Real Wage Gap Research Articles

The role amenities play in spatial sorting of migrants and their impact on welfare: Evidence from China.

From 2005 to 2015, China's high-skilled labor was increasingly concentrated in cities with high wages and high rents, while a narrowing of the wage gap between high- and low-skilled labor showed an opposite trend to an increase in geographic sorting. In this research, I estimated a spatial equilibrium structural model to identify the causes of this phenomenon and its impact on welfare. Changes in local labor demand essentially led to an increase in skill sorting, and changes in urban amenities further contributed to this trend. An agglomeration of high-skilled labor raised local productivity, increased wages for all workers, reduced the real wage gap, and widened the welfare gap between workers with different skills. In contrast to the welfare effects of changes in the wage gap driven by exogenous productivity changes, changes in urban wages, rents, and amenities increased welfare inequality between high- and low-skilled workers, but this is mainly because the utility of low-skilled workers from urban amenities is constrained by migration costs; if migration costs caused by China's household registration policy were eliminated, changes in urban wages, rents, and amenities would reduce welfare inequality between high- and low-skilled workers to a greater extent than a reduction in the real wage gap between these two groups.

On the peripheral-urban wage gap in Germany

We compare real wage differences between centralized and peripheral areas and highly centralized and peripheral areas using vast information of German administrative data that contains more than 2.8 Mio individuals and 660,000 firms. We provide substantial empirical evidence that most of the wage gaps can be explained by differences in endowments of individual and firm characteristics, particularly when unobserved individual and firm heterogeneity is appropriately accounted for. Our interpretation is that the selectivity of workers and firms in space explains most of the real wage gap between peripheral and (highly) centralized regions, and returns to characteristics are honoured rather equally in all regional types.

The Aggregate and Distributional Effects of Spatial Frictions

We develop a general equilibrium model of frictional labor reallocation across firms and regions, and use it to quantify the aggregate and distributional effects of spatial frictions that hinder worker mobility across regions in Germany. The model leverages matched employer-employee data to unpack spatial frictions into different types while isolating them from labor market frictions that operate also within region. The estimated model shows sizable spatial frictions between East and West Germany, especially due to the limited ability of workers to obtain job offers from more distant regions. Despite the large real wage gap between East and West of Germany, removing the spatial frictions leads, in equilibrium, to only a small increase in aggregate productivity and it mostly affects the within-region allocation of labor to firms rather than the between-region allocation. However, spatial frictions have large distributional consequences, as their removal drastically reduces the gap in lifetime earnings between East and West Germans.

The Impact of Competitiveness on Brain Drain, GMM Panel Approach

Brain drain is one of the challenges that many countries have been facing for ages and it is considered as one of the most damaging issues in the countries. So far, economists have always emphasized and focused on the factors affecting brain drain, including economic growth, quality of innovation, human capital, unemployment rate of graduates, institutional quality, intellectual property rights, economic, political and civil liberties, political and social environment, inequality, and so on. The study of each of them, in turn, explains the causes of brain drain. But along with these factors, the effect of the power of competitiveness on brain drain, which has recently been taken into consideration by international communities, has been neglected and there have not yet been comprehensive studies on it. While competitiveness as a factor of attraction can increase the motivation and welfare of the elites and it ultimately prevents the elites from leaving the country by employing them in different parts of the country. In this regard, the purpose of this study is to investigate the effect of competitiveness on brain drain from selected Islamic countries to the USA during the period from 2007 to 2015 using the Generalized Method of Moments (GMM). The results of this study showed that the competitiveness index has a negative and significant effect on brain drain. Additionally, the indexes of welfare gap and real wage gap have respectively positive, significant and positive, and insignificant relationships with brain drain in the studied countries. The variable of unemployment rate also has a positive and significant relationship with the brain drain. According to the findings of the study, poor competitiveness in Islamic countries, which are mostly sending countries, is a repulsive factor that leads to a large exodus of elites from the above-mentioned countries. Therefore, it is suggested that politicians and managers of the Islamic countries pay more attention to the indicators of competitiveness in order to reduce the brain drain.

Institutional determinants of regional diversity of labor market in Poland

The article focuses on regional diversity of the Polish Labor Market from institutional perspective. The Polish Labor Market is geographically diverse in terms of unemployment and employment rates, and also in terms of economic development. At the end of 2013 the difference between the lowest and the highest unemployment rate in the Polish regions was 12.1% (Wielkopolska located in the West Poland has unemployment rate of 9.6% and Warmia - Mazury in the East has unemployment of 21.7%). The question arises whether this difference comes from the structural or institutional sources. The paper describe the character of Polish Labor Market, whereas in the second part, it traces the impact of institutional variables such as real wage, Kaitz index and Gender gap on the regional unemployment rate in 2002–2012 in Poland.

Unskilled wage gaps within the Japanese Empire

This study calculates the cost of subsistence and respectability consumption baskets to derive ‘welfare ratios’ for 11 cities in the Japanese Empire as defined by Allen and his colleagues. Nominal wages tended to be higher where higher prices prevailed, and vice versa. Prices and nominal wages remained highest in Japan and lowest in Manchuria, with Korea and Taiwan being placed in between. Welfare ratios remained roughly comparable in the 1910s in the imperial cities outside Manchuria, where unskilled workers enjoyed substantially higher living standards. Interwar decades saw real wages rise in Tokyo, but fall in Dalian, which caused convergence in workers' income levels. Wage divergence occurred within Manchuria, as workers in Shenyang and Changchun enjoyed an improving welfare ratio. Real wages rose more slowly in Korean and Taiwanese than in Japanese cities. Replacing a subsistence lifestyle with a ‘respectable’ lifestyle yields a significantly different picture of the evolution of the real wage gap within the empire, which contradicts findings reported by existing studies in important respects.

Wage forms, costs of living and the urban–rural wage gap: Southern Sweden, 1881–1930

One common finding of studies of industrialising economies in the nineteenth and twentieth centuries is the existence of an urban–rural nominal wage gap. For the analysis of its causes and context it is however essential to know the extent to which the gap is due to urban–rural differences in payments in kind, cost of living and consumption patterns. Only a few studies have tried to estimate the real urban–rural wage gap though. This paper belongs to this stream of literature, aiming to develop a method for the estimation of the real wage gap given the kind of data available in the Swedish context, and to use it to estimate the real wage gap for Malmö County in 1881–1930. The main result is that the gap is reduced to about one-half of its nominal size when differences in payments in kind, cost of living and consumption patterns are accounted for. The real wage gap was still substantial though, and the trend was increasing. While urban real wages were ranging from 10% less to 40% more than agrarian wages in the nineteenth century, urban real wages were 30–100% above agrarian wages in the 1920s.

Real Wages and Labor Productivity in Britain and Germany, 1871–1938: A Unified Approach to the International Comparison of Living Standards

Throughout the period 1871–1938, the average British worker was better off than the average German worker, but there were significant differences between major sectors. For the aggregate economy, the real wage gap was about the same as the labor productivity gap, but again there were important sectoral differences. Compared to their productivity, German industrial workers were poorly paid, whereas German agricultural and service sector employees were overpaid. This affected the competitiveness of the two countries in these sectors. There were also important differences in comparative real wages by skill level, affecting the extent of poverty.

Real Wages and Labour Productivity in Britain and Germany, 1871-1938: A Unified Approach to the International Comparison of Living Standards

Throughout the period 1871-1938, the average British worker was better off than the average German worker, but there were significant differences between major sectors. For the aggregate economy, the real wage gap was about the same as the labour productivity gap, but again there were important sectoral differences. Compared to their productivity, German industrial workers were poorly paid, whereas German agricultural and service sector employees were overpaid. This affected the competitiveness of the two countries in these sectors. There were also impor-tant differences in comparative real wages by skill level, affecting the extent of poverty.

All in the Family: A Dynasty Approach to Household Migration Evidence from the 19th Century Austro-Hungarian Empire

This paper deals with the rural-urban migration of families in the last decades of the 19th century in one of the most developed regions of the Austro-Hungarian monarchy - the Pilsen region. The analysis indicates that the household head's expected real rural-urban wage gap was not the main factor behind migration. Instead, the observed behavior is consistent with families maximizing a dynastic utility function such that it was the future prospects of children which triggered migration. The results are not based on tracing of families in time but rely on identifying a control group of stayers. Specifically, I compare the structure of migrant families at the time of arrival to an urban area with that of families who stayed in the hinterlands and to decipher migration motifs.

Monitoring Wage Developments in EMU

The purpose of this paper is to provide a brief review of aggregatewage developments in the EU member states. We start with a short discussion of wage bargaining mechanisms, their impact on labour market outcomes, and take a look into the crystal ball to learn about possible future developments. Section III analyses nominal wage developments focussing, in particular, on the evolution of cross-country patterns as anindicator for the synchronisation of wage developments. Section IV discusses real wage growth in relation to productivity developments using a somewhat refined 'real wage gap indicator';and Section V simply concludes.

Do Farm Workers Earn Less? An Analysis of the Farm Labor Problem

AbstractDuring the four decades extending from 1950 to 1960, the ratio of the farm to nonfarm wage fluctuated between 0.45 and 0.55. We employ the Oaxaca technique and the Public Use Microdata Sample of the 1990 Census to decompose the farm/nonfarm wage differential. We also use the American Chamber of Commerce Research Association (ACCRA) cost‐of‐living data to measure the impact of the farm/nonfarm cost‐of‐living index on the wage gap. First, we find that the observed wage gap is reduced by half when nominal wages are deflated by the (ACCRA) cost‐of‐living index. Second, by applying the Oaxaca method separately to a subsample of young employees and a subsample of old employees we find that while for the subsample of employees younger than thirty‐five years the real wage gap practically vanishes, the gap for the subsample of employees who are thirty‐five years of age and over is higher than that of the total sample. This finding lends strong support to the hypothesis that between 1950 and 1970 the process of farm out‐migration was positively selective.

The Netherlands’ Real Wage Gap in the 1960’s. A Labour Market “Natural Experiment”

The Netherlands’ Real Wage Gap in the 1960’s. A Labour Market “Natural Experiment”

Classical and Keynesian unemployment in Austria

The labor market in a macroeconometric model of Austria is used to determine the natural unemployment rate, full-employment (F.E.) output, and the F.E. real wage for 1966–92. Gaps between actual and F.E. variables are examined analytically and historically. Observed unemployment is decomposed into natural, hidden, classical, and Keynesian components. Classical unemployment is associated with the real wage gap, while Keynesian unemployment depends on the output gap. A rise in the natural rate is found to account for almost all of the increase in unemployment between 1966–74 and 1975–81, but an increase in Keynesian unemployment is the major factor in the rise of unemployment between 1975–81 and 1982–92. A fiscal shock to the complete model is found to increase real GDP for a year or two, reducing Keynesian unemployment without an appreciable rise in classical unemployment; the wage gap is eventually increased, however, producing a modest rise in classical unemployment.

Measurement issues with real wage gaps in New Zealand

This paper applies the real wage gap framework in Bruno and Sachs’ (1985) seminal work “The Economics of Worldwide Stagflation” to New Zealand. An extensive sensitivity analysis finds that using different definitions of the actual real wage can change the measured real wage gap by over 30%, but that the warranted real wage is relatively insensitive to other changes in data and methodology. The data and models used do not provide any evidence to suggest that the real wage gap plays a significant role in explaining the path of employment or unemployment in New Zealand between 1967 and 1991. Two general conclusions are possible. Either the real wage gap is not a determinant of employment or unemployment in New Zealand, or it is a determinant, but this effect cannot be isolated to measurement error in either the warranted or the actual real wage.

Unemployment and the real wage gap: A reappraisal of the German experience

Unemployment and the Real Wage Gap: A Reappraisal of the German Experience.- The major European economies experienced a rise in unemployment since the late 1970s. At the same time, the real wage gap, a widely used measure of wage pressure, declined. This paper develops an analytical framework that relates the two phenomena. Particular emphasis is placed on the interaction of capital accumulation, wage setting and labour demand. The model is applied to the particular case of Ger-many and found to be consistent with the observed behaviour of wages, investment, output and employment.

WAGE‐MODERATING EFFECTS OF CORPORATISM: DECENTRALIZED VERSUS CENTRALIZED WAGE SETTING IN A UNION, FIRM, GOVERNMENT CONTEXT

Corporatism is often claimed to exert a moderating influence on the real wage gap, the difference between the actual wage rate and the full employment wage rate. Corporatist countries should, therefore, show a lesser degree of unemployment. This paper explores and models one of the reasons why these results might be observed. An important reason for wage moderation could be the endogeneity of the wage tax rate for a centralized or encompassing trade union. Copyright 1993 by Blackwell Publishers Ltd and The Victoria University of Manchester

Political and Economic Explanations for Unemployment: A Cross-National and Long-Term Analysis

This article shows that the widely accepted supply shock and real wage gap explanation of increases in unemployment rates since 1973 has only limited empirical support. The causal factors behind unemployment are best understood by focusing on conflicts of interest in Western democracies, on the distribution of power resources between major interest groups and on strategies of conflict. Given economic constraints, from this perspective unemployment appears as the labour market expression of distributive conflict, alternatives to which are inflation and industrial disputes. Strategic action by government elites and long-term patterns in settling conflicts are major factors behind the two great transformations of Western unemployment levels – the introduction of full employment in the immediate post-war period and the return to high unemployment since 1973 – as well as in variations in unemployment among eighteen Western democracies.

THE ECONOMICS OF WORLDWIDE STAGFLATION: A REVIEW *

THIS is not an easy book. Roughly half of it is devoted to a very thorough exposition of the macroeconomic theory of an economy with an imported intermediate product (energy). This clearly introduces the possibility of an exogenous supply shock if the terms on which energy can be bought shift. This section ends with some simulation exercises on a complete general equilibrium dynamic model of 35 equations. Thus when one turns to the empirical work in the second half of the book, which relates to the experience of oil importing countries over the last two decades, one has two expectations: that the estimated models will be complete simultaneous systems, and that the oil price will play a key role. Both expectations are disappointed. The main focus is not on the energy market but on the labour market, where the key contribution is in the use made of a notion of a real wage gap in the modelling of industrial country price and output dynamics. The real wage gap is the proportion by which real wage rates exceed their full employment equilibrium value. This modelling is not done in a consistent simultaneous structural framework, indeed it is not only rather scrappy in theoretical terms but also econometrically unsophisticated. The link between these two sections might be found in the determination of real wage gaps by energy price changes. They do indeed have a role to play but other factors can also generate gaps; thus the authors see the spontaneous European wage explosion of the late 1960's as opening up a gap, and likewise the widespread increase in payroll taxes. Another possible contributor is a productivity slowdown not reflected in wage trends; this is recognised, but is treated as being in large part endogenous. The authors' purpose is not to displace Keynesian demand considerations by a variant on new classical rational-expectations supply-side models, but to try to synthesise demand and supply factors in a model with alternative regimes the demarcation of which is blurred by aggregation. This is a very worthy task on which they have made considerable advances, although their particular mixture of rigorous theoretical and relatively casual empirical argument will not be to everyone's taste. With Keynesian features to support policy effectiveness the question of international co-operation arises naturally in the context of an open economy model and a comparative study. The case for co-operation is strong, but is complicated by the recognition that economies differ in ways which significantly affect not only their responses to their own policies, but

The Real Wage Gap and Employment [with Comments

The Real Wage Gap and Employment [with Comments