Foreign ownership wage premia in emerging economies

In this article we examine the relationship between wages, labour productivity and ownership using a linked employer–employee dataset covering a large fraction of the Czech labour market in 2006. We distinguish between different origins of ownership and study wage and productivity differences. The raw wage differential between foreign and domestically‐owned firms is about 23 percent. The empirical analysis is carried out on both firm‐ and individual‐level data. A key finding is that industry, region and notably human capital explain only a small part of the foreign–domestic ownership wage differential. Both white and blue collar workers as well as skilled and unskilled employees obtain a foreign ownership wage premium. Foreign ownership premia are more prevalent in older and less technologically advanced firms. Joint estimation of productivity and wage equations show that, controlling for human capital, the difference in productivity is about twice as large as the wage differential. Overall, results indicate that the international firms share their rents with their employees.     

The impact of wages on job search in a transition economy - evidence with data from Eastern Germany

This study is concerned with the impact of wages on job search decisions in Eastern Germany immediately after reunification and in later periods. Several concepts measuring wage effects are used. The results of bivariate probit estimates with incomplete classification for a global and local job search show that the wage level had stronger effects on the former than on the latter job search decision directly after the collapse of the Berlin Wall. The degree of satisfaction with current income and the earnings capacities were irrelevant for the search decision. Low-paid East German workers had a higher propensity to search for a new job in the old Länder than others. This is contrary to the misleading result of isolated estimates about the job search in Western Germany. In the subsequent periods the situation has changed. The difference of earnings capacities between Eastern and Western Germany, specific East German wage premiums and intraregional wage inequality affect the decision to search for a new job in the west.For helpful comments I thank Michael Burda, Knut Gerlach, Robert A. Hart, Stefan Niermann, Liz Regan and two referees.     

Determinants of wage stickiness in a developing economy

We explore wage flexibility in a developing country and compare our results to what has been found in similar studies using European data. In particular, we conduct a survey of 1189 firms in Pakistan to analyze the determinants of wage rigidity. We find that the existence of competitive wages and an interaction with the informal economy are statistically significant determinants of wage stickiness. While the role of competitive wages is similar to what has been found in studies of European firms, the latter find a much larger role for turnover, collective bargaining and employment protection. In contrast, in Pakistan we find that firms hiring from the informal sector are significantly more flexible in changing their wages. This suggests that the informal sector adds to the wage flexibility of the formal sector.     

Building the minimum wage: the distributional impact of Germany’s first sectoral minimum wage on wages and hours across different wage bargaining regimes

The first minimum wage in Germany was introduced in 1997 for blue-collar workers in sub-sectors of the construction industry. In the setting of a natural experiment, blue-collar workers in neighboring 4-digit industries and white-collar workers are used as control groups for differences-in-differences-in-differences estimation based on linked employer–employee data. Estimation results reveal a sizable positive impact on mean wages in East Germany, but no significant effect in West Germany. Size and significance of effects are neither homogeneous across wage regimes (individual vs. collective contracts) nor across the distribution. The patterns suggest a compression in the lower part of the wage distribution and spillover effects to wages where the minimum is not binding, even in West Germany, where the bite of the MW was low. No effects on hours of work or substitution between workers of different qualification levels are found.     

Worker flows, job flows and firm wage policies

Like many transition economies, Slovenia is undergoing profound changes in the workings of the labour market with potentially greater flexibility in terms of both wage and employment adjustment. To investigate the impact of these changes, we use unique longitudinal matched employer‐employee data that permits measurement of employment transitions and wages for workers and enables links of the workers to the firms in which they are employed. We can thus measure worker flows and job flows in a comprehensive and integrated manner. We find a high pace of job flows in Slovenia especially for young, small, private and foreign‐owned firms and for young, less educated workers. While job flows have approached the rates observed in developed market economies, the excess of worker flows above job flows is lower than that observed in market economies. A key factor in the patterns of the worker and job flows is the determination of wages in Slovenia. A base wage schedule provides strict guidelines for minimum wages for different skill categories. However, firms are permitted to offer higher wages to an individual based upon the success of the worker and/or the firm. Our analysis shows that firms deviate from the base wage schedule significantly and that the idiosyncratic wage policies of firms are closely related to the observed pattern of worker and job flows at the firm. Firms with more flexible wages (measured as less compression of wages within the firm) have less employment instability and are also able to improve the match quality of their workers. JEL Classifications: J23, J31, J41, J61, P23, P31.     

The labor market impact of immigration in Western Germany in the 1990s

In this article we estimate the wage and employment effects of recent immigration in Western Germany. Using administrative data for the period 1987-2001 and a labor-market equilibrium model, we find that the substantial immigration of the 1990s had very little adverse effects on native wages and on their employment levels. Instead, it had a sizeable adverse employment effect on previous immigrants as well as a small adverse effect on their wages. These asymmetric results are partly driven by a higher degree of substitution between old and new immigrants in the labor market and in part by the rigidity of wages in less than flexible labor markets. In a simple counter-factual experiment we show that in a world of perfect wage flexibility and no unemployment insurance the wage-bill loss of old immigrants would be much smaller.     

Full wages,part-time employment and the minimum wage

The economic effects of the minimum wage have become increasingly ambiguous. Historically, economists have asserted that increases in the minimum wage result in increases in unemployment. This relationship has been challenged recently by Card and Krueger, Katz and Krueger, and Card. These authors have provided empirical evidence that seems to indicate that there is no relationship between various economic variables (such as level of employment, and product price, among others) and the minimum wage. In addition, these authors have not provided a cogent presentation of the effects of the minimum wage on part-time employment. This study examines, from a theoretical standpoint, the effects of the minimum wage on employment. Furthermore, we emphasize the distinction between money wages and full wages; and the role that part-time employmentplays in the analysis. After incorporating these factors into a theoretical presentation, we provide empirical evidence by way of an OLS regression. We conclude that firms respond to increases in the minimum wage by altering the level of part-time employment. By doing this, firms are able to absorb the minimum wage increase because part timers receive fewer fringe benefits.     

The composition of wage differentials between migrants and natives

We consider the role of unobservables, such as differences in search frictions, reservation wages, and productivities for the explanation of wage differentials between migrants and natives. We disentangle these by estimating an empirical general equilibrium search model with on-the-job search due to Bontemps et al. (1999) on segments of the labour market defined by occupation, age, and nationality using a large scale German administrative dataset.The native-migrant wage differential is then decomposed into several parts, and we focus especially on the component that we label “migrant effect”, being the difference in wage offers between natives and migrants in the same occupation-age segment in firms of the same productivity. Counterfactual decompositions of wage differentials allow us to identify and quantify their drivers, thus explaining within a common framework what is often labelled the unexplained wage gap.     

Capital tax,minimum wage,and labor market outcomes

Often an increase in the minimum wage is accompanied by a reduction in the capital tax. This paper analyzes the effects of interactions between the minimum wage and the capital tax in the general equilibrium framework. The analysis is conducted in an inter-temporal search model in which firms post wages. A (binding) minimum wage provides a lower support for the distribution of wages. The paper finds that the interaction of these two policy instruments significantly modify labor market outcomes and welfare cost. In the presence of a binding minimum wage, a decrease in the capital tax leads to an increase in wage dispersion. In contrast, when it is not binding, a lower capital tax may reduce the dispersion in wages. A binding minimum wage magnifies the positive effects of a lower capital tax on labor supply, employment, and output. It also enhances the welfare cost of capital tax. A policy change which involves an increase in the minimum wage and a fall in the capital tax such that employment level remains constant increases welfare and output.     

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.     

Near rationality in wage setting

This study argues that it is interesting to examine near rational behaviour in the context of an efficiency wage model, where there are positive if decreasing returns to increasing the wage beyond the efficient level. Previous research has found it difficult to distinguish between efficiency wage and bargaining models, which have similar empirical predictions. But unions are a priori more likely to develop in environments in which the technology favours efficiency wage payments. This makes it interesting to investigate what it costs the firm to deviate from the efficiency wage. If it does not cost a lot, firms may give in to union demands. This study derives expressions for the wage deviation and for the associated profit loss. For illustrative purposes, these are calibrated for UK, US and Indian manufacturing, taking a plausible parameterization of the effort-wage function and using available estimates of the wage and employment elasticities of output. While there is evidence of positive effort returns to wages in the UK and India, the results are consistent with wage bargaining pushing the wage above the efficient level. The associated profit loss is considerably larger in the UK than in India. In contrast, US firms pay wages that are insignificantly different from the efficiency wage.     

The formal sector wage premium and firm size

We show theoretically that when larger firms pay higher wages and are more likely to be caught defaulting on labor taxes, then large-high wage firms will be in the formal and small-low wage firms will be in the informal sector. The formal sector wage premium is thus just a firm size wage differential. Using data from Ecuador we illustrate that firm size is indeed the key variable determining whether a formal sector premium exists.     

Understanding wage determination in a multi-level bargaining system: a panel data analysis

This article presents an estimation of the elasticity of actual wages to industry-level collective bargaining thereby quantifying empirically the role of industry-level bargaining on wage determination. For this purpose, we use a unique employer–employee panel dataset covering the entire Belgian employment population over 9 years (1998–2006). Like several other European countries, e.g. Germany, France, Italy and the Netherlands, Belgium has a relatively centralised wage bargaining system, with the industry level playing the most important role. Regression results confirm that wage increases collectively decided at the industry level are, on average, fully passed on to individual wages. In addition to industry-level bargaining, we are interested in the supplementary wage increases granted at the firm level, referred to as wage drift or wage cushion in the literature. Our estimates show that wage drift is affected by company size, by the economic performance of the industry and to a much lesser extent by labour market tensions as measured by the local unemployment rate. Interestingly, our results show that industry-level bargaining also takes most of these features into account.     

Firms and wage inequality in Central and Eastern Europe

We use large linked employer-employee data to analyze wage inequality patterns in Central and Eastern European (CEE) countries between 2002 and 2014. We show that, unlike in many other advanced economies, wage inequality levels have decreased in almost all CEE countries. These reductions in wage inequality resulted from disproportionately large increases in wages at the bottom of the wage distribution, and from decreases in between-firm wage inequality. We further find that the declines in wage inequality were driven by large wage structure effects that compensated for changes in the composition of workers.     

Marriage,cohabitation and women's response to changes in the male wage structure

Using microdata and grouped data that cover the period 1996 to 2006, we assess the extent to which cohabiting women adjust their labour supply to a lesser extent, if any, than married women in response to changes in male wages. Both microdata regressions and grouping estimators unambiguously indicate that cohabiting women respond less to variation in male wages than married women. However, the magnitude of the difference is not sizeable. We also assess the magnitude of married men's and cohabiting men's own wage elasticities and find that they do not differ much. Combined with the fact that male earnings account for roughly two-thirds of family earnings, these two findings explain why the impact of changes in male wages on family earnings is very similar for married couples and cohabiting couples: in both cases, a 10% decline in male wages appears to induce roughly a 6% drop in family earnings.     

Firm Size and Wages in Germany – Trends and Impacts of Mobility

The analysis of firm-size wage differentials in Germany, using data from the German Socio-Economic Panel, firstly corroborates the finding that wages rise with firm-size and shows that the rank order of mean wages between firm-size classes is stable for the period 1984–1993. Secondly, the most important novel results are as follows: (i) wage differentials between firm-size classes increased during the period investigated after controlling for individual attributes and computing with deflated values; (ii) average levels of the qualification of employees have diverged noticeably between small and large firms; (iii) movers from small to larger firms have to accept wages below the average pay of incumbents with comparable attributes in the new firms: (iv) movers to smaller firms, however, retain a portion of their higher wages in larger firms; and (v) wage differentials between smaller and larger firms decline with increasing unemployment.     

Male–female wage discrimination in Chinese industryInvestigation using firm‐level data1

We use firm‐level data to analyze male–female wage discrimination in China's industry. We find that there is a significant negative association between wages and the share of female workers in a firm's labour force. However, we also find that the marginal productivity of female workers is significantly lower than that of male workers. Comparing wage gaps and productivity gaps between men and women, we notice an intriguing contrast between state‐owned enterprises (SOEs) and private firms. The wage gap is smaller than the productivity gap in SOEs, while the converse is true for private firms. These results suggest that women in the state sector receive wage premiums, whereas women in the private sector face wage discrimination.     

Holdup and wage dispersion

This paper provides a search-theoretic model of the labor market, in which large firms hire workers sequentially and wages are bargained with full commitment. The firm's optimal vacancy-posting strategy trades off the fact that a larger size decreases marginal benefits from subsequent jobs, but avoids higher future recruiting costs attributable to the holdup effect. The holdup effect is dominant if the production function is not sufficiently concave, resulting in firm-size wage premium. The equilibrium features wage dispersion both within and between firms. When calibrated to the U.S. data, the extended model accounts for 67%–84% of the observed wage dispersion, among which 13%–27% is attributed to the holdup effect.     

Testing for uniform wage trends in West-Germany: A cohort analysis using quantile regressions for censored data

The rise of unemployment in West Germany is often attributed to an inflexibility of the wage structure in the face of a skill bias in labor demand trends. In addition, there is concern in Germany that during the 70s and 80s unions were pursuing a too egalitarian wage policy. In a cohort analysis, we estimate quantile regressions of wages taking account of the censoring in the data. We present a new framework to describe trends in the entire wage distribution across education and age groups in a parsimonious way. We explore whether wage trends are uniform across cohorts, thus defining a macroeconomic wage trend. Our findings are that wages of workers with intermediate education levels, among them especially those of young workers, deteriorated slightly relative to both high and low education levels. Wage inequality within age-education groups stayed fairly constant. Nevertheless, the German wage structure was fairly stable, especially in international comparison. The results appear consistent with a skill bias in labor demand trends, recognizing that union wages are only likely to be binding floors for low-wage earners.     

Analysis of wage differences between native and immigrant workers in Spain

This paper analyses the nature of wage differences between native and immigrant workers in Spain. By estimating separated wage equations for the sub samples of both native and non-native workers and applying the Oaxaca–Blinder method, we observe that the relative unexplained (or discriminatory) component of the wage difference has a decreasing behaviour along the most part of the wage distribution, even becoming negative at the end. So, in this paper we detect the existence of a remarkable wage difference against the group of immigrants with the lowest wages which is not explained by the differences in the productive features of both native and non-native workers. This paper has been funded by the project SEJ2004-04065/ECON. Previous versions of this article have greatly improved thanks to the comments of two anonymous referees and the Managing Editor.