scholarly journals Estimation of a Roy/Search/Compensating Differential Model of the Labor Market

Econometrica ◽  
2020 ◽  
Vol 88 (3) ◽  
pp. 1031-1069 ◽  
Author(s):  
Christopher Taber ◽  
Rune Vejlin
Keyword(s):  
Wage Inequality ◽  
Capital Accumulation ◽  
Compensating Differentials ◽  
Search Frictions ◽  
Differential Model ◽  
Job Match ◽  
Relative Contribution ◽  
Compensating Differential ◽  
Roy Model ◽  
Wage Variation

In this paper, we develop a model that captures key components of the Roy model, a search model, compensating differentials, and human capital accumulation on‐the‐job. We establish which components of the model can be non‐parametrically identified and which ones cannot. We estimate the model and use it to assess the relative contribution of the different factors for overall wage inequality. We find that variation in premarket skills (the key feature of the Roy model) is the most important component to account for the majority of wage variation. We also demonstrate that there is substantial interaction between the other components, most notably, that the importance of the job match obtained by search frictions varies from around 4% to around 29%, depending on how we account for other components. Inequality due to preferences for non‐pecuniary aspects of the job (which leads to compensating differentials) and search are both very important for explaining other features of the data. Search is important for turnover, but so are preferences for non‐pecuniary aspects of jobs as one‐third of all choices between two jobs would have resulted in a different outcome if the worker only cared about wages.

scholarly journals Workplace Heterogeneity and the Rise of West German Wage Inequality*

2013 ◽  
Vol 128 (3) ◽  
pp. 967-1015 ◽  
Author(s):  
David Card ◽  
Jörg Heining ◽  
Patrick Kline
Keyword(s):  
Wage Inequality ◽  
Fixed Effects ◽  
Wage Structure ◽  
Three Dimensions ◽  
Job Match ◽  
Wage Premiums ◽  
Dramatic Rise ◽  
Plant Level ◽  
Wage Variation ◽  
Education Groups

Abstract We study the role of establishment-specific wage premiums in generating recent increases in West German wage inequality. Models with additive fixed effects for workers and establishments are fit into four subintervals spanning the period from 1985 to 2009. We show that these models provide a good approximation to the wage structure and can explain nearly all of the dramatic rise in West German wage inequality. Our estimates suggest that the increasing dispersion of West German wages has arisen from a combination of rising heterogeneity between workers, rising dispersion in the wage premiums at different establishments, and increasing assortativeness in the assignment of workers to plants. In contrast, the idiosyncratic job-match component of wage variation is small and stable over time. Decomposing changes in mean wages between different education groups, occupations, and industries, we find that increasing plant-level heterogeneity and rising assortativeness in the assignment of workers to establishments explain a large share of the rise in inequality along all three dimensions.

scholarly journals Leave‐Out Estimation of Variance Components

Econometrica ◽  
2020 ◽  
Vol 88 (5) ◽  
pp. 1859-1898 ◽  
Author(s):  
Patrick Kline ◽  
Raffaele Saggio ◽  
Mikkel Sølvsten
Keyword(s):  
Wage Inequality ◽  
Quadratic Forms ◽  
Fixed Effects ◽  
Linear Models ◽  
Large Data ◽  
Wage Determination ◽  
Fixed Effects Model ◽  
Relative Contribution ◽  
Estimation Of Variance ◽  
Linear Restrictions

We propose leave‐out estimators of quadratic forms designed for the study of linear models with unrestricted heteroscedasticity. Applications include analysis of variance and tests of linear restrictions in models with many regressors. An approximation algorithm is provided that enables accurate computation of the estimator in very large data sets. We study the large sample properties of our estimator allowing the number of regressors to grow in proportion to the number of observations. Consistency is established in a variety of settings where plug‐in methods and estimators predicated on homoscedasticity exhibit first‐order biases. For quadratic forms of increasing rank, the limiting distribution can be represented by a linear combination of normal and non‐central χ 2 random variables, with normality ensuing under strong identification. Standard error estimators are proposed that enable tests of linear restrictions and the construction of uniformly valid confidence intervals for quadratic forms of interest. We find in Italian social security records that leave‐out estimates of a variance decomposition in a two‐way fixed effects model of wage determination yield substantially different conclusions regarding the relative contribution of workers, firms, and worker‐firm sorting to wage inequality than conventional methods. Monte Carlo exercises corroborate the accuracy of our asymptotic approximations, with clear evidence of non‐normality emerging when worker mobility between blocks of firms is limited.

scholarly journals R&D Direction and North-South Diffusion, Human Capital, Growth, and Wages

2011 ◽  
Vol 2011 ◽  
pp. 1-14 ◽  
Author(s):  
Óscar Afonso
Keyword(s):  
Economic Growth ◽  
Human Capital ◽  
Research And Development ◽  
Endogenous Growth ◽  
Wage Inequality ◽  
Capital Accumulation ◽  
Knowledge Diffusion ◽  
Human Capital Accumulation ◽  
Capital Growth ◽  
And Diffusion

This paper highlights some recent components related to the endogenous growth literature; in particular, (i) research and development progress, direction, and diffusion; (ii) human-capital accumulation; (iii) wage inequality; (iv) nonscale economic growth, showing how each one has been treated by the existing seminal literature and the expected impact of bringing them together. The connection of the different components is mainly done by involving the leading literature on North-South technological-knowledge diffusion by imitation under trade, and the prevailing literature on intra- and intercountry wage inequality.

scholarly journals Immigration, Working Conditions, and Compensating Differentials

ILR Review ◽  
2021 ◽  
pp. 001979392110213
Author(s):  
Chad Sparber ◽  
Madeline Zavodny
Keyword(s):  
Working Conditions ◽  
Labor Market Outcomes ◽  
The United States ◽  
Compensating Differentials ◽  
Market Outcomes ◽  
Workplace Hazards ◽  
Skilled Immigrants ◽  
Compensating Differential ◽  
Induced Changes ◽  
The Impact

The large inflow of less-educated immigrants into the United States in recent decades may have affected US natives’ labor market outcomes in many ways, including their working conditions. Although the general consensus is that low-skilled immigrants tend to hold “worse” jobs than US natives, the impact of immigration on natives’ working conditions has received little attention. This study examines how immigration has affected US natives’ occupational exposure to workplace hazards and the compensating differential paid for such exposure from 1990 to 2018. Results indicate that immigration causes less-educated natives’ exposure to workplace hazards to fall, and instrumental variables results show a larger impact among women than among men. The corresponding compensating differential appears to fall among men, but not after accounting for immigration-induced changes in the financial returns to occupational skills.

scholarly journals Compensating Differentials for Sexual Harassment

2011 ◽  
Vol 101 (3) ◽  
pp. 630-634 ◽  
Author(s):  
Joni Hersch
Keyword(s):  
Sexual Harassment ◽  
Wage Differential ◽  
Equal Employment Opportunity Commission ◽  
Equal Employment Opportunity ◽  
Employment Opportunity ◽  
Compensating Differentials ◽  
Age Group ◽  
Female Workers ◽  
Compensating Wage Differential ◽  
Compensating Differential

Workplace sexual harassment is illegal, but many workers report that they have been sexually harassed. Exposure to the risk of sexual harassment may decrease productivity, which would reduce wages. Alternatively, workers may receive a compensating differential for exposure to sexual harassment, which would increase wages. Data on claims of sexual harassment filed with the Equal Employment Opportunity Commission are used to calculate the first measures of sexual harassment risks by industry, age group, and sex. Female workers face far higher sexual harassment risks. On balance, workers receive a compensating wage differential for exposure to the risk of sexual harassment.

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