Against the Wind: Bargaining Recentralisation and Wage Inequality in Norway 1987–91

In the late 1980s, Norway's labour market experienced similar supply and demand shifts for skills to other countries', but unlike other OECD nations, Norway's wage setting system became more centralised. The pay distribution in Norway became more compressed at the bottom from 1987 to 1991, while low wage workers in other countries lost ground relatively. Using Norwegian microdata for 1987 and 1991, I found that changing labour market prices helped cause this wage compression. Further, the less educated had declining relative overall employment but increasing relative public sector employment, both possible labour market responses to the wage compression     

RISK AVERSION AND FIELD OF STUDY CHOICE: THE ROLE OF INDIVIDUAL ABILITY

Does the choice of field of study depend on individual risk aversion? The direction of the relationship between individual risk attitudes and type of university degree chosen is potentially ambiguous. On the one hand, risk averse individuals may prefer degree courses which allow high returns in the labour market; on the other hand, if these degrees expose students to a higher probability of dropping out, those who are more risk averse may be induced to choose less challenging fields. Using data from a sample of students enrolled at a middle‐sized Italian public university in 2009, we find that, controlling for a large number of individual characteristics, more risk averse students are more likely to choose any other field (Humanities, Engineering, and Sciences) rather than Social Sciences. We interpret this result bearing in mind that some of these fields, such as Humanities, involve a reduction in the risk of dropping out, while others (such as Engineering and Sciences) involve a lower risk in the labour market. It also emerges that the effect of risk aversion on degree choice is related to student ability. Risk averse students characterized by high abilities tend to prefer Engineering, while the propensity of risk averse students to enrol in Humanities decreases when ability increases, suggesting that the attention paid to labour market risks and drop‐out risk varies according to student skills.     

Impact of Immigration on Inhabitants' Educational Investments

We examine whether immigration into the labour market of the building and construction (BaC) industry affects enrolment in vocational programmes that teach the skills required in this industry. Results suggest that a higher supply of immigrant labour is associated with lower enrolment into programmes teaching BaC skills. The strength of this relationship increases according to the grades that the students achieved in lower secondary school. This finding indicates that the negative effect of immigration on educational recruitment is mainly caused by students who turn away from these programmes, rather than a reduction in apprenticeship positions offered by employers.     

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.     

The economics of production systems: Segmentation and skill-biased change

In this paper, the concept of production systems is introduced. I assume a standard thick-market externality together with the idea that higher quality goods also require higher skills from workers. Firms face a trade-off between low-quality goods with low skill-requirements for which the potentially abundant labour force generates strong thick-market externalities and higher quality goods with higher skill-requirements. In equilibrium, the economy is partitioned into production systems, i.e., clusters of firms producing the same quality. The distribution of skills determines the boundaries of the production systems, which in turn determine the wages. In this framework an increase in the supply of skilled workers can induce first higher wages for all workers and then higher wages for the skilled but lower wages for the unskilled. This is consistent with the late 20th century evolution of the US labour market.     

The effects of rising labour costs on global supply chains: the case of China’s cotton yarn industry

Rapid economic growth in China and India has resulted in rapidly rising labour costs in those countries. In this study a Muth-type model is used to assess the potential effects of this development on global supply chains using China’s cotton yarn industry as a case study. The model considers i) product differentiation at the yarn level; ii) imperfect competition in the markets for cotton yarn and raw cotton fibre, iii) input substitution between raw cotton fibre, labour, and capital; and iv) offsetting increases in the demand for cotton yarn caused by rising consumer income. Results suggest the effects of rising labour costs on the supply chain are modest, and easily swamped or obscured by the effects of rising income. Increases in industry market power (both oligopoly and oligopsony) have the same effect on the supply chain as increases in labour costs, raising prices to consumers of cotton yarn, and lowering prices to input suppliers, including foreign suppliers of raw cotton fibre. The combined effects of increases in labour costs and income have increased the factor shares for labour and to a lesser extent capital at the expense of raw cotton fibre.     

The impact of taxes on female labour supply

There is little agreement in economics on the factors influencing labour supply and hence on the impact of taxes. Within the marginal model, real wages and incomes are directing people's labour market behaviour independent of time and space, whereas the human resources approach takes account of the social environment and past behaviour. Even if strong assumptions are made, the neoclassical theory cannot predict the outcome of a wage increase. The labour supply response depends on the relative strengths of the substitution and the income effect. Since nonparticipation in the labour market is explained by a reservation wage being higher than the market wage, this is the only situation in which neoclassical theory would predict a rise in labour force participation with a wage increase. This case occured in a ‘natural experiment’ in Sweden. The Swedish tax system changed in 1971 from joint to separate taxation of spouses resulting in a substantial increase in the net wage of married women. This article investigates the impact of the change in the Swedish tax system on female labour force participation, concluding that it cannot explain the substantial rise in the participation rates of Swedish women. This is a significant result, questioning standard neoclassical theory and supporting the more institutional views of human labour market behaviour. That is that time and space as well as the social environment are important when analyzing labour supply. This will have consequences for international comparisons. Only factors which explain developments within one country might be relevant for explaining international differences, e.g. in labour force participation.     

Female employment and occupational changes in the 1990s: How is the EU performing relative to the US?

This paper provides a comparison of the incidence and composition of female employment both in the EU and in the US. Despite a significant increase in female labour market participation in the EU, about 50% of the difference between the employment rates in the US and the EU can still be attributed to differences in the educational attainments and the employment rates of women aged 25–54. We highlight the main features of female employment in both areas, paying particular attention to the differences across age cohorts and educational levels. Our main findings are as follows: (i) the educational level of the EU female population is slowly converging to that of the US across age cohorts, (ii) the employment rates of less educated women are much lower in the EU than in the US (with the exceptions of the Scandinavian countries) even for women aged 25–34, and (iii) occupational segregation is lower for the younger highly educated women who seem to be entering more typically male occupations and less typically female occupations, although at a higher rate in the US than in the EU.     

Cheap Talk in the Classroom: How Biased Grading at School Explains Gender Differences in Achievements, Career Choices and Wages

In this paper, I provide a theoretical explanation for the gender differences in education and on the labour market that are observed empirically in most OECD (Organisation for Economic Cooperation and Development) countries, including the US Within a cheap talk model of grading, I show that biased grading in schools results in (1) boys outperforming girls in maths and sciences, (2) boys having more top and more bottom achievers in maths and sciences than girls, (3) girls outperforming boys in reading literacy, (4) female graduates enrolling in university studies more often than male graduates, (5) the predominance of female students in arts and humanities at the university, (6) the predominance of male students in maths and sciences at the university and (7) the gender wage gap on the labour market for the highly educated.     

The effect of legal status on immigrant wages and occupational skills

Native and foreign-born workers with a high school degree or less education work in different types of occupations. This article exploits the 1986 Immigration Reform and Control Act to examine whether legal status causes immigrants to work in occupations that use skills similar to those of natives. Legal status decreases the manual skill intensity of immigrants’ occupations by about two percentiles. It increases communication skill intensity by a similar amount. This reduces the skill gap between Mexican-born and native-born American workers by 11–15%.     

Canadian regional labour market evolutions: a long-run restrictions SVAR analysis

Canada's high reliance on commodities can work against its constitutionally mandated goal of regional equity in economic development, while also inhibiting macroeconomic performance and limiting monetary policy effectiveness. Yet, flexible and integrated regional labour markets can help achieve both equity and macroeconomic goals. Therefore, this study examines the dynamics of Canadian provincial labour markets using a long-run restrictions structural vector autoregression (SVAR) model. Labour market fluctuations are decomposed into the parts arising from shocks to labour demand (new jobs), labour supply through migration (new people) and internal labour supply (original residents). The results suggest that demand innovations primarily underlie provincial labour market fluctuations. Despite significant geographic and language barriers that could impede their performance, there also is little overall evidence to suggest that provincial labour markets are more sluggish or less flexible than US state labour markets. Finally, original residents benefit slightly more from increased provincial labour demand compared to findings for US states.     

Brain waste? Educated immigrants in the US labor market

This paper investigates the occupational placement of immigrants in the US labor market using census data. We find striking differences among highly educated immigrants from different countries, even after we control for individuals' age, experience and level of education. With some exceptions, educated immigrants from Latin American and Eastern European countries are more likely to end up in unskilled jobs than immigrants from Asia and industrial countries. A large part of the variation can be explained by attributes of the country of origin that influence the quality of human capital, such as expenditure on tertiary education and the use of English as a medium of instruction. These findings suggest that “underplaced” migrants suffer primarily from low (or poorly transferable) skills rather than skill underutilization. The selection effects of US immigration policy also play an important role in explaining cross-country variation. The observed under-placement of educated migrants might be alleviated if home and host countries cooperate by sharing information on labor market conditions and work toward the recognition of qualifications.     

Tertiary Performance, Field of Study and Graduate Starting Salaries

This paper analyses data from the University of Western Australia (UWA) Graduate Destination Survey linked to information from the University's Student Records System to explore the determinants of graduates' starting salaries over the years 2002 to 2004. While the details examined also include age, gender, language spoken at home, country of birth, disability status and high school attended, most emphasis is placed on the impact on starting salaries of students' academic performance and their field of study. The analyses show that the main determinant of graduates' starting salaries is the weighted average mark they achieve at university. The salary differentials associated with higher marks in the Australian labour market appear greater than those reported in similar studies of the US and the UK labour markets. Science graduates are shown to have relatively low starting salaries, casting a shadow over recent suggestions that the supply of this group be increased through lower fee regimes.     

Multi-family households in a labour supply model: a calibration method with application to Poland

Models of cooperative and noncooperative behaviour opened the household ‘black box’ and allowed for individual treatment of partners in couples. However, labour supply literature has so far largely ignored a broader issue – the distinction of single versus multi-family (‘complex’) households. We propose a method to account for multi-family household structure by borrowing from recent applications of the collective model to identify the degree of sharing. We assume that each household is characterized by a between-family sharing parameter, which is calibrated on estimated preferences, observed labour market status and other characteristics. We apply the method to Polish labour market data.     

Brain waste? Educated immigrants in the US labor market

This paper investigates the occupational placement of immigrants in the US labor market using census data. We find striking differences among highly educated immigrants from different countries, even after we control for individuals' age, experience and level of education. With some exceptions, educated immigrants from Latin American and Eastern European countries are more likely to end up in unskilled jobs than immigrants from Asia and industrial countries. A large part of the variation can be explained by attributes of the country of origin that influence the quality of human capital, such as expenditure on tertiary education and the use of English as a medium of instruction. These findings suggest that “underplaced” migrants suffer primarily from low (or poorly transferable) skills rather than skill underutilization. The selection effects of US immigration policy also play an important role in explaining cross-country variation. The observed under-placement of educated migrants might be alleviated if home and host countries cooperate by sharing information on labor market conditions and work toward the recognition of qualifications.     

The Earnings of Immigrant Men in Australia: Assimilation, Cohort Effects, and Macroeconomic Conditions

This paper analyzes the earnings of immigrant men in Australia using data from Income Distribution Surveys for 1982, 1986 and 1990. The paper expands on the standard approach used in the literature to evaluate immigrant earnings adjustment by considering the impact of current labour market conditions and conditions at labour market entry on current earnings. Immigrants from non-English speaking backgrounds have significantly lower earnings on arrival in Australia compared with native-born males, and this gap is not narrowed as years in Australia increase. However, poorer macroeconomic conditions at entry are found to have a significantly smaller negative effect on the earnings of immigrants from non-English speaking backgrounds than native-born males.     

Wages,Profits, and Rent‐Sharing in an Open Economy

This paper examines the link between international trade and labor market bargaining power. It reviews simple theories of rent‐sharing in closed and open economies. Earlier studies on the issue of rent‐sharing implicitly assume a closed economy. This assumption may provide some misleading results, especially for studying current developments in the US labor market. Empirical results suggest that the apparent decline in labor’s bargaining power in US manufacturing may be attributable to growing international integration.     

Patterns of integration

This paper compares the distribution of jobs by complexity and firms' willingness to hire low‐educated labour for jobs of varying complexity in Norway, Italy and Hungary. In investigating how unqualified workers can cope with complex jobs, it compares their involvement in various forms of post‐school skills formation. The countries are also compared in terms of the proportion of small businesses, which, it is assumed, manage and tolerate the losses from functional illiteracy more than large firms do. Unskilled Norwegians benefit from synergies that exist between work in complex jobs, post‐school skills formation and civil integration. Italy has an abundant supply of simple jobs and its small businesses employ unqualified workers even in complex jobs. Inadequate post‐school skills formation and the lack of a sizeable small‐business sector set limits on the inclusion of low‐educated Hungarians.     

The effect of universal child benefits on labour supply

Using a difference‐in‐differences estimator, I find the Canadian Universal Child Care Benefit has significant negative income effects on the labour supply of married individuals. The likelihood of lower‐educated mothers to participate in the labour force is reduced 3.2 percentage points when receiving the benefit. Median hours worked per week among lower‐educated mothers is reduced by 1.9 hours. The effects on higher‐educated mothers are substantial, with median hours worked among higher‐educated mothers reduced by nearly one hour per week. For men, the evidence suggests small but significant income effects on labour supply, consistent with the literature on labour supply elasticities.     

Training and worker effort: a signalling perspective

Abstract This paper analyzes the interaction between firms’ investment in general skills training and workers’ incentives. It shows that when a firm has an informational advantage over its workers, its provision of free general skills training can serve as a signal that there will be a long‐term relationship between the firm and its workers. This signal induces the workers to exert more effort in learning firm‐specific skills, which enhances the firm's profits. In contrast with most of the existing literature, the model implies that firms may provide free general skills training even if there is no labour market friction.