response to the policy.     

工资粘性、经济波动与货币政策模拟——基于DSGE模型的分析

本文在BGG模型的基础上,引入了工资粘性,使之成为综合考虑价格粘性、金融加速器效应以及工资粘性的DSGE模型,我们模拟并比较了中国不同货币政策的影响。贝叶斯估计结果验证了中国工资粘性的存在,说明中国劳动力市场的配置尚存在改善的余地。货币政策模拟结果显示,价格型货币政策效应较强但持续期较短,而数量型货币政策效应较为温和但影响相对持久,央行需注重价格型货币政策与数量型货币政策的合理搭配与使用。     

Public–private sector wage differentials and the business cycle

This paper uses microeconomic data for the period from 1990 to 2004 to examine the relationship between public–private sector wage differentials and labour market conditions in Finland. The results show that the public sector wage premium is strongly counter-cyclical. On average, a 10 percent increase in the local unemployment rate increases the public–private sector wage gap by one percent. Separate analyses by government sector and quantiles of the distribution of wages reveal that it is local government workers and those working at lower skill levels who benefit more from increasing unemployment rate. The paper also exploits the longitudinal structure of the data to examine whether the results are constant over time. These results indicate that the cyclical pattern primarily emerges in years with deteriorated labour markets.     

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.     

Spatial wage disparities: Sorting matters!

Spatial wage disparities can result from spatial differences in the skill composition of the workforce, in non-human endowments, and in local interactions. To distinguish between these explanations, we estimate a model of wage determination across local labour markets using a very large panel of French workers. We control for worker characteristics, worker fixed effects, industry fixed effects, and the characteristics of the local labour market. Our findings suggest that individual skills account for a large fraction of existing spatial wage disparities with strong evidence of spatial sorting by skills. Interaction effects are mostly driven by the local density of employment. Not controlling for worker heterogeneity leads to very biased estimates of interaction effects. Endowments only appear to play a small role.     

Spatial changes in labour market inequality

We study spatial changes in labour market inequality for US states and MSAs using Census and American Community Survey data between 1980 and 2010. We report evidence of significant spatial variations in education employment shares and in the college wage premium for US states and MSAs, and show that the pattern of shifts through time has resulted in increased spatial inequality. Because relative supply of college versus high school educated workers has risen faster at the spatial level in places with higher initial supply levels, we also report a strong persistence and increased inequality of spatial relative demand. Bigger relative demand increases are observed in more technologically advanced states that have experienced faster increases in R&D and computer usage, and in states where union decline has been fastest. Finally, we show the increased concentration of more educated workers into particular spatial locations and rising spatial wage inequality are important features of labour market polarization, as they have resulted in faster employment growth in high skill occupations, but also in a higher demand for low wage workers in low skill occupations. Overall, our spatial analysis complements research findings from labour economics on wage inequality trends and from urban economics on agglomeration effects connected to education and technology.     

The effect of economic policy uncertainty on China’s housing market

This study examines the relationship between economic policy uncertainty (EPU) and housing price at the macro-level in China as a developing country. The empirical evidence indicates that EPU has a leading effect on China’s housing market. In general, the housing market is prosperous when economic policy is stable and there is a positive relationship between housing price variation and EPU, which means housing market risk grows under unstable economic policies in this developing economy. Moreover, economic policy variation affects low-amplitude changes in housing prices. A variation of policy uncertainty enhances the risk premium of the housing market. By contrast, the level of EPU influences high-amplitude changes in housing prices, which reflects the trend of EPU dominating China's housing market.     

Empirical labor search: A survey

This paper surveys the existing empirical research that uses search theory to empirically analyze labor supply questions in a structural framework, using data on individual labor market transitions and durations, wages, and individual characteristics. The starting points of the literature are the Mincerian earnings function, Heckman's classic selection model, and dynamic optimization theory. We develop a general framework for the labor market where the search for a job involves dynamic decision making under uncertainty. It can be specialized to be in agreement with most published research using labor search models. We discuss estimation, policy evaluation with the estimated model, equilibrium model versions, and the decomposition of wage variation into factors due to heterogeneity of various model determinants as well as search frictions themselves. We summarize the main empirical conclusions.     

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.     

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.     

Skill: the solution to low wage work?

During the UK Labour government's 13 years in power, raising skill levels was seen as the principal mechanism to improve the position of workers stuck in low wage jobs. This article draws together research undertaken in low wage sectors to question the assumptions that underlay Labour's approach to low pay.