Differences In Relative Wages Research Articles

The Value of Smarter Teachers: International Evidence on Teacher Cognitive Skills and Student Performance

Differences in teacher quality are commonly cited as a key determinant of the huge international student performance gaps. However, convincing evidence on this relationship is still lacking, in part because it is unclear how to measure teacher quality consistently across countries. We use unique international assessment data to investigate the role of teacher cognitive skills as one main dimension of teacher quality in explaining student outcomes. Our main identification strategy exploits exogenous variation in teacher cognitive skills attributable to international differences in relative wages of nonteacher public sector employees. Using student-level test score data, we find that teacher cognitive skills are an important determinant of international differences in student performance. Results are supported by fixed-effects estimation that uses within-country between-subject variation in teacher skills.

A Comparison of the Wage Structure between the Public and Private Sectors in Japan

This paper compares the wage structure between the public and private sectors in Japan by using a large microdata set covering public and private sector employees. Rather than comparing overall wage levels, we examine the differences in relative wages by gender, age, education, and region. According to the estimation of wage functions, wage gaps by gender and educational attainment are smaller in the public sector than in private companies. The public sector’s age-wage profile is steeper than that of the private sector. Public sector wages are more compressed; the wages are relatively higher at the lower end of the wage distribution and relatively lower at the higher end. The regional wage differential is smaller in the public sector. As a result, the wage level of public sector workers is relatively higher in rural regions and relatively lower in large metropolitan regions. To ensure the efficient provision of public services, it is inappropriate to compare only average wages. We should carefully observe the differences in wage structure by individual characteristics and by region.

The Value of Smarter Teachers: International Evidence on Teacher Cognitive Skills and Student Performance

Differences in teacher quality are commonly cited as a key determinant of the huge international student performance gaps. However, convincing evidence on this relationship is still lacking, in part because it is unclear how to measure teacher quality consistently across countries. We use unique international assessment data to investigate the role of teacher cognitive skills as one main dimension of teacher quality in explaining student outcomes. Our main identification strategy exploits exogenous variation in teacher cognitive skills attributable to international differences in relative wages of nonteacher public sector employees. Using student-level test score data, we find that teacher cognitive skills are an important determinant of international differences in student performance. Results are supported by fixed-effects estimation that uses within-country between-subject variation in teacher skills.

A Cohort Analysis of the College Premium in Mexico

This paper provides the first empirical evidence for Mexico about relative wage dif ferences between college-educated and high-school-educated workers across five-year age groups. Rotating panel surveys are used to implement an imperfect substitution model for similar male workers between dif ferent age groups and between the two education groups. For the period 2005-2012, the results suggest a partial elasticity of substitution of 1.7 for college- and high-school-educated workers and a partial elasticity of substitution of about 3 across age groups. Remarkably, the wage gap between younger and older workers with the same education level increased after the economic crisis of 2008.

A Comparison of the Wage Structure between the Public and Private Sectors in Japan

This paper compares the wage structure between the public and private sectors in Japan by using a large microdata set covering public and private sector employees. Rather than comparing overall wage levels, we examine the differences in relative wages by gender, age, education, and region. According to the estimation of wage functions, wage gaps by gender and educational attainment are smaller in the public sector than in private companies. The public sector’s age-wage profile is steeper than that of the private sector. Public sector wages are more compressed; the wages are relatively higher at the lower end of the wage distribution and relatively lower at the higher end. The regional wage differential is smaller in the public sector. As a result, the wage level of public sector workers is relatively higher in rural regions and relatively lower in large metropolitan regions. To ensure the efficient provision of public services, it is inappropriate to compare only average wages. We should carefully observe the differences in wage structure by individual characteristics and by region.

Testing for Factor Price Equality with Unobserved Differences in Factor Quality or Productivity

We develop a method for identifying departures from relative factor price equality that is robust to unobserved variation in factor productivity. We implement this method using data on the relative wage bills of nonproduction and production workers across 170 local labor markets comprising the continental United States for 1972, 1992, and 2007. We find evidence of statistically significant differences in relative wages in all three years. These differences increase in magnitude over time and are related to industry structure in a manner that is consistent with neoclassical models of production. (JEL J31, J61, R23)

Testing for Factor Price Equality with Unobserved Differences in Factor Quality or Productivity

We develop a method for identifying departures from relative factor price equality that is robust to unobserved variation in factor productivity. We implement this method using data on the relative wage bills of non-production and production workers across 170 local labor markets comprising the continental United States for 1972, 1992 and 2007. We find evidence of statistically significant differences in relative wages in all three years. These differences increase in magnitude over time and are related to industry structure in a manner that is consistent with neoclassical models of production.

Costs and Benefits of Apprenticeship Training. A Comparison of Germany and Switzerland

Abstract For the first time it has been made possible to merge a German and a Swiss firm-level data set that include detailed information about costs and benefits of apprenticeship training. Previous analyzes based only on aggregate data showed that the net costs of training apprentices are substantial in Germany, whereas apprenticeship training is on average profitable during the training period for firms in Switzerland, even though the two training systems are rather similar. This paper analyzes the reasons for these differences with matching methods. We simulate the impact of changes in certain parameters such as wages, apprenticeship system-related factors and allocation of tasks to apprentices on the cost-benefit ratio using the counterfactual values of the other country. The results show that most of the difference in the net costs of training between the two countries can be explained by a higher share of productive tasks allocated to apprentices in Switzerland and the differences in relative wages...

RELATIVE WAGE DIFFERENCES AND THE CAREER TRANSITIONS OF IT PROFESSIONALS.

In this study, we draw upon the utility theory of career mobility to hypothesize the career transition behaviors of IT professionals in response to relative wage differences. We evaluate our hypothesis using survival analysis to analyze longitudinal data on the career moves of IT professionals. As expected, we find that IT professionals respond to relative wage differences by making career transitions; moreover, we find that female IT professionals are more sensitive than male IT professionals to relative wage differences in their career transition behaviors.

Cost and Benefit of Apprenticeship Training: A Comparison of Germany and Switzerland

For the first time it has been made possible to merge a German and a Swiss firm-level data set that include detailed information about costs and benefits of apprenticeship training. Previous analyses based only on aggregate data showed that the net costs of training apprentices are substantial in Germany, whereas apprenticeship training is on average profitable during the training period for firms in Switzerland, even though the two training systems are rather similar. This paper analyzes the reasons for these differences with matching methods. We simulate the impact of changes in certain parameters such as wages, apprenticeship system-related factors and allocation of tasks to apprentices on the cost-benefit ratio using the counterfactual values of the other country. The results show that most of the difference in the net costs of training between the two countries can be explained by a higher share of productive tasks allocated to apprentices in Switzerland and the differences in relative wages.

An Alternative Explanation of Differences in Relative Wages among Developed Economies by Endogenizing Invention, Innovation and Diffusion

I develop a model for a small, open, technology-lagging economy that imports leading-edge knowledge from the technology leader by paying high-skilled researchers from the leading country their opportunity cost to train the lagging country's future high-skilled workers while adding to a local appropriate stock of skill-biased knowledge. The laggard may also import only as share of leading-edge knowledge at a reduced licensing fee. I use as the large, technology-leading country the closed economy from an endogenous growth model that endogenizes invention, innovation and diffusion of knowledge that is capable of matching inverse movements of the relative wage and the detrended relative supply of skilled workers plus the various growth experiences of the U.S. over the last 40 years. Innovation is modeled as diffusing skill-biased knowledge (created by what is termed the inventive sector) to adoptive knowledge (accessible by low-skilled intensive sectors), consistent with the diffusion literature. By forgoing a homegrown inventive sector, the technology lagging country has a larger percentage of high-skilled workers in the innovative sector resulting in what I call the specialization in innovation effect. Since the lagging country specializes in innovation, it has more of its resources devoted to innovation which tends to diffuse a larger share of any given amount of imported skill-biased knowledge to adoptive knowledge and thus tends to decrease its relative wage. This effect may help explain the higher wage premium in the U.S. and the U.K. (countries that arguably specialize in inventive rather than innovative activities) than in other developed such as Germany, France, and Italy since the 1980s. Importing a smaller share of leading-edge knowledge contributes to even lower wage inequality in the laggard without sacrificing economic growth because the lower cost of human capital accumulation allows for a faster accumulation rate and more diffusion of knowledge throughout its economy. The specialization effect will be in evidence as long as the effect is not dominated by differential accumulation rates between the leader and laggard economies. If the developed laggard has a threshold level of human capital to access leading-edge technologies, a slower human capital accumulation rate relative to the leader may allow the laggard to import a stock of skill-biased knowledge each period that is much larger that it is capable of producing itself if it did not import technology. This raises the share of total knowledge that is skill-biased and tends to raise the relative wage.

Intra-Industry Trade between European Union and Transition Economies: Does Income Distribution Matter?

EU-TE trade is increasingly characterised by intra-industry trade. For some countries (Czech Republic), the share of intra-industry trade in total trade with the EU approaches 60 percent. The decomposition of intra-industry trade into horizontal and vertical shares reveals overwhelming vertical structures with strong quality advantages for the EU and shrinking quality advantages for TE countries wherever trade has been liberalised. Empirical research on factors determining this structure in an EU-TE framework has lagged theoretical and empirical research on horizontal trade and vertical trade in other regions of the world. The main objective of this paper is, therefore, to contribute to the ongoing debate over EU-TE trade structures, by offering an explanation of intra-industry trade. We utilize a cross-country approach in which relative wage differences and country size play a leading role. In addition, as implied by a model of the product-quality cycle, we examine income distribution factors as determinates of the emerging EU-TE structure of trade flows. Using OLS regressions, we find first, that relative differences in wages (per capita income) and country size explain intra-industry trade, when trade is vertical and completely liberalized and second, that cross country differences in income distribution play no explanatory role. We conclude that if increasing wage differences resulted from an increasing productivity gap between high-quality and low-quality industries, then vertical structures will, over the long-term create significant barriers for the increase in TE incomes and lowering EU-TE income differentials.

Intra-Industry Trade between European Union and Transition Economies: Does Income Distribution Matter?

EU-TE trade is increasingly characterised by intra-industry trade. For some countries (Czech Republic), the share of intra-industry trade in total trade with the EU approaches 60 percent. The decomposition of intra-industry trade into horizontal and vertical shares reveals overwhelming vertical structures with strong quality advantages for the EU and shrinking quality advantages for TE countries wherever trade has been liberalised. Empirical research on factors determining this structure in an EU-TE framework has lagged theoretical and empirical research on horizontal trade and vertical trade in other regions of the world. The main objective of this paper is, therefore, to contribute to the ongoing debate over EU-TE trade structures, by offering an explanation of intra-industry trade. We utilize a cross-country approach in which relative wage differences and country size play a leading role. In addition, as implied by a model of the productquality cycle, we examine income distribution factors as determinates of the emerging EU-TE structure of trade flows. Using OLS regressions, we find first, that relative differences in wages (per capita income) and country size explain intra-industry trade, when trade is vertical and completely liberalized and second, that cross country differences in income distribution play no explanatory role. We conclude that if increasing wage differences resulted from an increasing productivity gap between highquality and low-quality industries, then vertical structures will, over the long-term create significant barriers for the increase in TE incomes and lowering EU-TE income differentials.

Spatial Routes to Gender Wage (In)equality: Regional Restructuring and Wage Differentials by Gender and Education

I examine how different dimensions of restructuring are related to gender wage inequality. The analysis extends research on regional wage differentials to include differentials between men and women in two educational groups at opposite ends of the educational hierarchy. Relative wages across regional labor markets in the United States are modeled in a multilevel framework as outcomes of variation in economic conditions associated with restructuring. Using microdata from the 1990 PUMS-A 5 percent census files, as well as independent sources of macro-data on counties, I show that the direction of wage changes associated with each dimension of restructuring generally does not differ by gender or education. Wages are either higher or lower than the average labor market for all groups. However, there are significant differences in relative wages by gender and many important differences between the two educational groups in the spatial distribution of gender wage inequality. Several “spatial routes” to gender wage equality emerge that differ from the dominant temporal explanations of the declining gender wage gap and differ according to the educational background of workers.

A DIRECT TEST OF THE EFFICIENCY WAGE MODEL USING UK MICRO-DATA

increase a firm's productivity. This is in contrast to a neoclassical production function, where outside unemployment plays no such role. Similarly, if workers are homogeneous, then differences in relative wages should not, in a standard neoclassical model, affect the firm's output. However, in an efficiency wage model, a high relative wage in this firm will make it more productive than its counterparts. In this paper, we present evidence in favour of both of these predictions of the efficiency wage model. Of course, the fact that high relative wages are associated with higher levels of productivity may just reflect the existence of either unobserved human capital or rent-sharing. We do, therefore, make an attempt to discriminate between these alternatives, and argue that the efficiency wage model is a more plausible interpretation of our results.

The Role of Absolute and Relative Wage Differentials in the Choice of a Work Activity

A basic economic hypothesis states that, being equal, an increase in the wage at a certain work activity will attract labor to it. Economic theory tells us that the list of things includes prices of goods, wages in alternative activities, and real income. But what if are not equal and, in particular, if wages in alternative work activities vary simultaneously? It then seems natural to concentrate on wage differentials. It is said that labor will be attracted to the types of employment where wages increased more. There are, however, several questions concerning the precise nature of this approach: Under what conditions is it possible to dispense of the wage levels? That is, what are the conditions under which wage differentials play an independent role, and what are in these cases the other factors which affect supply? Finally, should wage differentials be measured in absolute or relative terms ? The purpose of this note is to analyze the role of absolute and relative wage differences in short-run' decisions concerning the choice of work activities within a given occupation and level of skill. Our framework is static demand theory. We focus on individual supply functions and assume that the individual views the amounts of time which he works (or may work) at different jobs as different commodities. Initially, we assume that it is feasible to combine work activities. The essentials of this approach have been outlined by Becker (1965, 1971, pp. 166-70). The first section of the paper is concerned with alternative specifications of the supply functions and the role of relative and absolute wage differentials in these specifications. We note that even if income (properly defined) is held constant, neither absolute nor relative wage differentials are sufficient to determine the allocation of labor. Either the wage level

"Availability" and Other Influences on the Commodity Composition of Trade

T HE purpose of this paper is to assess the relative importance of the various factors that influence the commodity composition of the foreign trade of the United States. The concern is with the composition of exports and imports as of a given moment in time rather than with long-run influences and tendencies. The search for influential factors is carried on first within the framework of the law of comparative advantage. It seems clear that differences in relative wages, which have frequently been stressed by the protectionists, are not generally a controlling factor. There is some evidence, however, that differences in relative output per worker are more important, particularly in determining the shares of third markets enjoyed by two countries producing similar products. The role of capital-labor scarcities, whose importance has been stressed by Professor Wassily Leontief, is also examined. It is argued that Leontief's findings that United States exports have a higher labor content and a lower capital content than United States imports can be explained better and more simply by the availability factor. In other words, goods that happen to

The Role of Relative Wage Differences in International Trade

Introduction: the problem, 1. — I. Examination of statistics: absolute wage differences and the ability to compete, 4; wages and the productivity of labor, 5; relative wages and their relation to exports, 8; cheap labor groups, 14. — II. The theory of relative wages: isolating the influence of wage differences on competitive power, 16; conditions under which a comparative advantage in wages is likely to be decisive, 20; comparison with the doctrine of comparative costs, 25; importance of relative wages and the need for more statistics, 28.