SOFT SKILLS,HARD SKILLS,AND THE BLACK/WHITE WAGE GAP

This study examines the relative importance of soft skills versus hard skills across occupations and its impact on the observed wage gap between Blacks and Whites in the United States. It posits that the Black/White pay gap may vary across occupations that require the use of different types of skills. We classify occupations into hard‐skill intensive versus soft‐skill intensive jobs using the skill content measures of different occupations from the Occupational Information Network (O*Net). We then use data from the National Longitudinal Survey of Youth (NLSY) and Current Population Survey (CPS) to investigate the impact of job skill type on the wage gap. Consistent with our theoretical predictions, we show that this wage gap in white‐collar jobs is smaller for hard‐skills jobs than it is for soft‐skills jobs. Moreover, we demonstrate that, in response to variations in the wage gap across different occupations, Blacks are more likely to self‐select themselves into hard‐skills jobs, ceteris paribus. This shows not only that discrimination against Blacks varies across occupations, but also that such discrimination induces the self‐selection of Blacks into certain occupations. Moreover, this finding highlights the role played by co‐worker/customer discrimination in explaining the racial wage gap in the U.S. labor market. (JEL J15, J31)     

CULTURAL DIVERSITY, DISCRIMINATION, AND ECONOMIC OUTCOMES: AN EXPERIMENTAL ANALYSIS

Does cultural diversity affect economic outcomes? We develop an experimental framework that complements ongoing research on this question. We vary the ethnic mix of bargaining sessions to study intercultural interactions among members of U.S. Hispanic and Navajo cultures. We control for demographic differences in our subject pools and elicit beliefs directly in order to differentiate between statistical discrimination and preference‐based discrimination. Hispanic and Navajo subjects behave differently, and their behavior is affected by the ethnic composition of the experimental session. Our experimental framework can shed light on economic behavior and outcomes in societies of mixed ethnicity, race, and religion. (JEL C78, C90, Z10)     

BROADBAND INTERNET,FIRM PERFORMANCE,AND WORKER WELFARE: EVIDENCE AND MECHANISM

This paper examines the effect of high-speed internet on firm's productivity and worker's wage in China. We exploit a national policy reform and devise a difference-in-difference strategy to address the endogeneity. We find that high-speed internet significantly increases firm's productivity and worker's wage, and the estimate is larger for firms in industries with high skill intensity and for more educated workers. We provide suggestive evidence that the mechanism is likely from firm's increased use of skill-biased technology and the flattened management organization. (JEL O2, O3, J3)     

NOMINAL WAGE CONTRACTS AND THE MONETARY TRANSMISSION MECHANISM

We introduce staggered and synchronized nominal wage contracts into a one‐sector monetary dynamic general equilibrium model to analyze the importance of the monetary transmission mechanism. We find a stronger monetary propagation mechanism under a synchronized setting as compared to a staggered setting. This causes the economy under staggering to be less volatile, better matching the data, as well as bringing about lower welfare costs (measured in terms of consumption). However, our results are mixed when it comses to evaluating the contemporaneous correlations and cross‐correlations. We conclude that overall staggered contracts do better in matching the U.S. economy. (JEL E32, E51, J41)     

MINIMUM WAGES,IMPORT STATUS,AND FIRMS' INNOVATION: THEORY AND EVIDENCE FROM CHINA

This study explores the heterogeneous effects of minimum wage on innovation of different types of firms. We develop an open‐economy R&D‐based growth model and obtain the following result: raising the minimum wage reduces innovation of firms that use domestic inputs but increases innovation of firms that import foreign inputs. We test this result using city‐level data on minimum wages and firm‐level patent data in China. In accordance with our theory, we find that raising the minimum wage is associated with more innovation by importing firms and less by non‐importing firms. This result survives a battery of robustness checks. (JEL E24, F43, O31)     

Bonuses,unions, and labor productivity in South Korea

Using a set of time-series (1972–1989) and cross-sectional data on eight two-digit Korean manufacturing industries, we examine the variability of South Korea’s employee bonus system and the effect of the employee bonus on productivity. A test of the variability of the bonus showed that the bonus rate (ratio of the bonus to the wage) was positively influenced by industrial output, so the bonus is not merely a disguised wage. An augmented Cobb-Douglas production function estimation shows that the bonus has a positive and significant productivity effect. Capital-intensive and laborintensive industries did not have significantly different productivity effects due to the bonus. Lastly, Korean unions reduced labor productivity and negatively affected the productivity effect of the bonus. Also, compared with the previous period, the productivity effect of the bonus has become negative since the1987 Great Labor Offensive.     

PAYING MORE TO HIRE THE BEST? FOREIGN FIRMS,WAGES, AND WORKER MOBILITY

In the context of the debate on the labor‐market consequences of globalization, we adopt an original approach toward the identification of the wage differences between foreign and domestic firms: worker mobility. Using matched employer‐employee panel data for Portugal, we consider virtually all spells of interfirm mobility over a period of 10 yr. We find that foreign firms offer significantly more generous wage policies, although there is also a (smaller) selection effect. The results are robust to the consideration of displaced workers, wage growth differences in the new firms, and different subsets of workers. (JEL J31, J63, F23)     

LABOR CONTRACTS AND FLEXIBILITY: EVIDENCE FROM A LABOR MARKET REFORM IN SPAIN

This paper evaluates the effects of a labor market reform in Spain that removed restrictions on fixed‐term or temporary contracts. Our empirical results are based on longitudinal firm‐level data that cover observations before and after the reform. We posit and estimate a dynamic labor demand model with indefinite and fixed‐term labor contracts, and a general structure of labor adjustment costs. Experiments using the estimated model show important positive effects of the reform on total employment (i.e., a 3.5% increase) and job turnover. There is a strong substitution of permanent by temporary workers (i.e., a 10% decline in permanent employment). The effects on labor productivity and the value of firms are very small. In contrast, a counterfactual reform that halved all firing costs would produce the same employment increase as the actual reform, but much larger improvements in productivity and in the value of firms. (JEL J23, J32, J41)     

GOVERNMENT INTERVENTION,LAND MARKET,AND URBAN DEVELOPMENT: EVIDENCE FROM CHINESE CITIES

This article investigates how government intervention in land market affects China's urban development, using data from prefecture‐level cities between 2000 and 2010. We find that government intervention enlarges the impact of positive productivity shocks on housing price appreciation, through mainly the government control over residential land supply. However, we find no significant evidence that high government intervention constrains population growth and leads to wage increase. Such patterns of urban dynamics can be explained by the fact that migrant workers are the driving force behind China's urbanization, but they have limited housing demand and are not well compensated. (JEL P52, R12, H11)     

A COMPETITIVE MODEL OF WORKER REPLACEMENT AND WAGE RIGIDITY

We adapt the models of Menzio and Moen (2010) and Snell and Thomas (2010) to consider a labor market in which firms can commit to wage contracts but cannot commit not to replace incumbent workers. Workers are risk averse, so that there exists an incentive for firms to smooth wages. Real wages respond in a highly nonlinear manner to shocks, exhibiting downward rigidity, and magnifying the response of unemployment to negative shocks. We also consider layoffs and show that for a range of shocks labor hoarding occurs while wages are cut. We argue these features are consistent with recent evidence. (JEL E32, J41)     

Gender,Productivity, and the Marital Wage Premium

Explanations for married men’s wage premium often emphasize greater market productivity due to a gendered division of household labor, though this “specialization thesis” has been insufficiently interrogated. Using data from Wave 2 of the National Survey of Families and Households (N = 972), this paper examines the relationship between wages and time spent in paid labor and housework for married women and men with high levels of labor force attachment and their spouses. Scrutiny of couples’ time use finds strong evidence for the gendered division of labor, but little support for the anticipated wage effects of the specialization thesis itself. Less strict sample restrictions point to the need for continued research directed at couples’ joint employment and household labor decisions.     

ARE WORKERS WILLING TO PAY TO JOIN A BETTER TEAM?

Using data from the Major League Baseball free‐agent market, this study is the first to show that the productivity expected of the team a worker will join produces a significant, negative compensating wage differential. The younger workers in the sample drive this result, trading 25% of their wages to join teams with an expected productivity one standard deviation higher. This investment can be recouped if a reasonable increase in human capital occurs. These results are robust to contract length‐wage simultaneity and indicate that investment in human capital motivates the observed tradeoff, suggesting a new pathway through which human capital accumulation can affect wages. Reliable measures of workers' own past productivity and the productivity expected of a worker's future team provide key advantages to identifying these effects. (JEL J31, J24, M54)     

THE AGRICULTURAL PRODUCTIVITY GAP IN EUROPE

For 15 European countries over the 1970–2004 period we find large and persistent agricultural productivity gaps, the ratio of value added per hour in nonagriculture to that in agriculture. Comparing the gap in value added per hour to the wage gap between the two sectors suggests that value added in the data is mismeasured. We further find that, controlling for differences in gross domestic product per capita and institutions, the mismeasurement is positively related to self‐employed share of hours in agriculture. Correcting for underreporting of self‐employment income using our preferred correction factor reduces the measured agricultural productivity gap by 38%. These findings suggest that underreporting can account for a significant portion of the measured agricultural productivity gap. (JEL E01, O47, O52, Q10)     

Anti-Discrimination vs. Anti-Poverty? A Comparison of Pay Equity and Living Wage Reforms

SUMMARY

Welfare reform focuses attention on the potential of pay equity and living wage strategies to move women out of the ranks of the working poor. In this study, we use data from a large municipality in the Northeast to simulate implementation of the two policies and compare their relative effectiveness in raising the earnings of female- and minority-dominated jobs, narrowing gender- and race-based earnings differentials, and lifting workers out of poverty. Results show that pay equity raises salaries across-the-board, but especially among low-skilled and minority-dominated jobs, and closes the wage gap. Both pay equity and living wage dramatically reduce the incidence of poverty; living wage, however, leaves virtually untouched the type of discrimination targeted by pay equity and has little impact on the wage gap. The implications of these results for addressing the needs of women transitioning off public assistance and wage justice are discussed. We conclude that both policies should be an integral part of welfare reform efforts, as well as key planks in an overall wage justice strategy.     

Marriage and the Motherhood Wage Penalty Among African Americans,Hispanics, and Whites

This study draws on data from the National Longitudinal Survey of Youth (N = 5,929) to analyze the moderating effects of race and marriage on the motherhood wage penalty. Fixed‐effects models reveal that for Hispanic women, motherhood is not associated with a wage penalty. For African Americans, only married mothers with more than 2 children pay a wage penalty. For Whites, all married mothers pay a wage penalty, as do all never‐married mothers and divorced mothers with 1 or 2 children. These findings imply that racial differences in the motherhood wage penalty persist even for women with similar marital statuses, and they suggest that patterns of racial stratification shape women’s family experiences and labor market outcomes.     

Does Motherhood Affect Productivity, Relative Performance, and Earnings?

The Ladies Professional Golf Association provides a unique setting to examine productivity differences between women with children and women without children. In this paper, productivity is directly observed (e.g., the player’s golf score), unlike most studies that use wage as a proxy for productivity. Therefore, discrimination cannot be a source of observed differences in productivity between mothers and nonmothers, since the earnings of players are strictly determined by relative performance. Using panel data on women professional golfers, I find that motherhood lowers productivity. The productivity of women who eventually become mothers increases in the years before giving birth and then declines thereafter. The results support the human-capital explanation and Becker’s effort hypothesis of the family gap. One further finding is that marriage increases productivity.

RENT CREATION AND RENT SHARING: NEW MEASURES AND IMPACTS ON TOTAL FACTOR PRODUCTIVITY

This analysis proposes new measures of rent creation and rent sharing and assesses their impact on productivity on cross‐country‐industry panel data. We find first that: (1) anticompetitive product market regulations positively affect rent creation and (2) employment protection legislation boosts hourly wages, particularly for low‐skill workers. However, we find no significant impact of this employment legislation on rent sharing, as the hourly wage increases are offset by a negative impact on hours worked. Second, using regulation indicators as instruments, we find that rent creation and rent sharing both have a substantial negative impact on total factor productivity. (JEL E22, E24, O30, L50, O43, O47, C23)     

THE IMPACT OF LABOR CONTRACTS: EVIDENCE FROM BRAZIL

The conventional Keynesian model suggests that frictions created by nominal wage contracts generate a positive relationship between inflation and output. On the other hand, the New Classical/Real Business Cycle theory claims that firms and workers base their employment behavior, and hence output, on the marginal product of labor ignoring the efficiencies of fixed nominal wage contracts. Using Brazilian data, where nominal wages were indexed by law, tests show that fixed nominal wage contracts insignificantly affected output. Thus, the data support the view that fixed nominal wages play an insignificant role in determining the evolution of output. ( JEL E31)     

Movin’ on up: Hierarchical occupational segmentation and gender wage gaps

Our study evaluates and extends existing wage decomposition methodologies that seek to measure the contributions of endowments, pure wage discrimination, and job segregation. We employ data from a regional supermarket that faced a Title VII class-action lawsuit to examine how standard wage specifications integrated with a model of hierarchical segregation might perform in wage decompositions. Our results show that a common misspecification of the wage structure leads to false inferences about the presence of pure wage discrimination. We demonstrate the generalizability of our methodology using CPS data.     

MANDATORY RETIREMENT AS A CLAUSE IN AN EMPLOYMENT INSURANCE CONTRACT

This paper postulates the existence of an "employment insurance contract" in which firms insure the employment of workers, at a predetermined wage, against potential, age related declines in productivity. To limit its liability the firm establishes an age limit to its promise ––– the mandatory retirement age. It is demonstrated that Pareto-efficient contracts exist which involve mandatory retirement at a specific age. The existence of these contracts, including mandatory retirement, increases workers' life-time utility and encourages the accumulation of human capital. Empirical results are consistent with the predictions of the model.