UNDERSTANDING THE EVOLUTION OF THE US WAGE DISTRIBUTION: A THEORETICAL ANALYSIS

In this paper, we propose an analytically tractable overlapping‐generations model of human capital accumulation and study its implications for the evolution of the US wage distribution from 1970 to 2000. The key feature of the model, and the only source of heterogeneity, is that individuals differ in their ability to accumulate human capital. Therefore, wage inequality results only from differences in human capital accumulation. We examine the response of this model to skill‐biased technical change (SBTC) theoretically. We show that in response to SBTC, the model generates behavior consistent with some prominent trends observed in the US data including (i) a rise in overall wage inequality both in the short run and long run, (ii) an initial fall in the education premium followed by a strong recovery, leading to a higher premium in the long run, (iii) the fact that most of this fall and rise takes place among younger workers, (iv) a rise in within‐group inequality, (v) stagnation in median wage growth (and a slowdown in aggregate labor productivity), and (vi) a rise in consumption inequality that is much smaller than the rise in wage inequality. These results suggest that the heterogeneity in the ability to accumulate human capital is an important feature for understanding the effects of SBTC and interpreting the transformation of the US labor markets since the 1970s.     

Idiosyncratic Shocks and the Role of Nonconvexities in Plant and Aggregate Investment Dynamics

We study a model of lumpy investment wherein establishments face persistent shocks to common and plant‐specific productivity, and nonconvex adjustment costs lead them to pursue generalized (S, s) investment rules. We allow persistent heterogeneity in both capital and total factor productivity alongside low‐level investments exempt from adjustment costs to develop the first model consistent with the cross‐sectional distribution of establishment investment rates. Examining the implications of lumpy investment for aggregate dynamics in this setting, we find that they remain substantial when factor supply considerations are ignored, but are quantitatively irrelevant in general equilibrium. The substantial implications of general equilibrium extend beyond the dynamics of aggregate series. While the presence of idiosyncratic shocks makes the time‐averaged distribution of plant‐level investment rates largely invariant to market‐clearing movements in real wages and interest rates, we show that the dynamics of plants' investments differ sharply in their presence. Thus, model‐based estimations of capital adjustment costs involving panel data may be quite sensitive to the assumption about equilibrium. Our analysis also offers new insights about how nonconvex adjustment costs influence investment at the plant. When establishments face idiosyncratic productivity shocks consistent with existing estimates, we find that nonconvex costs do not cause lumpy investments, but act to eliminate them.     

Size,Skill and Sorting

Abstract. The rise in inequality between the 1970s and the 1990s and the persistent gap in pay between large and small employers are two of the most robust findings in the study of labor markets. Mainstream economists focus on differences in observable and unobservable skills to explain both the overall rising inequality and the size–wage gap. In this paper we model how increasing returns to skill can affect the size–wage gap both with constant sorting and with size‐biased, skill‐biased technological change (e.g. if large firms always had access to computers, but small firms gained access to computers with the rise of affordable personal computers). We analyze the Current Population Surveys from 1979 to 1993 to determine whether large and small employers are converging in terms of mean wages (the employer size–wage effect), wage structures by occupation and education, characteristics of employees, and wage structures by region. We find mixed evidence of convergence and no consistent support for any single version of human capital theory.     

CHANGES IN CHINA'S WAGE STRUCTURE

Using a national sample of Urban Household Surveys, we document several profound changes in China's wage structure during a period of rapid economic growth. Between 1992 and 2007, the average real wage increased by 202%, accompanied by a sharp rise in wage inequality. Decomposition analysis reveals 80% of this wage growth to be attributable to higher pay for basic labor, rising returns to human capital, and increases in the state‐sector wage premium. By employing an aggregate production function framework, we account for the sources of wage growth and wage inequality amid fast economic growth and transition. We find capital accumulation, skill‐biased technological change, and rural–urban migration to be the major forces behind the evolving wage structure in urban China.     

Immigration Policy,Equilibrium Unemployment,and Underinvestment in Human Capital

We analyse the impact of different immigration policies on human capital investment in a search‐theoretic model. This class of models features unemployment and underinvestment in human capital. The underinvestment in human capital can be solved by combining immigration policy with appropriate education subsidies. Extending the model with respect to different skill groups allows to analyse the observed bimodal skilled immigration of the USA.     

Skill Complementarities and Migration Decisions

This paper offers an explanation of the high mobility of skilled workers based on human capital complementarities. If the skill premium is increasing in the average level of human capital of a location, and there exist fixed migration costs, in equilibrium the more skilled the workers are, the stronger the economic incentives to migrate towards the richest regions will be. Moreover, endogenously generated differences in productivity due to migration affect occupational choices and regional specialization. Empirical evidence consistent with the proposed explanation is provided using data on Italian regions. It emerges that, even after controlling for economic conditions, a high population share of individuals who completed college or high‐school in a region seems to be a relevant pull factor for the most educated migrants. In contrast, the importance of this variable, which measures the average level of human capital of a location, drops when unskilled migrants are considered. Finally, the effects of migration on the evolution of regional disparities are taken into account.     

Permanent Disadvantage or Gradual Integration: Explaining the Immigrant–Native Earnings Gap in Sweden

Theoretical explanations suggest that wage differentials between immigrant and native workers are generated either by differences in the acquisition of human capital or by various forms of exclusion of immigrants from fair labour market rewards. We evaluate the labour quality and labour market discrimination hypotheses by using a large sample of Swedish employees in 1995. Our findings show that labour market integration is relatively unproblematic for immigrants from Western countries, whereas immigrants from other countries, especially from Africa, Asia and Latin America, face substantial obstacles to earnings progress when entering the Swedish labour market. For the latter group of countries, extensive controls for general and country‐specific human capital reduce the earnings differentials. However, the remaining gap is of a non‐trivial magnitude. Thus, the labour quality hypothesis accounts for a part of the observed native–immigrant wage gap, but the remaining differentials can be interpreted in terms of labour market discrimination.     

The Role of Automatic Stabilizers in the U.S. Business Cycle

Most countries have automatic rules in their tax‐and‐transfer systems that are partly intended to stabilize economic fluctuations. This paper measures their effect on the dynamics of the business cycle. We put forward a model that merges the standard incomplete‐markets model of consumption and inequality with the new Keynesian model of nominal rigidities and business cycles, and that includes most of the main potential stabilizers in the U.S. data and the theoretical channels by which they may work. We find that the conventional argument that stabilizing disposable income will stabilize aggregate demand plays a negligible role in the dynamics of the business cycle, whereas tax‐and‐transfer programs that affect inequality and social insurance can have a larger effect on aggregate volatility. However, as currently designed, the set of stabilizers in place in the United States has had little effect on the volatility of aggregate output fluctuations or on their welfare costs despite stabilizing aggregate consumption. The stabilizers have a more important role when monetary policy is constrained by the zero lower bound, and they affect welfare significantly through the provision of social insurance.     

A Parsimonious Macroeconomic Model for Asset Pricing

I study asset prices in a two‐agent macroeconomic model with two key features: limited stock market participation and heterogeneity in the elasticity of intertemporal substitution in consumption (EIS). The model is consistent with some prominent features of asset prices, such as a high equity premium, relatively smooth interest rates, procyclical stock prices, and countercyclical variation in the equity premium, its volatility, and in the Sharpe ratio. In this model, the risk‐free asset market plays a central role by allowing non‐stockholders (with low EIS) to smooth the fluctuations in their labor income. This process concentrates non‐stockholders' labor income risk among a small group of stockholders, who then demand a high premium for bearing the aggregate equity risk. Furthermore, this mechanism is consistent with the very small share of aggregate wealth held by non‐stockholders in the U.S. data, which has proved problematic for previous models with limited participation. I show that this large wealth inequality is also important for the model's ability to generate a countercyclical equity premium. When it comes to business cycle performance, the model's progress has been more limited: consumption is still too volatile compared to the data, whereas investment is still too smooth. These are important areas for potential improvement in this framework.     

Linking young individuals' capital to investment intentions: Comparing two cultural backgrounds

By integrating the Entrepreneurial Intentionality Model and the Theory of Planned Behaviour, we explored the effects of human, social and financial capital on young individuals' investment intentions in two groups (97 English and 97 Greeks). Results indicated that human capital is directly and indirectly related to investment intentions via, first, subjective norms and, consequently, personal attitudes and perceived behavioural control, while social capital is only indirectly related to investment intentions via perceived behavioural control. In the individualistic group (English), human capital related directly and positively with investment intentions while social capital related indirectly to investment intentions via its positive relationship to subjective norms. With regard to participants from a collectivistic background (Greeks), human capital related indirectly to investment intentions via, first, subjective norms and, consequently, personal attitudes and perceived behavioural control, while social capital related directly and indirectly to investment intentions via perceived behavioural control. Financial capital was only negatively related to investment intentions in the total and Greek sample.     

Why Do Women's Wages Increase So Slowly Throughout Their Career? A Dynamic Model of Statistical Discrimination

Abstract. The aim of this paper is to explain the growing wage differentials between men and women during their working careers. We provide a dynamic model of statistical discrimination, which integrates specific human capital decisions: on‐the‐job training investment and wages are endogenously determined. We reveal a small wage differential at the beginning of women's career, but women's wages increase more slowly; this is partly due to a lower level of human capital investment by women and partly because firms smooth training costs between different periods.     

Human Capital,Wages and Family Interactions

The majority of studies of the returns to human capital investment have generally considered the relationship among wages and individuals’ investment in education. However, among factors which increase individuals’ stocks of human capital and affect their labour market performances there are variables linked to the relevant social environment, such as the family. This paper takes into consideration intra‐generational relations which form between spouses through marriage, as well as inter‐generational relationships between parents and their sons/daughters. The empirical work investigates the effects of some family background variables on individuals’ economic performances, using data drawn from the 1995 survey of household income and wealth conducted by the Bank of Italy. The results of the analysis show that individuals’ wages do not depend only on their own human capital endowment, but also on that of other family members (parents and partners).     

DISTANCE TO FRONTIER,SELECTION, AND ECONOMIC GROWTH

We analyze an economy where firms undertake both innovation and adoption of technologies from the world technology frontier. The selection of high‐skill managers and firms is more important for innovation than for adoption. As the economy approaches the frontier, selection becomes more important. Countries at early stages of development pursue an investment‐based strategy, which relies on existing firms and managers to maximize investment but sacrifices selection. Closer to the world technology frontier, economies switch to an innovation‐based strategy with short‐term relationships, younger firms, less investment, and better selection of firms and managers. We show that relatively backward economies may switch out of the investment‐based strategy too soon, so certain policies such as limits on product market competition or investment subsidies, which encourage the investment‐based strategy, may be beneficial. However, these policies may have significant long‐run costs because they make it more likely that a society will be trapped in the investment‐based strategy and fail to converge to the world technology frontier. (JEL: O31, O33, O38, O40, L16)     

RELATIVE FACTOR ENDOWMENTS AND INTERNATIONAL PORTFOLIO CHOICE

We present a model of international portfolio choice based on cross‐country differences in relative factor abundance. Countries have varying degrees of similarity in their factor endowment ratios, and are subject to aggregate productivity shocks. Risk‐averse consumers can insure against these shocks by investing their wealth at home and abroad. In a many‐good setup, the change in factor prices after a positive shock in a particular country provides insurance to countries that have dissimilar factor endowment ratios, but is bad news for countries with similar factor endowment ratios, since their incomes will worsen. Therefore countries with similar relative factor endowments have a stronger incentive to invest in one another for insurance purposes than countries with dissimilar endowments. The importance of this effect depends on the size of countries. Empirical evidence linking bilateral international equity investment positions to a proxy for relative factor endowments supports our theory: the similarity of host and source countries in their relative capital–labor ratios has a positive effect on the source country’s investment position in the host country. The effect of similarity is enhanced by the size of host countries.     

Social Increasing Returns and the Effects of Immigration on the Host Country Economy

In this paper we analyse the impact of both the number of immigrants and their human capital on the welfare of the host economy. We will show that in the presence of ‘social increasing returns’ in human and physical capital accumulation, arising from a labour market characterized by a costly search and by randomness of the matching technology, immigrants’ skill level may influence the investments in human capital of natives as well as the investments in physical capital. We will find that the immigrants’ human capital interacts with social increasing returns making them stronger or weaker according to the level of immigrants’ human capital relative to that of natives. If immigrants have a higher level of human capital, increasing returns are accelerated, while if immigrants’ human capital is lower, increasing returns are weakened if not reversed. The consequence of this behaviour is that in the first case immigration has a positive impact on native welfare and there is a positive interrelation between the skills of natives, the skills of immigrants and the firms’ level of physical capital. In the second case immigration may have a negative impact on the welfare of natives, on the skills of native workers and on the physical capital of firms.     

Redistribution Through Education and Other Mechanisms Under Capital‐Market Imperfections and Uncertainty: A Welfare Effect Analysis

Abstract. This paper considers a two‐period model of endogenous human capital formation under the credits‐market imperfection and uncertainty assumptions. We compare in the first part of the paper ex‐ante and ex‐post general‐equilibrium effects of the education subsidy policy to those of the negative income tax and the unskilled wage subsidy regimes. We show that the education subsidy policy raises an efficiency‐inequality trade‐off issue, and therefore it is optimal unless the degree of inequality aversion is relatively high and financing the subsidy is not too distorsive. Public loans are generally claimed to provide a solution for such issue. We explore the implications of implementing the public loan under several schemes in the second part of the paper. We show that combining between a pure public loan and education subsidies provides higher levels of welfare than these two policies taken separately provided that the inequality aversion degree is high. For low degrees of inequality aversion, the pure public loan is the optimal policy.     

利润分享:一种协调人力资本的治理手段

在Mumcu模型的基础上,建立一个人力资本密集型企业与人力资本有关薪酬谈判的模型,即人力资本凭借其专用性使其投资重要性不断攀升,在与企业薪酬谈判中的话语权也不断增强。在这种情况下,关键性的人力资本已不仅限于获取劳动市场上的均衡工资,更可以与企业分享其创造的价值。反观,当人力资本密集型企业生产对关键性人力资本的依赖性不断增强并且难以控制时,企业只有通过与其分享租金以协调人力资本与企业保持合作,实现共赢。     

GOVERNMENT SPENDING COMPOSITION,TECHNICAL CHANGE,AND WAGE INEQUALITY

In this paper we argue that government spending played a significant role in stimulating the wave of innovation that hit the U.S. economy in the late 1970s and in the 1980s, as well as the simultaneous increase in inequality and in education attainments. Since the late 1970s U.S. policymakers began targeting commercial innovations more directly and explicitly. We focus on the shift in the composition of public demand toward high‐tech goods, which, by increasing the market‐size of innovative firms, functions as a de facto innovation policy tool. We build a quality‐ladders non‐scale growth model with heterogeneous industries and endogenous supply of skills, and show that an increase in the technological content of public spending stimulates R&D, raises the wage of skilled workers, and, at the same time, stimulates human capital accumulation. A calibrated version of the model suggests that government policy explains between 12% and 15% of the observed increase in wage inequality in the period 1976–1991. (JEL: E62, J31, O33, O41)     

我国企业盈余可持续性影响因素研究——基于EBO模型的我国上市公司实证数据

本文在运用EBO模型计算了不同企业不同年份终端隐含价值的基础上,对影响终端隐含价值的因素进行了分析,发现企业预测期盈利能力、行业市场占有率、负债/资产比率、固定成本结构对终端隐含价值有显著正的影响,证明了代理理论适合我国国情,企业负债有利于企业盈利的长期可持续性;而企业规模、投资规模对终端隐含价值有显著负的影响,说明我国上市公司资金的使用效率有待提高。     

Wage Inequality of US Truck Drivers

Using CPS data for the period 1979–2009, the wage dispersion of truck drivers (and subsets of the truck driving sample) is compared with the trends in wage dispersion of males economy‐wide. We find that truckers' wages experienced a decrease in inequality post‐deregulation, as expected given the literature on regulation's impact on the labor market. We also find that the wage dispersion for truckers is markedly different from males economy‐wide, providing evidence that the wage distribution of truck drivers has been dominated by the changing structure of the occupation post‐deregulation and largely immune to the factors that increased inequality for the aggregate labor market.