A Distributional Analysis of Public–Private Wage Differential in India

In this paper, we examine public–private wage differential among men in India across the entire wage distribution. We find that the raw wage gap between public and private sector is positive across the entire wage distribution in both urban and rural areas. A quantile regression‐based decomposition reveals that that the public sector workers enjoy a positive wage premium across the entire wage distribution in both urban and rural areas, although the magnitude of wage premium is smaller at the top quantiles.     

The Motherhood Wage Penalty and Its Determinants: A Public–Private Comparison

We investigate whether public and private sector employees bear a different wage penalty for having children. According to our estimates, the total motherhood wage penalty is much larger in the private than in the public sector. Nevertheless, in both sectors, we find no unexplained penalty once we control for potential determinants of the family pay gap, namely, a reduced labour supply of mothers, child‐related career interruptions, less access to management positions, and adjustments in working conditions. Finally, only child‐related career interruptions play a different role in explaining the motherhood wage penalty in each sector.     

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.     

Is There a Double‐Negative Effect? Gender and Ethnic Wage Differentials in Italy

This paper investigates the gender and ethnic wage differentials for female migrants in Italy by applying the Oaxaca–Blinder decomposition, with and without Heckman correction, to account for self‐selection into the labour market. The gender wage gap is nearly 15 per cent, more than 60 per cent of which is unexplained by observable differences. The ethnic wage gap is much larger (39 per cent), but endowments explain 53 per cent of the gap. We also estimate the double‐negative effect of being both female and a migrant. A female migrant earns 42 per cent less than an Italian male; the unexplained component is estimated to be 53–65 per cent. Results are robust to different specifications.     

Low‐wage Jobs — Springboard to High‐paid Ones?

We examine whether low‐paid jobs have an effect on the probability that unemployed persons obtain better‐paid jobs in the future (springboard effect). We make use of data from the German Socio‐Economic Panel (SOEP) and apply a dynamic random effects bivariate probit model. Our results suggest that low‐wage jobs can act as springboards to better‐paid work. The improvement of the chance to obtain a high‐wage job by accepting low‐paid work is particularly large for less‐skilled persons and for individuals who experienced longer periods of unemployment. Low‐paid work is less beneficial if the job is associated with a low social status.     

Crime and the Decline of Unions

In this paper we investigate the relationship between union membership and crime. Using state level data between 1993 and 2006, we find the elasticity of crime with respect to union membership is roughly −0.5. From our results, we predict the decline in union membership has increased crime by 15 per cent since 1993. Furthermore, we find the elasticity between union jobs and crime is larger in absolute value when using an instrumental variable approach to control for the impact unions have on labor market efficiency.     

Residential Location,Job Location,and Wages: Theory and Empirics

I develop a stylized partial on‐the‐job equilibrium search model that incorporates a spatial dimension. Workers reside on a circle and can move at a cost. Each point on the circle has a wage distribution. Implications about wages and job mobility are drawn from the model and tested on Danish matched employer–employee data. The model predictions hold true. I find that workers working farther away from their residence earn higher wages. When a worker is making a job‐to‐job transition where he/she changes workplace location he/she experiences a higher wage change than a worker making a job‐to‐job transition without changing workplace location. However, workers making a job‐to‐job transition that makes the workplace location closer to the residence experience a wage drop. Furthermore, low‐wage workers and workers with high transportation costs are more likely to make job‐to‐job transitions, but also residential moves.     

Is There a Motherhood Wage Penalty in the Finnish Private Sector?

This paper investigates the effects of children on women's wages in the Finnish private sector. The paper finds evidence of the motherhood wage penalty, the penalty varying with the length of the child‐related career break. Mothers staying at home no longer than for 2 years face considerably smaller penalties than mothers spending longer periods at home. The negative wage effects of children decrease, however, quickly with time. For example, mothers who experience a career break of 2 years or less do not lag behind non‐mothers in terms of wages after the second year from the return to employment. There is also variation in the motherhood wage penalty across the wage distribution. The penalty is higher at the top of the distribution than in the middle of it, especially in the cases of prolonged child‐related career breaks.     

Instrumental Variables Estimates of the Effect of Subsidized Training on the Quantiles of Trainee Earnings

This paper reports estimates of the effects of JTPA training programs on the distribution of earnings. The estimation uses a new instrumental variable (IV) method that measures program impacts on quantiles. The quantile treatment effects (QTE) estimator reduces to quantile regression when selection for treatment is exogenously determined. QTE can be computed as the solution to a convex linear programming problem, although this requires first‐step estimation of a nuisance function. We develop distribution theory for the case where the first step is estimated nonparametrically. For women, the empirical results show that the JTPA program had the largest proportional impact at low quantiles. Perhaps surprisingly, however, JTPA training raised the quantiles of earnings for men only in the upper half of the trainee earnings distribution.     

SEARCH INTENSITY,DIRECTED SEARCH,AND THE WAGE DISTRIBUTION

We propose a search equilibrium model in which homogeneous firms post wages along with a vacancy to attract job seekers while homogeneous unemployed workers invest in costly job seeking. The key innovation relies on the organization of the search market and the search behavior of the job seekers. The search market is continuously segmented by wage level, individuals can spread their search investment over the different submarkets, and search intensity has marginal decreasing returns in each submarket. We demonstrate the existence of a nondegenerate equilibrium wage distribution. The density of this wage distribution is increasing at low wages and decreasing at high wages. The distribution can be right‐tailed, and, under additional restrictions, is hump‐shaped. Our results are illustrated by an example generating a Beta wage distribution.     

New Firms as Employers: The Wage Penalty for Voluntary and Involuntary Job Switchers

According to previous research, new firms pay lower wages. However, previous studies have been unable to control for the possibility that the opportunity costs of accepting employment at new firms may differ across individuals. In this paper, we investigate whether a wage penalty for being employed at a new firm exists if we take the individual employee's experience and status in the labour market into consideration. We focus on individuals who decide to switch jobs and use matched employee–employer data about all firms and employees in Sweden for the period 1998–2010. Our results show that the share of job transitions into lower wages are higher for those who switch to new firms compared with incumbent firms (40 per cent and 31 per cent, respectively). Our endogenous wage equation estimates indicate that being an involuntary job switcher has an equally negative effect on wages at both new and incumbent firms. However, the positive effect of education on wages is more pronounced for job switchers selecting into incumbent firms.     

Nonparametric Instrumental Variables Estimation of a Quantile Regression Model

We consider nonparametric estimation of a regression function that is identified by requiring a specified quantile of the regression “error” conditional on an instrumental variable to be zero. The resulting estimating equation is a nonlinear integral equation of the first kind, which generates an ill‐posed inverse problem. The integral operator and distribution of the instrumental variable are unknown and must be estimated nonparametrically. We show that the estimator is mean‐square consistent, derive its rate of convergence in probability, and give conditions under which this rate is optimal in a minimax sense. The results of Monte Carlo experiments show that the estimator behaves well in finite samples.     

Unconditional Quantile Regressions

We propose a new regression method to evaluate the impact of changes in the distribution of the explanatory variables on quantiles of the unconditional (marginal) distribution of an outcome variable. The proposed method consists of running a regression of the (recentered) influence function (RIF) of the unconditional quantile on the explanatory variables. The influence function, a widely used tool in robust estimation, is easily computed for quantiles, as well as for other distributional statistics. Our approach, thus, can be readily generalized to other distributional statistics.     

A New Look at the Public Wage Premium in Italy: The Role of Schooling Endogeneity

This paper uses a sample of male workers to estimate public and private wage structures and the public wage premium for Italy. Results from a model with endogenous sector and schooling suggest that public employees have on average lower unobserved wage potentials in both sectors than private employees, but work in the sector where they benefit from a comparative wage advantage. Schooling is positively correlated with wages in both sectors, and controlling for that is crucial to get more reliable estimates and predictions. The associated average unconditional public wage premium is 12 per cent. The net premium is 9 per cent, but not statistically significant.     

SORTING AND THE OUTPUT LOSS DUE TO SEARCH FRICTIONS

We analyze a general search model with on‐the‐job search (OJS) and sorting of heterogeneous workers into heterogeneous jobs. For given values of nonmarket time, the relative efficiency of OJS, and the amount of search frictions, we derive a simple relationship between the unemployment rate, mismatch, and wage dispersion. We estimate the latter two from standard micro data. Our methodology accounts for measurement error, which is crucial to distinguish true from spurious mismatch and wage dispersion. We find that without frictions, output would be about 9.5% higher if firms can commit to pay wages as a function of match quality and 15.5% higher if they cannot. Noncommitment leads to a business‐stealing externality which causes a 5.5% drop in output.     

DO BETTER PAID POLITICIANS PERFORM BETTER? DISENTANGLING INCENTIVES FROM SELECTION

The wage paid to politicians affects both the choice of citizens to run for office and the performance of those who are appointed. First, if skilled individuals shy away from politics because of higher opportunities in the private sector, an increase in politicians’ pay may change their mind. Second, if the re‐election prospects of incumbents depend on their in‐office deeds, a higher wage may foster performance. We use data on all Italian municipal governments from 1993 to 2001 and test these hypotheses in a quasi‐experimental setup. In Italy, the wage of mayors depends on population size and sharply rises at different thresholds. We apply a regression discontinuity design to the only threshold that uniquely identifies a wage increase: 5,000 inhabitants. Exploiting the existence of a two‐term limit, we further disentangle the composition from the incentive component of the effect of the wage on performance. Our results show that a higher wage attracts more‐educated candidates, and that better‐paid politicians size down the government machinery by improving efficiency. Importantly, most of this effect is driven by the selection of competent politicians, rather than by the incentive to be re‐elected.     

Does Rent‐sharing Profit Female and Male Workers? Evidence from Israeli Matched Employer–Employee Data

This paper analyses the impact of workplace characteristics on individual wages based on a unique cross‐section matched employer–employee data set for the Israeli private manufacturing sector in 1995. Specifically, we examine the effects of the interaction between profit‐sharing and wages on the gender wage gap. The empirical findings show that individual compensation is significantly and positively correlated with firms’ profits‐per‐employee, even when controlling for all of the following: group effects in the residuals, individual and firms’ characteristics, industry wage differentials and endogeneity of profits. Wage–profit elasticity is found to be 11 per cent and it does not significantly differ between genders. With respect to the overall gender wage gap (on average women earn 28 per cent less than men), the results show that within firms there is no gender discrimination and that 12 per cent of this gap can be explained by the wage–profits profile and by the fact that women are more likely to be employed in less profitable firms than men.     

Unemployment Insurance and Underemployment

Should unemployment insurance (UI) systems provide coverage for underemployed job seekers? Based on a statistical analysis of Norwegian unemployment spells, we conclude that the answer to this question is yes. Allowing insured job seekers to retain partial UI benefits during periods of insufficient part‐time work not only reduces UI expenditures during the part‐time work period, but it also unambiguously reduces the time until a regular self‐supporting job is found. Probable explanations are that even small temporary part‐time jobs provide access to useful vacancy information and that such jobs are used by employers as a screening device when hiring from the unemployment pool.     

Unemployment Duration of Spouses: Evidence From France

This paper analyses the conditional probability of leaving unemployment of French married individuals from 1991 to 2002. We find that the effect of spousal labor income on unemployment duration is asymmetric for men and women. In particular, the probability of men to find a job is increasing in wife's labor income, while it is decreasing in husband's earnings for women. To adjust for endogenous selection into marriage, we use the quarter of birth as an instrumental variable for the spousal wage. Finally, we show that introducing a breadwinner stigma in a joint job search model generates the positive correlation observed for men in the data.     

The Union Effect on Wages in Chile: A Two‐Stage Approach Using Panel Data

We estimate the union effect on wages in Chile to be between 18 and 24 per cent. We follow a two‐stage procedure that allows us to correct the endogeneity of union status and to separate true from spurious dependence, by exploiting the union history of individuals using panel data. We find evidence of comparative‐advantage sorting in union status, strong true state dependence and a re‐distributional effect of union membership (i.e. wage gains from unionization are larger for lower‐wage earners).