Wage Determination Research Articles

Customer Discrimination in the Market for Physicians in the USA

In this paper I study the gender wage gap of self-employed physicians in the USA. The data from CTS Physicians survey show that self-employed female physicians earn 13% less than self-employed male physicians, but no such difference exists in the salaried sector. I develop a model of simultaneous wage determination in private practice and salaried sector in presence of customer discrimination. The model predicts that female physicians charge lower price than male physicians if there is customer discrimination in the market. The model also predicts adverse selection among male physicians in the hospital sector. Only the very low ability male physicians will work for hospitals who benefit from high ability female physicians in the workplace driving the wages up.

Firm age and wage determination: evidence from matched employer–employee data in Japan

ABSTRACT Firm age, a new factor underlying wage differentials, has been analysed in the emerging literature using matched employer–employee data, though its effect on wages remains inconclusive. This study adds to the literature by providing insights into different wage determinants between industries. We find firm age has a negative effect on wages and a positive effect on a slope of the wage–tenure profile, particularly in non-manufacturing industries. The industrial difference may be explained by the difference in firms’ survival rates and expectations on long-term training.

Analysis of wage distribution in Malaysia

Labor force demand in Malaysia has grown significantly over the decades since the independence era. Changes in economic structure have led to changes in labor force utilization. There are hundreds of studies had been done to investigate the determinants of wages, including human capital factor, demographic factor as well as job characteristic. The objective of this paper is to examine the determinant of wages in Malaysia using the Salaries and Wages Survey, 2016 conducted by the Department of Statistics Malaysia. Based on the analysis of mean differences, the average wage is significantly different for all variables, including age, ethnicity, marital status, education level and occupation. Even in the analysis of the distribution for men and women, the difference in average wage is also identified for each occupation category and sector of the industry.

임금의 결정과 사적자치의 한계

The discussion on this topic has brought out the following results.BR Firstly, now that an employment contract fundamentally holds its nature as an agreement to bond, the liberty of contract applies, generally, even to labor relations. But, since employees cannot stand on an equal footing in their relationships with employers, the State has an obligation to protect them, who are relatively put in a vulnerable position. Thus, there is a big potenti-al for its intervention in labor relations. Typically, the minimum standards for working conditions are guaranteed by the established Employment Standard Act and labor-related laws are interpreted as obligatory provisions. Such a role by the State is occasionally played through the interpretation of a judge.BR Secondly, a wage is all forms of monetary compensation essentially paid by an employer to an employee in exchange for work done. As for wages, the person concerned is entitled to decide several facts such as the name of monetary compensation, but their determinations are made objectively and practically. Therefore, views of the person concerned do not need to be considered. People concerned are limited to deciding objective facts for wage determination and have no right to decide the legal nature of direct wages. On top of this, attaching conditions to the incidence or payment of wages is not allowed because it puts only employees in an unfavorable position and makes legal relations insecure.BR Thirdly, the effect of the labor-management agreement on the terms and conditions of employment shall be null and void. The Agreement means to make employees give up wages they deserve for their labor or to get them unpaid. It is also set out to avoid mandatory provisions for ordinary wages, therefore, it shall be declared null and void. The nature of wages or ordinary wages cannot be excluded through employment terms and conditions and is not allowed even through an employment agreement or a revision of the collective agreement.

Inter-industry wage inequality: persistent differences and turbulent equalisation

AbstractThe empirical stylised fact of persistent inter-industry wage differentials is an enduring challenge to economic theory. This paper applies the classical theory of ‘real competition’ to the turbulent dynamics of these inter-industrial wage differentials. Theoretically, we argue that competitive wage determination can be decomposed into equalising, dispersing and turbulently equalising factors. Empirically, we show graphically and econometrically for 31 US industries in 1987–2016 that wage differentials, like regulating profit rates, are governed by turbulent equalisation. Furthermore, we apply a fixed-effects OLS as well as a hierarchical Bayesian inference model and find that the link between regulating profit rates and wage differentials is positive, significant and robust.

Wage Rate: Is this Return to Education or Return to Physical Capability? Evidence from Rural India

This paper estimates the wage function for daily labor market participants in Semi-Arid Tropics of rural India within a traditional agrarian framework. Village level data on 18 villages for 2009–2010 and 2012–2013 have been used for this study. Three-years balanced panel estimation has also been conducted to test the time invariance of the findings from the cross-sectional study. A modified Mincerian earning equation is estimated for different types of workers—regressing upon a set of human capital measures, socioeconomic factors and, demand influences after correcting for potential sample selection bias. The study finds differential impacts of education and physical ability to determine wages for male and female workers. It reveals the greater importance of education in explaining wages of male laborers while for females, nutritional status playing a significant role than education in wage determination process. Among the other factors, drought works as a major exogenous shock and hence impacts wages badly. Working in the non-farm sector has a significant impact on wages. Also, the wage–participation relationship has found more operative in the lower section of the society.

The wage-productivity nexus in the world factory economy

This paper highlights new findings on the wage-productivity nexus in the World Factory Economy. After presenting the long-run macro-elasticity characterizing the phase of Chinese economic development since the eighties, we look at the wage-productivity nexus from a micro level perspective using a detailed firm-level dataset covering the period of ownership restructuring (1998–2007). A few results are quite robust under different estimation strategies. First, throughout the impressive Chinese economic miracle, elasticities of real wages to productivities – that is the ratios of rates of variation of the former to the latter – are always positive both under pooled and longitudinal estimates, both at firm- and sectoral-levels. Second, such elasticities are dramatically low, and falling in many distinct phases since the late seventies. That is, even in the manufacturing sector, the distribution of gains from the impressive labour productivity growth appears to be markedly uneven. Finally, third, governance institutions seem to matter a lot, with the majority of ownership types exhibiting firm-specific wage determination processes. The low elasticities of wages to productivity are plausibly the consequence of the massive flow of migrant workers from the rural areas to the coasts, somewhat resembling the early phase of the English Industrial Revolution with the pattern of enclosure in the country-side and massive migrations to the industrial towns.

Gender wage inequality during Sri Lanka’s post-reform growth: A distributional analysis

Abstract This paper investigates gender wage inequality in Sri Lanka during 1992–2014, a period of robust economic growth following pro-market reforms. The gap in mean wages between men and women decreased steadily over this period. Unconditional quantile regression reveals the decline in gender wage inequality was driven by the upper half of the distribution, and was due to improvements in women’s observable human capital. Yet, the pay structure became more unequal, indicating widening gender gaps in the returns to labor market characteristics and in unobservable determinants of wages. The gender gap in pay structure widened disproportionately in the lower half of the distribution, coinciding with falling absolute and relative returns to women in manufacturing industries and production occupations facing greater international competition. The study also demonstrates selection bias underestimates the gender wage gap and overestimates the gains in equality over time. Factors that hinder gender equality in the labor market are discussed along with policy implications.

Wage Determination and the Bite of Collective Contracts in Italy and Spain: Evidence from the Metalworking Industry

espanolEn varios paises de la OCDE, las asociaciones empresariales y las organizaciones sindicales fijan tarifas salariales minimas de obligado cumplimiento para todos los empleadores en la industria. Una hipotesis considera que la totalidad de los salarios en estas industrias solo cambia cuando se renegocian los convenios colectivos, sin variar a lo largo del ciclo economico. Una hipotesis alternativa enfatiza que solo los salarios cercanos a las tarifas minimas se ven afectados por las condiciones fijadas en el convenio, mientras la mayoria de los salarios si varia a lo largo del ciclo. En este trabajo se distingue entre ambas hipotesis y se utiliza una nueva base de datos que enlaza informacion de tarifas salariales del sector del metal en Italia y Espana entre 2005 y 2013 con los historiales laborales de los trabajadores de esta industria. Se documenta que, en ambos paises y en el periodo considerado, un aumento en la tasa de desempleo local de 1 (pp) disminuyo los salarios en 0,45 pp. En cambio, un aumento de 1 pp en la tasa de desempleo en el momento de la renegociacion del convenio colectivo redujo los salarios en 0,07 pp, una reduccion debida principalmente a los salarios cercanos a las tarifas fijadas en convenio. Por lo tanto, en el sector del metal y durante el periodo considerado, la mayoria de los salarios si respondio ante cambios en la tasa de paro local. No obstante, la magnitud estimada de la respuesta es inferior a la predicha por un modelo teorico de emparejamiento habitualmente utilizado en la literatura economica EnglishIn several OECD countries employer federations and unions fix skill-specific wage floors for all workers in an industry. One view of those “explicit” contracts argues that the prevailing wage structure reflects the labor market conditions back at the time when those contracts were bargained, with little space for renegotiation. An alternative view stresses that only workers close to the minima are affected by wage floors and that the wage structure reacts to current labor market conditions. We disentangle both models using a novel data set that combines more tan 1,000 signature dates and 15,000 wage floors set in the metal working industry with labor market histories of metal workers drawn from Social Security records in Italy and Spain. An increase in the contemporaneous local unemployment rate of 1 p.p. diminished contemporaneous mean wages by about 0.45 p.p. between 2005 and 2013 in both countries. Instead, a 1 p.p. higher unemployment rate back at the time of contract renewal reduced wages by 0.07 p.p., an impact driven by wages close to the negotiated wage floors. Even though the evidence for earlier periods is mixed in Italy, the results do not support the view that the wage structure reflects labor market conditions at the time of bargaining. The results support the hypothesis that (most) wages respond to local current unemployment rate, although the estimated elasticity falls short of the prediction of an off-the-shelf bargaining model.

Leave‐Out Estimation of Variance Components

We propose leave‐out estimators of quadratic forms designed for the study of linear models with unrestricted heteroscedasticity. Applications include analysis of variance and tests of linear restrictions in models with many regressors. An approximation algorithm is provided that enables accurate computation of the estimator in very large data sets. We study the large sample properties of our estimator allowing the number of regressors to grow in proportion to the number of observations. Consistency is established in a variety of settings where plug‐in methods and estimators predicated on homoscedasticity exhibit first‐order biases. For quadratic forms of increasing rank, the limiting distribution can be represented by a linear combination of normal and non‐centralχ2random variables, with normality ensuing under strong identification. Standard error estimators are proposed that enable tests of linear restrictions and the construction of uniformly valid confidence intervals for quadratic forms of interest. We find in Italian social security records that leave‐out estimates of a variance decomposition in a two‐way fixed effects model of wage determination yield substantially different conclusions regarding the relative contribution of workers, firms, and worker‐firm sorting to wage inequality than conventional methods. Monte Carlo exercises corroborate the accuracy of our asymptotic approximations, with clear evidence of non‐normality emerging when worker mobility between blocks of firms is limited.

The Gap that Survived the Transition: The Gender Wage Gap Over Three Decades in Estonia

This paper looks at the gender wage gap throughout the transition from communism to capitalism and throughout fast economic convergence. The case of Estonia is used, and the labour force survey micro data is employed from 1989 to 2020. The communist regimes were characterized by highly regulated wage determination and the high educational attainment and labour market participation of women. Despite a formally egalitarian regime, the raw gender wage gap was as large as 41% in 1989. The large gender wage gap under communist rule diminished quickly during the transition to a capitalism, mainly due to the erosion of distortions in the labour market, such as low returns to education. The paper has two main messages, first, the position of women in the labour market has improved over the last three decades. The mechanism behind their gains is similar to those in other formerly centrally planned economies, the education of women is even better now, they are employed in better occupations and their returns to education are higher. Second, the gender wage gap was large already three decades ago and the unexplained part has been resistant to decline. This points to strong inertia in the gender wage gap and to the importance of longer-term factors in it. The decline in the gap is related to the overall decline in wage inequality, minimum wages have also contributed to this process. While gender attitudes have become much more egalitarian, it is difficult to prove their role.

대졸 청년의 취업 결정요인 및 노동시장 성과 격차 - 동남권(부산, 울산, 경남)을 중심으로 -

이 논문은 한국고용정보원의 대졸자직업이동경로조사 자료(2007GOMS-2016GOMS)를 이용하여 동남권 대졸 청년의 취업 결정요인과 지역별 노동시장 성과 격차를 분석하였다. 첫째, 동남권의 청년 노동시장을 분석한 결과, 2018년 기준 청년고용률은 수도권보다 4.1%p 낮았고, 월평균 임금은 12.2만 원 적었다. 동남권 내에서는 청년고용률은 경남, 임금수준은 부산이 가장 낮았다. 둘째, 동남권 청년의 취업 결정요인을 분석한 결과, 분석대상(전체 기업/대기업)에 따라 추정계수의 방향과 영향력이 다르게 나타났다. 청년들이 선호하는 대기업취업을 중심으로 살펴보면, 남성일수록, 연령이 낮을수록, 4년제 대학일수록, 국·공립대학일수록, 학교 성적이 높을수록, 부모 학력과 가계소득이 높을수록 대기업 취업 확률이 높았다. 셋째, 대학이 위치한 지역에 따른 취업률 격차를 추정한 결과, 수도권 대학이 동남권과 비수도권 대학보다 취업 확률이 유의하게 높았으며, 취업에 미치는 영향력은 대기업 취업에서 더 컸다. 동남권 내에서는 비동남권에 비해 부산은 대기업 취업 확률이 낮고, 울산과 경남은 높았다. 넷째, 취업한 지역을 구분하여 임금 격차를 추정한 결과, 수도권 기업에 취업한 청년들이 동남권과 비수도권 기업에 취업한 청년보다 임금수준이 유의하게 높았으며, 이러한 임금 격차는 대기업 취업의 경우 더 크게 나타났다. 동남권 내에서는 비동남권에 비해 부산은 임금수준이 낮고, 울산과 경남은 높았다. 다섯째, 지역균형발전 차원에서 사회적 관심이 높은 수도권과 동남권(또는 비수도권) 간의 취업률 및 임금 격차가 시간의 흐름에 따라 어떻게 변화하고 있는지를 추정한 결과, 지난 10년간 큰 변화 없이 동남권과 비수도권 청년의 대기업 취업률과 임금수준이 수도권에 비해 유의하게 낮았다. 이는 청년 노동시장에서도 지역별 취업률 및 임금 격차가 존재하고 있으며, 이러한 격차가 해소되지 않는다면 동남권과 비수도권 고학력 청년들의 수도권 유출과 지역 불균형이 더욱 확대될 수 있음을 시사한다.

Interplay Between Reservation Wage and Unemployment Duration: Evidence from Jordan, Serbia, Montenegro, Ukraine and Moldova in 2015

This study investigates the reservation wage along with the unemployment duration of the youth in five countries from three groups of countries, the MENA countries, the WB countries and the CIS countries. The study assesses the determinants of the reservation wage and in particular how it is related to unemployment duration. The data comes from the School to Work Transition Survey in 2015 which is a survey that is labor market designed and includes labor market information on young people aged 15 to 29 years. The Two Stage Least Square (2SLS) model is conducted by using instrumental variables. This technique is used since we suspect that ednogeneity between the reservation wage and the unemployment duration is possible in our model. The results suggest the interplay between the reservation wage and the unemployment duration is countercyclical, the longer the unemployment duration the lower the reservation wage. Youth that lives in a household that receives other sources of income and remittances have lower reservation wages and youth that comes from a household with good financial situation and receives governmental financial assistance have higher reservation wages. Married youth with children have higher reservation wage and lower unemployment duration and more educated and trained youth has higher reservation wage.

Non-Cognitive Skills: How Much Do They Matter for Earnings in Canada?

Evidence from different countries suggests that non-cognitive skills play an important role in wage determination and overall social outcomes, but studies for Canada are scarce. We contribute to filling this gap by estimating wage regressions with the Big Five traits using the Longitudinal and International Study of Adults. Our results indicate that conscientiousness is positively associated with wages, while agreeableness, extraversion, and neuroticism are associated with negative returns, with higher magnitudes on agreeableness and conscientiousness for females. Cognitive ability has the highest estimated wage return so, while significant, non-cognitive skills do not seem to be the most important wage determinant.

Differences in wage determination in the Eurozone: A challenge to the resilience of the common currency

Different developments in wages and unit labor costs across countries can reduce the synchronization of business cycles within a currency area and therefore be a potential source of asymmetric shocks and/or asymmetric response to a common shock. In this paper, we use novel econometric methods to identify differences and similarities in wage determination across Eurozone countries. Results show that wages have different determinants across euro area countries, among which two relatively distinct groups can be identified. In particular, wages in Germany, Austria, Belgium, Luxembourg, the Netherlands and Finland behave more similarly, are less sticky and respond more to macroeconomic conditions than those in the group composed of Italy, Spain, Portugal, France and Ireland. Moreover, the equilibrium wage has been affected by a structural change contemporaneous to the international financial crisis. Finally, structural reforms since the euro crisis have contributed to make labor market structures in Eurozone countries more similar, which contributed to improve the resilience of the Eurozone, but the job is not completed yet.

Migrants and Informal Casual Labour Markets

Internal migration in India is estimated to be at around 100 million people and short-term seasonal migration for work is estimated to vary between 80 and 140 million. Employers may benefit from the increase in the supply of labour, and middle-class households may benefit from the lower price of household services provided by the migrants and their families. Local residents with comparable skills to those of migrants may find that they have to compete for jobs in the labour market. Many regions implicitly differentially prioritize the interests of local residents and of migrants whilst filling vacant jobs, resulting in a tradeoff between welfare rights and openness to migration. Migrants take into account the tradeoffs of poor working conditions and unwritten and unenforceable contracts, with the higher income in the destination region, and all considered migrate. We provide a framework for understanding this socio-economic outcome. In many urban contexts, migrants and other low-skilled workers gather at some focal point such as a busy market place or crossroad in the morning and meet with potential employers who negotiate the type of work to be performed, the wage, and the number of hours that the worker has to work. Surprisingly, there has been a paucity of research on the employer–employee match in the daily urban casual labour market. Working days are usually long—between 12 and 14 h in many instances—and the wage and working conditions are usually negotiated. The market wherein the bargain takes place is a flexible labour market where workers can be replaced by the employer at a minimal cost to the employer. In most of such contracts workers report that they have been cheated and face harassment. The requirements for complete contracting are severe in this market. It is difficult ex ante to specify what constitutes a satisfactory performance of the contract (as it is difficult to record and measure performance), and accordingly, it is difficult to enforce the contract via a third party. This leads to opportunism as the employer holds up the worker by requiring further responsibilities such as longer hours of work to be undertaken that were not negotiated in the first place. We postulate a bargaining approach to unearth the role of regulation and the determination of wages and work conditions in the informal casual labour market.

Labour market transitions after layoffs: the role of occupational skills

Abstract We study the role of occupational skills for labour market transitions after layoffs. Drawing on Lazear’s skill-weights approach, we develop empirical measures for occupational specificity and the skill distance between occupations to investigate how skills map into job mobility and wages. Our analysis reveals several important insights. First, higher occupational specificity is associated with lower job mobility and a longer period of unemployment. However, it is also associated with higher wages. Workers receive a wage premium of about 9% for re-employment in a one standard deviation more specific occupation. These results suggest a risk–return trade-off to educational investments into more specific skills. Second, the skill distance is negatively associated with wages. Workers moving between occupations with similar skill requirements suffer smaller wage losses than those with more distant moves. Thus, skills appear to be transferable across occupations and to play a pivotal role in the determination of wages.

Inflación de alimentos en Perú: El rol de la política monetaria

Food inflation in Peru has a significant influence on total inflation, so the presence of second-round effects on core inflation may be high. This paper estimates the size of these second-round effects using a general equilibrium model for the Peruvian economy. The results indicate the absence of a significant second round effect on Peruvian inflation, given that food inflation does not play any role in the formation of inflation expectations and in the determination of wages.

A simple method to estimate large fixed effects models applied to wage determinants

Models with high-dimensional sets of fixed effects are frequently used to examine, among others, linked employer-employee data, student outcomes and migration. Estimating these models is computationally difficult because of the high-dimensional design matrix. I present a simple algorithm to compute the OLS estimates of large two-way fixed effects (TWFE) and match effect models including estimates of the fixed effects. The algorithm simplifies specification tests and variance estimation even with multi-way clustered errors. An application using German linked employer-employee data illustrates key advantages of the algorithm: Omitting match effects substantially affects estimates including the gender wage gap. Analyzing the estimated fixed effects suggest that firm fixed effects are the main channel through which job transitions drive wage dynamics, which underlines the importance of firm heterogeneity for labor market dynamics.

Neoclassical versus Neoricardian Schools on Wage Determination

Neoclassical versus Neoricardian Schools on Wage Determination