On the role of social wage comparisons in gift-exchange experiments

This study extends a bilateral gift-exchange experiment by Clark et al. (2010). We investigate how the provision of either quantitative or qualitative information on the average wage paid in all worker-employer relationships impacts the wage set by employers and worker performance. We find that information on the average wage reduces (increases) both wage offers and effort levels in one-shot (repeated) relationships.     

Welfare implications of net social security wealth

Real net social wealth (NSSW), the real present value of social security benefits received minus social security taxes paid, is frequently used as a direct proxy measure for the impact of a social security system on generation welfare. The present paper establishes to the contrary, for a class of overlapping generation economies, that NSSW can be simultaneously negatively correlated with welfare for every agent in every generation. More generally, the paper determines the extent to which social security is needed in these economies to ensure social optimality, and investigates the proper subset of economies for which NSSW and generation welfare exhibit positive correlation.     

The veteran wage differential

There is debate in the literature as to whether military service is rewarded in the economy and the extent to which veterans receive either a wage premium or penalty. In this paper, we take a new approach to this question by conducting a wage decomposition of the veteran wage differential and decomposing the wage distribution of veterans and civilians instead of focusing only on the standard wage gap analysis at the averages. We find the veteran wage differential is driven by observable factors such as education, occupation, and industry, but also by location choice, a factor that has been previously overlooked in the literature. At the average, we find white men experience a veteran penalty whereas black men and women experience a veteran premium consistent with the bridging hypothesis. Additionally, we find that as we move along the wage distribution for all demographic groups, the veteran premium tends to become a veteran penalty, even after accounting for selection into military service. However, once we account for selection, we find that the premium for veteran black men disappears.     

Employment and wage dynamics in Estonia, 1989-951

This study monitors the effects of economic transition on wages and employment in a former Soviet Republic. Estonia's case is of particular interest because of its early adoption of relatively free labour market policies. Relative wages for the highest educated groups rose for all age groups. There were also rapid increases in returns to job experience, particularly at young ages. Increasing wage dispersion across human capital groups was accompanied by narrowing wage dispersion within human capital groups. Relative wages rose in sectors which gained relative employment, while they fell in shrinking sectors. In addition, there were large flows of labour between shrinking and growing sectors, suggesting that labour market equilibrating mechanisms developed very rapidly in Estonia.     

Minimum wage spillover effects and social welfare in a model of stochastic job matching

In this paper, I carry out a welfare analysis of the minimum wage in the framework of a Diamond–Mortensen–Pissarides model with stochastic job matching. I explore the role of the minimum wage in a labor market with trading externalities and present the necessary and sufficient condition for a minimum wage hike to be efficiency enhancing. In this context, I characterize minimum wage spillover effects and demonstrate that there is a direct link between the welfare effects and spillover effects of a minimum wage. This theoretical finding suggests that the welfare impact of minimum wage changes can be inferred from the empirical observation of spillover effects on the wage distribution.     

The gender gap in early-career wage growth

In the UK the gender pay gap on entry to the labour market is approximately zero but ten years after labour market entry, there is a gender wage gap of almost 25 log points. This article explores the reason for this gender gap in early-career wage growth, considering three main hypotheses – human capital, job-shopping and 'psychological' theories. Human capital factors can explain about 11 log points, job-shopping about 1.5 log points and the psychological theories up to 4.5 log points depending on the specification. But a substantial unexplained gap remains: women who have continuous full-time employment, have had no children and express no desire to have them earn about 8 log points less than equivalent men after 10 years in the labour market.     

Portuguese emigration 1958-1985: some empirical evidence

Supplying work in the home country or abroad must be seen as the result of the same decisional process. If that is true, the same set of variables should be used to explain the participation in the labor market and the emigration rates.Based upon empirical results, we discuss some of the traditional conclusions of the economic literature. Our empirical results, for example, show that: 1) there is a strong support for considering home wages and the wages in the country of destination asymmetrically, 2) imperfections in the capital markets seem to play an important role when workers must pay for their moving expenses and 3) there is a differential in coefficients between the period before 1974 and after that date, as 1974 is the year most of the Central European countries changed their immigration policies.     

The Socially Optimal Level of Saving in Australia, 1960-61 to 1994-95

In this paper a model is developed which determines the socially optimal level of saving for a small open economy. The model also determines the socially optimal disposition of saving between domestic capital accumulation and overseas asset accumulation. The model is then applied to the Australian economy for the period 1960-61 to 1994-95. For each year of that period socially optimal levels of saving, investment and the current account of the balance of payments are determined. Two main conclusions emerge. Firstly, while Australia under-saved by an average of 1.7 per cent of GDP from 1974-75 to 1994-95, it over-saved by an average of 5.3 per cent of GDP in the earlier period from 1960-61 to 1973-74. Secondly, Australia did not make optimal use of world capital markets to smooth consumption in the period from 1960-61 to 1994-95; although there is less evidence for this since 1984-85, suggesting that deregulation of capital markets may have facilitated the optimal smoothing of consumption.     

The evolution of wage inequality in Italy

This article analyses the evolution of inequality in yearly and daily wages between and within groups of blue and white collar, using the INPS-ISFOL database for the period 1985 to 1999 in Italy. Between-group inequality increased in the 1990s as clerical wages grew slowly, whereas blue collars' wages remained nearly constant. Within-group inequality increased only if measured by daily wages. The covariance structure analysis shows that inequality comes from persistent differentials among older workers and from high income volatility for younger cohorts. Within inequalities in office and manual workers are driven by the growth of permanency for the older cohorts (individual abilities, say experience, matter more) and by the growth of income volatility for the younger cohorts (luck in the labour market). Within each group, low paid workers during their career acquire earning gains for their abilities and reduce differentials with respect to high paid workers.     

The dynamics of wage determination in Romania

This article examines wage developments in Romania over the last 20 years, discusses the evolving role of government wage policy and structural labour market changes, and analyses the dynamics of the wage determination process. It finds that government wage policy has had a significant demonstration effect on private sector wages, driven mainly by policy decisions over the past few years. The article also finds strong causality from private sector wages to wages in state‐owned enterprises (SOEs) and government. No causality was found for changes in government wages to wages in SOEs or from SOE wages to private sector wages.     

The wage effects of ethnicity in Estonia

Using the retrospective (1989-94) Estonian Labour Force Survey (ELFS), we attempt to examine potential wage discrimination based on ethnicity (Estonian and Russian). Using standard wage decomposition methodology, we look at male full-time workers in the years 1989 and 1994. There is no evidence of discrimination against either ethnic group in 1989. However, the available data provide substantial evidence of discrimination against ethnic Russians in 1994. The evidence also suggests that Estonian language ability does not significantly affect wages. Surprisingly, Estonian-born ethnic Russians appear to fare worse than immigrant ethnic Russians in terms of wages.
JEL classification: J71, P23.     

The Vietnam reforms,change in wage inequality and the role of the minimum wage

The Vietnam ‘renovation’ reforms were implemented during the 1990s, but their full effect was only felt several years later. We present evidence on the developments in real wage growth and inequality in Vietnam from 1998 to 2008. Using a variety of approaches (traditional measures of inequality, comparison of density functions, decomposition of the change in real wage by sector as well as a detailed decomposition of the change in the Gini), we present a consistent picture: contrary to what one might have expected given the nature of the reforms, inequality declined sharply in the private sector (but not in the state sector). This study links these developments to the policy of aggressively increasing the minimum wage over the past several years, differences in implementation by sector as well as variation in the over‐time changes in minimum wage.     

The Rise and Likely Fall of the German Income Tax, 1958-2005

Data from official statistics and tax laws are exploited todescribe fifty years of income taxation in Germany, with a focuson its role as a fiscal and distributive tool. The temporalpattern that emerges from the data is one of a golden age ofthe German income tax, followed by a slow shift towards a majorcrisis. The turning point on the income-tax path seems to haveoccurred in 1986. I put forward the thesis that this downturnwas the outcome of a long-term change in the balance of politicalpower. That change is probably rooted in structural breaks thatoccurred in the German economy during the 1970s and early 1980s.(JEL D31, D72, H23}.     

Assessing the impact of a wage subsidy for single parents on social assistance

Abstract This paper studies the impact of a wage subsidy program aimed at long‐term social assistance recipients in Quebec. The program closely mimics the Self‐Sufficiency Project and was implemented for a trial period of one year in 2002.We focus on the labour market transitions of the targeted population starting one year before the implementation of the program and until the end of 2005. Our results show that the duration of spells off social assistance increased, while the duration of social assistance spells decreased slightly. The response to the program varies considerably with both observed and unobserved characteristics.     

The Polish wage inequality explosion1

This paper presents and analyses the sharp increase in hourly wage inequality after 1998 in Poland. The increase was similar in magnitude to the much‐studied increase in British wage inequality during the 1980s. Using data from the Polish Labour Force Survey, we find this increase to be associated with rising wage differentials and within‐group variances at both the upper and lower ends of the wage distribution. These increases are associated with differences in wage‐setting patterns between the public and private sector as well as with the rapid increase in demand for educated labour. One important difference between the sectors is the lack of an impact of local labour market conditions, or wage curve, clearly evident in private sector wages, on public sector wages.     

The motherhood wage penalty in times of transition

Depopulation trend in Ukraine caused to a large extent by the lowest low fertility rates raises serious concerns about the long-term economic growth and the country's future in general. In this paper we investigate the existence and the extent of the motherhood wage penalty as a potential impediment to having (more) children in a unique institutional environment. This environment is characterized by: de jure family supportive labor laws but de facto no legal enforcement of these laws; publicly subsidized childcare; and low cultural support for maternal employment, combined with extensive involvement of grand-parents. Relying on the data from the Ukrainian Longitudinal Monitoring Survey over the period from 1997 to 2007, we find that the overall motherhood wage penalty in Ukraine is much lower than in countries with similar de jure family policies and cultural norms. It constitutes approximately 19%, controlling for individual unobserved heterogeneity, a number of human capital characteristics, actual time in the labor force, and selection into employment. We also find that the motherhood wage penalty differs by education, age at birth of first child, and marital status.