Monopsonistic discrimination, worker turnover, and the gender wage gap

Motivated by models of worker flows, we argue in this paper that monopsonistic discrimination may be a substantial factor behind the overall gender wage gap. Using matched employer–employee data from Norway, we estimate establishment-specific wage premiums separately for men and women, conditioning on fixed individual effects. Regressions of worker turnover on the wage premium identify less wage elastic labour supply facing each establishment of women than that of men. Workforce gender composition is strongly related to employers' wage policies. The results suggest that 70–90% of the gender wage gap for low-educated workers may be attributed to differences in labour market frictions between men and women, while the similar figures for high-educated workers ranges from 20 to 70%.     

Public and private sector jobs,unreported income and consumption gap in India: Evidence from micro-data

This paper documents the wage and consumption gap between private and public sector employees in India. We empirically investigate the wage gap as well as difference in consumption expenditure using household survey from the 2004-05 National Sample Survey of India. Our results show that despite a lower level of public sector income in some of the income quantiles, the consumption of durable goods is not different between these two groups, statistically. After checking for competing explanations, we conclude that the absence of statistically significant consumption gap could be an outcome of ‘unreported’ income earned by public sector workers in India.     

The impact of cognitive skills on the distribution of the black-white wage gap

In this paper we use a semi-parametric estimation procedure to examine differences in the distribution of wages for black and white male workers in the US. In keeping with recent studies we find that differences in cognitive skills are an important determinant of the black-white wage gap and can explain almost the entire male racial wage gap among high wage workers. However, we find that equalising the distribution of cognitive skills will be less successful in reducing this gap at the lower end of the distribution.     

Skill shortages and labor market outcomes in Central Europe

The new Central European members of the EU have been characterized by low employment rates, especially among unskilled workers, despite the GDP recoveries and large private sector shares in output and employment. Evidence points at skill shortages in Central Europe as a key impediment to faster labor reallocation and convergence to the EU-15 employment structures. In this paper, we develop a simple model of labor reallocation with transaction costs and show how skill shortages can inhibit firm creation and increase income inequality. We use the model to examine the impact of training subsidies and their financing on skill acquisition and start-ups of new private firms, and show that the positive effect of subsidies would be mostly offset by high wage taxes. Shifting financing from wage to consumption taxes would improve incentives for workers’ training and firm start-ups, while relying more on income taxes could reduce the income gap between workers and entrepreneurs.     

Do Low‐Wage Workers React Less to Longer Unemployment Benefits? Quasi‐Experimental Evidence*

The fact that unemployed workers have different abilities to smooth consumption entails heterogeneous responses to extended unemployment benefits. Our empirical exercise explores a quasi‐experimental setting generated by an increase in the benefits entitlement period. The results suggest a hump‐shape response of unemployment duration over the one‐year pre‐unemployment wage distribution; individuals at the bottom and top of the wage distribution reacted less than those in the interquartile range. This behaviour of job searchers is consistent with labour supply models with unemployment insurance and savings. It questions the optimality of very long entitlement periods to target the unemployment experiences of low‐wage workers.     

Wage‐setting Decisions on Newly Hired Employees: Survey Evidence from Colombian Firms

This paper uses a survey on wage formation applied to 1305 Colombian firms to study wage‐setting decisions of newly hired employees. The survey indicates that wages of the newly hired are based mainly on a predefined wage structure. This may help to explain, in part, the presence of downward nominal wage rigidities in the Colombian formal labour market, since firms are unwilling to differentiate the pay of new hires from the wages of existing workers. Using multinomial logit models, we find that firm size and the share of temporary workers increase the relative risk of using a predefined internal structure over bargaining between employee and employer when setting the wages of the newly hired employees. Copyright © 2013 John Wiley & Sons, Ltd.     

Wage Growth Implications of Fixed-Term Employment: An Analysis by Contract Duration and Job Mobility

Focusing on Spain, where fixed-term workers account for a third of the wage and salary workforce, we examine the wage growth implications of fixed-term employment of varying duration while distinguishing between wage growth occurring on-the-job versus via job mobility. Wage growth among employees with indefinite work contracts largely occurs via job mobility, whereas fixed-term workers gain via job mobility as well as on-the-job. Consequently, job stayers with fixed-term contracts a year ago narrow their wage gap with respect to similar counterparts with indefinite-term contracts. Yet, this effect is solely driven by the 10.5 percentage points higher wage growth experienced by fixed-term workers with 6-months contracts able to keep their jobs beyond their initial contract period. Given the limited number of short-term temporary workers in those circumstances, the overall wage gap between past fixed-term and indefinite-term workers is unlikely to vanish in the near future.     

Identification issues in the public/private wage gap,with an application to Italy

This paper reviews some of the standard assumptions that are imposed in order to estimate the average public/private wage gap and that are mainly related to the possible selection of the sector. There are two contributions to the existing public/private wage gap literature. One is a better understanding of the identified parameters: standard estimators identify a local effect (LATE), which in general cannot be generalized to the entire population, as instead is almost always done. The other is the partial identification of the population average treatment effect, with an instrumental variable. To the best of my knowledge, this is the first paper in this literature that employs bounds. The technique is applied to male workers in Italy. For compliers, LATE estimates a wage advantage from working in the public sector greater than 30%. This return is within the narrowest bounds on the population average treatment effect that are consistent even with a much smaller gap (about 15% or more).     

The limits of the wage impact of discrimination

In spite of almost 40 years of active enforcement efforts by the EEOC, as well as the strong intervention by the plaintiff bar, the most popular benchmark by which we measure the influence of prejudice on wages paid to female and minority workers has changed very little. This paper maintains that to a large extent this seeming immunity of discriminatory wage gaps to the legal remedies provided by Title VII results from the mismeasurement of those effects. An alternative to the standard Oaxaca decomposition of the wage gap is offered which allows us to put plausible ranges around the true impact of antidiscrimination laws. Not only does this reduce the residual impact of the discrimination that appears to withstand Title VII remedies, it also suggests that the pre‐Title VII impact of discrimination on wages accounted for little of the gap observed at the time of its passage. Copyright © 2005 John Wiley & Sons, Ltd.     

Public–private wage gap in Latin America (1992–2007): A matching approach

Using matching methods, we estimate the public–private wage gap for urban workers in eleven Latin American countries for the 1992–2007 period. These methods do not require any estimation of earnings equations and hence no validity-out-of-the-support assumptions; furthermore, this approach allows us to estimate not only the average wage gap but also its distribution. Our main findings indicate that the average public sector worker earns more than his/her private counterpart, and that this differential increased over the 1992–2007 period. Important differences along the wage distribution are also shown in the results; in fact, public servants in the highest percentiles of the wage distribution generally earn less than their private sector equivalents. Nonetheless, the percentile at which a positive wage gap becomes a wage penalty shifted over the period as the average wage gap experienced by most countries widened. Still, the most qualified public sector workers do face a wage penalty. Furthermore, indicators of government effectiveness show no relationship with the country ranking according to the public–private wage gap.     

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.     

Semiparametric three‐step estimation methods for simultaneous equation systems

This paper proposes a new method for estimating a structural model of labour supply in which hours of work depend on (log) wages and the wage rate is considered endogenous. The main innovation with respect to other related estimation procedures is that a nonparametric additive structure in the hours of work equation is permitted. Though the focus of the paper is on this particular application, a three‐step methodology for estimating models in the presence of the above econometric problems is described. In the first step the reduced form parameters of the participation equation are estimated by a maximum likelihood procedure adapted for estimation of an additive nonparametric function. In the second step the structural parameters of the wage equation are estimated after obtaining the selection‐corrected conditional mean function. Finally, in the third step the structural parameters of the labour supply equation are estimated using local maximum likelihood estimation techniques. The paper concludes with an application to illustrate the feasibility, performance and possible gain of using this method. Copyright © 2005 John Wiley & Sons, Ltd.     

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.     

The Gender Wage Gap in Europe: Job Preferences,Gender Convergence and Distributional Effects

The gender wage gap has declined over time. However, most of the remaining gap is unexplained, partly because of gender convergence in wage‐determining characteristics. In this paper, we show the degree of convergence differs substantially across Europe. In some countries, predominantly in Eastern Europe, the gender wage gap is entirely unexplained. However, in other countries, differences between the characteristics of men and women explain a relatively large proportion of the wage gap. Gender differences in job preferences contribute 10% to the wage gap, which is more than job tenure, previous employment status or field of study. The role of job preferences is particularly strong at the top of the wage distribution.     

Tensions in industrial democracy and human resource management: a case study of Japanese enterprises in the Philippines

Critical areas in the entry of Japanese enterprises in a developing country like the Philippines involve the following: internal labour market formation, wage and compensation system, labour-management relations schemes and other management strategies. Human resource development in Japanese enterprises in the Philippines faces structural and institutional barriers. A high turnover rate of workers is one structural barrier, involving the labour market, which prevents the internalization of skills. There is an emphasis upon job-based wages and a reliance upon the local minimum wage standards both of which are distinctly non-Japanese practices.

There is a serious gap between perceptions among Japanese expatriates, Filipino managers and the local rank-and-file workers with respect to the hierarchy of factors in wage determination. Differences with respect to the concept and valuation of work add to the problems of communication.

In the Philippines, there are structural and institutional barriers to co-operation and the formation of consensus between the workers and the owners of the means of production. A long history of jurisprudence on labour-management disputes provides an incentive to resort to the legalistic approach to settle conflicts involving work relations. This paper will examine some of the tensions that occur between the expatriate Japanese firms and the industrial relations system of the host country.     

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.     

A gender wage gap decomposition for matched employer–employee data

In this paper we evaluate the extent to which the gender wage gap in the Finnish manufacturing sector is attributable to within-job wage differentials, sex differences in individual qualifications, and disproportionate concentration of women in lower-paying firms and lower-paying jobs within firms. We use matched employer–employee data to compare wage differentials between similarly qualified female and male workers who are doing similar work for the same employer. Our modelling approach employs a correlated random effects specification to account for the hierarchical grouped structure of the underlying data.     

Simulation Estimation of the Convergence of the Black–White Earnings Gap and Income Dynamics*

In this article, the effect of Title VII of the 1964 Civil Rights Act on the convergence of the black–white earnings gap and income dynamics is studied through the dynamic panel Tobit models implemented using the simulation estimators. It is found that the black–white earnings gap declined moderately after the implementation of Title VII of the 1964 Civil Rights Act in 1965. Based on the simulation studies of wage trajectories, it is also found that the positive impact of the Civil Rights Act on the convergence of the black–white earnings gap is especially significant for the group of middle‐aged and highly educated workers. Moreover, the rich dynamic structure of the earnings process is identified from the Current Population Survey‐Social Security Administration data set. It is shown that the various sources of dynamics in the earnings process are dominated by spurious state dependence for both blacks and whites.     

Relative wage and unemployment changes in Poland: microeconometric evidence

We estimate changes in the Polish wage and unemployment structures between the years 1994 and 1998 in order to identify labour market characteristics associated with increasing and decreasing relative demand, as well as relative wage rigidities. The evidence shows that relative demand for workers with a low level of education decreased. Whereas relative wages for workers with basic vocational education also fell in this situation, relative wages of workers with only primary education did not, pointing to a relative wage rigidity for this group which faced an above-average unemployment risk throughout the observation period.     

Outsourcing, labor market pooling, and labor contracts

This paper considers the interaction between input sharing and labor market pooling in urban areas. In particular, it examines the impact of the size of a city and business risks on the organizational structures of firms located in urban agglomerations, and it also discusses the impact of organizational structure on incentives to insure workers against income risks. It is shown that manufacturing firms suffer from a coordination game in their decision to outsource production. The existence of idiosyncratic risks causes manufacturers to refrain from outsourcing. The incentives to offer wage and employment protection to workers are more pronounced when manufacturers outsource the production of their inputs to a local market, which mitigates the impact of labor market pooling.