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.     

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.     

Wage Discrimination Against Immigrants in Austria?

This paper analyses wage discrimination against immigrants in Austria using combined information from the labour force surveys and administrative social security data. We find that immigrants experience a wage penalty of 15 percentage points compared with natives. However, a substantial part of this gap can be explained by differences in human capital endowment and job position. Decomposition methods using quantile regressions indicate larger discrimination in the upper part of the wage distribution.     

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.     

Reasons for Wage Rigidity in Germany

Abstract. This study investigates institutional and economic reasons for downward wage rigidity regarding three occupational skill groups. Based on a survey of 801 firms in Germany and an econometric analysis, we find strong support for explanations based on the effects of labour union contracts and efficiency wages that differ between skill groups. Survey respondents indicate that labour union contracts and implicit contracts are important reasons for wage rigidity for the (less) skilled. Specific human capital and negative signals for new hires are causes of the stickiness of wages for the highly skilled. Compared with US evidence, German firms seem to attach more importance to labour union contracts and specific human capital.     

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.     

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。     

The Structure of Wages by Firm Size: A Comparison of Canada and the USA

Cross‐country comparisons of the skill premium between USA and Canada show differences in the returns to higher education between the two countries since the 1980s. This paper analyses whether such differences could be related to differences in skill distribution and worker sorting across firm size between the two countries. Estimation of the wage structure by size for male non‐unionized workers in the private sector reveals that selectivity effects on wages are present and similar in both countries. There are significant and substantial cross‐country differences in the returns to education among large firms, especially for younger workers.     

Technology Effects on Wages in Finnish Manufacturing

In this paper we study the effect of technology on establishment‐level wages using a classification of manufacturing industries based on four technology levels. The technology wage premiums are estimated separately for non‐manual and manual workers using wage equations with available control variables for plant and workforce characteristics (human capital) over the time period 1974–93. The results do not show a straightforward increasing relationship between a plant’s average wages and its technology at higher technology levels. However, establishments with the lowest technology level paid the lowest wages during the whole period. We also find that the relative non‐manual to manual wage ratio increased over the time period in the highest technology levels. These findings are consistent with technology wage premiums and skill‐biased technological change found in studies for other countries     

RETHINKING THE EFFECT OF IMMIGRATION ON WAGES

This paper calculates the effects of immigration on the wages of native US workers of various skill levels in two steps. In the first step we use labor demand functions to estimate the elasticity of substitution across different groups of workers. Second, we use the underlying production structure and the estimated elasticities to calculate the total wage effects of immigration in the long run. We emphasize that a production function framework is needed to combine own‐group effects with cross‐group effects in order to obtain the total wage effects for each native group. In order to obtain a parsimonious representation of elasticities that can be estimated with available data, we adopt alternative nested‐CES models and let the data select the preferred specification. New to this paper is the estimate of the substitutability between natives and immigrants of similar education and experience levels. In the data‐preferred model, there is a small but significant degree of imperfect substitutability between natives and immigrants which, when combined with the other estimated elasticities, implies that in the period from 1990 to 2006 immigration had a small effect on the wages of native workers with no high school degree (between 0.6% and +1.7%). It also had a small positive effect on average native wages (+0.6%) and a substantial negative effect (−6.7%) on wages of previous immigrants in the long run.     

Analysing the Gender Wage Gap (GWG) Using Personnel Records

We use monthly personnel records of a large German company for the years 1999–2005 to analyse the gender wage gap (GWG). The unconditional GWG is 15 per cent for blue‐collar and 26 per cent for white‐collar workers. Different returns to entry age explain a substantial part of the GWG as well as segregation of men and women in different hierarchical levels. The relative GWG increases with increasing tenure for blue‐collar but declines for white‐collar workers. Taking into account the different impact of general and firm‐specific human capital on white‐collar and blue‐collar occupation, this is consistent with theories of statistical discrimination.     

Comparisons in Gender Wage Differentials and Discrimination between Germany and the United Kingdom

Due to the lack of consistent data, direct and robust comparisons of cross‐country labour markets have been virtually impossible. This study uses a new panel data series that controls for inconsistencies, thus overcoming this problem. This study estimates gender wage differentials and gender discrimination in the German and UK labour markets. Panel estimates are used to identify general wage differences between the two countries, with cross‐sectional comparisons undertaken to identify changes that have occurred between 1991 and 1993, that are consistent with known labour market policies. It is found that gender wage differentials are greater in the UK than Germany with employer discrimination against females attributed with the majority of the difference in both countries.     

The Structure of Wages in the Netherlands, 1986–98

Abstract. For many OECD countries an increase in wage inequality has been documented since the early 1980s. This is often attributed to a general rise in the demand for skilled workers resulting from recent technological change. Using the Organization for Strategic Labour Market Research (OSA) Labour Supply data, this paper studies the wage structure in the Netherlands over the period 1986–98 and demonstrates that wage inequality did not increase to any significant extent in the Netherlands. Using the accounting framework proposed by Juhn et al. (Journal of Political Economy 101: 410–442, 1993), it is shown that the relatively stable wage structure until at least the late 1990s can be attributed mainly to returns to observable components, such as education and experience, while residual wage inequality is found to be of minor importance in explaining the Dutch wage structure. These estimates suggest that the demand for skill in the Netherlands is likely not to have been rising to the extent it did in many other countries over this period.     

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.     

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.     

Careers and productivity in an internal labor market

This paper contributes to the existing literature by evaluating the effects of age and tenure on careers and productivity within an internal labor market. We use the administrative personnel records of a long balanced panel of blue-collar workers from a manufacturing firm in Germany with a distinct classification of wage groups and unique information on workers’ productivity in form of suggestions for productivity improvement. Using robust locally weighted regression, our main findings suggest that the probability of promotion is highest for younger workers and early in the career. Older workers are less likely to be promoted. The likelihood of making a rewarded suggestion is inversely u-shaped with respect to tenure and age. Furthermore, workers’ ability and firm-specific human capital determine the workers’ careers and productivity.     

Urban Versus Rural Return to Human Capital in Portugal: A Cookbook Recipe for Applying Assignment Models

Abstract. The Portuguese economy has been characterized by modernization since the post‐war period, and Lisbon is a centre of this process. This paper analyses rates of return on human capital in Lisbon versus the rest of the country in the period 1982–92. An assignment model of heterogeneous workers to heterogeneous jobs is applied. We introduce the concept of the complexity dispersion parameter, which measures job heterogeneity and the ease of substitution between worker types. It is free dimension and can be compared across countries. We also develop a cookbook recipe for the estimation of this parameter. The main implication of the model — a high return to human capital is associated with similar workers being assigned to more complex jobs — is confirmed by the data. The complexity dispersion parameter suggests that paying half of the optimal wage level at least doubles the cost per efficiency unit of labour.     

Technology Import and Industrial Employment: Evidence from Developing Countries

Abstract. This paper based on panel data across countries examines the possible effect of the imported technology on labour absorption in the industrial sector, after controlling for real wage rate and GDP per capita. Findings tend to suggest a negative relationship between the two. Technical efficiency index derived on the basis of the stochastic frontier function framework is also negatively affected by the import of technology. Without enhancing the knowledge relating to the mechanisms of exploiting the new technology acquired from abroad, a mere increase in import of technology would mean rising unutilized capacity. And this could be due to the poor skill base of the available human capital. Investment in human capital in terms of skill formation, up‐gradation, and training on the one hand and technological advancement to suit the internal labour market conditions are the two important policy conclusions for reviving the role of industry as the engine of pro‐poor growth.     

Wage Differentials between Ethnic Groups in Switzerland

This paper analyses the average wage differentials between various groups of immigrants and the Swiss workers. Classical Oaxaca‐Blinder decompositions are applied to a sample of 7,494 males (whose 1,070 immigrants) interviewed for the 1995 Swiss Labour Force Survey. Education and experience before and after migration are separately considered in two different ways. We control for sample selection in the wage and salary sector. We also investigate earnings differentials between natives and immigrants who arrived in the country before the age of 6. Our main results are that the part of differentials due to difference in coefficient varies strongly with different ethnic groups considered, that education is a strong determinant of the difference in observed characteristics and that second generation immigrants are fairly well assimilated in the Swiss labour market.