Effects Of Wage Inequality Research Articles

Intra-household inequality, fairness and productivity. Evidence from a real effort experiment

Abstract This paper investigates experimentally how changes in wage rates and entitlements affect individual productivity in lab-in-the-field experiments run with married couples from rural regions in Uganda. We design a game in which the production task itself is straightforward, but where the rules governing payment vary across subjects and between rounds. In some cases, all the value of output goes to the husband; in other cases all goes to the wife; in other cases the value of output is shared equally and finally in some cases each spouse receives income according to only their own output. To consider the effects of wage inequality we vary the price paid for each completed item so that the ratio of male to female wages varies from 0.5 to 2. All this is done transparently so that both partners know the rules of the game. The results generally indicate that a rise in relative wages lowers relative effort, a result that is contrary to the most straightforward interpretation of standard models of the household, but compatible with some models of fairness. Men do not generally respond strongly to treatment. In contrast, women’s labor supply is strongly backward bending when all income goes to the husband, but effort rises with wages when each spouse gets to keep their own earnings. The results therefore suggest that the effects of reforming or removing one inequality may depend critically on the existence of other inequalities.

Team Performance, Efficiency and Wage Distribution in Professional Baseball

The effect of wage inequality on team production is an important question in labor economics. Data from sports are well suited to study this problem, with more than 10 published papers in the last decade. We analyze the effect of wage inequality both on team performance and efficiency, using data from Major League Baseball(MLB) and a stochastic frontier model with a translog production function. Most studies have examined the impact of inequality within a linear framework, and found that more equal pay structures enhance team production. This presupposes that there is no limit to benefficial effects of equality in pay, an idea which seems suspect. In this paper we allow for a possible non-linear relationship between wage inequality and team performance, and find that most MLB teams have wage structures which are sub-optimal. Furthermore using a semi-parametric estimation we find that high efficiency teams have a lower degree of wage inequality than low efficiency teams. This suggests that teams first compete by trying to adjust the structure of the wages to the optimum and then increasing the amount of total wages.

Winning and Wage Inequality in Major League Baseball

The effect of wage inequality on team production is an important question in labor economics. Data from sports are well suited to study this problem, with more than 10 published papers in the last decade. We analyze the effect of wage inequality on team performance, using an unique dataset from Major League Baseball. Most studies have examined the impact of inequality within a linear model framework, and found that more equal pay structures enhance team production. This presupposes that there is no limit to beneficial effects of equality in pay, an idea which seems suspect. We specify and model a more reasonable data generating process for sportive contests, based on the differences between relative characteristics of the teams. Monte Carlo experiments reveal that estimating linear models using winning percentage as a dependent variable results in having biased and inconsistent estimates, which confounds any inference based on them, thus favoring our modeling strategy. Using our improved modeling procedure, we allow the relationship between wage inequality and winning to be non-linear, based on an insight by Lazear (1991), and we confirm the existence of an optimum level of wage inequality, finding evidence supporting the tournament theory of Lazear and Rosen (1981).

The effects of wage compression on general and firm-specific training

The issue of who finances on-the-job training has important implications for labour markets. It is persistently difficult to test empirically whether it is the employer or the employee who carries the costs of general training. This article presents a simple method that compares the effect of wage inequality on duration of general training and firm-specific training. The result is consistent with the proposition that it is the worker who bears a greater part of the costs associated with general training than in the case of firm-specific training.