Determinants Of Earnings Research Articles

Discussion of: The State Expropriation Risk and the Pricing of Foreign Earnings

Discussion of: The State Expropriation Risk and the Pricing of Foreign Earnings

Hukou stratification, class structure, and earnings in transitional China

The massive economic transformation in China has triggered a vigorous scholarly debate on whether the persistent power of the state or the increasing market liberalization is the main driving force of inequality. In this article, we attempt to understand this debate through the lens of two coexisting stratification systems––the longstanding hukou (household registration) system and an emerging class structure. Using data from the Chinese General Social Survey from 2008 to 2015, we develop new typologies for hukou stratification and class structure and examine their relative contributions in determining workers’ earnings. We further investigate differences in their effects between the Inland and Coastal regions. We find that class ranks ahead of education and hukou as the strongest determinant of earnings in China as a whole. Regionally, hukou and class are strong determinants of earnings, but hukou has a relatively stronger effect in Inland China. The findings shed light on the changing stratification dynamics in transitional China and contribute to the literature on the market transition debate.

Disparities in the Wage-and-Salary Earnings, Determinants, and Distribution of Health Economics, Outcomes Research, and Market Access Professionals: An Exploratory Study

ObjectiveThe aim was to estimate the wage-and-salary earnings of a sample of health economics, outcomes research, and market access (HE/OR/MA) professionals; compare male versus female and US versus non-US earnings; assess the magnitude of the effect of several human-capital and job-related covariates on the determination of earnings; and examine inequality in the distribution of earnings.MethodsThe study used self-reported survey data collected in 2017 from a subset of HE/OR/MA professionals in the HealthEconomics.com global subscriber list. HE/OR/MA professionals in this subset completed a questionnaire. The sample consisted of 372 participants who reported their wage-and-salary earnings and other indicators. The sample was not necessarily representative of the global HE/OR/MA community. The study methods included a two-way classification model with multiple replications, an ordinary least-squares model, and three inequality indicators.Principal FindingsThe results suggested substantial disparities between the wage-and-salary earnings of respondents living in the USA and those living in other countries; mild gender disparities in earnings; greater inequality outside the USA than within the USA; and, within each location, more unequal distribution of men’s earnings than that of women’s earnings.ConclusionsAlthough the findings may not be extrapolated to the worldwide population of HE/OR/MA professionals, they provide a point of comparison with earlier studies and offer insights into the mechanics of one of the most innovative and fastest growing health-sector workforce segments in developed as well as emerging countries.

Household-level determinants of employment and earnings in rural Nigeria

Despite the extensive literature on rural poverty outcome, the labour employment channel has not been carefully investigated for rural Nigeria. The paper used the socioeconomic data from the three ...

The One-Child Policy Amplifies Economic Inequality Across Generations in China

Using nationally representative longitudinal household survey data, this study finds that China’s one-child policy (OCP), one of the most extreme forms of birth control in recorded history, has amplified the intergenerational transmission of inequality in the country. Rural/poor Chinese families, whose fertility choices are less constrained by the OCP than those of urban/rich ones, have more children but invest less in their human capital. Since education is a major determinant of earnings, income inequality persists and increases across generations. Our results also show that the OCP accounts for 35.4%–51.5% of the decline in intergenerational income mobility in recent decades.

Ethnic regional networks and immigrants' earnings: A spatial autoregressive network approach

AbstractThe conventional model of immigrant earnings does not account for the correlation of outcomes across immigrant ethnic networks. We apply a spatial autoregressive network approach to account for the spill‐over effects of migrant ethnic group economic resources and labour market outcomes. We employ unit‐record data across 10 years for New Zealand, a major immigrant‐receiving country. By applying the generalized method of moment (GMM) estimation, we address endogeneity of the spatial network variable. Results confirm strong positive associations of earnings with both ethnic concentration and networks of resources. The analytically enhanced approach provides opportunities for new research on the determinants of immigrant earnings.

Financial Statement Comparability, Earnings Smoothing and Loan-Loss Provisioning in Banking

We investigate the effect of financial statement comparability on banks’ earnings smoothing behavior through loan-loss provisioning. Financial statement comparability makes information about peers accessible to outside investors and, thereby, improves transparency and the information environment. We, therefore, predict a negative association between financial statement comparability and earnings smoothing for opportunistic reasons. Based on a sample of 628 US banks (4,683 bank-years observations) for the period 1999-2013, we show that financial statement comparability constrains income smoothing through loan-loss provisioning. We further reveal that this constraining effect is more pronounced for larger banks and during the global financial crisis (GFC) period. These results are robust to alternative specifications of comparability and earning management, bank (firm) fixed effect regression, and also dealing with endogeneity issues. We contribute to the literature on the benefits of producing comparable financial statements, as well as to the literature on the determinants of earnings smoothing by banks. Our results are also relevant for standard setters who stress the importance of financial statement comparability for nurturing investor confidence.

Macroeconomic determinants of earnings on shares: Evidence from Rosneft oil company

Subject. The article investigates how macroeconomic variables influence the pricing for common stocks of Rosneft Oil Company. Objectives. The study identifies principal macroeconomic factors and evaluates their impact on the dynamism of stock exchange rates in the oil and gas sector. Methods. We rely upon econometric modeling and linear regression based on the least square method. The regression is tested for autocorrelation in residues, heteroskedasticity and non-strict multicollinearity. To arrive at correct standard errors of coefficients given the autocorrelation, we do the robust estimation of covariance matrix. Results. The dynamics of earnings on shares of Rosneft Oil Company was found to correlate with macroeconomic factors as follows. It has the linear dependency on the Brent price trend, real effective exchange rate of RUB, market risk premium. However, it is inverse to the price index of industrial producers. The earnings on shares were found to be most dependent on fluctuations of the price index of producers, foreign exchange rate and market risk premium. Conclusions and Relevance. Earnings on shares of the analyzable company and the group of macroeconomic factors reveal the relationship that is statistically considerable. The high determination coefficient and significance in large confidence intervals of regression coefficients are indicative of the high quality of the model. Hence, using macroeconomic variables as regressors, the model may be effective for evaluating and predicting earnings on shares in the oil and gas sector. The findings can be used for further research on macroeconomic shocks and their impact on prices for financial assets issued by the Russian oil and gas companies. The model can be applied to the fundamental analysis and prediction of stock exchange rates of identical companies.

The Minimum Wage and Fathers’ Residence with Children

The minimum wage is an important determinant of earnings among lower-skilled parents and may have implications for their children’s living arrangements. We used nationally representative data to examine associations between the minimum wage and fathers’ residence with their biological children. Results revealed no association between the minimum wage and father residence among all low-income families. However, this finding masks important heterogeneity within these families based on which parent’s earnings were sensitive to minimum wage levels. In families where only fathers’ earnings were sensitive to minimum wage levels, fathers were more likely to live with their children as minimum wages increased, consistent with research that shows the importance of economic stability for fathers’ residence and custody arrangements. In contrast, in families where only mothers’ earnings were sensitive to minimum wage levels, higher minimum wages were negatively associated with fathers’ residence, consistent with theories of maternal independence. These associations with residence were not observed in situations where both parents’ earnings were sensitive to the minimum wage. Results indicate that these economic policies may be consequential for family processes and well-being in key subsets of low-earning families.

Monopsony in Labor Markets: A Review

Researchers’ interest in monopsony has increased in recent years. This article reviews the accumulating evidence that employers have considerable monopsony power. It summarizes the application of this idea to explaining the impact of minimum wages and immigration, in anti-trust, and in understanding how to model the determinants of earnings in matched employer–employee data sets and the implications for inequality and the labor share.

The One-Child Policy Amplifies Economic Inequality Across Generations in China

This study finds that China's one-child policy (OCP), one of the most extreme forms of birth control in recorded history, has amplified economic inequality across generations in China since its introduction in 1979. Poor Chinese families, whose fertility choices are less constrained by the OCP than rich ones, have more children but invest less in human capital per child. Since human capital is a major determinant of earnings, the income inequality persists and enlarges across generations as a consequence. Based on nationally representative longitudinal household survey data, our estimation results show that the OCP accounts for 32.7%-47.3% of the decline in intergenerational income mobility. The OCP has significant ramifications for Chinese society, not only intragenerationally but also intergenerationally.

Earnings Dynamics and Intergenerational Transmission of Skill

This paper develops and estimates a two-factor model of intergenerational skill transmission when earnings inequality reflects differences in individual skills and other non-skill shocks. We consider heterogeneity in both initial skills and skill growth rates, allowing variation in skill growth to change over the lifecycle. Using administrative tax data on two linked generations of Canadians covering 37 years, we exploit covariances in log earnings (at different ages) both across and within generations to identify and estimate the intergenerational correlation structure for initial skills and skill growth rates, lifecycle skill growth profiles, and the dynamics of non-skill earnings shocks.We estimate low intergenerational elasticities (IGEs) for earnings in Canada (less than 0.2, even when based on 5- and 9-year average earnings); however, skill IGEs are typically 2-3 times larger due to considerable (and persistent) variation in earnings conditional on skills. Both earnings and skill IGEs decline substantially for more recent cohorts and are lower for children born to younger fathers.We estimate significant heterogeneity in both initial skills and skill growth rates, showing that intergenerational transmission of these factors explains up to 40% of children's skill variation. Skills become a more important determinant of earnings over the first part of workers' careers, while intergenerational transmission of skills becomes less important with age. Although inherited initial skills (compared to skill growth) are a more important determinant of children's skills throughout their lives, parents' initial skills and skill growth rates are equally important determinants of children's skills, largely because both strongly influence children's initial skills.Finally, we study intergenerational mobility for the 35 largest cities in Canada, determining the extent to which considerable differences in earnings and skill IGEs vary with the extent of local heterogeneity in parental skills vs. earnings instability. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

How Much Should We Trust Estimates of Firm Effects and Worker Sorting?

Many studies use matched employer-employee data to estimate a statistical model of earnings determination where log-earnings are expressed as the sum of worker effects, firm effects, covariates, and idiosyncratic error terms. Estimates based on this model have produced two influential yet controversial conclusions. First, firm effects typically explain around 20% of the variance of log-earnings, pointing to the importance of firm-specific wage-setting for earnings inequality. Second, the correlation between firm and worker effects is often small and sometimes negative, indicating little if any sorting of high-wage workers to high-paying firms. The objective of this paper is to assess the sensitivity of these conclusions to the biases that arise because of limited mobility of workers across firms. We use employer-employee data from the US and several European countries while taking advantage of both fixed-effects and random-effects methods for bias-correction. We find that limited mobility bias is severe and that bias-correction is important. Once one corrects for limited mobility bias, firm effects dispersion matters less for earnings inequality and worker sorting becomes always positive and typically strong. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

How Much Should We Trust Estimates of Firm Effects and Worker Sorting?

Many studies use matched employer-employee data to estimate a statistical model of earnings determination where log-earnings are expressed as the sum of worker effects, firm effects, covariates, and idiosyncratic error terms. Estimates based on this model have produced two influential yet controversial conclusions. First, firm effects typically explain around 20% of the variance of log-earnings, pointing to the importance of firm-specific wage-setting for earnings inequality. Second, the correlation between firm and worker effects is often small and sometimes negative, indicating little if any sorting of high-wage workers to high-paying firms. The objective of this paper is to assess the sensitivity of these conclusions to the biases that arise because of limited mobility of workers across firms. We use employer-employee data from the US and several European countries while taking advantage of both fixed-effects and random-effects methods for bias-correction. We find that limited mobility bias is severe and that bias-correction is important. Once one corrects for limited mobility bias, firm effects dispersion matters less for earnings inequality and worker sorting becomes always positive and typically strong.

International Strategy, R&D Intensity, and Sustainable Earnings of Biotech Firms

For a relatively small country such as Korea to successfully establish its presence in the global biotech industry, it must pair a successful domestic model with an effective export strategy. However, there are little empirical findings on the relationship between biotech firms’ internationalization strategy, research and development (R&D) intensity, and sustainable earnings. Thus, we explore this often overlooked area by analyzing the relationship between the international strategies and sustainable earnings of biotech firms. By using a sample of 29,583 firm-year observations in South Korea between 2000 and 2017, this study analyzes the association between internationalization strategy and sustainable earnings. Findings from the analysis show that internationalization strategy has a negative impact on biotech firms. However, the impact of international strategy on sustainable earnings of a biotech firm is observed to be positively influenced by R&D intensity. This study contributes to the research on the determinants of sustainable earnings by empirically proving that biotech firms’ internationalization strategy with high R&D investments leads to an increase in earnings sustainability.

Non-GAAP earnings disclosures around regulation G – The case of “implicit non-GAAP reporting”

We identify a phenomenon related to non-GAAP earnings disclosure and examine its prevalence around Regulation G (RegG). Specifically, we analyze to what extent firms only disclose adjustments to GAAP earnings instead of entire adjusted earnings figures thereby not providing the ideal non-GAAP to GAAP reconciliation promoted by RegG. We refer to this reporting behavior as “implicit non-GAAP reporting” and ask three different questions: How is “implicit non-GAAP reporting” related with the adoption of RegG? What type of firm reports implicit non-GAAP measures? What are the motives for “implicit non-GAAP reporting” post-RegG? Our analyses yield three key findings. First, the frequency of “implicit non-GAAP reporting” spikes after the regulatory intervention but to a lesser degree also existed before. Second, during the post-RegG time period, the prevalence of “implicit non-GAAP reporting” is much higher among firms who only started to report non-GAAP earnings after RegG was enacted (starters) than among those, which continued to disclose non-GAAP earnings across the regulatory intervention (continuers). Third, we show that only for starters, “implicit non-GAAP reporting” is associated with motives of beating analyst earnings forecasts as well as experiencing GAAP losses. Our study provides important insights for regulators, firms and academics into "implicit non-GAAP reporting" by examining properties and determinants of implicit vs. explicit non-GAAP earnings for different types of firms around RegG.

A Probe into the Wages and Salaries of Health Economics, Outcomes Research, and Market Access Professionals.

To estimate the central tendency and spread of health economics, outcomes research, and market access (HE/OR/MA) professionals' wage-and-salary earnings; compare male versus female and US versus non-US earnings levels; and examine inequality in their distribution. Self-reported survey data were collected in 2015 from HE/OR/MA professionals in the HealthEconomics.com global subscriber list. The study design consisted of a two-way classification model with multiple replications and three inequality indicators. HE/OR/MA professionals from the HealthEconomics.com global subscriber list completed a questionnaire. The sample consisted of 403 participants. Within each location, men earned higher wages and salaries than women, and within each gender, HE/OR/MA professionals living in the USA earned higher wages and salaries than those living outside the USA. Evidence of a gap was suggested by the presence of gender and location disparities in earnings determinants. Results also suggested the presence of moderate inequality that was similar for both genders and greater for non-US than US residents. This study shed light into the labor market structure of HE/OR/MA professionals and may be conducive to more rational and efficient workforce management policies.

The Race Between Demand and Supply: Tinbergen\u2019s Pioneering Studies of Earnings Inequality

Understanding inequality and devising policies to alleviate it was a central focus of Jan Tinbergen’s lifetime research. He was far ahead of his time in many aspects of his work. This essay places his work in the perspective of research on inequality in his time and now, focusing on his studies on the pricing of skills and the evolution of skill prices. In his most fundamental contribution, Tinbergen developed the modern framework for hedonic models as part of his agenda for integrating demand and supply for skills to study determination of earnings and its distribution and the design of effective policy. His lifetime emphasis on social planning caused some economists to ignore his fundamental work.

The role of education in the determination of earnings in Poland – intergenerational differences

The role of education in the determination of earnings in Poland – intergenerational differences

Anatomy of Lifetime Earnings Inequality: Heterogeneity in Job Ladder Risk vs. Human Capital

We study the determinants of lifetime earnings (LE) inequality in the United States, for which differences in lifetime earnings growth are key. Using administrative data and focusing on the roles of job ladder dynamics and on-the-job learning, we document that: 1) lower LE workers change jobs more often, mainly driven by higher non-employment; 2) earnings growth for job stayers is similar at around 2 percent in the bottom two-thirds of the LE distribution, whereas for job switchers it rises with LE; and 3) top LE workers enjoy high earnings growth regardless of job switching. We estimate a job ladder model with on-the-job learning featuring ex ante heterogeneity in learning ability and job ladder risk—job loss, job finding, and contact rates. We find that learning ability differences explain almost all earnings growth heterogeneity above the median, whereas ex ante heterogeneity in job ladder risk accounts for 80 percent of LE growth differences below the median.