Sticky floors and glass ceilings in Latin America

We employ unconditional quantile-decomposition methods to analyze the gender wage gap (gwg) in the urban region of twelve Latin American countries. Using data from harmonized household surveys we decompose the gwg into an explained component (differences in human capital) and an unexplained component (different rates of return to human capital). We find evidence of sticky floors (larger gwg at the tenth percentile than at the median) and glass ceilings (larger gwg at the ninetieth percentile than at the median). The former are more frequent and their magnitude is generally larger. Working women are more educated than working men all along the wage distribution, which partially hides the ‘unexplained’ pay difference. Finally, we find that poorer countries and countries with more income inequality have higher gwg at the tenth percentile of the wage distribution. Richer countries and countries with lower inequality present larger gwg at the ninetieth percent of the wage distribution.     

A DUAL DEFINITION FOR THE FACTOR CONTENT OF TRADE AND ITS EFFECT ON FACTOR REWARDS IN US MANUFACTURING SECTOR

We introduce a dual definition of the Factor Content of Trade (FCT) using the concept of the Equivalent Autarky Equilibrium. Estimating a symmetric normalized quadratic revenue function for the U.S. manufacturing sector between 1965 and 1991, we find that the FCT for capital is positive, while the FCT for skilled and unskilled labor is negative, suggesting that the Leontief Paradox is not present. Then the growth rate of the factor rewards is decomposed to the FCT, endowments, and technological change effects. We find that technological change is the most important determinant in explaining wage inequality between skilled and unskilled labor. (JEL F11, F16, J31)     

The Case of Cubans: Racial Inequality in U.S. Homeownership and Home Values

Prior research finds that human capital may explain racial housing inequality, whereas others note the historical role that race played in creating unequal housing conditions. This study uses the case of Cubans in the United States to examine whether human capital explains Black–White housing inequalities, or if they are a result of nativity/cohort differences—a proxy for the federal policies that supported Cubans’ economic and social incorporation. Using pooled data from the American Community Survey, I examine how human capital characteristics and nativity/migration cohorts shape odds of homeownership and predicted home values among Cubans. Extended analyses using decomposition methods find that although human capital characteristics are important, they play a smaller role in explaining Black–White differences in homeownership and home values. Indicative of the changing structure of racial stratification in the United States, results reveal substantial inequality among the oldest of Cuban immigrants and U.S.‐born Cubans, despite a trend toward declining inequality among recent arrivals. Supported by the literature of systemic racism, the case of Cubans shows how human capital explanations do not sufficiently explain racial housing inequalities and how the future of racial stratification is one of inter‐ and intra‐ethnic group inequality.     

Cultural constraints on rising income inequality: A U.S.–Japan comparison

Prior research has identified fundamental cultural and normative concepts—including wa, enryo, giri, and amae—that are typically argued to be integral to Japanese society. We advance this line of research by discussing how these traditional cultural concepts may influence labor market relations and thereby constrain the degree of income inequality in Japan relative to the U.S. Collectivist cultural attitudes are embedded in Japanese work organization, and are naturally inherited social constraints when compared to more unbridled labor market relations of the “New Economy” in the U.S. While studies of rising inequality in the U.S. and Europe consider how governmental policies impinge upon market forces in order to moderate labor market outcomes, our analysis suggests how culture may sometimes directly constrain income inequality without imposing legal regulations or instituting official programs.     

Age,Experience, and Schooling: Decomposing Earnings Inequality in the United States and Brazil*

This article analyzes age and experience profiles of earnings inequality for U.S. and Brazilian males. Decomposition of the inequality profiles using a standard human capital earnings equation clarifies the determinants of cross-sectional inequality profiles and demonstrates a number of important differences in the shape of the two countries' profiles and in their underlying components. Most dramatic are Brazil's higher returns to schooling and higher variance in years of schooling, both factors contributing to the significantly higher level of income inequality in Brazil. Changes in the distribution of schooling across cohorts are shown to play a central role in explaining cross-sectional inequality profiles within each country and differences in earnings inequality in the United States and Brazil.     

Occupational Race Segregation,Globalization, and White Advantage: White-Black Earnings Inequality in U.S. Metropolitan Areas

Addressing the need to systematically assess the materialist foundations of color-blind racism, we use insights from critical race theory to investigate the metropolitan-level racial inequality at the turn of the century. Namely, we examine the association between occupational race segregation and white advantage (i.e., white-black earnings inequality) for men and women in 202 U.S. metropolitan statistical areas in the year 2000. We find that occupational race segregation exacerbates white advantage for both male and female workers, supporting the tenets of the materialist conception of color-blind racism. We also consider how processes of globalization and labor market transformation impact white advantage. Our findings indicate that global capital increases white advantage for males, whereas foreign direct investment and casualization serve to decrease it. They also indicate that exports decrease white advantage for females, whereas percent foreign born increases it.     

The influence of earnings on income distribution in the United States

This article discusses whether the so called “skill-biased technological change” hypothesis is able to explain the individual earnings inequality in the U.S. during the period 1968–2000. Using the statistic information supplied by the Census Bureau and the Bureau of Labor Statistics, the article analyzes the earnings evolution, explaining the reasons why earnings inequality has increased, and the relation of this increase with the household income distribution. The main conclusions are the following: (a) changes on labor productivity are not the main cause of the increase in earnings’ inequality, and (b) this earnings’ inequality is not the only reason for the increase of the households’ income inequality.     

Employment and unemployment patterns in the U.S. and Europe, 1973–1987

Employment trends in the United States and Europe are compared using Bureau of Labor Statistics data. These data set the stage for a discussion of the difference in employment growth between the U.S. and Europe. Also included are some elements that may partly explain the U.S. and European differences in job growth. In conclusion, labor market problems still remain even with the tremendous job growth in the U.S.     

Wages of regular and irregular workers, the price of education, and income inequality

In this paper, we develop a model characterized by skill-biased technological change and increasing costs of education to investigate income inequality. Irregular workers cannot escape poverty by commencing investment in education because wage inequality between regular and irregular workers widens and the price of education increases with the average level of education. Moreover, if the productivity of elementary education is low relative to that of higher education, middle-income individuals are eventually unable to pursue higher education because the threshold for education expenditure rises with the price of education. Thus, income inequality may widen, even among regular workers.     

On the welfare loss caused by inequality of opportunity

Based on the ethical principle of equality of opportunity, this paper presents a measure of the welfare loss that is caused by an unfair distribution of a particular outcome (income, health, education, etc). The key idea is that a fair society should produce outcomes that depend on individuals’ effort and not on their external circumstances such as gender, socioeconomic background, etc. We propose measuring inequality of opportunity as the welfare loss attributed to the outcome differences among individuals who exert a similar level of effort. Our results are in line with those aspects of fairness literature that give priority to the ex post compensation approach to equality of opportunity. Finally, we present an empirical application for the measurement of the welfare loss in the income distribution in Europe. We have observed a high degree of heterogeneity among European countries. The welfare loss due to inequality of opportunity ranges in those, from basically zero to almost one fifth of their potential welfare.     

Decomposition of Changes in Korean Wage Inequality, 1998–2007

South Korea experienced a steep increase in wage inequality between the Asian financial crisis in 1997 and the global financial crisis in 2008. This paper investigates the causes of the sharp change during that time period by looking at the contributions of changes in the distributions of schooling and unionization. The effects are estimated applying two robust distributional function based decomposition methods on Korean Labor and Panel Survey data for the time period 1998–2007. The results suggest changes in the distribution of schooling can explain about 10 % of the changes in the 90/50 percentile wage gap. The declining unionization rate does not have much impact on the upward trend of Korean wage inequality. In addition, aggregate decomposition results suggest that changes in labor force composition can explain a significant proportion of the total wage changes in the upper-tail of the distribution. Based on our findings we provide a list of policy recommendations to address the wage inequality issue in Korea.     

THE U.S. LABOR INCOME SHARE AND AUTOMATION SHOCKS

The causes and consequences of the 1964–2016 swings in the U.S. labor income share/labor share (LS) are parsed through the lens of a structural model estimated on aggregate and LS series jointly. Where conventional models fall short, the present model yields a counter-cyclical LS unconditionally and in response to demand and monetary policy shocks, as well as a small wage pro-cyclicality, via moderate wage indexation. Shifts in automation, workers' market power, investment efficiency, and the relative price of investment account for 54%, 24%, 6%, and 4% of LS fluctuations, respectively. Automation shocks explain the lion's share of the post-2007 cyclical LS tumble and 11% of output cycles, and generate a distinctive counter-cyclical labor response. (JEL E32, E25, E52)     

FINANCIAL DEVELOPMENT AND WAGE INEQUALITY: THEORY AND EVIDENCE

We argue that financial market development contributed to the rise in the skill premium and residual wage inequality in the United States since the 1980s. We present an endogenous growth model with imperfect credit markets and establish how improving the efficiency of these markets affects modes of production, innovation, and wage dispersion between skilled and unskilled workers. The experience of U.S. states following banking deregulation provides empirical support for our hypothesis. We find that wages of skilled workers increased by between 0.5% and 6.3% following deregulation while those of unskilled workers fell by between 3.5% and 8.7%. Similarly, residual (or within‐group) inequality increased; the 90–50 percentile ratio of residuals from a Mincerian wage regression and their standard deviation increased by 4.2% and 1.7%, respectively. (JEL E25, J31, G24)     

Uneven Development and Local Inequality in the U.S. South: The Role of Outside Investment,Landed Elites,and Racial Dynamics

This paper develops a historically contingent understanding of patterns of uneven economic development in the U.S. South. We conceptualize spatial variation in economic development and its consequences for inequality to be embedded in both local and international dynamics. The character of local economic development, it is argued, reflects the organizational base and heterogeneity of local elites, the divisions and relative power of nonelites, and the embeddedness of the local political economy in national and world systems of politics and production. These ideas are developed and made historically and spatially specific through an analysis of uneven development in one Southern state, North Carolina. Our findings suggest that contemporary patterns of uneven development and the resulting income deprivations and inequality reflect conditional interactions between elite economic projects and racial divisions within the working class. We find that outside investment seems to reproduce rather than disrupt local patterns of inequality and poverty.     

Occupational Human Capital and Wages: The Role of Skills Transferability Across Occupations

This paper examines the effect of accumulated human capital, and particularly occupational human capital, on the workers’ wages. Unlike previous studies that apply occupational tenure as a proxy for occupational human capital, this paper applies the concept of Shaw’s (1984) occupational human capital to capture the transferability of occupational skills and estimates a new measure of occupational human capital, so-called occupational investment. Using the National Longitudinal Survey of Youth (NLSY) from 1979 to 2000, the key findings of this paper suggest that occupational skills from the previous jobs can also affect the workers’ wages at the current job and that occupational investment is one of the important sources of wages supporting the Shaw’s original work on wage determination. Specifically, 5 years of (3-digit) occupational investment relative to current occupational tenure could lead to a wage increase of 7.7 to 18.4 %. I also find that the general labor market experience accounts for a large share of workers’ wages.     

Wage Inequality and Performance in Nonprofit and For‐Profit Organizations

This article examines the effects of several forms of wage inequality on service quality and employee effort. We suggest that two popular theories, tournament and fair wage/equity, are not necessarily competing. Each theory accurately describes aspects of employee behavior, but because of sectoral differences in organizational objectives and employee attitudes, tournament theory's predictions are relatively stronger in the for‐profit sector, while fair wage/equity theory's predictions are relatively stronger in the nonprofit sector. Using an employer–employee matched data set of nursing homes linked to a federal regulatory database and a resident survey, we found that ownership moderates the relationship between wage inequality and service quality. Although wage inequality positively affects service quality in the for‐profit sector, the reverse is true among nonprofit organizations. We also found that overall wage inequality in the workplace has a more pronounced influence on employee discretionary effort than does the employee's place in the distribution of wages.     

Between- and within-group wage inequalities, and the advent of new technology

We present a simple model that explains two features of the dynamics of wage inequalities: between-group and within-group. Individuals are assumed to be heterogeneous in their innate abilities. With the advent of a new technology, each individual decides whether or not to acquire the skill for the new high-tech sector. The heterogeneity explains not only the between-group wage inequality but also the within-group wage inequality, which are observed in advanced countries such as the US and UK.     

Wage distribution and firm size: The case of the United States

Substantial literature has been produced on the increasing wage gap in the United States, invoking various possible factors, but largely ignoring the relationship between firm size and wage distribution. In this study, the author decomposes wage differences over time between large, medium and small firms, identifying the effects of observed characteristics (and their returns) along with residual inequality, i.e. inequality among workers with the same observed characteristics. From 1992 to 2012, trends at small, medium and large firms became more uniform, while wage inequality rose across the board. Significantly, it increased more quickly in the upper half of the wage distribution and at large firms, where residual inequality was highest.     

From classes to copulas: wages,capital, and top incomes

Public debates about the rise in top income shares often focus on the growing dispersion in earnings, and the soaring pay for top executives and financial-sector employees. But can the change in the marginal distribution of earnings on its own explain the rise in top income shares? Are top executives replacing capital owners in the group of top-income earners, or are we rather witnessing a fusion of top capital and top earnings? This paper proposes an extension of the copula framework and uses it for exploring the changing composition of top incomes. It illustrates that changes in top income shares can easily be decomposed into respective changes in the marginal distributions of labour and capital income and the changing association between the two types of income. An application using tax record data from Norway shows that the association between top labour and capital incomes grew stronger between 1995 and 2005 in the top half of the wage and capital income distribution, though it declined for the top 1% of capital income receivers. A gender decomposition demonstrates that the association of wage and capital incomes at the top is particularly striking for men, whilst women are largely under-represented in the top halves of the two marginal distributions.     

PRODUCTIVITY GROWTH IN GOODS AND SERVICES ACROSS THE HETEROGENEOUS STATES OF AMERICA

In this study, we examine the importance of multifactor productivity (MFP) growth in goods and services for U.S. States during 1980–2007 by applying the dual growth accounting framework. We find that MFP growth was relatively high and converged in the goods sector, but was low and did not converge in services. Although low growth in MFP in services was due to declining real user cost, particularly in real estate services, the lack of convergence itself was due to variation in wage growth. We also document that while the gap between productivity and wage growth was higher in goods, the two series were more strongly correlated in services. Finally, states with higher initial human capital experienced higher growth in both sectors. (JEL O47, R11)