Wage Determination Research Articles

The importance of foreign language skills in the labour markets of Central and Eastern Europe: assessment based on data from online job portals

This paper investigates the role of foreign language skills in the Visegrad Four countries’ labour markets using data obtained from key online vacancy boards in these countries and from an online wage survey. Firstly, it considers the demand for language skills based on vacancies and then builds on this information by analysing the wage premium associated with foreign language skills on the occupation and individual level. The results indicate that English language knowledge is highly in demand in the Visegrad region, followed by the command of German language. Particularly, English proficiency appears to be correlated with higher wages, when controlled for common wage determinants in a regression.

The Hukou Impact on the Chinese Wage Structure

Faster urbanization plays a key role in the Chinese economic transformation. However, at the Lewis turning point, the hukou institution constitutes a serious risk to the process, as it restricts the access of migrants to public services offered by cities. To attract further migration, firms started to accept a premium on top of the wage. Thus, the social discrimination introduced by the hukou system is partially compensated by the reactions of market participants, as migrant workers receive additional pay. Based on huge cross sections of private households, this paper provides insights into the size and the evolution of the wage premium. After controlling for standard wage determinants, such as sex, education, experience and ownership of firms, we find that the premium amounts to 7 percent of the hourly wage. Because of the premium, the share of non-wage labor costs is on the rise, especially for low-skilled migrants. To avoid further distortions and reduce inefficiencies, the hukou status should be unified. Migrants should obtain urban hukou as long as they live in cities. They should keep their land use rights when they are in the rural areas. Otherwise, the system could constitute a significant barrier for further urbanization. The removal of institutional bias could restore the link between wages and productivity and improve the allocation of labor.

Immigration and labour market outcomes in Australia: Findings from HILDA 2001–2014

Using panel data for the period 2001–2014 from the Household, Income and Labour Dynamics in Australia (HILDA) Survey, hourly wage equations and probit models of the probability of being employed were estimated. Results show that English-language proficiency, education qualifications and work experience are important positive determinants of both individual wage and of the likelihood of having a paid job. By comparison to many previous studies that find either a negative or no wage gap for migrants, we find that male migrants from OECD and English-speaking countries earn a higher hourly wage than male native-born Australians and female migrants from these countries earn a similar wage as female native-born Australians. Without controlling for the education level, migrants from non-OECD and non-English speaking countries earn a similar wage compared to native born Australians. Controlling for their education level, migrants from non-OECD and non-English speaking countries earn less than native-born Australian workers, but this wage gap diminishes with their length of residency in Australia. We also find that there is no difference between male migrants and male native-born Australians in terms of the likelihood of being employed, but we do find that female migrants are more likely to be unemployed compared to female native-born Australians.

Mexican real wages and the U.S. economy

This article examines real wage determinants from 1996 to 2014 across Mexican states. Real wages are determined in equilibrium by combining labor supply (years of education and population growth) and labor demand (mostly external factors) forces. Panel data models provide two main results. First, years of education and U.S. real GDP appear to be reliable predictors of wages in fixed effects models, with very marked changes after the U.S. 2008–2009 financial crisis and stronger effects on northern Mexican states. Second, dynamic panels confirm the role of foreign forces: positive from the U.S. economy and negative from the real exchange rate.

Wage Inequalities: A Result of Different Levels and Fields of Tertiary Education?

In this article we examine the impact of tertiary education on the amounts of wages in Slovenia for 2011. We use micro data from the statistical survey Structure of Earnings Statistics and micro data from the survey of graduates from tertiary education. We found out that there are significant differences in the amounts of wages as regards the level and field of education. Region and activity of the company where the person is employed also plays an important role in wage determination. Also the effects of gender and public/private sector are statistically significant. Using the average wage per hour as dependent variable gives similar results as the average annual wages.

How Much Does Talent Matter? Evidence from the Brazilian Formal Cultural Industry

The goal of this paper is to evaluate how much does talent – the individual non-observed characteristics – matter to explain the wage differences between workers from the cultural industry and workers from other formal industries in Brazil. To do so we use the data from 2003 to 2008 of the Rais-Migra – MTE, which is a true panel of formal workers from Brazil, and use fixed effects estimators to capture the talent measure and the Blinder (1973) and Oaxaca (1973) decomposition to seek for evidences of wage difference. The results imply that the talent is important in the determination of wages especially when considering formal workers in the cultural activities, occupations and workers in both cultural activities and occupation. The Oaxaca decomposition provides evidence that when considering talent, each of the groups paid their workers more per se, proving that not only the talent matter, but also that the formal cultural environment in Brazil positively discriminates their workers.

Determinants of Wages and Labour Supply in the UK

We explore characteristics of the UK labour market with special emphasis on explanation of the existing wage inequalities, determinants of participation and variation in the magnitude of hours of labour supplied among individuals. We explain up to 92 percent of variance in the wage rates from the supply side. Accuracy of the model is accounted by a variety of factors relevant to the labour market, such as gender gaps, marital status, on and off the job training, fluency in English and regional characteristics. The study is quite distinct, since it not only incorporates variables pertinent form the economic point of view, but also some quantified qualitative regressors relating to individuals’ opinions and political preferences. Interestingly, we find that the psychological profile of an individual has a very big influence over his decision on whether to participate, but once he joined the labour force his personal beliefs and opinions have no further impact on the probability of finding a job. The chance of being employed once participating depends mainly on the local labour market conditions. We also report unbiased and reliable estimate of labour supply elasticity based on BHPS sample.

Determinants of graduates' job opportunities and initial wages in China

AbstractBased on a sample of new graduates in the Beijing area, this study examines how college prestige, major and sex affect their job search prospects and initial wages. Using a parametric survival approach and a Heckman selection model, it shows that graduates find jobs faster if they come from prestigious universities, signalling ability and qualification. They also receive higher initial wages than graduates from other tertiary education institutions. Engineering and business graduates find jobs more easily than law and science graduates, but liberal arts and social science graduates receive higher wages. Female graduates find jobs faster than male graduates, but they earn less.

Do Occupational Regulations Increase Earnings? Evidence from China

We examine the influence of occupational certification and licensing in China. In the empirical analysis, we find that licensing is associated with an average of 15 percent higher wages and certification with a 13–14 percent higher wage based on ordinary least squares estimates. However, using propensity score and instrumental variable estimates suggests that part of the positive effect of certification on wages is due to self‐selection. In addition, the characteristics of a certificate or license, such as the type and quantity, further influence wage determination in China.

Pemikiran Afzalur Rahman Tentang Tata Kelola Pertanahan dan Relevansinya di Indonesia

In economic activity appeared the three actors in it; State, the private sector, and communities that each had different bargaining positions, such as access to capital and political access with respect to natural resources such as land that limited. Changes in economic perspective view toward the rapidly developing ground. Currently the ground further highlighted its function as capital assets and commodities, the mastery and utilization of land depended on market mechanisms. This meant that capitalist contributed to intervene the mastery and ownership of land. This affected concentrated on a handful of people who had big capital with more tendency to speculative rather than productive. Results of the research which was found that Rahman had a general idea that the fundamental principle of the whole body of norms or rules in economic activity was turn the attitude of altruism, namely the altruistic rather than personal interests. In particular, first; Rahman rationale was, as a basic theological importance of managing in the form of hard work to meet the livelihood so that they did not fail or lagging from others in the struggle for survival. Rahman explained that the emphasis on man's efforts to obtain a source of livelihood was one of the fundamental economic principles in Islam; if this principle ignored it will meet with failure causing poverty and starvation. Secondly, in terms of basic thoughts of Rahman on the corporate governance of the land of Islam over to an aspect of the economic approach based on the production of the agricultural sector, ranging from the certainty of land ownership which affected toward the result of increased production, land distribution, the production of the agricultural sector which emphasized the holding of insurance with the principles of " mutuality "and" cooperative "as both a preventative and a recovery in production activities, improvement of human resources (HR), and the determination of minimum wages by using a calculation in accordance with the basic necessities. Third, based on the basic thoughts, Rahman had relevance to the corporate governance of land in Indonesia, the relevance contained in the constitution or the Indonesian positive laws that applied today.

When more flexibility yields more fragility: The microfoundations of Keynesian aggregate unemployment

Wages are an element of cost crucially affecting the competitiveness of individual firms. But the wage bill is also a crucial element of aggregate demand. Hence it could be that more “flexible” and “fluid” labour markets, while allowing for faster inter-firm reallocation of labour, may also render the whole economic system more fragile, more prone to recession, and more volatile. In this work, we investigate some conditions under which such a conjecture applies. The paper presents an agent-based model that investigates the effects of two “archetypes of capitalism” – in terms of regimes of labour governance defined by the mechanisms of wage determination, firing, labour protection and productivity gains sharing – upon (i) labour market regularities and (ii) macroeconomic dynamics (long-term rates of growth, GDP fluctuations, unemployment rates, inequality, etc.). The model is built upon the “Keynes meets Schumpeter” family of models (Dosi et al., 2010), explicitly incorporating different microfounded labour market regimes. Our results show that seemingly more rigid labour markets and labour relations are conducive to coordination successes leading to higher and smoother growth.

Market forces and workers’ power resources: A sociological account of real wage growth in advanced capitalism

Sociologists rarely study the determinants of real wage growth, even though it affects core sociological concerns such as social stratification and income inequality. Using data from 14 countries over a 38-year period, this study assesses the multifaceted determinants of real wage growth in the manufacturing sectors of advanced capitalist societies. On this topic, neoclassical economics suggests that wages should track labor productivity, but sociological theories of class conflict suggest that both firms and workers use ‘power resources’ to shape distributional outcomes in their favor. Drawing on these ideas and others, the author argues that real wage growth is loosely related to productivity growth but strongly related to the power resources of workers. This argument is tested with panel regression techniques. The results provide strong support for a power resource theory of wage determination. The study ends by considering possible reasons for the weak effect of labor productivity on real wages.

AN ESTIMATION OF WORKER AND FIRM EFFECTS WITH CENSORED DATA

ABSTRACTIn this paper, we develop a new estimation method that is suitable for censored models with two high dimensional fixed effects and that is based on a sequence of least squares regressions, yielding significant savings in computing time and hence making it applicable to frameworks in which standard estimation techniques become unfeasible. We propose to apply this estimation method to investigate the role of firms in individual wage variation. Using a longitudinal match employer‐employee dataset from Spain, we show that the analysis of wage determination can be misleading when wages are censored. In particular, the role of firm wage policies in wage dispersion is overestimated by more than ten percentage points, while the role of time‐invariant individual characteristics is underestimated by fifteen percentage points. Hence, controlling for censored wages appears to reinforce the idea that when explaining individual wage dispersion, what workers ‘are’ is more important than what workers ‘do’.

Wage Formation: Towards Isolating Search and Bargaining Effects from the Marginal Product

This article estimates the importance of workers’ outside options in wage determination. The article uses the predictions of search and bargaining theory and proposes novel identification strategies to separate the respective effects of outside options from those of unobserved productivity. Using an administrative panel database for Germany, this study exploits differences in both the employment composition across cities of Germany and mobility across jobs as sources of variation for identification. The main finding of the article is that a 10% increase in the outside options of a worker generates a 7% wage increase.

Comparing Micro-Evidence on Rent Sharing from Two Different Econometric Models

Researchers contributing to the empirical rent-sharing literature have typically resorted to estimating the responsiveness of workers' wages on firms' ability to pay in order to assess the extent to which employers share rents with their employees. This paper compares rent-sharing estimates using such a wage determination regression with estimates based on a productivity regression that relies on standard firm-level input and output data. We view these two regressions as reduced-form equations stemming from, or at least compatible with, a variety of underlying theoretical structural models. Using a large matched firm-worker panel data sample for French manufacturing, we find that the industry distributions of the rent-sharing estimates based on them are significantly different on average, even if they slightly overlap and are correlated. Precisely, if we only rely on the firm-level information, we find that the median of the relative and absolute extent of rent-sharing parameters amount roughly to 0.40 and 0.30 for the productivity regression and to 0.20 and 0.16 for the wage determination regression. When we also take advantage of the worker-level information to control for unobserved worker ability in the model of wage determination, we find that these parameters further reduce as expected and have a median value of only about 0.10.

Comparing Micro-Evidence on Rent Sharing from Two Different Econometric Models

Researchers contributing to the empirical rent-sharing literature have typically resorted to estimating the responsiveness of workers' wages on firms' ability to pay in order to assess the extent to which employers share rents with their employees. This paper compares rent-sharing estimates using such a wage determination regression with estimates based on a productivity regression that relies on standard firm-level input and output data. We view these two regressions as reduced-form equations stemming from, or at least compatible with, a variety of underlying theoretical structural models. Using a large matched firm-worker panel data sample for French manufacturing, we find that the industry distributions of the rent-sharing estimates based on them are significantly different on average, even if they slightly overlap and are correlated. Precisely, if we only rely on the firm-level information, we find that the median of the relative and absolute extent of rent-sharing parameters amount roughly to 0.40 and 0.30 for the productivity regression and to 0.20 and 0.16 for the wage determination regression. When we also take advantage of the worker-level information to control for unobserved worker ability in the model of wage determination, we find that these parameters further reduce as expected and have a median value of only about 0.10.

Intensity of Off-Farm Employment and Its Impact on Wage Distribution: Does the Source of Health Insurance Coverage Matter?

The determinants of off-farm wages, with emphasis on the role of working “full-time” off the farm, are examined using data from the 2015 Agricultural Resource Management Survey and quantile regression. The targeted groups of farm operators for the analysis are based on whether health insurance coverage is obtained from the “off-farm” employer, and whether it is obtained from “other” sources. Findings indicate a negative association between “full-time” off-farm work and off-farm wages among farm operators in both categories who are at the higher portions of their respective off-farm wage distributions, which is in accordance with the compensating differential prediction.

Capacity Utilisation and Unemployment in Selected West Africa Countries

The purpose of this research paper is to examine the proposition that capacity utilisation is an important factor in the determination of unemployment and wages. Underlying this proposition is the notion that capacity utilisation helps to determine the future path of the economy and is a significant factor in the response of the economy to different supply and demand shocks. We derived capacity utilisation and unemployment relationships, which were estimated and tested using data covering from 1997 to 2016 for three West Africa countries. The results suggest that long-term unemployment and capacity utilisation have a significant impact on unemployment. The policy implications of our findings are that in view of the strong effect of capacity utilisation on unemployment, programmes that enhance efficiency in production and investment enhancing policies may allow unemployed to regain access to the labour market.

The Role of Trade and Offshoring in the Determination of Relative Wages and Child Labour

Incorporating family decisions in a two-period.model of the world economy, we predict that trade liberalization raises the skill premium and reduces child labour in developing countries where the adult labour force is sufficiently well educated to attract production activities from abroad that will increase the demand for skilled relative to unskilled labour. Elsewhere, liberalization will reduce the skill premium, but it will not necessarily raise child labour. Our prediction is not rejected by the data, and it explains why child labour is negatively associated with trade openness in those developing countries where the labour force was relatively well educated when the liberalization took place, but not in the others.

Offshoring and Wage Inequality: Theory and Evidence from China

We present a global production sharing model that integrates the organizational choices of offshoring into the determination of relative wages in developing countries. The model shows that offshoring through foreign direct investment contributes more prominently than arm's length outsourcing to the demand for skill in the South, thereby increasing the relative wage of skilled workers. We incorporate these theoretical results into an augmented Mincer earnings function and test the model based on a natural experiment in which China lifted its restrictions on foreign ownership for multinational companies upon its accession to the World Trade Organization in 2001. Empirical findings based on detailed Urban Household Surveys and trade data from Chinese customs provide support to our proposed theory, thus shedding light on the changes in firm ownership structure, the skill upgrading in exports, and the evolution of wage inequality from 1992 to 2008 in China's manufacturing sector.