Differences In Wage Inequality Research Articles

Wage inequality across regions in India: Exploring the role of education and skills

This study explores regional differences in wage inequality in India and examine various contributory factors for increasing disparities in wages across different regions in India. Using data from the India Human Development Survey (IHDS) 2011–12 and employing RIF regression methodology, the study investigates the influence of the level of education, experience, English and computer skills, gender, age, religion, and other background characteristics on wage inequality. The findings reveal that higher education levels, experience, English, and computer skills significantly contribute to wage disparities across regions. The study highlights the importance of addressing these factors to promote greater equity and inclusivity in the labor market.

Factors Contributing to Income and Wage Inequality: Comparative Evidence from Croatia, Serbia and Slovenia

ABSTRACT We examine sources of income and wage inequality in three transition countries. Our results reveal that much lower inequality of disposable income in Slovenia than in Croatia and Serbia can mainly be explained by more equally distributed net wages across households. This is partly attributed to the lower fraction of households with very low work intensity in Slovenia than in the other two countries, combined with a higher redistributive capacity of taxes and social transfers. We find that educational qualifications and both quantity and quality of work, play an important role in explaining differences in wage inequality in all three countries.

Informal Employment and the Structure of Wages in India: A Review of Trends

The “alternative”, “atypical” or “informal” workforce has grown in developed and developing countries alike. One of the more recent evolutions of informal employment has been of informal employment within formal enterprises. In the interest of flexibility and cost‐reduction, many formal firms increasingly resort to hiring workers on a temporary or informal basis. Alongside, and perhaps, as a result of the persistence and pervasiveness of informal employment, issues relating to inequality have come to the fore. This paper is motivated by these two intertwining aspects of Indian labor market—informality and wage inequality. Using nationally representative sample data, the paper examines trends in wage inequality among various forms of informal workers, overlaying these findings with broader trends in inequality. Using a regression based inequality decomposition, the paper compares the sources of wage inequality across different employment groups and the reasons for differences in wage inequality.

Explaining international differences in wage inequality: Skills matter

Several studies employing decomposition methods have argued that skills only play a minor role in explaining cross-country differences in wage inequality. In this paper, we build upon the work of Leuven, Oosterbeek and van Ophem (2004) and extend the decomposition analysis to take account of the relative demand for, and supply of, skills. Doing this confirms that skills do matter and are likely to be at least as important as labour market institutions in explaining international differences in wage inequality.

Wage inequality, skill inequality, and employment: evidence and policy lessons from PIAAC

This paper investigates international differences in wage inequality and skills and whether a compressed wage distribution is associated with high unemployment across core OECD countries. Wage dispersion and wage structure are widely debated among policymakers; compressed wage structure is often perceived as an important cause of high unemployment. Firstly, this paper examines differences in wage dispersion across OECD countries and their link to skill dispersion. Some countries that have more compressed (dispersed) wage structures simultaneously have more compressed (dispersed) skill structures as well, and skill differences explain part of the differences in wage dispersion. However, even when accounted for skills, some countries have a more compressed wage structure, most likely caused by labor market institutions. We do not find an effect of wage compression on the labor market performance in the low-skill sector. Based on the Program for International Assessment of Adult Competencies (PIAAC) survey of adult skills for core OECD countries, this paper cannot confirm the skill compression nor wage compression hypotheses. Rather than insisting on the deregulation of labor market institutions and reductions in public welfare policy as the main policy recommendations to achieve higher employment (and higher wage inequality), policymakers should reconsider aggregate demand deficiency and the variation in macroeconomic policies as potential explanations for the employment differences across countries. JEL Classification: J31, J24, E24

Does the Prosperity Level of States Affect Participation in Trade Unions? A Quantitative Research

<p><em>International differences in wage inequality remain a reality, despite efforts of negotiations and demands of the unions and contrary to the will of international organizations and associations for an international minimum wage. At the same time, the fall in wages and, specifically in minimum wages, combined with the decline of unionization are facts that seem connected.</em></p><p><em>This article presents the results of a quantitative research</em><em>-</em><em>using the </em><em>Mann-Whitney non-parametric test and the linear bivariate correlation—which examines the potential connection between the Gross Domestic Product and union density in 33 member-states of the OECD, while examining the type of the correlation between them. The research results showed that high Gross Domestic Product is directly proportional to the size of union density and that there is a positive correlation between the two.</em><em></em></p>

Do skills matter for wage inequality?

Policymakers in many OECD countries are increasingly concerned about high and rising inequality. Much of the evidence (as far back as Adam Smith’s The Wealth of Nations) points to the importance of skills in tackling wage inequality. Yet a recent strand of the research argues that (cognitive) skills explain little of the cross-country differences in wage inequality. Does this challenge the received wisdom on the relationship between skills and wage inequality? No, because this recent research fails to account for the fact that the price of skill (and thus wage inequality) is determined to a large extent by the match of skill supply and demand.

Why is Wage Inequality so High in the United States? Pitching Cognitive Skills Against Institutions (Once Again)

We revisit the relationship between cognitive skills and wage inequality and, contrary to most previous research, find that skills do play an important role in explaining differences in wage inequality between the United States and other OECD countries. We argue that previous research suffered from a number of methodological shortcomings, and we offer a single and unified analytical framework for analysing the contribution of skills (including demand and supply conditions) and labour market institutions to wage inequality. Our results suggest that higher skills inequality in the United States accounts for 15% of the difference in wage inequality with other countries, while differences in the demand for and supply of skills can explain just over a quarter. In comparison, higher minimum wages in other countries explain only 7% of the difference in wage inequality with the United States, while higher union coverage can explain 40%.

Skill-biased technical change, educational choice, and labor market polarization: the U.S. versus Europe

This paper analyzes the effect of recent technical change on the labor market and explains the observed differences in wage inequality among advanced countries. In particular, we focus on the difference between the inequality in the U.S. and in continental Europe. Many studies have indicated a rise in wage inequality in the U.S. over the past three decades. On the other hand, there has been little change in wage inequality in continental Europe. By introducing human capital investment into the model by Acemoglu (Am Econ Rev 89:1259–1278, 1999), we show that ex ante homogeneous economies would have distinct ex post wage distribution. The strategic complementarity between human capital investment and firms’ hiring strategies yields the possibility that multiple equilibria exist, which explains the difference in wage distribution between the U.S. and Europe. In addition, we show that differences in tax or education systems can explain the difference in wage distribution between the U.S. and Europe.

International Differences in Wage Inequality: A New Glance with European Matched Employer–Employee Data

AbstractUsing international harmonized matched employer–employee micro data from the European Structure of Earnings Survey for nine European countries, this article examines the origin of international differences in wage inequality. Wage inequality is highly correlated with the magnitude of inter‐firm wage differentials. Workplace‐ and job‐related factors generally have a more significant impact on within‐country wage inequality than individual characteristics. European countries differ significantly not only in the extent of wage inequality but also in the relative influence of factors shaping wage inequality. Although cross‐country differences in labour force composition play a part in the explanation, differences in the distribution and in labour market prices attached to workplace and job characteristics are the primary factors contributing to international differences in wage inequality.

Regional differences in wage inequality across industries in China

Using a panel of 29 provinces over the years 1995–2001, we explore the large regional variation in industry wage differentials in China and examine the provincial characteristics that are consistent with greater inequality. We find that the effect of foreign direct investment (FDI) varies by province. One of the reasons that FDI can have differential effects is that the type of FDI (export vs. import-oriented) varies substantially across the provinces. Export-oriented FDI raises the wages of workers in industries that rely more on unskilled workers and lowers the wages of workers in industries that rely more on skilled workers, lowering the industry differential.

The Structure of Worker Compensation in Brazil, with a Comparison to France and the United States

Abstract We employ comprehensive linked employer-employee data for Brazil to analyze wage determinants and compare results to Abowd et al. (2001) for French and U.S. manufacturing. While returns to human capital in Brazilian manufacturing exceed those of the other countries, occupation and gender differentials are similar. The worker-characteristics component accounts for much of the greater wage inequality in Brazil, but the establishment-fixed component has scant explanatory power. Thus, firm- or industry-level factors offer little scope for explaining the differences in wage inequality. Brazil's wage structure resembles that of France, a country with some similarity in labor market institutions.

Supply and demand, allocation and wage inequality: an international comparison

An allocation model of workers differentiated by their field of study is developed to test whether international differences in the wage structure can be explained by differences in labour demand and supply in each country. The model explicitly takes into account the effects of supply and demand shifts on the allocation structure to disentangle country specific differences in the recruitment for one occupation from real supply–demand effects. Empirical results based on data for nine countries show that cross-country differences in wage inequality explain at least two–third of the differences in labour demand and supply.

Diverse Disparities: The Politics and Economics of Wage, Market and Disposable Income Inequalities

This paper analyzes the evolution of inequality and its determinants across different forms of income. A number of results emerge from this effort. First, OECD countries have been and continue to be much more diverse in their distributions of earnings and disposable income than they are in their distributions of market income. Second, the larger cross-national variation in the distributions of earnings and disposable income can be attributed to the role of political actors (such as unions and, more importantly, political parties) and economic institutions that allow actors to coordinate their activities. Third, the transmission of cross-national differences in wage inequality into market-based inequality appears to be muted relative to economic and demographic transformations that have gone on within the OECD countries. Fourth, the way in which political parties are able to pursue their goals varies across forms of income. Political parties' capacity to shape the distribution of earnings is contingent on the degree of wage bargaining coordination. Absent coordination between labor and capital, right-wing policy works to modestly increase inequality. Alternatively, the egalitarian efforts of left-wing parties have the undesired effect of raising earnings inequality. In contrast, when labor market actors are able to coordinate, left-wing policy reinforces the egalitarian effects of coordination whereas the impact of right-wing policy is institutionally constrained. In turn, political parties affect directly the distribution of disposable income through their choices about fiscal redistribution.

Supply and Demand, Allocation and Wage Inequality: An International Comparison

In this paper, we develop an allocation model of workers differentiated by their field of study to test whether international differences in the wage structure can be explained by differences in labor demand and supply in each country. The model explicitly takes into account the effects of supply and demand shifts on the allocation structure to disentangle country specific differences in the recruitment for one occupation from real supply-demand effects. Empirical results based on data for nine countries show that cross-country differences in wage inequality explain at least 2/3 of the differences in labor demand and supply.

Wage Differentials in Taiwanese Manufacturing, 1982–1997

The present paper examines the impacts of technological change and trade flows on wage inequality across manufacturing industries. Using micro–level data from the Taiwan Manpower Utilization Survey (TMUS), 1982–1997, a slight decline in the log–wage differential between college and high–school workers is detected during this period. These results indicate that the accelerated growth in the relative supply of college graduates, combined with steady demand growth in favor of more highly educated workers, can largely explain the narrowing wage differentials within Taiwanese manufacturing over the period 1982–1997. In terms of demand–side factors, this study concludes that technology and trade are the two major forces driving the differences in wage inequality across industries.

Wage and test score dispersion: some international evidence

Previous research has shown that wage-setting institutions help explain international differences in wage inequality. We expand on this theme to explore the role that educational institutions play in determining differences in wage dispersion across countries and within countries over time. We compare the distribution of test scores at age thirteen in 1964 and 1982 and wages later in life across eleven countries. We find that wage dispersion later in life is never greater than test score dispersion. In particular, Lorenz curves for a cohort’s wages always lie above or on top of the cohort’s test score Lorenz curve. Furthermore, wage dispersion, as summarized by Gini coefficients, is significantly related to test score dispersion in the country. A general fall in test score dispersion between 1962 and 1982 appears to be reflected in reduced wage dispersion within cohorts. For three countries with available data (the US, the UK, and Japan), we find evidence of skill-biased changes in wage dispersion between the early 1970s and the late 1980s.

Egalitarian and elitist education systems as the basis for international differences in wage inequality

This paper investigates one reason why some countries have experienced a strong increase in wage inequality over the last decades while others have not. The explanation is based on the link between the quality of education and induced technological change. A country with qualitatively better-educated skilled workers, relative to unskilled workers, has a higher ratio of human capital to labour than a country where the quality of education is more equal across education levels. These differences lead to different paths of induced technological change across countries, which in turn imply different histories of the distribution of labour income.

On gender differences in wages in Switzerland

In this paper, we devise a new methodology to analyse the gender differences in wage inequality. We first examine some traditional wage decomposition based on the means of wages, and then show how this approach can be extended to the whole distribution by using a simple measure of inequality, that is the variance of the logarithm of wages. We then apply this method to Swiss data for the years 1991 and 1995. It appears that the greatest contribution to gender wage inequality differences in Switzerland is due to differences in the distributions of unobservable characteristics, while human capital tends to compensate slightly for this effect.

Changes in the U.S. Wage Structure 1963-1987: Application of Quantile Regression

The 1980's witnessed rapid changes in the structure of wages in the United States. In this study, recently developed techniques for quantile regression are applied to every March Current Population Survey since 1964 and changes in the return to schooling and experience at different points of the wage distribution are examined. The quantile regression technique parsimoniously describes the entire conditional wage distribution. This conditional distribution is used to examine changes in within-group wage inequality as measured by the difference between conditional quantiles. Two linear models are considered: a simple one-group model, and a 16-group model. The results suggest that the returns to schooling and experience differ across quantiles of the wage distribution but their patterns of change are similar. Significant differences in wage inequality are also found across the various skill groups. The paper also presents a new imputation method for CPS data.