Relative Wages Research Articles

Tariffs and Foreign Direct Investment in a Dynamic North–South Model

AbstractThis paper examines how import tariffs by a developed country (the North) and a developing country (the South) affect innovation and foreign direct investment (FDI) using a quality ladder model. We show that a Northern import tariff raises the relative wage of Northern labor, but impedes innovation and FDI. This may worsen Northern welfare. By contrast, a Southern import tariff raises the relative wage of Southern labor and promotes innovation and FDI. This can improve Southern welfare. These imply that the South has a stronger incentive than the North to impose an import tariff, which is consistent with actual observation.

Asymmetrical Monetary Relations and Involuntary Unemployment in a General Equilibrium Model

Abstract This article aims to model Keynesian involuntary unemployment within the framework of Walrasian general equilibrium, incorporating an additional hypothesis: the possibility of credit restrictions by banks or financial intermediaries. Keynes’s theory of involuntary unemployment is based on the rejection of the “second classical postulate,” which leads to the idea that entrepreneurs alone decide the level of employment. This is what some Keynesians call the asymmetry of the wage relationship. The result is a restriction of Walras’ law, which no longer includes the labor market. However, the problem is that entrepreneurs themselves may find themselves constrained by financial intermediaries. If there is a second type of asymmetry, i.e., between banks/financial intermediaries and entrepreneurs, Walras’ law will be doubly restricted since it will also exclude the credit market. I set out to identify the consequences of the properties of involuntary unemployment in a general equilibrium model.

Job computerization, occupational employment and wages: A comparative study of the United States, Germany, and Japan

This study adds to the growing literature on wage and employment responses to the risk of job computerization. Specifically, it revisits the original occupational perspective and inquires into the nature of the adjustments of occupational wages and employment, i.e., the potential benefits and costs associated with professional careers in such occupations. The investigation further aims at identifying whether these adjustment processes are universal — as suggested by the global availability of the respective technology — or reflect country-specific peculiarities. To this end, it conducts a comparative analysis with data from the United States, Germany, and Japan, three G7 lead countries which share the commitment to fostering technological progress, but which are also characterized by distinctly different labor market institutions and approaches to industrial policies. Generally consistent with the country-specific employment institutions and common corporate strategies, transmission channels — as reflected by the relationship between adjustments of occupational employment and wages — differ between countries. In all three countries, though, higher risks of computerization are associated with relative wage losses in occupations which require low levels of formal education or training.

Individualism, innovation, and inequality: Exploring the nexus

We provide an alternative explanation for the direction of technological change and the related wage inequality between skilled and unskilled workers. To this end, we formulate a skill-biased technological change model in which households’ decisions on consumption, savings, and human-capital accumulation are influenced by the level of individualism. We conclude that more individualistic cultures experience higher technological-knowledge bias toward skilled technologies, larger output growth rates, and higher wage inequality between skilled and unskilled workers. We also find that union bargaining only reduces wage inequality between skilled and unskilled at moderate levels of individualism, while introducing redistributive income taxes does not necessarily reduce income inequality.

Wage bargaining structure and political budget cycles: A policy game approach

Utilizing a panel dataset from OECD countries, this study unveils new evidence suggesting that the centralization of wage bargaining plays a significant role in mitigating Political Budget Cycles. To explain this empirical finding, the paper introduces a political economy model based on a policy game framework, encompassing three key agents: (i) an opportunistic government that decides on the level of budget deficits with the objective of enhancing its reelection prospects, (ii) workers/voters who decide on their sectoral affiliations, and (iii) unions that independently negotiate wages with firms. In this model, the opportunistic government has an incentive to run a budget deficit to favor the median voter, who is affiliated with non-tradable sectors. The mechanism emerges from the impact of debt-financed public spending on relative prices, and consequently, on relative wages between non-tradable and tradable sectors. Wage centralization mitigates the political incentive of opportunistic governments by attenuating the responsiveness of sectoral wages to sectoral prices, thereby pushing down budget deficits towards a socially more optimal level.

The Impact of Partners’ Relative Wages on Couples’ Gender Division of Paid Work after Parenthood across Origin Groups

The Impact of Partners’ Relative Wages on Couples’ Gender Division of Paid Work after Parenthood across Origin Groups

Unraveling wage inequality: tangible and intangible assets, globalization and labor market regulations

In this paper, we study the asymmetric effects of different types of capital-embodied technological change, as proxied by tangible and intangible assets, on relative wages (high- to medium-skilled, high- to low-skilled and medium- to low-skilled workers), relying upon the technology-skill complementarity and polarization of the labor force frameworks. We also consider two additional major channels that contribute to shaping wage differentials: globalization (in terms of trade openness and global value chains participation) and labor market institutions. The empirical analysis is carried out using a panel dataset comprising 17 mostly advanced European economies and 5 industries, with annual observations spanning the period 2008–2017. Our findings suggest that software and databases—as a proxy for intangible technologies—exert downward pressure on low-skilled wages, while robotics is associated with a polarization of the wage distribution at the expense of middle-skilled labor. Additionally, less-skilled workers’ relative wages are negatively affected by trade openness and global value chain participation, but positively influenced by sector-specific labor market regulations.

Spatial disparity of skill premium in China: The role of financial intermediation development

In China, the relative wages of high-skilled and low-skilled workers display huge variation across different regions. We examine whether financial intermediation development (FID) can explain such variation. Conceptually, better-developed financial intermediation helps financially-constrained firms raise new capital, which is usually skill-biased, resulting in an increased demand for skilled labor and skill premium. Using a cross-section of workers from the 1% Population Survey of 2005, we find consistent evidence; besides, the relationship is stronger among workers in industries with higher capital-skill complementarity and in non-state-owned enterprises. Overall, our results suggest that the financial market plays a role in explaining skill premium in China.

Struggles over solar in the United States: Oppositional coalitions and the limits of territorial resentment

With the expansion of renewable infrastructure, struggles over land use have raised concerns about the uneven impacts of utility solar on rural, energy producing communities. Engaging the framework of colonial racial capitalism, we contribute to energy scholarship focused on the social and cultural impacts of decarbonization through an ethnographic and archival study of organized opposition emerging in Central Washington. In 2020, residents of Goldendale, WA mobilized to create CEASE–Citizens Educated Against Solar Energy–working strategically with members of the Yakama Nation, to challenge the siting process. We ask the following questions: What motivates organized opposition to the solar siting process? What are the opportunities and constraints to building coalitions across settler and Indigenous rural geographies? What can these coalitions tell us about the future of energy justice? In our case study, we found CEASE, a rural populist leaning grassroots organization, to briefly join efforts with the Yakama Nation, viewing the state in misalignment with rural identities and livelihoods. Yet, opposition forming through a focus on historically and geographically specific understandings of private property and the wage relation complicate shared visions for energy justice. Here, ideas and feelings around property, work, and futures remain contradictory, incomplete, and dynamic, meaning a singular settler vision does not need to be the only one charting energy futures.

Gender pay gaps in the young adult labor force: prejudice-based discrimination or misreading of the observed-to-offered wage relationship?

Abstract We examine the plausibility of using prejudice-based discrimination to explain the wage differences among young men and women in eleven European countries. Utilizing a sample of over 20,000 individuals and estimating a series of country-specific regression models that adjust for ability and selection bias, we find evidence that leads to a good possibility of prejudice-based discrimination in Greece, Italy, Spain, Czechia, Hungary, and the UK. In the UK, this possibility of discrimination is mitigated to an extent by gender differences in credentials. In Austria, Germany, Denmark, and Switzerland, we find no evidence for prejudice-based discrimination. Oaxaca decompositions reveal that if women’s own human capital characteristics were rewarded at the same level as men’s in the former (six) countries, they would expect a wage gain.

How the 1963 Equal Pay Act and 1964 Civil Rights Act Shaped the Gender Gap in Pay.

In the 1960s, two landmark statutes-the Equal Pay and Civil Rights Acts-targeted the long-standing practice of employment discrimination against U.S. women. For the next 15 years, the gender gap in median earnings among full-time, full-year workers changed little, leading many scholars to conclude that the legislation was ineffectual. This article revisits this conclusion using two research designs, which leverage (i) cross-state variation in preexisting state equal pay laws and (ii) variation in the 1960 gender gap across occupation-industry-state-group cells to capture differences in the legislation's incidence. Both designs suggest that federal antidiscrimination legislation led to striking gains in women's relative wages, which were concentrated among below-median wage earners. These wage gains offset preexisting labor market forces, which worked to depress women's relative pay growth, resulting in the apparent stability of the gender gap at the median and mean in the 1960s and 1970s. The data show little evidence of short-term changes in women's employment but suggest that firms reduced their hiring and promotion of women in the medium to long term. The historical record points to the key role of the Equal Pay Act in driving these changes.

Les cryptoactifs, innovations sociales et institution

This article proposes to analyze cryptoassets as social innovations through their capacity to respond to new polymorphic needs and to transform the structuring institutions of the economic system. The framework of the School of Regulation defines five structural forms: money, competition, the wage relation, the state and the international order. The institution originally targeted by cryptoassets is money, responding to new needs (aspiration to currencies freed from states and banks, search for anonymity, ease for international transfers and credible alternative to the dollar). Cryptoassets also satisfy the new needs arising from global digital capitalism (the creation of communities, the valuation of digital goods and services, the co-production of services through the network).

Labor Relations in Reform-Era Cuba

As part of the model-updating reform started in 2011, there has been a significant shift in Cuba's labor relations. Although the share of state jobs in the labor force — in public institutions and enterprises — is the largest, non-state jobs dominate if enterprises alone are considered. In the non-state sector, self- and family employment predominate, but new private enterprises are growing fast while cooperatives and their membership decrease. These changes in the employment structure have greatly impacted Cuban society, with growing inequalities in income, labor conditions, and rights, gender, skin color. The new preponderance of private wage relations has severe implications for Cuban socialism. To be consistent with the agreed-on documents guiding the reform and with the sacrifices made by generations of Cubans to build a post-capitalist society, the Cuban Revolution must build a new socialist hegemony inside workplaces and beyond. The non-state sector cannot be regulated and guided toward satisfying the needs and aspirations of the Cuban people only through norms, incentive policies, and administrative measures. A new hegemony of socialist relations is fundamental to secure a future for the Cuban Revolution.

The impact of ICT and robots on labour market outcomes of demographic groups in Europe

We study the age- and gender-specific labour market effects of two key modern technologies, Information and Communication Technologies (ICT) and robots. Our sample includes 14 European countries between 2010 and 2018. We use the variation in technology adoption between industries and apply the instrumental variables strategy proposed by Acemoglu and Restrepo (2020) to identify the causal effects of technology adoption. We find that exposure to ICT and robots increased the shares of young and prime-aged women in employment and in the wage bills of particular sectors. However, it reduced the shares of older women and prime-aged men. We do not detect significant effects of technology adoption on the relative wages of most demographic groups. Between 2010 and 2018, the growth in ICT capital played a larger role than robot adoption in the changes in the within-sector labour market outcomes of demographic groups.

TÜRK İŞGÜCÜ PİYASASINDA OKUL SONRASI YATIRIM, EĞİTİM VE ÜCRET DİNAMİKLERİ: BETİMSEL BİR ÇALIŞMA

Although Human Capital Theory asserts post-school investment as an important mechanism in the wage differentials, it is not adequately scrutinized by the literature. Post-school investment is linked to demographic factors like gender, age, education, marital status, etc., and has a dual effect in the wage differentials of individuals (Blaug, 1976; Mincer J. A., 1974a; Polachek, 1975; Rodríguez, Saltiel, & Urzua, 2018). Moreover, PSI can mediate the effect of education on wages which has been widely discussed in the literature. In light of these, this study aims to understand the dynamics of post-school investment, education, and wages in relation with other demographics ignoring the causal relationship between these variables using Adult Education Survey (TURKSTAT, 2007). Results indicate that PSI is high for observations who are young, non-married, women, high wage earner, non-routine job holder, and vocational collage school graduate. Interestingly, results indicate that low wage earners have to invest on their human capital to compete in the labor market against job losses most probably as they are low skilled workers, and their abilities are prone to depreciation easily. Moreover, men can earn more than women, even if they have a lower education level.

Towards a post-neoliberal mode of European economic integration? A regulationist critique of the failing forward-approach

In light of the Euro crisis and disintegrative tendencies, recent approaches in European integration research increasingly emphasise constraints and crises of integration, most prominently elaborated in the so-called failing forward-approach. However, we argue that this approach is significantly limited in understanding both the nature of crises and the potential breadth of current ruptures in European economic integration. Based on regulation theory, we develop an alternative and more encompassing account of how different periods and modes of integration emerged as a response to crises but simultaneously unleashed new crisis tendencies. More specifically, we detail how the specific and asymmetric Europeanisation of forms of regulation provided a response to the crisis of the Fordist mode of development but concomitantly set the scene for the Euro crisis to emerge. This triggered a partial reconfiguration of the post-Fordist, neoliberal European mode of regulation since 2010, without, however, substantially addressing its underlying crisis tendencies. Against this background, and in the face of mounting geopolitical rivalries and the climate crisis, we analyse significant ruptures in the neoliberal mode of regulation in the EU currently underway, namely in the area of the regulation of the wage relation (European Minimum Wage Directive, Posting of Workers Directive), fiscal policy (NextGenerationEU, reform of the Stability and Growth Pact) as well as in the regulation of competition (strategic industrial policy, relaxation of competition law). Together, and although it seems too early to discern a ‘post-neoliberal’ mode of development, these ruptures indicate a significant departure from the neoliberal mode of European economic integration.

When is it About the Money? Relative Wages and Fathers’ Parental Leave Decisions

When is it About the Money? Relative Wages and Fathers’ Parental Leave Decisions

Skills and Selection into Teaching: Evidence from Latin America

This paper documents a novel stylized fact: many teachers in Latin America have low levels of cognitive skills. This fact is the result of both low levels of skills among the population and—in the case of numeracy—a gap between the average skill level of teachers and the rest of the tertiary-educated population (i.e., a teacher skills gap). To characterize the selection patterns behind this gap, we show that individuals with a teaching degree have lower average skills than individuals with other tertiary degrees, and that this gap is larger than the teacher skills gap. This difference is mainly explained by the selection into teaching of graduates from non-teaching degrees. Finally, we show evidence on one important determinant of the teacher skills gap: teacher relative wages are decreasing in skills. JEL Classification Codes: I21; J24; J45

Routine-biased technological change and employee outcomes after mass layoffs: evidence from Brazil

Abstract We investigate the impact of “routinization” on the labor outcomes of displaced workers. We use a rich Brazilian panel dataset and an occupation-task mapping to examine the effect of job displacement in different groups, classified according to their tasks. Our main result is that following a layoff, workers previously employed in routine-intensive occupations suffer a more significant decline in wages and more extended periods of unemployment. As expected, job displacement has a negative and lasting impact on wages. Still, workers in routine-intensive occupations are more impacted than those in non-routine occupations in terms of wages (an increase of one point in the routine-intensity index results in a further decline of 2% in workers’ relative wages) and employment. Furthermore, our results indicate that workers in routine-intensive occupations are more likely to change occupations after the shock, and those who do not switch occupational fields suffer a more significant decline in wages. Lastly, even though the loss of employer-specific wage premiums explains 13% of displaced workers’ drop in wages, it does not explain routine-intensive workers’ more substantial losses.

The structural-demographic theory revisited: An empirical test for industrialized societies.

The structural demographic theory for industrialized societies generates three testable predictions. The first prediction is that labor oversupply leads to declining (relative) wages. The second prediction is that labor oversupply leads to elite overproduction: as relative wages fall, elite incomes display a hump-shaped pattern while elite numbers increase. The third prediction is that elite overproduction leads to political instability. I test these predictions on US data by combining evidence from existing studies with empirical proxies for elite numbers and elite income. The predictions are not supported by the data. First, labor oversupply cannot explain the polarization of wages and the decline in relative wages. The largest share in wage variance is explained by automation. Second, the data shows that as relative wages fall, elite incomes increase, in contrast to the hump-shaped pattern displayed by the model. Third, elite overproduction did not predict political instability in the last decades. Political instability is modelled by the Political Stress Index (PSI). The reviewed evidence shows that the increase in the model based PSI in the last decades is driven by the increase in inequality. The rise in inequality was caused by technological change, globalisation and to a lesser extent by the erosion of labor market institutions. Attributing the rise in inequality and the resulting increase in political instability to labor oversupply rather than to the lost race between education and technology may weaken incentives to design effective policies addressing the inefficiencies in the US education system.