Segmentation of Rural Labour Contracts: Some Further Evidence

The paper offers an explanation of labour tying commonly observed in seasonally agricultural economies. Employers may either hire regular labourers in the slack season to satisfy all or most of the labour demand in the high season but have underutilised labour in the low–demand season or rely on casual labourers only. Thus farmers hiring regular labour may also hire some casual labour as and when needed to minimise the hoarding costs of regular labour. Secondly, daily regular wages are usually lower than daily casual wages, but regular labourers usually get some wage–advance as well. Thus asset–poor workers have incentives to choose regular labour with interest–free wage advance because they face high marginal costs of credit in the segmented credit markets. The optimum hoarding costs decrease with increase in farm size, but increase with increase in spot market wages. However with improved availability of alternative employment opportunities and/or cheaper credit facilities to the asset–poor labourers, the supply of regular labour is likely to decline. Empirical evidence from the ICRISAT villages in south India seems to be consistent with the primary propositions of the model.     

A limited-dependent analysis of the choice of regular labour contract in seasonal agriculture

The paper examines both theoretically and empirically the factors determining the demand for regular labour in seasonal agriculture. In an implicit contract framework it is argued that there are ‘hoarding costs’ of regular labour in the slack period when there is not much work to be done. Consequently, the number of regular labour employed is constrained by the hoarding cost where larger employment-intensive farms tend to hire more regular labour. Evidence from the ICRISAT villages in India, too, show that though the marginal costs of regular labour are zero, there are significant hoarding costs of regular labour among small farms so that larger farmers are the major demanders of regular labour. Estimates of the double-hurdle model jointly determining the probability of hiring regular labour and demand for regular labour-hours (if a regular labour is hired) are shown to be an improvement over univariate tobit estimates of the demand for regular labour-hours only.     

Trade, Wages and Unemployment in the Presence of Hiring and Firing Costs

This paper offers a new explanation of the recent Australian wage inequality and unemployment experience. Building on a standard international trade model, it is argued that trade affects wage inequality and unemployment through changes in the bargaining power of different groups of workers in the presence of hiring and firing costs. This allows previously puzzling aspects of the trends to be explained, including the inconsistency of the existing Stolper-Samuelson trade explanation with rising relative skilled wages at the same time as rising skilled labour intensity of production. Considering differences in labour market institutions, in particular hiring and firing costs and minimum wages, allows differences between the experiences of Australia, the USA and Europe to be explained.     

Wage-related labour standards and FDI in China: some survey findings from Guangdong province

Abstract. The paper presents findings from a survey of foreign invested enterprises (FIEs) in Guangdong, China, on the relationship between foreign direct investment (FDI) and wage‐related labour standards (regular wages, and compliance with official overtime and minimum wages), which show that wage‐related standards are statistically higher in FIEs whose home countries’ standards are higher, after controlling for other influences. However, a cost‐reduction FIE is more likely to be associated with inferior standards. The results call for a finer examination of the relationship between FDI and labour standards beyond the simple ‘race to the bottom’ thesis.     

Organic farms' seasonal farm labour-sourcing strategies in the pre-‘Arizona’ mode of immigration control

This study analysed the strategies of the more labour-intensive organic farms in sourcing seasonal farmworkers for their operations. The study period (2002) captures the farm labour market conditions prior to enforcement of stricter ‘Arizona’ style of immigration controls. Farmers at that time usually would tend to exhaust the full potentials of family labour contributions before relying on off-farm labour sources. When off-farm workers were considered, the results establish the farms' dependence on foreign labourers for seasonal farm work, although farmers seemed to have already been more cautiously hiring these workers in areas with lower concentrations of undocumented workers. This study also confirmed that farmers generally used high wage offers (possibly directed to domestic workers with more employment options) to lure them into working in their farms. The results also emphasize the need for improvements in the H2A guest farmworker visa programme that did not offer significant remedy for seasonal farm labour hiring at that time.     

Increasing urban wage inequality in China

Two strictly comparable cross‐section household datasets, relating to 1988 and 1995, are used to analyse the increase in wage inequality from an initially low level in urban China over this period of labour market reform. The institutional background and the evolution of policy are described. The rapid growth of wage inequality and the sharp widening of wage structure are quantified. Earnings functions are compared, and the increase in both the level and the inequality of wages are decomposed into their constituent elements. Quantile regression analysis is conducted to throw light on the relationships between the observed and the unobserved determinants of wages. Distinctions are made between the variables likely to represent human capital, discrimination, and segmentation. The evidence suggests that productive characteristics were increasingly rewarded as marketization occurred, but that discrimination and segmentation also grew. The move towards a fully‐fledged labour market was by no means complete.     

A Note on Efficiency Wage Theory and Principal–Agent Theory

Why are principal–agent models used in some circumstances and efficiency wage models in others? In this note, it is argued that efficiency wages provide incentives based on an evaluation of the agent's input, while the incentives analysed in principal–agent models rely on the agent's output. The choice between the two incentive schemes depends on the probability that the agent is caught shirking. Moreover, we demonstrate that a combination of input‐ and output‐related elements provides stronger incentives than payment schemes based on merely one of these elements. However, the combination requires a more complex labour contract involving an increased cost of writing the contract. The interaction between this transaction cost and a hiring cost is analysed.     

影子工资、影子收入与农户劳动供给——基于四川沐川县、安徽金寨县的调查分析

贫困地区就业的典型特征是自我雇佣,很少从事有酬劳动。如何在没有工资的情况下估计劳动供给行为就成为一个难题。在这种情况下,通过影子工资和影子收入来观察农户及其成员的劳动供给行为,为我们研究农户劳动力配置提供了一个有效的分析工具。本文利用Translog和C—D生产函数对四川省沐川县、安徽金寨县农户在林业、种植业、畜牧业和非农业的影子工资率进行估算,并利用Heckman两阶段模型分析了影子工资率等因素对农户劳动供给的影响,结果表明该地区农户的影子工资与劳动时间之间是负向关系,闲暇对于男性和女性来说是劣质品,家庭劳动供给的联合决策特征非常明显,家庭劳动力存在主次之分,该结论对于说明家庭内劳动分工以及劳动力流动有一定的指导意义。     

Detecting policy effects with wage rigidity and instability – evidence on the Taiwan labour market

With stagnant wages and growing productivity, a widening gap is becoming prevalent in global labour markets. The relationship between wages and productivity has become indeterminate, especially after the 2008 financial crisis. This article presents the phenomenon for why salary rarely follows up with productivity after an economy recovers. By using the GMM method, this study shows the interaction among wage, productivity and tightness, in which we illustrate the Taiwan labour market as an example to show how hiring system changes press wages away from an efficient allocation, causing instability and market failure. Surveying 35 labour markets for different industries, we reveal that the situation in the labour markets has drastically changed since 2008. We find that this resulted in a severe problem when the Taiwan firms got used to policies like ‘22K’, ‘fix-term contract’ and ‘unpaid leave’ programmes. These plans negatively impacted the economy and raised market failure with instability.     

RISING WAGES: HAS CHINA LOST ITS GLOBAL LABOR ADVANTAGE?

We document dramatic rising wages in China for the period 1978–2007 based on multiple sources of aggregate statistics. Although real wages increased seven‐fold during the period, growth was uneven across ownership types, industries and regions. Over the past decade, the wages of state‐owned enterprises have increased rapidly and wage disparities between skill‐intensive and labour‐intensive industries have widened. Comparisons of international data show that China's manufacturing wage has already converged to that of Asian emerging markets, but China still enjoys enormous labour cost advantages over its neighbouring developed economies. Our analysis suggests that China's wage growth will stabilize to a moderate pace in the near future.     

THE GENDER PAY GAP UNDER DUOPSONY: JOAN ROBINSON MEETS HAROLD HOTELLING

This paper presents an alternative explanation of the gender pay gap resting on a simple Hotelling-style duopsony model of the labour market. Since there are only two employers, equally productive women and men have to commute and face travel cost to do so. We assume that some women have higher travel cost, e.g., due to more domestic responsibilities. Employers exploit that women on average are less inclined to commute and offer lower wages to all women. Since women's firm-level labour supply is for this reason less wage-elastic, this model is in line with Robinson's explanation of wage discrimination.     

Labour Markets in China: A Study of the Structure and Evolution of Wages

This paper examines the development of labour markets and the evolution of a structure of wages in China, using household surveys for 1988, 1995, 2002 and 2007. It finds evidence of both provincial and sectoral segmentation in labour markets, with eastern regions and the state-controlled sector enjoying high wage premiums in the early reform period. During the reform, China has progressed slowly towards an integrated labour market with convergence in incomes between the rural non-agriculture sector and the urban market-based sector by 1995, when industry flourished in the rural areas. The wage gap between the rural non-agriculture sector and other sectors increased and the urban state-controlled sector remained segmented with respect to all other sectors up to 2002. However, the data from 2007 show there has been increasing sectoral and spatial integration.     

The Gender Wage Gap in Offered,Observed, and Reservation Wages for Spain

The literature on the gender wage gap and wage discrimination has exclusively analyzed observed wage differences, ignoring inactive or unemployed individuals. In order to obtain a more complete overview of gender wage differences, this paper analyzed inactive or unemployed individuals in terms of offered and reservation wages in Spain in the years 1994, 2000, and 2006. The results show that the observed wages give a more positive perspective of the gender wage gap than offered ones. Furthermore, the existence of an important gender wage gap for reservation wages has been noted, which is possibly because women take charge of household and family caregiving tasks to a greater degree than men. The results show that Spanish women had higher reservation wages and lower offered wages than men, which explains their lower participation in the labor market.     

Wage formation during economic transformation: macroeconomic facts and firm survey evidence from Slovenia

This article provides macroeconomic stylised facts on wage comparisons and microeconomic evidence on how institutional changes, competitive pressures in firms' output markets, human capital and efficiency wage payment affect wage formation during the early stages of transformation. Wages in Slovenia are higher than in other transition Central and Eastern European countries and higher than labour productivity. We use a firm survey panel dataset of Slovenian enterprises to investigate labour cost adjustment and its policy relevance. The results reveal that transformation was not a uniform process as it has induced different labour cost adjustments and wage responses to transformation shocks over time. The hypothesis that labour productivity and competitive pressures in firms' output markets were important for wage formation was not supported. We confirm that rent seeking increased wages in insider, management and employee-owned enterprises in anticipation of privatisation. The effect of human capital was modest and efficiency wage payment was found not to be significant. The hypothesis of unionisation in Slovenian enterprises was not supported.     

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.     

Chronic Labour Hoarding: Direct Evidence from Japan

This paper presents direct evidence on the characteristics of labour hoarding in Japan, using long-run, subjective survey data. A labour hoarding judgement index was constructed, and showed a seasonal pattern that did not reflect the external labour market condition. It consists of a stationary unanticipated part and a nonstationary antici pated one. The former part, unlike the latter, has no long-run relationship with sales, wage rate and working hours, the latter part has it. Furthermore, Granger causality is from labour hoarding to working hours.
JEL Classification Numbers: E24, J23     

The effect of real wages and inflation on labour productivity in Malaysia

This study examines the relationship between labour productivity, real wages and inflation in Malaysia using the bounds testing approach to cointegration and also the Granger causality test. The findings of this study suggest that inflation is negatively related to labour productivity. However, the effect of real wages on labour productivity is non-linear and the two have an inverted-U shape relationship. From a policy viewpoint, the Granger causality test shows that real wages Granger-cause labour productivity, but there is no evidence of reversal causation. Hence, the Malaysian dataset supports the claims by the efficiency wage theory. Moreover, we find that inflation and labour productivity in Malaysia have bilateral causality in the short- and the long-run.     

What are the determinants of hiring? The importance of product market demand and search frictions

In this article, we study the importance of product market demand and search frictions for hiring. We use a search-matching model with imperfect competition in the product market to derive an equation for total hiring in a local labour market, and estimate it on Swedish panel data. If product markets are imperfectly competitive, product demand shocks should have a direct effect on employment for given levels of prices and wages. Our main finding is that product demand has such a direct effect on hiring. This highlights the importance of taking imperfect competition in the product market into account in studies of employment dynamics and hiring. We also find that, for given levels of prices, wages, and product demand, the number of unemployed workers in a local labour market has a positive effect on hiring, suggesting that search frictions matter. Quantitatively, product demand shocks seem to be more important for understanding the variation in hiring than shocks to the number of unemployed workers.     

Welfare Policy in the Presence of Unionised Labour and Internationally Mobile Firms*

To what extent does the welfare state exacerbate the loss of jobs due to offshoring? We consider a model with oligopolistic sectors that are exposed to offshoring, as well as a unionised labour force that is entitled to unemployment benefits. We find that deeper economic integration induces wage moderation to the point that wages become independent of workers' outside options. Because the entire incidence of redistribution falls on net wages, the unions' willingness to moderate wages is constrained by the level of redistribution. Beyond an upper limit of redistribution, extending the welfare state compels unions to oppose wage moderation at the cost of losing jobs to offshoring. Below that upper limit, however, redistribution becomes less rather than more distortive.     

Labour Demand and Wage-induced Innovations: Evidence from the OECD countries

This paper shows that increasing real wages steepens or reverses the slope of the labour demand schedule because increasing wages give firms incentives to innovate and to invest in newer and more efficient vintages of capital. Using macroeconomic data for the OECD countries it is shown that the efficiency inducement of higher real wages steepens the traditional neoclassical labour demand function substantially. Taking into account the adverse demand effects of wage reductions it is doubtful that real wage reductions are a cure for the unemployment problem in the OECD countries.