Wage Markup Research Articles

Supply of Human Capital in Times of Skill Biased Technological Change / Die Reaktion des Humankapitalangebots auf qualifikationsverzerrten technischen Fortschritt

Summary This paper analyses the skill supply consequences of skill biased technological change. In a simple microeconomic model it is shown that higher skill wage mark-ups as well as higher relative unskilled unemployment - frequently attributed to skill biased technological change - induce overqualification. Therefore over-qualification is an equilibrium mechanism when skill rents increase. A shift-share analysis on the basis of representative German individual data (the Mikrozensus) shows indeed that the qualification levels for jobs with given characteristics increased between 1991 and 1995 in Germany. The job characteristics analysed are type of activity mainly pursued, place of activity or position in the enterprise. These findings are interpreted as evidence for increasing over-qualification in the wake of skill biased technological change.

European inflation dynamics

We provide evidence on the fit of the New Phillips Curve (NPC) for the Euro area over the period 1970–1998, and use it as a tool to compare the characteristics of European inflation dynamics with those observed in the U.S. We also analyze the factors underlying inflation inertia by examining the cyclical behavior of marginal costs, as well as that of its two main components, namely, labor productivity and real wages. Some of the findings can be summarized as follows: (a) the NPC fits Euro area data very well, possibly better than U.S. data, (b) the degree of price stickiness implied by the estimates is substantial, but in line with survey evidence and U.S. estimates, (c) inflation dynamics in the Euro area appear to have a stronger forward-looking component (i.e., less inertia) than in the U.S., (d) labor market frictions, as manifested in the behavior of the wage markup, appear to have played a key role in shaping the behavior of marginal costs and, consequently, inflation in Europe.

Wage Divergence and Unemployment: The Impact of Insider Power and Training Costs

The US labour market is characterized by a high skill wage mark-up and low unemployment, while the German labour market has a low skill wage mark-up and a high, mainly unskilled unemployment rate. This paper adds an innovative labour supply explanation to the discussion how these distinct labour market equilibria could arise. Skill-biased technological change induces training needs for the employees willing to work in the skilled labour market and increases relative skill demand. In a simple general equilibrium model, this paper shows that skilled insiders in the USA enjoy higher rents and increase the skilled wage mark-up stronger than in Germany in the wake of skill-biased technological change. The reason is that the unskilled outsiders in the USA do not possess a powerful credible threat to improve their position. This is a consequence from higher training and education costs in the USA for unskilled employees and unemployed. In Germany, the lower skill wage mark-up leads to an increased relative skill demand which is not matched by the skill supply and therefore mis-match unemployment arises.

The Impact of Product Market Competition on Employment Determination in Unionised and Non-Unionised Firms: Firm Level Evidence for the U.K.

In this paper we investigate the effect of increased competition on employment in unionised and non-unionised firms. We model product and labour market imperfections, and their interactions, in Nash equilibrium. The model predicts that employment loss in unionised firms in the face of increased competition will be lower compared with non-unionised firms. This paradoxical outcome results from an offsetting beneficial employment effect of competition, which eliminates wage mark-ups in unionised firms. We find empirical support for the theoretical prediction using U.K. firm level data over the period 1985-1989.

Employment and Wages in the Private and Local Government Sectors in a Centralized Fiscal System

This paper discusses the interaction between the local government and private sector in an institutional context consistent with a centralized fiscal system. Under decentralized wage setting in the private sector, the effects of shocks in the two sectors depend on whether private and local public goods are substitutes or complements in the union utility function. Higher wage markup in the local government sector unambiguously decreases government output while the effect on private sector employment is ambiguous. Higher income taxes have ambiguous effects on local government output. Shocks in the private sector can be reinforced through feedback effects from the local government sector. A shift from decentralized to centralized wage setting in the private sector reduces wages and increases employment in both sectors.

THE OPEN SHOP UNION, WAGES, AND MANAGEMENT OPPOSITION

This paper develops a model of union-firm bargaining in which union membership is determined with the wage through the impact of management opposition to unionization. Empirical evidence, both for the United States and the United Kingdom, suggests that management opposition to unions is an important determinant of union membership necessary for the union to be able to obtain a wage mark-up and the authors analyze how this critical level varies with the parameters of the model, such as the competitive wage and the firm's product market conditions. Copyright 1993 by Royal Economic Society.

The impact of trade union membership on training in Britain

In order to measure the union/non-union training differential in Britain, a recursive model of training participation and union membership is estimated, using data taken from the 1989 Labour Force Survey. The results show a positive and significant effect of union membership on training participation in small establishments. This is consistent with the hypothesis that any negative impact on employer-provided training that might have arisen from the union wage mark-up is outweighed by a positive influence exerted by unions through the exercise of collective voice and/or reductions in labour turnover. By contrast, in establishments with 25 or more workers unions have no significant impact on training.

THE EFFECTS OF TRADE UNIONS ON THE DISTRIBUTION OF EARNINGS: A SAMPLE SELECTIVITY APPROACH†

Using individual microdata from six British local labor markets in 1986 containing information on both union membership and recognition the paper examines the influence of trade unions on both moments of the earnings distribution. The problem of sample selection and its impact on the estimated union wage differential is investigated. Finally the effect of union legislation on the union-mark-up is examined by comparison of the 1986 results with those of a similar study for 1975. There is evidence for both a positive wage mark-up and a reduction in earnings variability in the union sector. Further manual males do not appear to have fared as well as non-manual males between 1975 and 1986. Copyright 1992 by Blackwell Publishing Ltd

Conflict and inflation in industrial countries

This paper examines expirically the conflict theory of inflation, using a sample of pooled time-series, cross-section data over the period 1971–87 for 10 industrial countries: USA, Japan, Canada, Germany, France, UK, Italy, Belgium, Netherlands and Sweden. To this end a wage-price adjustment model based on the ideas of distributional conflict in wage formation and mark-up pricing in goods markets is set out. The model provides a satisfactory explanation of the inflationary process in industrial countries. It is shown that conflict between workers and capitalists over the distribution of income exerts a significant influence on the pattern of inflation. Import prices, inflationary expectations and labour market conditions are also important, with the latter acting as a regulator of class conflict.

INDUSTRY CHARACTERISTICS AND INTER‐REGIONAL WAGE DIFFERENCES

This paper utilizes two large micro data sets--the General Household Survey and the New Earnings Survey--to identify those factors that influence the interregional wage structure. Industry-regional wage mark-ups are generated from a traditional human capital model and are then used to examine the effect that industry-regional averages, like bargaining type, firm size, demand pressures, and consumer prices, have on residual hourly earnings differentials. The significance of union bargaining variables, together with the low elasticity found on unemployment, cast some doubt on a traditional competitive equilibrium model of wage determination. Copyright 1991 by Scottish Economic Society.

Intersectoral Terms of Trade, Agricultural Growth and the Pattern of Demand

The movement of intersectoral terms of trade in India is generally regarded as an issue of crucial importance in affecting patterns of growth and income distribution both in agriculture and in industry. While there is substantial (and often acrimonious) debate on the determinants of agriculture-industry terms of trade as well as their precise impact on economic welfare and the growth process, the significance of such movements tends to be taken for granted by all protagonists. In this paper a slightly different position is taken, in which intersectoral terms of trade are assigned a less important role in determining economic processes. Some of the arguments can be starkly presented as follows: In general the government in India has little power in determining such terms of trade, which emerge not because of the differential lobbying power of particular classes but because of the workings of political economic variables such as labour productivity in industry, the real wage and industrial mark-up and import prices. This view contests both 'urban bias' and 'rich farmer lobby' sets of theories. Secondly, it is argued that terms of trade movements (trends) in themselves have not affected either the real incomes of the rural poor or rates of agricultural investment and growth. Thirdly, it is suggested that the causes of industrial growth or stagnation are not to be found in such terms of trade movements, although the latter may affect the pattern of industrial demand and therefore the allocation of investment. These arguments and others are elaborated below. The first section describes the movement of agricultural-industry terms of trade since the early 1950s and isolates three major phases. Various explanations are considered, and a detailed consideration is made of the factors affecting terms of trade in the latest phase. In the second section the question of the impact on agriculture is taken up, in terms of how the rural poor as well as cultivators who are net sellers are affected. The

Union Wage, Hours, and Earnings Differentials in the Construction Industry

Full-information maximum likelihood is used to estimate union wage, hours, and earnings markups. Construction union wage markups are positive (58.2% at the sample means). Since union hours markups are negative (-4.0%) for most demographic groups, union earnings markups (51.1%) are smaller than the wage markups. All exogenous variables are allowed to interact with the endogenous union dummy variable, which allows us to test whether markups vary across demographic groups, whether increased local unionization has a positive spillover effect in the nonunion sector, and whether increased local unemployment equally affects wages and hours in increased local unemployment equally affects wages and hours in the two sectors.

International Comparisons of Money Velocity and Wage Mark-Ups

International Comparisons of Money Velocity and Wage Mark-Ups

International Comparisons of Money Velocity and Wage Mark-ups.

International Comparisons of Money Velocity and Wage Mark-ups.

White-Collar Unions, Blue-Collar Unions, and Wages in Manufacturing

Examination of the wage effects of white-collar and blue-collar unions in manufacturing. Model of relative wages and employment; Effect of unionism on the relative wage; Effects of clerical workers' union; Estimates of wage markups and their effects. (Abstract copyright EBSCO.)

Monetary and Wage Mark-Up Theories of the Price Level: Some Data

Monetary and Wage Mark-Up Theories of the Price Level: Some Data

Book Review:International Comparisons of Money Velocity and Wage Mark-Ups. John H. Hotson

Book Review:International Comparisons of Money Velocity and Wage Mark-Ups. John H. Hotson